================================================================================
   U. S.   S E C U R I T I E S   A N D   E X C H A N G E   C O M M I S S I O N
                             WASHINGTON, D.C. 20549

                               -------------------
                                   Form 10-KSB

(Mark One)

     [X]  Annual  Report  Pursuant  to  Section  13 or 15(d)  of the  Securities
          Exchange Act of 1934
                    For the fiscal year ended September 30, 1997

     [_]  Transition  Report  Pursuant to Section 13 or 15(d) of the  Securities
          Exchange  Act of 1934 
                    For the transition period from __________ to __________

                             ----------------------

                         Commission File Number 0-22169

                             ----------------------

                        SOY ENVIRONMENTAL PRODUCTS, INC.
                 (Name of Small Business Issuer in its Charter)


           Delaware                                       48-1192445
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation or organization)


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

                                  913-599-0800
                           (Issuer's Telephone Number)

Securities registered under Section 12(b) of the Exchange Act:  None

Securities registered under Section 12(g) of the Exchange Act:

                         Common Stock, $0.001 Par Value
                                (Title of Class)

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

Yes  [X]         No  [_]

         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of  Regulation  S-B contained in this form,  and no disclosure  will be
contained,  to the best of the  registrant's  knowledge,  in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [_]

         Issuer's revenues for the most recent fiscal year were $56,678.

         The aggregate  market value of the voting stock held by  non-affiliates
computed by reference  to the price at which the stock was sold,  or the average
bid and asked  prices of such stock,  as of  September  30, 1997 was: No Current
Market.

         The number of shares  outstanding  of each of the  issuer's  classes of
common  equity was  5,445,200  shares of Common  Stock,  par value $.001,  as of
September 30, 1997.

Transitional Small Business Format (Check One):

Yes  [_]         No  [_]

================================================================================
<PAGE>
                                     PART I

         Except for historical  information contained herein, this Annual Report
on Form 10-KSB contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended (the "Securities Act") and Section
21E of the Securities  Exchange Act of 1934, as amended (the "Exchange Act") and
Soy   Environmental   Products,   Inc.   (the   "Company")   intends  that  such
forward-looking  statements  be subject  to the safe  harbors  created  thereby.
Wherever possible,  the Company has identified these forward-looking  statements
by words such as "anticipates,"  "believes,"  "estimates," "expects" and similar
expressions. Such forward-looking statements involve risks and uncertainties and
include,  but are not limited to,  statements  regarding  future  events and the
Company's  plans and  expectations.  The  Company's  actual  results  may differ
materially  from such  statements.  Factors that may cause or contribute to such
differences  include,  but are not  limited  to,  those  discussed  in  "ITEM 1.
DESCRIPTION  OF  BUSINESS - FACTORS  AFFECTING  FUTURE  PERFORMANCE  AND ITEM 6.
MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS," as well as those discussed  elsewhere in this Annual Report and the
exhibits  hereto and  incorporated by reference.  Although the Company  believes
that the  assumptions  underlying  the  forward-looking  statements  herein  are
reasonable,  any of the assumptions could prove inaccurate and, therefore, there
can be no  assurance  that  the  results  contemplated  in such  forward-looking
statements will be realized. In addition, as disclosed under "ITEM 1. BUSINESS -
FACTORS  AFFECTING  FUTURE  PERFORMANCE,"  the  business and  operations  of the
Company  are  subject to  substantial  risks which  increase  the  uncertainties
inherent in the  forward-looking  statements included in this Annual Report. The
inclusion  of such  forward-looking  information  should  not be  regarded  as a
representation by the company or any other person that the future events,  plans
or expectations contemplated by the Company will be achieved.

ITEM 1.  DESCRIPTION OF BUSINESS.

Overview

         The Company is a development  stage company that has acquired rights to
non-toxic and  biodegradable  consumer and  commercial  products  processed from
soybean oil. The Company  intends to develop a  distribution  network for and to
market these products directly and through retail outlets. The Company's current
product line, sold under registered  trademarks of "SoyClean,"  "SoyRelease" and
"Naturen," includes cleaners, lubricants, paint removers and strippers, adhesive
removers and other  products.  These  products are processed  from methyl esters
that are derived from processing soybean oil and possess unique  characteristics
that provide an effective and environmentally  friendly alternative to petroleum
and chemical based solvents and lubricants. This line of products is believed to
be the most  comprehensive  line of non-toxic and biodegradable  products in the
marketplace.

         The  Company's  existing line of products,  as a result of  independent
testing, have proven to meet or exceed industry standards for competing products
as well as having  properties  superior to petroleum and chemical based products
with respect to environmental  safety.  The trend toward utilizing  solvents and
products that are safer to workers as well as the environment creates increasing
demand for non-hazardous and non-polluting products such as the Company's.  This
trend,  coupled with  governmental  regulation  of the use of hazardous or toxic
substances,  is  believed  to have  created  an  opportunity  for the  Company's
trademark branded products to gain consumer acceptance and market share.

         The Company was  incorporated  on January 10, 1996 and changed its name
from Denom  Acquisition Corp. to Soy  Environmental  Products,  Inc. on April 3,
1997.  Effective  October 21, 1996 the Company  acquired 100% of the outstanding
stock of Delta  Environmental,  Inc.  ("DEI")  in  exchange  for  shares  of the
Company's Common Stock. DEI had been formed as a Delaware corporation on October
1, 1996 and had entered into a license agreement in September 1996 entitling DEI
to the exclusive use, sales and  distribution  rights to the "SoyClean"  line of
products.

Strategy

         The Company  plans to become a leading  distributor  of  non-toxic  and
biodegradable  products.  The  Company  intends to  increase  public  awareness,
through  advertising  and  public  relations  campaigns,  of  the  environmental
concerns  caused by  petroleum  and  chemical  based  products  and contrast the
environmentally  friendly nature of its products.  The Company's  strategy is to
aggressively  market its products to consumers and to automotive  and industrial
users through manufacturer representative relationships it seeks to develop over
the near-term. While the Company's products are currently marketed to industrial
users, it intends to increase this marketing  effort and to heavily  concentrate
on consumer  and  automotive  users.  The home  consumers  and  automotive  user
marketing  efforts will concentrate on introducing the Company's  products first
through home centers and then through automotive supply,  food, drug and variety
stores.  The  Company's  efforts in the  industrial  user  market  will focus on
developing and expanding its current manufacturer representative force that will
market the Company's products directly to manufacturers, municipalities, schools
and other  industrial  users.  The Company  hopes to  penetrate  the  lubricant,
solvent  and  cleaner  market  and  establish  market  share in this  segment by
providing its non-toxic and biodegradable  products that are as effective as and
priced competitive with similar petroleum and chemical based products.
                                       -2-
<PAGE>
Products

         The  Company's  products  include  lines  that  are  currently  sold to
industrial  and  automotive  users and lines that will be marketed  for consumer
use. All of the Company's products are  "environmentally  friendly" in that they
are biodegradable,  non-hazardous and lack volatile  emissions.  When used in an
industrial  environment,  the Company's  products may reduce  worker  illness or
injury  resulting  from  exposure to petroleum and chemical  based  solvents and
cleaners.  In addition to the commercial product line, the Company is developing
products  that it  believes  will meet or exceed  competitive  standards  in the
retail  consumer  market.  These branded  products focus on common cleaning uses
found  throughout the home and small  businesses.  The Company believes that the
biodegradable,  non-toxic  nature  of  these  products,  in  addition  to  their
effective  cleaning  characteristics,   position  these  products  for  consumer
acceptance.

         Industrial  Lines.  The Company's  industrial  product line consists of
SoyClean Graffiti Remover, SoyRelease3, SoyFormula3 and Naturen.

         o        SoyClean Graffiti Remover.  This product is formulated for use
                  by  municipalities,  institutions,  school districts,  utility
                  companies and law  enforcement  organizations.  It effectively
                  removes  graffiti  from  a  wide  range  of  surfaces  and  is
                  available in five package  sizes.  SoyClean  Graffiti  Remover
                  replaces petroleum and hydrocarbon based graffiti cleaners.

         o        SoyRelease3.  This  product is designed  for state,  local and
                  federal  departments  of  transportation  and the  paving  and
                  general contracting industries.  This product prevents asphalt
                  from adhering to truck beds,  paving equipment and other metal
                  surfaces and is also  effective  for removing  asphalt and tar
                  from   vehicles   and  other   surfaces.   SoyRelease3   is  a
                  biodegradable  substitute for diesel and other petroleum based
                  products used for similar cleaning  operations at construction
                  sites.

         o        SoyFormula3.  This  product is designed  primarily  for use in
                  manufacturing  as a replacement for hazardous  mineral spirits
                  or petroleum based solvents used primarily in manufacturing.

         o        Naturen.  This product is  formulated  for  cleaning  printing
                  press blankets as well as other press components.  Naturen has
                  been  in  use  in  Europe  since  1991  and  meets  regulatory
                  standards in the United States printing industry.

         Consumer Lines. The "SoyClean" retail line is composed of products that
can  be  used  by  the  homeowner  as  well  as in  industrial,  commercial  and
institutional  settings.  The  "SoyClean"  retail line consists of the following
products:

         o        Graffiti Remover.  This product  effectively  removes graffiti
                  from a variety of surfaces.  It is effective on paints as well
                  as  markers  and has  been  used by  numerous  municipalities,
                  schools,  utilities and homeowners.  The product is offered in
                  three container sizes for commercial or home use.

         o        Barbecue  Grill  Cleaner.  This  product is  designed to clean
                  grease and char on barbecue  cookers  and grills by  softening
                  and loosening the soil on the grill surfaces prior to rinsing.

         o        Adhesive/Mastic  Remover. This product is specially formulated
                  to remove adhesive and mastic from hard surfaces.

         o        Paint Stripper.  This product strips paint,  varnish and other
                  similar  finishes from a variety of surfaces.  This product is
                  packaged in container sizes appropriate for both the homeowner
                  and the commercial customer.

         o        Driveway Cleaner. This product cleans driveways, sidewalks and
                  other  concrete  surfaces.  It can  be  useful  in  commercial
                  workshops,  automotive  repair  shops  and by  homeowners  for
                  garage, basement, patio or driveway clean up.

         o        Lubricant.  This  multi-purpose  lubricant is designed for use
                  around the home, garage, shop, factory or office. This product
                  is a biodegradable,  non-toxic lubricant that penetrates rust,
                  loosens frozen parts, provides a light coating for lubrication
                  of moving parts and protects against corrosion.

         o        Hard Surface  Stain  Remover.  This  biodegradable,  waterless
                  cleaner  effectively  cleans oil,  grease and other  stains on
                  hard surfaces.

Product Testing

         SoyClean products have been independently tested as follows:
                                       -3-
<PAGE>
         The  U.S.  Army  Material  Command  Logistics  Center  in  Pennsylvania
evaluated  SoyClean  for military  vehicle  degreasing  operations  and issued a
report of its results in September  1995.  The test  resulted in  recommendation
that the cleaner be used.

         ARCO  Chemical  Company  evaluated   SoyClean's  graffiti  remover  and
concluded  that the  product  effectively  removed  graffiti  while  having  low
flammability compared to other products.

         Scientific  Certification Systems certified five SoyClean product types
for its SCS environmental label (Green Cross Seal) in June 1997.

         Consumer Testing  Laboratories,  Inc., in May of 1997,  tested SoyClean
products,  including  the  graffiti  remover,  the  lubricant  and the  driveway
cleaner, and issued a rating for their intended uses.

Marketing

         The Company's  marketing strategy for the industrial and retail product
lines is designed to increase awareness and knowledge of "SoyClean" benefits and
value.  The Company  intends to utilize the  strengths of management to open the
appropriate  channels of  distribution,  and use cost effective  advertising and
promotion techniques to create consumer awareness.

         The Company has not yet  established  the  distribution  system for its
consumer products,  and no assurance can be given that its consumer product will
be accepted,  or that a  satisfactory  distribution  network can be  established
which will result in its consumer  products  being a success.  The attributes of
the Company's products being  environmentally  friendly alternatives to products
currently  in use are  believed  to be the most  significant  advantage  of such
products.  The Company  intends to use television and other mass media to create
awareness  of its  total  product  line  as the  Company's  revenues  and  other
resources allow.

         Industrial Products. The industrial product line is in the early growth
stage of a product  life cycle.  The Company  expects  demand for  environmental
products by industrial users to continue and to expand. Sales for the industrial
line will be  directed  through  an in house  employee  sales  person  that will
develop manufacturer's  representative relationships with distributors that will
market  the  Company's  products  directly  to users.  Industries  that  utilize
hazardous products in manufacturing will be primarily targeted.

         Consumer  Products.  The  Company's  Chairman,  Mr. Sean F. Lee, has an
extensive  background  in the home  center  retail  market  segment and has been
actively  involved in senior  management  of several  major  national  companies
involved  in the  sales  and  distribution  of retail  products.  The  Company's
strategy is to utilize its management's  knowledge of the distribution  channels
required in order to establish a line of branded  products with the  appropriate
retail outlets.

         The Company is launching the consumer  product line by concentrating on
the penetration of the home center market segment. As in the industrial segment,
the Company intends to engage  manufacturer's  representatives that will promote
its  products to home center  product  buyers.  In this segment the Company will
compete  directly with  petro/chemical  based  products  that have  applications
similar  to  many  of the  "SoyClean"  environmental  friendly  products.  It is
anticipated  that the  reputation of the Company's  Chairman  within this market
segment will have the effect of minimizing many of the obstacles to market entry
by new products and new companies.  Other retailers,  such as automotive,  food,
drug and  variety  discount  stores  will be targeted  for  distribution  of the
Company's products at retail after the home center retailers.

         Since the Company's  retail  products are price  competitive  and price
elastic,  its  strategy  is to  penetrate  targeted  markets  by  educating  and
informing  consumers  about the attributes of "SoyClean." The Company intends to
get maximum exposure for "SoyClean" products by utilizing a national advertising
campaign  to achieve  this  objective.  This  approach is  appropriate  for mass
promotion and affords  efficient  communication  of the  Company's  message to a
large number of consumers. The campaign will help establish the "SoyClean" brand
identity and convey to the consumer the  availability  of products  that satisfy
their needs.

Proprietary Rights

         The  Company  has  acquired  the world  wide  rights to the  registered
tradenames of "SoyClean"  and  "SoyRelease"  through a licensing  agreement with
Interchem  Environmental,  Inc. The licensing  agreement also grants the Company
the  exclusive  rights  to  distribution  of  the  "SoyClean"  and  "SoyRelease"
products.  The Company has also  acquired  through an agreement  with  Interchem
Environmental, Inc. the United States rights for the tradename "Naturen."

         The  Company  intends  to rely on a  combination  of trade  secret  and
copyright  laws,   license  agreements  and   confidentiality   and  non-compete
agreements  to establish  and protect its  proprietary  rights.  There can be no
assurance  that any  confidentiality  agreements  between  the  Company  and its
employees and consultants or any license agreements will
                                       -4-
<PAGE>
provide meaningful protection for the Company's  proprietary  information in the
event of any unauthorized use or disclosure of such proprietary information.

Production Facility

         The Company owns an interest in a 2,000,000 gallon a year manufacturing
facility in Ralston,  Iowa  consisting of 6,000 square feet of production  space
plus outdoor  storage  tanks.  This interest is owned by virtue of a 25% profits
interest in Interwest,  L.C., a limited liability company organized in Iowa. The
facility is co-owned  and managed by West Central  Cooperative  also of Ralston,
Iowa.  The  production  facility  is  utilized  to process  soybean oil which is
further  distilled  into methyl esters and glycerin.  The methyl esters are then
formulated with various  additives to produce the Company's final products.  The
glycerin by-product is sold to third parties for use in unrelated products.  The
Ralston  facility is expected to meet the production  needs for the Company into
the near  future.  In the event this  facility  is unable to meet the  Company's
needs for product,  the Company anticipates the facility would be expanded or an
additional facility would be located.

Competition

         Because  the  Company's  consumer  products  are new,  the scope of the
Company's  competition  is  difficult  to  assess  accurately.  Currently,  most
cleaners,  solvents and other products competitive with those of the Company are
petroleum  based  and are not  biodegradable.  The  Company  will  compete  with
numerous  well-established chemical and consumer products companies all of which
possess substantially greater experience,  financial,  marketing,  personnel and
other resources than the Company and have  established  greater  recognition for
their brand  names than the  Company.  Many of the  Company's  competitors  have
achieved  significant  national,   retail  and  local  brand  name  and  product
recognition and engage in extensive advertising and promotional  programs,  both
generally  and in response  to efforts by  additional  competitors  to enter new
markets  and/or to introduce  new  products.  The  Company's  ability to compete
successfully  will depend on the Company's success at penetrating the industrial
and consumer  markets with its product  lines,  the consumer  acceptance  of its
products  and the  Company's  ability to research  and develop new and  improved
products.  There can be no  assurance  that the Company  will be able to compete
successfully,   that  its  products  will  meet  with  consumer  approval,  that
competitors will not develop and market products that are similar or superior to
the Company's products or that the Company will be able to successfully  enhance
its products or develop new products meeting with consumer approval.

Regulation

         The use of  certain  chemicals  and  other  substances  is  subject  to
extensive and frequently changing federal,  state, provincial and local laws and
substantial regulation under these laws by governmental agencies,  including the
United States  Environmental  Protection  Agency,  the  Occupational  Health and
Safety  Administration,  various state agencies and county and local authorities
acting in conjunction  with federal and state  authorities.  Among other things,
these  regulatory  bodies  impose  requirements  to control air,  soil and water
pollution,  to protect  against  occupational  exposure to chemicals,  including
health and  safety  risks,  and to  require  notification  or  reporting  of the
storage,  use, and release of certain  hazardous  chemicals and substances.  The
Company's products do not utilize chemicals that are classified under applicable
laws as hazardous  chemicals or  substances.  The  production  of the  Company's
products does not currently produce waste or by-products,  and none are expected
to be  generated  by  potential  new  products.  The Company  does not intend to
maintain  insurance to compensate it for any liabilities it may incur if it were
to violate environmental  protection laws or regulations.  However, there can be
no assurance that the Company will not incur environmental liability arising out
of the use of hazardous  substances.  To date, the Company does not believe that
it has incurred any such liability in their operations.

         The Company believes that it is in substantial compliance with all laws
and regulations  governing its material business operations and has obtained all
required licenses and permits for the operation of its business. There can be no
assurance  that the  Company  in the  future  will be able to  comply  with,  or
continue  to comply  with,  current or future  government  regulations  in every
jurisdiction in which it will conduct its material business  operations  without
substantial  cost or  interruption  of its  operations,  or that any  present or
future federal, state, provincial or local environmental  protection regulations
may not restrict the Company's  present and possible future  activities.  In the
event that the Company is unable to comply with such  requirements,  the Company
could  be  subject  to  substantial  sanctions,  including  restrictions  on its
business  operations,  monetary liability and criminal  sanctions,  any of which
could have a material adverse effect upon the Company's business.

Employees

         At September 30, 1997, the Company  employed five full time  personnel,
two administrative and three marketing  employees.  The Company's  employees are
not  covered by any  collective  bargaining  agreements  or unions.  The Company
considers its relationship with its employees to be good.
                                       -5-
<PAGE>
Factors Affecting Future Performance

         Limited  Operating  History;  Recent Losses.  The Company has only been
operating since August 1996 and is a developmental  stage company.  Accordingly,
the Company has a limited operating history with respect to the distribution and
marketing of consumer and industrial  solvent,  cleaner and lubricant  products,
its sole  line of  business.  The  Company  has had  negative  cash  flow  since
inception  and  expects to  continue  to have  insufficient  liquidity  and cash
resources  until such time as its sales  revenues  increase  substantially.  The
Company's immediate strategy is to expand its sales and marketing efforts and to
continue its research and  development  activities.  The  Company's  independent
auditors  have  qualified  their audit report with respect to the ability of the
Company to continue as a going  concern.  The Company will  require  significant
additional  capital  to  fully  implement  its  business  plan  and  expand  its
operations.  There can be no assurance that the Company will be able to achieve,
or  maintain,  profitable  operations  or positive  cash flow at any time in the
future.

         Outstanding  Obligations.  The Company  recently issued $924,000 of its
Senior  Secured  Convertible  Notes  due  January  31,  1998.  Of  the  $924,000
outstanding,  $720,000 of such Senior Secured  Convertible  Notes were converted
into 720,00  shares of the  Company's  Common Stock and the  remaining  $204,000
principal  amount went into default.  The Senior Secured  Convertible  Notes are
secured by a lien on essentially all of the assets of the Company. No collection
activity with respect to such defaulted notes has been commenced and the Company
anticipates that the notes will ultimately be converted or otherwise  satisfied.
However,  there is no assurance that the Company will have  sufficient  funds to
satisfy the  obligations  under such Senior Secured  Convertible  Notes.  If the
Company fails to satisfy its  obligations  under such notes, it is possible that
the holders  thereof  would  exercise  their  remedies and seek to satisfy their
obligation  through a sale or forfeiture of the Company's assets. In such event,
in all likelihood, the Company could not continue as a going concern.

         Capital   Requirements.   The  Company   anticipates  that  substantial
additional  funding  will be required to  adequately  meet  management's  growth
objectives  and  fully  implement  its  business  plan.  The  Company  may  seek
additional debt or equity financing through banks, other financial institutions,
companies or  individuals.  No  assurance  can be given that the Company will be
able to obtain any such  additional  equity or debt  financing  on  satisfactory
terms or at all. No assurance can be given that any such financing, if obtained,
will be adequate to meet the Company's needs for the foreseeable  future. If the
Company is not able to successfully  obtain  sufficient  capital,  the Company's
ability  to  continue  as a viable  business  enterprise  will be  substantially
impaired.

         Need to Develop  Distribution  Network.  The Company has only  recently
commenced  development  of a  distribution  system for its industrial and retail
products.  Establishment of a distribution network sufficient to supply customer
demand for the Company's product will be critical to the success of the Company.
Numerous factors,  including lack of sufficient inventory or capital, failure of
the  Company's  products to generate  sufficient  demand and lack of  sufficient
qualified,  experienced personnel may contribute to the difficulties the Company
will face in establishing an efficient distribution network. No assurance can be
given that the Company's  products will be accepted by consumers or  industries,
that  a  satisfactory  distribution  network  can be  established  or  that  the
Company's proposed operations will be profitable.

         Uncertainty  of  Widespread  Market  Acceptance  of  Products,  Limited
Marketing  Experience.  The  Company  has  just  started  marketing  its line of
consumer products. There have been limited sales of its industrial products, and
the Company has  conducted  only limited  marketing  activities  and has limited
marketing  experience  with respect to all of its product  lines.  As is typical
with new  products,  demand and market  acceptance  for the  Company's  consumer
products are subject to a high level of uncertainty. Achieving widespread market
acceptance for these products will require substantial marketing efforts and the
expenditure of sufficient funds to create brand  recognition and customer demand
and to cause  potential  customers  to consider  the  potential  benefits of the
Company's  products as against the traditional  products to which they have long
been accustomed.  Moreover,  the Company has limited marketing  capabilities and
resources. To date, substantially all of the Company's marketing activities have
been conducted by members of management. The prospects for the Company's product
line will be largely  dependent  upon the  Company's  ability to achieve  market
penetration  for  such  products.  Achieving  market  penetration  will  require
sufficient  efforts  by the  Company to create  awareness  of and demand for the
Company's  products and services.  The  Company's  ability to build its customer
base will  depend in part on the  Company's  ability to locate,  hire and retain
sufficient   qualified  marketing  personnel  and  to  fund  marketing  efforts,
including  advertising.  There can be no assurance  that the Company's  products
will  achieve  widespread  market  acceptance  or that the  Company's  marketing
efforts will result in profitable operations.

         Supply, Capacity and Distribution Constraints. In order for the Company
to  successfully  market its  products,  the Company must be able to timely fill
orders for its  product  lines.  The  ability of the  Company to timely meet its
supply requirements will depend on numerous factors including the ability of the
Company to  successfully  establish  an  effective  distribution  network and to
maintain adequate  inventories and the ability of the Company's sole supplier to
adequately  produce the Company's products in volumes sufficient to meet demand.
Failure of the Company to adequately  supply its products to retailers or of the
Company's   supplier  to  adequately  produce  products  to  meet  demand  could
materially adversely impact the operations of the Company.
                                       -6-
<PAGE>
         Competition.  The market for environmentally friendly chemical products
is recent and a rapidly growing  segment of the United States economy.  Numerous
companies  similar to the Company  have entered the market in the last few years
in anticipation of the perceived opportunities surrounding  environmentally safe
products  and as a result the  markets  for the  Company's  products  are highly
competitive.  The Company  believes  that its  products can compete and that its
management's qualifications will enable it to compete effectively. A significant
factor in the ability of the Company's consumer products to compete successfully
in the market will be its ability to secure and maintain  shelf space with major
national retail chains.  There is no assurance that the Company's  business plan
to acquire and maintain such shelf space can be  successfully  implemented.  The
consumer  product  industry is highly  competitive  and the Company will compete
with  established  manufacturers  and  distributors,  many of  which  will  have
significantly greater operating history, name recognition and resources than the
Company.  Other companies and vendors may also enter into  competition  with the
Company as a result of the  Company's  increased  marketing  efforts as expected
after this Offering is successfully completed. The lack of financial strength of
the Company may be a negative factor for the Company's  ability to penetrate the
home center market even if the Company's products are superior.

         Dependence Upon Raw Materials and Suppliers. The Company's products are
manufactured from soybeans. As a commodity,  soybeans are subject to significant
price fluctuations  based upon supply and demand of such product.  The supply of
soybeans  may be affected by numerous  factors,  including  general  weather and
planting  conditions,   drought,   pestilence  and  governmental   subsidies  or
regulation.  The Company's sole supplier of its products is Interwest,  L.C., an
affiliate of the Company.  Interruption  of the Company's  product  supply could
result from several factors,  such as disruption of supply of raw product,  work
stoppages,  strikes  or  other  labor  difficulties,   changes  in  governmental
regulations  or natural or man caused  disasters  occurring  with respect to its
supplier.  Any increase of costs of the  Company's raw products or disruption of
its supplier could severely affect the Company's business operations.

         License Agreement. The Company's rights to a substantial portion of its
product lines are dependent upon its rights under the license agreement with and
the rights of Interchem  Environmental,  Inc.  with respect to such products and
the process, formulae and other proprietary rights related to such products. Any
termination or impairment of the rights of Interchem Environmental, Inc. to such
proprietary  rights or to the rights of the Company under the license  agreement
would materially adversely affect the Company.

         Limited  Patent and  Proprietary  Information  Protection.  The Company
believes that the proprietary  processes used in production of its products does
not  infringe  on the  proprietary  rights  of  others.  In the  event  that the
Company's  products  infringe the patent or  proprietary  rights of others,  the
Company may be required to modify its process or obtain a license.  There can be
no assurance  that the Company would be able to do so in a timely  manner,  upon
acceptable  terms and  conditions  or at all.  The failure to do so would have a
material adverse effect on the Company.  In addition,  there can be no assurance
that the Company will have the financial or other resources  necessary to defend
a patent  infringement  or proprietary  rights action.  Moreover,  if any of the
Company's products infringe patents or proprietary rights of others, the Company
could, under certain circumstances,  become liable for damages, which could have
a material adverse effect on the Company. The Company also relies on proprietary
know-how and confidential information and employs various methods to protect the
processes,  concepts,  ideas and  documentation  associated with its proprietary
rights.  However,  such methods may not afford complete protection and there can
be no  assurance  that others will not  independently  develop  such  processes,
concepts,  ideas and  documentation.  Although  the Company  requires all of its
employees to sign  confidentiality  agreements,  there can be no assurance  that
such agreements will be enforceable or will provide meaningful protection to the
Company.  There can be no assurance  that the Company will be able to adequately
protect its trade secrets or that other  companies will not acquire  information
which  the  Company  considers  to be  proprietary.  Moreover,  there  can be no
assurance  that  other  companies  will  not   independently   develop  know-how
comparable to or superior to that of the Company.

         Adequacy  of  Product  Liability  Insurance.  The use of the  Company's
products  entails  inherent  risks of adverse  effects  which  could  expose the
Company to product  liability  claims.  Product  liability  claims  could have a
material adverse effect on the business and financial  condition of the Company.
While the Company has obtained $2,000,000 in product liability insurance,  there
can be no  assurance  that the  Company  will be able to maintain  such  product
liability  insurance on acceptable  terms or if maintained  that such  insurance
will provide adequate coverage against all potential claims.

         Need for  Additional  Development  of  Certain  Products.  The  Company
believes  that  development  work on its  products  is  substantially  complete.
However,  testing of these  products has been limited.  The Company  anticipates
that its future  research and  development  activities  combined with experience
gained from  commercial  production  and use of the products could result in the
need for further refinement and development.  The Company also expects to modify
the products for  particular  customer  applications.  There can be no assurance
that unforeseen  circumstances will not require expensive additional development
of the Company's products and their applications.  In addition,  the Company may
in the future need to make  improvements  in its product  line in order for such
products to remain competitive.

         Reliance  on  Management;  Limited  Personnel.  The  Company  is highly
dependent  on the  services  of its  officers  and on the  sales  and  marketing
activities  conducted  by its  Chairman,  Sean F. Lee.  While the Company has an
employment  agreement with Mr. Lee, the loss of his services or the inability to
attract or retain alternative or additional qualified
                                       -7-
<PAGE>
personnel will have a materially  adverse affect on the Company.  Attracting and
retaining  qualified  personnel is critical to the Company's  business  plan. No
assurances  can be given that the Company will be able to retain or attract such
qualified personnel or agents, or to successfully implement its business plan.

         Management  of Growth.  The  Company  anticipates  rapid  growth in the
future if its financing and marketing  efforts are successful.  This growth,  if
achieved, will place significant strains on the Company's financial,  managerial
and  other  resources.  Failure  to  effectively  manage  growth  could  have  a
materially adverse effect on the Company's business and profitability.

         Seasonal Fluctuations. The Company's limited experience suggests that a
greater  demand  for  its  products  will  occur  in  summer  months,  which  is
anticipated to result in more revenues in the Company's  third and fourth fiscal
quarters.  Fluctuations in quarterly operating results may impact the market for
the  Company's  Common  Stock  and  result in high  volatility  the price of the
Company's Common Stock, if a market is established.

         Control by Existing Shareholders. The Company's officers, directors and
principal  shareholders  and their  affiliates  own or control a majority of the
Company's  outstanding Common Stock. As a result, these shareholders,  if acting
together, would be able to effectively control matters requiring approval by the
shareholders  of the Company,  including the election of the Company's  Board of
Directors.

         International Sales. The Company anticipates engaging in foreign sales.
Currency   fluctuation   and  other   normal   risks  of   conducting   business
internationally,  including  regulatory  changes and  requirements,  fluctuating
exchange rates, tariffs and other barriers, management difficulties, potentially
adverse  tax  consequences  and  potentially  difficult  legal  enforcement  and
collection  problems  could have a materially  adverse  impact on the  financial
condition of the Company.

         Securities  Law  Compliance.  The Company has been  involved in complex
merger and  acquisition  transactions  and in offerings of securities  which may
have  associated  compliance  defects  by the  Company  or one  or  more  of its
shareholders.  While  management  is not aware  that the  Company  has failed to
comply with applicable rules and regulations, no assurances can be made that all
such transactions were in complete  compliance with applicable federal and state
securities laws or that a claim with respect to non-compliance will not be made.
Similarly,  a claim of non-compliance may be made with respect to this Offering.
Costs may be incurred by the Company to defend any claim of  non-compliance  and
the Company may be required to offer rescission  rights with respect to sales of
its  securities  which  would  severely  affect  the  operations  and  financial
condition of the Company.

         Illiquidity and Lack of Public Market.  At the present time there is no
public market for any of the Company's securities. The Company is in the process
of qualifying its Common Stock for  over-the-counter  trading through listing on
the NASDAQ Electronic Bulletin Board and by attracting qualified  broker/dealers
to make a market in its Common Stock.  There can be no assurance  that an active
trading market in the Company's Common Stock will develop or be sustained.  If a
market for the  Company's  Common  Stock does  develop,  the market price of the
Common Stock may be highly volatile.  Any  broker/dealer  that makes a market in
the Company's  securities  may have a significant  influence over the market for
the Company's Common Stock, if such market develops, and the price and liquidity
of the Common Stock may be affected by the degree of participation of any person
in such market.  Even if a market  develops,  there can be no assurance that all
market  making  activity may cease at any time.  As a result,  purchasers of the
Company's Common Stock may be unable to liquidate their investment readily or at
all.

ITEM 2.  DESCRIPTION OF PROPERTY.

         The Company through its  wholly-owned  subsidiary DEI sub-leases,  on a
month-to-month  basis,  approximately  3,800  square feet of office space at its
principal  place of business in Overland  Park,  Kansas.  The primary  tenant is
Interchem (N.A.)  Industries,  Inc. and the primary lease expires on October 31,
2000.  The monthly  rental paid by the Company is $3,565.  The space is used for
the  general  administration  of the  Company  including  all  marketing  of the
Company's products.

         The Company also leases approximately 2,000 square feet of office space
in  Phoenix,  Arizona  at a cost of $1,207 per month on a  month-to-month  basis
which is utilized as a marketing office.

ITEM 3. LEGAL PROCEEDINGS.

         The  Company is not  currently  involved in any  litigation  and is not
aware of any threatened litigation involving the Company.

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

         Not applicable.
                                       -8-
<PAGE>
                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Market

         No public  trading  market  currently  exists for the Company's  Common
Stock.  The Company is currently in the process of  qualifying  its Common Stock
for  over-the-counter  trading on the NASDAQ  Electronic  Bulletin Board. If the
Company's Common Stock is approved for such trading, it is anticipated that only
a limited  public market would  initially  develop and no assurance can be given
that  any  significant  public  market  for  the  Company's  Common  Stock  will
ultimately develop or be sustained.

Dividends

         The Company has never  declared  or paid  dividends,  intends to retain
earnings for future  business  uses and does not intend to pay  dividends in the
foreseeable  future. The timing and payment of future dividends will depend upon
numerous factors, including future earnings,  operations,  capital requirements,
restrictions in future financing agreements, general financial conditions of the
Company  and  general  business   conditions.   Additionally,   the  Company  is
contractually  restricted  from  declaring  or  paying  dividends  under  a Note
Agreement  entered  into on July 3, 1997  until all Senior  Secured  Convertible
Notes issued  pursuant to such agreement have been paid or converted into Common
Stock under their terms.  The final maturity of the Senior  Secured  Convertible
Notes under the Note Agreement is July 31, 1998.

Sale of Unregistered Securities

         On January 12, 1996, the Company issued  1,469,500 shares of its Common
Stock to shareholders of Cactus Patch Farms, Inc. in exchange for the payment of
certain  legal and  accounting  fees in the amount of $8,817.  This offering was
conducted by prior  management  of the Company and was made in reliance upon the
exemption  from  registration  provided  under Rule 504 of Regulation D. Current
management  is  unaware  of all  facts  and  circumstances  forming  a basis for
reliance  on  this  exemption,   but  believes  the  offering  was  exempt  from
registration under Section 4(2) of the Securities Act.

         Effective  October 21, 1996, the Company acquired all outstanding stock
of DEI in exchange for 2,530,500  shares of its Common Stock. The Company relied
upon the exemption from  registration  of the shares issued in this  transaction
afforded by Section 4(2) of the Securities Act.

         From  September  23, 1996 through  March 13, 1997,  DEI, the  Company's
wholly-owned  subsidiary,  placed 1,393,800 shares of its common stock for total
consideration  of $464,600  through Capital West Investment  Group that acted as
its  placement  agent.  Capital  West  Investment  Group  received  $46,460 as a
placement  agent fee in  connection  with this  offering.  The offering was made
solely to  "accredited  investors" as defined in Rule 501(a) of Regulation D and
the shares were  offered in  reliance  on the  exemption  from  registration  as
provided  in  Rules  504  and 506 of  Regulation  D.  The  Company  assumed  the
obligations of DEI after its acquisition and issued a total of 1,393,800  shares
of its Common Stock in exchange for the DEI shares  issued prior to  acquisition
and directly thereafter in reliance on Rules 504 and 506 of Regulation D.

         From June 27, 1997 through  September  23, 1997,  the Company  issued a
total of $924,000 of its Senior  Secured  Convertible  Notes and 924,000 Class A
Warrants  as units for total  consideration  of  $770,000.  The  Senior  Secured
Convertible  Notes  were  placed by Fox & Company  Investments,  Inc.  for total
commissions  and fees of $115,500 and the issuance of 462,000  Class B Warrants.
The offering was solely to  "accredited  investors" and made in reliance on Rule
506 of Regulation D. The Senior Secured  Convertible  Notes were due January 31,
1998  with a final  maturity  of July  31,  1998,  predicated  upon  payment  of
extension fees and additional interest. The Senior Secured Convertible Notes are
convertible  into  shares  of  Company  Common  Stock  on the  basis of $1.00 of
principal per share and as of January 31, 1998, $720,000 principal amount of the
Senior Secured  Convertible  Notes had been converted into 720,000 shares of the
Company's  Common Stock. The remaining  $204,000  principal amount of the Senior
Secured  Convertible Notes are outstanding and in default.  The Class A Warrants
entitle the holder  thereof to purchase one share of the Company's  Common Stock
per Warrant for $1.00 per share.  The Class A Warrants  expire on September  30,
2000, and are cancelable by the Company upon 45 days written notice,  subject to
prior exercise, in the event the Company's Common Stock closing bid price in any
public  market  equals or exceeds  $3.00 per share for 120  consecutive  trading
days. The Class B Warrants are exercisable commencing July 3, 1998 for shares of
Company Common Stock at $1.20 per share. The Class B Warrants are not subject to
redemption or cancellation and expire on September 30, 2007.

         From December 8, 1997 through  January 31, 1998,  the Company  issued a
total of $241,500 of Convertible Subordinate Notes and 241,500 Warrants as units
for total  consideration  of $200,000.  The Convertible  Subordinate  Notes were
placed  through  Capital  West  Investments  Holding  Company,  Inc.  for  total
commissions of $14,000.  The offering was solely to  "accredited  investors" and
made in reliance on Rule 506 of Regulation D. Each Convertible Subordinate Note
                                       -9-
<PAGE>
is due four months from issuance and is convertible into shares of the Company's
Common Stock on the basis of $1.00 of principal  per share.  The Warrants  allow
the holder  thereof the right to purchase  one share of Common Stock per Warrant
at $1.00 for three years from the date of issuance.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

General

         The following  discussion  of the results of  operations  and financial
condition should be read in conjunction with the Financial  Statements and notes
thereto for the year ended September 30, 1997 and the period ended September 30,
1996. See Item 7 below.  Prior to October 21, 1996, the Company had no operating
history.  Subsequent  to October 21, 1996 all of the Company's  operations  were
carried out by its wholly-owned subsidiary DEI. Therefore, all discussions below
concerning the Company prior to the acquisition of DEI relate to and reflect the
operations of DEI only.

Results of Operations

         The Company generated nominal revenues for the year ended September 30,
1997.  Additionally,  prior to October 21, 1996,  the date DEI was acquired,  no
activity had occurred  with respect to the Company  resulting in no  significant
prior year's operations to compare to the Company's current operations.

         For the year ended September 30, 1997, the Company had sales of $56,678
with cost of sales equal to $43,090 resulting in a gross profit of $13,588. Cost
of sales as a  percentage  of sales was  76.03%  for this  period.  General  and
administrative  expenses  were  $614,093 for the year ended  September  30, 1997
which  resulted  in a loss from  operations  of  $600,505  for the  period.  The
Company's net loss for the year ended  September 30, 1997 was $780,032 or $(.15)
per share.

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

Liquidity and Capital Resources

         From the date of formation to the date of the  acquisition  of DEI, the
Company had no revenues or operating  income.  For the year ended  September 30,
1997,  the  Company had nominal  revenues  of $56,678,  primarily  from sales of
samples and trial  products.  As of the date of  acquisition of DEI, the Company
had no tangible  assets.  As a result of the  acquisition  of DEI on October 21,
1996, the Company had total assets of $181,515 and total shareholders' equity of
$124,774 compared to $648,406 and $(400,228),  respectively, as of September 30,
1997. As of September 30, 1996, the Company had current assets of $21,512 in the
form of cash and current  liabilities  of $56,799.  At September  30, 1997,  the
Company had current  assets of  $433,330,  comprised of $185,938  cash,  $12,936
accounts receivable,  $141,000 inventory,  and prepaid expenses of $93,456, with
current liabilities of $417,370.

         Since  inception,   the  Company's  working  capital  needs  have  been
satisfied by financing activities primarily consisting of the private placements
of Common Stock and debt. In the quarter ended  September 30, 1997,  the Company
completed a private  placement of  discounted  notes with a total face amount of
$924,000  resulting  in net  proceeds  to the Company of  $594,000.  The Company
anticipates  meeting its working  capital  needs during the current  fiscal year
primarily  with  proceeds  from  the sale of  securities  and  secondarily  with
revenues from sales and  distribution  operations,  if any. The Company believes
that it will  require  substantial  additional  funds  to  cover  the  costs  of
manufacturing its products,  general and administrative overhead and meeting its
reporting  obligations under the Exchange Act. If such funds are necessary,  the
Company  will seek to borrow  such funds  and/or  raise such funds  through  the
private or public sale of its Common Stock or other  securities.  No  assurances
can be given that such financing, if required, will be available, or that it can
be obtained on terms satisfactory to the Company.  In the opinion of management,
inflation has not had a material affect on the operations of the Company.
                                      -10-
<PAGE>
         During the year ending September 30, 1998, the Company anticipates that
it will establish a manufacturer's  representative organization to represent the
Company's products throughout the United States and perhaps internationally. The
organization will be responsible for contacting and developing target markets as
determined by the Company's segments involving large hardware/home center retail
chains and the light industrial and automotive users.  Management  believes that
the proceeds from its  financing  activities  as currently  anticipated  will be
sufficient  to provide for the  Company's  planned  expansion of its  marketing,
distribution and sales activities.
                                      -11-
<PAGE>
ITEM 7.  FINANCIAL STATEMENTS


                                      INDEX
                                                                            Page
                                                                            ----

Report of Independent Public Accountant...................................... 13

Consolidated Balance Sheet - September 30, 1997.............................. 14

Consolidated Statements of Operations
     Year ended  September 30, 1997 and
     period from date of inception,
     September 15, 1996 through September 30, 1996........................... 15

Consolidated Statement of Changes in Stockholders' Equity (Deficit) -
     Year ended September 30, 1997 and period ended September 30, 1996....... 16

Consolidated Statements of Cash Flow 
     Year ended September 30, 1997 and 
     period from date of inception,
     September 15, 1996 through September 30, 1996........................... 17

Notes to Consolidated Financial Statement.................................... 19
                                      -12-
<PAGE>
                          INDEPENDENT AUDITORS' REPORT


To The Stockholders and Board of Directors of
Soy Environmental Products, Inc. and Subsidiary

We have audited the accompanying consolidated balance sheet of Soy Environmental
Products,  Inc.  and  Subsidiary  as of  September  30,  1997,  and the  related
consolidated   statements  of  operations,   changes  in  stockholders'   equity
(deficit),  and cash flows for the year then ended,  and for the period from the
date of  inception,  September  15,  1996  through  September  30,  1996.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
consolidated  financial  statement  presentation.  We  believe  that our  audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of Soy Environmental
Products, Inc. and Subsidiary as of September 30, 1997, and the results of their
operations,  changes in stockholders' equity (deficit), and their cash flows for
the year then ended,  and for the period from the date of  inception,  September
15, 1996 through  September  30, 1996,  in conformity  with  generally  accepted
accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will  continue as a going  concern.  As discussed in Note 10 to
the  consolidated  financial  statements,  the Company's  significant  operating
losses raise substantial doubt about its ability to continue as a going concern.
The consolidated  financial statements do not include any adjustments that might
result from the outcome of this uncertainty.



/s/ Semple & Cooper, L.L.P.

Certified Public Accountants

Phoenix, Arizona
January 20, 1997
                                      -13-
<PAGE>
                 SOY ENVIRONMENTAL PRODUCTS, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEET
                               September 30, 1997


                                     ASSETS

Current Assets:
 Cash and cash equivalents (Notes 1 and 2)                            $ 185,938
   Accounts receivable (Note 1)                                          12,936
   Inventory (Notes 1 and 3)                                            141,000
   Prepaid expenses                                                      93,456
                                                                      ---------
        Total Current Assets                                            433,330

Property, plant and equipment, net (Note 1)                              13,183
Investment, at equity (Note 6)                                          190,000
Organization costs, net (Note 1)                                          7,093
License fees, net (Note 1)                                                4,800
                                                                      ---------
        Total Assets                                                  $ 648,406
                                                                      =========
                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current Liabilities:
   Notes payable - current portion (Notes 4 and 7)                    $ 221,914
   Accounts payable                                                     140,600
   Accrued expenses                                                      54,856
                                                                      ---------
        Total Current Liabilities                                       417,370
                                                                      ---------

Notes payable - long-term portion (Notes 4 and 7)                       631,264
                                                                      ---------

Contingencies (Notes 5 and 8)                                              --

Stockholders' Equity (Deficit): (Note 9)
   Common stock, $.001 par value, 20,000,000 shares
     authorized, 5,445,200 shares issued and outstanding                  5,445
   Additional paid-in capital                                           415,085
   Accumulated deficit                                                 (820,758)
                                                                      ---------

        Total Stockholders' Equity (Deficit)                           (400,228)
                                                                      ---------

        Total Liabilities and Stockholders' Equity                    $ 648,406
                                                                      =========

                   The Accompanying Notes are an Integral Part
                           of the Financial Statements
                                      -14-
<PAGE>
                 SOY ENVIRONMENTAL PRODUCTS, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS



                                                                   Period From
                                                                   The Date of
                                                                    Inception,
                                                                  September 15,
                                                 Year Ended          Through
                                                September 30,     September 30,
                                                     1997              1996
                                                =============     =============


Sales                                           $      56,678     $        --

Cost of Sales                                          43,090              --
                                                -------------     -------------

Gross Profit                                           13,588              --

General and Administrative Expenses                   614,093           (40,726)
                                                -------------     -------------
Loss from Operations                                 (600,505)          (40,726)

Other Income (Expenses):                                  788              --
Interest income                                         1,586              --
Other income                                         (181,901)             --
                                                -------------     -------------
Net loss                                             (780,032)    $     (40,726)
                                                =============     =============
Loss per share (Note 1)                         $        (.15)    $        (.03)
                                                =============     =============
Weighted average shares outstanding             $   5,076,634     $   1,519,833
                                                =============     =============

                   The Accompanying Notes are an Integral Part
                           of the Financial Statements
                                      -15-
<PAGE>
                 SOY ENVIRONMENTAL PRODUCTS, INC. AND SUBSIDIARY
       CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                    FOR THE YEAR ENDED SEPTEMBER 30, 1997 AND
                       THE PERIOD ENDED SEPTEMBER 30, 1996


<TABLE>
<CAPTION>
                                                                                                 Total
                                                              Additional                      Stockholders'
                                    Common Stock                Paid-in       Accumulated        Equity
                               Shares           Amount          Capital         Deficit         (Deficit)
                               ------           ------          -------         -------         ---------
<S>                        <C>              <C>              <C>             <C>              <C>           
Balance at January
10, 1996                            --      $        --      $        --     $        --      $        --

Shares issued for
payment of expenses            8,816,922            8,817             --              --              8,817
                           -------------    -------------    -------------   -------------    -------------

Balance at September
30, 1996                       8,816,922            8,817             --              --              8,817

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

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

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

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

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

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


Balance at
September 30, 1997             5,445,200    $       5,445    $     415,085   $    (820,758)   $    (400,228)
                           =============    =============    =============   =============    =============
</TABLE>

                   The Accompanying Notes are an Integral Part
                           of the Financial Statements
                                      -16-
<PAGE>
                 SOY ENVIRONMENTAL PRODUCTS, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                      Period From
                                                                      The Date of
                                                                       Inception,
                                                                      September 15,
                                                      Year Ended         Through
                                                     September 30,    September 30,
                                                          1997            1996
                                                     -------------    -------------
<S>                                                  <C>              <C>        
Cash flows from operating activities:
  Cash collected from customers                      $      45,328    $        --
  Cash paid to suppliers and employees                    (748,572)         (10,485)
  Interest received                                            788             --
  Interest paid                                           (128,723)            --
                                                     -------------    -------------

     Net cash used by operating activities                (831,179)         (10,485)
                                                     -------------    -------------
Cash flows from investing activities:
  Purchase of fixed assets                                    --               --
  Increase in investment                                   (13,646)         (93,500)
  Disbursements for intangibles                            (40,000)          (5,003)
                                                     -------------    -------------
     Net cash used by investing activities                 (53,646)         (98,503)
                                                     -------------    -------------
Cash flows from financing activities:
  Proceeds from debt                                       970,000             --
  Repayment of debt                                       (150,000)            --
  Proceeds from issuance of stock                          229,251          130,500
                                                     -------------    -------------
     Net cash provided by financing activities           1,049,251          130,500
                                                     -------------    -------------
Net increase in cash and cash equivalents                  164,426           21,512

Cash and cash equivalents at beginning of period            21,512             --
                                                     -------------    -------------
Cash and cash equivalents at
  end of period                                      $     185,938    $      21,512
                                                     =============    =============
</TABLE>

                   The Accompanying Notes are an Integral Part
                           of the Financial Statements
                                      -17-
<PAGE>
                 SOY ENVIRONMENTAL PRODUCTS, INC. AND SUBSIDIARY
                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)


                                                                  Period From
                                                                  The Date of
                                                                   Inception,
                                                                 September 15,
                                                 Year Ended         Through
                                                September 30,    September 30,
                                                     1997             1996
                                                -------------    -------------

Reconciliation of Net Loss to Net Cash
  Used by Operating Activities:

Net Loss                                        $    (780,032)   $    (409,726)
                                                -------------    -------------

Adjustments to reconcile net loss to net cash
  provided  (used)  by  operating activities:
        Depreciation and amortization                   2,437             --
        Stock issued for consulting fees               16,962           30,000
        Amortization of discount                       33,178             --

Changes in Assets and Liabilities:                       --
  Accounts receivable                                 (12,936)            --
  Prepaid expenses                                    (93,456)            --
  Inventory                                          (141,000)            --
  Refundable deposits                                   5,003             --
  Accounts payable                                     83,859              241
  Accrued expenses                                     54,806             --
                                                -------------    -------------


                                                      (51,147)          30,241
                                                -------------    -------------

Net cash used by operating activities           $    (831,179)   $     (10,485)
                                                =============    =============

                   The Accompanying Notes are an Integral Part
                           of the Financial Statements
                                      -18-
<PAGE>
                 SOY ENVIRONMENTAL PRODUCTS, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.   Summary of Significant  Accounting  Principles,  Nature of Operations,  and
     Pervasiveness of Estimates:

     Nature of Corporation:

     Soy Environmental  Products,  Inc.  (formerly Denom Acquisition  Corp.) and
     Subsidiary is a Corporation  which was duly formed and organized  under the
     laws of the State of Delaware on January 10,  1996.  The Company was in the
     development  stage and had no activity from its inception  through  October
     21, 1996, the date of the reverse merger. The principal business purpose of
     the Corporation is to engage in the  development of ownership  interest in,
     and the operation of, bio-degradable chemical facilities,  and to establish
     national sales and distribution networks for these products.

     Reverse Merger:

     Effective  October 21, 1996, the Company  purchased all of the  outstanding
     common stock of Delta Environmental, Inc. The acquisition was accounted for
     as a  reverse  merger  using the  purchase  method  of  accounting  and the
     stockholders of Delta  Environmental,  Inc. received  approximately  ninety
     (90) percent of the outstanding common stock of Soy Environmental Products,
     Inc. after the merger.  Soy  Environmental  Products,  Inc. had no activity
     through the merger date.  The activity for the period ended  September  30,
     1996 represents the operations of Delta Environmental, Inc.

     Principles of Consolidation:

     The  consolidated   financial   statements  include  the  accounts  of  Soy
     Environmental  Products,  Inc.  and  its  wholly-owned  subsidiary,   Delta
     Environmental, Inc. All significant inter-company balances and transactions
     have been eliminated in consolidation.

     Revenue Recognition:

     Revenues are  recognized on the accrual  basis of  accounting  with revenue
     from product sales recognized at the time of shipment.

     Pervasiveness of Estimates:

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions  that affect the reported amounts of assets and liabilities and
     disclosure  of  contingent  assets  and  liabilities  at  the  date  of the
     financial  statements  and the  reported  amounts of revenues  and expenses
     during  the  reporting  period.  Actual  results  could  differ  from those
     estimates.

     Fair Value of Financial Instruments:

     The carrying  amounts of cash and cash  equivalents,  accounts  receivable,
     accounts payable, notes payable and accrued expenses approximate fair value
     because of the short maturity of these items.  Based on the borrowing rates
     currently available to the Company,  the carrying amounts of long-term debt
     approximate fair value.

     Stock-Based Compensation:

     Statements  of Financial  Accounting  Standards  No. 123,  "Accounting  for
     Stock-Based Compensation" (SFAS No. 123) establishes a fair value method of
     accounting for stock-based compensation plans and for transactions in which
     an entity  acquires  goods or services from  non-employees  in exchange for
     equity instruments. The Company adopted this accounting standard on October
     1, 1996. SFAS No. 123 encourages,  but does not require companies to record
     compensation cost for stock-based  employee  compensation.  The Company has
     chosen to continue to account for stock-
                                      -19-
<PAGE>
                 SOY ENVIRONMENTAL PRODUCTS, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     based  compensation  utilizing  the  intrinsic  value method  prescribed in
     Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
     Employees." Accordingly, compensation cost for stock options is measured as
     the excess,  if any, of the fair market price of the Company's stock at the
     date of grant over the amount an employee must pay to acquire the stock.

     Cash and Cash Equivalents:

     For financial accounting purposes, cash and cash equivalents are considered
     to be all highly liquid  investments  purchased with an initial maturity of
     three (3) months or less.

     Accounts Receivable:

     The  Company  follows the  allowance  method of  recognizing  uncollectible
     accounts  receivable.  The allowance is provided based upon a review of the
     individual  accounts  outstanding,   and  prior  history  of  uncollectible
     accounts receivable.  At September 30, 1997, no allowance has been provided
     for as management believes the accounts are fully collectible.

     Inventory:

     Inventory is stated at the lower of cost,  first-in  first-out  method,  or
     market. Inventory quantities are reviewed periodically for obsolescence.

     Organization Costs:

     Organization   costs  consist  of  costs   incurred   prior  to  commencing
     operations.   These  costs  consist  primarily  of  professional  fees  and
     administrative  costs,  and are  amortized  ratably  over a five  (5)  year
     period. For the year ended September 30, 1997,  amortization expense in the
     amount of $1,773 was charged to operations.

     Property and Equipment:

     Property and equipment are recorded at cost.  Depreciation  is provided for
     on the straight-line  method over the estimated useful lives of the assets.
     Maintenance   and  repairs  are  charged  to  operations   when   incurred.
     Betterments and renewals are capitalized when incurred.  For the year ended
     September 30, 1997,  depreciation expense and accumulated  depreciation was
     $464.

     The useful lives of property and equipment, which is comprised of furniture
     and  fixtures,  for  purposes of  computing  depreciation  is five to seven
     years.

     License Fees:

     The license fees consist of costs incurred in relation to the purchase of a
     license to market certain chemical  compounds for  bioremediation  that are
     based upon soy product derivatives.  This license will be amortized ratably
     over a twenty-five  (25) year period.  The Company  evaluates the estimated
     net  realizable  value of its  license fee at each  balance  sheet date and
     records an impairment if the carrying value exceeds the expected future net
     operating  cash  flows  from the  related  operation.  For the  year  ended
     September 30, 1997,  amortization expense and accumulated  amortization was
     $200.

     Income Taxes:

     For financial  statement and tax reporting  purposes,  the Company  reports
     income and expenses based on the accrual method of accounting. For the year
     ended  September  30, 1997 and the period  ended  September  30,  1996,  no
     provisions  were made for federal or state  income  taxes due to  operating
     losses incurred in the respective periods.
                                      -20-
<PAGE>
                 SOY ENVIRONMENTAL PRODUCTS, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     At September  30,  1997,  the Company has  available  federal and state net
     operating loss  carryforwards  in the  approximate  amounts of $895,000 and
     $60,000  respectively,  which may  provide  future  tax  benefits  expiring
     primarily through 2012 and 2002.

     Deferred income taxes arise from timing  differences  resulting from income
     and expense  items  reported  for  financial  and tax purposes in different
     periods.  Deferred  income taxes  represent  the  estimated tax benefit for
     timing  differences in the utilization of net operating loss  carryforwards
     and  valuation  allowances.  As of September  30, 1997 and 1996,  valuation
     allowances in the approximate amounts of $304,000 and $9,000, respectively,
     were established  because, in management's  opinion, it is more likely than
     not that the Company's deferred tax assets will not be realized.

     Loss Per Common Share:

     The  computation of loss per share is based on the weighted  average number
     of common shares  outstanding for the period.  Common share equivalents are
     not  included  in  the   calculation  of  loss  per  share,   as  they  are
     anti-dilutive.

2.   Concentrations:

     Cash and Cash Equivalents:

     The Company  maintains  cash and cash  equivalents  with various  financial
     institutions.  Deposits  not to exceed  $100,000  at each  institution  are
     insured by the Federal  Deposit  Insurance  Corporation.  At September  30,
     1997, the Company has uninsured cash and cash  equivalents of approximately
     $79,000.

     Major Supplier:

     The Company purchases substantially all of its supply of soybeans and other
     materials from Interwest Cooperative LLC, a related entity. As of September
     30, 1997, the amount included in accounts payable was approximately $150.

3.   Inventory:

     At September 30, 1997, inventory consists of the following:

        Raw materials                                                 $   80,398
        Finished goods                                                    60,602
                                                                      ----------
                                                                      $  141,000
                                                                      ==========
                                                      
4.   Notes Payable:

     As of September 30, 1997, notes payable are as follows:

     Non-interest  bearing  note payable
     to an  individual,  due on  demand;
     unsecured.                                                         $ 50,000
                                      -21-

<PAGE>
                 SOY ENVIRONMENTAL PRODUCTS, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Non-interest bearing Senior Secured
     Convertible notes, in the aggregate of
     $924,000 (less unamortized discount of
     $120,822, effective rate approximately
     32%), principal due January 30, 1998 and
     convertible after November 15, 1997 into
     924,000 shares of common stock; secured
     by stock and corporate assets.                                     803,178
                                                                     ----------
                                                                        853,178
     Less: current portion of notes payable                            (221,914)
                                                                     ----------

                                                                     $  631,264
                                                                     ==========

     During January,  1998, $720,000 ($631,264,  net of unamortized  discount at
     September 30, 1997) of the  aforementioned  notes were converted to 720,000
     shares  of  common  stock.  Therefore,  the debt  related  to same has been
     reflected as long-term as of September 30, 1997.

5.   Related Party Transactions:

     Note Payable to Related Party:

     During the year ended  September 30, 1997, the Company  entered into a debt
     agreement  with an officer  for  $100,000.  The debt was paid in full as of
     September  30, 1997 and  interest in the amount of $20,000 has been accrued
     as of September 30, 1997.

     Leasing Arrangements:

     The Company  leases  office space under a  month-to-month  operating  lease
     agreement  with a related  entity.  For the year ended  September 30, 1997,
     rental expense for the office lease was $43,669.

     Major Supplier:

     As discussed in Note 2, a related  entity is the supplier of  substantially
     all of the Company's soybeans.

     License Agreement:

     On September 15, 1996, Delta  Environmental,  Inc. entered into a licensing
     agreement  with  Interchem  Environmental,  Inc.  for the license to market
     various Interchem  Environmental,  Inc. products. The contract provides for
     royalties to be paid at a rate of one-half of one percent  (.005%) of gross
     sales. In exchange for the licensing  agreement,  Interchem  Environmental,
     Inc.  received  500,000 shares of Delta  Environmental,  Inc. stock from an
     existing stockholder.

     Consultancy Agreement:

     On December 31, 1996, the Company entered into a consulting  agreement with
     Interchem Industries,  Inc., a related entity. The agreement is for a three
     (3) year period, with a total commitment of approximately $225,000.

6.   Investment, at Equity:

     The  investment  consists  of  approximately  a  twenty-five  (25)  percent
     ownership  interest in Interwest,  L.C., an Iowa limited liability company.
     The investment is accounted for under the equity method of  accounting.  No
     adjustment  has been made for the current  year loss due to the  immaterial
     nature of same.
                                      -22-
<PAGE>
                 SOY ENVIRONMENTAL PRODUCTS, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


     Following is a summary of financial  position and results of  operations of
     Interwest, L.C. at September 30, 1997:


     Current Assets                                                 $   127,094
     Property, plant and equipment                                    1,141,165
     Other assets, net                                                    7,707
                                                                    -----------
         Total Assets                                               $ 1,275,966
                                                                    ===========
         Current liabilities                                        $   138,769
         Long-term debt                                               1,168,000
                                                                    -----------
                                                                    $ 1,306,769
                                                                    -----------
         Stockholders' equity (deficit)                             $   (30,803)
                                                                    -----------
         Total liabilities and stockholders' equity                 $ 1,275,966
                                                                    ===========
         Sales                                                      $   135,199
                                                                    ===========
         Net loss                                                   $   (24,182)
                                                                    ===========

7.   Statement of Cash Flows:

     Non-Cash Financing Activities:

     For the year ended  September 30, 1997,  the Company  recognized  financing
     activities that affected  stockholders'  equity, but did not result in cash
     receipts.

     As of  September  30,  1997,  these  non-cash  activities  consisted of the
     following:

         The Company  completed a debt offering for $924,000,  which  included a
         discount on the debt in the amount of $154,000.

         The  Company  issued  51,400  shares of common  stock  for  payment  of
         consulting fees in the amount of $16,962.

8.   Contingencies:

     In relation to the Company's  debt  offering,  the Company  issued  924,000
     warrants exercisable at $1 per share. Upon exercise of these warrants,  the
     placement agent is to receive five percent (5%) of the proceeds received by
     the Company.  Should all the warrants be exercised,  the Company will incur
     $46,200 of  additional  costs.  As of September  30, 1997, no liability has
     been accrued.

9.   Stockholders' Equity:

     Common Stock and Stock Split:

     On November 8, 1996, the Company's Board of Directors  authorized a 1 for 6
     reverse split of its common stock.

     Private Offerings:
                                      -23-
<PAGE>
                 SOY ENVIRONMENTAL PRODUCTS, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

     Options and Warrants:

     The Company had issued stock options  pursuant to an employment  agreement.
     The options were  exercisable  at $.33 per share for a period of five years
     from grant date. As of September 30, 1997, the options had been cancelled.

     The Company has issued warrants to accredited  investors in connection with
     a debt offering. In relation to the debt offering, 924,000 Class A Warrants
     have been  issued at an  exercise  price of $1.00 per share.  The  warrants
     become  exercisable  after November 15, 1997, and expire in three years. As
     of September 30, 1997, no warrants have been exercised.

     In addition,  the  placement  agent on the debt offering  received  462,000
     Class B  Warrants,  exercisable  at $1.20 per share,  expiring  in ten (10)
     years.

10.  Going Concern:

     As shown in the financial  statements,  the Company has incurred net losses
     of $780,032 and $40,726,  respectively,  for the year ended  September  30,
     1997 and for the period  from the date of  inception,  September  15,  1996
     through  September  30, 1996. In addition,  as of September  30, 1997,  the
     Company had a stockholders' deficit in the amount of $400,228, and $204,000
     of debt went into default subsequent to the balance sheet date.

     The foregoing  factors  indicate that the Company may be unable to continue
     in  existence.  The  financial  statements  do not include any  adjustments
     relating to the  recoverability  and  classification of recorded assets, or
     the amounts and  classification  of liabilities  that might be necessary in
     the event the Company cannot continue  existence.  Management believes that
     the Company is positioned to continue as a going concern.

11.  Subsequent Events:

     Subsequent  to the  balance  sheet date,  the  Company  initiated a private
     placement  pursuant to  Regulation  D  promulgated  by the  Securities  and
     Exchange Commission.  The private placement offers for sale 105 units, each
     consisting of 20,000 shares of cumulative  convertible preferred stock, and
     10,000 common stock purchase warrants at $20,000 per unit.

     In  addition,  the Board of Directors  authorized a private  placement on a
     best  efforts  basis  of up  to  $241,500  convertible  notes  and  241,500
     warrants.

     During January,  1998,  $720,000 of Senior Secured  Convertible  notes were
     converted  to 720,000  shares of common  stock.  The  balance of the Senior
     Secured Convertible notes, $204,000 went into default.
                                      -24-
<PAGE>
ITEM 8.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE.

     From the inception of the Company until the  acquisition of DEI, on October
21, 1996, its accountants were Rotenberg Company, L.L.P. of Rochester, New York.
Due to the change in control of the Company  resulting  from the  acquisition of
DEI,  the  Company's  Board of  Directors  decided  to retain as its  certifying
accountant the accountants for DEI, Semple & Cooper P.L.C. of Phoenix,  Arizona.
The decision to change  accountants  was that solely of the  Company's  Board of
Directors.  At no time have there been any  disagreements  with prior or current
accountants   regarding  any  matter  of  accounting  principals  or  practices,
financial  statement  disclosure,  or auditing  scope or procedure.  None of the
accounting  reports  associated  with the  financial  statements  of either  the
Company or DEI over the past two years or from the date of inception to the date
hereof contained an adverse opinion or disclaimer of opinion, or was modified as
to uncertainty, audit scope, or accounting principles.


                                    PART III

ITEM 9.  DIRECTORS,   EXECUTIVE   OFFICERS,   PROMOTERS  AND  CONTROL   PERSONS;
         COMPLIANCE WITH SECTION 16 (A) OF THE EXCHANGE ACT.

The  Directors  and  Executive  Officers  of the  Company  and their ages are as
follows:

    Name                Age                      Position
    ----                ---                      --------

Sean F. Lee             56         Chairman/Chief Executive Officer/Director
George T. Bard          67         President/Director
Gary L. Haer            43         Chief Financial Officer/Secretary/Director
Lee E. Derr             48         Director
Lawrence G. Olson       60         Director


Directors and Executive Officers

     Sean F. Lee, Chairman,  Chief Executive Officer and Director has held these
positions since October 1997. Mr. Lee is generally responsible for all marketing
and  distribution  activities  of the Company.  Mr. Lee holds degrees from Kells
College  in  Ireland  and Hood  College  in  Maryland.  Mr.  Lee has  served  in
management  positions in the retail industry since 1963.  Recently,  Mr. Lee was
co-founder  and Chairman of Infopak,  a company  which  manufactures  a handheld
computer and creates custom  software for the real estate  industry and held the
position of Chairman  from  inception  in January  1991 till its sale in October
1996.  Mr.  Lee's  retail  experience  includes  18 years with  Montgomery  Ward
starting as a trainee and ending in 1981 as merchandise  manager for the Western
Region. In 1982 Mr. Lee joined W. R. Grace as a divisional Vice President ending
in 1986 as Chief Executive  Officer of Grace Homecenters West. Mr. Lee was Chief
Executive Officer of Homebase, a $1.7 billion home improvement chain in 1988 and
1989.

     George T. Bard, President and Director, has served in these positions since
September 1996. Mr. Bard is responsible  for general  management of the Company.
Mr.  Bard is an attorney  admitted to the  California  Bar,  graduated  from the
University  of Michigan  and holds a law degree from Lincoln  University  of San
Francisco.  Prior to his involvement with the Company, in addition to practicing
law, he was a Vice President of Continental Grain and served as chief negotiator
for the World Milling Group.

     Gary L. Haer,  Chief Financial  Officer,  Secretary and Director,  has held
these  positions since September 1996. Mr. Haer is responsible for management of
logistics and  manufacturing  for the Company.  Mr. Haer holds a B.S.  degree in
Accounting  from  Northwest  Missouri  State  University  and a MBA  from  Baker
University.  Prior to joining the Company Mr. Haer has held  various  management
positions in  operations,  insurance and  accounting.  As a Manager for Hartford
Insurance  Group,  he  was  responsible  for  market  development  and  control,
financial  analysis,  and  agency  management.  Part  of Mr.  Haer's  experience
includes,  from 1981 to 1992, being a major partner in a diversified agriculture
operation,  Haer Farms,  where he was responsible  for  accounting,  finance and
operations. During this period he served on several financial review
                                      -25-
<PAGE>
committees  for the FHA. Since 1993,  Mr. Haer has been  accounting  manager for
Interchem (N.A.) Industries, Inc., which developed the Company's products.

     Lee E. Derr,  Director,  has been a director of the Company since September
1996  and,  through  Interchem  Environmental,  Inc.,  is  responsible  for  its
accounting and administrative functions. Mr. Derr holds a B.S. degree in Finance
from the  University  of Missouri.  In addition  Mr. Derr is a Certified  Public
Accountant.  Prior to founding  Interchem (N.A.)  Industries,  Inc. Mr. Derr was
Vice President and Chief  Financial  Officer of C.  Christopher  and Company,  a
Kansas City, Missouri based registered securities broker/dealer. In addition Mr.
Derr previously served as Vice President of Finance for Wulfsberg  Electronics a
division of Sundstrand  Corporation.  Since 1985 Mr. Derr has been  President of
Interchem (N.A.)  Industries,  Inc. and continues today to direct all aspects of
that company's operations.

     Lawrence G. Olson,  Director,  has held his position with the Company since
September  1996.  Mr. Olson holds a B.S.  degree in Civil  Engineering  from the
University of Southern California.  He currently is President and owner of Olson
Precast of Arizona,  Inc., a precast  production and  construction  company with
which he has been affiliated since 1973.

     The business of the Company will be largely  dependent  upon the efforts of
Messrs. Lee and Derr. The Company does not currently have, but intends to obtain
and maintain,  key-man life insurance in the amount of not less than  $1,000,000
on the life of Mr. Lee.

Key Employees

     William  Fredericks,  55,  Executive Vice President,  joined the Company in
October 1997 and is responsible  for all marketing  activities  with emphasis on
the  consumer  segment.  From  November  1996 until  joining  the  Company,  Mr.
Fredericks  was the Director of  Merchandising,  Sales and  Operations of Haynes
Furniture Company,  Inc., a regional furniture outlet retailer.  From 1993 until
October 1996, Mr.  Fredericks was Director of Special  Projects  (Marketing) and
New Business  Development for Home Quarters  Warehouse,  Inc., a division of the
Hechinger  Company,  and  from  October  1991 to  November  1992  was  the  Vice
President,  Sales and Operations for Nature's Elements International,  Ltd. From
1973 to 1991, Mr. Fredericks served in various  capacities within  merchandising
and operations, including Senior Vice President and Chief Merchandising Officer,
at Channel Home Centers, Inc., a division of W.R. Grace. Additionally, from 1992
to present, Mr. Fredericks has owned and operated Fredericks & Associates/AMASAR
enterprises, an importer/exporter of consumer products.

Compliance with Section 16(a) of the Exchange Act

     During the fiscal year ended September 30, 1996, each director, officer and
beneficial owner of more than 10% of the Company's  outstanding  Common Stock as
listed in Item 11 below failed to timely file reports on Form 3 upon the Company
becoming subject to the reporting requirements of the Exchange Act. All required
reports were  subsequently  filed on February 11, 1998 after these  persons were
advised of their reporting  requirements  under the Exchange Act.  Additionally,
Mr. Stanton and Vexterglen  Limited failed to timely file a Form 4 in connection
with  the  disposition  of  615,206  shares  of the  Company's  Common  Stock on
September 23, 1997,  Mr. Kohler and Capital West  Investments  Holding  Company,
Inc.  failed to  timely  file a Form 4 in  connection  with the  disposition  of
500,362  shares of the Company's  Common Stock on September  23, 1997,  Mr. Haer
failed to timely  file a Form 4 in  connection  with the  acquisition  of 50,000
shares of the Company's  Common Stock on September 18, 1997 and Mr. Olson failed
to timely file a Form 4 in connection  with the  acquisition of 17,000 shares of
the Company's  Common Stock on September 9, 1997.  All  delinquent  Forms 4 were
also filed on February 11, 1998.
                                      -26-
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION.

Compensation Summary of Executive Officers

     The following table sets forth certain  compensation paid or accrued by the
Company during the fiscal year ended  September 30, 1997 to the Chief  Executive
Officer and the Chief  Financial  Officer.  None of the  officers of the Company
made in excess of $100,000 during fiscal 1997.

                           SUMMARY COMPENSATION TABLE

                                                    Annual Compensation
                                           -------------------------------------

                                                                       Other
                                  Fiscal                              Annual
  Name and Principal Position      Year       Salary     Bonus     Compensation
--------------------------------------------------------------------------------

Sean Lee,                          1997      $73,077      __            __
Chief Executive Officer            1996         __        __            __
                                   1995         __        __            __

Gary L. Haer                       1997      $48,679      __            __
Chief Financial Officer            1996      $34,538      __            __
                                   1995         __        __            __



Employment Agreements

     Mr. Lee has entered into a three year employment contract whereby beginning
January 1, 1997 he will be paid an annual  salary of  $100,000.  At such time as
the gross  annual  revenues of the  Company  exceed  $5,000,000  the salary will
increase to $150,000  per year and in addition  Mr. Lee will receive an override
equal to nine-tenths of one percent of the Company's gross revenue.

     At present the Company does not maintain any form of bonus,  stock  option,
stock  bonus,  profit  sharing,  deferred  compensation  or  other  benefits  or
incentive  plan for the benefit of any  employees,  officers or  directors.  The
Board of Directors is currently considering a package of benefits and intends to
present a plan at the  Company's  next annual  meeting.  There are no employment
contracts with any individual  working for or associated with the Company or its
subsidiary except for Mr. Sean F. Lee.

     The Company and Interchem (N.A.) Industries have entered into a Consultancy
Agreement  as  described  in Item 12 below  pursuant to which Mr. Derr  provides
services to the Company.

Director Compensation

     All authorized out of pocket  expenses  incurred by a Director on behalf of
the Company are subject to reimbursement upon receipt by the Company of required
documentation  substantiating such expense. The Company anticipates that it will
implement a stock  option plan to provide  incentive  compensation  to its Board
members and other  employees and service  providers.  Except as set forth above,
there are no current  plans nor at present  does the Company have any current or
future  obligation to compensate  the  individuals  serving in the capacity of a
Director of the Company.  Interchem (N.A.) Industries,  Inc. is compensated as a
consultant  to the  Company.  Mr.  Derr is  President  of  Interchem  (N.A.) and
receives compensation from such entity.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The following table sets forth as of October 1, 1997,  certain  information
regarding  beneficial  ownership of the Company's Common Stock by all directors,
executive officers and key employees and all persons who own beneficially,
                                      -27-
<PAGE>
directly or  indirectly,  more than five percent of the Company's  Common Stock,
and all  directors,  executive  officers  and key  employees of the Company as a
group:

<TABLE>
<CAPTION>
         Name and Address of                Amount and Nature      Percent of Beneficial
         Beneficial Ownership                 of Class(1)(7)               Owner
         --------------------                 --------------               -----

<S>                                             <C>                       <C>   
     Sean F. Lee(2)                              815,968                  14.96%
     8855 Black Canyon Freeway
     Suite 2000
     Phoenix, Arizona  85021

     D. J. Stanton(3)                            815,968                  14.96%
     456 Queen Street, W.
     Mount Forest, Ontario CANADA

     Lawrence L. Kohler(4)                       609,031                  11.18%
     2525 East Camelback Road
     Suite 510
     Phoenix, Arizona  85016

     Interchem Environmental, Inc.(5)(6)         500,000                   9.18%
     9135 Barton Street
     Overland Park, Kansas  66216

     Lee E. Derr(5)                              500,000                   9.18%
     9135 Barton Street
     Overland Park, Kansas  66214

     Capital West Investments Holding            460,400                   8.46%
       Company, Inc.
     2525 East Camelback Road
     Suite 510
     Phoenix, Arizona  85016

     George T. Bard                              300,000                   5.51%
     8347 East Las Estancias
     Scottsdale, Arizona  85250

     Gary L. Haer                                250,000                   4.59%
     9135 Barton Street
     Overland Park, Kansas  66216

     Lawrence G. Olson                            55,000                   1.01%
     214 West Vista Avenue
     Phoenix, Arizona 85021

     All Directors and Executive               1,920,968                  35.28%
     Officers as a Group (5 Persons)
</TABLE>

     Unless otherwise  indicated,  the Company has been advised that each person
above has sole voting power over the shares indicted.

(1) Based upon 5,445,200 shares of Common Stock being issued and  outstanding on
October 1, 1997.
(2) Mr. Lee holds all shares through the Lee Family Trust.
(3) Mr. Stanton holds the shares beneficially through Vexterglen Limited and
such shares are held in trust by the Bank of Ireland. Mr. Stanton holds no
position as management or any other interest in the Company or the predecessor
companies.
(4) Mr. Kohler owns 149,031 shares directly and controls  460,000 shares through
Capital West Investments  Holding Company,  Inc.  ("CWIHC").  Mr. Kohler holds a
majority of the equity stock in CWIHC.
(5) Mr. Lee E. Derr, a Director of and consultant to the Company,  is an officer
and  director  of  Interchem  (N.A.)  Industries,  Inc.  and  its  wholly  owned
subsidiary  Interchem  Environmental,  Inc.  Mr. Derr does not own any shares of
Interchem  (N.A.)  Industries,  Inc.  and  therefore  disclaims  any  beneficial
interest  in the  shares  of the  Company's  Common  Stock  owned  by  Interchem
Environmental, Inc. Mr. Derr disclaims ownership of any shares of the Company.
(6) Interchem Environmental, Inc. is a 100% wholly owned subsidiary of Interchem
(N.A.) Industries, Inc. Interchem Industries is a corporation with approximately
800 shareholders. No one controls more than 5% of the outstanding stock.
                                      -28-
<PAGE>
(7) Certain of these  shareholders  have  committed  to  transfer,  for  nominal
consideration,  100,000  shares of  previously  issued  Common  Stock to certain
representatives of Fox & Company Investments, Inc.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     In  September of 1996 DEI entered  into a 25 year  license  agreement  with
Interchem  Environmental,  Inc. ("IEI"), a wholly-owned  subsidiary of Interchem
(N.A.) Industries, Inc., whereby IEI granted DEI an exclusive world wide license
for the promotion,  use, sale and  distribution of "SoyClean,"  "SoyRelease" and
"Naturen" products.  The agreement provides for a royalty fee of one-half of one
percent of gross sales.  Also,  in January 1997,  the Company  purchased its 25%
interest in Interwest, L.C. from IEI for $190,000.

     Effective  October 21, 1996, the Company acquired all outstanding  stock of
DEI in  exchange  for  2,530,500  shares of its Common  Stock.  Such shares were
issued as follows:  Capital West  Investments  Holding  Company,  Inc. - 765,612
shares; Vexterglen Limited - 713,148;  Interchem Environmental,  Inc. - 500,000;
Gary L. Haer -  200,000;  Milton  R.  Barnes -  105,016;  Lawrence  L.  Kohler -
105,016;  Frank X. Helstab - 84,678;  Jeffery Loth - 43,030; and Pickwick Group,
L.L.C. - 14,000.

     Capital West  Investment  Group,  a subsidiary of Capital West  Investments
Holding  Company,  of which Mr. Lawrence M. Kohler is President,  received total
commissions  in  connection  with  the  private   placements  of  the  Company's
securities equal to $85,460 and a total of 150,000 Class B Warrants, portions of
which were allocated to participating representatives, including Mr. Kohler, and
other registered agents and broker/dealers.

     The  Company  has  entered  into  a two  year  Consultancy  Agreement  with
Interchem (N.A.)  Industries,  Inc. whereby in exchange for consulting  services
the Company, beginning January 1, 1997, will pay a monthly consulting fee in the
amount of $8,333.33.  Mr. Lee E. Derr, a Director of the Company,  is an officer
and director of Interchem  (N.A.)  Industries,  Inc. The Company also sub-leases
its  administrative  office space from Interchem  (N.A.)  Industries,  Inc. on a
month-to-month basis at $3,565.


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.


(a)  Exhibits Index

     Number   Description

     2.1(1)            Agreement and Plan of  Reorganization  dated September 3,
                       1996 by and between  Soy  Environmental  Products,  Inc.,
                       formerly Denom  Acquisition Corp. and the shareholders of
                       Delta Environmental, Inc.

     3.1(1)            Certificate of Incorporation of Denom Acquisition Corp.

     3.2(1)            Certificate of Amendment to Certificate of  Incorporation
                       of Denom Acquisition Corp.

     3.3(1)            Bylaws of Denom Acquisition Corp.

     4.1               Note Agreement dated July 3, 1997 among Soy Environmental
                       Products, Inc. and Fox & Company Investments, Inc.

     4.2(3)            Security   Agreement   dated   July  3,  1997  among  Soy
                       Environmental   Products,   Inc.   and   Fox  &   Company
                       Investments, Inc.

     4.3               Class A Warrant  Agreement  dated  July 3, 1997 among Soy
                       Environmental   Products,   Inc.   and   Fox  &   Company
                       Investments, Inc.

     4.4               Class B Warrant  Agreement dated September 23, 1997 among
                       Soy  Environmental  Products,  Inc.  and  Fox  &  Company
                       Investments, Inc.

     4.5               Letter   Agreement   dated   July  3,   1997   among  Soy
                       Environmental   Products,   Inc.   and   Fox  &   Company
                       Investments, Inc.

     10.1(1)           License Agreement dated September 15, 1996 by and between
                       Interchem  Environmental,  Inc. and Delta  Environmental,
                       Inc.
                                      -29-
<PAGE>
     10.2(2)           Employment  Agreement  dated  September  31,  1996 by and
                       between Delta Environmental, Inc. and Sean F. Lee

     10.3              Consultancy  Agreement  dated December 31, 1996,  between
                       Soy  Environmental  Products,  Inc. and Interchem  (N.A.)
                       Industries, Inc.

     10.4              Agreement  dated January 16, 1997 by and among  Interchem
                       Environmental,  Inc. and Soy Environmental Products, Inc.
                       regarding purchase of interest in Interwest, L.C.

     21                Subsidiaries of Registrant

     23                Consent of Independent Public Accountant

     99.1(2)           U.S. Army Testing Report

     99.2(2)           Testing Data by Arco Chemical

     99.3              Scientific Certification Systems Letter of Certification

     99.4              Consumer Testing Laboratories Testing Report

(1)  Incorporated by reference from the Registrant's Form 10-QSB filed February
     24, 1997.
(2)  Incorporated by reference from the Registrant's Form 10-SB/A (Amendment No.
     1) filed May 29, 1997.
(3)  Incorporated by reference from the Registrant's Form 10-SB/A (Amendment No.
     2) filed July 18, 1997.

(b)  Reports on Form 8-K

None
                                      -30-
<PAGE>
     In accordance  with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                  SOY ENVIRONMENTAL PRODUCTS, INC.
                                  (Registrant)


Date:    March 24, 1998           By:   /s/ Gary L. Haer
     ----------------------          -------------------------------------------
                                     Gary L. Haer, Chief Financial Officer

     In  accordance  with the Exchange Act, this report has been signed below by
the following  persons on behalf of the  registrant and in the capacities and on
the dates indicated.


Date:                             By:
     ----------------------          -------------------------------------------
                                     Sean F. Lee, Chief Executive Officer
                                     and Director



Date:    March 25, 1998           By:   /s/ George T. Bard
     ----------------------          -------------------------------------------
                                     George T. Bard, President and Director



Date:    March 24, 1998           By:   /s/ Gary L. Haer
     ----------------------          -------------------------------------------
                                     Gary L. Haer, Chief Financial Officer, 
                                     Secretary and Director


Date:    March 24, 1998           By:   /s/ Lee E. Derr
     ----------------------          -------------------------------------------
                                     Lee E. Derr, Director


Date:    March 25, 1998           By:   /s/ Lawrence G. Olson
     ----------------------          -------------------------------------------
                                     Lawrence G. Olson, Director