Please excuse the technical difficulties... Or, Ooops, our lawyer just called.

The boys over at stocklemon.com were sure busy on Monday night. After the bell on Monday, HSOA released another round of record earnings. They blew away the estimate by over 50%, and after hours action took the stock up over 25%. Knowing that they had to do something NOW, the stocklemon boys hit the crack pipe and tried to discredit HSOA again on Tuesday morning. The story has since been pulled from their site - when you click on the archive link to the story, you are redirected to a story on CSHD. Perhaps their lawyer called?

Lets review stocklemon.com's latest hatchet job on HSOA (yes, I saved a copy):

"In the story we noted that insiders sold millions of dollars in stock at very high prices – on the heels of a highly misleading press release, in which the company trumpeted a “contract in New Orleans” to sell mobile homes. Turned out the counterparty to the contract was a company that Home Solutions itself had just established and funded, a fact that Home Solutions conveniently failed to disclose. The shareholder lawsuits predictably followed."

Well - in typical Stocklemon fashion, there are a couple of interesting things they forgot to mention here.

1.) In the original press announcement they refer to, HSOA did NOT provide any type of revenue guidance for the contract with ARH. When I read this press announcement for the first time, that told me loud and clear that the impact in FY06 would be minimal. Don't let the lemonheads fool you - despite their best efforts to convince the world otherwise, they are not that stupid (no really, it just isn’t possible for them to be THAT stupid).

2.) ARH had their grand opening today on 8/18/2006. Their website is now fully functional, with lots of floor plans and 3d renderings of the model homes. Visit thier website @ (http://www.amrenhomes.com/index.html)

3.) ARH is active in community charity programs. Think Stocklemon.com is???? (http://www.amrenhomes.com/community.html)

4.) Yes, some lawfirms were fishing around trying to find plaintiffs for class action suits. Too bad they couldnt find a lead plaintiff as of these postings:(http://biz.yahoo.com/iw/060818/0155334.html)(http://biz.yahoo.com/pz/060814/103772.html)

5.) HSOA did NOT 'Establish' ARH. They made them a loan for 800k that is fully disclosed in the current 10q: (http://www.sec.gov/Archives/edgar/data/855424/000100329706000346/hom10q1.htm)

"On May 24, 2006, the Company entered into an exclusive agreement with a modular housing sales agent stating it will provide installation services for modular housing in New Orleans and surrounding areas. In connection with the agreement, the Company agreed to loan a third party up to $800 in a note receivable. The note requires one balloon installment of all accrued but unpaid interest and all outstanding principal on August 17, 2006. The note bears interest at the lesser of (a) 7% on a per annum basis, (b) the maximum rate per annum permitted by applicable law."

So lets get this right - HSOA LOANS ARH 800k, gets at least 7% interest, and gets the exclusive rights to installation services for any home that ARH sells? Most companies DREAM of having contracts this good. I guess they could have made more money starting a website, lying about stocks, and then naked shorting them, but hey, I guess some people just have morals.

Ok, that myth is busted!! NEXT?


"Is history about to repeat itself?In the late afternoon of August 14, Home Solutions filed an S-3 registration for insiders to sell over 5 million shares of stock. Just two hours later, the company released a quarterly report that seemed decent at first glance, until you take a deeper look."

1.) Come on guys!! Lol - that is sneaky, even for you!!! "for insiders to sell over 5 million shares"? lol... The last transaction was for Frank F, CEO, to PURCHASE 100k Shares on the open market. Here is a link to the S3: (http://www.sec.gov/Archives/edgar/data/855424/000100329706000343/hsoaforms31.htm)

Myth Busted!! NEXT

"HOLD ON!! It appears as if Home Solutions is booking revenue for work that has not even been performed, notice the phrase “to be used…”This is furthered on the following page when we get a clearer understanding of why Home Solutions showed such great operating margins. As stated in the filings:“HSR of Louisiana generated higher margin fees associated with contracts to commit a portion of its labor force with its major recovery/restoration customer”Again we see the words “to commit”, thereby in the future. That explains the high margins. It is easy to have high margins when you book work that you haven’t performed."
1.) Uh - read the 10q there tough guy. 3 of the 43 million booked this year was for standby. Standby is common in the service industry - see the post below for more on this.

Myth Busted!!! Next??

"The company who they are booking this revenue with is C&B Services, which itself has been merged into an OTC BB company named Charys (OTCBB:CHYS). This is the $40 million customer who allows HSOA such terrific margins. Here is a look at the pedigree of the directors of Charys (parent to C&B Services):"

1.) After this, they went on, slinging mud a couple of people involved with CHYS and C&B services. What the hell is the point??? Even if CHYS goes under, and takes C&B with them, HSOA is STILL protected for any work performed as a sub. They simply file a lean on the properties that they did the work on. Maybe the stocklemon boys should focus on magazine companies, since they personally know how to run them into the ground - they obviously have NO understanding of the type of work that HSOA does.

Myth Busted!!! NEXT?

"Home Solutions is a rollup. Nearly all of its growth is due to acquisitions for debt and/or stock. With rollups, you have to be extra careful with the numbers. Since rollups intentionally grow fast through acquisitions, “Record Revenues” and “Record Earnings” alone do not provide a basis for record share prices. The key factor is dilution. A rollup will always show “Record Revenues and “Record Earnings” … at least for a while. But to justify higher share prices, those revenues and profits have to justify the dilution. The only way to do that is through gaining large-scale efficiencies and synergies – enough to offset the capital cost of the acquisitions – and then some. "
1.) Ok, so here they go ripping on HSOA for making some great acquisitions again. Who says that HSOA and Fireline wont achieve "large-scale efficiencies and synergies"??
2.) They then go on the "dilution!!!" tyrade. What they fail to tell you is that Fireline is bringing thier assets and A/R to the party. 28m in A/R to exact. It seems that this A/R is what HSOA will repay the debt they took out to buy Fireline with, which means they should be brining on 40m in rev per year with 10m ebitda for 11m in cash and 4m shares. They just bought this company for a multiple of .9x 1 year earnings. Most acquisitions are 4-5x. Hmmm. Yea. Sounds like dillution to me. Maybe the stocklemon boys have words that start with 'Dil' on the brain. Choose your own favorite. Doh!!

Myth Busted!!! NEXT???

"In our first report, Stocklemon questioned how this company can ever meet their target of $160 million in revenue for the year. Sad for investors that the company never seems to break it out, but we do know two things.HSOA has booked $43 mil in rev for the first half of 2006. How is the company going to generate $120 mil for the next 6 months?? Anyone ?1. $40 million is supposed to come from Charys.2. HSOA acquired Fireline, who supposedly did $20 mil in revenue for the first half of the year, yet HSOA never raised guidance to adjust to the acquisition. Are they losing $20 mil in other places??? "
1.) This is laughable at best. What the sourpusses are trying to tell you is that HSOA is lying OVER AND OVER again about guidance. They continue to re-affirm the number. So, what is the play here for HSOA??? Come out with a bogus estimate for the year, continue to re-affirm it, acquire another company, and then go out of business? We will know by the end of Q3, when HSOA promised to provide clarity on the impact of the fireline acquisition.

Stocklemon is basically saying that HSOA will go out of business before the end of Q3. I think they are wrong. They seem to be wrong about everything at HSOA though. I think the more likely story is they knew their GIANT short position was in SERIOUS jeopardy after the stellar earnings, and they had to make up as much as they could and release it before things could get out of hand. I further bet that they used that report to cover their short, and move on to greener pastures, like OIC, who they reported on days later. Now the retail shorts are the only ones left to feel the squeeze when HSOA ups guidance AGAIN this year.