DYNAMIC FUELS, LLC
(A Development Stage Company)
 FINANCIAL STATEMENTS
 SEPTEMBER 30, 2009 and 2008
 WITH
 INDEPENDENT AUDITORS REPORT




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CONTENTS
 Independent Auditors Report
    
    
    1Balance Sheets
    
    
    2Statements of Operations
    
    
    3Statements of Members Equity
    
    
    4Statements of Cash Flows
    
    
    5Notes to Financial Statements
    
    
    6




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      1




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DYNAMIC FUELS, LLC
(A Development Stage Company)
 BALANCE SHEETS
 September 30, 2009 and 2008
 2009
    
    
    2008AssetsCurrent assets:Cash
    
    $
    32,321,714
    
    
    $
    25,489,560Restricted cash
    
    
    42,775,005
    
    
    
    Accounts receivable
    
    
    
    
    
    
    16,523Prepaid expenses and other current assets
    
    
    1,916,918
    
    
    
    3,668,115Total current assets
    
    
    77,013,637
    
    
    
    29,174,198Property, plant and equipment, net
    
    
    76,432,295
    
    
    
    6,954,612Other
    
    
    1,192,133
    
    
    
    274,240Total assets
    
    $
    154,638,065
    
    
    $
    36,403,050Liabilities and Members EquityCurrent liabilities:Accounts payable and accrued liabilities
    
    $
    13,020,431
    
    
    $
    1,130,446Due to related parties
    
    
    2,946,556
    
    
    
    300,892Total current liabilities
    
    
    15,966,987
    
    
    
    1,431,338Asset retirement obligation
    
    
    16,434
    
    
    
    Notes payable
    
    
    100,000,000
    
    
    
    Total liabilities
    
    
    115,983,421
    
    
    
    1,431,338Commitments and contingenciesMembers equity:Syntroleum Corporation capital contributions
    
    
    24,250,000
    
    
    
    18,250,000Tyson Foods, Inc. capital contributions
    
    
    24,250,000
    
    
    
    18,250,000Deficit accumulated during the development stage
    
    
    (9,845,356
    )
    
    
    (1,528,288
    )Total members equity
    
    
    38,654,644
    
    
    
    34,971,712Total liabilities and members equity
    
    $
    154,638,065
    
    
    $
    36,403,050
   2




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DYNAMIC FUELS, LLC
(A Development Stage Company)
 STATEMENTS OF OPERATIONS
 Period fromJune 22, 2007,Date ofYear ended
    
    
    Year ended
    
    
    Inception, toSeptember 30,
    
    
    September 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009Expenses:General and administrative
    
    $
    5,203,280
    
    
    $
    1,470,059
    
    
    $
    6,985,442Depreciation and amortization
    
    
    57,426
    
    
    
    431
    
    
    
    57,857Total expenses
    
    
    5,260,706
    
    
    
    1,470,490
    
    
    
    7,043,299Loss from operations
    
    
    (5,260,706
    )
    
    
    (1,470,490
    )
    
    
    (7,043,299
    )Interest income
    
    
    604,415
    
    
    
    176,936
    
    
    
    858,720Interest rate swap valuation adjustment
    
    
    (3,678,664
    )
    
    
    
    
    
    
    (3,678,664
    )Other income (expense)
    
    
    17,887
    
    
    
    
    
    
    
    17,887Net loss
    
    $
    (8,317,068
    )
    
    $
    (1,293,554
    )
    
    $
    (9,845,356
    )Allocation of net loss to members:Syntroleum Corporation
    
    $
    (4,158,534
    )
    
    $
    (646,777
    )
    
    $
    (4,922,678
    )Tyson Foods, Inc.
    
    
    (4,158,534
    )
    
    
    (646,777
    )
    
    
    (4,922,678
    )$
    (8,317,068
    )
    
    $
    (1,293,554
    )
    
    $
    (9,845,356
    )
   3




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DYNAMIC FUELS, LLC
(A Development Stage Company)
 STATEMENTS OF MEMBERS EQUITY
 Period June 22, 2007 (Date of Inception) to September 30, 2009
 DeficitAccumulatedCapital Contributions
    
    
    During theSyntroleum
    
    
    Tyson
    
    
    DevelopmentCorporation
    
    
    Foods, Inc.
    
    
    Stage
    
    
    TotalBalance, June 22, 2007
(date of inception)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Cash contributions
    
    
    4,250,000
    
    
    
    4,250,000
    
    
    
    
    
    
    
    8,500,000Net loss
    
    
    
    
    
    
    
    
    
    
    (234,734
    )
    
    
    (234,734
    )Balance, September 30, 2007
    
    
    4,250,000
    
    
    
    4,250,000
    
    
    
    (234,734
    )
    
    
    8,265,266Cash contributions
    
    
    14,000,000
    
    
    
    14,000,000
    
    
    
    
    
    
    
    28,000,000Net loss
    
    
    
    
    
    
    
    
    
    
    (1,293,554
    )
    
    
    (1,293,554
    )Balance, September 30, 2008
    
    
    18,250,000
    
    
    
    18,250,000
    
    
    
    (1,528,288
    )
    
    
    34,971,712Cash contributions
    
    
    6,000,000
    
    
    
    6,000,000
    
    
    
    
    
    
    
    12,000,000Net loss
    
    
    
    
    
    
    
    
    
    
    (8,317,068
    )
    
    
    (8,317,068
    )Balance, September 30, 2009
    
    $
    24,250,000
    
    
    $
    24,250,000
    
    
    $
    (9,845,356
    )
    
    $
    38,654,644
   4




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DYNAMIC FUELS, LLC
(A Development Stage Company)
 STATEMENTS OF CASH FLOWS
 Period fromJune 22, 2007,Date ofYear ended
    
    
    Year ended
    
    
    Inception, toSeptember 30,
    
    
    September 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009Cash Flows from Operating ActivitiesNet loss
    
    $
    (8,317,068
    )
    
    $
    (1,293,554
    )
    
    $
    (9,845,356
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation and amortization
    
    
    57,426
    
    
    
    431
    
    
    
    57,857Mark-to-market interest rate swap in excess
of cash collateral
    
    
    2,088,663
    
    
    
    
    
    
    
    2,088,663Changes in:Accounts receivable
    
    
    16,523
    
    
    
    (16,523
    )
    
    
    Prepaid expenses and other
    
    
    (367,319
    )
    
    
    (3,942,355
    )
    
    
    (4,309,674
    )Accounts payable and accrued liabilities
    
    
    427,790
    
    
    
    17,709
    
    
    
    1,558,236Due to related parties
    
    
    557,001
    
    
    
    (90,338
    )
    
    
    857,893Asset retirement obligation
    
    
    16,434
    
    
    
    
    
    
    
    16,434Net cash used in operating activities
    
    
    (5,520,550
    )
    
    
    (5,324,630
    )
    
    
    (9,575,947
    )Cash Flows from Investing ActivitiesPayments for the purchase of property, plant and
equipment
    
    
    (56,530,791
    )
    
    
    (5,447,302
    )
    
    
    (63,485,834
    )Change in restricted cash
    
    
    (42,775,005
    )
    
    
    
    
    
    
    (42,775,005
    )Net cash used in investing activities
    
    
    (99,305,796
    )
    
    
    (5,447,302
    )
    
    
    (106,260,839
    )Cash Flows from Financing ActivitiesProceeds from sale of tax-exempt bonds
    
    
    100,000,000
    
    
    
    
    
    
    
    100,000,000Proceeds from capital contributions
    
    
    12,000,000
    
    
    
    28,000,000
    
    
    
    48,500,000Debt issuance costs
    
    
    (341,500
    )
    
    
    
    
    
    
    (341,500
    )Net cash provided by financing activities
    
    
    111,658,500
    
    
    
    28,000,000
    
    
    
    148,158,500Net change in cash
    
    
    6,832,154
    
    
    
    17,228,068
    
    
    
    32,321,714Cash, beginning of year
    
    
    25,489,560
    
    
    
    8,261,492
    
    
    
    Cash, end of year
    
    $
    32,321,714
    
    
    $
    25,489,560
    
    
    $
    32,321,714
   5




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DYNAMIC FUELS, LLC
(A Development Stage Company)
 NOTES TO FINANCIAL STATEMENTS
 September 30, 2009 and 2008
 Note 1  Summary of Significant Accounting Policies
 Nature of operations
   Cash
  Restricted cash
  Property, plant and equipment
   6




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Interest
  Other assets
  Asset retirement obligations
  Income taxes
   Use of estimates
  Fair value of financial instruments
   7




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Subsequent events
  Note 2  Related Party Transactions
  Note 3  Property, Plant and Equipment
  2009
    
    
    2008Plant construction in progress
    
    $
    76,038,984
    
    
    $
    6,941,781Computer hardware and software
    
    
    314,237
    
    
    
    Furniture and automobile
    
    
    87,259
    
    
    
    13,26276,440,480
    
    
    
    6,955,043Accumulated depreciation
    
    
    8,185
    
    
    
    431Property, plant and equipment, net
    
    $
    76,432,295
    
    
    $
    6,954,612
  Note 4  Notes Payable
   8




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Note 5  Commitments and Contingencies
    Note 6  Members Equity
   Note 7  Derivative Financial Instruments
    9




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Note 8  Fair Value Measurements
  Level 1 
    
    Unadjusted quoted prices available in active markets for the identical assets or
liabilities at the measurement date.Level 2 
    
    Other significant observable inputs available at the measurement date, including quoted
prices for similar securities.Level 3 
    
    Unobservable inputs that cannot be corroborated by observable market data and reflect
the use of significant management judgment. These values are generally determined using
pricing models for which the assumptions utilize managements estimates of market participant
assumptions.
     10




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September 30,Valuation inputs
    
    2009Level 1  Quoted prices
    
    $
    Level 2  Other significant observable inputs
    
    
    2,089,000Level 3  Significant unobservable inputs
    
    
    Total
    
    $
    2,089,000
  11