##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934.
 For the fiscal quarter ended June 30, 2009
 OR
 o
    
    Transition report under Section 13 or 15(d) of the Exchange Act.
 For
the transition period from

to
.
 Commission file number 000-53202
 HOMELAND ENERGY SOLUTIONS, LLC
  Iowa
    
    20-3919356(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 2779 Highway 24, Lawler, Iowa, 52154
 (563) 238-5555
 þ o
 þ Yes
o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if smaller reporting company)
 o þ




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##### 



INDEX
 Page No.PART I. FINANCIAL INFORMATION
    
    
    3Item 1. Financial Statements
    
    
    3Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    19Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    29Item 4T. Controls and Procedures
    
    
    29PART II. OTHER INFORMATION
    
    
    31Item 1. Legal Proceedings
    
    
    31Item 1A. Risk Factors
    
    
    31Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    31Item 3. Defaults Upon Senior Securities
    
    
    31Item 4. Submission of Matters to a Vote of Security Holders
    
    
    31Item 5. Other Information
    
    
    31Item 6. Exhibits
    
    
    31SIGNATURES
    
    
    32Exhibit 10.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
Homeland Energy Solutions, LLC
 Balance Sheets
June 30, 2009 and December 31, 2008
 6/30/2009
    
    
    12/31/2008Unaudited
    
    
    AuditedASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    5,849,255
    
    
    $
    44,599Accounts receivable
    
    
    6,174,895
    
    
    
    Inventory
    
    
    5,928,852
    
    
    
    Due from broker
    
    
    613,112
    
    
    
    Derivative instruments
    
    
    615,362
    
    
    
    Prepaid and other
    
    
    1,658,312
    
    
    
    115,867Total current assets
    
    
    20,839,788
    
    
    
    160,466PROPERTY AND EQUIPMENTLand and improvements
    
    
    22,383,469
    
    
    
    3,705,585Buildings
    
    
    4,857,318
    
    
    
    Equipment
    
    
    129,337,892
    
    
    
    58,963Construction in progress
    
    
    8,352
    
    
    
    136,065,515156,587,031
    
    
    
    139,830,063Less accumulated depreciation
    
    
    2,890,361
    
    
    
    7,886Total property and equipment
    
    
    153,696,670
    
    
    
    139,822,177OTHER ASSETSLoan fees, net of amortization 2009 $317,844; 2008 $229,382
    
    
    855,128
    
    
    
    943,590Restricted cash
    
    
    10,171,114
    
    
    
    10,044,677Assets held for sale
    
    
    250,000
    
    
    
    Utility rights, net of amortization 2009 $60,888; 2008 $0
    
    
    2,621,712
    
    
    
    2,085,708Total other assets
    
    
    13,897,954
    
    
    
    13,073,975TOTAL ASSETS
    
    $
    188,434,412
    
    
    $
    153,056,6186/30/2009
    
    

    12/31/2008LIABILITIES AND MEMBERS EQUITYCURRENT LIABILITIESAccounts payable
    
    $
    2,538,992
    
    
    $
    2,877,051Retainage payable
    
    
    939,346
    
    
    
    6,532,576Interest payable
    
    
    297,706
    
    
    
    Property tax payable
    
    
    6,420
    
    
    
    6,424Payroll payable
    
    
    80,998
    
    
    
    20,870Current maturities of long term liabilities
    
    
    3,700,000
    
    
    
    20,000Total current liabilities
    
    
    7,563,462
    
    
    
    9,456,921COMMITMENTS AND CONTINGENCIES (NOTE 6)LONG-TERM DEBT, less current maturities
    
    
    89,000,705
    
    
    
    51,636,807MEMBERS EQUITYCapital units, less syndication costs
    
    
    89,572,744
    
    
    
    89,572,744Retained earnings
    
    
    2,297,501
    
    
    
    2,390,146Total members equity
    
    
    91,870,245
    
    
    
    91,962,890TOTAL LIABILITIES AND MEMBERS EQUITY
    
    $
    188,434,412
    
    
    $
    153,056,618
   3




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Homeland Energy Solutions, LLC

Statements of Operations (Unaudited)
 Three Months
    
    
    Three Months
    
    
    Six Months
    
    
    Six MonthsEnded 6/30/09
    
    
    Ended 6/30/08
    
    
    Ended 6/30/09
    
    
    Ended 6/30/08REVENUE
    
    $
    39,562,718
    
    
    $
    
    
    
    $
    39,562,718
    
    
    $
    COSTS OF GOODS SOLD
    
    
    38,133,578
    
    
    
    
    
    
    
    38,133,578
    
    
    
    GROSS PROFIT
    
    
    1,429,140
    
    
    
    
    
    
    
    1,429,140
    
    
    
    OPERATING EXPENSES
    
    
    150,199
    
    
    
    20,474
    
    
    
    1,366,736
    
    
    
    200,752OPERATING INCOME (LOSS)
    
    
    1,278,941
    
    
    
    (20,474
    )
    
    
    62,404
    
    
    
    (200,752
    )OTHER INCOME (EXPENSE)Interest expense
    
    
    (594,198
    )
    
    
    
    
    
    
    (594,198
    )
    
    
    Interest income
    
    
    61,591
    
    
    
    155,349
    
    
    
    139,148
    
    
    
    514,806Grant income
    
    
    300,000
    
    
    
    
    
    
    
    300,000
    
    
    
    (232,607
    )
    
    
    155,349
    
    
    
    (155,050
    )
    
    
    514,806Net income (loss)
    
    $
    1,046,334
    
    
    $
    134,875
    
    
    $
    (92,646
    )
    
    $
    314,054Basic & diluted net income (loss) per unit
    
    $
    11.44
    
    
    $
    1.47
    
    
    $
    (1.01
    )
    
    $
    3.43Weighted average of units outstanding for the
calculation of basic & diluted net income per unit
    
    
    91,445
    
    
    
    91,445
    
    
    
    91,445
    
    
    
    91,445
   4




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##### Table of Contents



Homeland Energy Solutions, LLC
 Statements of Cash Flows (Unaudited)
For the Six Months Ended June 30, 2009 and 2008
 2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIESNet income (loss)
    
    $
    (92,646
    )
    
    $
    314,054Adjustments to reconcile net income to net cash
provided by (used in) operating activities:Depreciation and amortization
    
    
    2,972,052
    
    
    
    1,899Unrealized loss (gain) on risk management activities
    
    
    (615,362
    )
    
    
    Asset impairment
    
    
    480,875
    
    
    
    Increase in restricted cash
    
    
    (126,437
    )
    
    
    Change in working capital components:(Increase) decrease in accounts receivable
    
    
    (6,174,895
    )
    
    
    (Increase) decrease in inventory
    
    
    (5,928,852
    )
    
    
    (Increase) decrease in cash due to (from) broker
    
    
    (613,112
    )
    
    
    (Increase) decrease in prepaid expenses
    
    
    (1,542,445
    )
    
    
    Increase (decrease) in accounts payable
    
    
    1,863,720
    
    
    
    (165,144
    )Increase (decrease) in other current liabilities
    
    
    357,830
    
    
    
    (207,423
    )Net cash (used in) operating activities
    
    
    (9,419,272
    )
    
    
    (56,614
    )CASH FLOWS FROM INVESTING ACTIVITIESPayments for equipment and construction in progress
    
    
    (25,419,970
    )
    
    
    (43,616,358
    )Payments for other assets
    
    
    (400,000
    )
    
    
    Purchase of land options
    
    
    
    
    
    
    (5,000
    )Net cash (used in) investing activities
    
    
    (25,819,970
    )
    
    
    (44,050,539
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from long-term borrowing
    
    
    41,223,898
    
    
    
    Payments on long-term borrowing
    
    
    (180,000
    )
    
    
    (5,000
    )Payments for rejected subscriptions
    
    
    
    
    
    
    (7,500,000
    )Net cash provided by (used in) financing activities
    
    
    41,043,898
    
    
    
    (7,505,000
    )Net increase (decrease) in cash
    
    $
    5,804,656
    
    
    $
    (51,612,153
    )CASH AND CASH EQUIVALENTSBeginning
    
    
    44,599
    
    
    
    64,986,226Ending
    
    $
    5,849,255
    
    
    $
    13,374,073SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATIONCash paid for interest
    
    $
    1,113,290
    
    
    $
    217,164SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIESAccounts payable related to construction in progress
    
    $
    215,780
    
    
    $
    7,081,224Retainage payable related to construction in progress
    
    
    939,346
    
    
    
    5,835,775Interest capitalized
    
    
    817,183
    
    
    
    Insurance costs capitalized
    
    
    83,423
    
    
    
    141,309Loan fee amortization capitalized
    
    
    58,974
    
    
    
    88,462
   5




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1. Nature of Business and Significant Accounting Policies
   Nature of business
  Fiscal Reporting Period:
 Accounting Estimates
 Cash and Cash Equivalents
  Accounts Receivable
 Revenue Recognition:
  6




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Inventories
 Property and Equipment
  Long-Lived Assets:
    Derivative Instruments
   7




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Intangible Assets
 Loan Fees
    
    
    Utility Rights
    
    
    Total2009
    
    $
    88,461
    
    
    $
    120,174
    
    
    $
    208,6352010
    
    
    176,923
    
    
    
    240,348
    
    
    
    417,2712011
    
    
    176,923
    
    
    
    240,348
    
    
    
    417,2712012
    
    
    176,923
    
    
    
    182,631
    
    
    
    359,5542013
    
    
    176,923
    
    
    
    163,392
    
    
    
    340,315Thereafter
    
    
    58,975
    
    
    
    1,511,427
    
    
    
    1,570,402Total
    
    $
    855,128
    
    
    $
    2,621,712
    
    
    $
    3,476,840
 Restricted Cash & Cash Equivalents
 Fair Value
 Grant Income
 Income Taxes
 Net Income (loss) per Unit
  8




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Environmental Liabilities
 Risks and Uncertainties
   Reclassification
 Recently Issued Accounting Standards
   9




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10




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2. Inventory
  June 30, 2009Raw Materials
    
    $
    3,054,312Work in Process
    
    
    937,062Finished Goods
    
    
    1,937,478Totals
    
    $
    5,928,852
 3. Debt
 Master Loan Agreement with Home Federal Savings Bank
  Construction Loan
   Conversion to Term Loan and Term Revolving Loan
   11




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Revolving Line of Credit Loan
  Security Interests and Mortgages
      12




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4. Members Equity
   5. Related Party Transactions
    6. Commitments, Contingencies and Agreements
  Ethanol, Distillers grain, marketing agreements and major customers
   13




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June 30, 2009Sales ethanol
    
    $
    32,814,000Sales distiller grains
    
    
    6,993,000Marketing fees ethanol
    
    
    261,000Marketing fees distiller grains
    
    
    119,000Amount due from ethanol marketer
    
    
    4,143,000Amount due from distiller marketer
    
    
    1,321,000
   
    
    Refund of sales, service or use taxes paid to contractors and subcontractors during construction
work (estimated at $1,000,000). As of June 30, 2009 the Company has not filed for any
refund of sales or use taxes. Any refunds received in the future will be accounted for as
a reduction of construction costs.
 
    
    Investment tax credit (limited to $10,000,000. To be amortized over 5 years). This Iowa tax
credit may be claimed for qualifying expenditures, not to exceed $10,000,000, directly
related to new jobs created by the start-up, location, expansion or modernization of the
company under the program. This credit is to be taken in the year the qualifying asset is
placed into service and is amortized over a 5 year period starting with the 2009 tax
return. Since the Company is organized as a limited liability company, under state law all
earnings and tax credits pass through to the members. The investment tax credit will have
no impact on the financial statements.
  14




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
    
    Local Value-added Property Tax Exemption (estimated at $10,350,000). The Community has
approved an exemption from taxation on all or a portion of the value added by improvements
to real property directly related to new jobs created by location or expansion of the
company and used in the operations of the company. No exemptions have been received as of
June 30, 2009. Future exemptions will be account for as a reduction of property tax
expense.
    2009
    
    $
    1,894,0002010
    
    
    3,787,0002011
    
    
    3,787,0002012
    
    
    3,787,0002013
    
    
    3,787,000Thereafter
    
    
    19,884,000Total anticipated commitments
    
    $
    37,000,000
 7. LEASE OBLIGATIONS
   2009
    
    $
    942,7502010
    
    
    1,063,5002011
    
    
    1,063,5002012
    
    
    279,0002013
    
    
    279,000Total lease commitments
    
    $
    3,627,750
 8. DERIVATIVE INSTRUMENTS
    15




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Balance Sheet

    
    Asset Fair
    
    
    Liability FairClassification
    
    Value
    
    
    ValueDerivatives not designated as
hedging instruments:Commodity Contracts
    
    Derivative Instruments
    
    $
    615,362
    
    
    $
    
  Income Statement

    
    Realized
    
    
    Unrealized
    
    
    Total GainClassification

    
    Gain (Loss)
    
    
    Gain (Loss)
    
    
    (Loss)Derivatives not
designated as
hedging
instruments: Commodity
Contracts for the
three month period
    
    Cost of Goods Sold
    
    $
    941,766
    
    
    
    798,424
    
    
    
    1,740,190 Commodity
Contracts for the
six month period
    
    Cost of Goods Sold
    
    $
    1,135,112
    
    
    
    615,362
    
    
    
    1,750,474
 9. FAIR VALUE MEASUREMENTS
     16




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Derivative financial instruments
 Asset held for sale
  Total
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Other Assets, assets held for sale
    
    $
    250,000
    
    
    $
    
    
    
    $
    
    
    
    $
    250,000Asset, derivative financial instruments
    
    
    615,362
    
    
    
    615,362
    
    
    
    
    
    
    
    
   Assets heldfor SaleBalance January 1, 2009
    
    $
    Transfers in and/or out of Level 3
    
    
    250,000Ending balance June 30, 2009
    
    $
    250,000
  17




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10. Subsequent Events
     18




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
   
    
    Our ability to satisfy the financial covenants contained in our credit agreements
with our senior lender;
 
    
    Changes in our business strategy, capital improvements or development plans;
 
    
    Volatility of corn, natural gas, ethanol, unleaded gasoline, distillers grain and
other commodities prices;
 
    
    Changes in economic conditions or the occurrence of certain events causing an
economic impact in the agriculture, oil or automobile industries;
 
    
    Limitations and restrictions contained in the instruments and agreements governing
our indebtedness;
 
    
    Our ability to generate sufficient liquidity to fund our operations, debt service
requirements and capital expenditures;
 
    
    The results of our hedging transactions and other risk management strategies;
 
    
    Our inelastic demand for corn, as it is the only available feedstock for our plant;
 
    
    Changes in the environmental regulations or in our ability to comply with the
environmental regulations that apply to our plant site and our operations;
 
    
    The effects of mergers, bankruptcies or consolidations in the ethanol industry;
 
    
    Changes in the availability
of credit to support the level of liquidity necessary for our risk management activities;
 
    
    Changes in or elimination of federal and/or state laws having an impact on the
ethanol industry (including the elimination of any federal and/or state ethanol tax
incentives);
    
    Overcapacity within the ethanol industry;
    
    Difficulties or disruptions we may encounter during the initial operating period at
our plant;
    
    Changes and advances in ethanol production technology that may make it more
difficult for us to compete with other ethanol plants utilizing such technology;
    
    Our reliance on key management personnel and maintaining labor relations;
    
    Our ability to retain adequate administrative and operational personnel;
    
    The development of infrastructure related to the sale and distribution of ethanol;
    
    Fluctuation in U.S. petroleum prices and corresponding oil consumption;
    
    Competition in the ethanol
industry and from alternative fuel additives;
    
    Our ability to profitably operate the ethanol plant and maintain a positive spread
between the selling price of our products and our raw material costs;
and
    
    Changes in the availability
and price of corn and natural gas.
   19




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Available Information
 www.homelandenergysolutions.com
 Overview
        20




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Results of Operations for the Three Months Ended June 30, 2009
  Quarter EndedJune 30, 2009(Unaudited)Income Statement Data
    
    Amount
    
    
    PercentRevenues
    
    $
    39,562,718
    
    
    
    100.00
    %Cost of Goods Sold
    
    $
    38,133,578
    
    
    
    96.39
    %Gross Profit (Loss)
    
    $
    1,429,140
    
    
    
    3.61
    %Operating Expenses
    
    $
    150,199
    
    
    
    0.38
    %Operating Income (Loss)
    
    $
    1,278,941
    
    
    
    3.23
    %Other Income (Expense)
    
    $
    (232.607
    )
    
    
    (0.59
    )%Net Income (Loss)
    
    $
    1,046,334
    
    
    
    2.64
    %
  21




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Revenues
      22




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Cost of Goods Sold
         23




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Operating Expense
  Operating Income (Loss)
 Liquidity and Capital Resources Project Capitalization
 Changes in Financial Condition for the Six Months Ended June 30, 2009
   24




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Liquidity and Capital Resources
   Six Months EndedJune 30, 2009Net cash (used in) operating activities
    
    $
    (9,419,272
    )Net cash (used in) investing activities
    
    $
    (25,819,970
    )Net cash provided by financing activities
    
    $
    41,043,898Net increase in cash
    
    $
    5,804,656Cash and cash equivalents, end of period
    
    $
    5,849,255
      25




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Project Capitalization
    1.
    
    A $74,000,000 term loan, for which interest is currently due each month, and we must
begin making principal payments of approximately $617,000 per month in February 2010;
 2.
    
    A $20,000,000 term revolving loan, for which interest is due monthly; and
 3.
    
    A $6,000,000 seasonal line of credit, which is subject to a monthly borrowing base.
     26




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27




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Application of Critical Accounting Estimates and Significant Accounting Policies
     28




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Off-Balance Sheet Arrangements
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk.
  
 Item 4. Controls and Procedures.
 Disclosure Controls and Procedures
   29




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
 
 
 
   30




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Changes in Internal Controls
  
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
  Exhibit
    
    
    
    Method ofNo.
    
    Description
    
    Filing10.1
    
    
    U.S. Energy Agreement Dated July 10, 2009.
    
    *+31.1
    
    
    Certificate pursuant to 17 CFR 240 13a-14(a)
    
    *31.2
    
    
    Certificate pursuant to 17 CFR 240 13a-14(a)
    
    *32.1
    
    
    Certificate pursuant to 18 U.S.C. Section 1350
    
    *32.2
    
    
    Certificate pursuant to 18 U.S.C. Section 1350
    
    *
 
 (*)
    
    Filed herewith.(+)
    
    Material has been omitted pursuant to a request for confidential treatment and such materials
have been filed separately with the Securities and Exchange Commission.  31




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SIGNATURES
  HOMELAND ENERGY SOLUTIONS, LLCDate:      August 14, 2009
    /s/ Walter WendlandWalter WendlandChief Executive Officer and President
(Principal Executive Officer)Date:      August 14, 2009
    /s/ Christine A. MarchandChristine A. MarchandChief Financial Officer
 (Principal Financial and Accounting Officer)  32




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EXHIBIT INDEX
 ExhibitNo.
    

    Description10.1
    

    U.S. Energy Agreement Dated July 10, 2009.31.1
    

    Certificate pursuant to 17 CFR 240 13a-14(a)31.2
    

    Certificate pursuant to 17 CFR 240 13a-14(a)32.1
    

    Certificate pursuant to 18 U.S.C. Section 135032.2
    

    Certificate pursuant to 18 U.S.C. Section 1350