<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q/A

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934

                 For the Quarterly Period Ended: March 31, 1996

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934

          For the transition period from ____________ to ____________

                        Commission File Number: 33-96794
                                               ----------

                          DECORATIVE HOME ACCENTS, INC.
             (Exact name of registrant as specified in its charter)

           Delaware                                     57-0998387
-------------------------------             ------------------------------------
(State or other jurisdiction of             (IRS Employer Identification Number)
 incorporation or organization)             

             Industrial Park Drive, Abbeville, South Carolina 29620
             ------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code: (864) 446-2123


        Indicate by check mark whether the registrant has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports).

                                 Yes [ ]                 No  [X]

        Indicate by check mark whether the registrant has been subject to such
filing requirements for the past 90 days.

                                 Yes [X]                 No  [ ]

        As of May 10, 1996, there were 1,074,838 shares outstanding of the
Registrant's Class A Common Stock ($0.01 par value), 1,756,126 shares
outstanding of the Registrant's Class B Non-Voting Common Stock ($0.01 par
value), 386,040 shares outstanding of the Registrant's Class C Common Stock
($0.01 par value), 808,333 shares outstanding of the Registrant's Class D Common
Stock ($0.01 par value), 125,000 shares outstanding of the Registrant's Class F
Common Stock and 51,875 outstanding shares of the Registrant's 14% Cumulative
Redeemable Preferred Stock ($0.01 par value).

<PAGE>   2

                          DECORATIVE HOME ACCENTS, INC.

                          QUARTER ENDED MARCH 31, 1996

                                      INDEX
<TABLE>
<CAPTION>
                                                                                              Page
                                                                                               No.
                                                                                               ---
<S>            <C>                                                                             <C>

PART I  FINANCIAL INFORMATION

   Item 1.     Financial Statements (Unaudited)

               Condensed Consolidated Balance Sheets as of March 31, 1996 (As Restated)
                      and December 31, 1995 .................................................  4

               Condensed Consolidated Statements of Operations for the three
                      months ended March 31, 1996 (As Restated) and 1995.....................  5

               Condensed Consolidated Statement of Stockholders' Equity for the
                      three months ended March 31, 1996 (As Restated)........................  6

               Condensed Consolidated Statements of Cash Flows for the three
                      months ended March 31, 1996 (As Restated) and 1995 ....................  7

               Notes to Condensed Consolidated Financial Statements (Unaudited)..............  8

   Item 2.     Management's Discussion and Analysis of Financial Condition
                      and Results of Operations ............................................. 10

PART II        OTHER INFORMATION


               Signature Page ............................................................... 15

</TABLE>


                                       2
<PAGE>   3


                                 AMENDMENT NO. 1

        THIS AMENDMENT NO. 1 MODIFIES THE QUARTERLY REPORT FILED ON FORM 10-Q BY
THE REGISTRANT FOR THE PERIOD ENDED MARCH 31, 1996 AS FOLLOWS: PART I, ITEM 1,
FINANCIAL STATEMENTS (UNAUDITED), AND ITEM 2, MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HAVE BEEN REPLACED IN
THEIR ENTIRETY.



                                       3
<PAGE>   4

PART I  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                          DECORATIVE HOME ACCENTS, INC.
              CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
                                   (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                          March 31,
                                                                             1996       December 31,
                                                                       (Unaudited)       1995 (1)
                                                                       -----------       --------
<S>                                                                          <C>          <C>   
                                                                    (Restated - Note 4)
ASSETS
CURRENT ASSETS:
        Cash and cash equivalents                                         $       -    $     169
        Investment securities                                                 1,000        1,000
        Accounts receivable - net of allowance for doubtful accounts of
          $2,661 at March 31, 1996 and $2,506 at December 31, 1995           31,255       28,982
        Income taxes receivable                                               3,488        2,714
        Inventories                                                          47,705       43,713
        Deferred income taxes                                                 4,231        4,282
        Other current assets                                                  1,077          598
                                                                          ---------    ---------
            Total current assets                                             88,756       81,458

PROPERTY, PLANT AND EQUIPMENT, NET                                           30,626       30,667
OTHER ASSETS                                                                  9,314        8,790
INTANGIBLE ASSETS, NET                                                       93,508       94,938
                                                                          ---------    ---------

TOTAL ASSETS                                                              $ 222,204    $ 215,853
                                                                          =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
        Accounts payable                                                     13,686       14,452
        Accrued liabilities                                                   7,017        9,775
        Accrued interest                                                      4,067        7,583
                                                                          ---------    ---------
            Total current liabilities                                        24,770       31,810
                                                                          ---------    ---------

LONG-TERM DEBT                                                              151,326      131,452
DEFERRED INCOME TAXES                                                         1,154        3,348
REDEEMABLE PREFERRED STOCK                                                   43,123       41,059
REDEEMABLE COMMON STOCK                                                       1,817        1,639
STOCKHOLDERS' EQUITY:
        Common stocks                                                             9            9
        Additional paid-in capital                                           13,864       16,107
        Reduction of certain equity interest to predecessor basis            (6,209)      (6,209)
        Accumulated deficit                                                  (7,650)      (3,362)
                                                                          ---------    ---------
            Total stockholders' equity                                           14        6,545
                                                                          ---------    ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                $ 222,204    $ 215,853
                                                                          =========    =========

</TABLE>

(1) Derived from December 31, 1995 audited consolidated financial statements.

See notes to condensed consolidated financial statements (unaudited).



                                       4
<PAGE>   5

                          DECORATIVE HOME ACCENTS, INC.
         CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS)
                                   (UNAUDITED)
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                               Three Months Ended
                                           March 31, 1996   March 31, 1995
                                           --------------   --------------
<S>                                            <C>         <C>     
                                       (Restated - Note 4)

SALES                                          $ 38,783    $ 11,276

COST OF GOODS SOLD                               28,836       5,819
                                               --------    --------

GROSS PROFIT                                      9,947       5,457

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES     11,736       4,261
                                               --------    --------

INCOME (LOSS) FROM OPERATIONS                    (1,789)      1,196
                                               --------    --------

INTEREST INCOME (EXPENSE)
        Interest expense                         (4,614)     (1,812)
        Interest income                               9         131
                                               --------    --------
            Interest income (expense), net       (4,605)     (1,681)
                                               --------    --------

LOSS BEFORE PROVISION FOR INCOME TAXES           (6,394)       (485)

INCOME TAX BENEFIT                                2,106         184
                                               --------    --------

NET LOSS                                       $ (4,288)   $   (301)
                                               ========    ========

</TABLE>


See notes to condensed consolidated financial statements (unaudited).



                                       5
<PAGE>   6

                         DECORATIVE HOME ACCENTS, INC.
            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
            FOR THE THREE MONTHS ENDED MARCH 31, 1996 (IN THOUSANDS)
                                   (UNAUDITED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                               Reduction of
                                                                              Certain Equity
                                                                                Interest to                  Total
                                                    Common    Additional       Predecessor     Retained   Stockholders'
                                                    Stocks  Paid-in Capital        Basis       Earnings      Equity
                                                    ------  ---------------   --------------   --------   -------------
<S>                  <C> <C>                      <C>         <C>               <C>            <C>         <C>     
Balances at December 31, 1995                     $      9    $ 16,107          $ (6,209)      $ (3,362)   $  6,545

Accretion of redeemable common stock for the
     three months ended March 31, 1996                            (179)                                        (179)

Accretion of redeemable preferred stock for the
     three months ended March 31, 1996                            (189)                                        (189)

Preferred stock dividend paid-in-kind                           (1,875)                                      (1,875)

Net loss (Restated - Note 4)                                                                     (4,288)     (4,288)
                                                  --------    --------          --------       --------    --------

Balances at March 31, 1996 (Restated - Note 4)    $      9    $ 13,864          $ (6,209)      $ (7,650)   $     14
                                                  ========    ========          ========       ========    ========

</TABLE>



      See notes to condensed consolidated financial statements (unaudited).


                                       6
<PAGE>   7




                          DECORATIVE HOME ACCENTS, INC.
         CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
                                   (UNAUDITED)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                            Three months ended
                                                                March 31
                                                           1996           1995
                                                       -------------------------
<S>                                                       <C>         <C>      
                                                   (Restated - Note 4)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                  $ (4,288)   $   (301)
Adjustment to reconcile net loss to net cash
   provided by (used in) operating activities:
Depreciation and amortization                                2,328       1,027
Deferred tax (benefit) provision                            (2,143)        131
  Changes in operating assets and liabilities:
        Accounts receivable                                 (2,273)      1,548
        Inventories                                         (3,992)       (639)
        Income tax receivable                                 (774)          -
        Other current assets                                  (479)     (1,158)
        Accounts payable                                      (766)      1,286
        Accrued liabilities                                 (1,009)     (1,419)
        Accrued interest                                    (3,516)      1,757
        Income taxes payable                                     -        (567)
                                                          --------    --------
            Net cash provided by (used in) operating
                     activities                            (16,912)      1,665
                                                          --------    --------
CASH FLOWS FROM INVESTING ACTIVITIES:
        Purchase of property and equipment                    (857)       (440)
        Other long term assets                                (524)          -
                                                          --------    --------
            Net cash used in investing activities           (1,381)       (440)
                                                          --------    --------

CASH FLOWS FROM FINANCING ACTIVITIES:
        Net borrowings under revolving line of credit       19,874           -
        Redeemable preferred stock dividends paid           (1,750)          -
                                                          --------    --------
             Net cash provided by  financing activities     18,124           -
                                                          --------    --------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS              (169)      1,225

CASH AND CASH EQUIVALENTS AT BEGINNING
      OF PERIOD                                                169       8,355
                                                          --------    --------

CASH AND CASH EQUIVALENTS AT  END OF
      PERIOD                                              $      -    $  9,580
                                                          ========    ========

SUPPLEMENTAL CASH FLOW INFORMATION:
        Interest paid                                     $  9,875    $      -
                                                          ========    ========

</TABLE>


See notes to condensed consolidated financial statements (unaudited).



                                       7
<PAGE>   8

DECORATIVE HOME ACCENTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1996 (AS RESTATED) AND 1995


1.      BASIS OF INTERIM PRESENTATION

        The accompanying interim unaudited condensed consolidated financial
        statements have been prepared in accordance with generally accepted
        accounting principles for interim financial information and the
        instructions of Regulation S-X. Accordingly, they do not include all the
        information and footnotes required by generally accepted accounting
        principles for complete financial statements. In the opinion of
        management, all adjustments (consisting of normal recurring adjustments)
        considered necessary for a fair presentation have been included in the
        interim financial information.

        For interim reporting, the Company's subsidiary, Home innovations. Inc.
        ("HII") records an estimated gross profit based on information provided
        by its accounting and financial systems. At year-end, inventories of the
        Company are stated at the lower of cost, determined using the first-in,
        first-out (FIFO) method, or market.

        The Company's business is seasonal in nature, with its highest sales
        levels historically occurring in the third and fourth fiscal quarters,
        which include the holiday selling season. Therefore, the results of
        operations for the interim periods are not necessarily indicative of the
        operating results of the full year.


2.      ORGANIZATION

        The accompanying interim consolidated financial statements as of March
        31, 1996, include the accounts of Decorative Home Accents, Inc. ("DHA"
        or the "Company") and its wholly-owned subsidiaries, The Rug Barn, Inc.
        and Home Innovations, Inc. (purchased on July 13, 1995).

        All significant intercompany transactions and accounts have been
        eliminated.


3.      BALANCE SHEET COMPONENTS

        Inventories are summarized as follows (in $000's):

<TABLE>
<CAPTION>

                            March 31, 1996  December 31, 1995   
                            --------------  -----------------   
<S>                                <C>                 <C>      
         Raw materials             $23,552             $24,464  
         Work-in-process             2,130                 973  
         Finished goods             22,023              18,276  
                                   -------             -------  
                                   $47,705             $43,713  
                                   =======             =======  

</TABLE>




                                        8
<PAGE>   9

        Property, plant and equipment is summarized as follows (in $000's):

<TABLE>
<CAPTION>
                               MARCH 31, 1996   DECEMBER 31, 1995
                               --------------   -----------------
<S>                                  <C>                <C>        
        Land                         $    863           $    863   
        Buildings and improvements     15,398             15,384  
        Furniture and fixtures          3,193              3,184  
        Machinery and equipment        14,171             14,101  
                                     --------           --------  
                                       33,625             33,532  
                                                                  
        Accumulated depreciation       (3,895)            (3,375) 
                                     --------           --------  
                                       29,730             30,157  
        Construction in progress          896                510  
                                     --------           --------  
                                     $ 30,626           $ 30,667  
                                     ========           ========  
</TABLE>
                                                        
4.       RESTATEMENT

        Subsequent to the original issuance of the Company's financial
        statements for the three months ended March 1996, the six months ended
        June 30, 1996 and the nine months ended September 30, 1996, management
        determined that certain customer chargebacks and credits had either not
        been properly recorded in the financial statements or had been recorded
        in improper accounting periods. As a result, the accompanying financial
        statements have been restated. The following is a summary of the effects
        of the restatements:

<TABLE>
<CAPTION>
                                          THREE MONTHS ENDED MARCH 31, 1996
                                          ---------------------------------
                                              AS                AS ORIGINALLY
                                           RESTATED                RECORDED
                                           --------                --------
<S>                                        <C>                    <C>    
Net sales                                  $38,783                $39,786
Loss from operations                       $(1,789)               $  (867)
Net loss                                   $(4,288)               $(3,670)

</TABLE>

<TABLE>
<CAPTION>
                                               AS OF MARCH 31, 1996
                                          ---------------------------------
                                              AS               AS ORIGINALLY
                                           RESTATED               RECORDED
                                           --------               --------
<S>                                        <C>                    <C>    
Current assets                            $ 88,756               $ 89,455
Total assets                              $222,204               $222,935
Current liabilities                       $ 24,770               $ 24,910
Total liabilities                         $177,250               $177,363
Total shareholders' equity                $     14               $    632

</TABLE>



                                       9
<PAGE>   10


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Note: Subsequent to the original issuance of the Company's financial statements
      for the three months ended March 1996, the six months ended June 30, 1996
      and the nine months ended September 30, 1996, management determined that
      certain customer chargebacks and credits had either not been properly
      recorded in the financial statements or had been recorded in improper
      accounting periods. As a result, the accompanying financial statements
      have been restated. The Company has implemented additional procedures
      including timely reconciliation of the Company's accounts receivable to
      avoid such future errors.

      This Management's Discussion and Analysis of Financial Condition and
      Results of Operations reflects the restatement of the Company's unaudited
      condensed consolidated statements of operations for the three months ended
      March 31, 1996. See Note 4 to the Company's unaudited condensed
      consolidated financial statements.

INTRODUCTION

The following discussion provides management's assessment of the results of
operations and liquidity and capital resources of DHA and should be read in
conjunction with the respective financial statements of DHA and the notes
thereto included elsewhere in this Form 10-Q. The following table includes
unaudited proforma financial information as if the July 1995 purchase of Home
Innovations, Inc. ("HII") occurred as of January 1, 1995. Such adjustments to
the proforma financial information consist principally of the following: net
adjustments to cost of goods sold and SG & A expenses related to adjusting
depreciation expense for the new basis of accounting resulting from the HII
acquisition; increases in SG& A expenses to account for the amortization of
goodwill and the identifiable intangible assets resulting from the HII
acquisition; increases in SG & A expenses to account for compensation expense
resulting from granting stock options at less than fair market value; net
adjustments to interest expense resulting from issuance of 13% Senior Notes due
2002 and extinguishment of prior debt, amortization of debt issuance costs and
accretion of discount on the Senior Notes.

Management's discussion and analysis of the results of operations should be read
using the proforma financial information presented below:

<TABLE>
<CAPTION>

                                       ACTUAL        PROFORMA
                                        Three Months Ended
                                      -----------------------
                                       March 31,   March 31,
                                        1996        1995
                                        ----        -----
<S>                                   <C>         <C>     
Sales                                 $ 38,783    $ 52,712
Cost of Goods Sold                      28,836      37,531
                                      --------    --------
     Gross Profit                        9,947      15,181
Selling, General and Administrative
     Expenses                           11,736      11,460
                                      --------    --------
Income (Loss) From Operations           (1,789)      3,721

Interest Expense, Net                   (4,605)     (4,222)
                                      --------    --------

Loss Before Income Taxes              $ (6,394)   $   (501)
                                      ========    ========

</TABLE>

IMPACT OF THE PURCHASE OF HOME INNOVATIONS, INC.

On July 13, 1995, DHA acquired HII, a leading manufacturer of niche oriented
home accessories with the following product categories: bath furnishings, window
and specialty products, bedding products and the new Calvin Klein Home
Collection, a new line of designer home products launched in September 1995
under the Calvin Klein trademark. The cash purchase price of HII was
approximately $95.1 million, after a $6.7 million reduction to the purchase
price, including acquisition related costs of approximately $1.8 million and the
assumption of approximately $31.0 million in liabilities consisting of trade
payables and accruals and $2.3 million of junior subordinated notes.



                                       10
<PAGE>   11

The $6.7 million adjustment to the purchase price was determined as a result of
the level of net assets acquired as of the closing date and certain
indemnifications from the sellers. The $6.7 million was received from the
sellers in December, 1995.

RESULTS OF OPERATIONS

As described above, the results of operations for the three months ended March
31, 1995 reflect proforma adjustments related to the merger agreement discussed
above.

        Comparison of Results of Operations for the Three Months Ended March 31,
        1996 (Actual) (As Restated) with the Proforma Results of Operations for
        the Three Months Ended March 31, 1995 (with proforma adjustments as
        discussed above).

NET SALES

Net sales for three months ended March 31, 1996 decreased by $13.9 million, or
26.4% from $52.7 million of proforma net sales for the three months ended March
31, 1995 to $38.8 million for the three months ended March 31, 1996. Sales
across most of the Company's major product lines decreased principally as a
result of soft retail conditions in the major markets served by the Company. All
distribution channels served were affected by the soft retail environment
including the giftware trade. The reduction of consumer spending and the
associated tightening of retailer's inventory positions which began in the third
quarter of 1995 continued to have negative effects on the Company's sales
performance as expected. Also, the Company's 1996 sales were negatively impacted
by increased accounts receivable chargebacks related to customer returns and
sales allowances. If current market conditions prevail, the Company expects full
year sales to continue to be adversely affected.

GROSS PROFIT

The gross profit margin decreased from a proforma of 28.8% for the three months
ended March 31, 1995 to 25.6% for the three months ended March 31, 1996. The
decrease of approximately 3.2 percentage points in the Company's gross profit
margin partially resulted from plant efficiency losses in the printing and
cut-and-sew operations. As part of the Company's program to improve long-term
operating performance and control inventory investment, the Company temporarily
reduced manufacturing operations at certain plants during the quarter. This
resulted in fixed overhead being unabsorbed by inventory production. The Company
believes that its manufacturing operations are now properly sized relative to
current market demand for the Company's products. There were no significant
changes in the prices paid for raw materials between the 1995 and 1996 periods
as the Company was able to secure raw material purchase contracts at levels
equal to or more favorable than that of the prior year.

SELLING, GENERAL & ADMINISTRATIVE EXPENSES

SG&A expenses increased $276,000 or 2.4% from a proforma of $11.5 million for
the three months ended March 31, 1995 to $11.7 million for the three months
ended March 31, 1996. As a percentage of sales, SG&A expenses increased from a
proforma of 21.7% for the three months ended March 31, 1995 to 30.2% for the
same period of 1996. The increase in SG&A expenses as a percentage of sales was
principally attributable to the fixed nature of the Company's selling and
administrative salary base. Specifically, marketing and design functions, while
not increasing substantially from year to year on an absolute dollar basis,
reflect a higher percentage because of the decreased sales in the 1996 quarter.
SG&A expenses associated with the launch of the Calvin Klein Home line, which
since its inception in September 1995 have as a percentage of sales exceeded the
level of the Company's mature businesses, also contributed to the increased SG&A
for the 1996 quarter. Historically, the Company's SG&A costs as a percentage of
sales have exceeded many of the Company's competitors due to the commission
structure associated with the giftware trade and a relatively high fixed cost
structure within Home Innovations. During the 1996 quarter, the Company
implemented a consolidation of many of its marketing and administrative
functions in an attempt to improve the SG&A expense ratio and expects to see
improvement in its absolute dollar of SG&A costs going forward beginning in the
second half of 1996.



                                       11
<PAGE>   12

INTEREST EXPENSE, NET

Interest expense, net increased from a proforma of $4.2 million for the three
months ended March 31, 1995 to $4.6 million for the three months ended March 31,
1996. This increase was principally due to increased borrowings under the
Company's revolving line of credit during the first quarter of 1996.

SEASONALITY

The Company's business is seasonal in nature with its highest sales levels
historically occurring during the third and fourth fiscal quarters, which
includes the holiday selling season.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary sources of liquidity for operations and expansion have
historically been funds generated internally and borrowings under the Company's
$50.0 million revolving credit facility. Available borrowings under the credit
facility are based on specified levels of underlying collateral. As of March 31,
1996, the Company had approximately $9.1 million available under the revolving
credit facility described above (net of $24.7 million of outstanding borrowings
and $1.4 million in outstanding letters of credit). The Company intends to
utilize borrowings under the revolving credit facility to meet seasonal
fluctuations in the Company's working capital requirements, typically peaking in
early October, and to fund the anticipated build up of inventory relating to the
continued introduction of the Calvin Klein Home line of products. Management
expects the Calvin Klein Home line of products to increase the Company's working
capital needs in 1996 by approximately $8 to $12 million from 1995 levels.
Management believes that the working capital requirements related to Calvin
Klein in 1996 peaked in April 1996. Management believes that the Company's cash
flow from operations and borrowing under the revolving credit facility will be
sufficient to fund the Calvin Klein Home requirements. The obligations under the
revolving credit facility are secured by a first lien on the inventory and
receivables of The Rug Barn, Inc. and Home Innovations, Inc. and its
subsidiaries. The revolving credit facility contains certain financial and other
covenants with which the Company must comply, including, but not limited to a
requirement to maintain certain financial ratios and limitations on the ability
of Rug Barn and Home Innovations to incur additional indebtedness and pay
dividends. The Company was in compliance with the loan covenants, as amended, at
March 31, 1996.

Cash flows used in operating activities were approximately $16.9 million for the
three month period ended March 31, 1996. Driving the cash used in operating
activities for the first quarter, in addition to the Company's net loss, were an
increase in receivables of $2.3 million and inventory of $4.0 million and a
reduction of $3.5 million in accrued interest. The additional inventory
investment related principally to the introduction of the new Calvin Klein Home
line. The increase in receivables resulted from a slight increase in the
Company's sales velocity in the latter weeks of the quarter. The reduction of
$3.5 million in accrued interest resulted from the semi-annual interest payment
on the Company's $125 million, 13% Senior Notes.

Capital expenditures for the three month period in 1996 approximated $857,000.
The Company currently has no material commitments for capital expenditures.

Borrowings under the Company's line of credit increased by approximately $19.9
million during the three month period ended March 31, 1996. The additional
borrowings resulted primarily from the cash used in operating activities
including the interest payment on the Company's Senior Notes and the continued
inventory investment in Calvin Klein Home. Additionally, the Company paid
dividends totaling $1.75 million on its redeemable preferred stock in January
1996. During 1996 the Company expects that dividends will be paid in kind rather
than in cash.

Management expects that the Company's cash flow from operations and borrowings
under the revolving credit facility, as required, will be adequate to finance
anticipated operation needs, planned capital expenditures and to meet its debt
service obligations in 1996.



                                       12
<PAGE>   13

INFLATION

Although the operations of the Company are generally influenced by economic
conditions, the Company does not believe that inflation had a material effect on
the results of operations during the three months ended March 31, 1996 and 1995.
The Company has been historically able to mitigate the impact of the increases
in the spot market prices of cotton through fixed price purchase contracts.

EFFECT OF COMPLIANCE WITH ENVIRONMENTAL PROTECTION PROVISIONS

Compliance with Federal, State and local provisions that have been enacted or
adopted regulating the discharge of materials in the environment, or otherwise
relating to protection of the environment, has not had, and is not expected to
have, a material adverse effect on the capital expenditures, net income or
competitive position of the Company.

PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

The statements contained in this Item 2 (Management's Discussion and Analysis of
Financial Condition and Results of Operations) that are not historical facts are
forward-looking statements subject to the safe harbor created by the Private
Securities Litigation Reform Act of 1995. The Company cautions readers of this
Quarterly Report on Form 10-Q that a number of important factors could cause the
Company's actual results in 1996 and beyond to differ materially from those
expressed in any such forward-looking statements. These factors include, without
limitation, the general economic and business conditions affecting the retail
industry, the Company's ability to meet its debt service obligations,
contractual restrictions on HII's and the Rug Barn's ability to pay dividends to
the Company, competition from a variety of firms ranging from small
manufacturers to large textile mills, the seasonality of the Company's sales,
the volatility of the Company's raw material cost, the Company's dependence on
key personnel and the risk of loss of a material customer or a significant
license. These and other factors are more fully described in the Company's
previous filings with the Securities and Exchange Commission including, without
limitation, the Company's Prospectus dated November 10, 1995.



                                       13

<PAGE>   14

PART II OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

The Company is involved in various routine legal proceedings incidental to the
conduct of its business. Management believes that none of these legal
proceedings will have a material adverse impact on the financial condition or
results of operations of the Company.

ITEM 2.  CHANGES IN SECURITIES                                             None

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES                                   None

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS               None

ITEM 5.  OTHER INFORMATION                                                 None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

        (A)  EXHIBITS
               SEE EXHIBIT INDEX.

        (B)  REPORTS ON FORM 8-K
               NONE



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<PAGE>   15

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Form 10-Q/A (Amendment No. 1 to its quarterly
report on Form 10-Q for the quarter ended March 31, 1996) to be signed on its
behalf by the undersigned thereunto duly authorized.


                                       Decorative Home Accents, Inc.
                                      ---------------------------------
                                              (Registrant)



Date: August 1, 1997                        /s/ Jay N. Baker
     ----------------------------     ----------------------------------
                                              Jay N. Baker*
                                          Chief Financial Officer


*Duly authorized to sign on behalf of the Registrant.



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<PAGE>   16

                                  EXHIBIT INDEX
<TABLE>
<CAPTION>

EXHIBIT
NUMBER  DESCRIPTION
------  -----------
<S>     <C>                                                               
3.3     Certificate of Correction to Certificate of Designation for Decorative
        Home Accents, Inc.

27      Financial data schedule

4.6     Form of Third Amendment to the Amended and Restated Credit Agreement,
        dated as of July 13, 1995, by among LaSalle National Bank, as co-agent
        and lender, General Electric Capital Corporation, as co-agent and
        lender, the Rug Barn, Inc., Home Innovations, Inc., Home Curtain Corp.,
        Calvin Klein Home, Inc., Draymore Mfg. Corp. and R.A. Briggs and
        Company, as amended by the First Amendment, dated as of November 17,
        1995, and by the Second Amendment, dated as of December 31, 1995.

</TABLE>


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