Table of Contents





|                                  
|----------------------------------
|UNITED STATES                     
|SECURITIES AND EXCHANGE COMMISSION
|                                  
|Washington, D.C. 20549            
|                                  
|                                  
|FORM 10-Q                         
|                                  

|                                                                  |                                                                                    
|----------------------------------------------------------------- | -----------------------------------------------------------------------------------
|x                                                                 | Quarterly report under Section 13
 or 15(d) of the Securities Exchange Act of 1934.
|                                                                  |                                                                                    
|For
 the quarterly period ended July 31, 2010                    
|                                                                  |                                                                                    
|OR                                                               
|                                                                  |                                                                                    
|o                                                                 | Transition report under Section 13
 or 15(d) of the Exchange Act.                  
|                                                                  |                                                                                    
|For
 the transition period from _______ to _________             
|                                                                  |                                                                                    
|Commission
 file number 000-53112                                
|                                                                 
|                                                                 
|                                                                 
|SOY ENERGY, LLC                                                  
|                                                                 
|(Exact name of small business issuer as specified in its charter)

|                                |                                     
|------------------------------- | ------------------------------------
|Iowa                            | 20-4026473                          
|(State or other jurisdiction of | (I.R.S. Employer Identification No.)
|incorporation or organization)  |                                     

|                                                      
|------------------------------------------------------
|222 N.
 MAIN STREET, P. O. BOX 663, MARCUS, IOWA 51035
|(Address of principal executive offices)              
|                                                      
|(712)
 376-2081                                       
|(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.                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                            | xYes  | oNo 
|                                                                                                                                                                                                                                                                                                                                                                                            |       |     
|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 o | No o
|                                                                                                                                                                                                                                                                                                                                                                                            |       |     
|Indicate by
 check mark whether the registrant is a large accelerated filer, an
 accelerated filer, or a non-accelerated filer. See definition of accelerated
 filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check
 one):                                                                                                                                        

|                                                                      |                           |   | 
|--------------------------------------------------------------------- | ------------------------- | - | 
|Large accelerated filer o                                             | Accelerated filer         | o
|                                                                      |                           |   | 
|Non-accelerated filer o(Do
 not check if a smaller reporting company) | 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).                                                                       
|                                                                                                                                                                                         
|                                                                                                                                                                                          | oYes | xNo
|                                                                                                                                                                                          |      |    
|State the number of shares
 outstanding for each of the issuers classes of common equity as of the
 latest practicable date: As of September 14, 2010, we had 33,018 units
 outstanding.







Table of Contents

|           |                                                                                       |    |   
|---------- | ------------------------------------------------------------------------------------- | -- | --
|PART 1.    | FINANCIAL INFORMATION                                                                 |    | 3 
|Item 1.    | Financial
 Statements                                                                 |    | 3 
|Item 2.    | Managements
 Discussion and Analysis of Financial Condition and Results of Operation |    | 12
|Item 3.    | Quantitative
 and Qualitative Disclosures about Market Risk                           |    | 21
|Item 4.    | Controls and
 Procedures                                                              |    | 21
|PART II.   | OTHER INFORMATION                                                                     |    | 21
|Item 1.    | Legal
 Proceedings                                                                    |    | 21
|Item 1A.   | Risk Factors                                                                          |    | 21
|Item 2.    | Unregistered
 Sales of Equity Securities and Use of Proceeds                          |    | 22
|Item 3.    | Defaults Upon
 Senior Securities                                                      |    | 22
|Item 4.    | [Reserved]                                                                            |    | 22
|Item 5.    | Other
 Information                                                                    |    | 22
|Item 6.    | Exhibits                                                                              |    | 23
|SIGNATURES |                                                                                       | 23

2

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Table of Contents

|         |                      
|-------- | ---------------------
|PART
 1. | FINANCIAL INFORMATION

Item 1. Financial Statements

|                             
|-----------------------------
|SOY ENERGY, LLC              
|(A Development Stage Company)
|                             
|Condensed Balance Sheets     

|                                                           |  |                |            |                   |   |            |  
|---------------------------------------------------------- |  | -------------- | ---------- | ----------------- | - | ---------- | -
|                                                           |  |                |            |                   |  
|ASSETS                                                     |  | July 31,
 2010 |            | October 31,
 2009 |  
|                                                           |  |                |            |                   |  
|                                                           |  | (Unaudited)    |            |                   |  
|Current Assets                                             |  |                |            |                   |   |            |  
|Cash and equivalents                                       |  | $              | 18,908,781 |                   | $ | 19,826,065 |  
|Accrued interest receivable                                |  |                | 5,291      |                   |   | 6,171      |  
|Prepaid expenses                                           |  |                | 12,356     |                   |   | 4,441      |  
|                                                           |  |                |            |                   |   |            |  
|Total current assets                                       |  |                | 18,926,428 |                   |   | 19,836,677 |  
|                                                           |  |                |            |                   |   |            |  
|Equipment                                                  |  |                |            |                   |   |            |  
|Equipment                                                  |  |                | 9,780      |                   |   | 8,873      |  
|Accumulated depreciation                                   |  |                | (5,465     | )                 |   | (4,267     | )
|                                                           |  |                |            |                   |   |            |  
|Net equipment                                              |  |                | 4,315      |                   |   | 4,606      |  
|                                                           |  |                |            |                   |   |            |  
|Other Assets                                               |  |                |            |                   |   |            |  
|Assets held for sale                                       |  |                | 2,920,637  |                   |   | 3,557,061  |  
|Escrow deposit                                             |  |                | 250,000    |                   |   |           |  
|Loan fees                                                  |  |                | 40,000     |                   |   |           |  
|                                                           |  |                |            |                   |   |            |  
|Total other assets                                         |  |                | 3,210,637  |                   |   | 3,557,061  |  
|                                                           |  |                |            |                   |   |            |  
|                                                           |  |                |            |                   |   |            |  
|Total Assets                                               |  | $              | 22,141,380 |                   | $ | 23,398,344 |  
|                                                           |  |                |            |                   |   |            |  
|                                                           |  |                |            |                   |   |            |  
|LIABILITIES AND MEMBERS EQUITY                            |  |                |            |                   |   |            |  
|                                                           |  |                |            |                   |   |            |  
|Current Liabilities                                        |  |                |            |                   |   |            |  
|Accounts payable                                           |  | $              | 111,186    |                   | $ | 54,879     |  
|Accrued expenses                                           |  |                | 11,235     |                   |   | 8,027      |  
|                                                           |  |                |            |                   |   |            |  
|Total current liabilities                                  |  |                | 122,421    |                   |   | 62,906     |  
|                                                           |  |                |            |                   |   |            |  
|Members Equity                                            |  |                |            |                   |   |            |  
|Member contributions, 33,018 units issued
 and outstanding |  |                | 31,031,572 |                   |   | 31,031,572 |  
|Deficit accumulated during development
 stage              |  |                | (9,012,613 | )                 |   | (7,696,134 | )
|                                                           |  |                |            |                   |   |            |  
|Total members equity                                      |  |                | 22,018,959 |                   |   | 23,335,438 |  
|                                                           |  |                |            |                   |   |            |  
|                                                           |  |                |            |                   |   |            |  
|Total Liabilities and Members Equity                      |  | $              | 22,141,380 |                   | $ | 23,398,344 |  
|                                                           |  |                |            |                   |   |            |  

Notes to
Unaudited Condensed Financial Statements are an integral part of this
Statement.

3

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Table of Contents

SOY ENERGY, LLC(A Development Stage Company)

Condensed Statements of Operations

|                                                       |  |                                      |          |                                     |   |          |  
|------------------------------------------------------ |  | ------------------------------------ | -------- | ----------------------------------- | - | -------- | -
|                                                       |  |                                      |          |                                     |   |          |  
|                                                       |  | Three Months 
 Ended
 July 31,
 2010 |          | Three Months
 Ended
 July 31,
 2009 |  
|                                                       |  |                                      |          |                                     |  
|                                                       |  | (Unaudited)                          |          | (Unaudited)                         |  
|                                                       |  |                                      |          |                                     |   |          |  
|Revenues                                               |  | $                                    |         |                                     | $ |         |  
|                                                       |  |                                      |          |                                     |   |          |  
|Operating Expenses                                     |  |                                      |          |                                     |   |          |  
|General and administrative                             |  |                                      | 73,969   |                                     |   | 59,461   |  
|Professional fees                                      |  |                                      | 193,945  |                                     |   | 200,724  |  
|                                                       |  |                                      |          |                                     |   |          |  
|Total operating expenses                               |  |                                      | 267,914  |                                     |   | 260,185  |  
|                                                       |  |                                      |          |                                     |   |          |  
|                                                       |  |                                      |          |                                     |   |          |  
|Operating Loss                                         |  |                                      | (267,914 | )                                   |   | (260,185 | )
|                                                       |  |                                      |          |                                     |   |          |  
|Other Income                                           |  |                                      |          |                                     |   |          |  
|Interest income                                        |  |                                      | 11,984   |                                     |   | 25,449   |  
|Other income                                           |  |                                      | 491      |                                     |   |         |  
|                                                       |  |                                      |          |                                     |   |          |  
|Total other income                                     |  |                                      | 12,475   |                                     |   | 25,449   |  
|                                                       |  |                                      |          |                                     |   |          |  
|                                                       |  |                                      |          |                                     |   |          |  
|Net Loss                                               |  | $                                    | (255,439 | )                                   | $ | (234,736 | )
|                                                       |  |                                      |          |                                     |   |          |  
|                                                       |  |                                      |          |                                     |   |          |  
|Weighted Average Units Outstanding - Basic and Diluted |  |                                      | 33,018   |                                     |   | 33,018   |  
|                                                       |  |                                      |          |                                     |   |          |  
|                                                       |  |                                      |          |                                     |   |          |  
|Net Loss Per Unit - Basic and Diluted                  |  | $                                    | (7.74    | )                                   | $ | (7.11    | )
|                                                       |  |                                      |          |                                     |   |          |  

Notes to
Unaudited Condensed Financial Statements are an integral part of this
Statement.

4

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Table of Contents

SOY ENERGY, LLC(A Development Stage Company)

Condensed Statements of Operations

|                                                       |  |                                    |            |                                    |   |                                                        |   |   |             |  
|------------------------------------------------------ |  | ---------------------------------- | ---------- | ---------------------------------- | - | ------------------------------------------------------ | - | - | ----------- | -
|                                                       |  |                                    |            |                                    |   |                                                        |   |   |             |  
|                                                       |  | Nine months
 ended
 July 31,
 2010 |            | Nine months
 ended
 July 31,
 2009 |   | From Inception
 (December 15,
 2005) to
 July 31, 2010 |  
|                                                       |  |                                    |            |                                    |   |                                                        |  
|                                                       |  | (Unaudited)                        |            | (Unaudited)                        |   | (Unaudited)                                            |  
|Revenues                                               |  | $                                  |           |                                    | $ |                                                       |   | $ |            |  
|                                                       |  |                                    |            |                                    |   |                                                        |   |   |             |  
|Operating Expenses                                     |  |                                    |            |                                    |   |                                                        |   |   |             |  
|General and administrative                             |  |                                    | 185,461    |                                    |   | 183,389                                                |   |   | 1,091,908   |  
|Professional fees                                      |  |                                    | 535,895    |                                    |   | 404,374                                                |   |   | 1,757,680   |  
|Impairment expense                                     |  |                                    | 630,863    |                                    |   |                                                       |   |   | 7,553,488   |  
|                                                       |  |                                    |            |                                    |   |                                                        |   |   |             |  
|Total operating expenses                               |  |                                    | 1,352,219  |                                    |   | 587,763                                                |   |   | 10,403,076  |  
|                                                       |  |                                    |            |                                    |   |                                                        |   |   |             |  
|                                                       |  |                                    |            |                                    |   |                                                        |   |   |             |  
|Operating Loss                                         |  |                                    | (1,352,219 | )                                  |   | (587,763                                               | ) |   | (10,403,076 | )
|                                                       |  |                                    |            |                                    |   |                                                        |   |   |             |  
|Other Income                                           |  |                                    |            |                                    |   |                                                        |   |   |             |  
|Interest income                                        |  |                                    | 35,249     |                                    |   | 124,603                                                |   |   | 1,376,162   |  
|Other income                                           |  |                                    | 491        |                                    |   |                                                       |   |   | 14,301      |  
|                                                       |  |                                    |            |                                    |   |                                                        |   |   |             |  
|Total other income                                     |  |                                    | 35,740     |                                    |   | 124,603                                                |   |   | 1,390,463   |  
|                                                       |  |                                    |            |                                    |   |                                                        |   |   |             |  
|                                                       |  |                                    |            |                                    |   |                                                        |   |   |             |  
|Net Loss                                               |  | $                                  | (1,316,479 | )                                  | $ | (463,160                                               | ) | $ | (9,012,613  | )
|                                                       |  |                                    |            |                                    |   |                                                        |   |   |             |  
|                                                       |  |                                    |            |                                    |   |                                                        |   |   |             |  
|Weighted Average Units Outstanding - Basic and Diluted |  |                                    | 33,018     |                                    |   | 33,018                                                 |   |   | 23,190      |  
|                                                       |  |                                    |            |                                    |   |                                                        |   |   |             |  
|                                                       |  |                                    |            |                                    |   |                                                        |   |   |             |  
|Net Loss Per Unit - Basic and Diluted                  |  | $                                  | (39.87     | )                                  | $ | (14.03                                                 | ) | $ | (388.64     | )
|                                                       |  |                                    |            |                                    |   |                                                        |   |   |             |  

Notes to
Unaudited Condensed Financial Statements are an integral part of this
Statement.

5

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Table of Contents

SOY ENERGY, LLC(A Development Stage Company)

Condensed Statements of Cash Flows

|                                                                              |  |                                     |            |                                     |   |                                                         |   |   |             |  
|----------------------------------------------------------------------------- |  | ----------------------------------- | ---------- | ----------------------------------- | - | ------------------------------------------------------- | - | - | ----------- | -
|                                                                              |  |                                     |            |                                     |   |                                                         |  
|                                                                              |  | Nine
 months
 Ended
 July 31,
 2010 |            | Nine
 months
 Ended
 July 31,
 2009 |   | From
 Inception
 (December 15,
 2005) to
 July 31, 2010 |  
|                                                                              |  |                                     |            |                                     |   |                                                         |  
|                                                                              |  | (Unaudited)                         |            | (Unaudited)                         |   | (Unaudited)                                             |  
|Cash Flows from Operating Activities                                          |  |                                     |            |                                     |   |                                                         |   |   |             |  
|Net loss                                                                      |  | $                                   | (1,316,479 | )                                   | $ | (463,160                                                | ) | $ | (9,012,613  | )
|Adjustments to reconcile net loss to net cash used for operating
 activities: |  |                                     |            |                                     |   |                                                         |   |   |             |  
|Depreciation                                                                  |  |                                     | 1,198      |                                     |   | 1,331                                                   |   |   | 5,465       |  
|Impairment of long-lived assets                                               |  |                                     | 630,863    |                                     |   |                                                        |   |   | 7,553,488   |  
|Write off of construction services related to terminated agreement            |  |                                     |           |                                     |   |                                                        |   |   | 50,000      |  
|Write off of loan commitment fees                                             |  |                                     |           |                                     |   |                                                        |   |   | 25,000      |  
|Non-cash interest income                                                      |  |                                     |           |                                     |   |                                                        |   |   | (30,000     | )
|Changes in operating assets and liabilities:                                  |  |                                     |            |                                     |   |                                                         |   |   |             |  
|Accrued
 interest receivable                                                  |  |                                     | 880        |                                     |   | 22,420                                                  |   |   | (5,291      | )
|Prepaid
 expenses                                                             |  |                                     | (7,915     | )                                   |   | 31,466                                                  |   |   | (12,356     | )
|Accounts
 payable                                                             |  |                                     | 56,307     |                                     |   | (88,930                                                 | ) |   | 111,186     |  
|Accrued
 expenses                                                             |  |                                     | 3,208      |                                     |   | 3,160                                                   |   |   | 11,235      |  
|                                                                              |  |                                     |            |                                     |   |                                                         |   |   |             |  
|Net cash used for operating activities                                        |  |                                     | (631,938   | )                                   |   | (493,713                                                | ) |   | (1,303,886  | )
|                                                                             
|Cash Flows from Investing Activities                                          |  |                                     |            |                                     |   |                                                         |   |   |             |  
|Capital expenditures                                                          |  |                                     | (907       | )                                   |   | (195,111                                                | ) |   | (10,784,466 | )
|Proceeds from disposal of property and equipment                              |  |                                     |           |                                     |   |                                                        |   |   | 1,725,000   |  
|Proceeds from disposal of assets held for sale                                |  |                                     | 5,561      |                                     |   |                                                        |   |   | 5,561       |  
|Funding escrow deposit                                                        |  |                                     | (250,000   | )                                   |   |                                                        |   |   | (250,000    | )
|Payments for design services deposit                                          |  |                                     |           |                                     |   |                                                        |   |   | (5,450,000  | )
|Refund of design services deposit                                             |  |                                     |           |                                     |   |                                                        |   |   | 3,300,000   |  
|Payments for construction deposit                                             |  |                                     |           |                                     |   |                                                        |   |   | (2,500,000  | )
|Refund of construction deposit                                                |  |                                     |           |                                     |   |                                                        |   |   | 2,450,000   |  
|Payments for certificates of deposit                                          |  |                                     |           |                                     |   |                                                        |   |   | (1,950,000  | )
|Proceeds from maturing certificates of deposit                                |  |                                     |           |                                     |   |                                                        |   |   | 1,950,000   |  
|                                                                              |  |                                     |            |                                     |   |                                                         |   |   |             |  
|Net cash used for investing activities                                        |  |                                     | (245,346   | )                                   |   | (195,111                                                | ) |   | (11,503,905 | )
|                                                                             
|Cash Flows from Financing Activities                                          |  |                                     |            |                                     |   |                                                         |   |   |             |  
|Loan fees                                                                     |  |                                     | (40,000    | )                                   |   |                                                        |   |   | (65,000     | )
|Members contributed capital                                                  |  |                                     |           |                                     |   |                                                        |   |   | 31,968,000  |  
|Payments for offering costs                                                   |  |                                     |           |                                     |   |                                                        |   |   | (186,428    | )
|                                                                              |  |                                     |            |                                     |   |                                                         |   |   |             |  
|Net cash (used for) provided by financing activities                          |  |                                     | (40,000    | )                                   |   |                                                        |   |   | 31,716,572  |  
|                                                                              |  |                                     |            |                                     |   |                                                         |   |   |             |  
|                                                                             
|Net (Decrease) Increase in Cash and Equivalents                               |  |                                     | (917,284   | )                                   |   | (688,824                                                | ) |   | 18,908,781  |  
|                                                                              |  |                                     |            |                                     |   |                                                         |   |   |             |  
|Cash and Equivalents at Beginning of Period                                   |  |                                     | 19,826,065 |                                     |   | 20,803,450                                              |   |   |            |  
|                                                                              |  |                                     |            |                                     |   |                                                         |   |   |             |  
|                                                                             
|Cash and Equivalents at End of Period                                         |  | $                                   | 18,908,781 |                                     | $ | 20,114,626                                              |   | $ | 18,908,781  |  
|                                                                              |  |                                     |            |                                     |   |                                                         |   |   |             |  
|                                                                             
|Supplemental Cash Flow Information                                            |  |                                     |            |                                     |   |                                                         |   |   |             |  
|Capitalized interest paid                                                     |  | $                                   |           |                                     | $ |                                                        |   | $ | 133,556     |  
|                                                                              |  |                                     |            |                                     |   |                                                         |   |   |             |  
|                                                                              |  |                                     |            |                                     |   |                                                         |   |   |             |  
|Supplemental Schedule of Noncash Investing and
 Financing Activities          |  |                                     |            |                                     |   |                                                         |   |   |             |  
|Construction-in-progress applied against design services deposit              |  | $                                   |           |                                     | $ |                                                        |   | $ | 963,675     |  
|                                                                              |  |                                     |            |                                     |   |                                                         |   |   |             |  
|Design services deposit applied against accounts payable to related
 party    |  | $                                   |           |                                     | $ |                                                        |   | $ | 431,696     |  
|                                                                              |  |                                     |            |                                     |   |                                                         |   |   |             |  
|Property and equipment returned for member units                              |  | $                                   |           |                                     | $ |                                                        |   | $ | 750,000     |  
|                                                                              |  |                                     |            |                                     |   |                                                         |   |   |             |  
|Property and equipment reclassified to assets held for sale                   |  | $                                   |           |                                     | $ |                                                        |   | $ | 3,557,061   |  
|                                                                              |  |                                     |            |                                     |   |                                                         |   |   |             |  

Notes to Unaudited Condensed
Financial Statements are an integral part of this Statement.

6

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Table of Contents

SOY ENERGY, LLC(A Development Stage Company)

Notes to Unaudited Condensed Financial
Statements

July 31, 2010

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed interim financial statements have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in annual financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted as permitted by such rules and regulations. These
financial statements and related footnotes should be read in conjunction with
the financial statements and footnotes thereto included in the Companys
audited financial statements for the year ended October 31, 2009, contained in
the Companys Form 10-K.

In the opinion of management, the interim condensed financial
statements reflect all adjustments, consisting of only normal recurring
adjustments, considered necessary for fair presentation of the Companys
financial position as of July 31, 2010 and the results of operations and cash
flows for all periods present.

Nature of Business

Soy Energy, LLC, a development stage Iowa limited liability company,
(the Company) was originally organized to develop, own and operate a 30 million
gallon per year (MGY) production biodiesel facility between Cleghorn and
Marcus, Iowa in Cherokee County. The Company was formed December 15, 2005 to
have a perpetual life. As of July 31, 2010, the Company is in the development
stage and is considering the purchase of or investment in an existing biodiesel
facility instead of developing a biodiesel facility between Marcus and
Cleghorn, Iowa. On July 29, 2009, the Company entered into an Asset Purchase
Agreement to acquire an existing biodiesel facility from Freedom Fuels, LLC
(Freedom Fuels), a debtor in possession in bankruptcy in Mason City, Iowa. Due
to a lack of financing, the Company entered into an Asset Purchase
Agreement on April 2, 2010 to acquire the Mason City, Iowa biodiesel facility
from OSM-REO FF, LLC.

Accounting Estimates

Management uses estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting principles. Those
estimates and assumptions affect reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities, and reported revenues and
expenses. Significant estimates include assets held for sale valuation and any
assumptions used in the impairment analysis of assets held for sale. Actual
results may differ from previously estimated amounts and such differences may
be material to the financial statements.

Equipment

Equipment is stated at cost. Equipment is depreciated over estimated
service lives of related assets, five years, using the straight-line method of
accounting. Property, plant and equipment undergoing development that is not in
service is shown on the balance sheet as construction-in-progress and is not
depreciated.

Ordinary maintenance and repairs are expensed as incurred. Cost of
renewals and betterments are capitalized in appropriate property and equipment
accounts and depreciated as discussed above.

Long-Lived Assets

The Company reviews its long-lived assets, such as property and
equipment and purchased intangible assets subject to amortization, for
impairment whenever events or changes in circumstances indicate the carrying
amount of an asset may not be recoverable. If circumstances require a
long-lived asset be tested for possible impairment, the Company first compares
undiscounted cash flows expected to be generated by an asset to the carrying
value of the asset. If the carrying value of the long-lived asset is not
recoverable on an undiscounted cash flow basis, an impairment is recognized to
the extent that the carrying value exceeds its fair value. Fair value is
determined through various valuation techniques including discounted cash flow
models, quoted market values and third-party independent appraisals, as
considered necessary. During the quarter ended April 30, 2010, the Company
recorded an impairment charge totaling approximately $631,000 related to assets
held for sale. Management has determined that the projected future undiscounted
cash flows for assets held for sale exceed their carrying value at July 31,
2010; therefore, no additional impairment loss was indicated or recognized for
the three months ended July 31, 2010.

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SOY ENERGY, LLC(A Development Stage Company)

Notes to Unaudited Condensed Financial
Statements

July 31, 2010

2. LIQUIDITY

The Company is a developmental stage company and has no operating
revenues. The Company has determined it is not currently feasible to build a
biodiesel facility with the available cash on hand. As further described in
Note 5, on April 2, 2010, the Company entered into an Asset Purchase Agreement
to acquire substantially all of the assets of Freedom Fuels, LLC assigned to
OSM-REO FF, LLC pursuant to a bankruptcy court order. The Companys current
cash reserves are sufficient to fund operations without additional financing
through 2011 if it does not purchase the existing biodiesel facility.

The Company may return a portion of the equity proceeds, net of any
outstanding obligations to its members, if it does not invest in a biodiesel
facility which would be less than members original investment.

3. FAIR VALUE MEASUREMENTS

Effective November 1, 2008, the Company adopted FASB ASC 820-10, as it
applies to our financial instruments, and FASB ASC 825-10. FASB ASC 820-10
defines fair value, outlines a framework for measuring fair value, and details
the required disclosures about fair value measurements. FASB ASC 825-10 permits
companies to irrevocably choose to measure certain financial instruments and
other items at fair value. FASB ASC 825-10 also establishes presentation and
disclosure requirements designed to facilitate comparisons between entities
that choose different measurement attributes for similar types of assets and
liabilities.

Under FASB ASC 820-10, fair value is defined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date in the
principal or most advantageous market. FASB ASC 820-10 establishes a hierarchy
in determining the fair value of an asset or liability. The fair value
hierarchy has three levels of inputs, both observable and unobservable. FASB
ASC 820-10 requires the utilization of the lowest possible level of input to
determine fair value. Level 1 inputs include quoted market prices in an active
market for identical assets or liabilities. Level 2 inputs are market data,
other than Level 1, that are observable either directly or indirectly. Level 2
inputs include quoted market prices for similar assets or liabilities, quoted
market prices in an inactive market, and other observable information that can
be corroborated by market data. Level 3 inputs are unobservable and
corroborated by little or no market data.

Except for those assets and liabilities which are required by
authoritative accounting guidance to be recorded at fair value in our balance
sheets, the Company has elected not to record any other assets or liabilities
at fair value, as permitted by FASB ASC 825-10. No events occurred during the
nine months ended July 31, 2010 that would require adjustment to the recognized
balances of assets or liabilities which are recorded at fair value on a
nonrecurring basis.

As of July 31, 2010, the Company does not have any assets or
liabilities measured at fair value on a recurring or nonrecurring basis that
would require disclosure under this guidance.

The assets held for sale, with a carrying amount of approximately
$3,557,000 at April 30, 2010, were written down to fair value of approximately
$2,921,000 after completing the long-lived asset valuation analysis. The fair
value of the assets held for sale were based on third party information and
knowledge of sales of similar assets, which is considered a Level 2 input in
the valuation hierarchy. The resulting impairment charge of approximately
$631,000 was included in earnings for the quarter ended April 30, 2010. There
was no impairment charge for the three months ended July 31, 2010.

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SOY ENERGY, LLC(A Development Stage Company)

Notes to Unaudited Condensed Financial
Statements

July 31, 2010

4. ASSETS HELD FOR SALE

The Company is actively working to sell the assets held for sale. These
assets have been recorded at their estimated fair value, less estimated selling
costs. The fair value of these assets was determined based on recent sales of
similar equipment.

Amounts
included in assets held for sale are as follows:

|                                             |  |                |           |                    |   |           | 
|-------------------------------------------- |  | -------------- | --------- | ------------------ | - | --------- | 
|                                             |  | July 31,
 2010 |           | October 31,
 2009* |  
|                                             |  |                |           |                    |   |           | 
|Land                                         |  | $              | 250,262   |                    | $ | 250,262   | 
|Equipment                                    |  |                | 2,670,375 |                    |   | 3,306,799 | 
|                                             |  |                |           |                    |   |           | 
|                                             |  |                |           |                    |   |           | 
|                                             |  | $              | 2,920,637 |                    | $ | 3,557,061 | 
|                                             |  |                |           |                    |   |           | 
|                                             |  |                |           |                    |   |           | 
|* Derived
 from audited financial statements

5. COMMITMENTS AND CONTINGENCIES

Consulting Contract

During October 2009, the Company entered into an agreement with an
unrelated advisory service to assist the Company to obtain approximately
$6,000,000 in debt financing. The agreement provides for the Company to pay a
non-refundable advisory fee of $10,000 and a $5,000 monthly fee through the
earlier of March 31, 2010, the closing of the loan, or written notice of
termination by the Company. Additionally, the Company agreed to pay the
advisory service at time of closing, a debt placement fee of 1% of the total
amount of committed debt provided advisory fees will be credited against the
debt placement fee.

On April 1, 2010, the consulting agreement was extended to renew
monthly until terminated by either party giving written notice of such
termination. The Company is continuing to pay the $5,000 monthly fee until the
agreement is terminated. As of July 31, 2010, the Company has paid a total of
$40,000 in advisory fees towards obtaining the debt financing.

Asset Purchase Agreements

On July 29, 2009, the Company entered into an Asset Purchase Agreement
with Freedom Fuels in Mason City, Iowa pursuant to which the Company would (a)
acquire substantially all of Freedom Fuels assets and thereafter operate the
biodiesel facility; (b) assign to Freedom Fuels all of the Companys right,
title and interest in the debtor in possession loans; and, (c) assign to Freedom
Fuels all of the Companys right, title and interest in the dividend cash flow
note, in exchange for $9,000,000 in cash (the Transaction). The Company would
not assume or be liable for any liabilities of Freedom Fuels.

The closing of the Transaction contemplated by the Asset Purchase
Agreement was conditioned upon the receipt of certain regulatory approvals.
Freedom Fuels subsequently filed a voluntary bankruptcy petition under Chapter
11 of Title 11 of the United States Code; accordingly, closing of the
Transaction was conditioned upon approval and confirmation from the Bankruptcy
Court of Freedom Fuels plan of reorganization, which included the Transaction.
The Asset Purchase Agreement also required that the Company obtain certain
additional financing which the Company sought but did not receive.

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SOY ENERGY, LLC(A Development Stage Company)

Notes to Unaudited Condensed Financial
Statements

July 31, 2010

The Company and Freedom Fuels anticipated the Transaction would be
complete by December 31, 2009; however, the closing was delayed as result of
lack of financing. Freedom Fuels then transferred its assets to its bank, Outsource Services
Management, LLC and the bankruptcy proceedings transferred to Chapter 7.
Outsource Services Management, LLC subsequently transferred the assets to
OSM-REO FF, LLC.

On April 2, 2010, the Company entered into an Asset Purchase Agreement
with OSM-REO FF, LLC, a Minnesota limited liability company, pursuant to which
the Company will acquire substantially all of Freedom Fuels assets assigned to
OSM-REO FF, LLC and thereafter operate the biodiesel facility in exchange for a
total of $10,000,000 paid in cash and long-term debt. However, the purchase
price may be reduced up to $250,000 for expenses incurred by the Company to
make certain specified repairs. The assets will be transferred to the Company
as-is. The Company will not assume or be liable for any liabilities incurred
prior to the closing date of the Asset Purchase Agreement; however, the Company
may assume certain Freedom Fuels contracts or permits that may have
obligations that continue through and after the closing of the Asset Purchase
Agreement.

The Companys April 2, 2010 Asset Purchase Agreement with OSM-REO FF,
LLC provides for OSM-REO FF, LLC to loan the Company a total $6,077,595,
consisting of a $77,595 loan (Initial Loan), to retire certain OSM-REO FF,
LLC claims against New Equity, LLC, and a $6,000,000 loan (Acquisition Loan)
to acquire the Mason City, Iowa biodiesel facility.

The Initial
Loan, a non-interest bearing note, is to mature during 2021.

The Acquisition Loan is to bear 5% interest to 2016 then the 5-year
LIBOR/swap rate plus 3.5%, but no less than 5%. The loan provides for interest
only payments for the first 12 months followed by 120 monthly principal and
interest payments sufficient to fully amortize the principal balance at
maturity in 2021. As part of the Acquisition Loan agreement, the loan
agreements will be secured by certain business assets and will be subject to
various financial and non-financial covenants that limit distributions, capital
expenditures, and debt.

The closing of the transaction contemplated by the Asset Purchase
Agreement is conditioned upon approval by regulatory authorities. In August
2010, the Company entered into an amendment to the Asset Purchase Agreement to
extend the Closing deadline to September 27, 2010.

Settlement and Termination Agreement

On July 29, 2009, the Company entered into a Unit Purchase Agreement
(the UPA) with New Equity, LLC (New Equity) pursuant to which the Company
would issue 8,254 membership units of the Company to New Equity, representing a
20% ownership interest in the Company after the issuance. As consideration, New
Equity was to assign to the Company all of its interest in the debtor in
possession loan and provide a promissory note for $2,000,000 (Dividend Cash
Flow Note). The Dividend Cash Flow Note would have required New Equity to
repay the note with distributions from the Company. The repayment schedule
required that after the first $1,000,000 of distributions, 50% of the
distributions New Equity received thereafter would be remitted back to the
Company until the note was repaid. The dividend cash flow note did not bear
interest.

On March 31, 2010, the Company entered into an agreement with New Equity,
Outsource Services Management, LLC and OSM-REO FF, LLC to release certain
direct claims and to terminate the Unit Purchase Agreement. The Agreement also
provides for Soy Energy to pay New Equity up to $375,000, reimbursement of
certain costs and expenses incurred by New Equity related to the Freedom Fuels
biodiesel production facility and for certain other expenses New Equity
incurred since its formation. The Agreement is contingent upon regulatory
approval and upon the consummation of the acquisition through the delivery of
deeds of conveyance.

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SOY ENERGY, LLC(A Development Stage Company)

Notes to Unaudited Condensed Financial
Statements

July 31, 2010

Escrow Deposit

On July 1, 2010, the Company made a non-refundable deposit totaling
$250,000 with the Deposit Escrow Agent as earnest money in connection with the
April 2, 2010 Asset Purchase Agreement with OSM-REO FF, LLC. The deposit shall
be held in escrow and subsequently released to OSM-REO FF, LLC upon closing or
termination of the agreement. If the transaction is closed prior to the closing
deadline the deposit shall be credited toward the purchase price of the
biodiesel facility.

Construction Agreement

On April 6, 2010, the Company entered into a Phase 1 Engineering
Services Agreement with an unrelated party totaling $125,000 to determine the
required and necessary modifications to the Mason City, Iowa biodiesel
production facility to allow for multiple feedstock capabilities. The Company
paid $62,500 as of April 30, 2010 and paid an additional $62,500 during the
three months ended July 31, 2010. The total fee will be credited against the
maximum guaranteed price of the project.

On August 11, 2010, the Company entered into a construction agreement
with the same unrelated party (contractor) discussed in the previous paragraph
for the design and construction of modifications of the Mason City, Iowa
biodiesel facility allowing for the use of multiple feedstocks. Substantial
completion of the work shall be achieved no later than 270 days after the date
of notice to proceed has been delivered. If not completed within 45 days after
the scheduled substantial completion date, the contractor shall pay the Company
$5,500 per day up to, but not exceeding, $350,000. The Guaranteed Maximum Price
of the project is $8,350,000 including the contractors fee of $350,000. The
amount of the Guaranteed Maximum Price will be deposited in to an escrow
account to be drawn upon as work progresses. The Company may terminate the
agreement with 7 days notice upon written request without cause; however, the
contractor is due any amounts incurred for work completed. The Company may
terminate the agreement with cause with 7 days notice whereby any unpaid work
done by the contractor will only be paid to the extent the Companys costs and
expenses to complete the project are less than the unpaid balance of the Cost
of the Work. If the costs and expenses to complete the project exceed the Cost
of the Work the contractor shall pay the excess.

Marketing Agreement

On August 12, 2010, the Company entered into a marketing agreement with
an unrelated party whereby the marketer would sell and market all of the
biodiesel produced by the Company. In the event that the Company is not
producing biodiesel by July 15, 2011 either company shall have the option to
terminate the agreement with 21 days written notice. The Company shall pay the
marketer a fee. The agreement shall commence on the effective date, August 12,
2010, and has an initial term with options to renew for additional terms. If either party breaches the
contract, the other party may terminate the agreement if the breach is not
cured within 30 days of written notice. This agreement may also be terminated
by mutual consent of both parties.

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Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operation

We prepared
the following discussion and analysis to help you better understand our
financial condition, changes in our financial condition, and results of
operations for the three and nine month periods ended July 31, 2010. This
discussion should be read in conjunction with the financial statements and
notes and the information contained in our annual report on Form 10-K for the
fiscal year ended October 31, 2009.

Forward Looking Statements

This report
contains forward-looking statements that involve future events, our future
performance and our expected future operations and actions. In some cases you
can identify forward-looking statements by the use of words such as may,
will, should, anticipate, believe, expect, plan, future,
intend, could, estimate, predict, hope, potential, continue, or
the negative of these terms or other similar expressions. These forward-looking
statements are only our predictions and involve numerous assumptions, risks and
uncertainties, including, but not limited to, those business risks and factors
described elsewhere in this report, in our other Securities and Exchange
Commission filings, as well as those listed below.

| |   |                                                                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our ability to close on financing from OSM-REO FF, LLC, a Minnesota
 limited liability company (OSM) to purchase
 the biodiesel plant in Mason City (the Mason City
 biodiesel production facility);                                                                                                                                                         
| |   |                                                                                                                                                                                                                                                                                                                                                              
| |  | Our ability to
 close on our agreement with OSM to purchase the Mason City biodiesel
 production facility;                                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                              
| |  | Overcapacity
 within the biodiesel industry;                                                                                                                                                                                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                                                                                                              
| |  | Our ability
 to effectively operate the Mason City biodiesel production facility and
 manage its business;                                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                              
| |  | Changes in
 our business strategy, capital improvements or development plans;                                                                                                                                                                                                                                                                                
| |   |                                                                                                                                                                                                                                                                                                                                                              
| |  | Availability
 and costs of feedstock, particularly soy oil, animal fats and corn oil;                                                                                                                                                                                                                                                                        
| |   |                                                                                                                                                                                                                                                                                                                                                              
| |  | Changes in
 the price and market for biodiesel and glycerin;                                                                                                                                                                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                                                                                                              
| |  | Our ability to successfully have equipment installed on the Mason
 City biodiesel production facility to make the plant a multi-feedstock
 capable facility;                                                                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                                                                                                              
| |  | Actual
 biodiesel and glycerin production varying at the Mason City biodiesel
 production facility from expectations;                                                                                                                                                                                                                                        
| |   |                                                                                                                                                                                                                                                                                                                                                              
| |  | Changes in or elimination of governmental laws, tariffs, trade or
 other controls or enforcement practices such as national, state or local
 energy policy; federal biodiesel tax incentives; or environmental laws and
 regulations that apply to the Mason City biodiesel production facility,
 including lack of reinstatement of the blenders tax credit;
| |   |                                                                                                                                                                                                                                                                                                                                                              
| |  | Changes in the weather or general economic conditions impacting the
 availability and price of vegetable oils and animal fats;                                                                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                              
| |  | Total U.S.
 consumption of diesel;                                                                                                                                                                                                                                                                                                                           
| |   |                                                                                                                                                                                                                                                                                                                                                              
| |  | Weather changes, strikes, transportation or production problems
 causing supply interruptions or shortages affecting the availability and
 price of feedstock;                                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                              
| |  | Changes in plant production capacity or technical difficulties in
 operating the Mason City biodiesel production facility;                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                              
| |  | Changes in
 interest rates or the availability of credit;                                                                                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                              
| |  | Our ability
 to generate free cash flow to invest in our business;                                                                                                                                                                                                                                                                                           
| |   |                                                                                                                                                                                                                                                                                                                                                              
| |  | Our
 potential liability resulting from future litigation;                                                                                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                              
| |  | Outcome of litigation regarding possible patent infringement on
 certain types of corn oil production technology, which may cause ethanol
 producers that are currently producing corn oil to cease production and limit
 our ability to obtain this type of feedstock;                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                              
| |  | General
 economic conditions;                                                                                                                                                                                                                                                                                                                                
| |   |                                                                                                                                                                                                                                                                                                                                                              
| |  | Ability to
 sell our assets held for sale at their carrying value minus selling costs;                                                                                                                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                                                                              
| |  | Changes and
 advances in biodiesel production technology;                                                                                                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                                              
| |  | Competition
 from other alternative fuels; and                                                                                                                                                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                              
| |  | Other
 factors described elsewhere in this report.                                                                                                                                                                                                                                                                                                           

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We
undertake no duty to update these forward looking statements, even though our
situation may change in the future. Furthermore, we cannot guarantee future
results, events, levels of activity, performance or achievements. We caution
you not to put undue reliance on any forward-looking statements which speak
only as of the date of this report. You should read this report completely and
with the understanding that our actual future results may be materially
different from what we currently expect. We qualify all of our forward looking
statements by these cautionary statements.

Overview

We are a
development stage Iowa limited liability company with no prior operating
history. We were organized as an Iowa limited liability company by filing
articles of organization with the Iowa Secretary of State on December 15, 2005.
We were in the process of developing a 15 million gallon per year biodiesel
plant near Marcus, Iowa in Cherokee County. We originally planned to construct
a 30 million gallon per year biodiesel plant, but due to changes in our
business plan, our members voted to pursue construction of a smaller biodiesel plant.

When the
economy went into a recession, management determined in October 2008 that
obtaining the financing necessary to build even this smaller biodiesel plant
was not likely feasible. Therefore, we then began exploring possibilities to
use our assets to merge with or invest in a company that has already completed
construction of a biodiesel plant, rather than constructing our own plant.
Construction of the proposed 15 million gallon per year plant in Marcus, Iowa
was approximately 10% complete when management determined completion of the
construction was no longer feasible. Although we believe that we will be able
to sell our long-lived assets at their current carrying value, we may not be
able to sell them at a profit. If we do not sell these assets at the current
carrying value or at all, it may result in a material loss to the financial
statements. Because we do not anticipate constructing the Marcus, Iowa plant,
all funds we expended in our construction and plant development efforts were deemed
a loss. From our inception to July 31, 2010, we have incurred accumulated
losses of approximately $9,013,000, including impairment charges of
approximately $7,553,000.

On July 29,
2009, we entered into an Asset Purchase Agreement (APA) with Freedom Fuels,
LLC, an Iowa limited liability company (Freedom Fuels) which was in Chapter
11 bankruptcy and owned a biodiesel plant in Mason City, Iowa, pursuant to which
we would acquire substantially all of Freedom Fuels assets in exchange for $9,000,000
in cash, an agreement assigning to Freedom Fuels all of our right, title and
interest in the debtor in possession loans, and an agreement assigning to
Freedom Fuels all of the our right, title and interest in the dividend cash
flow note of $2 million issued by New Equity, LLC to us. On the same day, we
entered into a Unit Purchase Agreement with New Equity, LLC, an Iowa limited
liability company (New Equity) pursuant to which we would issue 8,254 of our
membership units to New Equity, representing a 20% ownership interest in Soy
Energy, LLC. New Equity, LLC is comprised of 19 members of Freedom Fuels. New
Equity was designated as the Freedom Fuels Debtor In Possession Lender in the
plan of reorganization of Freedom Fuels filed with the Bankruptcy Court. As
consideration for the units that were to be issued under the Unit Purchase
Agreement, New Equity was to assign to us all of its interest in the Debtor In
Possession Loan and provide us with a promissory note for $2,000,000.

However,
prior to closing on either of these agreements, it became clear that the
financing needed to close on this transaction would not be able to be obtained.
Freedom Fuels then transferred all of its assets to its bank and on February 2,
2010 the proceedings were converted from a Chapter 11 voluntary bankruptcy to a
Chapter 7 involuntary bankruptcy.

On April 2,
2010, we entered into an Asset Purchase Agreement with OSM. OSM was previously
assigned certain assets related to the biodiesel production facility of Freedom
Fuels, LLC. Under the Asset Purchase Agreement, we will pay OSM $10,000,000 to
acquire the biodiesel production facility and related assets (the
Transaction). The assets are being transferred to Soy as-is. However, the
purchase price may be reduced up to $250,000 for expenses incurred by Soy to
make certain specified repairs. The Asset Purchase Agreement provides that we
will not assume liabilities of Freedom Fuels or OSM, with the exception of
certain taxes, certain liabilities under contracts we assume, and obligations
under existing confidentiality agreements.

We and OSM
have made customary representations, warranties and covenants in the Asset
Purchase Agreement. Among other conditions, the closing of the Transaction is
conditioned upon a $6,000,000 loan to us from OSM to buy the assets. The
terms of the financing are described below. In addition, the Transaction is
subject to approval by our unitholders before the closing on the
Transaction and such unitholder approval was obtained at our annual member
meeting on June 24, 2010.

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On August
13, 2010, we entered into an Amendment to the Asset Purchase Agreement with OSM
(the Amendment). The purpose of the Amendment is to modify the definition of
Closing Deadline to extend such date to September 27, 2010.

On March
31, 2010, we entered into a Settlement and Termination Agreement with OSM and
New Equity. The Settlement and Termination Agreement provides for the
termination of the Unit Purchase Agreement dated July 29, 2009 between New
Equity and us. In addition, the parties each agreed to release one or both of
the other parties from certain claims arising from the Unit Purchase Agreement,
the acquisition of the Mason City biodiesel production facility, and the
Freedom Fuels bankruptcy. In exchange for the termination of the Unit Purchase
Agreement and the release, we agreed to pay New Equity an amount equal to
certain expenses that New Equity has incurred, up to an aggregate amount of
$375,000. The termination of the Unit Purchase Agreement, releases and payment
are conditioned on, and take effect upon, the closing of our acquisition of the
Mason City biodiesel production facility.

To date, we
have not generated any revenues and we do not anticipate generating any
revenues unless we successfully purchase an existing biodiesel facility. Since
we have not commenced any operations, we do not yet have comparable income,
production or sales data.

Liquidity and Capital Resources

Plan of Operations

We expect
to spend the next 12 months (i) closing on the Asset Purchase Agreement and the
loan documents we entered into with OSM on April 2, 2010 (the Loan
Agreement), which provides the terms on which OSM will provide us with certain
debt financing to fund our acquisition of the Mason City biodiesel production
facility; (ii) installing equipment on the Mason City biodiesel production
facility to process corn oil; and (iii) beginning our operations of the Mason
City biodiesel production facility. We do not anticipate raising additional
equity capital in the next 12 months. However, in the event our equity reserves
are not adequate to recommence and continue operations of the Mason City
biodiesel production facility, we may be forced to do so. We expect our equity
reserves will be adequate for the purchase of the Mason City biodiesel
production facility, along with the debt financing we anticipate receiving from
OSM. We also plan to use approximately $8,350,000 of our equity reserves to
install the front end equipment on the Mason City biodiesel production facility
so that it will be multi-feedstock capable. Should we be unsuccessful in
completing the purchase of the Mason City biodiesel production facility or in
our operation of the plant, our project may fail and we may be dissolved. If we
are dissolved, our assets will be distributed pursuant to our operating
agreement.

On April 6, 2010, we entered into a Phase 1 Engineering Services
Agreement (Phase 1 Agreement) with Ball Industrial Services, LLC (BIS). The
Phase 1 Agreement is related to the required and necessary modifications of the
Mason City biodiesel production facility to allow the biodiesel production
facility to use 100% corn stillage oil as a feedstock for the conversion to
biodiesel (the Project). The work to be provided under the Phase 1 Agreement
was the necessary preliminary engineering services for the Project and was
completed by BIS on May 21, 2010.

We paid BIS
$62,500 upon the execution of the Phase 1 Agreement and paid an additional
$62,500 upon the completion of the Phase I Engineering Services. This total fee
of $125,000 shall be included and credited against the guaranteed maximum price
of the Project.

We entered
into a Construction and Design Agreement (the Construction Agreement) with
BIS and Ball Construction Services, LLC
(collectively, Ball) effective August 11, 2010. Under the Construction
Agreement, Ball will provide design, engineering, procurement, testing,
training, and construction services and labor, materials, supplies and
equipment for modifications to the Mason City biodiesel production facility to
allow the Mason City biodiesel production facility to produce biodiesel using
multiple feedstocks. However, if we do not close on its proposed purchase of
the Mason City biodiesel production facility, or if we do not obtain a full financing commitment within 45 days of
signing the Construction Agreement, the Construction Agreement will terminate.

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Ball will
begin detailed engineering of the modifications when we provide Ball an
unrestricted notice to proceed, once we have consummated the acquisition of
the Mason City biodiesel production facility and closed on financing. Ball must
achieve substantial completion of the modifications no later than 270 days
after the notice to proceed. Ball will pay us liquidated damages of $5,500 for
each day that substantial completion extends beyond 45 days after the scheduled
substantial completion date. However, liquidated damages for such delay shall
not exceed $350,000.

In exchange
for the modifications, we will pay Ball the cost of the work (including a
project management fee of $350,000), up to a guaranteed maximum price of
$8,350,000. If the final cost of the work is less than the guaranteed maximum
price, we will divide the difference. Sales, use and similar taxes are excluded
from the guaranteed maximum price and will be billed to us separately. We are
also required to start-up the Mason City biodiesel production facility using
crude soybean oil and must clean and purge the Mason City biodiesel production
facility prior to substantial completion of the work.

Ball
guarantees that all of the work will be new (unless otherwise approved by us),
of good quality, in conformance with the Construction Agreement and all legal
requirements, and free of defects in materials and workmanship. For one year
from substantial completion, Ball will correct any work that does not conform to
the requirements of the Construction Agreement. If the Mason City biodiesel
production facility fails to perform due to defective work, the one-year period
will be extended one day for each day that the Mason City biodiesel production
facility is not operating due to the defective work. The Construction Agreement
states that Ball will not be liable to us for any special, punitive,
incidental, indirect or consequential damages arising from the breach of any
warranty.

Ball will
provide two months of on-site operational support for our personnel after
successful completion of the performance tests; on-site inspections in the
third, sixth, ninth, and twelfth months following substantial completion; and,
for one year from substantial completion, up to 200 hours of off-site technical
and operating procedure support.

We may
terminate the Construction Agreement without cause upon seven days written
notice to Ball. In such case, we must pay Ball the cost of the work to the
termination (including a pro rata portion of the project management fee), to
the extent we have not already paid such amounts. We must also pay Ball for
equipment that we retain and for certain costs of assignment or termination of
subcontracts.

We may also
terminate the Construction Agreement upon seven days written notice if Ball
commits certain breaches or defaults. In such case, we may take possession of
the project site and all materials, equipment and documents and finish the
work. Ball will not receive any further payments until the work is finally
completed. If our cost and expense of completing the work exceeds the unpaid
balance of the cost of the work, then Ball must pay the difference to us.
However, if our cost and expense of completing the work is less than the unpaid
balance of the cost of the work, we must pay Ball any amounts remaining unpaid
that were accrued before the termination, without regard for Balls project
management fee.

Unless such
event is cured within 10 days written notice, Ball may terminate the
Construction Agreement if the work is stopped for 45 consecutive days due to:
the issuance of an order of a court or other public authority; an act of
government; our nonpayment; repeated suspensions; delays or interruptions of the
entire work by us that constitute in the aggregate more than 75 percent of the
total number of days scheduled for completion, or 120 days in any 365-day
period, whichever is less; or our repeated failure to fulfill our obligations.
In the event of such termination, Ball can recover from us payment, plus any
costs actually incurred due to such termination and damages. Additionally, Ball
may stop work for our failure to pay amounts when due, if we fail to cure or
reasonably commence to cure such nonpayment within 10 days of notice from Ball.

If either
party institutes or has instituted against it a case under the United States
Bankruptcy Code, the bankrupt party must furnish adequate assurance of its
ability to perform all future obligations and must also file an appropriate
action within the bankruptcy court to seek assumption or rejection of the
Construction Agreement within sixty (60) days of the institution of the
bankruptcy filing.

15

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Table of Contents

We
anticipate the success of our operation of the Mason City biodiesel production
facility will be dependent upon several factors. First, we will be dependent
upon Ball to successfully install the front-end equipment on the Mason City
biodiesel production facility, so that we can effectively utilize a variety of
feedstocks, and, specifically, corn oil. We may have difficulties getting the
additional equipment to operate smoothly with the current plant technology.
Then we will need to be able to find an adequate and cost-effective supply of
corn oil to use to produce our biodiesel. We anticipate that we will be able to
obtain corn oil largely from local ethanol plants. However, this will require
us to enter into agreements with such ethanol plants and we may be unable to
enter into the necessary number of agreements or such agreements may be on
terms unfavorable to us. Additionally, ethanol plants that are presently
producing corn oil as a by-product, may cease such production in the future as
a result of patent infringement litigation related to the corn oil technology
many ethanol plants are currently using. We may decide to enter into joint
ventures with ethanol plants to encourage them to install corn oil equipment on
their plants, but this means we will also assume some of the risk.

Finally, we
will be dependent upon our marketer to sell our biodiesel at profitable prices.
On August 12, 2010, we entered into a biodiesel marketing agreement with RPMG,
INC., a Minnesota corporation (RPMG) (the Marketing Agreement). Pursuant to
the terms of the Marketing Agreement, we agreed that RPMG will market all of
the biodiesel we may produce at the Mason City biodiesel production facility
during the term of the Marketing Agreement, subject to our right to enter into
tolling arrangements that will not be subject to the Marketing Agreement. If we
have not commenced operations at the Mason City biodiesel production facility
on or before July 15, 2011, then either party may terminate the Marketing
Agreement upon twenty-one (21) days written notice to the other party.

RPMG will
be responsible for and shall bear the risk of loss of all biodiesel marketed
for us from the time the biodiesel crosses the loading flange at the Mason City
biodiesel facility and the common carrier or customer accepts for loading the
biodiesel at the Mason City biodiesel facility in either a railcar, tank truck
or other transport vehicle.

We will
provide RPMG with production estimates and if we are unable to deliver this
estimated monthly biodiesel production and, if as a consequence of the
non-delivery, and in order to meet its sale obligation to third parties, RPMG is
required to purchase biodiesel, RPMG may purchase biodiesel in the marketplace
to meet its delivery obligations on such terms and conditions as it deems
appropriate in its sole discretion, provided that RPMG shall utilize
commercially reasonable efforts to make any such open market purchases at the
lowest available price. If RPMG as a result thereof incurs financial loss, we
will reimburse RPMG for any such loss net of any gains.

The
Marketing Agreement requires RPMG to use commercially reasonable efforts to
obtain the best price for all biodiesel sold under the Marketing Agreement and
RPMG shall have the complete discretion to fix the price, terms and conditions
of the biodiesel sales. In exchange for its sales and marketing services, RPMG
shall earn a monthly marketing fee. On a monthly basis, RPMG shall calculate an
estimate of the gross price for the biodiesel for which RPMG is responsible
under the Marketing Agreement to be shipped for the succeeding month, less the
estimated distribution expenses (which is the out-of-pocket costs for
expenditure obligations to third parties incurred by RPMG in marketing our
biodiesel) applicable to said biodiesel, divided by the estimated gallons of
biodiesel to be shipped for the succeeding month (the Net Sales Price Per
Gallon).

RPMG on a
weekly basis will pay 90% of the Net Sales Price Per Gallon multiplied by the
number of gallons of biodiesel delivered by us to RPMG for the week, on an
average net 10-day basis (e.g. payment on Wednesday shall be for biodiesel
delivered during the seven-day period ending on the previous Wednesday). The
remaining balance owed, if any, based on actual gross sales less actual
distribution expense and less the marketing fee shall be paid within 15 days
after the end of each month.

Following
the initial term of the Marketing Agreement, the Marketing Agreement shall
automatically renew for successive terms, unless either party gives written
notice of non-renewal to the other party not less than one hundred eighty (180)
days before the end of the then current term. In addition, either party may
terminate the Marketing Agreement upon written notice to the other party if the
other party breaches the Marketing Agreement and fails to cure the breach
within thirty (30) days after receipt of written notice of such breach or if
the other party becomes insolvent, files or has filed against it a petition in
bankruptcy that is not dismissed within thirty (30) days, or has a receiver
appointed over its assets.

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Table of Contents

Sources and
Uses of Funds

We
anticipate that any remaining funds from our original intrastate offering will
be used to purchase the Mason City biodiesel production facility from OSM,
install additional feedstock processing equipment on the Mason City biodiesel
production facility, and the start-up of operations. We also anticipate
receiving approximately $6,000,000 in debt financing from OSM pursuant to the
Loan Agreement for a portion of the purchase price of the Mason City biodiesel
production facility.

ESTIMATED USE OF PROCEEDS

|                                                                                               |  |        |            |    
|---------------------------------------------------------------------------------------------- |  | ------ | ---------- | ---
|Use of Proceeds                                                                                |  | Amount |           
|                                                                                               |  |        |           
|Equity Proceeds Raised                                                                         |  | $      | 31,782,000 | (1)
|Estimated Proceeds Used in Development and
 Construction of biodiesel facility in Marcus, Iowa |  | $      | 12,542,000 | (2)
|Proceeds required to purchase the Mason
 City plant and complete related improvements          |  | $      | 18,000,000 | (3)
|Interest income earned on cash and
 equivalents                                                |  | $      | 1,376,000  |    
|                                                                                               |  |        |            |    
|Estimated proceeds remaining for start-up
 of Mason City plant and related expenditures        |  | $      | 2,616,000  | (4)
|                                                                                               |  |        |            |    

(1)
This amount is our total equity proceeds less the redemption agreement for 750
units we executed with Bratney and our offering costs of approximately
$186,000. The primary offering costs we incurred in raising capital included
legal fees, accounting fees, printing and distribution costs, and meeting
costs.

(2)
We believe these amounts represent a reasonable estimate of the proceeds we
used as of July 31, 2010 on construction, building and facilities, purchase of
machinery and equipment and purchases of real estate related to our attempt to
construct a biodiesel facility in Marcus, Iowa plus ongoing administrative
costs we have associated with operating our business until an acquisition,
investment or merger with another company is closed.

(3)
This amount assumes that we close on the Asset Purchase Agreement with OSM. This figure does not included the $6,077,595
we anticipate we will obtain from OSM under the Loan Agreement, or the $375,000
paid to New Equity under the Settlement and Termination Agreement.

(4)
This number is our current cash and equivalents, less: our accounts payable;
proceeds needed to purchase the Mason City plant; and proceeds needed to
install feedstock processing equipment. If we sell some of the assets we have
held for sale, then this will increase the proceeds remaining to invest in the
Mason City biodiesel production facility. Additionally, this figure does not include the $6,077,595 in debt
financing that we intend to obtain from OSM pursuant to the Loan Agreement,
assuming we close on the Loan Agreement, or the $375,000 paid to New Equity
under the Settlement and Termination Agreement.

Site Acquisition and Development

We
purchased approximately 35 acres for our plant site near Marcus, Iowa in
Cherokee County. In August 2007, we commenced construction of our 30 million
gallon per year biodiesel plant. In November 2007, we suspended all
construction related activities on our plant while we sought the debt financing
we needed to complete construction of the plant. On April 10, 2008 our members
approved reducing the initial production capacity of the biodiesel plant to 15
million gallons per year from 30 million gallons per year. Upon completing
approximately 10% of the construction of our biodiesel plant in October 2008,
management determined that it would not likely be feasible to complete
construction of the biodiesel plant due to current economic conditions and our
lack of debt financing. We may be unable to sell the Marcus site and the
construction completed at a profit, or at all. Due to the significant changes we made to our project, we recorded an impairment
charge during our quarter ended October 31, 2008 in the value of constructed
and construction in process assets of approximately $6,923,000, a portion of
which is from the site we purchased. Additionally, as we have not sold the
assets being held, we recorded an additional impairment charge of approximately
$631,000 during the three months ended April 30, 2010. No additional impairment
loss was warranted for the three months ended July 31, 2010.

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Trends and Uncertainties Impacting the
Biodiesel Industry and Our Future Operations

We will be
subject to industry-wide factors that affect our anticipated operation of the
Mason City biodiesel production facility and financial performance. These
factors include, but are not limited to, the available supply and cost of
feedstock from which biodiesel and glycerin will be processed; dependence on
RPMG and a glycerin marketer, if we decide to use a glycerin marketer, to
market and distribute our products; the competitive nature of the biodiesel
industry; possible legislation at the federal, state and/or local level;
changes in federal tax incentives; and the cost of complying with extensive
environmental laws that regulate the biodiesel industry.

We
anticipate our revenues will consist of sales of biodiesel and glycerin from
the Mason City biodiesel production facility. We expect biodiesel sales to
constitute the bulk of our revenues. Although the price of diesel fuel has
increased over the last several years, diesel fuel prices per gallon remain at
levels below or equal to the price of biodiesel. In addition, other more
cost-efficient domestic alternative fuels may be developed and displace
biodiesel as an environmentally-friendly alternative. If diesel prices do not
continue to increase or a new fuel is developed to compete with biodiesel, it
may be difficult to market biodiesel, which could result in the loss of some or
all of the value of our units. Further, many biodiesel production facilities
have ceased production due to lack of demand for biodiesel, and the industry
will need to continue to grow demand to offset the increased supply brought to
the market place if and when these facilities re-start production in the
future.

We expect
to benefit from federal and state biodiesel supports and tax incentives,
however, these benefits may be subject to the applicability of such supports
and tax incentives to our operations of the Mason City biodiesel production
facility. Biodiesel has generally been more expensive to produce than
petroleum-based diesel and, as a result, the biodiesel industry depends on such
incentives to be competitive. Changes to these supports or incentives could
significantly impact demand for biodiesel. The most significant of these are
the blenders tax credit and the RFS, as amended by the Energy Independence and
Security Act of 2007 (the EISA).

The
American Jobs Creation Act of 2004 originally created the biodiesel blenders
excise tax credit under the Volumetric Ethanol Excise Tax Credit (VEETC).
Known as the blenders tax credit, it provides a tax credit of $1.00 per gallon
for biodiesel. The blenders credit could be claimed in both taxable and
nontaxable markets, including exempt fleet fuel programs and off-road diesel
markets. The desired effect of the blenders tax credit was to streamline the
use of biodiesel and encourage petroleum blenders to blend biodiesel as far
upstream as possible, which would allow more biodiesel to be used in the marketplace.
The blenders tax credit also streamlined the tax refund system for
below-the-rack blenders allowed a tax refund of the biodiesel tax credit on
each gallon of biodiesel blended with diesel (dyed or undyed) to be paid within
20 days of blending. Below-the-rack blenders are those blenders that
market fuel that is for ground transportation engines and is not in the bulk
transfer system. The blenders tax credit was set to expire on December 31,
2008, but was extended until December 31, 2009 as part of the Emergency
Economic Stabilization Act of 2008 (EESA) and as of the date of this report
has not been extended further. Without the blenders tax credit, many biodiesel
production facilities have been forced to cease operations, and if the blenders
tax credit is not reinstated prior to when we attempt to begin production at
the Mason City biodiesel production facility, we may face similar struggles.

The amended
RFS, known as RFS2, required the use of 9 billion gallons of renewable
fuel in 2008, increasing to 36 billion gallons of renewable fuel by 2022.
The RFS further required at least 500 million gallons of biodiesel and
biomass-based diesel fuel be blended into the national diesel pool in 2009,
increasing to 1 billion gallons by 2012. However, in November 2008,
the EPA announced that the RFS program in 2009 would continue to be applicable
to producers and importers of gasoline only. This meant that the
500 million gallons of biomass-based diesel required by RFS2 did not have
to be blended into U.S. fuel supplies in 2009. This is due to the fact that the
regulatory structure of the original RFS program did not provide a mechanism
for implementing the EISA requirement for the use of 500 million gallons
of biomass-based diesel. On February 3, 2010 the EPA issued final rules under RFS2. The final rules addressed this issue by combining the
2010 biomass-based diesel requirement of 650 million gallons with the 2009
biomass-based diesel requirement of 500 million gallons to require that
obligated parties meet a combined 2009/2010 requirement of 1.15 billion
gallons by the end of the 2010 compliance year.

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Table of Contents

The RFS2
requires that biodiesel reduce greenhouse gas emissions by 50% when compared to
conventional diesel in order to count towards the RFS2 mandate. The EPA
preliminarily found soy-based biodiesel to reduce greenhouse gas emissions by
only 22%. However, biodiesel produced from animal fats was found to meet this
greenhouse gas emissions reduction requirement. Lastly, when the EPA issued its
final determinations under the RFS2, it found that biodiesel produced from soy
oil complies with the 50% greenhouse gas emission reduction requirements.

Thus,
management anticipates that under the EPAs final RFS2 regulations, there may
be increased demand for biodiesel. There can be no assurance, however, that
demand for biodiesel will be increased by the RFS2, and any increase in demand
may be offset by the loss of the blenders tax credit. In addition, it is
already estimated that national biodiesel production capacity far exceeds the
2012 biodiesel and biomass-based diesel use RFS2 mandate. Accordingly, there is
no assurance that additional production of biodiesel and biomass-based diesel
will not continually outstrip any additional demand for biodiesel that might be
created by the RFS2.

Biodiesel
production grew as additional plants become operational, until 2009 when
production reduced. In 2006 biodiesel production was approximately 250 million
gallons. The National Biodiesel Board estimates that in 2008, biodiesel
production reached 700 million gallons. Estimates for 2009 biodiesel production
however, were approximately 450 million gallons. This reduction was likely
largely related to the recession and the related credit crisis. We believe this
increase in biodiesel supply, reduction in demand, and the loss of the blenders
credit have forced some biodiesel producers to cut back production or cease
production altogether. The combination of additional supply and stagnant or
reduced demand may damage our ability to generate revenue and maintain positive
cash flows should we reach the point where we begin operating the Mason City
biodiesel production facility.

Quarterly
Financial Results

At July 31,
2010, we had total assets of approximately $22,141,000 consisting primarily of
cash and equivalents and assets held for sale. At July 31, 2010, we had current
liabilities of approximately $122,000 consisting of our accounts payable and
other accrued expenses. Total members equity at July 31, 2010, was
approximately $22,019,000. Since our inception, we have generated no revenue
from operations. For the three and nine months ended July 31, 2010, we had a
net loss of approximately $255,000 and $1,316,000, respectively.

Based upon
the determination that building a biodiesel production facility would not
likely be feasible, we now anticipate purchasing the Mason City biodiesel
production facility from OSM for approximately $10,000,000 pursuant to the APA,
with $6,000,000 of such purchase price to be financed pursuant to the Loan
Agreement, and installing feedstock processing equipment on the plant for
approximately $8,350,000. If we cannot complete this transaction as
anticipated, we may be forced to dissolve our company, in which case, the
assets of the company will be distributed according to our operating agreement,
and may result in a loss of your investment.

Sources of Funds

In December
2005, we sold a total of 1,500 units to our founding members at a price of $333.33
per unit and received aggregate proceeds of $500,000. In addition, in April
2006 we issued 1,600 units to our seed capital members at a price of $500 per
unit and received aggregate proceeds of $800,000. We sold 30,668 units at a
price of $1,000 per unit in our Iowa registered offering and received aggregate
proceeds of $30,668,000. We broke escrow on our Iowa registered offering in
June 2007. We incurred costs of raising capital of approximately $186,000
related to the equity proceeds raised. These costs primarily consisted of legal
fees, professional fees and printing costs. In July 2008, we executed a redemption agreement with Bratney
pursuant to which Bratney agreed to return its 750 membership units.

We
determined the offering price for our founding members, seed capital and
general offering units based upon the capitalization requirements necessary to
fund our development, organization and financing activities as a
development-stage company with plans to construct and operate a biodiesel
plant. We did not rely upon any independent valuation, book value or other
valuation criteria in determining the founding member, seed capital or general
offering sales prices per unit.

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Debt Financing

In October
2008, management determined it would not likely be feasible to obtain the
necessary debt financing to complete construction of our biodiesel plant. We
now plan to purchase an existing biodiesel plant in Mason City, Iowa from OSM.
We plan to install additional feedstock equipment on this plant. We anticipate
we will receive approximately $6,000,000 in debt financing from OSM pursuant to
the Loan Agreement to be used towards the purchase price of the Mason City
biodiesel production facility.

On April 2,
2010, we entered into a Loan Agreement with OSM. Subject to the terms of the
Loan Agreement, OSM agreed to lend us $6,000,000 to be used to acquire the
Mason City biodiesel production facility. The initial interest rate is 5%. In
2016, the interest rate will adjust to the 5-year LIBOR/swap rate plus 3.5%,
but will not be less than 5%. During the first year of the loan, we will be
required to only pay interest on outstanding amounts. Beginning after the first
year of the loan, we will make principal and interest payments amortized over a
ten-year period, with maturity of the note in 2021.

The Loan
Agreement requires us to adhere to various covenants which restrict our
operating flexibility. The Loan Agreement restricts our ability to make
distributions to our members, to further pledge our assets for other financing
that we might require, and to make payments on subordinated debt we acquire. In
addition, the Loan Agreement requires us to maintain certain financial ratios
and to obtain OSMs permission before taking certain actions affecting our
business and material contracts.

At closing,
we will execute a mortgage in favor of OSM creating a first lien on all of the
assets we acquire under the Asset Purchase Agreement and the proceeds from
those assets. As a result, we must obtain OSMs permission to sell these
assets, which could limit our operating flexibility.

The Loan
Agreement provides that certain actions will constitute defaults, which would
allow OSM to terminate its commitment to loan the funds, or if already
advanced, to demand immediate repayment of the entire loan amount and foreclose
its security interest in our property. Defaults include the following events:

|  |                                                                                                                   
|- | ------------------------------------------------------------------------------------------------------------------
| | our failure
 to make the required principal and interest payments;                                                
|  |                                                                                                                   
| | if any
 representation or warranty made by us proves to be materially misleading or
 untrue;                      
|  |                                                                                                                   
| | our failure
 to comply with the terms of the Loan Agreement;                                                      
|  |                                                                                                                   
| | the
 destruction of the biodiesel plant;                                                                          
|  |                                                                                                                   
| | cessation of
 making certain improvements to the biodiesel plant required by OSM;                                 
|  |                                                                                                                   
| | our failure
 to comply with certain requirements of governmental bodies;                                          
|  |                                                                                                                   
| | if we have
 unsatisfied judgments against us that exceed $150,000 for 30 days or more;                            
|  |                                                                                                                   
| | if we file
 for bankruptcy or cease to exist as a legal entity;                                                   
|  |                                                                                                                   
| | if we are
 unable to pay our debts when due;                                                                      
|  |                                                                                                                   
| | if we are in
 default under a material contract or lose a permit or material contract
 necessary for our business;
|  |                                                                                                                   
| | if we are in
 default under any agreement with OSM; or                                                            
|  |                                                                                                                   
| | if we are in
 default with respect to any other indebtedness.                                                     

Grants and Government Programs

Currently,
there are limited numbers of grants, loans and forgivable loan programs
available to biodiesel producers. We are uncertain what grants, loans and forgivable
loan programs, if any, will be available if we complete the purchase of the
Mason City biodiesel production facility. Some combinations of programs are
mutually exclusive. Funds that we have expended in applying for grants, loans
and forgivable loan programs related to our construction of a facility in
Marcus, Iowa, will likely be a loss, unless we can transfer those benefits as a
result of our anticipated purchase of the Mason City biodiesel production
facility. Any benefits we may have already received may have to be repaid
because we no longer plan to complete construction of our Marcus plant.

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Table of Contents

Critical
Accounting Estimates

Management
uses estimates and assumptions in preparing our financial statements in
accordance with generally accepted accounting principles. These estimates and
assumptions affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported revenues and
expenses. The assets held for sale valuation and any assumptions used in the
impairment analysis of assets held for sale included in significant estimates
is based on the ability to sell or utilize these assets.

Off-Balance
Sheet Arrangements

We do not
have any off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures about
Market Risk

The Company
is not required to provide the information required by this item because it is
a smaller reporting company.

Item 4.
Controls and Procedures

Disclosure Controls and Procedures

Our
management, including our Chief Executive Officer (the principal executive
officer) Charles Sand, along with our Chief Financial Officer (the principal
financial officer) Dallas Thompson, have reviewed and evaluated the
effectiveness of our disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended)
as of July 31, 2010. Based upon this review and evaluation, these officers have
concluded that our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

Our
management, including our principal executive officer and principal financial
officer, have reviewed and evaluated any changes in our internal control over
financial reporting that occurred during the period ended July 31, 2010 and
there has been no change that has materially affected or is reasonably likely
to materially affect our internal control over financial reporting.

PART II.
OTHER INFORMATION

Item 1.
Legal Proceedings

From time
to time in the ordinary course of business, we may be named as a defendant in
legal proceedings related to various issues, including without limitation,
workers compensation claims, tort claims, or contractual disputes. We are not
currently subject to any material legal proceeding or claims. Management does
not believe that there are currently any material unasserted claims against us.

Item 1A.
Risk Factors.

The Company
is not required to provide the information required by this item because it is
a smaller reporting company.

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Table of Contents

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

We
did not sell any membership units during the three months ended July 31,
2010. None of our membership units were purchased by or on behalf of the Company or any
affiliated purchaser (as defined in Rule 10b-18(a)(3) of the Exchange Act) of
the Company during the three months ended July 31, 2010.

|                                                     |  |   |             |     
|---------------------------------------------------- |  | - | ----------- | ----
|Net Proceeds                                         |  | $ | 31,782,000  | (1) 
|Capital Expenditures and Construction
 Related Costs |  |   | (10,932,000 | )   
|Project Development Costs                            |  |   | (2,850,000  | )(2)
|                                                     |  |   |             |     
|Balance                                              |  | $ | 18,000,000  |     

(1)This amount is
our total equity proceeds less the redemption agreement for 750 units we
executed with Bratney and our offering costs of approximately $186,000. The
primary costs we incurred in raising capital included legal fees, accounting
fees, printing and distribution costs, and meeting costs.

(2)This amount
only reflects the funds we have expended as of July 31, 2010 on project
development costs and does not include the approximately $1,376,000 we have
received from interest on investments. The amount we have received from
interest has offset the amount we expended, as reflected on our statement of
cash flows and in the table Estimated Use of Proceeds above.

Item 3. Defaults Upon Senior Securities

None.

Item 4. [Reserved]

Item 5. Other Information

None.

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Table of Contents

Item 6. Exhibits

| |     |                                                                                                                              
| | --- | -----------------------------------------------------------------------------------------------------------------------------
| | (a) | The
 following exhibits are filed as part of this report. Exhibits previously
 filed are incorporated by reference, as noted.

|             |  |                                                                                                                                                                |  |                  
|------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------
|Exhibit
 No. |  | Description                                                                                                                                                    |  | Method of
 Filing
|             |  |                                                                                                                                                                |  |                  
|             |  |                                                                                                                                                                |  |                  
|10.1         |  | Asset
 Purchase Agreement between OSM-REO FF, LLC and Soy Energy, LLC dated April 2,
 2010.                                                                    |  | 1                
|             |  |                                                                                                                                                                |  |                  
|10.2         |  | Loan
 Agreement between OSM-REO FF, LLC and Soy Energy, LLC dated April 2, 2010.                                                                               |  | 1                
|             |  |                                                                                                                                                                |  |                  
|10.3         |  | Phase I
 Engineering Agreement between Ball Industrial Services, LLC and Soy Energy,
 LLC dated April 6, 2010.                                                 |  | 1                
|             |  |                                                                                                                                                                |  |                  
|10.4         |  | Termination
 and Settlement Agreement between New Equity, LLC, Outsource Services
 Management, LLC, OSMREO FF, LLC, and Soy Energy, LLC dated March 31, 2010. |  | 1                
|             |  |                                                                                                                                                                |  |                  
|10.5         |  | Construction
 and Design Agreement between Ball Industrial Services, LLC and Soy Energy,
 LLC dated August 11, 2010.                                           |  | *                
|             |  |                                                                                                                                                                |  |                  
|10.6         |  | Non-Pooled
 Biodiesel Marketing Agreement between RPMG, Inc. and Soy Energy, LLC dated
 August 12, 2010.+                                                      |  | *                
|             |  |                                                                                                                                                                |  |                  
|10.7         |  | Amendment to
 Asset Purchase Agreement between OSM-REO FF, LLC and Soy Energy, LLC dated
 August 13, 2010.                                                     |  | *                
|             |  |                                                                                                                                                                |  |                  
|31.1         |  | Certificate pursuant
 to 17 CFR 240 13a-14(a)                                                                                                                  |  | *                
|             |  |                                                                                                                                                                |  |                  
|31.2         |  | Certificate
 pursuant to 17 CFR 240 13a-14(a)                                                                                                                  |  | *                
|             |  |                                                                                                                                                                |  |                  
|32.1         |  | Certificate
 pursuant to 18 U.S.C. Section 1350                                                                                                                |  | *                
|             |  |                                                                                                                                                                |  |                  
|32.2         |  | Certificate
 pursuant to 18 U.S.C. Section 1350                                                                                                                |  | *                

|    |  |                                                                                        
|--- |  | ---------------------------------------------------------------------------------------
|(*) |  | Filed
 herewith.                                                                       
|(1) |  | Incorporated
 by reference to the quarterly report on Form 10-Q filed on June 14, 2010.
|(+) |  | Confidential
 Treatment Requested.                                                     

SIGNATURES

Pursuant to
the requirements 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.

|      |                     |  |                                       
|----- | ------------------- |  | --------------------------------------
|      |                     |  | SOY ENERGY, LLC                       
|      |                     |  |                                       
|Date  | September
 14, 2010 |  | /s/ Charles
 Sand                     
|      |                     |  |                                       
|      |                     |  | Charles Sand                          
|      |                     |  | President
 and Chief Executive Officer
|      |                     |  | (Principal
 Executive Officer)        
|      |                     |  |                                       
|Date: | September
 14, 2010 |  | /s/ Dallas
 Thompson                  
|      |                     |  |                                       
|      |                     |  | Dallas
 Thompson                      
|      |                     |  | Treasurer
 and Chief Financial Officer

23

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