In the opinion of management, the interim condensed financial statements reflect all adjustments considered necessary for fair presentation. The adjustments made to these statements consist only of normal recurring adjustments.

Homeland Energy Solutions, LLC is organized as an Iowa limited liability company. The members' liability is limited as specified in Homeland Energy Solutions' operating agreement and pursuant to the Iowa Revised Uniform Limited Liability Company Act.

Management uses estimates and assumptions in preparing these financial statements in accordance with United States Generally Accepted Accounting Principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates.

The Company maintains its accounts primarily at one financial institution. At various times, the Company's cash balances may exceed amounts insured by the Federal Deposit Insurance Corporation. The Company has not experienced losses in such accounts. Also included in cash and cash equivalents are highly liquid investmentinvestments that are readily convertible into known amounts of cash, which are subject to an insignificant risk of change in value due to interest rate, quoted price or penalty on withdrawal and have aan original maturity of three months or less.

Investments bought and held principally for the purpose of selling them in the near term are classified as trading securities. Trading securities are measured at fair value using prices obtained from pricing services. Any interest, dividends, and unrealized or realized gains and losses on the trading securities are recorded as part of other income.

At June 30, 2020, trading securities consisted of short term bond mutual funds with an approximate cost of $10,387,0002021 and fair value of $10,409,000. At December 31, 2019,2020, the Company held no trading securities consisted of corporate bondssecurities. During the three and short term bond mutual funds with an approximate cost of $42,370,000six months ended June 30, 2021, the Company had 0 interest, dividends and fair value of $42,508,000. Fornet unrealized gains from trading securities. During the three and six months ended June 30, 2020, the Company recorded interest, dividend and net realized and unrealized gains from these investments of approximately $500,000 and $181,000, respectively, included in other income on the statement of operations. During the same time period of 2019, the Company recorded interest, dividends and net unrealized gains from these investmentstrading securities of approximately $688,000$500,000 and $1,273,000,$181,000, respectively.

The Board of Directors voted to set aside up to $30 million in trading securities to be used by the Company for the repurchase of 25,860 membership units per the terms of an agreement with Mr. Retterath entered into on June 13, 2013 with the Company. These trading securities were used in April 2020 to repurchase the 25,860 membership unitesunits from Mr. Retterath.

Credit sales are made primarily to two customers and no collateral is required. The Company carries these accounts receivable at original invoice amount with no allowance for doubtful accounts due to the historical collection rates on these accounts.

The Company has a less than 20% investment interest in Renewable Products Marketing Group, LLC ("RPMG"). This investment is being accounted for under the equity method of accounting, as the Company has significant influence, under which the Company's share of net income is recognized as income in the Company's statement of operations and added to the investment account. The investment balance is included in other assets and the income recognized as other income. The investment is evaluated for indications of impairment on a regular basis. A loss would be recognized when the fair value is determined to be less than the carrying value.

In the first quarter of 2018, theThe Company adopted Accounting Standards Update (ASU) 2014-9,recognizes Revenue from Contracts with Customers (Topic 606).following Accounting Standards Update (ASU) 2014-09. Under the ASU, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entityCompany expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company applied the five-step method outlined in the ASU to all contracts with customers and elected the modified retrospective implementation method. The Company generally has a single performance obligation in its arrangements with customers. The Company believes for its contracts with customers, control is transferred at a point in time, typically upon delivery to the customers. When the Company performs shipping and handling activities after the transfer of control to the customers (e.g., when control transfers prior to delivery), they are considered as fulfillment activities, and accordingly, the costs are accrued for when the related revenue is recognized. The Company generally expenses sales commissions when incurred because the amortization period would have been less than one year.

The following is a description of principal activities from which we generate revenue. Revenues from contracts with customers are recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services.

All revenue recognized in the income statement of operations is considered to be revenue from contracts with customers. The disaggregation of revenue according to product line, along with accounts receivable from contracts with customers, is as disclosed in Note 5.

Shipping costs incurred by the Company in the sale of ethanol and distiller grains are not specifically identifiable and as a result, revenue from the sale of ethanol and distiller grains is recorded based on the net selling price reported to the Company from the marketer. Rail car lease costs incurred by the Company in the sale and shipment of distiller grain products are included in the cost of goods sold.

Inventories are generally valued at the lower of cost (first-in, first-out) or net realizable value.  In the valuation of inventories and purchase commitments, net realizable value is defined as estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation.

The Company reviews its property and equipment for impairment whenever events indicate that the carrying amount of the asset group may not be recoverable. If circumstances require an asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by the asset group to the carrying value of the asset group. If the carrying value of the asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.

The Company evaluates its contracts to determine whether the contracts are derivative instruments. Certain contracts that literally meet the definition of a derivative may be exempted from derivative accounting as normal purchases or normal sales. Normal purchases and normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. Contracts that meet the requirements of normal purchases or sales are documented as normal and exempted from the accounting and reporting requirements of derivative accounting.

The Company enters into short-term cash, option and futures contracts as a means of securing purchases of corn, natural gas and sales of ethanol for the plant and managing exposure to changes in commodity and energy prices. All of the Company's derivatives are designated as non-hedge derivatives for accounting purposes, with changes in fair value recognized in net income.income (loss). Although the contracts are economic hedges of specified risks, they are not designated as and accounted for as hedging instruments.

As part of its trading activity, the Company uses futures and option contracts through regulated commodity exchanges to manage its risk related to pricing of inventories. To reduce that risk, the Company generally takes positions using cash and futures contracts and options.

Realized and unrealized gains and losses related to derivative contracts related to corn and natural gas are included as a component of cost of goods sold and derivative contracts related to ethanol are included as a component of revenue in the accompanying financial statements. The fair values of contracts entered through commodity exchanges are presented on the accompanying balance sheet as derivative instruments. All contracts with the same counter party are reported on a net basis.

Basic and diluted net income (loss) per unit is computed by dividing net income (loss) by the weighted average number of members' units and members' unit equivalents outstanding during the period. There were no member unit equivalents outstanding during the periods presented; accordingly, the Company's basic and diluted net income per unit are the same.

The Company has certain risks and uncertainties that it will experience during volatile market conditions, which can have a severe impact on operations. The Company's revenues are derived from the sale and distribution of ethanol, distiller grains and corn oil to customers primarily located in the United States. Corn for the production process is supplied to the plant primarily from local agricultural producers and from purchases on the open market. For the six months ended June 30, 2020,2021, ethanol sales averaged approximately 74%75% of total revenues, while approximately 21%19% of revenues were generated from the sale of distiller grains. Corn

The Company's operating and financial performance is largely driven by the prices at which ethanol is sold and the net expense of corn. The price of ethanol is influenced by factors such as supply and demand, weather, government policies and programs, and unleaded gasoline and the petroleum markets. Excess ethanol supply in the market, in particular, puts downward pressure on the price of ethanol. The Company's largest cost of production is corn. The cost of corn is generally impacted by factors such as supply and demand, weather, and government policies and programs. The Company's risk management program is used to protect against the price volatility of these commodities.

On January 30, 2020, the World Health Organization declared the coronavirus outbreak (COVID-19) a “Public"Public Health Emergency of International Concern”Concern" and on March 11, 2020, declared COVID-19 a pandemic. The impact of COVID-19 has negatively impacted the Company’s operations, suppliers or other vendors, and customer base. Any future quarantines, labor shortages or other disruptions to the Company’sCompany's operations, or those of their customers, may adversely impact the Company’sCompany's revenues, ability to provide its services and operating results. In addition, a significant outbreak of epidemic, pandemic or contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, including the geographical area in which the Company operates, resulting in an economic downturn that could affect demand for its goods and services. The extent to which the coronavirus continues to impact the Company’sCompany's results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and actions taken to contain the coronavirus or its impact, among others.

Inventory consisted of the following as of June 30, 20202021 and December 31, 2019:2020:

On June 29, 2017, the Company amended and restated the Master Loan Agreement with Home Federal Savings Bank ("Home Federal"), amending the term revolving loan to provide funding to operate the plant and establishing a term loan to help fund the Company's $42 million expansion project. In return, the Company entered into agreements providing Home Federal a security interest in substantially all personal property located on Company property. The Company currently has two loans1 loan with Home Federal, a term revolving loan and a term loan.

During the term of the loans, the Company is subject to certain financial covenants at various times calculated monthly, quarterly or annually, including restriction of the payment of dividends and capital expenditures and maintenance of certain financial ratios including the minimum working capital and a fixed charge ratio as defined by the Master Loan Agreement. Failure to comply with the protective loan covenants or maintain the required financial ratios may cause acceleration of the outstanding principal balances on the loans and/or the imposition of fees, charges or penalties. The Company is in compliance with all debtfinancial covenants as of June 30, 2020.2021.

The Company has commitments for minimum purchases of various utilities such as natural gas and electricity over the next 12 months totaling approximately $6,400,000$516,000 accounted for under the normal purchase exclusion.

As of June 30, 2020,2021, the Company had 0 natural gas locked in placeat fixed prices. As of June 30, 2020, approximately 1,932,000 decatherms of natural gas was locked into place at fixed prices through December 31, 2020 accounted for under the normal purchase exclusion. As of June 30, 2019, approximately 2,422,500 decatherms of natural gas was locked into place at fixed prices through December 31, 2019.

A lease exists when a contract conveys to a party the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. The Company recognized a lease liability at the lease commencement date, as the present value of future lease payments, using an estimated rate of interest that the Company would pay to borrow equivalent funds on a collateralized basis. A lease asset is recognized based on the lease liability value and adjusted for any prepaid lease

payments, initial direct costs, or lease incentive amounts. The lease term at the commencement date includes any renewal options or termination options when it is reasonably certain that the Company will exercise or not exercise those options, respectively.

The Company leases rail cars and rail moving equipment with original terms up to 7 years. The Company is obligated to pay costs of insurance, taxes, repairs and maintenance pursuant to the terms of the leases. These costs are in addition to regular lease payments and are not included in lease expense. Rent expense incurred for the operating leases during the three and six months ended June 30, 2021 was approximately $492,000 and $953,000, respectively and for the same periods in 2020 was approximately $444,000 and $888,000, respectively, and for the same period in 2019 was approximately $433,000 and $854,000, respectively. The lease agreements have maturity dates ranging from March 2022 to October 2025. The weighted average remaining life of the lease term for these leases was 2.391.39 years as of June 30, 2020.2021.

The discount rate used in determining the lease liability for each individual lease was the Company's estimated incremental borrowing rate of 4.79%. The right-of-use asset operating lease, included in other assets, and operating lease liability, included in current and long term liabilities was $3,906,983approximately $2,307,790 and $3,116,941 as of June 30, 2020.2021 and December 31, 2020, respectively.

The Company's activities expose it to a variety of market risks, including the effects of changes in commodity prices. These financial exposures are monitored and managed by the Company as an integral part of its overall risk-management program. The Company's risk management program focuses on the unpredictability of financial and commodities markets and seeks to reduce the potentially adverse effects that the volatility of these markets may have on its operating results.

To reduce price risk caused by market fluctuations, the Company generally follows a policy of using exchange traded futures and options contracts to reduce its net position of merchandisable agricultural commodity inventories and forward cash purchase and sales contracts and uses exchange traded futures and options contracts to reduce price risk. Exchange-traded futures contracts are valued at market price. Changes in market price of exchange traded futures and options contracts related to corn and natural gas are recorded in costs of goods sold and changes in market prices of contracts related to the sale of ethanol, if applicable, are recorded in revenues.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various methods including market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, the Company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

Level 1: Valuations for assets and liabilities traded in active markets from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2: Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third-party pricing services for identical or similar assets or liabilities.

Level 3: Valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

A description of the valuation methodologies used for instruments measured at fair value, including the general classification of such instruments pursuant to the valuation hierarchy, is set forth below:

The Company's financial assets and liabilities not recorded at fair value, for which carrying value approximates fair value, consists of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and accrued expenses. Additionally, fixed rate term debt, carried at book value of $15,000,000 at June 30, 2020, had an estimated fair value of approximately $15,184,000, determined based on a discounted cash flows model. As of December 31, 2019, carrying value of long term debt carried at book value of $18,000,000 at December 31, 2019, had an estimated fair value of approximately $17,965,000.revolver debt.

In relation to the repurchase agreement discussed in Note 4, onOn August 1, 2013 Mr. Steve Retterath filed a lawsuit against the Company along with several directors, the Company's former CEO, former CFO, COO, a former director and the Company's outside legal counsel in Florida state court. In August 2016, this lawsuit was voluntarily dismissed without prejudice by the Retteraths. On August 14, 2013, the Company filed a lawsuit in Iowa state court to enforce the repurchase agreement the Company entered into with Mr. Retterath. No distributions have been paid to Mr. Retterath since the time of the original expected closing date of August 1, 2013. On June 15, 2017, the Iowa Court ruled in favor of Homeland that the repurchase agreement was valid and directed Mr. Retterath to perform his obligations under the repurchase agreement by August 1, 2017. Mr. Retterath subsequently filed various motions with the Iowa Court and was granted a stay regarding his obligation to perform the repurchase agreement while the court considered his post trial motions. On May 7, 2018, the Iowa Court denied Mr. Retterath's motions for a new trial and to reconsider the Iowa Court's prior ruling. In February 2020, the Iowa Supreme Court ruled in favor of the Company that the repurchase agreement was valid. In April 2020, the Company closed the repurchase of the membership units held by Mr. Retterath.

On August 9, 2013, GS Cleantech Corporation (GS Cleantech), a subsidiary of Greenshift Corporation, filed a complaint againstJuly 22, 2021, the Company alleging thatentered into an amendment to the Company's operation ofrevolving debt with Home Federal, creating a corn oil extraction process licensed bynew $50 million revolving loan in addition to existing debt instruments. The agreements Homeland entered into with Home Federal were: (i) a Third Amendment to Amended and Restated Master Loan Agreement (the “Loan Amendment”); (ii) a Third Amended and Restated Second Supplement to Master Loan Agreement (the “Term Loan Amendment”); (iii) a Revolving Promissory Note (the “Promissory Note”); and (iv) a Fifth Amended and Restated Mortgage (the “Amended Mortgage”).

Pursuant to the Loan Amendment, the Company infringes patent rights claimed by GS Cleantech. GS Cleantech seeks royalties, damagescan borrow up to $50 million pursuant to the revolving loan. The amount available pursuant to the revolving loan decreases to $40 million on December 31, 2021 and potentially triple damages associated withdecreases again to $30 million on May 31, 2022. Interest on the alleged infringement, as well as attorney's fees fromrevolving loan accrues at a rate of 30 basis points less than the Company. The Company has filed an answer and counterclaims claiming invalidityprime rate. There is a fee on the unused portion of the patents, noninfringement, and inequitable conduct. Recentlyrevolving loan equal to 0.30%. The maturity date of the federal appeals court rejected GS Cleantech's appeal. Itrevolving loan is unclear if GS Cleantech intends to seek additional appeals.November 6, 2025.

Homeland Energy Solutions, LLC (referred to herein as "we," "us," the "Company," or "Homeland") is an Iowa limited liability company. Homeland was formed on December 7, 2005 for the purpose of pooling investors for the development, construction and operation of a 100 million gallon per year ethanol plant located near Lawler, Iowa. We began producing ethanol and distiller grains at the plant in April 2009. We completed installation of corn oil extraction equipment and commenced selling corn oil during our fourth quarter of 2011. During our fourth quarter of 2017, we completed a plant expansion project. The ethanol plant is now capable of operating at a rate in excess of 190 million gallons of ethanol per year.

The following table shows the results of our operations and the percentage of revenues, cost of goods sold, operating expenses and other items to total revenues in our statement of operations for the three months ended June 30, 20202021 and 2019:2020:

Our total revenue for our second quarter of 20202021 was approximately 25% less105% more than our total revenue for our second quarter of 20192020 due primarily to less ethanol revenue.increased average prices for our products.

For our second quarter of 2020,2021, our total ethanol revenue was approximately 29% less111% more than our second quarter of 20192020 due to less gallons of ethanol sold along with lower average prices we received for our ethanol during the 2020 period.period, as well as slightly fewer gallons sold in 2020.

The average price per gallon we received for our ethanol during our second quarter of 20202021 was approximately 17% less96% more than the average price we received for our ethanol during our second quarter of 2019.2020. Management attributes this decreaseincrease in the average price we received for our ethanol with lowerhigher market gasoline prices, and less gasoline demand earlier inwhich impacts ethanol prices, during our second quarter of 2020 due2021 compared to the COVID-19 pandemic. Gasoline demand increased later in our second quarter of 2020 which positively impacted ethanol prices later in the quarter. We have continued to sell ethanol and are working to secure additional markets for our ethanol during thissame period of low ethanol demand.2020. Management believes that the COVID-19 pandemic impacted gasoline demand during the 2020 period. Management anticipates that the impact of the COVID-19 pandemic willmay continue for the rest of our 2020 fiscal year and potentially beyond, especially if additional travel restrictions are implemented later in our 20202021 fiscal year.

   ��We sold approximately 15% fewer7% more gallons of ethanol during our second quarter of 20202021 compared to the same period of 20192020. Management attributes this increase to increased travel as people begin to travel more as restrictions on travel due to market conditions which have impacted demand for ethanol. During times when ethanol pricesthe COVID-19 pandemic are low, we are focusing on operating the ethanol plant as efficiently as possible in order to maximize the amount of ethanol we can produce per bushel of corn ground.relaxing.

    

Our total distiller grains revenue was approximately 12% less82% more during our second quarter of 20202021 compared to the same period of 2019,2020, primarily due to decreasedan increased average price of distiller grains production, partially offset by higher averagesold, as well as slightly more dried distiller grains prices.sold. We sold approximately 15% fewer11% more tons of distiller grains during our second quarter of 20202021 compared to the same period of 20192020 due to reduced production at the ethanol plant overall along with increased production of corn oil. When we produce more pounds of corn oil, it reducesin 2020 during the volume of distiller grains we have available to sell.COVID-19 pandemic. We primarily sell our distillers grains in the dried form. The average price we received for our dried distiller grains was approximately 3% greater64% higher during our second quarter of 20202021 compared to the same period of 2019.2020. Management anticipates that distiller grains prices will remain steady during the rest of our 20202021 fiscal year especially if ethanol production remains lower. Distiller grains are an important component of feed rations for our customers which positively impacts distiller grains prices when market supply is lower. However, difficulties in the meat packing industry may leaddue to decreased animal feed demand which would likely impactanticipated stable distiller grains demand.

Our total cost of goods sold was approximately 26% less97% more for our second quarter of 20202021 compared to the same period of 2019.2020. Our cost of goods sold related to corn, without taking into account derivative instruments, was approximately 25% less103% more during our second quarter of 20202021 compared to our second quarter of 20192020 due to using lesshigher average corn costs per bushel, along with slightly more bushels of corn as well as lower corn costs.ground. We used approximately 13% fewer9% more bushels of corn during our second quarter of 20202021 compared to the same period of 20192020 due to reducedincreased overall production at the ethanol plant. Our average cost per bushel of corn was approximately 13% lower87% higher during our second quarter of 20202021 compared to our second quarter of 20192020 due primarily to less demand forincreased corn in our market.demand. Management anticipates that corn costs will remain lowerhigher unless current market conditions persistchange and corn demand is higherlower due to increased ethanol production.corn supply from new crop corn.

We experienced decreasedincreased natural gas costs during our second quarter of 20202021 compared to the same period of 20192020 primarily due to decreasedslightly higher average costs per MMBtu of natural gas used, along with slightly increased usage during the 2020 period, offset by slightly higher average cost per unit.2021 period. During our second quarter of 2020,2021, our average delivered cost per MMBtu of natural gas was approximately 2% greater13% higher compared to the same period of 2019.2020. In addition, we used approximately 11% fewer13% more MMBtu of natural gas during our second quarter of 20202021 compared to our second quarter of 20192020 due to decreasedincreased production at the ethanol plant.

We engage in risk management activities that are intended to fix the purchase price of the corn and natural gas we require to produce ethanol, distiller grains and corn oil. During our second quarter of 2020,2021, we had aexperienced combined realized gainand unrealized losses of approximately $1.43$14.8 million related to our corn and natural gas derivative instruments which increased our cost of goods sold. During our second quarter of 2020, we had combined realized and unrealized gains of approximately $350 thousand which decreased our cost of goods sold related to our corn and natural gas derivative instruments. We recognize

    Our total distiller grains revenue was approximately 60% more during our six months ended June 30, 2021 compared to the same period of 2020, primarily due to an increased average price of distiller grains sold, as well as slightly more dried distiller grains sold. We sold approximately 4% more tons of distiller grains during our six months ended June 30, 2021 compared to the same period of 2020 due to reduced production at the ethanol plant in 2020 due to the COVID-19 pandemic.

    We engage in risk management activities that are intended to fix the purchase price of the corn and natural gas we require to produce ethanol, distiller grains and corn oil. During our six months ended June 30, 2021, we experienced combined realized and unrealized losslosses of approximately $1.08$16.2 million related to our corn and natural gas derivative instruments. During our second quarter of 2019, we