June 6, 2006 Stocklemon Updates Home Solutions of America O, what a tangled web we weave when first we practice to deceive! --- Sir Walter Scott Stocklemon Updates Home Solutions of America (AMEX:HOM) Just two short weeks ago, Home Solutions of America (AMEX:HOM) was hitting new highs. On the cusp of the new hurricane season, the market was searching for the next great “hurricane story” stock. That was the precise moment when insiders of HOM were selling their positions in large quantities. What do they know that you don’t know ? Is this really a hurricane play, or is it no more than a lot of hot air that hit an updraft of misunderstood news and hysteria? You will not believe what we found out. On May 23, the company put out a press release with the headline: “American Renaissance Homes Selects Home Solutions of America as Exclusive Provider of Delivery and Installation Services for Modular Housing” http://biz.yahoo.com/bw/060523/20060523005354.html?.v=1 Ah, the company was rewarded with a contract to provide housing in storm-ravaged Louisiana. All looks good. CEO Fradella went as far to say, “I am pleased that ARH has elected the Company as the exclusive provider of installation services for the program”. Steve Richards, the President of ARH then chimed in his praises for Home Solutions of America. Stocklemon read these releases and with our natural skepticism and wondered “Who is this American Renaissance Homes?” So we went to Google, and, except for the press release, there were no references. Not a single one. We went to Dun & Bradstreet, and there was nothing. Then, we went to New Orleans corporate records and again nothing. It was not until we went to the Delaware Corporate Registry (https://sos-res.state.de.us/tin/GINameSearch.jsp ) that we found American Renaissance Homes: File Number: 4161295 Incorporation Date / Formation Date: 05/18/2006 Entity Name: AMERICAN RENAISSANCE HOMES, L.L.C. Entity Kind: LIMITED LIABILITY COMPANY (LLC) Entity Type: GENERAL Residency: DOMESTIC State: DE REGISTERED AGENT INFORMATION This company was established only 5 days before the Home Solutions’ Press Release was issued. As of the writing of this report, American Renaissance Homes does not even have a working phone number. But it gets MUCH BETTER. After a series of phone calls, we were able to speak with Alan Nazarro, COO of ARH and this is what we found out. 1. Home Solutions of America owns 40% of ARH. 2. The company currently has 0 contracts. It is the opinion of Stocklemon that this is what we have witnessed: The company needed an announcement about some deal in Louisiana. Therefore, a subsidiary is established without ever publicly disclosing that it is a subsidiary. Then a contract is awarded to Home Solutions from the subsidiary to install homes for which there are no current contracts to install. Meanwhile, in the following three days after the release the CEO sells $6.8 million worth of stock: http://finance.yahoo.com/q/it?s=HOM It is the opinion of Stocklemon that HOM intentionally deceived the marketplace for the following reasons. Forget about the obvious omission that the company is a subsidiary, but then goes on to state: "I am pleased that ARH has elected the Company as the exclusive provider of installation services for the program.” -- Frank J. Fradella …. Like they had a choice???? http://biz.yahoo.com/bw/060523/20060523005354.html?.v=1 Then to state in the announcement on June 5, “In addition, we expect the need for affordable housing in New Orleans, through the services we provide to American Renaissance Homes, to enhance revenue during the second half of the year…” ….when there are no current and active contracts. http://biz.yahoo.com/bw/060605/20060605005728.html?.v=1 After the close of business on June 5, Chairman Frank Fradella purchased 100,000 shares of HOM for an average purchase price of $10.15. This was done after a company press release on the same day states he sold stock for “diversification and estate planning”. To Stocklemon, it sounds like someone is paying too much attention to their share price. We can draw 2 conclusions from Fradella’s 100,000 share purchase: 1. Net of the purchase, Fradella still cashed in over $5.5 million HOM stock over the past two weeks. 2. The company has no news about contracts that are imminent. If so, Fradella would have knowledge that the market does not have and he would not have been able to purchase the stock without violating insider trading regulations. Conclusion This all comes down to corporate credibility. For investors to put their faith in a company’s projected contract revenues, accounts receivable, and guidance for future financial results, a company must hold credibility with investors. Credibility is earned through full and accurate disclosure. It is the opinion of Stocklemon that Home Solutions might soon face a hurricane of problems as the company has not been forthright with Wall St. *** Much of the content of this report was based upon a conversation with Alan Nazarro. We were very clear in our points with Mr. Nazarro and believe that we have represented every fact he stated correctly.