U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

(Mark One)

         [ X ]    QUARTERLY  REPORT UNDER SECTION 13 OR 15(D) OF THE  SECURITIES
                  EXCHANGE ACT OF 1934

         [   ]    TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(D) OF THE
                  SECURITIES EXCHANGE ACT

                  For the quarterly period ended March 31, 1998



                        SOY ENVIRONMENTAL PRODUCTS, INC.
                        --------------------------------
           (Exact name of small business as specified in its charter)



           Delaware                                          481192445
           --------                                          ---------
(State or other jurisdiction of                    (IRS Employer Identification)
 incorporation or organization)



                               9135 Barton Street
                           Overland Park, Kansas 66214
                           ---------------------------
                    (Address of Principal Executive Offices)


                                 (602) 894-0100
                                 --------------
                           (Issuer's Telephone Number)



Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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
    -----           -----

The  number of shares  outstanding  of each of the  issuer's  classes  of common
equity was 6,290,200  shares of common stock,  par value $.001,  as of March 31,
1998.

Transitional Small Business Disclosure Format (check one):

Yes               No   X
    -----            -----
<PAGE>
                        SOY ENVIRONMENTAL PRODUCTS, INC.
                           INDEX TO FORM 10-QSB FILING
                      FOR THE QUARTER ENDED MARCH 31, 1998


                                TABLE OF CONTENTS



                                     PART I
                              FINANCIAL INFORMATION


ITEM 1.  Financial Statements
              Consolidated Balance Sheets
                    March 31, 1998 (unaudited) and September 30, 1997
              Consolidated Statements of Operations
                    For the Three Month and Six Month Periods Ended March 31,
                    1998 and 1997 (unaudited)
              Consolidated Statement of Changes in Stockholders Equity (Deficit)
                    For the Period Ended March 31, 1998 and the Year Ended
                    September 30, 1997
              Consolidated Statement of Cash Flows
                    For the Three Month and Six Month Periods Ended March 31,
                    1998 and 1997 (unaudited)
              Notes to Consolidated Financial Statements


ITEM 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations



                                     PART II
                                OTHER INFORMATION



ITEM 2.  Changes in Securities

ITEM 3.  Defaults in Senior Securities

ITEM 4.  Submission of Matters to a Vote of Security Holders
<PAGE>
                          PART I. FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS


                 SOY ENVIRONMENTAL PRODUCTS, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS



                                     ASSETS

                                                       March 31     September 30
                                                       --------     ------------
                                                         1998           1997
                                                         ----           ----
                                                      (Unaudited)
Current Assets
        Cash                                         $    121,672   $    185,938
        Accounts Receivable                                 4,316         12,936
        Inventory                                         200,828        141,000
        Prepaid Expenses                                   13,995         93,456
                                                     ------------   ------------
                    Total Current Assets                  340,811        433,330

Property, plant and equipment, net (Note 1)                15,646         13,183
Investment, at equity (Note 6)                            154,051        190,000
Organization costs, net (Note 1)                            6,207          7,093
License fees, net (Note 1)                                  4,700          4,800
                                                     ------------   ------------
                    Total Assets                     $    521,415   $    648,406
                                                     ============   ============
                                        3
<PAGE>
                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                          March 31      September 30
                                                                          --------      ------------
                                                                            1998            1997
                                                                            ----            ----
                                                                        (Unaudited)

<S>                                                                     <C>             <C>         
Current Liabilities
        Notes Payable-current portion (Notes 4 and 7)                   $    484,042    $    221,914
        Accounts Payable                                                     111,294         140,600
        Accrued Expenses                                                      95,865          54,856
                                                                        ------------    ------------
                    Total Current Liabilities                           $    691,201    $    417,370
                                                                        ------------    ------------
Notes Payable Long Term Portion (Notes 4 and 7)                         $       --      $    631,264
                                                                        ------------    ------------
Contingencies (Notes 5 and 8)                                                   --              --
Stockholders' Equity (Deficit) (Note 9):
        Preferred Stock, $.001 Par Value, 3,000,000 shares
                authorized, 205,000 shares isued and
                outstanding as of March 31, 1998                                 205            --
        Common  Stock, $.001 Par Value, 20,000,000 shares
                authorized, 6,290,200 and 5,445,200 shares issued and
                outstanding as of March 31, 1998 and
                September 30, 1997, respectively                               6,290           5,445
        Additional Paid-in-capital                                         1,394,904         415,085
        Accumulated Deficit                                               (1,571,185)       (820,758)
                                                                        ------------    ------------
                    Total Stockholders' Equity (Deficit)                    (169,786)       (400,228)
                                                                        ------------    ------------

                    Total Liabilities and Stockholders' Equity          $    521,415    $    648,406
                                                                        ============    ============
</TABLE>

                  The Accompanying Notes are an Integral Part
                          of the Financial Statements
                                       4
<PAGE>
                 SOY ENVIRONMENTAL PRODUCTS, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
     For the Three Month & Six Month Periods Ended March 31, 1998 and 1997

<TABLE>
<CAPTION>
                                                       Three Months Ended             Six Months Ended
                                                       ------------------             ----------------
                                                            March 31                      March 31
                                                            --------                      --------
                                                       1998           1997           1998           1997
                                                       ====           ====           ====           ====
                                                           (Unaudited)                   (Unaudited)

<S>                                                <C>            <C>            <C>            <C>        
Sales                                              $   114,335    $     5,046    $   126,770    $     8,179

Cost of Sales                                           79,139          2,354         89,770          3,906
                                                   -----------    -----------    -----------    -----------

             Gross Profit                               35,196          2,692         37,000          4,273

             General and Administrative Expenses       351,075        116,035        572,047        197,754
                                                   -----------    -----------    -----------    -----------

             Loss from Operations                     (315,879)      (113,343)      (535,047)      (193,481)

             Miscellaneous Income (Loss)               (35,427)          --          (35,189)           245

             Interest Expense                          (89,821)          --         (180,191)          --
                                                   ===========    ===========    ===========    ===========

             Net Loss                              $  (441,127)   $  (113,343)   $  (750,427)   $  (193,236)
                                                   ===========    ===========    ===========    ===========

Loss Per Share (Note 1)                                  (0.07)         (0.02)         (0.13)         (0.04)
                                                   ===========    ===========    ===========    ===========

Basic Weighted Average Shares Outstanding            6,008,533      5,190,308      5,867,700      4,795,100
                                                   ===========    ===========    ===========    ===========
</TABLE>

                   The Accompanying Notes are an Integral Part
                           of the Financial Statements
                                       5
<PAGE>
                 SOY ENVIRONMENTAL PRODUCTS, INC. AND SUBSIDIARY
       CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
    FOR THE PERIOD ENDED MARCH 31, 1998 AND THE YEAR ENDED SEPTEMBER 30, 1997

<TABLE>
<CAPTION>
                                                                                                                         Total
                                                                                                                         -----
                                                                                         Additional                  Stockholders'
                                                                                         ----------                  -------------
                                Preferred       Stock            Common Stock              Paid-in     Accumulated      Equity
                                ---------       -----            ------------              -------     -----------      ------
                                 Shares         Amount        Shares         Amount        Capital       Deficit       (Deficit)
                                 ------         ------        ------         ------        -------       -------       ---------

<S>                                <C>       <C>             <C>          <C>            <C>           <C>            <C>        
Balance at September 30,
1996                                  --     $      --       8,816,922    $     8,817    $      --     $      --      $     8,817

1 for 6 reverse stock split           --            --      (7,347,422)        (7,347)         7,347          --             --

Reverse merger with Delta
Environmental, Inc. (Note 1)          --            --       2,530,500          2,530         32,470       (40,726)        (5,726)
                               -----------   -----------   -----------    -----------    -----------   -----------    -----------

Adjusted balance after
reverse merger                        --            --       4,000,000          4,000         39,817       (40,726)         3,091

Proceeds from private
offering, net of costs of
$104,849                              --            --       1,393,800          1,394        358,357          --          359,751

Compensation for consulting
services                              --            --          51,400             51         16,911          --           16,962

Net loss for the year ended
September 30, 1997                    --            --            --             --             --        (780,032)      (780,032)
                               -----------   -----------   -----------    -----------    -----------   -----------    -----------

Balance at September 30,
1997                                  --            --       5,445,200          5,445        415,085      (820,758)      (400,228)

Proceeds from private
offering; Net of costs of
$69,131                            205,000           205          --             --          135,664          --          135,869

Conversion of Senior
Convertible Debt                      --            --         720,000            720        719,280          --          720,000

Compensation for consulting
services                              --            --         125,000            125        124,875          --          125,000

Net loss for the six months
ended March 31, 1998                  --            --            --             --             --        (750,427)      (750,427)
                               -----------   -----------   -----------    -----------    -----------   -----------    -----------

Balance at March 31, 1998          205,000   $       205     6,290,200    $     6,290    $ 1,394,904   $(1,571,185)   $  (169,786)
                               ===========   ===========   ===========    ===========    ===========   ===========    ===========
</TABLE>

                   The Accompanying Notes are an Integral Part
                           of the Financial Statements
                                       6
<PAGE>
                 SOY ENVIRONMENTAL PRODUCTS, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENT OF CASH FLOWS
      For the Three Month & Six Month Periods Ended March 31, 1998 and 1997

<TABLE>
<CAPTION>
                                                           Three Months Ended         Six Months Ended
                                                           ------------------         ----------------
                                                                March 31                  March 31
                                                                --------                  --------
                                                            1998         1997         1998         1997
                                                            ====         ====         ====         ====
                                                               (Unaudited)               (Unaudited)

<S>                                                       <C>           <C>         <C>          <C>      
Net cash used by operating activitites                    (393,151)     (75,953)    (707,723)    (240,649)
                                                         ---------    ---------    ---------    ---------

Cash Flows for Investing Activities:
             Increase in Furniture and Equipment                                      (4,224)        --
             Increase in Investment                         35,949      (42,698)      35,949      (42,698)
                                                         ---------    ---------    ---------    ---------
Net cash used by investing activities                       35,949      (42,698)      31,725      (42,698)
                                                         ---------    ---------    ---------    ---------

Cash Flows from Financing Activities:
             Proceeds from issuance of preferred stock     205,000         --        205,000         --
             Proceeds from issuance of common stock        806,483       47,519      775,868      238,477
             Repayment of notes payable                   (559,507)        --       (369,136)        --
             Proceeds (payments) from notes payable           --         50,000         --         50,000
                                                         ---------    ---------    ---------    ---------

             Net cash provided by financing activities     451,976       97,519      611,732      288,477
                                                         ---------    ---------    ---------    ---------
Net increase (decrease) in cash                             94,774      (21,132)     (64,266)       5,130

Cash at the beginning of period                             26,898       26,262      185,938         --
                                                         ---------    ---------    ---------    ---------

Cash at end of period                                    $ 121,672    $   5,130    $ 121,672    $   5,130
                                                         =========    =========    =========    =========
</TABLE>

                   The Accompanying Notes are an Integral Part
                           of the Financial Statements
                                       7
<PAGE>
                 SOY ENVIRONMENTAL PRODUCTS INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       Summary of Significant Accounting Policies

         Basis of Presentation:

         The accompanying  Statements of Operations for the three and six months
         ended March 31, 1998 and 1997,  Statement  of Changes in  Stockholders'
         Equity for the period ended March 31, 1998 and  Statements of Cash Flow
         for the three  and six  months  ended  March  31,  1998 and  1997,  are
         consolidated  statements and include all of the accounts of the Company
         and  its  wholly-owned  subsidiary,   Delta  Environmental,   Inc.  All
         intercompany   accounts  and   transactions   were  eliminated  in  the
         consolidation of these statements.

         Interim Financial Statements:

         The unaudited  interim  financial  statements  include all  adjustments
         (consisting  of normal  recurring  accruals)  which,  in the opinion of
         management, are necessary in order to make the financial statements not
         misleading.  Operating  results for the six months ended March 31, 1998
         are not necessarily  indicative of the results that may be expected for
         the entire year ending September 30, 1998.  These financial  statements
         have been prepared in accordance  with the  instructions to Form 10-QSB
         and do not contain certain  information  required by generally accepted
         accounting  principles.  These statements should be read in conjunction
         with financial  statements and notes thereto  included in the Company's
         Form 10-KSB for the year ended September 30, 1997.

         Loss Per Common Share and Common Equivalent Share:

         The  computation  of loss  per  share  is based on the net loss and the
         weighted  average  number of shares of common  stock and  common  stock
         equivalents  outstanding  for each period.  Certain  stock  options and
         warrants  outstanding  during the quarters and periods  ended March 31,
         1998 and 1997 are not included in the computation of loss per share for
         those  periods  because  their effect would be  antidilutive.  Loss per
         share  for the  quarter  and  period  ended  March  31,  1997 have been
         restated to give retroactive effect to FASB No. 128.

2.       Concentrations:

         Major Supplier:

         The Company purchases substantially all of its supply of soybean methyl
         esters and other materials from Interwest  L.L.C., a related entity. As
         of March  31,  1998,  the  amount  included  in  accounts  payable  was
         approximately $346.

3.       Notes Payable:

         As of March 31, 1998, notes payable are
         as follows:  Non-interest  bearing note
         payable  to  an   individual,   Due  on
         demand: unsecured                                  $  50,000

         Non-interest   bearing  Senior  Secured
         Convertible  Notes, in the aggregate of
         $204,000  (effective rate approximately
         32%),  principal  due  January 30, 1998
         and convertible after November 15, 1997
         into  204,000  shares of common  stock;
         secured by stock and corporate assets                204,000
                                       8
<PAGE>
                 SOY ENVIRONMENTAL PRODUCTS INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         Non-interest bearing promissory note in
         the aggregate  amount Of $241,500 (less
         unamortized    discount   of   $11,458,
         effective   rate   Approximately   60%,
         principal   due  April  30,   1998  and
         Convertible  after  April 30, 1998 into
         241,500 shares of Common Stock                       230,042
                                                           ----------
                                                              484,042
                                                           ----------

                                                           $  696,271
                                                           ==========


         As of January 30, 1998,  $204,000 of Senior Secured  Convertible  Notes
         went into  default  and began  accruing  interest at the rate of 5% per
         month.

4.       Investment:

         The  investment  consists of an approximate  25% ownership  interest in
         Interwest,  L.L.C., an Iowa limited liability  company.  The investment
         will be accounted for under the equity method.

         Current Assets                                             $   136,800
         Property, plant and equipment                                1,043,411
         Other assets, net                                                2,375
                                                                    -----------

              Total Assets                                          $ 1,182,586
                                                                    ===========

              Current Liabilities                                   $   166,384

              Long-term debt                                          1,150,000
                                                                    -----------
                                                                    $ 1,316,384
                                                                    -----------

              Stockholders' equity                                  $  (133,798)
                                                                    -----------

              Total liabilities and stockholders' equity            $ 1,182,586
                                                                    ===========
                                                           

5.       Contingencies:

         In relation to the Company's debt offering,  the Company issued 924,000
         warrants  exercisable at $1 per share. Upon exercise of these warrants,
         the  placement  agent is to receive  five  percent (5%) of the proceeds
         received by the  Company.  Should all the  warrants be  exercised,  the
         Company will incur $46,200 of additional  costs.  As of March 31, 1998,
         no liability has been accrued.

6.       Stockholders' Equity:

         Common Stock and Stock Split:

         On November 8 1996, the Company's Board of Directors authorized a 1 for
         6 reverse split of its common stock.
                                       9
<PAGE>
                 SOY ENVIRONMENTAL PRODUCTS INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


         Private Offerings:

         During the year ended  September  30,  1997,  the  Company  completed a
         private  placement of common stock pursuant to Regulation D promulgated
         by the Securities and Exchange Commission. The Company issued 1,393,800
         shares of common stock pursuant to the offering.

         Options and Warrants:

         The Company has issued 100,000 stock options  pursuant to an employment
         agreement.  The options are exercisable at $1.00 per share for a period
         for five years from grant date.

         In December 1997, the Board of Directors authorized a private placement
         on a  best  efforts  basis  of  up  to  $241,500  principal  amount  of
         convertible notes and 241,500 warrants. The full amount of $241,500 was
         sold during the quarter ended March 31, 1998.

         The Company also  initiated a Private  Placement  for the sale of up to
         20,000 shares or up to  $2,100,000  of Series A  Convertible  Preferred
         Stock.  An amount of $205,000  was sold during the quarter  ended March
         31, 1998.


7.       Basic Earnings Per Common Share:

         Basic earnings per share are based upon the weighted  average number of
         shares  outstanding for each of the respective  periods.  The following
         data  reflects the amount used in computing  earnings per share for the
         six month and three month periods ended March 31, 1998.

<TABLE>
<CAPTION>
                                                   Three Months Ended             Six Months Ended
                                                   ------------------             ----------------
                                                        March 31                      March 31
                                                        --------                      --------
                                                   1998           1997           1998           1997
                                                   ----           ----           ----           ----

<S>                                            <C>            <C>            <C>            <C>         
            Net income available to common     $  (441,127)   $  (113,343)   $  (750,427)   $  (193,236)
              stockholders used in basic EPS

            Basic earnings (loss) per share

            Weighted average common shares       6,008,533      5,190,308      5,867,700      4,795,100
              outstanding                      -----------    -----------    -----------    -----------

            Basic earnings (loss) per share    $     (0.07)   $     (0.02)   $     (0.13)   $     (0.04)
                                               ===========    ===========    ===========    ===========
</TABLE>

         Earnings per share  assuming  dilution have not been  presented as they
         were antidilutive.

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

         The following  discussion  of the results of  operations  and financial
condition should be read in conjunction with the financial  statements and notes
thereto appearing elsewhere in this Form 10-QSB. Prior to  October 21, 1996, the
Company  had no  operating  history.  Subsequent  to October 21, 1996 all of the
Company's  operations are being carried out by its wholly owned subsidiary Delta
Environmental,  Inc.  (DEI').  Therefore,  all discussions  below concerning the
Company prior to the  acquisition of DEI relate to and reflect the operations of
DEI only.
                                       10
<PAGE>
I.       RESULTS OF OPERATIONS

         Six Months  Ended March 3l, 1998  Compared to 6 Months  Ended March 3l,
1997.  For the six month period  ended March 31, 1998,  the Company had sales of
$126,770  with cost of sales  equal to $89,770  resulting  in a gross  profit of
$37,000.  For the same period  ending March 31,  1997,  the Company had sales of
$8,179 and cost of sales of $3,906 with a gross profit of $4,273.  Cost of sales
as a percentage  of sales was 70.8% and 47.8% for the six month  periods  ending
March 31, 1998 and 1997,  respectively.  The wide variance in percentages is due
to the small volume of sales and neither  percentage may be indicative of future
costs of sales as a percentage of sales on anticipated higher revenues.  For the
three  months ended March 31, 1998 the Company had sales of $114,335 and cost of
sales of $79,139  with a gross  profit of $35,196.  For the same  period  ending
March 31, 1997, the Company had sales of $5,046 and cost of sales of $2.354 with
a gross profit of $2,692. General and administrative  expenses were $572,047 for
the six months ended March 31, 1998, which resulted in a loss from operations of
$535,047 for the period.. For the same period ending March 31, 1997, general and
administrative expenses were $197,754 and the loss from operations was $193,481.
General and  administrative  expenses  for the three months ended March 31, 1998
were $351,075 which resulted in a loss of $441,127.  The increase in general and
administrative  expenses of  approximately  $374,000  was due  primarily  to the
start-up  costs  for  the  marketing   program  of  the  Company.   General  and
administrative  costs for the three  months  ended March 31, 1997 were  $116,035
which resulted in a loss of $113,343

         The Company  anticipates that its operating expenses will be increasing
so  that  the  Company's  future  profitability  will  depend  upon  significant
increases  in revenue from  operations.  While the Company  believes  that sales
revenue will increase due to the Company's marketing activities and distribution
agreements  recently entered into, there can be no assurance as to the amount of
income which the Company may be able to generate  from  distributions  and sales
operations.  Losses  have  primarily  resulted  from high  start-up  and general
administrative  costs compared to the Company's initial low sales volume.  Given
the  Company's  financial  resources,  its  anticipated  expenses and the highly
competitive environment in which it will operate, there can be no assurance that
the Company will be able to generate  sufficient  revenue to fund its current or
future  operations or that the Company's future operations will be profitable in
the near future or at all.

II.      LIQUIDITY AND CAPITAL RESOURCES

         From the date of its  formation,  January 10, 1996,  to the date of the
acquisition  of DEI,  October 21, 1996, the Company had no revenues or operating
income.  For the six month period ended March 31, 1998, the Company had revenues
of $126,770,  primarily from its initial delivery to Payless Cashways. As of the
date of acquisition of DEI, the Company had no tangible assets. On September 30,
1997,  the Company had total assets of $648,406 and total  stockholders'  equity
(deficit) of $(400,228) compared to $521,415 and $(169,786), respectively, as of
March 31, 1998.  As of September  30,  1997,  the Company had current  assets of
$433,330 in the form of cash,  accounts  receivable  and current  liabilities of
$417,370.  At March 31,  1998,  the  Company  had  current  assets  of  $340,811
comprised of $121,672 cash, $4,316 accounts  receivable and $200,828  inventory,
and current liabilities of $691,201.  The Company has increased its inventory in
anticipation of increased sales and expects to continue to increase inventory as
sales activities increase.

         Since  inception,   the  Company's  working  capital  needs  have  been
satisfied by financing activities  consisting of the private placement of common
stock and debt.  During the period ended March 31, 1998, a portion of the Senior
Secured  debt went into  default.  In  addition,  the Company has  approximately
$241,500 of debt due in April, 1998.

         The Company  anticipates  meeting its working  capital needs during the
current  fiscal year  primarily  with proceeds  from the sale of securities  and
secondarily  with revenues from sales and distribution  operations.  The Company
believes that it will require substantial additional funds to cover the costs of
manufacturing its products,  general and administrative overhead and meeting its
reporting  obligations  under the  Securities  Exchange  Act.  If such funds are
necessary,  the Company  will seek to borrow such funds  and/or raise such funds
through the private or public sale of its common stock or other  securities.  No
assurances can be given that such financing,  if required, will be available, or
that it can be obtained on terms satisfactory to the Company.  In the opinion of
management,  inflation  has not had a material  affect on the  operations of the
Company.
                                       11
<PAGE>
         During  January,  1998,  the Company  received its first purchase order
from Payless Cashways of  approximately  $100,000.  The Company's  products with
respect to this order were  shipped in the first  quarter of 1998.  The  Company
anticipates  additional orders for its product will be generated from other home
improvement  center retailers.  The Company has commenced the establishment of a
manufacturer's  representative  organization to represent the Company's  product
throughout the U.S. that it continues to expand. The organization is responsible
for  contacting  and  developing  target  markets as determined by the Company's
segments  involving  large  hardware/home  center  retail  chains  and the light
industrial and automotive users.  Management believes that the proceeds from its
financing activities as currently  anticipated will be sufficient to provide for
the  Company's  planned  expansion  of its  marketing,  distribution  and  sales
activities.
                                       12
<PAGE>
                           PART II. OTHER INFORMATION


ITEM 2.     CHANGES IN SECURITIES

         From December 8, 1997 through  January 31, 1998,  the Company  issued a
total of  $241,500 of  Convertible  Subordinated  Notes and 241,500  Warrants as
units for total  consideration of $200,000.  The Convertible  Subordinated Notes
were placed through Capital West  Investments  Holding  Company,  Inc. for total
commissions  of  $14,000.  The  offering  was solely to  "accredited  investors"
pursuant to Rule 506 of Regulation D. Each Convertible  Subordinated Note is due
four months from issuance and is convertible into shares of the Company's Common
Stock on the basis of $1.00 of  principal  per  share.  The  Warrants  allow the
holder  thereof the right to purchase  one share of Common  Stock per Warrant at
$1.00 for three years from the date of issuance.

         Subject to the filing of the amendment to the Company's  certificate of
incorporation  described in Item 4, and the filing of an appropriate certificate
of  designation  in  Delaware,  the Company  issued  205,000  shares of Series A
Preferred  Stock and  102,500  Class C Warrants  as units from  February 6, 1998
through February 26, 1998 for a total  consideration  of $205,000.  The offering
was made solely to  accredited  investors  pursuant to Rule 506 of Regulation D.
The Series A Preferred Stock was placed through  Capital West  Investment  Group
and Fox & Company Investments, Inc. for total commissions of $26,650. The Series
A Preferred Stock has the following terms:

         Dividends.  The holders of the Series A Preferred Stock are entitled to
receive a $.12 (12 %)  annual,  dividend,  accruing  each June 1 and  December 1
commencing on June 1, 1998.  Dividends shall be payable when, as and if declared
by the Board of Directors,  shall be  cumulative,  and shall only be paid out of
funds legally available  therefor,  if any. Any accumulated but unpaid dividends
will be payable upon conversion of the Series A Preferred Stock to Common Stock.
At the  Company's  discretion,  dividends may be paid in shares of the Company's
Common Stock with a predetermined value of $2.00 per share.

         Priority.  The Series A Preferred  Stock has  preference  in payment of
dividends  over the  Company's  Common Stock.  In the event of any  liquidation,
dissolution,  or winding up of the  Company,  the  holders of Series A Preferred
Stock will be entitled to receive  $1.00 per share of Series A Preferred  Stock,
plus any accumulated but unpaid dividends accrued thereon, before the holders of
Common Stock receive any  distributions.  The Company may not establish a series
of  preferred  superior to the Series A  Preferred  Stock,  but may  establish a
series with equal preferences to dividends and liquidation distributions.

         Conversion.  The  Series  A  Preferred  Stock is  convertible  into the
Company's Common Stock in minimum denominations of 1,000 shares,  initially on a
one-for-one  basis.  The conversion ratio is subject to adjustment as of January
1, 1999 and each January 1  thereafter  (each,  an  "Adjustment  Date").  On any
Adjustment  Date the conversion  ratio will be adjusted to the quotient of which
$1.00 is the numerator and an amount equal to 75% of the Company's  Common Stock
five day prior  average  closing  price is the  denominator.  If any  adjustment
changes the conversion  ratio to more than one share of Series A Preferred Stock
for one share of Common  Stock (or  increases  such ratio to more than the prior
ratio)  notice will be given to all holders of the Series A Preferred  Stock and
the  holders  may elect  within 45 days of such  notice to convert  the Series A
Preferred  Stock at the  conversion  ratio in  effect  immediately  prior to the
Adjustment Date.

         Mandatory  Conversion.  The  Series  A  Preferred  Stock  will  convert
automatically  into the Company's Common Stock at the conversion ratio in effect
in the event of a qualified  public offering  ("QPO") of or upon attainment of a
qualified  market price ("QMP") for the Company's Common Stock. A QPO will occur
upon the  successful  completion of a public  offering of the  Company's  Common
Stock at a price of not less than $4.00 per share with total  gross  proceeds of
not less than $5,000,000.  A QMP will occur at any time after January 1, 1999 in
the event the closing bid price of the Company's  Common Stock in an established
market  equals or exceeds $4.00 per share for 90  consecutive  trading days with
volume of not less than one percent of the shares outstanding.

         Anti-Dilution.  The conversion ratio of the Series A Preferred Stock is
subject to  adjustment  to prevent  dilution  in the event of any stock  splits,
stock dividends  (except  dividends payable on the Series A Preferred Stock), or
other adjustments to capital structure of the Company.

         The 102,500 Class C Warrants  issued as part of the units in connection
with the placement of the Series A Preferred Stock provide the holders the right
to acquire  102,500  shares of Common  Stock at a price of $1.25 per share until
December  1,  1999,  and for $1.50 per share  thereafter.  The Class C  Warrants
expire on March 1, 2000.
                                       13
<PAGE>
         The Company issued  102,500 Class D Warrants to acquire  102,500 shares
of  Common  Stock at a price of $1.50  per  share  to the  placement  agents  in
connection  with the  placement  of the  Series A  Preferred  Stock  and Class C
Warrants. The Class D Warrants expire March 1, 2002.

         During the period from January 1, 1998 through March 31, 1998, $720,000
of the Company's  Senior Secured  Convertible  Notes were converted into 720,000
shares of the Company's  Common Stock.  The conversions were made in reliance on
Section  3(a)(9) and of the Securities Act of 1933, as amended (the  "Securities
Act") as an exchange by the Company with its existing  security holders where no
commission  or  remuneration  was  paid  and  pursuant  to  Section  4(2) of the
Securities Act as a transaction not involving any public offering.

         The  Company  issued  125,000  shares as  compensation  for  consulting
services to certain  consultants  of the Company  during the quarter ended March
31, 1998. Such shares were issued pursuant to Section 4(2) of the Securities Act
as a transaction not involving any public offering.


ITEM 3.    DEFAULTS IN SENIOR SECURITIES

         The Company issued $924,000 of its Senior Secured Convertible Notes due
January 31, 1998. Of the $924,000  outstanding,  $720,000 of such Senior Secured
Convertible  Notes were converted  into 720,000  shares of the Company's  Common
Stock and the remaining $204,000 principal amount went into default.  The Senior
Secured  Convertible  Notes accumulate  interest at the rate of 5% per month. At
April 30, 1998, approximately $250,000 of principal and accumulated interest was
outstanding  on  the  Senior  Secured  Convertible  Notes.  The  Senior  Secured
Convertible  Notes are secured by a lien on essentially all of the assets of the
Company.  No collection  activity with respect to such defaulted  notes has been
commenced  and the  Company  anticipates  that  the  notes  will  ultimately  be
converted  or  otherwise  satisfied.  However,  there is no  assurance  that the
Company will have sufficient funds to satisfy the obligations  under such Senior
Secured Convertible Notes. If the Company fails to satisfy its obligations under
such  notes,  it is possible  that the  holders  thereof  would  exercise  their
remedies and seek to satisfy their  obligations  through a sale or forfeiture of
the Company's  assets.  In such event, in all likelihood,  the company could not
continue as a going concern.

         The  Company is in default of  payment  of  approximately  $150,000  in
principal and accumulated interest on its outstanding  Convertible  Subordinated
Notes  described in Item 2 above.  Such notes are  accumulating  interest at the
rate of 5% per month.  Although these notes are not secured by the assets of the
Company,  if the holders of such notes institute legal  proceedings  against the
Company and the  Company is unable to repay such  notes,  the Company may not be
able to continue as a going concern.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         In  accordance  with a definitive  Informational  Statement on Form 14C
filed with the  Securities  and  Exchange  Commission,  the Company  solicited a
stockholder  consent  to amend  the  Company's  certificate  of  incorporate  to
authorize the issuance of up to 3,000,000 shares of preferred stock. The Company
obtained the written  signatures of 3,345,967  shares to approve such amendment.
The amendment to the  certificate of  incorporation  has been filed in Delaware,
together with a certificate of designation for the Company's  Series A Preferred
Stock.

                                   SIGNATURES

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


                        SOY ENVIRONMENTAL PRODUCTS, INC.
                                  (Registrant)



Dated:   June 1, 1998                 By: /s/ Gary L. Haer
         ------------                     --------------------------------------
                                          Gary L. Haer,  Chief Financial Officer
                                       14