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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 September 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
(State or other jurisdiction of 
incorporation or organization)
    
    20-3919356
(I.R.S. Employer Identification No.)
 106 W. Main Street
Riceville, IA 50466
 (641) 985-4025
 þ o
 o þ
   o þ




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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
    
    
    14Item 3. Controls and Procedures
    
    
    29PART II. OTHER INFORMATION
    
    
    29Item 1. Legal Proceeding
    
    
    29Item 1A. Risk Factors
    
    
    29Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    30Item 3. Defaults Upon Senior Securities
    
    
    30Item 4. Submission of Matters to a Vote of Security Holders
    
    
    30Item 5. Other Information
    
    
    30Item 6. Exhibits
    
    
    31SIGNATURES
    
    
    31Exhibit 10.28Exhibit 10.29Exhibit 31.1Exhibti 31.2Exhibit 32.1Exhibit 32.2
  
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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 HOMELAND ENERGY SOLUTIONS, LLC   BALANCE SHEET (UNAUDITED)
 ASSETS
 9/30/2007CURRENT ASSETSCash and cash equivalents
    
    $
    232,631Attorney escrow account
    
    
    156Prepaid offering costs
    
    
    247,608Prepaid expenses
    
    
    13,564Total current assets
    
    
    493,959PROPERTY AND EQUIPMENT, at costLand
    
    
    3,530,487Equipment
    
    
    23,816Construction in progress
    
    
    4,219,514Less accumulated depreciation
    
    
    (3,141
    )7,770,676OTHER ASSETSLoan fees, net of amortization $35,990
    
    
    36,982Land options
    
    
    29,77466,756Total Assets
    
    $
    8,331,391LIABILITIES AND MEMBERS EQUITYCURRENT LIABILITIESAccounts payable
    
    $
    2,382,824Retainage payable
    
    
    160,001Notes payable
    
    
    4,606,512Property tax payable
    
    
    4,347Payroll tax payable
    
    
    4,188Accrued interest payable
    
    
    157,519Total current liabilities
    
    
    7,315,391COMMITMENTS AND CONTINGENCIES (NOTE 8)MEMBERS EQUITYCapital units, less syndication costs
    
    
    1,305,893Deficit accumulated during development stage
    
    
    (289,893
    )Total members equity
    
    
    1,016,000Total liabilities and members equity
    
    $
    8,331,391
 See Notes to the unaudited Financial Statements.
  3




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HOMELAND ENERGY SOLUTIONS, LLC   STATEMENTS OF OPERATIONS (UNAUDITED)
For the Quarter Ended September 30, 2007, for the Quarter
Ended September 30, 2006 and for the period from
December 7, 2005 (Date of Inception) to September 30, 2007
 Period fromQuarter Ended
    
    
    Quarter Ended
    
    
    inception to9/30/07
    
    
    9/30/06
    
    
    9/30/07OPERATING REVENUE
    
    $
    
    
    
    $
    
    
    
    $
    OPERATING EXPENSESProfessional expenses
    
    
    29,381
    
    
    
    43,101
    
    
    
    207,401Engineering & design
    
    
    
    
    
    
    10,445
    
    
    
    18,652Feasibility studies
    
    
    17,000
    
    
    
    40,000
    
    
    
    84,750Filing fees/permits
    
    
    3,509
    
    
    
    10,165
    
    
    
    18,113Land options
    
    
    
    
    
    
    1,650
    
    
    
    1,650Insurance
    
    
    4,500
    
    
    
    
    
    
    
    15,278Office Expense
    
    
    1,955
    
    
    
    
    
    
    
    12,401Depreciation
    
    
    949
    
    
    
    
    
    
    
    3,141Amortization
    
    
    
    
    
    
    
    
    
    
    390Rent
    
    
    900
    
    
    
    
    
    
    
    3,600Utilities
    
    
    1,055
    
    
    
    
    
    
    
    5,195Crop input expense
    
    
    
    
    
    
    
    
    
    
    4,552Property tax
    
    
    
    
    
    
    
    
    
    
    341Miscellaneous expenses
    
    
    233
    
    
    
    315
    
    
    
    2,700Total Expenses
    
    
    59,482
    
    
    
    105,676
    
    
    
    378,164OTHER INCOMEInterest income
    
    
    4,603
    
    
    
    13,355
    
    
    
    59,296Crop income
    
    
    3,975
    
    
    
    
    
    
    
    3,975Grant income
    
    
    
    
    
    
    
    
    
    
    25,000Total Other Income
    
    
    8,578
    
    
    
    13,355
    
    
    
    88,271Net loss during development stage
    
    $
    (50,904
    )
    
    $
    (92,321
    )
    
    $
    (289,893
    )Basic and Diluted loss per capital unit
    
    $
    (17.86
    )
    
    $
    (32.39
    )Basic and Diluted weighted average capital units O/S
    
    
    2,850
    
    
    
    2,850
 See Notes to the unaudited Financial Statements.
  4




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HOMELAND ENERGY SOLUTIONS, LLC   STATEMENTS OF OPERATIONS (UNAUDITED)
For the Nine Months Ended September 30, 2007 and
for the Nine Months Ended September 30, 2006
 Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended9/30/07
    
    
    9/30/06OPERATING REVENUE
    
    $
    
    
    
    $
    OPERATING EXPENSESProfessional expenses
    
    
    130,003
    
    
    
    64,896Engineering & design
    
    
    
    
    
    
    12,621Feasibility studies
    
    
    17,000
    
    
    
    67,750Filing fees/permits
    
    
    6,343
    
    
    
    10,165Land options
    
    
    
    
    
    
    1,650Insurance
    
    
    13,739
    
    
    
    Office Expense
    
    
    5,834
    
    
    
    Depreciation
    
    
    2,848
    
    
    
    Amortization
    
    
    390
    
    
    
    Rent
    
    
    2,400
    
    
    
    Utilities
    
    
    5,724
    
    
    
    Crop input expense
    
    
    4,552
    
    
    
    Property tax
    
    
    341
    
    
    
    Miscellaneous expenses
    
    
    1,260
    
    
    
    719Total Expenses
    
    
    190,434
    
    
    
    157,801OTHER INCOMEInterest income
    
    
    26,236
    
    
    
    21,033Crop income
    
    
    3,975
    
    
    
    Grant income
    
    
    14,125
    
    
    
    10,875Total Other Income
    
    
    44,336
    
    
    
    31,908Net loss during development stage
    
    $
    (146,098
    )
    
    $
    (125,893
    )Basic and Diluted loss per capital unit
    
    $
    (51.26
    )
    
    $
    (71.49
    )Basic and Diluted weighted average capital units O/S
    
    
    2,850
    
    
    
    1,761
 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 Nine Months Ended September 30, 2007, for the Nine
Months Ended September 30, 2006 and for the period from
December 7, 2005 (Date of Inception) to September 30, 2007
 Nine Months
    
    
    Nine Months
    
    
    Period fromEnded
    
    
    Ended
    
    
    inception to9/30/07
    
    
    9/30/06
    
    
    9/30/07CASH FLOWS FROM OPERATING ACTIVITIESNet loss during development stage
    
    $
    (146,098
    )
    
    $
    (125,893
    )
    
    $
    (289,893
    )Depreciation and Amortization
    
    
    3,238
    
    
    
    
    
    
    
    3,531Write off land options
    
    
    
    
    
    
    
    
    
    
    1,650Adjustments to reconcile net loss
to net cash used in operating activitiesChanges in assets and liabilitiesIncrease in other current assets
    
    
    10,600
    
    
    
    (11,356
    )
    
    
    (13,720
    )(Decrease) increase in accounts payable
    
    
    (33,295
    )
    
    
    
    
    
    
    62,022Increase in other current liabilities
    
    
    8,535
    
    
    
    
    
    
    
    8,535Net cash used in operating activities
    
    
    (157,020
    )
    
    
    (137,249
    )
    
    
    (227,875
    )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
    
    
    (1,567,613
    )
    
    
    
    
    
    
    (1,567,613
    )Purchase of equipment
    
    
    
    
    
    
    
    
    
    
    (23,816
    )Purchase of land
    
    
    (3,528,524
    )
    
    
    
    
    
    
    (3,528,524
    )Purchase of land options
    
    
    (18,125
    )
    
    
    (13,115
    )
    
    
    (33,387
    )Net cash used in investing activities
    
    
    (4,499,774
    )
    
    
    (613,115
    )
    
    
    (5,153,340
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from short-term borrowing
    
    
    4,583,540
    
    
    
    
    
    
    
    4,583,540Payments for origination fees on short-term borrowing
    
    
    (50,000
    )
    
    
    
    
    
    
    (50,000
    )Payments for prepaid offering costs
    
    
    (1,824
    )
    
    
    (70,827
    )
    
    
    (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
    
    
    4,531,716
    
    
    
    1,235,066
    
    
    
    5,613,846Net change in cash
    
    
    (125,078
    )
    
    
    484,702
    
    
    
    232,631CASH AND CASH EQUIVALENTSBeginning of period
    
    
    357,709
    
    
    
    
    
    
    
    End of period
    
    $
    232,631
    
    
    $
    484,702
    
    
    $
    232,631SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING & FINANCING ACTIVITIESAccounts payable related to construction in progress
    
    $
    2,298,781
    
    
    $
    
    
    
    $
    2,298,781Accounts payable related to pre-paid offering costs
    
    $
    20,197
    
    
    $
    
    
    
    $
    20,197Retainage payable related to construction in progress
    
    $
    160,001
    
    
    $
    
    
    
    $
    160,001Loan fees related to short-term borrowings
    
    $
    22,972
    
    
    $
    
    
    
    $
    22,972Interest capitalized
    
    $
    157,519
    
    
    $
    
    
    
    $
    157,519Loan fee amortization capitalized
    
    $
    35,600
    
    
    $
    
    
    
    
    35,600
 See Notes to the unaudited Financial Statements.
  6




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HOMELAND ENERGY SOLUTIONS, LLC
  1. Nature of Business
  2. Summary of Significant Accounting Policies
    Fiscal Reporting Period
  Accounting Estimates
  Cash
   Property and Plant
    7




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HOMELAND ENERGY SOLUTIONS, LLC
  Intangible Asset
  Cost of Raising Anticipated Capital
  Organizational and Start-up Costs
  Revenue Recognition
  Income Taxes
  Recently Issued Accounting Standards
   Grant Income
   8




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HOMELAND ENERGY SOLUTIONS, LLC
   3. Development Stage Enterprise
   4. Debt
  5. Members Equity
     9




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HOMELAND ENERGY SOLUTIONS, LLC
    6. Related Party Transactions
  7. Commitments and Contingencies
        10




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HOMELAND ENERGY SOLUTIONS, LLC
           11




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HOMELAND ENERGY SOLUTIONS, LLC
        8. Subsequent Events
   12
    Table of Contents   HOMELAND ENERGY SOLUTIONS, LLC
      13




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Item 2. Managements Discussion and Analysis and Plan of Operations.
 Forward Looking Statements
  
    
    Our ability to enter into definitive loan documents to secure the debt financing necessary
to construct and operate our plant;
    
    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 due to weather or other unforeseen circumstances at our site and
technical difficulties in constructing the plant;
    
    Changes in the availability and price of natural gas and/or coal to power our plant;
    
    Changes to our budget in the event that we implement a coal gasification energy center to
power our plant;
    
    Our ability to procure the financing necessary to build a coal gasification energy center
to power our plant as well as our ability to enter into a binding agreement with a design build
firm to build our coal gasification energy center;
    
    Our ability to comply with current environmental regulations that apply to our site and our
anticipated operations;
    
    Changes in the environmental regulations that apply to our plant site and operations that
may require us to install additional technology or otherwise increase our costs of compliance
with the environmental regulations;
    
    Our ability to secure all necessary licenses and permits to construct and operate our plant;
    
    Our ability to attract and hire our management and other employees for our plant;
    
    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 that may make it more difficult for
us to compete with other ethanol plants utilizing such technology; and
    
    Competition in the ethanol industry and from other alternative fuel additives.
  14




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##### Table of Contents



Overview
     15
    Table of Contents  Plan of Operations to Start-Up of the Ethanol Plant
   Project Capitalization
  Seed Capital Offering
  Registered Offering
   16
    Table of Contents  Bridge Loan
   Senior Debt Financing
     17
    Table of Contents  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.
    Site Development and Construction Activities
   18
    Table of Contents  Design-Build Agreement with Fagen, Inc. and the First Amendment to the Design-Build Agreement
  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.
   Agreement with Air Resource Specialists, Inc.
   19
    Table of Contents  Agreement with PlanScape Partners
  Agreement with Terracon Consultants Inc.
  Agreement with Transystems
  Agreement with JB Holland Construction, Inc.
  Permitting and Regulatory Activities
   20
    Table of Contents    Environmental Permits Obtained as of the Date of this Report
 
    
    Construction Air Permit
 
    
    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
  Nuisance
 21
    Table of Contents    Additional Environmental Issues for Coal Gasification
    Trends and Uncertainties Impacting the Ethanol Industry and our Future Operations
  22
    Table of Contents          23
    Table of Contents  Massachusetts v. EPA
 Technology Developments
 24
    Table of Contents   Trends and Uncertainties Impacting the Corn and Natural Gas Markets and Our Future Cost of Goods
Sold
     Operating Expenses
  Liquidity and Capital Resources
 Estimated Sources of Funds
   25
    Table of Contents  Sources of Funds
    
    
    
    
    
    PercentSeed Capital Proceeds (1)
    
    $
    1,325,000
    
    
    
    0.72
    %Unit Proceeds (2)
    
    $
    87,595,000
    
    
    
    47.28
    %Senior Debt Financing (3)
    
    $
    94,000,000
    
    
    
    50.73
    %Interest on Escrow (4)
    
    $
    2,360,000
    
    
    
    1.27
    %Total Sources of Funds (5)
    
    $
    185,280,000
    
    
    
    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 issued 85,595 membership units in our registered offering. Once the balance
of our Bridge Loan is paid, the $2,000,000 pledged by one of our investors as collateral is
expected to be released and the investor has submitted a subscription agreement to us for an
additional 2,000 units totaling $2,000,000. We expect to accept this subscription but as of the
date of this report we have not yet done so.(3)
    
    We currently do not have a definitive loan agreement with a senior lender for debt financing
in the amount of $94,000,000. We do have a conditional debt financing commitment letter for
proposed senior credit facilities up to $94,000,000. 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. Under the terms of the conditional debt financing
commitment letter, we must enter into definitive loan documents no later than November 30, 2007 or
the commitment will expire.(4)
    
    As of October 29, 2007, we had earned approximately $2,360,000 in interest on our escrow
account.(5)
    
    Our total sources of funds is expected to be sufficient to cover our estimated project cost of
$173,860,000 as well as to cover the $10,000,000 debt service reserve that we are required to
maintain under our conditional debt financing commitment letter with Home Federal Savings Bank.
 Estimated Use of Proceeds
   26
    Table of Contents  Percent ofUse of Proceeds
    
    Amount
    
    
    TotalPlant construction
    
    $
    120,000,000
    
    
    
    69.02
    %Land cost
    
    
    3,500,000
    
    
    
    2.01
    %Site development costs
    
    
    5,670,000
    
    
    
    3.26
    %Pipeline costs
    
    
    4,000,000
    
    
    
    2.30
    %Construction contingency
    
    
    2,220,000
    
    
    
    1.28
    %Construction insurance costs
    
    
    225,000
    
    
    
    0.13
    %Construction manager fees
    
    
    125,000
    
    
    
    0.07
    %Administrative building
    
    
    760,000
    
    
    
    0.45
    %Office equipment
    
    
    85,000
    
    
    
    0.04
    %Computers, Software, Network
    
    
    175,000
    
    
    
    0.10
    %Rail Infrastructure
    
    
    11,000,000
    
    
    
    6.33
    %Rolling stock
    
    
    500,000
    
    
    
    0.29
    %Fire Protection, water supply and
water treatment
    
    
    3,500,000
    
    
    
    2.01
    %Capitalized interest
    
    
    4,000,000
    
    
    
    2.30
    %Start up costs:Financing costs
    
    
    2,500,000
    
    
    
    1.43
    %Organization costs (1)
    
    
    1,400,000
    
    
    
    0.80
    %Pre production period costs
    
    
    950,000
    
    
    
    0.56
    %Working capital
    
    
    7,000,000
    
    
    
    4.03
    %Inventory  corn
    
    
    2,000,000
    
    
    
    1.15
    %Inventory  chemicals and ingredients
    
    
    500,000
    
    
    
    0.29
    %Inventory  Ethanol
    
    
    2,500,000
    
    
    
    1.43
    %Inventory  DDGS
    
    
    500,000
    
    
    
    0.29
    %Spare parts  process equipment
    
    
    750,000
    
    
    
    0.43
    %Total
    
    $
    173,860,000
    
    
    
    100.00
    %
 
 (1)
    
    Includes estimated offering expenses of $480,000.
 Plant Construction
 Land Cost
 Site Development
 Construction Contingency
 Construction 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  27
    Table of Contents  Financing Costs
 Organizational Costs
 Pre-Production Period Costs
 Inventory.
 Financial Results for the Fiscal Quarter Ended September 30, 2007 and the period from Inception
through September 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
  28
    Table of Contents  Off Balance Sheet Arrangements
  
 Item 3. Controls and Procedures
      
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
   29
    Table of Contents  Carbon dioxide may be regulated in the future by the EPA as an air pollutant requiring us to
obtain additional permits and install additional environmental mitigation equipment, which could
adversely affect our financial performance .
 
 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
   30
    Table of Contents  Item 6. Exhibits
  Exhibit No.
    
    Description
    
    Method ofFiling10.28
    
    Disbursement Request and Authorization dated
September 7, 2007 between Homeland Energy
Solutions, LLC and Home Federal Savings Bank
    
    *10.29
    
    Change in Terms Agreement dated September 7,
2007 between Homeland Energy Solutions, LLC
and Home Federal Savings Bank
    
    *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.
 
 SIGNATURES
  HOMELAND ENERGY SOLUTIONS, LLCDate: November 14, 2007
    
    /s/ Stephen EastmanStephen EastmanPresident (Principal Executive Officer)Date: November 14, 2007
    
    /s/ Bernard RetterathBernard RetterathTreasurer (Principal Financial and Accounting Officer)
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