##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
 þ
    
    Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934.
 For the fiscal quarter ended June 30, 2007
 OR
 o
    
    Transition report under Section 13 or 15(d) of the Exchange Act.
 Commission file number 333-135967
 HOMELAND ENERGY SOLUTIONS, LLC
  Iowa
    
    20-3919356(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 106 W. Main Street
Riceville, IA 50466
 (641) 985-4025
 days.   
þ Yes   o No
 Act).   o Yes   þ No
   (Check one):   o Yes   þ No




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##### 



INDEX
 Page No.PART I. FINANCIAL INFORMATION
    
    
    3Item 1. Financial Statements.
    
    
    3Item 2. Managements Discussion and Analysis and Plan of Operations
    
    
    13Item 3. Controls and Procedures
    
    
    28PART II. OTHER INFORMATION
    
    
    28Item 1. Legal Proceeding
    
    
    28Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    28Item 3. Defaults Upon Senior Securities
    
    
    29Item 4. Submission of Matters to a Vote of Security Holders
    
    
    29Item 5. Other Information
    
    
    29Item 6. Exhibits
    
    
    29SIGNATURES
    
    
    30Exhibit 10.24Exhibit 10.25Exhibit 10.27Exhibit 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 SHEET (UNAUDITED)
 ASSETS
 6/30/2007CURRENT ASSETSCash and cash equivalents
    
    $
    410,946Attorney escrow account
    
    
    156Prepaid offering costs
    
    
    225,587Prepaid expenses
    
    
    8,907Total current assets
    
    
    645,596PROPERTY AND EQUIPMENT, at costLand
    
    
    3,530,487Equipment
    
    
    23,816Construction in progress
    
    
    449,569Less accumulated depreciation
    
    
    (2,192
    )4,001,680OTHER ASSETSLoan fees, net of amortization $18,328
    
    
    49,244Land options
    
    
    29,77479,018Total Assets
    
    $
    4,726,294LIABILITIES AND MEMBERS EQUITYCURRENT LIABILITIESAccounts payable
    
    $
    59,016Notes payable
    
    
    3,517,572Property tax payable
    
    
    4,090Accrued interest payable
    
    
    78,712Total current liabilities
    
    
    3,659,390COMMITMENTS AND CONTINGENCIES (NOTE 7)MEMBERS EQUITYCapital units, less syndication costs
    
    
    1,305,893Deficit accumulated during development stage
    
    
    (238,989
    )Total members equity
    
    
    1,066,904Total liabilities and
members equity
    
    $
    4,726,294
 See Notes to the unaudited Financial Statements.
  3




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HOMELAND ENERGY SOLUTIONS, LLC   STATEMENTS OF OPERATIONS (UNAUDITED)
For the Quarter Ended June 30, 2007, for the Quarter
Ended June 30, 2006 and for the period from
December 7, 2005 (Date of Inception) to June 30, 2007
 Period fromQuarter Ended
    
    
    Quarter Ended
    
    
    inception to6/30/07
    
    
    6/30/06
    
    
    6/30/07OPERATING REVENUE
    
    $
    
    
    
    $
    
    
    
    $
    OPERATING EXPENSESProfessional expenses
    
    
    49,461
    
    
    
    
    
    
    
    178,020Engineering & design
    
    
    
    
    
    
    
    
    
    
    18,652Feasibility studies
    
    
    
    
    
    
    21,750
    
    
    
    67,750Filing fees/permits
    
    
    1,676
    
    
    
    
    
    
    
    14,604Land options
    
    
    
    
    
    
    
    
    
    
    1,650Insurance
    
    
    4,619
    
    
    
    
    
    
    
    10,778Office Expense
    
    
    710
    
    
    
    
    
    
    
    10,446Depreciation
    
    
    950
    
    
    
    
    
    
    
    2,192Amortization
    
    
    
    
    
    
    
    
    
    
    390Rent
    
    
    900
    
    
    
    
    
    
    
    2,700Utilities
    
    
    898
    
    
    
    
    
    
    
    4,140Crop input expense
    
    
    4,552
    
    
    
    
    
    
    
    4,552Property tax
    
    
    341
    
    
    
    
    
    
    
    341Miscellaneous expenses
    
    
    206
    
    
    
    54
    
    
    
    2,467Total Expenses
    
    
    64,313
    
    
    
    21,804
    
    
    
    318,682OTHER INCOMEInterest income
    
    
    10,306
    
    
    
    7,678
    
    
    
    54,693Grant income
    
    
    
    
    
    
    10,875
    
    
    
    25,000Total Other Income
    
    
    10,306
    
    
    
    18,553
    
    
    
    79,693Net loss during development stage
    
    $
    (54,007
    )
    
    $
    (3,251
    )
    
    $
    (238,989
    )Basic and Diluted loss per capital unit
    
    $
    (18.95
    )
    
    $
    (1.73
    )
    
    
    (108.38
    )Basic and Diluted weighted average
capital units O/S
    
    
    2,850
    
    
    
    1,875
    
    
    
    2,205
 See Notes to the unaudited Financial Statements.
  4




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HOMELAND ENERGY SOLUTIONS, LLC   STATEMENTS OF OPERATIONS (UNAUDITED)
For the Six Months Ended June 30, 2007 and
for the Six Months Ended June 30, 2006
 Six Months
    
    
    Six MonthsEnded
    
    
    Ended6/30/07
    
    
    6/30/06OPERATING REVENUE
    
    $
    
    
    
    $
    OPERATING EXPENSESProfessional expenses
    
    
    100,622
    
    
    
    16,718Engineering & design
    
    
    
    
    
    
    2,177Feasibility studies
    
    
    
    
    
    
    27,750Filing fees/permits
    
    
    2,834
    
    
    
    Insurance
    
    
    9,239
    
    
    
    Office Expense
    
    
    3,879
    
    
    
    Depreciation
    
    
    1,899
    
    
    
    Amortization
    
    
    390
    
    
    
    Rent
    
    
    2,100
    
    
    
    Utilities
    
    
    4,069
    
    
    
    Crop input expense
    
    
    4,552
    
    
    
    Property tax
    
    
    341
    
    
    
    Miscellaneous expenses
    
    
    1,027
    
    
    
    403Total Expenses
    
    
    130,952
    
    
    
    47,048OTHER INCOMEInterest income
    
    
    21,633
    
    
    
    7,678Grant income
    
    
    14,125
    
    
    
    10,875Total Other Income
    
    
    35,758
    
    
    
    18,553Net loss during development stage
    
    $
    (95,194
    )
    
    $
    (28,495
    )Basic and Diluted loss per capital unit
    
    $
    (33.40
    )
    
    $
    (23.61
    )Basic and Diluted weighted average capital units O/S
    
    
    2,850
    
    
    
    1,207
 See Notes to the unaudited Financial Statements.
  5




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HOMELAND ENERGY SOLUTIONS, LLC
(A Development Stage Company)
STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months Ended June 30, 2007, for the Six
Months Ended June 30, 2006 and for the period from
December 7, 2005 (Date of Inception) to June 30, 2007
 Six Months
    
    
    Six Months
    
    
    Period fromEnded
    
    
    Ended
    
    
    inception to6/30/07
    
    
    6/30/06
    
    
    6/30/07CASH FLOWS FROM OPERATING ACTIVITIESNet loss during development stage
    
    $
    (95,194
    )
    
    $
    (28,495
    )
    
    $
    (238,989
    )Depreciation and Amortization
    
    
    2,289
    
    
    
    
    
    
    
    2,582Write off land options
    
    
    
    
    
    
    
    
    
    
    1,650Adjustments to reconcile net loss
to net cash used in operating activitiesChanges in assets and liabilitiesIncrease in other current assets
    
    
    15,257
    
    
    
    (52,398
    )
    
    
    (9,063
    )(Decrease) increase in accounts payable
    
    
    (67,436
    )
    
    
    24,932
    
    
    
    27,881Increase in other current liabilities
    
    
    4,090
    
    
    
    
    
    
    
    4,090Net cash used in operating activities
    
    
    (140,994
    )
    
    
    (55,961
    )
    
    
    (211,849
    )CASH FLOWS FROM INVESTING ACTIVITIESProceeds from maturity of certificate of deposit
    
    
    614,488
    
    
    
    
    
    
    
    1,214,488Purchase of certificate of deposit
    
    
    
    
    
    
    (600,000
    )
    
    
    (1,214,488
    )Payments for construction in progress
    
    
    (321,784
    )
    
    
    
    
    
    
    (321,784
    )Purchase of equipment
    
    
    
    
    
    
    
    
    
    
    (23,816
    )Purchase of land
    
    
    (3,528,524
    )
    
    
    
    
    
    
    (3,528,524
    )Purchase of land options
    
    
    (18,125
    )
    
    
    
    
    
    
    (33,387
    )Net cash used in investing activities
    
    
    (3,253,945
    )
    
    
    (600,000
    )
    
    
    (3,907,511
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from short-term borrowing
    
    
    3,500,000
    
    
    
    
    
    
    
    3,500,000Payments for origination fees on short-term borrowing
    
    
    (50,000
    )
    
    
    
    
    
    
    (50,000
    )Payments for prepaid offering costs
    
    
    (1,824
    )
    
    
    
    
    
    
    (225,587
    )Contributed capital
    
    
    
    
    
    
    1,325,000
    
    
    
    1,325,000Payments for syndication costs on capital units issued
    
    
    
    
    
    
    (19,107
    )
    
    
    (19,107
    )Net cash provided by financing activities
    
    
    3,448,176
    
    
    
    1,305,893
    
    
    
    4,530,306Net change in cash
    
    
    53,237
    
    
    
    649,932
    
    
    
    410,946CASH AND CASH EQUIVALENTSBeginning of period
    
    
    357,709
    
    
    
    
    
    
    
    End of period
    
    $
    410,946
    
    
    $
    649,932
    
    
    $
    410,946SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING & FINANCING ACTIVITIESAccounts payable related to construction in progress
    
    $
    31,135
    
    
    $
    
    
    
    $
    31,135Loan fees related to short-term borrowings
    
    $
    17,572
    
    
    $
    
    
    
    $
    17,572Interest capitalized
    
    $
    78,712
    
    
    $
    
    
    
    $
    78,712Loan fee amortization capitalized
    
    $
    17,938
    
    
    $
    
    
    
    $
    17,938
 See Notes to the unaudited Financial Statements.
  6




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1.
    
    Nature of Business
  2.
    
    Summary of Significant Accounting Policies
    Fiscal Reporting Period
  Accounting Estimates
  Cash
   Property and Plant
   7




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Intangible Asset
  Cost of Raising Anticipated Capital
  Organizational and Start-up Costs
  Revenue Recognition
  Income Taxes
  Recently Issued Accounting Standards
    8




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Grant Income
   3.
    
    Development Stage Enterprise
   4.
    
    Debt
  5.
    
    Members Equity
     9




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6.
    
    Related Party Transactions
  7.
    
    Commitments and Contingencies
         10




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##### Table of Contents



1)
    
    Refund of sales, service or use taxes paid during construction work
(estimated at $4,289,615)2)
    
    Investment tax credit (limited to $10,000,000. To be amortized over 5 years)3)
    
    Local Value-added Property Tax Exemption (estimated at $10,350,000)
 8.
    
    Subsequent Events
  Lump Sum Design-Build Agreement between Homeland Energy Solutions, LLC and Fagen, Inc.
   11




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First Amendment to Lump Sum Design-Build Agreement between Homeland Energy Solutions,
LLC and Fagen, Inc.
   License Agreement with Econo-Power International Corporation
     12




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Item 2.
    
    Managements Discussion and Analysis and Plan of Operations.
 Forward Looking Statements
  
    
    Investors ability to pay the outstanding balances on promissory notes after the closing of the offering;
    
    Our ability to obtain the debt financing necessary to construct and operate our plant;
    
    Our ability to enter into a binding agreement with a Design-Build Firm to build our coal gasification
energy center;
    
    Changes in our business strategy, capital improvements or development plans;
    
    Increases in the price of corn as the corn market becomes increasingly competitive;
    
    Our inelastic demand for corn, as it is the only available feedstock for our plant;
    
    Construction delays and technical difficulties in constructing the plant;
    
    Changes in the availability and price of coal and natural gas to power our plant;
    
    Changes in the environmental regulations that apply to our plant site and operations;
    
    Our ability to secure all necessary licenses and permits;
    
    Changes in federal and/or state laws (including the elimination of any federal and/or state ethanol tax
incentives);
    
    Changes and advances in ethanol production technology; and
    
    Competition in the ethanol industry and from other alternative fuel additives.
   13




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Overview
        14




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Plan of Operations for the Next 12 Months
  Project Capitalization
  Seed Capital Offering
  Registered Offering
  Bridge Loan
   15




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Senior Debt Financing
   Tax Abatement and Grants
  (1)
    
    offer a pension or profit-sharing plan for all employees;(2)
    
    produce value-added goods or be in one of 11 targeted industries;(3)
    
    provide medical and dental insurance and pay 80% of the premiums; and(4)
    
    have active productivity and worker safety improvement programs.
  (1)
    
    a local property tax exemption of up to 100% of the value added to the property for a
period not to exceed 20 years;(2)
    
    a refund of state sales, service or use taxes paid to contractors or subcontractors
during construction; and(3)
    
    an investment tax credit equal to a percentage of the qualifying investment, amortized
over 5 years.
    16




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Site Development and Construction Activities
    Design-Build Agreement with Fagen, Inc. and the First Amendment to the Design-Build Agreement
     17




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ICM, Inc. License Agreement
   
    
    Proprietary information and technology for our use in owning, operating, maintaining
and repairing our plant; and
    
    Proprietary information concerning the design, arrangement, configuration, and
specifications of the combinations of distillation, evaporation, and alcohol
dehydration equipment, the combination of the distillers grain drying and heat recovery
system generation equipment and all documents supporting those combinations, and the
computer system known as the distributed control system and all attendant documents.
   Coal Gasification Energy Center
      18




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Project Development Agreement with Burns & McDonnell
  License Agreement with Econo-Power International Corporation
    Permitting and Regulatory Activities
    19




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Environmental Permits to be in Place Prior to the Start of Significant Construction
 Construction Air Permits
  Construction Site Storm Water Discharge Permit
  Environmental Permits and Plans yet to be Obtained or Developed that must be in Place Prior to the
Start of Operations
 
    
    Title V Operating Air Permit
    
    Waste Water Discharge Permit
    
    New Source Performance Standards
    
    Storm Water Discharge Permit and Storm Water Pollution Prevention Plan (SWPPP Permits)
    
    Spill Prevention, Control and Countermeasures Plan
    
    High Capacity Well Permit
    
    Alcohol Fuel Producers Permit
    
    Risk Management Plan
  20




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Nuisance
   Additional Environmental Issues for Coal Gasification
    Trends and Uncertainties Impacting the Ethanol Industry and our Future Operations
   21




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22




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Massachusetts v. EPA
 Technology Developments
   23




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Trends and Uncertainties Impacting the Corn, Coal and Natural Gas Markets and Our Future Cost of
Goods Sold
      Operating Expenses
   24




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Liquidity and Capital Resources
 Estimated Sources of Funds
  Sources of Funds
    
    
    
    
    
    PercentSeed Capital Proceeds (1)
    
    $
    1,325,000
    
    
    
    0.55
    %Unit Proceeds (2)
    
    $
    93,720,000
    
    
    
    39.12
    %Senior Debt Financing (3)
    
    $
    143,000,000
    
    
    
    59.70
    %Interest on Escrow (4)
    
    $
    1,500,000
    
    
    
    0.63
    %Total Sources of Funds
    
    $
    239,545,000
    
    
    
    100.00
    %
 (1)
    
    We have issued a total of 2,850 units to our founders and seed capital investors in previous
private placement offerings in exchange for proceeds of $1,325,000.(2)
    
    We currently have subscriptions from investors totaling $93,720,000 in our registered
offering.(3)
    
    We currently do not have a definitive loan agreement with a senior lender for debt financing
in the amount of $143,000,000. We do have a non-binding debt financing term sheet for proposed
senior credit facilities up to $143,000,000. Definitive debt documents have not yet been finalized
and there is no assurance that they will be. Even if we do enter into final agreements, they may
not be upon the terms we expect.(4)
    
    As of July 31, 2007, we have earned approximately $1,500,000 in interest on our escrow
account.
 Estimated Use of Proceeds
  Percent ofUse of Proceeds
    
    Amount
    
    
    TotalPlant construction
    
    $
    120,000,000
    
    
    
    50.32
    %Coal Gasification Energy Center
    
    
    64,500,000
    
    
    
    27.05
    %Land cost
    
    
    3,500,000
    
    
    
    1.47
    %Site development costs
    
    
    7,670,000
    
    
    
    3.22
    %Pipeline costs
    
    
    4,000,000
    
    
    
    1.68
    %Construction contingency
    
    
    2,013,212
    
    
    
    0.85
    %Construction performance bond
    
    
    400,000
    
    
    
    0.17
    %Construction insurance costs
    
    
    150,000
    
    
    
    0.06
    %Construction manager fees
    
    
    125,000
    
    
    
    0.05
    %Administrative building
    
    
    760,000
    
    
    
    0.32
    %Office equipment
    
    
    85,000
    
    
    
    0.03
    %Computers, Software, Network
    
    
    175,000
    
    
    
    0.07
    %Rail Infrastructure
    
    
    10,500,000
    
    
    
    4.40
    %Rolling stock
    
    
    500,000
    
    
    
    0.21
    %Fire Protection, water supply and
water treatment
    
    
    3,500,000
    
    
    
    1.47
    %Capitalized interest
    
    
    2,000,000
    
    
    
    0.84
    %
  25




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Start up costs:Financing costs
    
    
    2,750,000
    
    
    
    1.15
    %Organization costs(1)
    
    
    1,400,000
    
    
    
    0.59
    %Pre production period costs
    
    
    950,000
    
    
    
    0.40
    %Working capital
    
    
    7,000,000
    
    
    
    2.94
    %Inventory  corn
    
    
    2,000,000
    
    
    
    0.84
    %Inventory  chemicals and ingredients
    
    
    500,000
    
    
    
    0.21
    %Inventory  Ethanol
    
    
    2,500,000
    
    
    
    1.04
    %Inventory  DDGS
    
    
    500,000
    
    
    
    0.21
    %Inventory  Coal
    
    
    250,000
    
    
    
    0.10
    %Spare parts  process equipment
    
    
    750,000
    
    
    
    0.31
    %Total
    
    $
    238,485,000
    
    
    
    100.00
    %
 
 (1)
    
    Includes estimated offering expenses of $480,000.
 Plant Construction
 Coal Gasification Energy Center
 Land Cost
 Site Development
 Construction Contingency
 Construction Performance Bond and Insurance Costs
 Administration Building, Furnishings, Office and Computer Equipment.
 Rail Infrastructure and Rolling Stock
 Fire Protection System, Water Supply and Water Treatment System.
 Capitalized Interest
  26




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Financing Costs
 Organizational Costs
 Pre-Production Period Costs
 Inventory.
 Financial Results for the Fiscal Quarter Ended June 30 2007 and the period from Inception through
June 30, 2007
  Employees
   # Full-TimePosition
    
    PersonnelProduction Supervisors
    
    
    4Operating Workers
    
    
    10Compliance Officers
    
    
    3Maintenance/Repair Workers
    
    
    3Welders
    
    
    3Electrical/Electronic Engineering Technicians
    
    
    2Director of Lab Operations
    
    
    1Lab Assistant
    
    
    2Laborers
    
    
    10General Manager
    
    
    1Plant/Commodity Managers
    
    
    2Director of Finance and Accounting Positions
    
    
    3Office Clerk
    
    
    1TOTAL
    
    
    45
  27




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Off Balance Sheet Arrangements
  
 Item 3.
    
    Controls and Procedures
      
 PART II. OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
   28




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Item 3.
    
    Defaults Upon Senior Securities
  
 Item 4.
    
    Submission of Matters to a Vote of Security Holders
  
 Item 5.
    
    Other Information
   29




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Item 6.
    
    Exhibits
  Exhibit
    
    
    
    Method ofNo.
    
    Description
    
    Filing10.24
    
    
    Lump Sum Design-Build Agreement dated July 6, 2007
between Homeland Energy Solutions and Fagen, Inc.+
    
    *10.25
    
    
    First Amendment to the Lump Sum Design-Build
Agreement dated July 6, 2007 between Homeland
Energy Solutions and Fagen, Inc.+
    
    *10.26
    
    
    License Agreement dated August 1, 2007 between
Homeland Energy Solutions and ICM, Inc, which is
filed as Exhibit D to Exhibit 10.24 filed herewith.+
    
    *10.27
    
    
    Patent and Technology Licensing Agreement dated
July 26, 2007 between Homeland Energy Solutions and
Econo-Power International Corporation.+
    
    *31.1
    
    
    Certificate pursuant to 17 CFR 240 15d-14(a)
    
    *31.2
    
    
    Certificate pursuant to 17 CFR 240 15d-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.
 
 SIGNATURES
  HOMELAND ENERGY SOLUTIONS, LLCDate: August 14, 2007
    /s/ Stephen EastmanStephen EastmanPresident (Principal Executive Officer)Date: August 14, 2007
    /s/ Bernard RetterathBernard RetterathTreasurer  (Principal Financial and Accounting Officer)  30