Table of Contents





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

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FORM 10-Q

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|                                                                    |                                                                                     
|------------------------------------------------------------------- | ------------------------------------------------------------------------------------
|x                                                                   | Quarterly report under Section 13
  or 15(d) of the Securities Exchange Act of 1934.
|                                                                   
|For the quarterly period ended April 30, 2008                      
|                                                                   
|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
  incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                                  
|222 N. MAIN STREET, P. O. BOX 663, MARCUS, IOWA 51035             
|(Address
  of principal executive offices)                        
|                                                                  
|(712) 376-2081                                                    
|(Issuers
  telephone number)                                     

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Indicate by check mark
whether the registrant: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days.


o Yes x No


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


o Yes x No


1





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|           |  |                                                                                        |  |   
|---------- |  | -------------------------------------------------------------------------------------- |  | --
|PART 1.    |  | FINANCIAL INFORMATION                                                                  |  | 3 
|Item 1.    |  | Financial
Statements                                                                   |  | 3 
|Item 2.    |  | Managements Discussion
  and Analysis of Financial Condition and Results of Operation |  | 10
|Item 3.    |  | Quantitative and
  Qualitative Disclosures about Market Risk                           |  | 21
|Item 4T.   |  | 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                          |  | 25
|Item 3.    |  | Defaults Upon Senior
  Securities                                                      |  | 26
|Item 4.    |  | Submission of Matters to
  a Vote of Security Holders                                  |  | 26
|Item 5.    |  | Other
Information                                                                      |  | 26
|Item 6.    |  | Exhibits                                                                               |  | 26
|SIGNATURES |  | 27                                                                                    

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                                                |  | April
  30,
  2008 |            | October
  31,
  2007 |  
|                                                      |  |                    |            |                      |  
|                                                      |  | (Unaudited)        |            |                      |   |           
|                                                      |  |                    |            |                      |   |            |  
|Current Assets                                        |  |                    |            |                      |   |            |  
|Cash and equivalents                                  |  | $                  | 15,928,351 |                      | $ | 16,244,811 |  
|Certificates of deposit                               |  |                    |           |                      |   | 1,850,000  |  
|Other receivable - related party                      |  |                    | 3,300,000  |                      |   |           |  
|Accrued interest receivable                           |  |                    | 34,000     |                      |   | 12,507     |  
|Prepaid expenses                                      |  |                    | 9,869      |                      |   | 2,250      |  
|                                                      |  |                    |            |                      |   |            |  
|Total current assets                                  |  |                    | 19,272,220 |                      |   | 18,109,568 |  
|                                                      |  |                    |            |                      |   |            |  
|Property,
  Plant and Equipment                       |  |                    |            |                      |   |            |  
|Land                                                  |  |                    | 250,262    |                      |   | 250,012    |  
|Equipment                                             |  |                    | 8,873      |                      |   | 8,873      |  
|                                                      |  |                    |            |                      |   |            |  
|Total                                                 |  |                    | 259,135    |                      |   | 258,885    |  
|Accumulated depreciation                              |  |                    | (1,605     | )                    |   | (718       | )
|                                                      |  |                    |            |                      |   |            |  
|Total                                                 |  |                    | 257,530    |                      |   | 258,167    |  
|Construction-in-progress                              |  |                    | 8,580,444  |                      |   | 11,093,267 |  
|                                                      |  |                    |            |                      |   |            |  
|Net property, plant and equipment                     |  |                    | 8,837,974  |                      |   | 11,351,434 |  
|                                                      |  |                    |            |                      |   |            |  
|Other
  Assets                                        |  |                    |            |                      |   |            |  
|Design services deposit - related party               |  |                    |           |                      |   | 4,535,000  |  
|Loan commitment fee                                   |  |                    | 25,000     |                      |   | 25,000     |  
|                                                      |  |                    |            |                      |   |            |  
|Total other assets                                    |  |                    | 25,000     |                      |   | 4,560,000  |  
|                                                      |  |                    |            |                      |   |            |  
|                                                      |  |                    |            |                      |   |            |  
|Total Assets                                          |  | $                  | 28,135,194 |                      | $ | 34,021,002 |  
|                                                      |  |                    |            |                      |   |            |  
|                                                      |  |                    |            |                      |   |            |  
|LIABILITIES
  AND MEMBERS EQUITY                     |  |                    |            |                      |   |            |  
|                                                      |  |                    |            |                      |   |            |  
|Current
  Liabilities                                 |  |                    |            |                      |   |            |  
|Accounts payable                                      |  | $                  | 207,298    |                      | $ | 499,379    |  
|Accounts payable - related party                      |  |                    |           |                      |   | 1,711,363  |  
|Accrued expenses                                      |  |                    | 6,685      |                      |   | 1,708      |  
|                                                      |  |                    |            |                      |   |            |  
|Total current liabilities                             |  |                    | 213,983    |                      |   | 2,212,450  |  
|                                                      |  |                    |            |                      |   |            |  
|Members
  Equity                                     |  |                    |            |                      |   |            |  
|Member contributions, 33,768 units
outstanding        |  |                    | 31,781,572 |                      |   | 31,781,572 |  
|(Deficit) income accumulated during development
stage |  |                    | (3,860,361 | )                    |   | 26,980     |  
|                                                      |  |                    |            |                      |   |            |  
|Total members equity                                 |  |                    | 27,921,211 |                      |   | 31,808,552 |  
|                                                      |  |                    |            |                      |   |            |  
|                                                      |  |                    |            |                      |   |            |  
|Total Liabilities and Members
Equity                 |  | $                  | 28,135,194 |                      | $ | 34,021,002 |  
|                                                      |  |                    |            |                      |   |            |  

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
  April 30,
  2008 |            | Three Months
  Ended
  April 30,
  2007 |  
|                                                       |  |                                         |            |                                         |  
|                                                       |  | (Unaudited)                             |            | (Unaudited)                             |  
|                                                       |  |                                         |            |                                         |   |         |  
|Revenues                                               |  | $                                       |           |                                         | $ |        |  
|                                                       |  |                                         |            |                                         |   |         |  
|Operating Expenses                                     |  |                                         |            |                                         |   |         |  
|General and administrative expense                     |  |                                         | 49,348     |                                         |   | 35,259  |  
|Professional fees                                      |  |                                         | 116,354    |                                         |   | 40,005  |  
|Impairment expense                                     |  |                                         | 4,000,000  |                                         |   |        |  
|                                                       |  |                                         |            |                                         |   |         |  
|Total operating expenses                               |  |                                         | 4,165,702  |                                         |   | 75,264  |  
|                                                       |  |                                         |            |                                         |   |         |  
|                                                       |  |                                         |            |                                         |   |         |  
|Operating Loss                                         |  |                                         | (4,165,702 | )                                       |   | (75,264 | )
|                                                       |  |                                         |            |                                         |   |         |  
|Other Income                                           |  |                                         |            |                                         |   |         |  
|Interest income                                        |  |                                         | 128,741    |                                         |   |        |  
|                                                       |  |                                         |            |                                         |   |         |  
|Total other income                                     |  |                                         | 128,741    |                                         |   |        |  
|                                                       |  |                                         |            |                                         |   |         |  
|                                                       |  |                                         |            |                                         |   |         |  
|Net Loss                                               |  | $                                       | (4,036,961 | )                                       | $ | (75,264 | )
|                                                       |  |                                         |            |                                         |   |         |  
|                                                       |  |                                         |            |                                         |   |         |  
|Weighted Average Units Outstanding - Basic and Diluted |  |                                         | 33,768     |                                         |   | 3,100   |  
|                                                       |  |                                         |            |                                         |   |         |  
|                                                       |  |                                         |            |                                         |   |         |  
|Net Loss Per Unit - Basic and Diluted                  |  | $                                       | (119.55    | )                                       | $ | (24.28  | )
|                                                       |  |                                         |            |                                         |   |         |  

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

|                                                       |  |                                    |            |                                    |   |                                                          |   |   |            |  
|------------------------------------------------------ |  | ---------------------------------- | ---------- | ---------------------------------- | - | -------------------------------------------------------- | - | - | ---------- | -
|                                                       |  |                                    |            |                                    |   |                                                          |  
|                                                       |  | Six Months
 Ended
 April 30,
 2008 |            | Six Months
 Ended
 April 30,
 2007 |   | From Inception
 (December 15,
 2005) to
 April 30,
 2008 |  
|                                                       |  |                                    |            |                                    |   |                                                          |  
|                                                       |  | (Unaudited)                        |            | (Unaudited)                        |   | (Unaudited)                                              |  
|                                                       |  |                                    |            |                                    |   |                                                          |  
|Revenues                                               |  | $                                  |           |                                    | $ |                                                         |   | $ |           |  
|                                                       |  |                                    |            |                                    |   |                                                          |   |   |            |  
|Operating Expenses                                     |  |                                    |            |                                    |   |                                                          |   |   |            |  
|General and administrative
expense                     |  |                                    | 113,569    |                                    |   | 65,648                                                   |   |   | 376,798    |  
|Professional fees                                      |  |                                    | 165,988    |                                    |   | 57,052                                                   |   |   | 460,242    |  
|Impairment expense                                     |  |                                    | 4,000,000  |                                    |   |                                                         |   |   | 4,000,000  |  
|                                                       |  |                                    |            |                                    |   |                                                          |   |   |            |  
|Total operating expenses                               |  |                                    | 4,279,557  |                                    |   | 122,700                                                  |   |   | 4,837,040  |  
|                                                       |  |                                    |            |                                    |   |                                                          |   |   |            |  
|                                                       |  |                                    |            |                                    |   |                                                          |   |   |            |  
|Operating Loss                                         |  |                                    | (4,279,557 | )                                  |   | (122,700                                                 | ) |   | (4,837,040 | )
|                                                       |  |                                    |            |                                    |   |                                                          |   |   |            |  
|Other Income                                           |  |                                    |            |                                    |   |                                                          |   |   |            |  
|Interest income                                        |  |                                    | 392,216    |                                    |   |                                                         |   |   | 963,655    |  
|Other income                                           |  |                                    |           |                                    |   | 250                                                      |   |   | 13,024     |  
|                                                       |  |                                    |            |                                    |   |                                                          |   |   |            |  
|Total other income                                     |  |                                    | 392,216    |                                    |   | 250                                                      |   |   | 976,679    |  
|                                                       |  |                                    |            |                                    |   |                                                          |   |   |            |  
|                                                       |  |                                    |            |                                    |   |                                                          |   |   |            |  
|Net Loss                                               |  | $                                  | (3,887,341 | )                                  | $ | (122,450                                                 | ) | $ | (3,860,361 | )
|                                                       |  |                                    |            |                                    |   |                                                          |   |   |            |  
|                                                       |  |                                    |            |                                    |   |                                                          |   |   |            |  
|Weighted Average Units Outstanding - Basic and Diluted |  |                                    | 33,768     |                                    |   | 3,100                                                    |   |   | 13,799     |  
|                                                       |  |                                    |            |                                    |   |                                                          |   |   |            |  
|                                                       |  |                                    |            |                                    |   |                                                          |   |   |            |  
|Net Loss Per Unit - Basic and Diluted                  |  | $                                  | (115.12    | )                                  | $ | (39.50                                                   | ) | $ | (279.76    | )
|                                                       |  |                                    |            |                                    |   |                                                          |   |   |            |  

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

|                                                                                            |  |                                     |            |                                     |   |                                                           |   |   |             |  
|------------------------------------------------------------------------------------------- |  | ----------------------------------- | ---------- | ----------------------------------- | - | --------------------------------------------------------- | - | - | ----------- | -
|                                                                                            |  |                                     |            |                                     |   |                                                           |   |   |             |  
|                                                                                            |  | Six
 Months
 Ended
 April 30,
 2008 |            | Six
 Months
 Ended
 April 30,
 2007 |   | From
 Inception
 (December 15,
 2005) to
 April 30,
 2008 |  
|                                                                                            |  |                                     |            |                                     |   |                                                           |  
|                                                                                            |  | (Unaudited)                         |            | (Unaudited)                         |   | (Unaudited)                                               |  
|                                                                                           
|Cash Flows from Operating Activities                                                        |  |                                     |            |                                     |   |                                                           |   |   |             |  
|Net loss                                                                                    |  | $                                   | (3,887,341 | )                                   | $ | (122,450                                                  | ) | $ | (3,860,361  | )
|Adjustments to reconcile net loss to net
cash provided by (used for)
 operating activities: |  |                                     |            |                                     |   |                                                           |   |   |             |  
|Depreciation                                                                                |  |                                     | 887        |                                     |   | 167                                                       |   |   | 1,605       |  
|Impairment of long-lived assets                                                             |  |                                     | 4,000,000  |                                     |   |                                                          |   |   | 4,000,000   |  
|Write off of construction services related
to terminated agreement                          |  |                                     |           |                                     |   |                                                          |   |   | 50,000      |  
|Changes in operating assets and
liabilities:                                                |  |                                     |            |                                     |   |                                                           |   |   |             |  
|Accrued interest receivable                                                                 |  |                                     | (21,493    | )                                   |   |                                                          |   |   | (34,000     | )
|Prepaid expenses                                                                            |  |                                     | (7,619     | )                                   |   | 2,250                                                     |   |   | (9,869      | )
|Accounts payable                                                                            |  |                                     | 80,855     |                                     |   | 41,282                                                    |   |   | 106,167     |  
|Accrued expenses                                                                            |  |                                     | 4,977      |                                     |   | 1,012                                                     |   |   | 6,685       |  
|                                                                                            |  |                                     |            |                                     |   |                                                           |   |   |             |  
|Net
 cash provided by (used for) operating activities                                       |  |                                     | 170,266    |                                     |   | (77,739                                                   | ) |   | 260,227     |  
|                                                                                            |  |                                     |            |                                     |   |                                                           |   |   |             |  
|Cash Flows from Investing Activities                                                        |  |                                     |            |                                     |   |                                                           |   |   |             |  
|Capital expenditures                                                                        |  |                                     | (2,330,397 | )                                   |   | (500,495                                                  | ) |   | (10,588,448 | )
|Payments for design services
deposit                                                        |  |                                     |           |                                     |   |                                                          |   |   | (5,450,000  | )
|Payments for construction deposit                                                           |  |                                     |           |                                     |   |                                                          |   |   | (2,500,000  | )
|Refund of construction deposit                                                              |  |                                     |           |                                     |   |                                                          |   |   | 2,450,000   |  
|Payments for certificates of
deposit                                                        |  |                                     | (100,000   | )                                   |   |                                                          |   |   | (1,950,000  | )
|Proceeds from maturing certificates of
deposit                                              |  |                                     | 1,950,000  |                                     |   |                                                          |   |   | 1,950,000   |  
|                                                                                            |  |                                     |            |                                     |   |                                                           |   |   |             |  
|Net
 cash used for investing activities                                                     |  |                                     | (480,397   | )                                   |   | (500,495                                                  | ) |   | (16,088,448 | )
|                                                                                            |  |                                     |            |                                     |   |                                                           |   |   |             |  
|Cash Flows from Financing Activities                                                        |  |                                     |            |                                     |   |                                                           |   |   |             |  
|Proceeds from (payments on) revolving notes
payable                                         |  |                                     |           |                                     |   | 434,000                                                   |   |   |            |  
|Loan commitment fees                                                                        |  |                                     |           |                                     |   | (25,000                                                   | ) |   | (25,000     | )
|Members contributed capital                                                                |  |                                     |           |                                     |   |                                                          |   |   | 31,968,000  |  
|Payments for offering costs                                                                 |  |                                     | (6,329     | )                                   |   | (38,386                                                   | ) |   | (186,428    | )
|                                                                                            |  |                                     |            |                                     |   |                                                           |   |   |             |  
|Net cash provided by (used for) financing
activities                                        |  |                                     | (6,329     | )                                   |   | 370,614                                                   |   |   | 31,756,572  |  
|                                                                                            |  |                                     |            |                                     |   |                                                           |   |   |             |  
|                                                                                            |  |                                     |            |                                     |   |                                                           |   |   |             |  
|Net (Decrease) Increase in Cash and
Equivalents                                             |  |                                     | (316,460   | )                                   |   | (207,620                                                  | ) |   | 15,928,351  |  
|                                                                                            |  |                                     |            |                                     |   |                                                           |   |   |             |  
|Cash and Equivalents at Beginning of Period                                                 |  |                                     | 16,244,811 |                                     |   | 209,537                                                   |   |   |            |  
|                                                                                            |  |                                     |            |                                     |   |                                                           |   |   |             |  
|                                                                                            |  |                                     |            |                                     |   |                                                           |   |   |             |  
|Cash and Equivalents at End of Period                                                       |  | $                                   | 15,928,351 |                                     | $ | 1,917                                                     |   | $ | 15,928,351  |  
|                                                                                            |  |                                     |            |                                     |   |                                                           |   |   |             |  
|Supplemental Cash Flow Information                                                          |  |                                     |            |                                     |   |                                                           |   |   |             |  
|Capitalized interest paid                                                                   |  | $                                   |           |                                     | $ | 86,443                                                    |   | $ | 133,556     |  
|                                                                                            |  |                                     |            |                                     |   |                                                           |   |   |             |  
|Supplemental Schedule of Noncash Investing and
 Financing Activities                        |  |                                     |            |                                     |   |                                                           |   |   |             |  
|Construction-in-progress included in
accounts payable                                       |  | $                                   | 101,131    |                                     | $ | 711,195                                                   |   | $ | 101,131     |  
|                                                                                            |  |                                     |            |                                     |   |                                                           |   |   |             |  
|Construction-in-progress applied against
design services deposit                            |  | $                                   | 48,675     |                                     | $ |                                                          |   | $ | 963,675     |  
|                                                                                            |  |                                     |            |                                     |   |                                                           |   |   |             |  
|Offering costs included in accounts
payable                                                 |  | $                                   |           |                                     | $ | 71,705                                                    |   | $ |            |  
|                                                                                            |  |                                     |            |                                     |   |                                                           |   |   |             |  
|Capitalized interest included in accrued
expenses                                           |  | $                                   |           |                                     | $ | 24,699                                                    |   | $ |            |  
|                                                                                            |  |                                     |            |                                     |   |                                                           |   |   |             |  
|Design services deposit applied against
accounts payable to related
 party                  |  | $                                   | 431,696    |                                     | $ |                                                          |   | $ | 431,696     |  
|                                                                                            |  |                                     |            |                                     |   |                                                           |   |   |             |  

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

April 30, 2008 and 2007

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Soy Energy,
LLC (a development stage Iowa limited liability company) was 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 April 30,
2008, Soy Energy is in the development stage with its efforts being principally
devoted to organizational, financing, and project development activities.
Construction began in June 2007 with completion originally expected in the
first calendar quarter of 2009. In November 2007, the Company suspended
construction on the project until debt financing can be secured as described in
Notes 2 and 4. In April 2008, the Companys members voted to reduce the project
from a 30 MGY to a 15 MGY production biodiesel facility. The Company
anticipates this change in the project to affect the carrying value of certain
construction-in-progress assets and construction related amounts and has
estimated impairment to be approximately $4,000,000 to $7,000,000. The Company
has recorded an impairment charge of $4,000,000 at the end of the current
quarter, which includes estimates related to being able to use certain
construction-in-progress assets and receiving a refund of amounts paid to the
former general contractor. The Company will continue to monitor and evaluate
the usage of these long-lived assets to determine if any additional impairment
is warranted.

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 April
30, 2008 and the results of operations and cash flows for all periods present.

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 long-lived asset impairment analysis, amounts expended for
construction-in-progress assets and construction related amounts as significant
changes are expected to take place on the project. The Company noted that
certain construction-in-progress assets and construction related amounts were
impaired and has recorded a charge of $4,000,000 during the current quarter
based on current plans to allow the use of corn oil as the primary feedstock
and to reduce the plant size. The Company has recorded an anticipated refund of $3,300,000
for amounts paid to the former general contractor as other
receivables, less amounts previously included with accounts payable. Actual
results could differ from these estimates and it is at least reasonably possible
that the estimates will change in the near term.

Property, Plant and Equipment

Property,
plant and equipment are stated at cost. Equipment is depreciated over estimated
service lives of related assets, three to seven 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. As the project has changed significantly, the Company
recognized an impairment charge on construction-in-progress and other
construction related amounts of $4,000,000 during the quarter ended April 30,
2008.

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.

7

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Table of Contents

SOY ENERGY, LLC(A Development Stage Company)

Notes to Unaudited Condensed Financial
Statements

April 30, 2008 and 2007

Long-Lived Assets

The Company
reviews property and equipment and other long-lived assets for impairment in
accordance with Statement of Financial Accounting Standards No. 144 (SFAS No.
144), Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed of.
Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate the carrying amount of an asset may not be recoverable.
Recoverability of these assets is measured by comparison of its carrying amount
to future undiscounted cash flows the assets are expected to generate. If
property and equipment and certain identifiable intangibles are considered to
be impaired, the impairment to be recognized equals the amount by which the
carrying value of the assets exceeds its fair value. As the project has changed
significantly when the Company decided to change technologies to allow for corn
oil as the primary feedstock and to reduce the size of the plant, the Company
estimated to have an impairment charge of approximately $4,000,000 to
$7,000,000 on construction-in-progress and other construction related amounts.
During the quarter ended April 30, 2008, the Company recorded an impairment
charge of $4,000,000 related to these long-lived assets.

2. LIQUIDITY

The Company is
a developmental stage company and has no operating revenues. The Company does
not currently produce biodiesel, as its project is under development. In
November 2007, the Company suspended construction of the biodiesel plant while
it worked to secure additional or new debt financing and to consider changes to
the Companys plant design including reducing the size of the plant. The
Companys current equity reserves will be sufficient to fund operations for the
next year if it does not resume construction of the biodiesel plant. The
Company does not plan on recommencing construction, at its current planned
size, until new project agreements and financing plans have been signed.

3. CONSTRUCTION-IN-PROGRESS

The Company
anticipated the construction to originally cost approximately $53,112,000 with
approximately $41,286,000 remaining at April 30, 2008. As the project was
changed from a 30 MGY to a 15 MGY plant, construction is now anticipated to
cost approximately $32,334,000. Due to the significant project changes, the
Company estimated impairment of approximately $4,000,000 to $7,000,000. The
Company has recorded an impairment charge of $4,000,000 during the quarter
ended April 30, 2008.

Amounts
included in construction-in-progress are as follows.

|                                             |  |                 |           |                    |   |            | 
|-------------------------------------------- |  | --------------- | --------- | ------------------ | - | ---------- | 
|                                             |  | April 30,
 2008 |           | October 31,
 2007* |  
|                                             |  |                 |           |                    |  
|Construction
 costs                          |  | $               | 8,428,851 |                    | $ | 10,944,264 | 
|Capitalized
 interest                        |  |                 | 133,556   |                    |   | 133,556    | 
|Insurance
 and other costs                   |  |                 | 18,037    |                    |   | 15,447     | 
|                                             |  |                 |           |                    |   |            | 
|                                             |  | $               | 8,580,444 |                    | $ | 11,093,267 | 
|                                             |  |                 |           |                    |   |            | 
|* Derived
 from audited financial statements |  |                 |           |                    |   |            | 

Construction
costs in accounts payable include approximately $101,000 and $502,000 of
retainage at April 30, 2008 and October 31, 2007, respectively. The Company
capitalized interest of approximately $134,000 since inception through October
31, 2007 and none during the six months ended April 30, 2008.

8

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Table of Contents

SOY ENERGY, LLC(A Development Stage Company)

Notes to Unaudited Condensed Financial
Statements

April 30, 2008 and 2007

4. COMMITMENTS AND CONTINGENCIES

Construction Contracts

The original
total cost of the project, including the construction and start-up expenses of
the biodiesel plant was expected to be approximately $60,686,000 with
approximately $53,112,000 for construction costs and approximately $7,574,000
of start-up expenses and project costs. Due to the project changing from a 30
MGY to a 15 MGY plant, construction is now anticipated to cost approximately
$55,003,000, with approximately $47,539,000 for construction costs, including a
construction contingency of $1,646,000, and approximately $7,464,000 of start
up expenses and project costs. The Company terminated the existing construction
contracts when it decided to change technologies to allow for corn oil as the
primary feedstock and to reduce the size of the plant. The Company is in the
process of signing agreements with a new construction contractor.

In May 2008,
the Company signed a letter of intent with a general contractor, an unrelated
party, to construct a 15 MGY biodiesel facility for approximately $33,530,000
which is contingent upon obtaining adequate financing, and feedstock supplies.
This amount includes infrastructure costs of approximately $1,196,000 already
incurred. The general contractor will provide on-site technical assistance for
one year from the start of operations and feedstock procurement services. In
addition, the general contractor will provide ongoing technology and
operational support services for $300,000 per year. The letter of intent
provides that the general contractor would complete the plant by June 10, 2009
assuming the Company entered into a construction agreement with the general
contractor by April 2008 and paid approximately $4,950,000 by June 10, 2008.
The Company has not entered a construction agreement and has not paid any
amounts to this general contractor.

In August
2006, the Company entered into an agreement for an unrelated party to construct
a boiler system for approximately $3,173,000, of which approximately $2,023,000
were incurred at April 30, 2008.

In October
2007, the Company entered into an agreement for an unrelated party to construct
an office building for approximately $382,000, of which approximately $59,000
was incurred at April 30, 2008.

Debt Placement Agent

In December
2007, the Company entered into an agreement with Piper Jaffray to act as participating
debt placement agent to structure and market senior debt participations in a
total amount of approximately $23,000,000. The Company will pay a placement fee
of 1.0% of the aggregate amount of senior debt participations raised by Piper
Jaffray at financial close. The agreement can be terminated by either party
with 30 days written notice. If the agreement is terminated, the Company shall
pay reasonable out-of-pocket expenses incurred to date by Piper Jaffray.

5. RELATED PARTY TRANSACTIONS

In January
2006, the Company entered into an agreement with a related party to serve as
temporary project manager, providing organizational and development services.
Services totaling approximately $1,000 and $17,000 were provided during the six
months ended April 30, 2008 and 2007, respectively. The related party is an
investor and serves on the Companys board of directors.

In May 2006,
the Company entered into a consulting agreement with a related party to assist
its temporary project manager. Services totaling approximately $13,000 were
provided during the six months ended April 30, 2007. No costs were incurred
under this agreement during the six months ended April 30, 2008. The related
party is an investor and serves on the Companys board of directors.

9

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Table of Contents

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

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 and in our other Securities and Exchange
Commission filings as well as those listed below.

| |   |                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Overcapacity
 within the biodiesel industry;                                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                
| |  | Availability
 and costs of feedstock, particularly vegetable oils;                                                                                                                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                                
| |  | Changes in
 the price and market for biodiesel and glycerin;                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                
| |  | Our ability
 to market and our reliance on third parties to market our products;                                                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                
| |  | Actual
 biodiesel and glycerin production varying 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
 our plant operations and their enforcement;
| |   |                                                                                                                                                                                                                                                                                                
| |  | 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 constructing or
 operating the plant;                                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                
| |  | Costs of
 construction and equipment and possible increases in these costs;                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                
| |  | Changes in
 our business strategy, capital improvements or development plans;                                                                                                                                                                                                                  
| |   |                                                                                                                                                                                                                                                                                                
| |  | Our proposed
 design-builder has limited experience in designing and constructing biodiesel
 plants;                                                                                                                                                                                           
| |   |                                                                                                                                                                                                                                                                                                
| |  | Lack of a
 definitive design-build agreement;                                                                                                                                                                                                                                                  
| |   |                                                                                                                                                                                                                                                                                                
| |  | Our lack of
 participating banks to fund our loan commitment;                                                                                                                                                                                                                                  
| |   |                                                                                                                                                                                                                                                                                                
| |  | Changes in
 interest rates or the availability of credit;                                                                                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                
| |  | Our ability
 to generate free cash flow to invest in our business and service our debt;                                                                                                                                                                                                        
| |   |                                                                                                                                                                                                                                                                                                
| |  | Our
 potential liability resulting from future litigation;                                                                                                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                                
| |  | Our ability
 to hire and retain key employees and maintain labor relations;                                                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                
| |  | Changes and
 advances in biodiesel production technology;                                                                                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                
| |  | Competition
 from alternative fuels; and                                                                                                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                
| |  | Other
 factors described elsewhere in this report.                                                                                                                                                                                                                                             

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.

10

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Table of Contents

Overview

Soy
Energy, LLC was organized as an Iowa limited liability company by filing
articles of organization with the Iowa
Secretary of State on December 15, 2005. We are a development stage company
formed for the purpose of constructing, owning and operating a 30 million
gallon per year biodiesel plant for the sale of biodiesel and its primary
co-product, glycerin in Marcus, Cherokee County, Iowa. We recently changed our
business plan, including a change in the production capacity and technology
provider for our biodiesel plant. Now we anticipate constructing a biodiesel
plant with a production capacity of 15 million gallons per year using
technology provided by Best Energies, Inc. (Best Energies). Best Energies is
a Wisconsin based company focused on developing essential technologies that add
value to the biodiesel production process. Currently, our principal place of
business is located at P.O. Box 663, 222 N. Main St., Marcus, Iowa 51035.

When
our fiscal year ended October 31, 2007, we had total assets exceeding
$10,000,000 and more than 500 unit holders; as a result, we were required to
file a registration statement on Form 10 to register our securities under the
Securities Exchange Act of 1934. Because our membership units are now
registered, we are subject to periodic reporting requirements. We must also
comply with the proxy and tender offer rules, and our directors, officers and
significant unit holders are now subject to additional reporting obligations.

Our
original business plan, including the original design of the biodiesel plant,
was estimated to cost $60,686,000 to complete. With the change in the
production technology of the plant and the reduction in the production capacity
of the plant, we currently anticipate the total project cost to be
approximately $55,003,000, which includes the amounts previously paid to
Bratney. The total project cost includes approximately $32,334,000 in
engineering and construction costs we anticipate paying to Best Energies,
approximately $10,359,000 in engineering and construction costs paid to
Bratney, our previous design builder; $3,200,000 for the biomass boiler, and
approximately $7,464,000 in other capital expenditures, start-up costs, working
capital and interest. We have budgeted $1,646,000 in construction contingency
to help offset any increases in our costs of construction.

We
originally entered into a Phase 2 Agreement and an Agreement for
Pre-Construction Services with Renewable Energy Group of Ames, Iowa (REG).
REG is a design-builder specializing in the design and construction of
biodiesel plants. However, after lengthy discussions, our board of directors
determined it was in the best interest of the company to change our
design-builder to the Bratney Companies of Des Moines, Iowa. We paid REG
$2,500,000 under our Phase 2 and Pre-Construction Services Agreements. We
requested that REG immediately refund $2,200,000 and provide us an itemized
list of performed services for the remaining $300,000. We immediately received
$2,200,000 and subsequently received $250,000 back from REG. We paid $1,500,000
of the refunded amount to Bratney Companies, as a deposit, under our Phase I
Design Services Agreement.

In
July 2006, we signed a design-build agreement with Bratney for the design and
construction of a 30 million gallon per year biodiesel facility. We agreed to a
guaranteed maximum price of $49,500,000 to construct the plant. We paid Bratney
$1,500,000 as a deposit at the time we executed the design-build agreement and
an additional deposit of $3,950,000 was paid in June 2007.

On
March 6, 2008, we gave notice to Bratney that we were terminating our
design-build agreement with them as management believed that the biodiesel
plant as designed would not be profitable to operate due to the high cost of
soybean oil and increasing costs of animal fats. Management decided to pursue a
different biodiesel plant design utilizing Best Energies technology in order to
reduce construction and future operating costs of our biodiesel plant. To date,
we have paid Bratney approximately $13,659,000 for design and construction
related services associated with the biodiesel plant. We anticipate receiving a
refund from Bratney of approximately $3,300,000. We are currently in
discussions with Bratney regarding the amount of this refund. Due to our
termination of our agreement with Bratney and decision to pursue a biodiesel
plant using Best Energies technology, we expect to have an impairment on the
carrying value of constructed assets and certain construction-in-progress
assets of approximately $4,000,000 to $7,000,000. We recorded an impairment
charge of $4,000,000 in April 2008.

On
April 10, 2008, we held our annual member meeting. During our annual meeting,
management presented a proposal to the members to pursue changes to our
business plan that management believes would make our proposed biodiesel plant
more competitive due to current conditions in the biodiesel market. At the
member meeting, our members approved pursuing the use of Best Energies
technology for the biodiesel plant and reducing the initial production capacity
of the biodiesel plant to 15 million gallons per year from 30 million gallons
per year. We anticipate that the proposed Best Energies design will allow us to
easily expand the biodiesel plant to a 25 million gallon per year capacity in
the future. We believe that the cost to construct the Best Energies biodiesel
plant will be
approximately $32,334,000 after taking into account the approximately
$1,196,000 previously expended on infrastructure costs.

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Table of Contents

On
May 12, 2008, we entered into a non-binding letter of intent (LOI) with Best
Biodiesel, Inc. (Best Biodiesel), a wholly-owned subsidiary of Best Energies.
Pursuant to the LOI, Best Biodiesel is expected to provide Soy Energy a
biodiesel plant with a nameplate capacity of 15 million gallons per year of
biodiesel produced from corn oil. The estimated purchase price for the
biodiesel plant is approximately $33,530,000, depending on the suitability of
the completed construction for the Best Energies designed plant. Management
anticipates that a portion of the construction completed by Bratney will be
utilized by Best Energies and anticipates the actual cost will be approximately
32,334,000. Best Biodiesel will also provide technology and operation support
services for a fee of $300,000 per year; provide an on-site technical manager
for one (1) year from start-up of operations; and provide feedstock procurement
services. Best Biodiesel would deliver the biodiesel plant by June 10, 2009
provided that Soy Energy entered into a definitive agreement by April 30, 2008
and Best Biodiesel receives a kick-off payment of $4,950,000 by June 10, 2008.
We do not expect our plant to be completed by June 10, 2009, as we did not
enter into a definitive agreement with Best Biodiesel by April 30, 2008, nor
did we make the kick-off payment by June 10, 2008. We anticipate that Best
Energies will engage Fagen, Inc. as a subcontractor and that Fagen, Inc. will
complete the general construction of our plant; however we have not executed a
binding design-build agreement with Best Energies and Best Energies has not
executed an agreement with Fagen, Inc. for the construction of our plant.

In
the future, and after we have completed construction of the biodiesel plant, we
are considering constructing a soybean crushing facility. We anticipate the
soybean crushing facility to process approximately 10.42 million bushels per
year of soybeans into approximately 10.4 million gallons per year of crude
soybean oil to be used as feedstock for the production of our biodiesel. We
expect the soybean crushing facility to cost approximately $35,000,000 which we
anticipate funding through cash generated from operations or a subsequent
offering and debt financing. However, due to the fact that we have changed our
plant design to utilize corn oil as our primary feedstock, we may pursue a
smaller soybean crushing facility or may abandon this plan altogether.

In
addition, we anticipate using a high pressure pellet fired boiler system to
fuel our plant. We have signed a final proposal with R.W. Rice Co. to design
and construct a pellet fired boiler system for our plant at a price of
$3,172,540. We expect that the Cherokee County Solid Waste Commission will
supply us with the pellets necessary to fuel the boiler system. We have signed
an agreement with the Cherokee County Solid Waste Commission for the sale and
purchase of pellets necessary to meet the energy needs of the plant.

We
expect that the biodiesel plant will process approximately 16 million gallons
per year of corn oil to produce approximately 15 million gallons of fuel-grade
biodiesel and 1.5 million gallons of glycerin per year. However, we anticipate
our biodiesel plant will be able to use several different types of feedstock
including soybean oil and animal fats to produce biodiesel.

From
our inception, and until April 30, 2008, we have incurred accumulated losses of
approximately $3,860,000 and we anticipate that accumulated losses will
continue to increase until the biodiesel plant is operational. Since we have
not yet become operational, we do not yet have comparable income, production or
sales data.

Liquidity and Capital Resources

We
expect to spend at least the next 12 months focused on three primary
activities: (1) project capitalization; (2) site development; and (3) plant
construction and start-up of operations. Assuming we can secure the debt financing
we need to complete capitalization of the project, we expect to have sufficient
cash on hand to cover all costs associated with construction of the project,
including, but not limited to, site development, utilities, construction and
equipment acquisition, staffing, office costs, audit, legal, compliance and
staff training. We estimate our total project costs will be approximately
$55,003,000.

12

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Table of Contents

Sources
and Uses of Funds

Below
is a table showing our estimated use of the funds in order to complete
construction of our biodiesel plant based on our revised plant design and
technology. This estimated use of funds may change as we continue to explore
changes to our business plan and plant design.

ESTIMATED USE OF FUNDS

|                                     |  |        |            | 
|------------------------------------ |  | ------ | ---------- | 
|Use of Proceeds                      |  | Amount |           
|Construction Costs:                  |  |        |            | 
|Paid To
 Bratney(1)                  |  | $      | 10,359,498 | 
|Best
 Energies Plant Costs (2)       |  |        | 32,333,429 | 
|Biomass
 Boiler                      |  |        | 3,200,000  | 
|Owners Costs:                        |  |        |            | 
|Inventory 
 Oil & Fat Feedstocks    |  |        | 1,675,000  | 
|Inventory 
 Chemicals & Catalysts   |  |        | 200,000    | 
|Inventory 
 Biodiesel               |  |        | 2,534,000  | 
|Inventory  Spare Parts              |  |        | 400,000    | 
|Startup
 Costs                       |  |        | 300,000    | 
|Land                                 |  |        | 250,000    | 
|Administration
 Building Furnishings |  |        | 100,000    | 
|Rolling
 Stock and Shop Equipment    |  |        | 435,000    | 
|Organizational
 Costs                |  |        | 655,000    | 
|Capitalized
 Fees and Interest       |  |        | 915,000    | 
|Contingency                          |  |        | 1,646,000  | 
|                                     |  |        |            | 
|TOTAL                                |  | $      | 55,002,927 | 

|    |                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | We paid
 Bratney approximately $13,659,498 for services under the design-build
 agreement; however we anticipate receiving a refund of approximately
 $3,300,000 from Bratney                                                                                  
|    |                                                                                                                                                                                                                                                                
|(2) | The LOI with
 Best Biodiesel states the estimated cost of the Best Energies Plant is
 $33,530,000; however, this estimate does not take into account dirt,
 foundation and dike work previously completed with an estimated value of
 approximately $1,196,000.

Set
forth below is an estimate of the sources of funding we will need to finance
the construction and startup operations of the biodiesel facility. The
information set forth below includes an estimate of the debt financing we need
to complete capitalization of the project. We have not executed any definitive
loan agreements for the debt financing required to complete project
capitalization. Our actual sources of funds could vary due to a number of
factors, including those described in this report.

SOURCES OF FUNDS

|                                   |  |   |            |  |                   |       |  
|---------------------------------- |  | - | ---------- |  | ----------------- | ----- | -
|Sources of Funds                   |  |   |            |  | Percent Of
 Total |      
|                                   |  |   |            |  |                  
|Unit
 Proceeds                     |  | $ | 30,668,000 |  |                   | 55.76 | %
|Seed Capital
 Proceeds             |  |   | 800,000    |  |                   | 1.45  | %
|Founding
 Member Proceeds          |  |   | 500,000    |  |                   | 0.91  | %
|Anticipated
 Best Energies In-Kind |  |   | 5,000,000  |  |                   | 9.09  | %
|Economic
 Development Grant        |  |   | 400,000    |  |                   | 0.73  | %
|Anticipated
 Term Debt Financing   |  |   | 17,634,927 |  |                   | 32.06 | %
|                                   |  |   |            |  |                   |       |  
|Total Sources of Funds             |  | $ | 55,002,927 |  |                   | 100.0 | %

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Table of Contents

Project Capitalization

We
raised $1,300,000 of equity in our private placement offerings to fund our
development, organizational and offering expenses. This includes $500,000 we
raised in our founders offering and $800,000 we raised in our seed capital
offering. In our Iowa intrastate offering, we raised $30,668,000 in equity. We
anticipate offering Best Energies 5,000 units in exchange for a $5,000,000
reduction in the total cost to design and build the plant. We anticipate
issuing these units in an exempt private placement to Best Energies after we
execute a definitive design-build agreement. In order to fully capitalize the
project, we anticipate requiring debt financing in the amount of approximately $17,635,000.

On
June 7, 2007, we received a contingent loan commitment from AgStar Financial
Services agreeing to provide us with $33,486,540 in financing to capitalize the
biodiesel plant. The AgStar loan commitment was contingent on AgStar securing
the participating lenders required to fund the loan commitment, other
conditions required by AgStars legal counsel and conditions that may be
required by any participating lenders. Based on this loan commitment, we
satisfied all of the requirements of our escrow agreement to release the equity
funds from escrow in June 2007.

As
of the date of filing of this report, AgStar has not secured the participating
lenders to fund the debt financing we require to complete construction of our
biodiesel plant. AgStar is continuing to seek participating lenders to fund its
loan commitment. As a result of AgStars inability to fund its loan commitment,
we are seeking additional or new financing sources to complete the
capitalization of our project.

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 biodiesel
plant. In November 2007, we suspended all construction related activities on
our plant while we sought the debt financing we need to complete construction
of the plant. To date, we have completed approximately 10% of the construction
of our biodiesel plant.

Plant Construction and Start-Up of Plant
Operations

Plant
Construction Activity

As
of June 1, 2008, our plant was approximately 10% complete. We suspended
construction of our biodiesel plant in November 2007. Prior to suspending
construction, we completed the dirt work and the construction of our dike. In
addition, we began construction on our foundation. We terminated our agreement
with Bratney and are in the process of pursuing the use of Best Energies
technology and implementing the other changes to our business plan that were
approved by our members at our April 10, 2008 member meeting. Due to the
significant changes to our project, we expect to have an impairment on the
carrying value of constructed assets and certain construction-in-progress
assets of approximately $4,000,000 to $7,000,000. We recorded an impairment
charge of $4,000,000 in April 2008. The following chart lists the status of
various projects related to construction of our plant:

|                                        |  |                                                                                                                                                                                                                                                                                                                                                
|--------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Project                                 |  | Status                                                                                                                                                                                                                                                                                                                                         
|                                        |  |                                                                                                                                                                                                                                                                                                                                                
|Dirt and
 Site Work                     |  | Dirt work
 commenced on August 1, 2007. Dirt work was approximately 98% complete on June
 1, 2008. To date, the cost of performing the dirt and site work was
 approximately $822,000.                                                                                                                                                         
|                                        |  |                                                                                                                                                                                                                                                                                                                                                
|Process
 Building and Boiler 
 Building |  | The boiler
 building was 5% complete on June 1, 2008. None of the equipment for the process
 building or boiler building has been installed. We have completed dirt work
 for the process building but have not completed construction of the
 foundation. To date, the cost of the work on the process building was
 approximately $5,273,000.

14

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|                                          |  |                                                                                                                                                                                                                                                                                   
|----------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Storage
 Tanks                            |  | As of June
 1, 2008, the storage tank farm was approximately 3% complete. The rail tank
 car loading and unloading area was approximately 1% complete. We have
 completed the dirt work and completed construction of the dike. To date, the
 cost was approximately $1,239,000.  
|                                          |  |                                                                                                                                                                                                                                                                                   
|Administration
 Office                    |  | The
 administration office was approximately 15% complete on June 1, 2008. We have
 completed the dirt work for the administrative building and have completed
 construction of the foundation. To date, the cost of work on the
 administration office was approximately $50,000.
|                                          |  |                                                                                                                                                                                                                                                                                   
|Truck
 Loading and Scale                  |  | The truck
 loading, unloading and scaling area construction was approximately 4%
 complete on June 1, 2008. We have completed the dirt work for the truck
 loading and scale facilities.                                                                                          
|                                          |  |                                                                                                                                                                                                                                                                                   
|Utilities 
 Electrical and 
 Natural Gas |  | The
 electrical wiring and control systems were approximately 0% complete as of
 June 1, 2008. We have brought electrical facilities to the project site.                                                                                                                         
|                                          |  |                                                                                                                                                                                                                                                                                   
|Utilities 
 Water                        |  | The water utility
 was approximately 0% complete as of June 1, 2008. Rural water has been
 brought to the site for potable water.                                                                                                                                                 
|                                          |  |                                                                                                                                                                                                                                                                                   
|Railroad
 Siding                          |  | Rail
 construction was approximately 10% complete on June 1, 2008. We have
 completed the dirt work on our railroad siding.                                                                                                                                                       

We
originally anticipated completing construction of the biodiesel plant in
October 2008. However, due to the suspension of construction, lack of debt
financing and the changes we have made to our business plan and plant design,
we are unsure as to when we will complete construction of the biodiesel plant,
if we complete construction at all.

Permitting
and Costs and Effects of Compliance with Environmental Laws

Stanley
Consultants, Inc. has assisted us in obtaining our required permits. We have or
in the process of obtaining all of the required air, water, construction and
other permits necessary to construct the plant and have either obtained or are
in the process of obtaining all the permits necessary to operate the plant. The
following chart lists the various permits for which we have applied:

|                                                           |  |                                                                                                                                                             
|---------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|Permit                                                     |  | Status                                                                                                                                                      
|                                                           |  |                                                                                                                                                             
|Spill,
 Prevention, Control and 
 Countermeasures Plan     |  | Stanley
 Consultants, Inc. is in the process of preparing this application. We
 anticipate receiving this permit before we commence operations at the plant.
|                                                           |  |                                                                                                                                                             
|                                                           |  |                                                                                                                                                             
|VOC
 Emissions from Equipment 
 Leaks Permit- Construction |  | Stanley
 Consultants, Inc. is in the process of preparing this application. We
 anticipate receiving this permit before we commence operations at the plant.
|                                                           |  |                                                                                                                                                             
|Boiler
 Permit 1                                           |  | We have
 applied for this permit. We anticipate receiving this permit before we
 commence using the boiler.                                                 
|                                                           |  |                                                                                                                                                             
|Boiler
 Permit 2                                           |  | We have
 applied for this permit. We anticipate receiving this permit before we
 commence using the boiler.                                                 
|                                                           |  |                                                                                                                                                             
|NPDES
 Stormwater General Permit  Construction            |  | We received
 this permit in September 2006.                                                                                                                 

15

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Table of Contents

|                                                                                 |  |                                                                                                                                                             
|-------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|NPDES
 Wastewater Discharge 
 Permit                                             |  | We received
 this permit in November 2006.                                                                                                                  
|                                                                                 |  |                                                                                                                                                             
|Superfund
 Amendments and 
 Reauthorization Act (SARA) Section 
 313 Form R      |  | Stanley
 Consultants, Inc. is in the process of preparing this application. We
 anticipate receiving this permit before we commence operations at the plant.
|                                                                                 |  |                                                                                                                                                             
|Resource
 Conservation and Recovery 
 Act (RCRA) Hazardous Materials ID 
 Number |  | Stanley
 Consultants, Inc. is in the process of preparing this application. We
 anticipate receiving this permit before we commence operations at the plant.
|                                                                                 |  |                                                                                                                                                             

Utilities
and Infrastructure

Electricity.
We will require a significant supply of electricity to operate our plant. We
anticipate that Mid -American Energy will supply us with our electricity needs,
but we have not entered into any agreement with Mid-American Energy.

Water.
We are currently considering connecting to a rural water supply or constructing
our own well, depending on the amount of water our plant requires. The
different technology and plant design options we are exploring will have an
effect on the amount of water our biodiesel plant requires.

PEF.
In June 2007, we entered into an agreement with the Cherokee County Solid Waste
Commission (CCSWC) to supply us with Process Engineered Fuel (PEF) pellets that
we anticipate using to fuel our biodiesel plant. We also anticipate
constructing a backup system to burn natural gas or other fuels in the event of
an interruption of our PEF pellet supply.

Natural
Gas. We anticipate having natural gas as the backup power supply for our
plant. We are in the process of exploring potential suppliers of the natural
gas backup. We anticipate that PEF will supply all of our biodiesel plants
energy needs, however, we expect that natural gas will be available should we
not be able secure sufficient PEF to operate the biodiesel plant.

Rail.
The Canadian National Railroad provides rail service near the site of our
biodiesel plant. We are currently in the process of establishing rail service
directly to our plant in order to ship biodiesel to our customers. As of June
1, 2008, rail construction was approximately 10% complete. We anticipate we
will enter into an agreement with the Canadian National Railroad for rail
service, but we have not currently entered into any such agreement.

Feedstock
Procurement

We
anticipate that the Best Energies technology would allow us to use corn oil as
the primary feedstock for the biodiesel plant and expect to pursue the use of
corn oil as the primary feedstock for our biodiesel production process. One
source of corn oil that can be used in the biodiesel production process is from
distillers grains produced by ethanol plants. We anticipate that we can procure
corn oil to be used in the biodiesel production process for prices that are
much lower than the current price of soybean oil. We anticipate that production
of biodiesel will require approximately 7.7 pounds of corn oil to produce one
gallon of biodiesel. Depending on the price at which we can secure corn oil,
this may allow our biodiesel plant to produce biodiesel less expensively than biodiesel
produced from soybean oil.

We
have not entered into any definitive agreements with ethanol producers to
procure the corn oil we are considering. However, we are negotiating with
several ethanol producers in order to secure a supply of corn oil and we are in
the process of negotiating letters of intent with these potential corn oil
suppliers. Although there are a large and growing number of ethanol plants, not
all of them produce and market corn oil. Ethanol producers may choose not to install
the equipment necessary to separate the corn oil since this would require a
significant capital expenditure by the ethanol plant. Further, since other
biodiesel producers are considering using corn oil as the feedstock for
their biodiesel production process, the price of corn oil may increase
significantly, which could eliminate any advantage to using corn oil.

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Table of Contents

Trends and Uncertainties Impacting the
Biodiesel Industry and Our Future Operations

If
we are able to build the plant and begin operations, we will be subject to
industry-wide factors that affect our operating and financial performance.
These factors include, but are not limited to, the available supply and cost of
feedstock from which our biodiesel and glycerin will be processed; dependence
on our biodiesel marketer and 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 our industry.

We
anticipate our revenues will consist of sales of biodiesel and glycerin. We
expect biodiesel sales to constitute the bulk of our future revenues. Although
the price of diesel fuel has increased over the last several years and
continues to rise, 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 our biodiesel, which could result in the loss of some or all
of the value of our units. Further, due to the increase in the supply of
biodiesel from the number of new biodiesel plants scheduled to begin production
and the expansion of current plants, we do not expect current biodiesel prices
to be sustainable in the long term and the industry will need to continue to
grow demand to offset the increased supply brought to the market place by
additional production.

We
also expect to benefit from federal and state biodiesel supports and tax
incentives. Changes to these supports or incentives could significantly impact
demand for biodiesel. The most significant of these are the Volumetric Ethanol
Excise Tax Credit (VEETC) and the Renewable Fuels Standard (RFS). The VEETC
creates a tax credit of $1.00 per gallon for biodiesel made from virgin oils
derived from agricultural products and animal fats and a tax credit of $0.50
per gallon for biodiesel made from non-virgin agricultural products and animal
fats. VEETC was designed to streamline the use of biodiesel and encourage
petroleum blenders to blend biodiesel. VEETC is scheduled to expire on December
31, 2008, and it may not be extended. The RFS requires refiners to use 9
billion gallons of renewable fuels in 2008, increasing to 36 billion gallons by
2022. Further, the RFS contains a requirement that 500 million gallons of
biodiesel and biomass-based diesel fuel be blended into the national diesel
pool in 2009, gradually increasing to 1 billion gallons by 2012. However, the
mandates of the RFS are expected to largely be met by ethanol and thus will
likely have a much smaller impact on the biodiesel industry. These programs may
be abandoned or repealed which could affect our ability to capitalize our
project and operate profitably should we complete construction of our proposed
plant.

On
May 22, 2008, the United States Congress voted to override the Presidents veto
of the Food and Energy Conservation Act of 2008 (the Farm Bill). The Farm
Bill reauthorizes the CCC Bioenergy Program which was created to promote
sustained increases in bioenergy production and related industrial agricultural
commodities, as well as to help improve the environment through the production
and use of cleaner burning fuels. Under the program, the USDA makes payments
through the Commodity Credit Corporation to eligible producers to encourage
increased purchases of eligible commodities for the purpose of expanding
production of bioenergy and supporting new production capacity. The Farm Bill
authorized $300 million in mandatory funding for the program over the 5 year
duration of the Farm Bill and authorizes an additional $25 million in funding
each year from fiscal year 2009 through fiscal year 2012, subject to Congress
annual appropriations process. Ethanol produced from corn will not qualify
under the program. The Farm Bill has been sent to the President, but it has not
been signed yet.

Biodiesel
production continues to grow as additional plants become operational. In 2005,
approximately 75 million gallons of biodiesel were produced in the United
States, a three fold increase from 2004 biodiesel production according to the
National Biodiesel Board. Further, in 2006 biodiesel production increased to
250 million gallons, a further significant increase from 2005. The National
Biodiesel Board estimates that in 2007, biodiesel production reached 450
million gallons. In January 2008, the National Biodiesel Board estimated there
were 171 active plants with an annual production capacity of 2.24 billion
gallons annually, with another 57 plants and 3 expansions in construction. The
biodiesel industry is becoming more competitive nationally as a result of the
substantial construction and expansion that is occurring in the industry. We
believe this increase in biodiesel supply as well as
high soybean oil prices 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 secure the debt
financing we require and hurt our ability to generate revenue and maintain
positive cash flows should our biodiesel plant become operational.

17

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Table of Contents

Quarterly Financial Results

At
April 30, 2008, we had total assets of approximately $28,135,000 consisting
primarily of cash and equivalents, other accounts receivables, land and
construction in progress. At April 30, 2008, we had current liabilities of
approximately $214,000 consisting of our accounts payable and other accrued
expenses. Total members equity at April 30, 2008, was approximately
$27,921,000. Since our inception, we have generated no revenue from operations.
For the six months ended April 30, 2008, we have a net loss of $3,887,000
primarily due to an impairment charge of $4,000,000 recorded during April 2008.

Based
on our business plan and current construction cost estimates, we believe the
total project will cost approximately $55,003,000. Our capitalization plan
consists of a combination of equity we raised in our seed capital and general
offerings, anticipated debt, and government grants. We anticipate that the cost
of our project may increase as we make changes to the design of our plant and
the technology we use for the plant.

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.

We
determined the offering price for our founding member, 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. We did not rely upon any independent valuation, book value or other
valuation criteria in determining the founding member, seed capital and general
offering sales price per unit.

Debt Financing

Based
on our current estimate of the total project cost and the equity we raised in
our seed capital and general offerings, and the $5,000,000 in-kind contribution
we expect Best Energies will make, we expect to require debt financing in the
amount of $17,635,000 to fully capitalize the project.

During
May 2006, we obtained loans with Farmers State Bank in Marcus, Iowa, totaling
$1,999,000, a portion of which we used to pay REG under our pre-construction
services agreement. Upon termination of our relationship with REG, we received
a refund of a portion of the funds paid to REG under our Phase 2 and
pre-construction services agreement. We paid Bratney $1,500,000 under our Phase
I Design Services Agreement and an additional deposit of $3,950,000 in June
2007. When we broke escrow on our Iowa registered intrastate offering in June
2007, we repaid the entire amount of our loans with Farmers State Bank.

On
June 7, 2007, we received a contingent loan commitment from AgStar Financial
Services agreeing to provide us with $33,486,540 in financing to capitalize the
biodiesel plant. The AgStar loan commitment was contingent on AgStar securing
the participating lenders required to fund the loan commitment, conditions
required by AgStars legal counsel, and conditions that may be required by any
participating lenders. Based on this contingent loan commitment, we satisfied
all of the requirements of our escrow agreement to release the equity funds
from escrow.

As
of the date of filing this report, AgStar has not secured the participating
lenders to fund the debt financing we require for our biodiesel plant. AgStar
is continuing to seek participating lenders to fund its loan commitment. As
a result of AgStars inability to fund its loan commitment, we continue to seek
additional or new financing sources to complete the capitalization of our
project.

18

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We
hope to attract the senior bank loan from a major bank, with participating
loans from other banks. We expect the senior loan will be a construction loan
secured by all of our property, including receivables and inventories. Based on
our knowledge of similar loans made in the industry and preliminary discussions
with potential lenders, we anticipate that we will pay near prime rate on this
loan, plus annual fees for maintenance and observation of the loan by the
lender, however, we may not be able to obtain debt financing or adequate debt
financing may not be available on the terms we currently anticipate. If we are
unable to obtain senior debt financing in an amount necessary to fully
capitalize the project, we may have to seek subordinated debt financing which
could require us to issue warrants. The issuance of warrants could reduce the
value of our units.

Grants and Government Programs

Currently,
there are limited numbers of grants, loans and forgivable loan programs
available to biodiesel producers. We anticipate applying for those programs that
are available. Although we may apply under several programs simultaneously and
may be awarded grants or other benefits from more than one program, it must be
noted that some combinations of programs are mutually exclusive. Under some
state and federal programs, awards are not made to applicants in cases where
construction of the project has started prior to the award date. These
applications may not result in awards of grants or loans. In addition, even if
a grant or loan is awarded, if we do not meet the conditions or criteria of the
grant or loan we will not receive the grant funds.

We
received a 15 year, 75% tax abatement on our property from Cherokee County
which was approved unanimously by the Cherokee County Board of Supervisors at
their April 18, 2006 meeting. In addition, we were approved for or expect to
apply for the following grants:

Enterprise
Zone Program  We were awarded financial assistance through the Iowa
Department of Economic Enterprise Zone Program. Enterprise Zones are designed
to stimulate economic development in economically distressed areas of Iowa. To
be eligible for the program, a business must make a minimum qualifying
investment of $500,000 over a three-year period and must create at least ten
full-time jobs over a three year period. The business must provide full-time
employees standard medical and dental insurance and pay an average starting
salary which is equal to or greater than 90% of the average county or regional
wage, whichever is lower. We anticipate we will receive approximately
$5,270,000 in state and local tax incentives under the program.

VAAPFAP
 We were approved for participation in the Iowa Value-Added Agricultural
Products and Processes Financial Assistance Program (VAAPFAP) administered by
the Iowa Department of Economic Development (IDED). VAAPFAP provides
financial assistance to new or existing companies that utilize the states
agricultural commodities to create new, innovative products or to produce
renewable fuels. Funds awarded under the program may be used for payments made
or expenses incurred for business planning and consulting services. We received
a $300,000, zero interest loan, and a $100,000 forgivable loan from the IDED.
To date, we have not drawn any funds on these VAAPFAP loans.

IDED-Iowa
High Quality Job Creation Program  We were approved for participation in
the Iowa High Quality Job Creation Program provided we maintain certain
requirements of the program. Our award includes approximately $4,537,000 in
investment tax credits and approximately $733,000 in construction sales tax
refund. The amount of tax incentives and assistance provided under the program
is based on the number of high quality jobs created and the amount of our
qualifying investment.

We
are only eligible to receive these benefits if we meet certain requirements. We
anticipate that we will be required to satisfy four of the following eight
requirements: (i) offer a pension or profit-sharing plan to all full-time
employees; (ii) participation in one of several specified industries, which
includes value-added agricultural products; (iii) provide at least 80% of the
cost of a standard medical and dental insurance plan for all full-time
employees; (iv) make child care services available to employees; (v) invest no
less than 1% of pretax profits in research and development in Iowa; (vi) invest
no less than 1% of pretax profits in worker training and skills enhancement;
(vii) maintain an active productivity and safety improvement program; or (viii)
purchase and occupy a facility that includes at least one vacant building which
is at least 20,000 square feet. The Department of Economic Development
may waive the above requirements when good cause is shown. If, at any time, we
fail to meet the requirements for participation in the program, we may have to
repay to the local taxing authority and the Iowa Department of Revenue and
Finance the total value for any incentives received.

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Value
Added Producer Grant (VAPG)  We anticipate that we will apply for the
United States Department of Agricultures VAPG grant. VAPG grant funds may be
used for planning activities or for working capital for marketing value-added
agricultural products and for farm-based renewable energy. Grant funds may not
be used for architectural, engineering or design work of our physical facility.
We will only be eligible for grant funds if greater than 50% of our members are
deemed agricultural producers. In other words, greater than 50% of our members
must produce the agricultural product to which value will be added due to our
project. We have not yet applied for nor been approved to receive any financial
assistance under VAPG, and we may not qualify for VAPG or we may not receive
any particular level of financial assistance, if any, under the program.

Renewable
Energy and Energy Efficiency Program  The Farm Security and Rural
Investment Act of 2002 (the Farm Bill) established the Renewable Energy Systems
and Energy Efficiency Improvements Program under Title IX, Section 9006. This
program was created to provide financial assistance to agricultural producers
and rural small businesses for the purpose of purchasing and installing
renewable energy systems and energy efficiency improvements in rural areas. The
program offers both grants and guaranteed loans for eligible projects. We
anticipate applying for grant funds under the Renewable Energy and Energy
Efficiency Program, however, we may not qualify for the program or we may not
receive any benefits under the program.

Iowa
Rail and Revolving Loan and Grant Program (RRLGP)- The Railroad Revolving
Loan and Grant program provides assistance to improve rail facilities that will
spur economic development and job growth and provide assistance to railroads
for the preservation and improvement of the rail transportation system. The
program can provide assistance as either loans or grants. Industries,
railroads, local governments or economic development agencies may apply for
financial assistance for projects such as:

| |   |                                                             
| | - | ------------------------------------------------------------
| |  | building
 rail spurs to a new or expanding development;     
| |   |                                                             
| |  | building or
 rebuilding sidings to accommodate growth;      
| |   |                                                             
| |  | purchasing or rehabilitating existing rail infrastructure;  
| |   |                                                             
| |  | rehabilitating
 existing rail lines to increase capacity; or
| |   |                                                             
| |  | other rail related development.                             

We will work
in conjunction with the Siouxland Metropolitan Planning Council located in
Sioux City, Iowa to apply for benefits under this program. Although we
anticipate that we will be eligible for benefits under the program, we have not
applied for nor been approved to receive any such benefits at this time. We may
not qualify for the program or receive any particular level of benefits, if
any, under the program.

Research and Development

We
do not conduct any research and development activities associated with the
development of new technologies for use in producing biodiesel.

Employees

We
currently have two full-time employees and no part-time employees. We
anticipate that once the plant is operational, we will have 19 full-time
employees and no part-time employees.

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 carrying value of certain property and equipment included in
significant estimates is based on the availability to utilize previously
constructed assets as well as amounts in progress. In addition, the Company has
recorded as other receivables amounts we estimate receiving from Bratney.

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Off-Balance Sheet Arrangements

We
do not have any off-balance sheet arrangements.

Item 3. Quantitative and Qualitative
Disclosures about Market Risks

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

Item 4T. Controls and Procedures

Our
management, including our Chief Executive Officer (the principal executive
officer), along with our Chief Financial Officer (the principal financial
officer), 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 April 30, 2008. Based upon this review
and evaluation, these officers have concluded that our disclosure controls and
procedures were not effective due to the material weakness discussed below.

Due
to the current operations and size of the Company, there is a lack of
segregation of duties in certain functions. In addition, there were adjustments
to our financial statements and other factors during the course of the annual
audit which impacted our closing process. To address these weaknesses, the
Company performed additional analysis and other post-closing procedures to
ensure that our financial statements are prepared in accordance with generally
accepted accounting principles. Accordingly, our executive officers and
management believe that the financial statements included in this report
present fairly in all material respects our financial condition, results of
operations and cash flows for the periods presented. The Company is in the
process of strengthening internal controls including enhancing our internal
control systems and procedures to assure that these weaknesses are corrected
and remediated.

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 as of April 30, 2008 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.

Risk
factors are discussed in our registration statement on Form 10 and any
amendments. The risks described in our registration statement on Form 10 are
not the only risks facing us. The following Risk Factors are provided to
supplement and update the Risk Factors previously disclosed in our registration
statement on Form 10. The Risk Factors set forth below should be read in
conjunction with the considerations set forth above in MANAGEMENTS DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONand the risk
factors set forth in our registration statement on Form 10.

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Our auditors identified a material weakness
in our disclosure and internal controls and procedures which may negatively
affect our financial condition.

Due
to the current operations and size of the Company, there is a lack of
segregation of duties in certain functions. In addition, there were adjustments
to our financial statements and other factors during the course of the audit
which impacted our closing process. To address these weaknesses, we have
performed additional analysis and other post-closing procedures to ensure that
our financial statements are prepared in accordance with generally accepted
accounting principles. These issues relating to our controls and procedures may
have a negative affect on our ability to operate the Company and may negatively
affect our financial condition.

We
have suspended construction of our biodiesel plant which may lead to increased
costs and delays in completing construction of our biodiesel plant or may
prevent us from constructing our biodiesel plant altogether which could decrease
the value of our units.

We
commenced construction of our biodiesel plant in August 2007. We suspended
construction of the biodiesel plant in November 2007 while we sought new or
additional debt financing to complete capitalization of our project. We
anticipate recommencing construction of the biodiesel plant as soon as we can
secure the debt financing we require. However, the cost to build the plant may
increase as a result of our suspension in construction. We have terminated our
agreement with Bratney, the contractor who was constructing the plant, and we
plan to pursue Best Energies as our technology provider and we anticipate that
Best Energies will utilize Fagen, Inc. as a subcontractor to construct the
biodiesel plant. These changes may lead to delays in constructing the biodiesel
plant. Further, the price of materials may increase during this time period.
Suspending construction of the biodiesel plant also will delay our commencement
of operations at the plant if we complete construction, which will delay our
ability to generate revenue. Additionally, we may never be able to restart
construction of the biodiesel plant which would lead to our failure. Suspending
construction may lead to increased costs to construct the biodiesel plant and
may delay our ability to generate revenue from the sale of biodiesel and
glycerin if we are able to complete construction at all, which could decrease
or eliminate the value of our units. If we fail, we may dissolve the company,
in which case, the assets of the company will be distributed according to the
terms of our operating agreement, which may result in our unit holders not
receiving any portion of our assets when the company is dissolved.

Bratney may not refund certain advances that
we are expecting which may hurt our financial condition and may cause our
failure.

We
are seeking a refund from Bratney of certain funds we advanced pursuant to our
design-build agreement that was terminated on March 6, 2008. We anticipate
receiving a refund of approximately $3,300,000. We are currently involved in
negotiations with Bratney with respect to this refund. Bratney may not refund
this amount for financial or other reasons. We may be forced to seek a refund
of this amount through litigation or other means, which may result in
additional costs. Ultimately, we may be unable to secure a refund of the
$3,300,000 we expect, which may negatively affect our financial condition and
may prevent us from fully capitalizing our project which may lead to our failure.

We have made changes to the design of our
biodiesel plant during the time that we have suspended construction which could
be costly to implement and could decrease the value of our units.

We
have decided to utilize Best Energies technology for our biodiesel plant that
management believes will make the biodiesel plant operate more efficiently. We
have terminated Bratney, the contractor who was constructing the plant. These
changes may lead to delays in constructing the biodiesel plant. We have also
decided to reduce the size of the biodiesel plant from an annual production
capacity of 30 million gallons to 15 million gallons and to utilize corn oil as
our primary feedstock instead of soybean oil. These changes to the design of
the plant, may lead to additional costs in constructing the biodiesel plant and
may lead to delays in completing construction of the biodiesel plant. Due to
the changes to our project, we anticipate the carrying value of constructed
assets and certain construction-in-progress assets will be affected and the
Company has estimated an impairment of approximately $4,000,000 to $7,000,000.
We recorded an impairment of $4,000,000 during April 2008. In addition,
decreasing the annual production capacity of the plant may lead to less revenue
which may impair our financial condition. Further, we may not be able to secure
the new technology we are exploring which may lead to our projects failure.
These costs and
delays may affect our ability to generate revenue and may increase our debt
service requirements, which could affect our ability to operate the biodiesel
plant profitably and could decrease or eliminate the value of our units.

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We may need to increase cost estimates for
construction of the biodiesel plant, and such increases could result in
devaluation of our units if the biodiesel plant construction requires
additional capital.

We
entered into a non-binding LOI with Best Biodiesel, a wholly-owned subsidiary
of Best Energies, to design and build our biodiesel plant; however we have not
executed a definitive design-build contract. We anticipate that the total cost
to construct the proposed biodiesel plant will be approximately $42,693,000,
including the amounts previously paid to Bratney, approximately $3,200,000 for
our biomass boiler, approximately $7,464,000 in other capital expenditures,
start-up costs, working capital and interest and a construction contingency of
approximately $1,646,000 for a total project completion cost of approximately
$55,003,000. This price includes construction period interest. However, the
final cost of the plant may be significantly higher.

There
may be design changes or cost overruns associated with the construction of the
plant. Shortages of steel or other materials necessary to construction could
affect the final completion date of the project. In addition, increases in the
prices of steel, concrete and other construction materials, as well as
increases in the cost of labor, could affect the final cost of construction of
the biodiesel plant. Further, shortages of steel, concrete and other
construction materials, as well as labor shortages, could affect the final
completion date of the project. We have budgeted $1,646,000 for our
construction contingency to help offset higher construction costs. However,
this may not be sufficient to offset increased costs. Advances and changes in
technology may require changes to our current plans in order to remain
competitive. Any significant increase in the estimated construction cost of the
plant could delay our ability to operate profitably and reduce the value of
your units because our revenue stream may not be able to adequately support the
increased cost and expense attributable to increased construction costs.

Best Energies has limited experience in the
biodiesel industry, which may result in increased costs or delays.

Best
Energies has limited experience in the design and construction of biodiesel
plants. The only operating biodiesel plant designed by Best Energies is located
in Cashton, Wisconsin. While Best Energies has designed a biodiesel plant, it
has not yet constructed a biodiesel plant and we anticipate that Best Energies
will hire Fagen, Inc. as a subcontractor for the general construction of our
biodiesel plant. As a result, our lenders may place more stringent requirements
and conditions on our debt financing due to Best Energies limited background
in designing and constructing biodiesel plants. It may also be more difficult
or expensive to obtain construction bonding for our project, which could
increase the cost of our project or delay commencement of construction.
Finally, unforeseen costs or delays in the project due to Best Energies limited
experience may reduce or eliminate the value of our units.

Fagen, Inc. and Best Energies do not have a
final agreement with respect to construction of our biodiesel plant and a final
agreement may not be made or may be delayed which could adversely affect the
value of our units.

We
anticipate that Fagen, Inc. will act as a subcontractor of Best Energies and
will construct our proposed biodiesel plant. Fagen, Inc. and Best Energies do
not have a definitive agreement with respect to construction of our proposed
biodiesel plant. Any such final agreement may not be made, or if it is made,
may be on terms that are less favorable than are currently anticipated by Best
Energies. Further, delays in securing a final agreement between Best Energies
and Fagen, Inc. might delay construction of the biodiesel plant which could
negatively affect our financial condition and could reduce or eliminate the
value of our units.

We anticipate that Fagen, Inc. will be a
subcontractor of Best Energies and we will therefore not have a direct contract
with Fagen, Inc. which could adversely affect our financial condition and the
value of our units.

We
anticipate that Fagen, Inc. will construct the biodiesel plant as a
subcontractor of Best Energies. Since we anticipate Fagen, Inc. will be a
subcontractor of Best Energies, we do not anticipate having a direct contract
with Fagen, Inc. for the construction of our proposed biodiesel plant. This may
make it more difficult to enforce claims against Fagen, Inc. if there are
problems with the construction of the biodiesel plant and we are unable to
resolve those issues with Best Energies. We anticipate that in order to recover
for failures in the construction of the biodiesel plant we will have to proceed
against Best Energies and not Fagen, Inc. Additionally, any contract between Best
Energies and Fagen, Inc. may include terms that are less favorable to us than
they are to Best Energies. Any failure by Fagen, Inc. may result in the failure
of our project, despite the fact that we will not have a contract directly with
Fagen, Inc. The lack of a direct contract with Fagen, Inc. may result in our
inability to pursue claims against Fagen, Inc. and may result in decreases in
the value of our units.

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We will depend on Best Energies, our
anticipated design builder, whose failure to perform could force us to abandon
business, hinder our ability to operate profitably or decrease the value of our
units.

We
will be highly dependent upon Best Energies to design, engineer and build the
plant. We have not yet entered into a definitive design-build agreement with
Best Energies to construct our biodiesel plant. Should we execute a
design-build contract with Best Energies, it may fail to perform its duties
under the contract as agreed or it may be unable to complete construction of
the plant at the price agreed to, or at all. We anticipate that we could locate
a new design-builder should Best Energies fail to perform, but this may result
in additional costs and delays in the completion of the biodiesel plant. Delays
in the completion of the biodiesel plant may result in less revenue, as it
would delay when the biodiesel plant could commence production of biodiesel and
glycerin for sale.

We
expect that we will also be highly dependent upon Best Energies to train
personnel in operating the plant. However, Best Energies has limited experience
in the design, construction, or operation of a biodiesel plant. If the
completed plant does not operate at the level anticipated by us in our business
plan, we will rely on Best Energies to adequately address such deficiency. Best
Energies may not be able to address such deficiency in an acceptable manner.
Failure to do so could cause us to halt or discontinue production of biodiesel,
which could damage our ability to generate revenues and reduce the value of our
units. Any failure by Best Energies to deliver pursuant to its agreements with
us may result in delays in construction of the plant, more expense to complete
the plant, and other problems that may result in the loss of some or all of the
value of our units.

We anticipate depending upon Best Energies
for expertise in the commencement of operations in the biodiesel industry and
any loss of this relationship could cause us delay and added expense, placing
us at a competitive disadvantage.

We
anticipate entering into a definitive design-build agreement with Best Energies
to design, engineer and build the plant. However, we do not currently have any
binding agreement with Best Energies and any definitive agreement may be less
beneficial to Soy Energy than we currently anticipate. Best Energies is a
Wisconsin corporation specializing in the engineering, construction and
operation of biodiesel plants. We expect that Best Energies will provide the
technology for our plant.

Any
loss of our relationship with Best Energies, particularly during the
construction and start-up period for the plant, may prevent us from commencing
operations and result in the failure of our business. The time and expense of
locating new consultants and contractors would result in unforeseen expenses
and delays. In addition, Best Energies involvement in other projects could
delay the commencement and start-up operations of our project. Unforeseen
expenses and delays may reduce our ability to generate revenue and operate
profitability and may significantly damage our competitive position in the
biodiesel industry such that the value of our units may be decreased or
eliminated altogether.

Our business is sensitive to feedstock
prices. Changes in the prices and availability of our feedstock may hinder our
ability to generate revenue and reduce the value of our units.

Our
future results of operations and financial condition will be significantly
affected by the cost and supply of feedstock. Changes in the price and supply
of feedstock are subject to and determined by market forces over which we have
no control. Because there is little or no correlation between the price of
feedstock and the price of biodiesel, we cannot pass along increased feedstock
prices to our biodiesel customers. As a result, increased feedstock prices may
result in decreased revenues. If we experience a sustained period of high
feedstock prices, such pricing may reduce our ability to generate revenue which
may prevent us from operating the biodiesel plant profitably. This could reduce
or eliminate the value of our units.

Biodiesel
production at our plant will require significant amounts of feedstock. We
anticipate that our biodiesel plant will be capable of processing corn oil,
soybean oil and animals fats, and the cost of feedstock will represent
approximately 70%-90% of our cost of production; however, there is no guarantee
that the Best Energies technology will be able to process all these feedstocks.

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We
expect to use corn oil as our primary feedstock to produce biodiesel. We
anticipate securing the corn oil from ethanol producers. However, in order for
ethanol producers to produce corn oil that can be used by us in the biodiesel
process, the ethanol plants will need to add corn oil extraction equipment.
Ethanol production facilities may be reluctant to install such corn oil
extraction equipment as it would require a significant capital investment. As a
result, we may not be able to secure a source of corn oil for use as a
feedstock. Moreover, the price for corn oil continues to rise. If we are unable
to obtain corn oil due to the high cost, we may be unable to produce our
biodiesel.

We
may also use soybean oil or animal fats to produce our biodiesel. Recently the
selling price of soybean oil has increased significantly. The average selling
price for soybean oil for April 2007 was approximately $0.31 per pound.
Preliminary April 2008 soybean oil price information indicates that soybean oil
prices reached more than approximately $0.57 per pound. Soybean oil prices are
expected to continue to increase with the USDA projecting an average price of
soybean oil for the 2008/2009 crop year of between $0.50 and $0.54 per pound.
Soybean prices may also be affected by other market sectors because soybeans
are comprised of 80% protein meal and only 20% oil. Soybean oil is a co-product
of processing, or crushing, soybeans for protein meal for livestock feed.
Currently, soybean crush capacity is concentrated among four companies,
Cargill, Inc., Bunge, ADM and Ag Processing Inc., which represent more than 80%
of crushing operations in the United States. Of these companies, both Cargill
and ADM have constructed biodiesel plants and we expect to compete with them
and other plants for feedstock origination. While we anticipate building a
crushing facility in the second phase of the project, we may never build such a
facility and therefore we may remain dependent upon third party suppliers for
any soybean oil we may require.

In
addition, we may also use animal fats as a feedstock to produce our biodiesel.
According to the April 2008 edition of Render Magazine, prices for rendered
products such as animal fat follow that of soy, palm and corn oil. As the
prices for competing products such as soy, palm and corn oil have risen, so
have prices for animal fat.

Competition for corn oil, raw soybean oil animal fats and other feedstock may
increase our cost of feedstock and harm our financial performance and the value
of our units. If we are unable to obtain adequate quantities of feedstock at
economical prices, the value of our units may decrease or be eliminated
altogether.

We anticipate being highly dependent on Best
Energies for the design and construction of our plant, which may cause
difficulty in enforcing claims against Best Energies.

Because
of the extensive role that Best Energies will have in the design and
construction of the plant, it may be difficult or impossible for us to enforce
claims that we may have against Best Energies. Our dependence on Best Energies
may reduce our profitability and the value of our units and could result in
reduced distributions to investors should conflicts arise.

Best
Energies and its affiliates may also have conflicts of interest with us because
employees or agents of Best Energies are involved with the development of other
biodiesel plants in the United States. We cannot require Best Energies to
devote its full time or attention to our activities. As a result, Best Energies
may have conflicts of interest in allocating personnel, materials and other
resources to our biodiesel plant which could result in a reduction or
elimination of the value of our units.

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

In
December 2005, we issued 1,500 of our membership units to our eight founding
members at a price of $333.33 per unit, for total founding member proceeds of
$500,000. In the spring of 2006, we sold 1,600 of our membership units to our
seed capital investors at a price of $500 per unit and received aggregate
proceeds of $800,000. We claimed exemption from federal registration with
respect to our unit sales in both our founding member and seed capital offerings
due to the application of Section 3(a)(11) of the Securities Act of 1933
(regarding intrastate offerings). We also claimed exemptions from registration
in the state of Iowa pursuant to the private placement and
accredited investor exemptions of the Iowa Uniform Securities Act. We only sold
our units in these offerings to accredited investors who represented that they
were residents of the state of Iowa.

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Commencing
in December 2006, we conducted a registered offering in the state of Iowa, but
were exempt from federal registration of the securities under Section 3(a)(11)
of the Securities Act of 1933. We registered a minimum of 25,000 units and a
maximum of 39,000 units at an offering price of $1,000 per unit. The offering
commenced on December 1, 2006 in the state of Iowa and closed on December 1,
2007. We sold 30,668 units at a price of $1,000 per unit. From our unit sales
we received total aggregate proceeds of $30,668,000. We incurred approximately
$186,000 of offering costs that offset equity proceeds raised as of October 31,
2007. The primary costs we incurred in raising capital included legal fees,
accounting fees, printing and distribution costs, and meeting costs.

We
were able to rely on Section 3(a)(11) for the seed capital offering, founders
offering, and Iowa registered offering, because we sold units only to residents
of the State of Iowa and the recipients of securities in each transaction
represented their intention to acquire the securities for investment only and
not with a view to, or for sale in connection with, any distribution thereof,
and appropriate legends were affixed to unit certificates and instruments
issued in such transactions. We gave each investor information about us and
gave them opportunities to ask questions regarding the terms and conditions of
the offering. Our directors and officers sold the units on a best efforts basis
and received no compensation for services related to the offer and sale.

When
our fiscal year ended October 31, 2007, we had total assets exceeding
$10,000,000 and more than 500 unit holders; as a result, we were required to
file a registration statement on Form 10 to register our securities under the
Securities Exchange Act of 1934. On February 28, 2008 we filed a Form 10 to
register our securities under the Securities Exchange Act of 1934. Our
registration statement on Form 10 became effective on May 28, 2008. Our SEC
file number is 000-53112.

For
the quarter ended April 30, 2008, we did not spend any offering proceeds.

Item 3. Defaults Upon Senior Securities

None.

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

The
annual meeting of the members was held on April 10, 2008 in Marcus, Iowa. The
members, both by written ballot and proxy, voted on a proposal to change our
business plan, making the biodiesel plant more competitive due to current
conditions in the biodiesel market. The proposal voted upon included: (i)
pursuing the use of Best Energies technology for the biodiesel plant; and (ii)
reducing the initial production capacity of the biodiesel plant to 15 million
gallons per year from 30 million gallons per year. The number of votes cast for
the proposals was 25,823 and the number of votes cast against the proposals was
1,360. There were no abstentions. There was no election of directors at this
annual meeting.

Item 5. Other Information

None.

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. |  | Exhibit                                       
| |             |  |                                               
| | 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. § 1350.    
| |             |  |                                               
| | 32.2        |  | Certificate
 Pursuant to 18 U.S.C. § 1350.    

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SIGNATURES

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

|      |               |                                        |                     
|----- | ------------- | -------------------------------------- | --------------------
|      |               | SOY ENERGY, LLC                       
|      |               |                                       
|Date: | June 16, 2008 |                                        | /s/ Charles Sand    
|      |               |                                        | Charles Sand        
|      |               | President
 and Chief Executive Officer
|      |               | (Principal
 Executive Officer)        
|      |               |                                       
|Date: | June 16, 2008 |                                        | /s/ Dallas
 Thompson
|      |               |                                        | Dallas
 Thompson    
|      |               | Treasurer and Chief Financial Officer 
|      |               |                                       

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