SOUTH DAKOTA SOYBEAN PROCESSORS LLC

Item 1. Financial Statements

Condensed Consolidated Financial Statements

June 30, 2024 and 2023

Condensed Consolidated Balance Sheets

(continued on the following page)

Condensed Consolidated Balance Sheets (continued)

Condensed Consolidated Statements of Operations (Unaudited)

For the Three and Six-Month Periods Ended June 30, 2024 and 2023

Condensed Consolidated Statements of Changes in Members' Equity (Unaudited)

For the Six Months Ended June 30, 2024 and 2023

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the Six Months Ended June 30, 2024 and 2023

Note 1 -Principal Activity and Significant Accounting Policies

The unaudited condensed consolidated financial statements contained herein have been prepared pursuant to the rules and regulations of the Securities Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although South Dakota Soybean Processors, LLC (the “Company”, “LLC”, “we”, “our”, or “us”) believes that the disclosures made are adequate to make the information not misleading.

In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included in the accompanying condensed consolidated financial statements. The results of operations and cash flows for interim periods are not necessarily indicative of results for a full year due in part to the seasonal nature of some of the Company’s businesses. The balance sheet data as of December 31, 2023 has been derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.

These statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2023, included in the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 22, 2024.

Principles of consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its controlled subsidiaries, High Plains Partners, LLC, HPP SD Holdings, LLC, and High Plains Processing, LLC, after elimination of all material intercompany accounts, transactions, and profits.

Use of estimates

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

Revenue

The Company accounts for all its revenues from contracts with customers under ASC 606, Revenue from Contracts with Customers.

The Company principally generates revenue from merchandising and transporting manufactured agricultural products used as ingredients in food, feed, energy, and industrial products. Revenue is measured based on the consideration specified in the contract with a customer and excludes any amounts collected on behalf of third parties (e.g. - taxes). The Company follows a policy of recognizing revenue at a single point in time when it satisfies its performance obligation by transferring control over a product to a customer. Control transfer typically occurs when goods are shipped from our facilities or at other predetermined control transfer points (for instance, destination terms). Shipping and handling costs related to contracts with customers for the sale of goods are accounted for as a fulfillment activity and are included in the cost of revenues. Accordingly, amounts billed to customers for such costs are included as a component of revenues.

Payments received in advance to the transfer of goods, or "contract liabilities", are included in "Deferred liabilities - current" on the Company's condensed consolidated balance sheets. These customer prepayments totaled $998,467 and $737,503 as of June 30, 2024 and December 31, 2023, respectively. Of the $737,503 balance as of December 31, 2023, the Company recognized $133,935 and $486,290 as revenues for the three and six months ended June 30, 2024, respectively. Of the $1,074,059 customer prepayments as of December 31, 2022, the Company recognized $104,792 and $828,245 of contract liabilities as revenues during the three and six months ended June 30, 2023, respectively.

The following table presents a disaggregation of revenue from contracts with customers for the three and six-month periods ended June 30, 2024 and 2023, by product type:

Recent accounting pronouncements

Any recent accounting pronouncements are not expected to have a material impact on our condensed financial statements.

Note 2 -Accounts Receivable

Accounts receivable are considered past due when payments are not received on a timely basis in accordance with the Company’s credit terms, which are generally 30 days from invoice date. Accounts considered uncollectible are written off. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering customers' financial condition, credit history, current and future economic conditions, and unusual circumstances, if any.

The following table presents the aging analysis of trade receivables as of June 30, 2024 and December 31, 2023:

The following table provides information regarding the Company's allowance for credit losses as of June 30, 2024 and December 31, 2023:

In general, cash received is applied to the oldest outstanding invoice first, unless payment is for a specified invoice. The Company, on a case-by-case basis, may charge a late fee of 1.5% per month on past-due receivables.

Note 3 -Inventories

The Company’s inventories consist of the following on June 30, 2024 and December 31, 2023:

Finished goods and raw materials are valued at estimated market value, which approximates net realizable value. Supplies and other inventories are stated at the lower of cost or net realizable value.

Note 4 -Investments in Related Parties

The Company’s investments in related parties consist of the following on June 30, 2024 and December 31, 2023:

The Company measures its investments in Prairie AquaTech, LLC, Prairie AquaTech Investments, LLC, Prairie AquaTech Manufacturing, LLC and High Plains Partners, LLC at their cost less any impairment plus or minus any observable price changes in orderly transactions since these equity investments do not have readily determinable fair values.

The Company invested $1,436,420 and $1,436,420 of soybean meal in Prairie AquaTech Manufacturing, LLC for the six months ended June 30, 2024 and 2023, respectively, to be used in the entity's operations.

In February 2022, the Company announced its plans to construct a multi-seed processing plant near Mitchell, South Dakota. In September 2022, the Company entered into a capital contribution and commitment agreement with High Plains Partners, LLC. Per the agreement, the Company transferred to High Plains Partners, LLC all rights, title and interest to all of the tangible and intangible development rights, including engineering, permitting, studies, records, etc., totaling $5.0 million in value in exchange for 2,615 Class B units in High Plains Partners, LLC. The Company also committed to investing up to another $81.4 million for 19,454 Class B capital units in the entity. As of June 30, 2024, the Company had contributed $86.4 million towards the project.

Effective September 30, 2023, the Company began consolidating the accounts of High Plains Processing, LLC, HPP SD Holdings, LLC, and High Plains Partners, LLC, formerly unconsolidated entities, into its financial statements . The Company and other regional investors committed to investing a total of $192.0 million into High Plains Partners. In September 2023, High Plains Partners created a joint venture with another partner to create High Plains Processing, LLC, to build a new multi-seed crush facility near Mitchell, South Dakota. Construction of the facility is estimated to be completed in late 2025. The consolidation is due to the Company's entering into a management agreement with the new processing facility along with its ability to appoint a majority of the board members of each entity. The financial data for previous periods has not been restated to reflect the consolidation of the three entities. The consolidation is not material to the financial position or results of operations for the periods presented and had no effect on previously reported net income. As of June 30, 2024, High Plains Partners, HPP SD Holdings, and High Plains Processing, LLC received a total of $155.6 million in proceeds from the issuance from capital units.

Note 5 -Property and Equipment

The following is a summary of the Company's property and equipment at June 30, 2024 and December 31, 2023:

Depreciation of property and equipment was $1,519,233 and $1,437,218 for the three months ended June 30, 2024 and 2023, respectively, and $3,023,367 and $2,851,294 for the six months ended June 30, 2024 and 2023, respectively.

Note 6 -Note Payable – Seasonal Loan

The Company has entered into a revolving credit agreement with CoBank which expires on October 1, 2024. The purpose of the credit agreement is to finance the operating needs of the Company. Under this agreement, the Company could borrow up to $85 million, and advances on the revolving credit agreement are secured. Interest accrues at a variable rate (7.56% as of June 30, 2024). The Company pays a 0.20% annual commitment fee on any funds not borrowed. There were advances outstanding of $32,365,300 and $0 as of June 30, 2024 and December 31, 2023, respectively. The remaining available funds to borrow under the terms of the revolving credit agreement were $52.6 million as of June 30, 2024.

Note 7 -Long-Term Debt

The following is a summary of the Company's long-term debt on June 30, 2024 and December 31, 2023:

The Company entered into an agreement as of September 20, 2023, with CoBank to amend and restate its Credit Agreement, which includes the revolving term loan, note payable, and seasonal loan. Under the terms and conditions of the Credit Agreement, CoBank agreed to make advances to the Company for up to $12 million on the revolving term loan with a variable effective interest rate of 7.86%. The amount available for borrowing on the revolving term loan will decrease by $600,000 everysix months until the loan's maturity date of March 20,

2028. The Company pays a 0.40% annual commitment fee on any funds not borrowed. The debt issuance costs of $24,000 paid by the Company were amortized over the term of the loan. The principal balance outstanding on the revolving term loan was $10.8 million and $0 as of June 30, 2024 and December 31, 2023, respectively. There wereno remaining commitments available to borrow on the revolving term loan as of June 30, 2024.

On September 20, 2023, the Company entered into note payable to CoBank to borrow up to $90.0 million until October 1, 2024, the proceeds of which are to be used to finance the Company's investment in High Plains Partners, LLC. The Company will make semi-annual payments of $4.5 million beginning October 20, 2024 until the note's maturity on March 20, 2028. The principal balance outstanding on the note payable was $45.0 million and $0 as of June 30, 2024 and December 31, 2023, respectively. There was $45.0 million available to borrow on the note payable as of June 30, 2024.

Under this agreement, the Company is subject to compliance with standard financial covenants and the maintenance of certain financial ratios. The Company was in compliance with all covenants and conditions with CoBank as of June 30, 2024.

The following are minimum principal payments on long-term debt obligations for the twelve-month periods ending June 30:

Note 8 -Operating Leases

The Company has several operating leases for railcars. These leases have terms ranging from 3-12 years and most do not have renewal terms provided. The leases require the Company to maintain the condition of the railcars, restrict the use of the railcars to specified products, such as soybean meal, hulls or oil, limit usage to the continental United States, Canada or Mexico, require approval to sublease to other entities and require the Company's submission of its financial statements. Lease expense for all railcars was $1,257,629 and $1,151,009 for the three months ended June 30, 2024 and 2023, respectively, and $2,329,352 and $2,031,160 for the six months ended June 30, 2024 and 2023, respectively.

The following is a schedule of the Company's operating leases for railcars as of June 30, 2024:

The Company also has a number of other operating leases for machinery and equipment. These leases have terms ranging from 3-7 years; however, most of these leases have automatic renewal terms. These leases require monthly payments of $5,336. Lease expense under these other operating leases was $17,565 and $12,969 for the three months ended June 30, 2024 and 2023, respectively, and $28,837 and $24,188 for the six-month periods ended June 30, 2024 and 2023, respectively.

On March 19, 2020, the Company entered into an agreement with an entity in the western United States to provide storage and handling services for the Company's soybean meal. The Company paid the entity $3,300,000 after the entity's construction of additional storage and handling facilities. The agreement began on May 1, 2021 and will mature on April 30, 2027 but includes an additional seven-year renewal period at the sole discretion of the Company. Lease expense under this agreement was $58,928 for each of the three-month periods ended June 30, 2024 and 2023, and $117,857 for each of the six-month periods ended June 30, 2024 and 2023, respectively.

Operating leases are included in right-to-use lease assets, current operating lease liabilities, and long-term lease liabilities on the Company's condensed consolidated balance sheets. These assets and liabilities are recognized at the commencement date based on the present value of remaining lease payments over the lease term using the Company's secured incremental borrowing rates or implicit rates, when readily determinable. Short-term operating leases, which have an initial term of 12 months or less, are not recorded on the condensed consolidated balance sheet.

Lease expense for these operating leases is recognized on a straight-line basis over the lease terms. The components of lease costs recognized within our condensed consolidated statements of operations for the three and six-month periods ended June 30, 2024 and 2023 were as follows:

The following summarizes the supplemental cash flow information for the three and six-month periods ended June 30, 2024 and 2023:

The following summarizes the weighted-average remaining lease term and weighted-average discount rate as of June 30, 2024:

The following is a maturity analysis of the undiscounted cash flows of the operating lease liabilities as of June 30, 2024:

Note 9 -Member Distribution

On January 30, 2024, the Company’s Board of Managers approved a cash distribution of approximately $39.5 million, or $1.30 per capital unit. The distribution was paid in accordance with the Company’s operating agreement and distribution policy on February 1, 2024.

Note 10 -Derivative Instruments and Hedging Activities

In the ordinary course of business, the Company enters into contractual arrangements as a means of managing exposure to changes in commodity prices and, occasionally, foreign exchange and interest rates. The Company’s derivative instruments primarily consist of commodity futures, options and forward contracts, and interest rate swaps, caps and floors. Although these contracts may be effective economic hedges of specified risks, they are not designated as, nor accounted for, hedging instruments. These contracts are recorded on the Company’s condensed consolidated balance sheets at fair value as discussed in Note 11, Fair Value.

As of June 30, 2024 and December 31, 2023, the net value of the Company’s open futures, options and forward contracts was $1,589,954 and $4,394,994, respectively.

During the three and six-month periods ended June 30, 2024 and 2023, net realized and unrealized gains (losses) on derivative transactions were recognized in the condensed consolidated statements of operations as follows:

The Company recorded gains (losses) in cost of goods sold related to its commodity derivative instruments of $(2,492,054) and $(3,687,043) for the three months ended June 30, 2024 and 2023, respectively, and $(995,622) and $10,796,570 for the six-month periods ended June 30, 2024 and 2023, respectively.

Note 11 -Fair Value

ASC 820, Fair Value Measurements and Disclosures, defines fair value, establishes a comprehensive framework for measuring fair value and expands disclosures that are required about fair value measurements. Specifically, this guidance establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. The three levels of hierarchy and examples are as follows:

•Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed on the New York Stock Exchange and commodity derivative contracts listed on the Chicago Board of Trade (“CBOT”).

•Level 2 – Pricing inputs are other than quoted prices in active markets but are either directly or indirectly observable as of the reported date. The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts or priced with models using highly observable inputs, such as commodity prices using forward future prices.

•Level 3 – Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial transmission rights.

The following tables set forth financial assets and liabilities measured at fair value in the condensed balance sheets and the respective levels to which fair value measurements are classified within the fair value hierarchy as of June 30, 2024 and December 31, 2023:

The Company enters into various commodity derivative instruments, including futures, options, swaps and other agreements. The fair value of the Company’s commodity derivatives is determined using unadjusted quoted prices for identical instruments on the CBOT. The Company estimates the fair market value of their finished goods and raw materials inventories using the market price quotations of similar forward futures contracts listed on the CBOT and adjusts for the local market adjustments derived from other grain terminals in our area.

The Company considers the carrying amount of significant classes of financial instruments on the condensed consolidated balance sheets, including cash, accounts receivable, and accounts payable, to be reasonable estimates of fair value due to their length or maturity. The fair value of the Company’s long-term debt approximates the carrying value. The interest rates on the long-term debt are similar to rates the Company would be able to obtain currently in the market.

The Company has patronage investments in other cooperatives and common and preferred stock holdings in privately held entities. There is no market for their patronage credits or the entity’s common and preferred holdings, and it is impracticable to estimate the fair value of the Company’s investments. These investments are carried on the balance sheet at the original cost plus the amount of patronage earnings allocated to the Company, less any cash distributions received.

Note 12 -Related Party Transactions

The Company has equity investments in Prairie AquaTech, LLC, Prairie AquaTech Manufacturing, LLC and Prairie AquaTech Investments, LLC. The Company sold soybean products to Prairie AquaTech, LLC and Prairie AquaTech Manufacturing, LLC totaling $3,415,179 and $2,285,001 for the three months ended June 30, 2024 and 2023, respectively, and $7,437,115 and $5,232,867 during the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024 and December 31, 2023, Prairie AquaTech, LLC and Prairie AquaTech Manufacturing, LLC owed the Company $776,699 and $1,216,699, respectively.

Note 13 - Commitments and Contingencies

The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to certain limits. At June 30, 2024 and December 31, 2023, the Company had approximately $118.5 million and $34.1 million, respectively, in excess of FDIC insured limits. The Company has not experienced any losses in such accounts.

As of June 30, 2024, the Company had unpaid commitments of approximately $242.3 million for construction and acquisition of property and equipment, all of which are expected to be incurred by June 30, 2025.

From time to time in the ordinary course of our business, the Company may be named as a defendant in legal proceedings related to various issues, including without limitation, workers’ compensation claims, tort claims, or contractual disputes. The Company carries insurance that provides protection against general commercial liability claims, claims against our directors, officers and employees, business interruption, automobile liability, and workers' compensation. The Company is not currently involved in any material legal proceedings and is not aware of any potential claims.

Note 14 -Subsequent Event

The Company evaluated all of its activities and concluded that no subsequent events have occurred that would require recognition in its financial statements or disclosed in the notes to its financial statements.