**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

----

 

**FORM10-K/A**

**AmendmentNo. 1**

 

ý         **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHESECURITIES EXCHANGE ACT OF 1934**

 

**Forthe fiscal year ended December 31, 2003**

 

**COMMISSIONFILE NO. 333-75804**

 

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**SOUTHDAKOTA SOYBEAN PROCESSORS, LLC**

(Exact Name ofRegistrant as Specified in its Charter)

 

| **South  Dakota**                | ** ** | **46-0462968**       |
|----------------------------------|------------|----------------------|
| (State of Other  Jurisdiction of |       | (I.R.S. Employer     |
| Incorporation or  Organization)  |       | Identification  No.) |

 

**100Caspian Avenue, Post Office Box 500, Volga, South Dakota 57071**

(Address ofPrincipal Executive Offices)

 

**(605)627-9240**

(Registrant’sTelephone Number)

 

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SECURITIESREGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT:  **NONE**

SECURITIESREGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:  **NONE**

 

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Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90days.  Yes  ý   No  o

 

Indicate by check mark if disclosure of delinquentfilers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter)is not contained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment to this Form10-K.  ý

 

Indicate by check mark whether the registrant is anaccelerated filer (as defined in Exchange Act Rule12b-2).  Yes  o   No  ý

 

State the aggregate market value of the voting andnon-voting common equity held by non affiliates computed by reference to theprice at which the common equity was last sold, or the average bid and askedprice of such common equity, as of the last business day of the registrant’smost recently completed second fiscal quarter: The aggregate market value ofthe common equity of the registrant and its predecessor held by non-affiliatesas of June 30, 2005 was approximately $73,884,375 basedon the latest salesprice of its capital units in its offering ending June 30, 2005, which were theonly public sales of its securities prior to June 30, 2005.

 

Indicate the number of shares outstanding of each ofthe registrant’s classes of common stock, as of the latest practicabledate:  As of the date of this filing, there were 30,445,500 Class Acapital units of the registrant outstanding.

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).  o Yes  ý No

 

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**EXPLANATORY NOTE**

 

This Amendment No. 1 tothe Annual Report on Form 10-K of South Dakota Soybean Processors, LLC (the “Company”)for the year ended December 31, 2003, filed on March 30, 2004, is being filedsolely for the purposes of replacing the independent auditor’s report andaccompanying financial statements for such period for the reasons described inItem 9 below.  The Company has made noother changes to the previously filed Form 10-K.  Other than as set forth below, the items ofthe Form 10-K, as previously filed, continue to speak as of the date ofthe original filings thereof, and the disclosure relating to such items is not beingupdated.

 

 

**PART II**

 

**Item 8.****                                  ****Financial Statements andSupplementary Data**

 

Reference is made to the “Indexto Financial Statements” of South Dakota Soybean Processors, LLC located atpage F-1 of this report on Form 10-K/A, and financial statements and schedulesfor the year ended December 31, 2003 referenced therein, which are herebyincorporated by reference.  Suchfinancial statements are marked to show all changes to the Company’s previouslyfiled financial statements that were required as a result of the re-auditdiscussed in Item 9 below.  Such changesdo not constitute a restatement of the Company’s previously filed financialstatements.

 

 

**Item 9.****                                  ****Changes in and Disagreements withAccountants on Accounting and Financial Disclosure**

 

The independent audit covering the Company’s financialstatements for the year ended December 31, 2003 was originally conductedby Eide Bailly, LLP, which later resigned from its engagement as the Company’sauditor in January 2005 due to an independence issue, as disclosed in theCompany’s prior filings.  Subsequently,in connection with its review of the Company’s Form 10-K for the yearended December 31, 2004, the Securities and Exchange Commission questionedwhether the independence of Eide Bailly, LLP may have also been compromisedwith respect to its review of the financial statements for the quarter endedSeptember 30, 2003, and its audit of the financial statements for the yearended December 31, 2003.  Followingcommunication with the Commission regarding the application of the independencerules in effect at the time, the Company agreed to comply with the Commission’srequest to amend its SEC filings, including this annual report, to includere-audited and re-reviewed financial statements for the periods in question.

 

The Company’s newauditor, Gordon, Hughes & Banks, LLP, has completed its audit of theCompany’s financial statements for the above period, and on November 9, 2005delivered to the Company its signed audit report, dated as ofSeptember 30, 2005, which is being filed herewith.  As stated above, no restatement of theCompany’s previously filed financial statements for such periods was requiredas a result of such subsequent audit.

 

**PART IV**

 

**Item 15.****                           ****Exhibits, Financial StatementSchedules, and Reports on Form 8-K**

 

The following exhibits and financial statements arefiled as part of, or are incorporated by reference into, this report:

 

(a)           Financial Statements and Schedules — Reference is made to the “Index toFinancial Statements” of South Dakota Soybean Processors, LLC located at pageF-1 of this report for a list of the financial statements and schedules for theyear ended December 31, 2003 included herein.

 

2

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(b)           Reports on Form 8-K – We did not file any reports on Form8-K during the quarter ended December 31, 2003.

 

(c)           Exhibits - See Exhibit Index following the Signature Page tothis report.

 

3

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**SIGNATURES**

 

Pursuant to the requirements of Section 13 or 15(d)of the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned, thereunto dulyauthorized.

 
|                            | SOUTH DAKOTA SOYBEAN  PROCESSORS, LLC |
|---------------------------------|---------------------------------------|
|                            |                                  |   |
| Dated:  November 10,  2005 |                                  |   |
|                            |                                  |   |
|                            | By                                    | /s/ Rodney G.  Christianson |
|                            |                                  | Rodney G. Christianson |
|                            |                                  | Chief Executive Officer |

 

 

Pursuant to therequirements of the Securities Exchange Act of 1934, this report has beensigned below by the following persons in the capacities indicated on November 10,2005.

 
| **SIGNATURE**               | ** ** | **TITLE**                                     |
|-----------------------------|------------|-----------------------------------------------|
|                        |       |                                          |
| /s/ Rodney G.  Christianson |       | Chief Executive Officer                       |
| Rodney G. Christianson      |       | (Principal Executive  Officer)                |
|                        |       |                                          |
| /s/ James A. Seurer         |       | Chief Financial Officer                       |
| James A. Seurer             |       | (Principal Financial  and Accounting Officer) |
|                        |       |                                          |
| /s/ Paul Barthel*           |       | Manager                                       |
| Paul Barthel                |       |                                          |
|                        |       |                                          |
| /s/ Robert E. Nelsen*       |       | Manager                                       |
| Robert E. Nelsen            |       |                                          |
|                        |       |                                          |
| /s/ Ryan J. Hill*           |       | Manager                                       |
| Ryan J. Hill                |       |                                          |
|                        |       |                                          |
| /s/ Peter Kontz*            |       | Manager                                       |
| Peter Kontz                 |       |                                          |
|                        |       |                                          |
| /s/ Bryce Loomis*           |       | Manager                                       |
| Bryce Loomis                |       |                                          |
|                        |       |                                          |
| /s/ Dale F. Murphy*         |       | Manager                                       |
| Dale F. Murphy              |       |                                          |
|                        |       |                                          |
| /s/ Daniel Potter*          |       | Manager                                       |
| Daniel Potter               |       |                                          |
|                        |       |                                          |
| /s/ Corey Schnabel*         |       | Manager                                       |
| Corey Schnabel              |       |                                          |
|                        |       |                                          |
| /s/ Rodney Skalbeck*        |       | Manager                                       |
| Rodney Skalbeck             |       |                                          |

 

4

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| /s/ Delbert Tschakert* |   | Manager |
|------------------------|--------|---------|
| Delbert Tschakert      |   |    |
|                   |   |    |
| /s/ Anthony VanUden*   |   | Manager |
| Anthony VanUden        |   |    |
|                   |   |    |
|                   |   | Manager |
| Ardon Wek              |   |    |
|                   |   |    |
|                   |   | Manager |
| Kent Howell            |   |    |
|                   |   |    |
|                   |   | Manager |
| Laron Krause           |   |    |
|                   |   |    |
|                   |   | Manager |
| Ronald Gorder          |   |    |
|                   |   |    |
|                   |   | Manager |
| Steven Preszler        |   |    |
|                   |   |    |
|                   |   | Manager |
| Greg Schmieding        |   |    |
|                   |   |    |
|                   |   | Manager |
| Dean Christopherson    |   |    |
|                   |   |    |
|                   |   | Manager |
| Jerome Jerzak          |   |    |
|                   |   |    |
|                   |   | Manager |
| Wayne Enger            |   |    |
|                   |   |    |
|                   |   | Manager |
| David Driessen         |   |    |

 

 

 
| * By   | /s/ Rodney G. Christianson                |   |
|--------|-------------------------------------------|--------|
|   | Rodney G. Christianson,  Attorney-in-Fact |   |

 

5

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**EXHIBITINDEX**

 
| **Exhibit  Number** | ** ** | **Description**                          | ** ** | **Filed  Herewith** | ** ** | **Incorporated Herein by Reference to**                                            |
|---------------------|------------|------------------------------------------|------------|---------------------|------------|------------------------------------------------------------------------------------|
|                |       |                                     |       |                |       |                                                                               |
| 24.1                |       | Power of  Attorney                       |       | o                   |       | See Signature  Page to this Annual Report on Form 10-K filed March  30,  2004 |
|                |       |                                     |       |                |       |                                                                               |
| 31.1                |       | Rule  13a-14(a)/15d-14(a) Certifications |       | ý              |       |                                                                               |
|                |       |                                     |       |                |       |                                                                               |
| 32.1                |       | Section 1350  Certifications        |       | ý              |       |                                                                               |

 

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**SOUTHDAKOTA SOYBEAN PROCESSORS,LLC**

 

***CONSOLIDATED FINANCIAL STATEMENTS***

 

***DECEMBER 31, 2003, 2002 AND2001***

 

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**SOUTH DAKOTA SOYBEAN PROCESSORS, LLC**

 

Table of Contents

 

 
| **REPORTS OF INDEPENDENT  REGISTERED PUBLIC ACCOUNTING FIRMS** |   |   |
|----------------------------------------------------------------|--------|--------|
|                                                           |   |   |
| **FINANCIAL STATEMENTS**                                       |   |   |
| Consolidated Balance Sheets                                    |   |   |
| Consolidated  Statements of Operations                         |   |   |
| Consolidated  Statements of Changes in Members’ Equity    |   |   |
| Consolidated  Statements of Cash Flows                         |   |   |
| Consolidated  Notes to Financial Statements                    |   |   |

 

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## REPORT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

The Boardof Managers

South Dakota Soybean Processors, LLC

Volga, South Dakota

 

We have audited the accompanying consolidatedbalance sheet of South Dakota Soybean Processors, LLC as of December 31, 2003 and the relatedconsolidated statements of operations, changes in members’ equity and cash flows for the year thenended.  These consolidated financialstatements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audit.

 

We conducted our audit in accordance with thestandards of the Public Company Accounting Oversight Board (UnitedStates).  Those standards require that weplan and perform the audit to obtain reasonable assurance about whether theconsolidated financial statements are free of material misstatement.  The Company is not required to have, nor werewe engaged to perform, an audit of its internal control over financialreporting.  Our audit includedconsideration of internal control over financial reporting as a basis fordesigning audit procedures that are appropriate in the circumstances, but notfor the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the consolidated financialstatements.  An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statementpresentation.  We believe that our auditprovides a reasonable basis for our opinion.

 

In ouropinion, the consolidated financial statements referred to above presentfairly, in all material respects, the financial position of South DakotaSoybean Processors, LLC as of December31, 2003, and the results of its operations and its cash flows for theyear then ended, in conformity with accounting principles generally accepted inthe United States of America.

 

 
|   |   | */s/  Gordon, Hughes & Banks, LLP* |
|--------|--------|----------------------------------------|

***Gordon, Hughes & Banks,LLP***

 

Greenwood Village, Colorado

September 30, 2005

 

 

F-1

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**INDEPENDENT****AUDITOR'S REPORT**

 

The Board of Managers

**South Dakota Soybean Processors, LLC**

Volga, South Dakota

 

 

We have audited the accompanying balance sheetof **South Dakota Soybean Processors, LLC******asof December 31, 2002 and the related statements ofoperations, changes in members’ equity, and cash flows for the year thenended.  We have also audited the statements of operations, changes in members’ equity,and cash flows for the year endedDecember 31, 2001. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express anopinion on these financialstatements based on our audits.

 

We conducted our audits in accordance with auditing standards generallyaccepted in the United States of America. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free ofmaterial misstatement.  An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements.  An audit alsoincludes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statementpresentation.  We believe that our auditsprovide a reasonable basis for our opinion.

 

In our opinion, the 2002 financial statements referredto above present fairly, in all material respects, the financial position of**South Dakota Soybean Processors, LLC**asof December 31, 2002, and the results of itsoperations and its cash flows for the year then ended in conformity withaccounting principles generally accepted in the United States of America.  Also, in our opinion, the 2001 financial statementsreferred to above present fairly, in all material respects, the results of its operations and itscash flows for the year endedDecember 31, 2001,in conformity with accounting principles generally accepted in the UnitedStates of America.

 
| /s/ Eide Bailly LLP       |   |   |
|---------------------------|--------|--------|
| Sioux Falls, South Dakota |   |
| January 23, 2003          |   |

 

F-2

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**SOUTH DAKOTA SOYBEAN PROCESSORS, LLC**

**CONSOLIDATED BALANCE SHEETS**

**DECEMBER 31, 2003 AND 2002**

 
| ** **                                                                                                | ** ** | **2003**        | ** **     | **2002**    | ** ** |
|-----------------------------------------------------------------------------------------------------------|------------|-----------------|----------------|-------------|------------|
| **ASSETS**                                                                                                |       |            | ** **     |        |       |
|                                                                                                      |       |            | ** **     |        |       |
| CURRENT ASSETS                                                                                            |       |            | ** **     |        |       |
| Cash and cash  equivalents                                                                                |       | **$**           | **529,697**    | ** **  | $          | 11,170 |   |
| Trade accounts  receivable, less allowance for  uncollectible accounts (2003 - $273,878; 2002 - $273,331) |       | **23,530,989**  | ** **     | 14,695,709  |       |
| Inventories                                                                                               |       | **10,776,402**  | ** **     | 13,113,098  |       |
| Margin deposits                                                                                           |       | **—**      | ** **     | 927,339     |       |
| Prepaid expenses                                                                                          |       | **516,419**     | ** **     | 482,977     |       |
| Assets held for  sale - Building                                                                          |       | **2,322,561**   | ** **     | 2,307,819   |       |
| Total current  assets                                                                                     |       | **37,676,068**  | ** **     | 31,538,112  |       |
|                                                                                                      |       | ** **      | ** **     |        |       |
| PROPERTY AND  EQUIPMENT                                                                                   |       | **50,250,024**  | ** **     | 49,172,714  |       |
| Less accumulated  depreciation                                                                            |       | **(18,424,405** | **)**          | (15,411,529 | )          |
|                                                                                                      |       | **31,825,619**  | ** **     | 33,761,185  |       |
|                                                                                                      |       | ** **      | ** **     |        |       |
| OTHER ASSETS                                                                                              |       | ** **      | ** **     |        |       |
| Investments                                                                                               |       | **3,970,102**   | ** **     | 4,928,261   |       |
| Notes receivable  - members                                                                               |       | **481,710**     | ** **     | —      |       |
| Patents, net                                                                                              |       | **7,647,844**   | ** **     | 36,836      |       |
| Other, net                                                                                                |       | **15,721**      | ** **     | 20,502      |       |
|                                                                                                      |       | **12,115,377**  | ** **     | 4,985,599   |       |
|                                                                                                      |       | ** **      | ** **     |        |       |
|                                                                                                      |       | **$**           | **81,617,064** | ** **  | $          | 70,284,896 |   |
|                                                                                                           |            |                 |                |             |            |  |  |  |  |  |  |  |  |

 

See Accompanying Notes to Consolidated Financial Statements

 

F-3

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| ** **                                                            | ** ** | **2003**       | ** **     | **2002**   | ** ** |
|-----------------------------------------------------------------------|------------|----------------|----------------|------------|------------|
| **LIABILITIES  AND MEMBERS’ EQUITY**                             |       |           |           |       |       |
|                                                                  |       |           |           |       |       |
| CURRENT  LIABILITIES                                                  |       |           |           |       |       |
| Excess of  outstanding checks over bank balance                       |       | **$**          | **2,388,936**  |       | $          | 3,603,838 |   |
| Current  maturities of long-term debt                                 |       | **976,117**    |           | 101,472    |       |
| Accounts payable                                                      |       | **1,883,200**  |           | 639,587    |       |
| Accrued  commodity purchases                                          |       | **21,492,404** |           | 20,150,385 |       |
| Accrued expenses                                                      |       | **1,385,864**  |           | 1,628,022  |       |
| Accrued interest                                                      |       | **50,316**     |           | 51,476     |       |
| Total current  liabilities                                            |       | **28,176,837** |           | 26,174,780 |       |
|                                                                  |       | ** **     |           |       |       |
| LONG-TERM  LIABILITIES                                                |       | ** **     |           |       |       |
| Long-term debt,  less current maturities                              |       | **17,543,141** |           | 10,143,459 |       |
| Deferred  compensation                                                |       | **121,301**    |           | 91,064     |       |
|                                                                  |       | **17,664,442** |           | 10,234,523 |       |
|                                                                  |       | ** **     |           |       |       |
| MINORITY  INTEREST IN CONSOLIDATED SUBSIDIARY                         |       | **1,045,195**  |           | —     |       |
|                                                                  |       | ** **     |           |       |       |
| COMMITMENTS                                                           |       | **—**     |           | —     |       |
|                                                                  |       | ** **     |           |       |       |
| MEMBERS’ EQUITY                                                  |       | ** **     |           |       |       |
| Class A Units,  no par value  28,258,500 units issued and outstanding |       | **34,730,590** |           | 33,875,593 |       |
|                                                                  |       | ** **     |           |       |       |
|                                                                  |       | **$**          | **81,617,064** |       | $          | 70,284,896 |   |

 

See Accompanying Notes to Consolidated FinancialStatements

 

F-4

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**SOUTH DAKOTA SOYBEAN PROCESSORS, LLC**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**FOR THE YEARS ENDED DECEMBER 31,2003, 2002 AND 2001**

 
| ** **                                                                                                    | ** ** | **2003**        | ** **      | **2002**    | ** ** | **2001**    | ** ** |
|---------------------------------------------------------------------------------------------------------------|------------|-----------------|-----------------|-------------|------------|-------------|------------|
|                                                                                                          |       |            | ** **      |        |       |        |       |
| NET REVENUE                                                                                                   |       | **$**           | **207,256,575** | ** **  | $          | 159,497,284 |       | $ | 148,258,146 |   |
|                                                                                                          |       | ** **      | ** **      |        |       |        |       |
| COST OF REVENUE                                                                                               |       | ** **      | ** **      |        |       |        |       |
| Cost of product  sold                                                                                         |       | **174,234,599** | ** **      | 128,457,162 |       | 121,012,364 |       |
| Production                                                                                                    |       | **14,046,771**  | ** **      | 11,707,538  |       | 10,686,189  |       |
| Freight and rail                                                                                              |       | **14,506,644**  | ** **      | 12,095,338  |       | 9,366,185   |       |
| Brokerage fees                                                                                                |       | **234,346**     | ** **      | 323,926     |       | 294,386     |       |
| Total cost of  revenue                                                                                        |       | **203,022,360** | ** **      | 152,583,964 |       | 141,359,124 |       |
|                                                                                                          |       | ** **      | ** **      |        |       |        |       |
| GROSS PROFIT                                                                                                  |       | **4,234,215**   | ** **      | 6,913,320   |       | 6,899,022   |       |
|                                                                                                          |       | ** **      | ** **      |        |       |        |       |
| OPERATING  EXPENSES                                                                                           |       | ** **      | ** **      |        |       |        |       |
| Administration                                                                                                |       | **3,639,442**   | ** **      | 2,679,633   |       | 2,234,248   |       |
| OPERATING PROFIT                                                                                              |       | **594,773**     | ** **      | 4,233,687   |       | 4,664,774   |       |
|                                                                                                          |       | ** **      | ** **      |        |       |        |       |
| OTHER INCOME  (EXPENSE)                                                                                       |       | ** **      | ** **      |        |       |        |       |
| Interest expense                                                                                              |       | **(802,178**    | **)**           | (542,220    | )          | (483,223    | )          |
| Other  non-operating income                                                                                   |       | **2,915,160**   | ** **      | 3,404,458   |       | 2,093,316   |       |
| Patronage  dividend income                                                                                    |       | **97,975**      | ** **      | 36,801      |       | 1,460,386   |       |
| Total other  income (expense)                                                                                 |       | **2,210,957**   | ** **      | 2,899,039   |       | 3,070,479   |       |
|                                                                                                          |       | ** **      | ** **      |        |       |        |       |
| INCOME BEFORE INCOME TAXES  AND MINORITY INTEREST OF SUBSIDIARY                                               |       | **2,805,730**   | ** **      | 7,132,726   |       | 7,735,253   |       |
|                                                                                                          |       | ** **      | ** **      |        |       |        |       |
| MINORITY  INTEREST IN  LOSS OF SUBSIDIARY                                                                     |       | **457,620**     | ** **      | —      |       | —      |       |
|                                                                                                          |       | ** **      | ** **      |        |       |        |       |
| INCOME BEFORE INCOME TAXES                                                                                    |       | **3,263,350**   | ** **      | 7,132,726   |       | 7,735,253   |       |
|                                                                                                          |       | ** **      | ** **      |        |       |        |       |
| INCOME TAX  EXPENSE (BENEFIT)                                                                                 |       | **(131,474**    | **)**           | 520,000     |       | —      |       |
|                                                                                                          |       | ** **      | ** **      |        |       |        |       |
| NET INCOME                                                                                                    |       | **$**           | **3,394,824**   | ** **  | $          | 6,612,726   |       | $ | 7,735,253 |   |
|                                                                                                          |       | ** **      | ** **      |        |       |        |       |
| BASIC AND  DILUTED EARNINGS PER CAPITAL UNIT                                                                  |       | **$**           | **0.12**        | ** **  | $          | 0.23        |       | $ | 0.27 |   |
|                                                                                                          |       | ** **      | ** **      |        |       |        |       |
| WEIGHTED AVERAGE  NUMBER OF UNITS OUTSTANDING FOR CALCULATION OF BASIC AND DILUTED EARNINGS PER  CAPITAL UNIT |       | **28,258,500**  | ** **      | 28,258,500  |       | 28,258,500  |       |

 

See Accompanying Notes to Consolidated Financial Statements

 

F-5

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**SOUTH DAKOTA SOYBEAN PROCESSORS, LLC**

**CONSOLIDATED STATEMENTS OF CHANGES INMEMBERS’ EQUITY**

**FOR THE YEARS ENDED DECEMBER 31,2003, 2002 AND 2001**

 
| ** **                          | ** ** | **Capital Units** | ** ** |
|-------------------------------------|------------|-------------------|------------|
| ** **                          | ** ** | **Shares**        | ** ** | **Amount** | ** ** |
|                                |       |              |       |   |   |
| **BALANCE,  JANUARY 1, 2001**       |       | 28,258,500        |       | 30,771,474 |   |
|                                |       |              |       |   |   |
| Net income                          |       | —            |       | 7,735,253 |   |
|                                |       |              |       |   |   |
| Proceeds from  members’ equity |       | —            |       | 4,200 |   |
|                                |       |              |       |   |   |
| Distributions to  members           |       | —            |       | (5,731,202 | ) |
|                                |       |              |       |   |   |
| **BALANCE,  DECEMBER 31, 2001**     |       | 28,258,500        |       | 32,779,725 |   |
|                                |       |              |       |   |   |
| Net income                          |       | —            |       | 6,612,726 |   |
|                                |       |              |       |   |   |
| Proceeds from  members’ equity |       | —            |       | 2,200 |   |
|                                |       |              |       |   |   |
| Distributions to  members           |       | —            |       | (5,519,058 | ) |
|                                |       |              |       |   |   |
| **BALANCE,  DECEMBER 31, 2002**     |       | 28,258,500        |       | 33,875,593 |   |
|                                |       |              |       |   |   |
| Net income                          |       | —            |       | 3,394,824 |   |
|                                |       |              |       |   |   |
| Distributions to  members           |       | —            |       | (2,539,827 | ) |
|                                |       |              |       |   |   |
| **BALANCE,  DECEMBER 31, 2003**     |       | 28,258,500        |       | $ | 34,730,590 |   |
|                                     |            |                   |            |  |  |  |

 

See Accompanying Notes to Consolidated Financial Statements

 

F-6

----

 

**SOUTH DAKOTA SOYBEAN PROCESSORS, LLC**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**FOR THE YEARS ENDED DECEMBER 31,2003, 2002 AND 2001**

 
| ** **                                                | ** ** | **2003**       | ** **    | **2002**   | ** ** | **2001**   | ** ** |
|-----------------------------------------------------------|------------|----------------|---------------|------------|------------|------------|------------|
| OPERATING  ACTIVITIES                                     |       |           |          |       |       |       |       |
| Net income                                                |       | **$**          | **3,394,824** | ** ** | $          | 6,612,726  |       | $ | 7,735,253 |   |
| Charges and  credits to net income not affecting cash:    |       | ** **     | ** **    |       |       |       |       |
| Depreciation                                              |       | **2,994,037**  | ** **    | 2,746,384  |       | 2,457,804  |       |
| Amortization                                              |       | **18,378**     | ** **    | 4,764      |       | 4,059      |       |
| Minority  interest in net loss of subsidiary              |       | **(457,620**   | **)**         | —     |       | —     |       |
| Loss on sale of  fixed assets                             |       | **1,325**      | ** **    | 30,288     |       | 118,920    |       |
| Non-cash  patronage dividends                             |       | **(97,976**    | **)**         | (28,964    | )          | (1,460,386 | )          |
| Change in assets  and liabilities                         |       | **(3,892,022** | **)**         | (530,981   | )          | 579,201    |       |
| NET CASH FROM  OPERATING ACTIVITIES                       |       | **1,960,946**  | ** **    | 8,834,217  |       | 9,434,851  |       |
|                                                      |       | ** **     | ** **    |       |       |       |       |
| INVESTING  ACTIVITIES                                     |       | ** **     | ** **    |       |       |       |       |
| Purchase of  investments                                  |       | **(4,076,686** | **)**         | (250       | )          | —     |       |
| Increase in  member loans                                 |       | **(480,710**   | **)**         | —     |       | —     |       |
| Cash assumed  with Urethane Soy Systems Co.               |       | **38,989**     | ** **    | —     |       | —     |       |
| Retirement of  patronage dividends                        |       | **56,134**     | ** **    | 103,262    |       | 809,713    |       |
| Purchase of  assets held for sale - Building              |       | **(14,742**    | **)**         | (2,307,819 | )          | —     |       |
| Patent costs                                              |       | **(53,000**    | **)**         | (36,998    | )          | —     |       |
| Proceeds from  sales of property and equipment            |       | **41,960**     | ** **    | —     |       | 122,125    |       |
| Purchase of  property and equipment                       |       | **(1,016,849** | **)**         | (4,645,020 | )          | (2,718,740 | )          |
| NET CASH USED  FOR INVESTING ACTIVITIES                   |       | **(5,504,904** | **)**         | (6,886,825 | )          | (1,786,902 | )          |
|                                                      |       | ** **     | ** **    |       |       |       |       |
| FINANCING  ACTIVITIES                                     |       | ** **     | ** **    |       |       |       |       |
| Change in excess of outstanding checks over bank  balance |       | **(1,214,902** | **)**         | 2,026,870  |       | 24,150     |       |
| Proceeds from  members’ equity transactions          |       | **—**     | ** **    | 2,200      |       | 4,200      |       |
| Distributions to  members                                 |       | **(2,539,827** | **)**         | (5,519,058 | )          | (5,731,202 | )          |
| Payments for  debt issue costs                            |       | **—**     | ** **    | (6,500     | )          | —     |       |
| Proceeds from  long-term debt                             |       | **9,489,103**  | ** **    | —     |       | 1,053,948  |       |
| Principal  payments on long-term debt                     |       | **(1,671,889** | **)**         | (454,991   | )          | (991,615   | )          |
| NET CASH FROM  (USED FOR) FINANCING ACTIVITIES            |       | **4,062,485**  | ** **    | (3,951,479 | )          | (5,640,519 | )          |
|                                                      |       | ** **     | ** **    |       |       |       |       |
| NET CHANGE IN  CASH AND CASH EQUIVALENTS                  |       | **518,527**    | ** **    | (2,004,087 | )          | 2,007,430  |       |
|                                                      |       | ** **     | ** **    |       |       |       |       |
| CASH AND CASH  EQUIVALENTS, BEGINNING OF YEAR             |       | **11,170**     | ** **    | 2,015,257  |       | 7,827      |       |
|                                                      |       | ** **     | ** **    |       |       |       |       |
| CASH AND CASH  EQUIVALENTS, END OF YEAR                   |       | **$**          | **529,697**   | ** ** | $          | 11,170     |       | $ | 2,015,257 |   |
|                                                      |       | ** **     | ** **    |       |       |       |       |
| SUPPLEMENTAL  DISCLOSURES OF CASH FLOW INFORMATION        |       | ** **     | ** **    |       |       |       |       |
| Cash paid during  the year for:                           |       | ** **     | ** **    |       |       |       |       |
|                                                      |       | ** **     | ** **    |       |       |       |       |
| Interest                                                  |       | **$**          | **887,746**   |       | $          | 530,421    |       | $ | 628,636 |   |
|                                                      |       | ** **     | ** **    |       |       |       |       |
| Income taxes                                              |       | **$**          | **—**    | ****       | $          | 520,000    |       | $ | — |   |

 

See Accompanying Notes to Consolidated Financial Statements

 

F-7

----

 

**SOUTH DAKOTA SOYBEAN PROCESSORS, LLC**

**CONSOLIDATEDNOTES TO FINANCIAL STATEMENTS**

 

**NOTE 1 -  PRINCIPAL ACTIVITY AND SIGNIFICANT ACCOUNTINGPOLICIES**

 

*Organization*

 

On October 12, 2001, Soybean Processors, LLC (the Company) wasformed.  The initial member of the LLCwas the South Dakota Soybean Processors Cooperative (the Cooperative).  The board of directors of the Cooperativeunanimously approved a plan of reorganization related to an exchange wherebythe LLC would acquire the assets and liabilities of the Cooperative.  The reorganization required the approval of75% of the members of the Cooperative who voted on the proposal.  On June 20, 2002, the members of the SouthDakota Soybean Processors Cooperative duly approved the reorganization of theCooperative into a limited liability company, which became effective on July 1,2002.  Effective July 1, 2002, the LLCacquired the assets and liabilities of the Cooperative. The transaction was anexchange of interests whereby the assets and liabilities of the Cooperativewere transferred for capital units of Soybean Processors, LLC.  For financial statement purposes, no gain orloss was recorded as a result of the exchange transaction. For income taxpurposes, the difference between the tax basis and the fair market value of theassets resulted in an income tax liability discussed in Note 10.

 

As a result of the exchange, the Cooperative was dissolved on July 1,2002, and the LLC’s capital units were distributed to the members of theCooperative at a rate of one capital unit of the LLC for each share of equitystock of the Cooperative.  In connectionwith the reorganization, the LLC changed its name to South Dakota SoybeanProcessors, LLC.

 

A minimum of 2,500 capital units is required for ownership of theLLC.  Such units will be subject tocertain transfer restrictions.  The LLCwill also retain the right to redeem the units at $.20 per unit in the event amember attempts to dispose of the units in a manner not in conformity with theOperating Agreement, if a member becomes a holder of less than 2,500 units,becomes an owner (directly or indirectly) of more than 1.5% of the issued andoutstanding capital units or becomes a bankrupt member.  The Operating Agreement of the LLC alsoincludes provisions whereby cash equal to a minimum of 30% of net income willbe distributed to unit holders subject to certain limitations.  These limitations include a minimum netincome of $500,000, restrictions imposed by debt and credit instruments or asrestricted by law in the event of insolvency.

 

In connection with the reorganization, the delivery of soybeans underthe previous member delivery agreements is no longer required as an obligationof membership.  Earnings, losses and cashdistributions are allocated to members based on their percentage of ownershipin the LLC.

 

The company owns approximately 58% of Urethane Soy Systems Company(USSC).  USSC is the manufacturer andpatent holder of SoyOyl®, a polyol made from soybean oil.  A minority interest is presented in theconsolidated balance sheet that represents the approximate 42% ownership ofother investors in the 96,025 outstanding common shares of USSC.

 

South Dakota Soybean Processors is operated for the purpose ofmanufacturing products from soybeans, such as soybean oil, meal, and hulls.

 

*Basis of presentation*

 

As a result of the reorganization mentioned above, the financialstatements of the prior periods have been restated to reflect the comparativebasis of the Company versus the Cooperative. The consolidated financial statements include the accounts of theCompany and its majority-owned subsidiary. The effects of all significant intercompany accounts and transactionshave been eliminated.

 

(continued on next page)

 

F-8

----

 

*Cash and cash equivalents*

 

The Company considers all highly liquid debt instruments with maturityof three months or less to be cash equivalents.

 

*Accounts receivable*

 

Accounts receivable are carried at cost. Accounts receivable areconsidered past due when payments are not received within thirty days.Generally, these accounts receivable represent amounts due for sale of soybeanmeal, oil, hulls and refined oil.

 

The carrying amount of trade receivables is reduced by a valuationallowance that reflects management’s best estimate of the amounts that will notbe collected.  Management reviews allreceivable balances that exceed 90 days from the invoice date and based on anassessment of current creditworthiness, estimates the portion, if any, of thebalance that will not be collected.

 

*Inventories*

 

Finished goods (soybean meal, oil, refined oil, and hulls) and rawmaterials (soybeans) are valued at estimated market value, which approximatesnet realizable value.  This accounting policy is in accordance withthe guidelines described in AICPA Statement of Position No. 85-3, *“Accounting by AgriculturalProducers and Agricultural Cooperatives.”*  Supplies and other are stated at the lower ofcost determined by the first-in, first-out method, or market.

 

*Assets held for sale*

 

Assetsheld for sale are carried at net book value.

 

*Investments*

 

Investments incooperatives are carried at cost plus the amount of patronage earningsallocated or estimates of interim allocations to the Company, less any cashdistributions received.

 

’

’

The investments in Cenex Harvest States (CHS) andCoBank include actual patronage allocations based upon written qualifiednotices of allocation received from CHS and CoBank.  Patronage allocations represent the Company’s proportionate share of the patronage earnings ofCHS and CoBank.  Sincethe company is no longer a cooperative as of July 1, 2002, it will no longerreceive patronage allocations.

 

(continued on next page)

 

F-9

----

 

*Property and equipment*

 

Property and equipment isstated at cost.  Expenditures forrenewals and improvements that significantly add to the productive capacity orextend the useful life of an asset are capitalized.  Expenditures for maintenance and repairs arecharged to expense when incurred.  When depreciable properties are sold orretired, the cost and accumulated depreciation are eliminated from the accountsand the resultant gain or loss is reflected in income.

 

The Company reviews its property and equipment for impairment wheneverevents indicate that the carrying amount of the asset may not be recoverable.An impairment loss is recorded when the sum of the future cash flows is lessthan the carrying amount of the asset. The amount of the loss is determined by comparing the fair market valueof the asset to the carrying amount of the asset.

 

Depreciation is providedfor over the estimated useful lives of the individual assets using thestraight-line method.  The range of theestimated useful lives used in the computation of depreciation are as follows:

 
| Buildings and  improvements |   | 10-39 years |   |
|-----------------------------|--------|-------------|--------|
| Equipment and  furnishings  |   | 3-15 years  |   |

 

*Patents*

 

The Company’s patents are intangible assets that are notconsidered to have an indefinite life and, under the rules of SFAS No. 142, areto be amortized over their estimated useful life.  Thepatents are being amortized using the straight-line method over a period of 16to 20 years, which is the shorter of the remaining estimated economic life ofthe patents acquired or 20 years from the date that the applications wereoriginally filed with the U.S. Patent Office.

 

*Other assets*

 

Other assets are carriedat cost.  Loan fees are being amortizedon an interest method of accounting over the term of the related loans.

 

*Use of estimates*

 

The preparation offinancial statements in conformity with generally accepted accountingprinciples requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities at the date of the financialstatements and reported amounts of revenues and expenses during the reportingperiod.  Actual results could differ fromthose estimates.

 

*RevenueRecognition*

 

Revenue is recognizedafter the related products are shipped which is when title is transferred to thecustomer.  Revenues are presented net ofdiscounts and sales allowances.

 

*Freight*

 

TheCompany presents all amounts billed to the customer for freight as a componentof net revenue.  Costs incurred forfreight are reported as a component of cost of revenue.

 

*Advertising costs*

 

Advertising and promotioncosts are expensed as incurred.

 

*Environmentalremediation*

 

It is management’sopinion that the amount of any potential environmental remediation costs willnot be material to the Company’s financial condition, results of operations, orcash flow; therefore, no accrual has been recorded.

 

(continued on next page)

 

F-10

----

 

*Recently issued accountingpronouncements*

 

In May 2003 the FASB issued SFAS No. 150, “Accounting for CertainFinancial Instruments with Characteristics of Both Liabilities and Equity”,which establishes standards for how an issuer classifies and measures certainfinancial instruments with characteristics of both liabilities and equity.  It requires that an issuer classify afinancial instrument that is within its scope as a liability (or an asset incertain circumstances).  Many of thoseinstruments were previously classified as equity.  SFAS No. 150 is effective for financialinstruments entered into or modified after May 31, 2003, and otherwise iseffective at the beginning of the first interim period beginning after June 15,2003, except for mandatory redeemable financial instruments of nonpublicentities that are subject to the provisions for the first fiscal periodbeginning after December 15, 2003.  TheStatement is to be implemented by reporting the cumulative effect of a changein an accounting principle for financial instruments created before theissuance date of the Statement and still existing at the beginning of theinterim period of adoption.  The Companybelieves that the adoption of this standard will not have a material effect onthe consolidated financial statements.

 

*Accounting for derivativeinstruments and hedging activities*

 

All of the Company’s derivatives are designated as non-hedgederivatives.  The futures and optionscontracts used by the Company are discussed below.  Although the contracts are effective economichedges of specified risks, they are not designated as and accounted for ashedging instruments.

 

The Company, as part of its trading activity, uses futures and optioncontracts offered through regulated commodity exchanges to reduce risk.  The Company is exposed to risk of loss in themarket value of inventories.  To reducethat risk, the Company generally takes opposite and offsetting positions usingfuture contracts or options.

 

Unrealized gains and losses on futures and options contracts used tohedge soybean, oil and meal inventories are recognized as a component of netproceeds for financial reporting. Inventories are recorded at estimated marketvalue, which approximates net realizable value, so that gains and losses on thederivative contracts are offset by gains and losses on inventories andreflected in earnings currently.

 

*Earnings per capital unit*

 

The ownership structure of the Company is made up of Class A capitalunits.  Earnings per capital unit are calculatedbased on the number of Class A capital units held.  On June 17, 2003, the Board of Managersdeclared a 2-for-1 split of Class A capital units effective immediately.  Prior to this transaction, there were14,129,250 Class A capital units outstanding. The 2-for-1 stock split is reflected in the calculation of earnings percapital unit.

 

For purposes of calculating basic earnings per capital unit, capitalunits issued by the Company are considered outstanding on the effective date ofissuance.

 

The Company has no other capital units or othermember equity instruments that are dilutive for purposes of calculatingearnings per capital unit.

 

*Reclassifications*

 

Reclassifications have been made to December 31, 2002 and December 31,2001 financial information to make them conform to the current periodpresentation.  The reclassification hadno effect on previously reported net income or members’ equity.

 

(continued on next page)

 

F-11

----

 

**NOTE 2 -  INVENTORIES**

 
| ** **                    | ** ** | **2003**       | ** **     | **2002**   | ** ** |
|-------------------------------|------------|----------------|----------------|------------|------------|
| Finished goods                |       |           |           |       |       |
| Soy processing                |       | **$**          | **(447,404**   | **)**      | $          | 9,550,460 |   |
| Refined Oil                   |       | **313,815**    | ** **     | 496,198    |       |
| Other                         |       | **34,536**     | ** **     | 26,609     |       |
| Total                         |       | **(99,053**    | **)**          | 10,073,267 |       |
|                          |       | ** **     | ** **     |       |       |
| Raw materials                 |       | ** **     | ** **     |       |       |
| Soy Processing                |       | **10,696,391** | ** **     | 2,935,400  |       |
| Refined Oil                   |       | **46,663**     | ** **     | 45,262     |       |
| Other                         |       | **78,465**     | ** **     | 9,424      |       |
| Total                         |       | **10,821,519** | ** **     | 2,990,086  |       |
|                          |       | ** **     | ** **     |       |       |
| Supplies &  Miscellaneous |       | **53,936**     | ** **     | 49,745     |       |
|                          |       | ** **     | ** **     |       |       |
| Totals                        |       | **$**          | **10,776,402** | ** ** | $          | 13,113,098 |   |

 

Finished goods and raw materials are valued at estimated market value,which approximates net realizable value. In addition, futures and option contracts are marked to market throughcost of revenues, with unrealized gains and losses recorded in the aboveinventory amounts.  This marketadjustment caused the soy processing finished goods to have a credit balance asof December 31, 2003. Supplies and other inventories are stated at the lower ofcost determined by the first-in, first-out method, or market.

 

**NOTE 3 -  MARGIN DEPOSITS**

 

The Company maintains deposits with a brokerage firm.  The deposits are used for risk management.

 

The Company uses futures and option contracts to manage the risk ofcommodity price volatility of soybeans, crude soybean oil and soybeanmeal.  Consistent with its inventoryaccounting policy, these contracts are recorded at market value.

 

At December 31, 2003, the Company had contracts maturing throughDecember 2004.

 

**NOTE 4 -  ASSETS HELD FOR SALE**

 

The Company has entered into a letter of understanding with MinnesotaSoybean Processors (MnSP) regarding the terms and conditions of the Company’sinvestment in a soybean oil storage facility located in Brewster, MN.  The Company will own and operate the facilityuntil MnSP commences its planned principal operations.  Upon commencement of MnSP’s operations, theCompany will transfer the facility to MnSP for consideration equal to theoriginal cost of construction plus the cost of any improvements to thefacility.

 

In August 2004, the Company exchanged the storagefacility with a net book value of $2,322,561 for 1,400,400 Class A shares inMinnesota Soybean Processors (MnSP), a Minnesota cooperative association.  The shares approximate 6.95% of MnSP’s outstanding equity.

 

(continued on next page)

 

F-12

----

 

**NOTE 5 -  PROPERTY AND EQUIPMENT**

 
| ** **                  | ** ** | **2003**   | ** ** | ** **                    | ** ** |
|-----------------------------|------------|------------|------------|-------------------------------|------------|
| ** **                  | ** ** | **Cost**   | ** ** | **Accumulated  Depreciation** | ** ** | **Net** | ** ** | **2002  Net** | ** ** |
|                        |       |       |       |                          |       |   |   |   |   |
| Land                        |       | $          | 237,643    |                          | $          | — |   | **$** | **237,643** | ** ** | $ | 237,643 |   |
| Land  improvements          |       | 18,572     |       | 17,711                        |       | **861** | ** ** | — |   |
| Buildings and  improvements |       | 14,290,569 |       | 2,556,169                     |       | **11,734,400** | ** ** | 12,136,431 |   |
| Machinery and  equipment    |       | 34,325,434 |       | 15,069,361                    |       | **19,256,073** | ** ** | 21,116,733 |   |
| Company vehicles            |       | 111,217    |       | 101,905                       |       | **9,312** | ** ** | 58,620 |   |
| Furniture and  fixtures     |       | 814,180    |       | 679,259                       |       | **134,921** | ** ** | 152,861 |   |
| Construction in  progress   |       | 452,409    |       | —                        |       | **452,409** | ** ** | 58,897 |   |
|                        |       |       |       |                          |       | ** ** | ** ** |   |   |
| Totals                      |       | $          | 50,250,024 |                          | $          | 18,424,405 |   | **$** | **31,825,619** | ** ** | $ | 33,761,185 |   |

 

**NOTE 6 -  OTHER INTANGIBLE ASSETS**

 

On January 1, 2003, the Company acquired an additional 54% interest inthe outstanding common stock of USSC to bring its total ownership interest toapproximately 58%.  The results of USSC’soperations have been consolidated in the Company’s financial statements since thatdate.  The Company believes that theacquisition of a controlling interest in USSC will allow the Company to develop and market ’soy-basedpolyurethane products.

 

The aggregate purchase price for the 54% interest was $8,576,686.  The Company had previously acquired a 4% interestfor $1,000,000.  In preparingconsolidated financial statements, the Company assigned the total considerationpaid for the USSC stock to USSC’s assets and liabilities.  This allocation resulted in an assignment of$7,401,245 to patents.  The costsof the patents are being amortized using the straight-line method over a periodof 16 to 20 years, which is the shorter of the remaining estimated economiclife of the patents acquired or 20 years from the date of filing theapplication with the U.S. Patent Office. None of these patent costsrecognized for financial reporting purposes are expected to be deductible fortax purposes.

 

The following table summaries the estimated fair values of the assetsacquired and liabilities assumed at the date of acquisition.

 
| Current assets             |   | $         | 85,742    |   |
|----------------------------|--------|-----------|-----------|--------|
| Property and  equipment    |   | 255,894   |      |
| Patents                    |   | 7,401,245 |      |
| Total assets  acquired     |   | 7,742,881 |      |
|                       |   |      |      |
| Current  liabilities       |   | 1,054,906 |      |
| Long-term debt             |   | 155,928   |      |
| Total  liabilities assumed |   | 1,210,834 |      |
| Net assets  acquired       |   | $         | 6,532,047 |   |

 

The Company has a contractual obligation to pay former USSCshareholders $4,050,000.  Three remaininginstallments of $891,000 are due on October 31, 2004, 2005 and 2006.

 

(continued on next page)

 

F-13

----

 

The following table provides information regarding the Company’s otherintangible assets as of December 31, 2003 and 2002:

 
| **Intangible  Assets**   | ** ** | **Life**         | ** ** | **Gross  Carrying  Amount** | ** ** | **Accumulated  Amortization** | ** ** | **Net**   | ** ** |
|--------------------------|------------|------------------|------------|-----------------------------|------------|-------------------------------|------------|-----------|------------|
|                     |       |             |       |                        |       |                          |       |      |       |
| As of December  31, 2003 |       |             |       |                        |       |                          |       |      |       |
| Loan Origination  Costs  |       | 10 Yrs.          |       | $                           | 20,502     |                          | $          | (4,781    | )          | $ | 15,721 |   |
| Patents                  |       | 16-20 Yrs.       |       | 7,661,394                   |       | (13,550                       | )          | 7,647,844 |       |
|                     |       |             |       | $                           | 7,681,896  |                          | $          | (18,331   | )          | $ | 7,663,565 |   |
|                     |       |             |       |                        |       |                          |       |      |       |
| As of December  31, 2002 |       |             |       |                        |       |                          |       |      |       |
| Loan Origination  Costs  |       | 16-20  Yrs. |       | $                           | 23,291     |                          | $          | (2,789    | )          | $ | 20,502 |   |

 

**NOTE 7 -  INVESTMENTS**

 
| ** **                            | ** ** | **2003**      | ** **    | **2002**  | ** ** |
|---------------------------------------|------------|---------------|---------------|-----------|------------|
| Investments in  associated companies: |       |          |          |      |       |
| Cenex Harvest  States                 |       | **$**         | **3,516,592** |      | $          | 3,543,333 |   |
| CoBank                                |       | **453,260**   |          | 384,678   |       |
|                                  |       | **3,969,852** |          | 3,928,011 |       |
| Urethane Soy  Systems Company, Inc.   |       | **—**    |          | 1,000,000 |       |
| Minnesota  Soybean Processors         |       | **250**       |          | 250       |       |
|                                  |       | ** **    |          |      |       |
| Totals                                |       | **$**         | **3,970,102** |      | $          | 4,928,261 |   |

 

**NOTE 8 -  NOTES PAYABLE – SEASONAL LOAN**

 

The Company has entered into a revolving credit agreement with CoBank,which was to expire on April 1,2005.  The purpose of the creditagreement is to finance the inventory and accounts receivable of theCompany.  The Company could borrow up to $6,000,000between June 1 and September 30 and up to $10,000,000 between October 1 and May31.  Interest is at a variable rate(3.47% at December 31, 2003).  There wereno advances outstanding at December 31, 2003 and 2002.

 

Advances on the revolving credit agreement are limited based uponinventory, accounts receivable, net of soybean accounts payable.

 

On June 17, 2004, the Company entered into a newrevolving credit agreement with CoBank, which expired on July 1, 2005. CoBankunilaterally extended the maturity date to September1, 2006. The Company currently has borrowing availability of approximately$15,300,000.

 

(continued on next page)

 

F-14

----

 

**NOTE 9 -  LONG-TERM DEBT**

 
| ** **                                                                                                                                                                                                                                                                | ** ** | **2003**       |           | **2002**   | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------|----------------|------------|------------|
|                                                                                                                                                                                                                                                                      |       |           |           |       |       |
| Revolving term  loan from CoBank, interest at variable rates (3.47% at December 31, 2003),  secured by substantially all property and equipment. Loan matures 3/20/2011.                                                                                                  |       | **15,281,832** |           | 9,874,620  |       |
|                                                                                                                                                                                                                                                                      |       | ** **     |           |       |       |
| Note payable to  former USSC shareholders, due in annual principal payments of $891,000,  interest at 0%, secured by USSC stock. Note matures on 10/31/2006.                                                                                                              |       | **2,673,000**  |           | —     |       |
|                                                                                                                                                                                                                                                                      |       | ** **     |           |       |       |
| Note payable to  Brookings County Railroad Authority, due in semi-annual principal and  interest installments of $36,885 at 5% secured by railroad track assets. Note  matures 9/1/2007.                                                                                  |       | **264,462**    |           | 322,812    |       |
|                                                                                                                                                                                                                                                                      |       | ** **     |           |       |       |
| Note payable to  Richard Kipphart, issued February 13, 2002, with quarterly interest payments  at 15% which began on June 30, 2002, and are paid in quarterly installments  thereafter. No prepayment of principal is allowed prior to maturity. Note  matures 2/13/2005. |       | **250,000**    |           | —     |       |
|                                                                                                                                                                                                                                                                      |       | ** **     |           |       |       |
| Note payable to  various companies at rates ranging from 0% to 7.5%. Notes mature on or before  4/15/2005.                                                                                                                                                                |       | **49,964**     |           | 8,754      |       |
|                                                                                                                                                                                                                                                                      |       | ** **     |           |       |       |
| Contract payable  to City of Volga, due in monthly installments of $3,229 at 0%. Contract  matures 12/31/2003.                                                                                                                                                            |       | **—**     |           | 38,745     |       |
|                                                                                                                                                                                                                                                                      |       | ** **     |           |       |       |
|                                                                                                                                                                                                                                                                      |       | **18,519,258** |           | 10,244,931 |       |
| Less current  maturities                                                                                                                                                                                                                                                  |       | **(976,117**   | **)**          | (101,472   | )          |
|                                                                                                                                                                                                                                                                      |       | ** **     |           |       |       |
| Totals                                                                                                                                                                                                                                                                    |       | **$**          | **17,543,141** |       | $          | 10,143,459 |   |
|                                                                                                                                                                                                                                                                           |            |                |                |            |            |  |  |

 

The Company entered into an agreement as of February 26, 2002 withCoBank to amend and restate its Master Loan Agreement (MLA).  Under the terms and conditions of the MLA,CoBank agrees to make loans to the Company up to $18,200,000 from August 1,2002 until April 30, 2003 and up to $21,000,000 from May 1, 2003 to September19, 2003.  Beginning September 2003, theavailable commitment decreases in scheduled periodic increments of $1,300,000through March 2011.

 

The MLA contains financial covenants related to the maintenance ofworking capital and achieving debt service quotients among affirmative andnegative covenants.

 

(continued on next page)

 

F-15

----

 

It is estimated that the minimum principal payments on long-term debtobligations will be as follows:

 
| For the years  ending December 31: |   |      |       |
|------------------------------------|--------|-----------|------------|
| 2004                               |   | $         | 976,117    |   |
| 2005                               |   | 2,265,682 |       |
| 2006                               |   | 2,264,407 |       |
| 2007                               |   | 2,267,668 |       |
| 2008                               |   | 2,271,083 |       |
| Thereafter                         |   | 8,474,301 |       |
|                               |   |      |       |
| Total                              |   | $         | 18,519,258 |   |

 

**NOTE 10 -  INCOME TAXES**

 

The Company is taxed as a limited liability company under the InternalRevenue Code.  The income of the companyflows through to the members to be taxed at the individual level rather thanthe corporate level.  Accordingly, theCompany will have no tax liability.

 

On June 20, 2002, the members approved a plan of reorganization toconvert the Cooperative’s structure from an exempt organization to a limitedliability company.  To the extent thatthe fair market value of the Cooperative’s net assets exceeded their adjustedtax basis, the Cooperative incurred a federal income tax liability.  The excess of the fair market value of theCooperative’s net assets over their adjusted tax basis was approximately$1,530,000. The Company’s effective tax rate is 34%. The State of South Dakotadoes not have a corporate income tax. This liability is estimated as follows:

 
| ** **                                     | ** ** | **2003** | ** **   | **2002** | ** ** | **2001** | ** ** |
|------------------------------------------------|------------|----------|--------------|----------|------------|----------|------------|
|                                           |       |     |         |     |       |     |       |
| Federal income  tax expense at statutory rates |       | **$**    | **(131,474** | **)**    | $          | 520,000  |       | $ | — |   |
|                                                |            |          |              |          |            |          |            |  |  |  |

 

A reconciliation of income tax at the statutory rate to the Company’seffective rate is as follows:

 
| ** **                                   | ** ** | **2002** | ** ** | **2001** | ** ** |
|----------------------------------------------|------------|----------|------------|----------|------------|
|                                         |       |     |       |     |       |
| Computed at the  expected statutory rate     |       | 34.0     | %          | 34.0     | %          |
| Patronage  exclusion (through June 30, 2002) |       | (34.0    | )%         | (34.0    | )%         |
|                                         |       |     |       |     |       |
| Income tax  expense - effective rate         |       | 0.0      | %          | 0.0      | %          |

 

The net book value of the Company’s assets exceeds the tax basis ofthose assets by approximately $7,450,000 at December 31, 2003.

 

(continued on next page)

 

F-16

----

 

**NOTE 11 -  EMPLOYEE BENEFIT PLANS**

 

The Company maintains a 401(k) plan for employees who meet theeligibility requirements set forth in the plan documents.  The Company matches a percentage of employees’contributed earnings.  The amountscharged to expense under this plan were approximately $63,000, $62,000, and$65,000 for the years ended December 31, 2003, 2002, and 2001, respectively.

 

The Company has a deferred compensation plan with key employees.  The agreements have benefits, which vestduring a three-year period.  The Companyshall make five equal annual installments upon retirement of theemployees.  The future payments have beendiscounted at 8%.  The amount recognizedas expense during the years ended December 31, 2003, 2002, and 2001 was$30,237, $21,064, and $34,000, respectively. The Company anticipates making payments of approximately $11,000 in2004.

 

**NOTE 12 -  OPERATING LEASES**

 

The Company leases 337 rail cars from GE Capital.  The lease requires monthly payments of$124,958.  The leases began in 1996 andhave eighteen-year terms.  The Companyalso leases 100 rail cars from Trinity Capital. The lease requires monthly payments of $38,300.  Lease expense was $1,903,367, $1,703,279, and$1,472,435 for the years ended December 31, 2003, 2002, and 2001,respectively.  The Company generatesrevenues from the use of 299 of these rail cars on other railroads.  Such revenues were $1,648,666, $1,448,409,and $1,427,645 for the years ended December 31, 2003, 2002, and 2001,respectively.

 

The Company has entered into a sub-lease agreement with the Dakota,Minnesota & Eastern Railroad Corporation (DME) for the hopper rail carsthat it leases from GE Capital.  TheCompany recognizes revenue from this sub-lease as the hopper rail cars are usedby the DME.  The sub-lease is for atwelve-month period and is renewed annually. The Company is responsible for all maintenance of the rail cars.

 

The Company also has a number of other operating leases for machineryand equipment. Rental expense under these other operating leases was $321,490,$628,306, and $354,224 for the years ended December 31, 2003, 2002, and 2001,respectively.

 

The following is a schedule of future minimum rental payments requiredunder these operating leases.

 
| ** **               | ** ** | **Rail Cars** | ** ** | **Other** | ** ** | **Total**  | ** ** |
|--------------------------|------------|---------------|------------|-----------|------------|------------|------------|
| Year ended  December 31: |       |          |       |      |       |       |       |
| 2004                     |       | $             | 1,959,096  |      | $          | 41,315     |       | $ | 2,000,411 |   |
| 2005                     |       | 1,959,096     |       | 41,315    |       | 2,000,411  |       |
| 2006                     |       | 1,911,846     |       | 30,616    |       | 1,942,462  |       |
| 2007                     |       | 1,704,596     |       | 4,644     |       | 1,709,240  |       |
| 2008                     |       | 1,436,496     |       | —    |       | 1,436,496  |       |
| Thereafter               |       | 10,842,774    |       | —    |       | 10,842,774 |       |
|                     |       |          |       |      |       |       |       |
| Totals                   |       | $             | 19,813,904 |      | $          | 117,890    |       | $ | 19,931,794 |   |

 

(continued on next page)

 

F-17

----

 

**NOTE 13 -  CASH FLOW INFORMATION**

 

The following is a schedule of changes in assets and liabilities usedto determine cash from operating activities:

 
| ** **                           | ** ** | **2003**       | ** **     | **2002**   | ** ** | **2001**   | ** ** |
|--------------------------------------|------------|----------------|----------------|------------|------------|------------|------------|
| (Increase)  decrease in assets:      |       |           |           |       |       |       |       |
| Trade accounts                       |       | **$**          | **(8,786,716** | **)**      | $          | (3,465,073 | )          | $ | (1,064,418 | ) |
| Inventories                          |       | **2,363,170**  | ** **     | (5,965,921 | )          | 718,574    |       |
| Margin account  deposit              |       | **1,114,848**  | ** **     | 187,654    |       | (573,983   | )          |
| Prepaids                             |       | **(33,442**    | **)**          | (223,820   | )          | (56,886    | )          |
|                                 |       | **(5,342,140** | **)**          | (9,467,160 | )          | (976,713   | )          |
|                                 |       | ** **     | ** **     |       |       |       |       |
| Increase  (decrease) in liabilities: |       | ** **     | ** **     |       |       |       |       |
| Accounts payable                     |       | **275,240**    | ** **     | 171,112    |       | (212,572   | )          |
| Accrued  commodity purchases         |       | **1,342,767**  | ** **     | 8,466,777  |       | 1,613,556  |       |
| Accrued expenses                     |       | **(198,126**   | **)**          | 277,226    |       | 120,930    |       |
| Deferred  compensation               |       | **30,237**     | ** **     | 21,064     |       | 34,000     |       |
|                                 |       | **1,450,118**  | ** **     | 8,936,179  |       | 1,555,914  |       |
|                                 |       | ** **     | ** **     |       |       |       |       |
| Total                                |       | **$**          | **(3,892,022** | **)**      | $          | (530,981   | )          | $ | 579,201 |   |
|                                      |            |                |                |            |            |            |            |  |  |  |  |  |  |  |  |  |  |  |

 

**NOTE 14 -  FAIR VALUE OF FINANCIAL INSTRUMENTS**

** **

Estimated fair values of the Company’s financial instruments (all ofwhich are held for non-trading purposes) are as follows:

 
| ** **                 | ** ** | **2003**             | ** **  | **2002**        | ** ** |
|----------------------------|------------|----------------------|-------------|-----------------|------------|
| ** **                 | ** ** | **Carrying  Amount** | ** **  | **Fair  Value** | ** ** | **Carrying  Amount** | ** ** | **Fair  Value** | ** ** |
|                       |       |                 |        |            |       |   |   |   |   |
| Cash and cash  equivalents |       | **$**                | **529,697** | ** **      | **$**      | **529,697** |   | $ | 11,170 |   | $ | 11,170 |   |
|                       |       | ** **           | ** **  | ** **      |       |   |   |   |   |
| Margin deposits            |       | **—**           | ** **  | **—**      |       | 927,339 |   | 927,339 |   |
|                       |       | ** **           | ** **  | ** **      |       |   |   |   |   |
| Long-term debt             |       | **18,519,258**       | ** **  | **18,370,381**  |       | 10,244,931 |   | 10,258,941 |   |
|                            |            |                      |             |                 |            |  |  |  |  |  |  |  |  |

 

The carrying amount approximates fair value of cash and margindeposits.  The fair value of long-termdebt is based on current rates at which the Company could borrow funds withsimilar remaining maturities.

 

The Company has a patronage investment in other cooperatives and commonstock in a privately held entity.  Thereis no market for their patronage credits or the entity’s common shares, and itwas impracticable to estimate fair value of the Company’s investment.  The investment is carried on the balancesheet at original cost.

 

(continued on next page)

 

F-18

----

 

**NOTE 15 -  COMMITMENTS**

 

During August 2000, the Company entered into an agreement withMinnesota Soybean Processors Cooperative (MnSP) for certain services and management of a proposed soybeanprocessing plant.  The agreement providesthe Company a fee of 10% of the equity raised by MnSP for the Company’sservices related to business planning and construction managementservices.  The Company has agreed toreinvest a minimum of 80% of the fees earned from MnSP in equity units ofMnSP.  Fees earned under this arrangementwere $1,245,205, $1,241,591 and $301,754 the years ended December 31, 2003,2002 and 2001, respectively.

 

In addition, the Company has agreed to provide management and marketingservices to MnSP on a cost-sharing basis. The agreement is for automatically renewing five-year periods beginningsixty days before the plant is scheduled to begin operations.  Operations of the MnSP plant began during2003, and the Company earned fees of $226,985 under this arrangement for theyear ended December 31, 2003.

 

In addition, the Company is making up to $1 million in interest freeloans backed by retained local earnings available for members of the Companywho invest in MnSP.  As of December 31,2003, the Company had made loans of $481,710. These will be repaid as the Board of Managers approves distributions ofprior earnings.

 

**NOTE 16 -  BUSINESS CREDIT RISK**

 

The Company maintains its cash balances with various financialinstitutions. At times during the year, the Company’s balances exceeded the$100,000 insurance limit of the Federal Deposit Insurance Corporation.

 

The Company also grants credit to customers throughout the UnitedStates and Canada.  The Company evaluateseach customer’s credit worthiness on a case-by-case basis.  Accounts receivable are generallyunsecured.  These receivables were$23,804,867 and $14,969,040 at December 31, 2003 and 2002, respectively.

 

Soybean meal sales accounted for approximately sixty-six percent oftotal revenues for the year ended December 31, 2003, sixty-six percent of totalrevenues for the year ended December 31, 2002, and sixty-eight percent for theyear ended December 31, 2001. Approximately thirty-seven percent, twenty-three percent, and twenty-onepercent of these sales were made to one customer for the years ended December31, 2003, 2002, and 2001, respectively. At December 31, 2003 and 2002, this customer owed the Companyapproximately $3,534,000 and $1,370,000, respectively.  Soybean oil sales represented approximatelynine percent of total revenues for the year ended December 31, 2003, twentypercent of sales for the years ended December 31, 2002, and twenty percent ofsales for the years ended December 31, 2001. Approximately forty-six percent ofthese sales were made to one customer for the years ended December 31, 2003.These sales were primarily to one customer in 2002 and prior. This customerowed the Company approximately $352,000 and $121,000 at December 31, 2003 and2002, respectively.  Refined oil salesrepresented approximately thirty percent of total revenues for the year endedDecember 31, 2003, and eleven percent of total revenues for the year endedDecember 31, 2002.  These sales were primarilyto one customer. This customer owed the Company approximately $6,516,000 and$4,591,000 at December 31, 2003 and 2002.

 

Sales by geographic area for these years ended December 31, 2003, 2002and 2001 are as follows:

 
| ** **    | ** ** | **2003**       | ** **      | **2002**   | ** **  | **2001**    | ** ** |
|---------------|------------|----------------|-----------------|------------|-------------|-------------|------------|
|          |       |           |            |       |        |        |       |
| United States |       | **$**          | **189,556,575** |       | 140,597,284 |        | $          | 130,558,146 |   |
| Canada        |       | **17,700,000** |            | 18,900,000 |        | 17,700,000  |       |
|          |       | ** **     |            |       |        |        |       |
|          |       | **$**          | **207,256,575** |       | $           | 159,497,284 |       | $ | 148,258,146 |   |
|               |            |                |                 |            |             |             |            |  |  |  |

 

(continued on next page)

 

F-19

----

 

**NOTE 17 -  SEGMENT REPORTING**

 

The Company organizes its business units into three reportablesegments: soybean-processing, crude oil refining, and polyurethane.  Separate management of each segment isrequired because each segment is subject to different marketing, production,and technology strategies.  Thesoybean-processing segment purchases soybeans and further processes them intoprimarily three products: soybean meal, crude soybean oil, and soybean hulls.  The oil-refining segment further refines thecrude soybean oil for sale in commercial applications.  The polyurethane segment processes oil into abio-based polyurethane product that is used in foam applications.  The segments’ accounting policies are thesame as those described in the summary of significant accounting polices.  Market prices are used to report intersegmentsales.  All items not related to one ofthe three segments are included in the column titled “Other.”

 

Segment information for the years ended December 31, 2003 and 2002 areas follows:

 
| ** **                              | ** ** | **Soybean  Processing** | ** **  | **Oil  Refining** | ** ** | **Polyurethane** | ** ** | **Other** | ** ** | **Total**  | ** ** |
|-----------------------------------------|------------|-------------------------|-------------|-------------------|------------|------------------|------------|-----------|------------|------------|------------|
| FOR THE YEAR  ENDED  DECEMBER 31, 2003: |       |                    |        |              |       |             |       |      |       |       |       |
|                                    |       |                    |        |              |       |             |       |      |       |       |       |
| Sales to  external customers            |       | $                       | 144,437,434 |              | $          | 62,500,006       |       | $         | 319,135    |       | $          | — |   | $ | 207,256,575 |   |
| Interest expense                        |       | 279,638                 |        | 317,853           |       | 204,687          |       | —    |       | 802,178    |       |
| Depreciation and  amortization          |       | 2,577,739               |        | 357,605           |       | 77,071           |       | —    |       | 3,012,415  |       |
| Income tax  benefit                     |       | 131,474                 |        | —            |       | —           |       | —    |       | 131,474    |       |
| Segment profit  (loss)                  |       | 3,597,665               |        | 183,411           |       | (1,088,940       | )          | 702,688   |       | 3,394,824  |       |
| Minority  interest                      |       | —                  |        | —            |       | 457,620          |       | —    |       | 457,620    |       |
|                                    |       |                    |        |              |       |             |       |      |       |       |       |
| Segment assets                          |       | 59,004,036              |        | 11,044,928        |       | 8,763,829        |       | 2,804,271 |       | 81,617,064 |       |
|                                    |       |                    |        |              |       |             |       |      |       |       |       |
| Expenditures for  segment assets        |       | 896,881                 |        | —            |       | 119,968          |       | —    |       | 1,016,849  |       |
|                                    |       |                    |        |              |       |             |       |      |       |       |       |
| FOR THE YEAR  ENDED  DECEMBER 31, 2002: |       |                    |        |              |       |             |       |      |       |       |       |
|                                    |       |                    |        |              |       |             |       |      |       |       |       |
| Sales to  external customers            |       | $                       | 141,942,209 |              | $          | 17,383,370       |       | $         | 163,066    |       | $          | — |   | $ | 159,488,645 |   |
| Interest expense                        |       | 398,533                 |        | 135,192           |       | 8,495            |       | —    |       | 542,220    |       |
| Depreciation and  amortization          |       | 2,593,432               |        | 118,688           |       | 39,027           |       | —    |       | 2,751,147  |       |
| Income tax  expense                     |       | 520,000                 |        | —            |       | —           |       | —    |       | 520,000    |       |
| Segment profit  (loss)                  |       | 6,237,559               |        | (381,815          | )          | (236,412         | )          | 993,394   |       | 6,612,726  |       |
| Minority  interest                      |       | —                  |        | —            |       | —           |       | —    |       | —     |       |
|                                    |       |                    |        |              |       |             |       |      |       |       |       |
| Segment assets                          |       | 58,604,024              |        | 7,847,047         |       | 1,471,945        |       | 2,361,881 |       | 70,284,897 |       |
|                                    |       |                    |        |              |       |             |       |      |       |       |       |
| Expenditures for  segment assets        |       | 1,135,688               |        | 3,509,332         |       | —           |       | —    |       | 4,645,020  |       |

 

(continued on next page)

 

F-20

----

 

**NOTE 18 -  LEGAL PROCEEDINGS**

 

From time-to-time in the ordinary course of the Company’s business, theCompany may be named as a defendant in legal proceedings related to variousissues, including without limitation, workers’ compensation claims, tortclaims, or contractual disputes.  TheCompany carries insurance that provides protection against general commercialliability claims, claims against directors, officers and employees, businessinterruption, automobile liability, and workers’ compensation claims.

 

OnJanuary 28, 2003, the Company was served with notice that it had beennamed as a defendant in a breach of contract suit in the circuit court of CookCounty, Illinois, along with a number of other individual defendants, includingthe Company’s Chief Executive Officer, Rodney Christianson. Theplaintiff, James Jackson, was an employee of USSC whose services wereterminated shortly after the Company became the majority owner in early January 2003.Mr. Jackson claimed that he was wrongfully terminated and that the defendantsunjustly interfered with his employment contract and committed fraud inconnection with theCompany’sacquisition of a controlling interest in USSC. On April 24, 2005 the Company reacheda mediated settlement that will include a payment of $300,000 to Mr. Jackson,of which USSC paid $60,000 and the insurance carrier assumed the remainder ofthe obligation.

 

In a related suit, USSC hasreached a mediated settlement with Thomas Kurth, former President of USSC, inwhich Mr. Kurth will transfer his USSC shares and his interest in adevelopmental product company to USSC for no compensation. As a result of theforegoing, the Company has increased its proportionate share in USSC stock to65.7%.

 

**NOTE 19 -STOCK OFFERING**

 

The Board of Managers approved a registration statement that was filedwith the Securities and Exchange Commission on February 14, 2005 for the saleof additional capital units in a public offering.  Themaximum offering proceeds under the registration statement will be $11,250,000.  As ofSeptember 30, 2005 the Company had sold 2,347,500 capital units for a total of $4,888,250.

 

#    #   #    #    #   #

 

 

F-21

----

 

## REPORT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON SCHEDULE

 

 

The Boardof Managers

SouthDakota Soybean Processors, LLC

Volga,South Dakota

 

 

Under thedate of September 30, 2005, we reported on the consolidated balance sheet ofSouth Dakota Soybean Processors, LLC as of December 31, 2003, and the relatedconsolidated statements of operations, members’ equity and cash flows for the year thenended.  In connection with our audit of the aforementioned consolidatedfinancial statements, we also have audited the related financial statementschedule listed in the accompanying index.  The financial statementschedule is the responsibility of the Company’s management.  Our responsibility is to expressan opinion on the financial statement schedule based on our audit.

 

In ouropinion, such financial statement schedule, when considered in relation to thebasic consolidated financial statements taken as a whole, presents fairly, inall material respects, the information set forth therein.

 
|   |   | */s/ Gordon, Hughes  & Banks, LLP* |
|--------|--------|----------------------------------------|

***Gordon, Hughes & Banks,LLP***

 

Greenwood Village, Colorado

September 30, 2005

 

 

F-22

----

 

# **INDEPENDENTAUDITOR'S REPORT**

 

 

The Board of Managers

South Dakota Soybean Processors, LLC

Volga, South Dakota

 

 

Under the date of January 23, 2003, we reported onthe balancesheet of SouthDakota Soybean Processors, LLC as of December 31, 2002,and the related statementsof operations, members’ equityand cash flows for each of the years in the two-year period ended December 31,2002, as contained herein.  In connection with our audits of theaforementioned financialstatements, we also have audited the related financial statement schedule listed in the accompanyingindex.  The financial statement scheduleis the responsibility of the Company’s management.  Our responsibility is to express an opinionon the financial statements schedulebased on our audits.

 

In our opinion, such financial statement schedule, when considered inrelation to the basic financialstatements taken as a whole, presents fairly, in all material respects, theinformation set forth therein.

 

 
| /s/ Eide Bailly LLP       |   |   |
|---------------------------|--------|--------|
|                      |   |
|                      |   |
| Sioux Falls, South Dakota |   |
| January  23, 2003         |   |

 

F-23

----

 

Indexto Financial Statements

 

**SOUTH DAKOTA SOYBEAN PROCESSORS, LLC**

 
| **Description**                  | ** ** | **Balance at  Beginning of  Period** | ** ** | **Charged  (Credited) to  Costs and  Expenses** | ** ** | **Deductions** | ** ** | **Balance at  End of  Period** | ** ** |
|----------------------------------|------------|--------------------------------------|------------|-------------------------------------------------|------------|----------------|------------|--------------------------------|------------|
| ** **                       | ** ** | ** **                           | ** ** | **Additions**                                   | ** ** | ** **     | ** ** | ** **                     | ** ** |
| **COL. A**                       | ** ** | **COL. B**                           | ** ** | **COL. C**                                      | ** ** | **COL. D**     | ** ** | **COL. E**                     | ** ** |
|                             |       |                                 |       |                                            |       |           |       |                           |       |
| Deducted from asset accounts:    |       |                                 |       |                                            |       |           |       |                           |       |
| Year ended December 31, 2001:    |       |                                 |       |                                            |       |           |       |                           |       |
| Allowance for doubtful accounts  |       | $                                    | 168,871    |                                            | 60,000     |           | 2,358      |                           | $          | 226,513 |   |
|                             |       |                                 |       |                                            |       |           |       |                           |       |
| Deducted from asset accounts:    |       |                                 |       |                                            |       |           |       |                           |       |
| Year ended December 31, 2002:    |       |                                 |       |                                            |       |           |       |                           |       |
| Allowance for doubtful accounts  |       | $                                    | 226,513    |                                            | 60,000     |           | 13,182     |                           | $          | 273,331 |   |
|                             |       |                                 |       |                                            |       |           |       |                           |       |
| Deducted from asset accounts:    |       |                                 |       |                                            |       |           |       |                           |       |
| Year ended December 31, 2003:    |       |                                 |       |                                            |       |           |       |                           |       |
| Allowance for doubtful  accounts |       | $                                    | 273,331    |                                            | —     |           | (547       | )                              | $          | 273,878 |   |

 

F-24

----