Biodiesel is a biodegradable engine fuel produced from renewable sources such as vegetable oils or animal fats. In the U.S., biodiesel is generally blended with petroleum diesel, though it is also used in its pure form. Although biodiesel\'s physical and chemical properties are similar to petroleum-based diesel fuel, biodiesel has beneficial environmental and lubrication characteristics.

Biodiesel also is non-toxic, so it is safe to handle, store, and transport. The Department of Energy and the Department of Transportation have designated biodiesel that meets the ASTM D6751 quality requirements as a legal alternative motor fuel that may be sold and distributed in the U.S. ASTM D6751 is the official specification for biodiesel adopted by the American Society for Testing and Materials to help ensure that biodiesel performs consistently over a wide range of conditions.

Annual biodiesel production in the U.S. has expanded from approximately 15 million gallons for the 12 months ended September 2002 to approximately 250 million gallons for the 12 months ended September 2006, according to data compiled by the National Biodiesel Board, or NBB. Annual biodiesel production in the U.S. increased to 288 million gallons for the calendar year ended December 2006, according to the NBB.

Although pure biodiesel, or B100, is used by vehicles operating in national parks, mining and marine and other environmentally sensitive areas, biodiesel in the U.S. is used primarily as a blend component in the diesel fuel market. A blend containing 20% biodiesel, or B20, is used principally by fleets covered by governmental regulations, including municipal transit and school buses. Blends containing 2% or 5% biodiesel, or B2 or B5, are used principally by on-road vehicles and the agriculture industry.

The Company also provides new facility construction management services to third parties and has used its construction expertise and design technology to become a leading builder of biodiesel facilities in the U.S.

The Company is in the process of developing a national network of biodiesel production facilities that it wholly-owns or that it manages and refers to as \"member-owned\" facilities. The Company owns a biodiesel production facility in Ralston, Iowa with 12 mmgy of production capacity. The Company recently commenced construction of two wholly-owned facilities: one 60 mmgy production capacity facility in St. Rose, Louisiana and one 60 mmgy production capacity facility in Emporia, Kansas.

For the member-owned facilities in its network, the Company provides facility construction management and operations management services. The Company currently operates and manages four member-owned biodiesel production facilities with aggregate production capacity of 120 mmgy. For each of its member-owned network facilities, the Company has entered into a Management and Operational Services Agreement, or MOSA.

The Company has created a national distribution system to supply its SoyPOWER brand ASTM D6751 certified biodiesel product. As of June 30, 2007, the Company leases more than 300 railcars for transportation and space in 17 terminals and have sold biodiesel in more than 35 U.S. states.

Cost of goods sold increased $34.9 million, or 188%, to $53.5 million for the three months ended March 31, 2007, from $18.5 million for the three months ended March 31, 2006.

Selling, general and administrative expenses increased $4.2 million to $5.1 million for the first quarter of 2007, compared to $0.9 million for the first quarter of 2006.

Income tax benefit was $0.9 million for the quarter ended March 31, 2007 compared to zero dollars for the quarter ended March 31, 2006.