UNITED STATES
SECURITIES
 AND EXCHANGE COMMISSION
WASHINGTON,   DC 20549

FORM 10-Q

(Mark One)

[x] Quarterly
report Section 13 or 15(d) of the Securities Exchange Act
of 1934

For the
quarterly period ended March 31, 2006

[  ]
Transition report under Section 13 or 15(d) of the Exchange
Actof 1934

For the
transition period from  to

Commission file
number0-22388



HOME SOLUTIONS OF AMERICA, INC.(Exact name
of registrant as specified in its charter)


Delaware
			
			99-0273889(State or
			other jurisdiction of
			
			(IRS Employerincorporation or organization)
			
			Identification No.)1500 Dragon Street Suite B Dallas, Texas 75207(Address
of principal executive offices)(214) 623-8446(Registrant's telephone
number, including area code)




|(Former name, former
address and former fiscal Year,
|----------------------------------------------------
|if changed since last report)                       



Indicate by check mark whether the registrant (1)
filed all reports required to be filed by Section 13 or 15(d) of the Exchange
Act during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes X 
No

Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, or a
non-accelerated filer.  See definition of "accelerated filer and large
accelerated filer" in Rule 12b2 of the Exchange Act. (check one):

Large accelerated filer  Accelerated
filer   Non-accelerated filerX

Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act)

Yes
      NoX

The number of shares outstanding of
the registrant's common stock, $.001 par value per share, as of May 12, 2006 was 37,635,518.

Transitional Small Business Disclosure Format: Yes  NoX








PART I
FINANCIAL INFORMATION

Item 1.  Financial Statements

|HOME SOLUTIONS OF AMERICA, INC.                              
|-------------------------------------------------------------
|CONSOLIDATED BALANCE SHEETS                                  
|(In Thousands,
  Except Per Share Data)                      
|(Unaudited)                                                  
|                                                             
|                                                             
|ASSETS                                                       
|Current assets:                                              
|                                                             
|                                                             
|                                                             
|                                                             
|                                                             
|                                                             
|                                                             
|                                                             
|                                                             
|Property and
  equipment, net of accumulated depreciation    
|Intangibles, net of
  accumulated amortization               
|                                                             
|Goodwill                                                     
|                                                             
|Notes receivable, net of
  current portion                   
|                                                             
|Non-current assets of
  discontinued operations held for sale
|                                                             
|Deferred tax asset                                           
|                                                             
|Other assets                                                 
|                                                             
|LIABILITIES AND STOCKHOLDERS' EQUITY                         
|Current liabilities:                                         
|                                                             
|                                                             
|                                                             
|                                                             
|                                                             
|                                                             
|Long-term liabilities:                                       
|                                                             
|                                                             
|                                                             
|                                                             
|                                                             
|                                                             
|                                                             
|Commitments and
  contingencies                              
|                                                             
|Stockholders' equity:                                        
|                                                             
|                                                             
|                                                             
|                                                             
|                                                             

|The accompanying notes are an integral part of these consolidated financial
  statements
|----------------------------------------------------------------------------------------

1







HOME SOLUTIONS OF AMERICA, INC.
	CONSOLIDATED STATEMENTS OF INCOME
	(In Thousands, Except Per Share Amounts)

|                                                                                                     |                                                 |                                                                               |        | Three months Ended
|---------------------------------------------------------------------------------------------------- | ----------------------------------------------- | ----------------------------------------------------------------------------- | ------ | ------------------
|                                                                                                     |                                                 |                                                                               |        | March   31,       
|                                                                                                     |                                                 |                                                                               |        |                   
|                                                                                                     |                                                 |                                                                               |        |                   
|                                                                                                     |                                                 |                                                                               |        |                   
|Net sales                                                                                            | $                                               | 19,280                                                                        | $      | 9,337             
|                                                                                                     |                                                 |                                                                               |        |                   
|Costs and
  expenses:                                                                                |                                                 |                                                                               |        |                   
|                                                                                                     | Cost of sales                                   |                                                                               | 9,332  |                   
|                                                                                                     | Selling, general
  and administrative expenses  |                                                                               | 5,949  |                   
|                                                                                                     |                                                 |                                                                               |        |                   
|                                                                                                     |                                                 |                                                                               |        |                   
|Operating income                                                                                     |                                                 | 3,999                                                                         |        | 1,539             
|                                                                                                     |                                                 |                                                                               |        |                   
|Other income
  (expense):                                                                            |                                                 |                                                                               |        |                   
|                                                                                                     | Loss on sale of
  assets                        |                                                                               | (2)    |                   
|                                                                                                     | Interest income                                 |                                                                               | 51     |                   
|                                                                                                     | Interest expense                                |                                                                               | (60)   |                   
|                                                                                                     | Other income                                    |                                                                               | 25     |                   
|                                                                                                     |                                                 | Total other
  expense, net                                                    |        | 14                
|                                                                                                     |                                                 | Income from continuing operations before income
  taxes and minority interest |        | 4,013             
|                                                                                                     |                                                 |                                                                               |        |                   
|                                                                                                     |                                                 | Income taxes                                                                  |        | (1,413)           
|                                                                                                     |                                                 |                                                                               |        |                   
|Minority interest                                                                                    |                                                 | (258)                                                                         |        | (193)             
|                                                                                                     |                                                 |                                                                               |        |                   
|Income from
  continuing operations                                                                  |                                                 | 2,342                                                                         |        | 1,021             
|                                                                                                     |                                                 |                                                                               |        |                   
|Gain on disposal (net of loss
	from discontinued operations of $(465)), net of tax provision of $293 |                                                 | 781                                                                           |        | -                 
|                                                                                                     |                                                 |                                                                               |        |                   
|Net income                                                                                           | $                                               | 3,123                                                                         | $      | 1,021             
|                                                                                                     |                                                 |                                                                               |        |                   
|Net income 
  available to common shareholders per share:                                            |                                                 |                                                                               |        |                   
|                                                                                                     | Basic:                                          |                                                                               |        |                   
|                                                                                                     | Income from
  continuing operations             | $                                                                             | 0.07   | $                 
|                                                                                                     | Gain from discontinued operations, net of tax   |                                                                               | 0.02   |                   
|                                                                                                     | Net income                                      | $                                                                             | 0.09   | $                 
|                                                                                                     | Diluted:                                        |                                                                               |        |                   
|                                                                                                     | Income from continuing
  operations             | $                                                                             | 0.06   | $                 
|                                                                                                     | Gain from discontinued
  operations, net of tax |                                                                               | 0.02   |                   
|                                                                                                     | Net income                                      | $                                                                             | 0.08   | $                 
|                                                                                                     |                                                 |                                                                               |        |                   
|Weighted average
  number of common shares outstanding:                                              |                                                 |                                                                               |        |                   
|                                                                                                     | Basic                                           |                                                                               | 35,898 |                   
|                                                                                                     | Diluted                                         |                                                                               | 40,702 |                   
|                                                                                                     |                                                 |                                                                               |        |                   

The accompanying notes are
  an integral part of these consolidated financial statements


2




|HOME SOLUTIONS OF AMERICA, INC.                                                              
|---------------------------------------------------------------------------------------------
|CONSOLIDATED STATEMENTS OFCASH FLOWS                                                         
|(In Thousands, Except Per Share Amounts)                                                     
|(Unaudited)                                                                                  
|                                                                                             
|                                                                                             
|                                                                                             
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                        
|Net income                                                                                   
|Adjustments
  to reconcile net income to net cash (used in) provided by                      
|operating
  activities:                                                                      
|Depreciation
  and amortization                                                              
|Minority
  interest in income of consolidated subsidiary                                     
|Provision
  for doubtful accounts                                                            
|(Gain)
  loss on sale of assets                                                              
|Stock-based
  compensation                                                                   
|Gain on sale of discontinued operations                                                      
|Changes in
  operating assets and liabilities, net of acquisitions and divestitures:         
|Accounts
  receivable                                                                        
|Prepaid
  expenses and other current assets                                                  
|Inventories                                                                                  
|Other
  assets                                                                               
|Accounts
  payable and accrued expenses                                                      
|Net cash
  provided by operating activities                                                  
|                                                                                             
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                        
|Proceeds
  from sale of property and equipment                                               
|Payments
  received on notes receivable                                                      
|Cash
  acquired in acquisitions, net of cash paid                                            
|Costs
  incurred for acquisition of Cornerstone Building & Remodeling, Inc.
  ("Cornerstone")
|Purchases
  of property and equipment                                                        
|Net cash provided
  by (used in) investing activities                                        
|                                                                                             
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                        
|                                                                                             
|Proceeds from note payable,
  net of cash issuance costs                                     
|Principal
  payments on debt and capital leases                                              
|Excess tax benefit from
  options exercises                                                  
|Proceeds
  from exercise of warrantsand
  options                                            
|Distributions
  to minority stockholder                                                      
|Net cash
  provided by (used in) financing activities                                        
|                                                                                             
|NET INCREASE  (DECREASE) IN CASH                                                             
|                                                                                             
|CASH AT BEGINNING OF PERIOD                                                                  
|                                                                                             
|CASH AT END OF PERIOD                                                                        
|                                                                                             

3





|HOME SOLUTIONS OF AMERICA, INC.                                        
|-----------------------------------------------------------------------
|CONSOLIDATED STATEMENTS OFCASH FLOWS                                   
|(In Thousands, Except Per Share Amounts)                               
|(Unaudited)                                                            
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|Supplemental
  schedule of non-cash investing and financing activities:
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       
|                                                                       

|The accompanying notes are an integral part of these
  consolidated financial statements.
|-----------------------------------------------------------------------------------------



















4





HOME SOLUTIONS OF AMERICA, INC.NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS(Dollars and Shares in
Thousands, Except Per Share Data)March 31, 2006

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES

Interim Unaudited Condensed Consolidated Financial Statements

The accompanying condensed consolidated financial statements have
been prepared in accordance with the Securities and Exchange Commission's
("SEC") regulations for interim financial information. Accordingly, they do not
include all of the disclosures required by accounting principles generally
accepted in the United States of America for complete financial statements. In
the opinion of management, all adjustments (which consist only of normal and
recurring adjustments) considered necessary for a fair presentation have been
included. The results of operations for the three month period ended March 31,
2006 are not necessarily indicative of the results that may be expected for the
entire fiscal year.

Company Description and
Nature of Operations

Home Solutions of America,
Inc. ("we," "us," "Home Solutions," or the "Company")a Delaware corporation, is a provider of recovery, restoration and
rebuilding/remodeling services to commercial and residential areas that are (i)
prone to flooding, hurricanes, tornados, fires or other naturally occurring and
repetitive weather related emergencies; and/or (ii) experiencing robust housing
development. Our growth strategy is to capitalize on the growing demand for our
suite of Recovery, Restoration and Rebuilding/Remodeling services. We seek to
expand our core service offerings through the future acquisition of strategic,
specialized, profitable and well-managed residential service companies with a
proven history of internal growth.

Our business segments consist of
three integrated service offerings:  (i) Recovery, (ii) Restoration and (iii)
Rebuilding/Remodeling.  Our Recovery services, which are provided through our
wholly-owned subsidiary, Home Solutions Restoration of Louisiana, Inc. ("HSR of Louisiana") and, to a
lesser extent, through our wholly-owned subsidiary, PW Stephens, Inc. ("PWS"),
include first response clean up and removal of debris, drying and
dehumidification, and preparing affected areas for the next stage of
restoration and rebuilding.  Our Restoration business segment includes PWS and
our wholly-owned subsidiary, Fiber Seal Systems, L.P. ("FSS").  Services
presently included in our Restoration business segment involve water and fire
restoration services, air decontamination, and removal of mold, asbestos and
lead paint provided through PWS, and cleaning, drying, and deodorization of
carpet and furniture as well as moving and storage services provided through FSS.  Our Rebuilding/Remodeling products and services currently consist of the production and
installation of custom kitchen cabinets and countertops provided through our
wholly-owned subsidiary, Southern Exposure Unlimited of Florida, Inc. and its
wholly-owned subsidiary, SouthernStone Cabinets, Inc. (collectively, "Southern Exposure") and the
installation of custom marble and granite countertops through our wholly-owned
subsidiary, Cornerstone Building and Remodeling, Inc. ("Cornerstone").

Principles of
Consolidation

The accompanying consolidated
financial statements include the accounts of Home Solutions and its whollyand majorityowned subsidiaries. All significant intercompany transactions and balances
have been eliminated in consolidation.   The minority owner's interest in a
subsidiary has been reflected as minority interest in the accompanying consolidated
balance sheet.

Use of Estimates

The preparation of financial
statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
the contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Significant estimates made by management include, among others, the
realizability of accounts and note receivable, inventories, recoverability of
property and equipment, intangibles and goodwill and valuation of deferred tax
assets.  Actual results could differ from these estimates.

Long-Lived Assets

The Company's management
assesses the recoverability of its long-lived assets upon the occurrence of a
triggering event by determining whether the depreciation and amortization of
long-lived assets over their remaining lives can be recovered through projected
undiscounted future cash flows.  The amount of long-lived asset impairment, if
any, is measured based on fair value and is charged to operations in the period
in which long-lived asset impairment is determined by management.  At March 31, 2006, the Company's management believes there is no impairment of its long-lived
assets.  There can be no assurance, however, that market conditions will not
change or demand for the Company's products and services will continue, which
could result in impairment of long-lived assets in the future.













5





HOME SOLUTIONS OF AMERICA, INC.NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS(Dollars and Shares in
Thousands, Except Per Share Data)March 31, 2006

NOTE 1 - BASIS OF PRESENTATION
 AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Intangibles

Identifiable assets and liabilities acquired in
connection with business acquisitions accounted for under the purchase method
are recorded at their respective fair values. The Company is amortizing the
identifiable intangibles over their estimated useful lives, ranging from 6 to 15 years.  Intangibles consist of the following at March 31, 2006:

Balance
			Estimated Useful
Life (Years)Trade name
			4,540
			15Customer list
			4,100
			15Supply agreement
			1,350
			20Non -compete
			441
			610,431Accumulated amortization
			(1,156)9,275


Amortization expense totaled
$226 and $54 for the three months ended March 31, 2006 and 2005, respectively. The
estimated amortization for the next five years is as follows.

|2007 | $ | 725
|---- | - | ---
|2008 |   | 725
|2009 |   | 725
|2010 |   | 725
|2011 |   | 725

Goodwill

Goodwill
represents the excess of acquisition cost over the net assets acquired in a
business combination and is not amortized in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other
Intangible Assets." The provisions of SFAS No. 142 require that the Company
allocate its goodwill to its various reporting units, determine the carrying
value of those businesses, and estimate the fair value of the reporting units
so that a two-step goodwill impairment test can be performed.  In the first
step of the goodwill impairment test, the fair value of each reporting unit is
compared to its carrying value.  Management reviews, on an annual basis, the
carrying value of goodwill in order to determine whether impairment has
occurred.  Impairment is based on several factors including the Company's
projection of future discounted operating cash flows. If an impairment of the
carrying value were to be indicated by this review, the Company would perform
the second step of the goodwill impairment test in order to determine the
amount of goodwill impairment, if any.

The
changes in the carrying amount of goodwill for the three months ended March 31, 2006 are as follows (see Note 3):

| | Balance
  as of December 31, 2005   | $ | 41,882 | 
| | ----------------------------------- | - | ------ | 
| | Goodwill
  acquired during the year |   | 920    | 
| | Balance
  as of March 31, 2006      | $ | 42,802 | 

Revenue
Recognition

The Company recognizes revenue in accordance with Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements", as revised by SAB 104. As such, the Company recognizes revenue
when persuasive evidence of an arrangement exists, title transfer has occurred,
the price is fixed or readily determinable and collectibility is probable.
Sales are recorded net of sales discounts.

PWS,
FSS, and HSR of Louisiana recognize revenue at the time the contract and related services are
performed.

Southern Exposureand Cornerstone recognize revenue for product sales at
the time the related products are shipped to the customer. These subsidiaries recognize revenue for installation jobs upon
complete installation of the cabinets and inspection by the customer. Deferred
revenue represents amounts billed to customers and collected prior to
completion of the cabinets and inspection by the customer.



6





HOME SOLUTIONS OF AMERICA, INC.NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS(Dollars and Shares in
Thousands, Except Per Share Data)March 31, 2006

NOTE 1 - BASIS OF PRESENTATIONAND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)

Stock-Based Compensation

At March 31, 2006, the Company had two stock-based compensation plans. Prior to January 1, 2006, the Company accounted for these plans under the recognition and measurement
provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations, as permitted by
SFAS No. 123, Accounting for Stock Based Compensation. No stock-based
employee compensation cost was recognized in the statements of operation for
the three months ended March 31, 2006, as all options granted under these plans had an exercise price equal to or greater than the market value of the
underlying common stock on the date of grant.

Effective January 1, 2006, on the first day of the Company's fiscal year 2006, the Company adopted the fair value recognition
provisions of SFAS No. 123(R), Share Based Payments, using the
modified-prospective transition method. Under this transition method,
compensation cost recognized in the three months ended March 31, 2006 includes: (a) compensation cost for all share-based payments granted and not yet
vested prior to January 1, 2006, based on the grant date fair value estimated
in accordance with the original provisions of SFAS No. 123, and (b)
compensation cost for all share-based payments granted subsequent to December 31, 2005 based on the grant-date fair value estimated in accordance with the
provisions of SFAS No. 123(R). Results for prior periods have not been
restated. Since stock-based compensation expense recognized in the statements
of operations for the three months ended March 31, 2006 is based on awards ultimately expected to vest, the compensation expense has been reduced for estimated
forfeitures. SFAS No. 123(R) requires forfeitures to be estimated at the time
of grant and revised, if necessary, in subsequent periods if actual forfeitures
differ from those estimates. We estimated forfeitures to be 2% of the options
issued.

The Company calculates stock-based compensation by
estimating the fair value of each option using the Black-Scholes option pricing
model. The Company's determination of fair value of share-based payment awards
are made as of their respective dates of grant using that option pricing model
and is affected by the Company's stock price as well as assumptions regarding a
number of subjective variables. These variables include, but are not limited to
the Company's expected stock price volatility over the term of the awards and
actual and projected employee stock option exercise behavior. The Black-Scholes
option pricing model was developed for use in estimating the value of traded
options that have no vesting or hedging restrictions and are fully
transferable. Because the Company's employee stock options have certain
characteristics that are significantly different from traded options, the
existing valuation models may not provide an accurate measure of the fair value
of the Company's employee stock options. Although the fair value of employee
stock options is determined in accordance with SFAS No. 123(R) using an
option-pricing model, that value may not be indicative of the fair value
observed in a willing buyer/willing seller market transaction. The calculated
compensation cost is recognized on a straight-line basis over the vesting
period of the option.

The Company has issued stock options to employees and
directors whose only condition for vesting are continued employment or
service during the related vesting period. Typically, the vesting period is 3
years for employee awards, although awards are sometimes granted with immediate
vesting. Directors have typically received immediately vested awards, subject
to continued service during the related period.

Prior
to the adoption of Statement 123(R), the Company presented all tax benefits of
deductions resulting from the exercise of stock options as operating cash flows
in the Statement of Cash Flows.  Statement 123(R) requires the cash flows
resulting from the tax benefits resulting from tax deductions in excess of the
compensation cost recognized for those options (excess tax benefit) to be
classified as financing cash flows.  The $218 excess tax benefit classified as
a financing cash inflow during the three month period ended March 31, 2006, would have been classified as an operating cash inflow if the Company had not adopted
Statement 123(R).

For
the three months ended March 31, 2006, the Company recognized compensation cost of $154 as a result of the adoption of SFAS 123R. The effect of the change
in applying the original provisions of SFAS 123 resulted in lowering income
from continuing operations, income before taxes, net income and basic and
diluted earnings per share are as follows:

|                                                                              |  | Three Months Ended
|----------------------------------------------------------------------------- |  | ------------------
|                                                                              |  | March 31, 2006    
|                                                                              |  | SFAS 123R         
|Income from continuing operations before
  income taxes and minority interest |  | $                 
|Net income                                                                    |  | $                 
|Basic income per share                                                        |  | $                 
|Diluted income per share                                                      |  | $                 



7




HOME SOLUTIONS OF AMERICA, INC.NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS(Dollars and Shares in
Thousands, Except Per Share Data)March 31, 2006

NOTE
1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

The following table illustrates the effect on net
income and net income per share for the three months ended March 31, 2005 as if the Company had applied the fair value recognition provisions of SFAS 123 to options
granted under the Company's stock option plans. For purposes of this pro forma
disclosure, the fair value of the options is estimated using the Black Scholes
option-pricing model and amortized on a straight-line basis to expense over the
options' vesting period (in thousands, except per share data):

|                                                                  |  | Three Months Ended
|----------------------------------------------------------------- |  | ------------------
|                                                                  |  | March 31,         
|                                                                  |  | 2005              
|                                                                  |  |                   
|Net income - as reported                                          |  | $                 
|Add: Share-based employee compensation
  expense included         |  |                   
|in net income, net of related tax effects
  - as reported         |  |                   
|Deduct: Share-based employee compensation
  expense determined    |  |                   
|under fair value method, net of related
  tax effects - pro forma |  |                   
|Net income - pro forma                                            |  | $                 
|                                                                  |  |                   
|Net income per common share - as reported                         |  |                   
|Basic                                                             |  | $                 
|Diluted                                                           |  |                   
|                                                                  |  |                   
|Net income per common share - pro forma                           |  |                   
|Basic                                                             |  | $                 
|Diluted                                                           |  | $                 

Share Option Plans

The Company has in effect two share-based plans under
which non-qualified and incentive stock options have been granted to employees,
non-employees and board members. The Board of Directors determines eligibility,
vesting schedules and exercise prices for options granted under the plans. We
issue new shares to satisfy stock option exercises and stock purchases under
our share-based plans. An income tax benefit of $218 was realized from activity
in our share-based plans during the three months ended March 31, 2006 and there was no such benefit in 2005.

A summary of the shares reserved for grant and options
available for grant under each plan is as follows:

|                                 |  | March 31, 2006
|-------------------------------- |  | --------------
|                                 |  | Shares        
|                                 |  | Reserved      
|                                 |  | for Grant     
|________Stock Plan ("1998 Plan") |  |               
|________Stock Plan ("2001 Plan") |  |               
|                                 |  |               

8





HOME SOLUTIONS OF AMERICA, INC.NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS(Dollars and Shares in
Thousands, Except Per Share Data)March 31, 2006

NOTE
1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

Option awards are generally granted with an exercise
price equal to the market price of the Company's stock at the date of grant.
Option awards generally have a vesting schedule of three years and are
exercisable over a 5 to 10 year service period.

The fair value of each share-based award is estimated
on the grant date using the Black Scholes option-pricing model. Expected
volatilities are based on the historical volatility of the Company's stock
price. The expected term of options granted subsequent to the adoption of SFAS
123R is derived using the simplified method as defined in the SEC's Staff Accounting Bulletin 107, Implementation of FASB 123R. The risk-free rate for
periods within the contractual life of the option is based on the U.S. Treasury
interest rates in effect at the time of grant. The fair value of options
granted was estimated using the following weighted-average assumptions:

|                         |  | Three Months Ended
|------------------------ |  | ------------------
|                         |  | March 31,         
|                         |  | 2006              
|Expected term (in years) |  |                   
|Expected volatility      |  |                   
|Risk-free interest rate  |  |                   
|Dividend yield           |  |                   

A summary of option activity under the stock option
plans and changes during the quarter then ended is presented below (in
thousands, except per share data):

|                                     |  | March 31, 2006
|------------------------------------ |  | --------------
|                                     |  |               
|                                     |  |               
|                                     |  |               
|                                     |  | Shares        
|Outstanding at beginning of period   |  |               
|Granted                              |  |               
|Cancelled/forfeited                  |  |               
|Exercised                            |  |               
|Outstanding at end of period         |  |               
|Options exercisable at end of period |  |               



A summary of the activity of the Company's nonvested
shares is presented below (in thousands, except share and per share data):



|                                               |  |        |      
|---------------------------------------------- |  | ------ | -----
|                                               |  |        |      
|                                               |  |        |      
|                                               |  |        |      
|                                               |  | Shares |      
|Nonvested outstanding at beginning of
  period |  |        | 490  
|Granted                                        |  |        | 250  
|Vested                                         |  |        | (254)
|Forfeited                                      |  |        | -    
|Nonvested outstanding at end of period         |  |        | 486  

There were no options granted
during the three month months ended March 31, 2005, therefore a summary of the grant-date fair value and intrinsic value information is not presented.





9





HOME SOLUTIONS OF AMERICA, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS(Dollars and Shares in
Thousands, Except Per Share Data)March 31, 2006

NOTE
1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

Issuance of Stock
for Non-cash Consideration

All issuances of the Company's stock for non-cash
consideration have been assigned a dollar amount equaling either the market
value of the shares issued or the value of consideration received whichever is
more readily determinable. The majority of the non-cash consideration received
pertains to services rendered by consultants and others and have been valued at
the market value of the shares issued. In certain issuances, the Company may
discount the value assigned to the issued for illiquidity and restriction on
resale.

Per Share Data

Basic earnings per share ("BEPS")
are computed by dividing income available to common stockholders by the
weighted average number of outstanding common shares during the period of
computation. Diluted earnings per share ("DEPS") give effect to all
potential dilutive common shares outstanding during the period of computation.
The computation of DEPS does not assume conversion, exercise or contingent
exercise of securities that would have an anti-dilutive effect on earnings.

The following is a table
reconciling BEPS and DEPS and the related weighted average number of shares
outstanding for the three months ended March 31, 2006:



|                                        | Three  months ended  March 31, 2006
|--------------------------------------- | -----------------------------------
|                                        |                                    
|                                        |                                    
|Basic EPS:                              |                                    
|Net income                              | $                                  
|                                        |                                    
|Income available to common stockholders |                                    
|                                        |                                    
|Effect of dilutive securities:          |                                    
|                                        |                                    
|Options and warrants                    |                                    
|                                        |                                    
|Diluted EPS:                            |                                    
|Income available to common stockholders | $                                  

The following is a table reconciling BEPS and DEPS and the
related weighted average number of shares outstanding for the three months
ended March 31, 2005:



|                                                                                                    | Three months ended  March 31, 2005
|--------------------------------------------------------------------------------------------------- | ----------------------------------
|                                                                                                    |                                   
|Basic EPS:                                                                                          |                                   
|Net income                                                                                          | $                                 
|Less: convertible preferred stock     dividends                                                     |                                   
|Amortization of convertible preferred
	 stock issuance costs and beneficial
	 conversion feature    |                                   
|                                                                                                    |                                   
|Income available to common stockholders                                                             |                                   
|                                                                                                    |                                   
|Effect of dilutive securities:                                                                      |                                   
|Interest expense and amortization of beneficial
  conversion 
	feature on convertible notes payable |                                   
|Options and warrants                                                                                |                                   
|Diluted EPS:                                                                                        |                                   
|Income available to common stockholders
	 plus assumed conversions                                  | $                                 

Recent accounting pronouncements issued by the FASB
(including its Emerging Issues Task Force), the American Institute of Certified
Public Accountants, and the Securities and Exchange Commission did not or are
not believed by management to have a material impact on the Company's present
or future consolidated financial statements.

10




HOME SOLUTIONS OF AMERICA, INC.NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS(Dollars and Shares in
Thousands, Except Per Share Data)March 31, 2006

NOTE 2 - SEGMENT INFORMATION

The Company operates in two segments: Recovery/Restoration Services, including indoor air contamination
removal, carpet cleaning, air duct cleaning and fabric protection services for
primarily residential properties and Rebuilding/Remodeling, which includes cabinet and countertop
installation services. See Note 8 for segment disclosure.

NOTE
3 - ACQUISITIONS AND DISPOSALS

During the first quarter of 2006, the Company
consummated two separate acquisitions. The acquisitions were accounted for as a
purchase. The combined purchase price was $745, payable in promissory notes of
$745 and cash of $20. The excess of the purchase price greater than the
tangible net assets acquired of $920 was assigned to goodwill at March 31, 2006 in the accompanying consolidated balance sheet.

Proforma disclosure information is not presented
because the operations acquired are not considered significant to the Company.

Cornerstone   Building and Remodeling Division

On March 24, 2006, the Company entered into an asset purchase agreement to sell certain assets and liabilities used in connection with
the operation of the building and remodeling division of Cornerstone, the
Company's wholly-owned subsidiary. The sales price was $500 cash at closing and
$3,000 in a note receivable (see Note 4 - Notes Receivable). The Company does
not consider the disposition to be significant to the Company's operations, and
does not consider the agreements entered into in connection with the
disposition to be material to the Company.

The
assets and liabilities of discontinued operations held for sale were as
follows:

Sales price
  $
  3,500Net assets sold
  
  (83)3,583Gain on sale
  
  (1,433)Deferred gain
  
  (452)Provision for income taxes
  
  3,131Gain on sale, netNet sales and loss before income taxes from discontinued
	operations were as follows:Net sales
  $
  514$
  (465)Loss before income taxes


In connection with the
disposition of the building and remodeling division, the Company has deferred
$1,433 of the gain realized in the sale based on the credit terms of the sale.
The deferred a portion of the gain is classified as deferred gain on sale of
discontinued operations on the consolidated balance sheet.









11





HOME SOLUTIONS OF AMERICA, INC.NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS(Dollars and Shares in
Thousands, Except Per Share Data)March 31, 2006

NOTE
4 - NOTES RECEIVABLE

As of March 31, 2006, the Company has a note receivable with a balance of $750. The note receivable required payments to the
Company of $150 paid in March 2006 to be followed by semi-annual payments of
$188 commencing on June 20, 2006 and with a final payment on December 31, 2007, as amended.  The note receivable is personally guaranteed by a third
party.  The Company recorded this note receivable with an implicit rate of
4.55%.

On March 24, 2006, the Company entered into an asset purchase agreement to sell certain assets and liabilities used in connection with
the operation of the building and remodeling division of Cornerstone, the
Company's wholly subsidiary. The sales price was $500 cash at closing and
$3,000 in a note receivable. The note receivable principal and accrued interest
is payable quarterly, beginning June 30, 2006 and maturing March 31, 2009. The note bears interest at the lesser of (a) on a per annum basis, the "prime
rate" as published in the Wall Street Journal and, (b) the maximum rate per
annum permitted by applicable law. The note is secured by the assets of the
purchaser and a guarantee by the parent company of the purchaser. At March 31, 2006 the note receivable balance was $3,000.

NOTE
5 - DEBT

In March 2006, the Company obtained a $10,000 revolving
line of credit ("Line of Credit") from a financial institution. The annual
interest rate is at the financial institution's prime rate of interest less one
quarter of one percent (0.25%). The initial interest rate on the Line of Credit
on March 6, 2006 was equal to 7.25%. Interest payments on the outstanding
principal balance of the Line of Credit are due monthly beginning on April 1, 2006. The Line of Credit expires, and all outstanding principal must be repaid to
the financial institution, on September 1, 2007. The borrowings from the Line of Credit will be used for working capital purposes.

Subject to the provisions of the Line of Credit, the Company can borrow, repay
and reborrow principal under the Line of Credit from time to time during its
term. The principal amount outstanding under the Line of Credit may not exceed
the lesser of (a) $10,000 or (b) an amount equal to two times the Company's
free cash flow for the immediately preceding two calendar quarters ("the Credit
Limit"). For purposes of the Line of Credit, the Company's free cash flow is
defined for each period of determination as (a) net income plus the sum of
interest, depreciation and amortization, less (b) distributions or dividends,
less (c) accounts receivable of the Company and its subsidiaries unpaid 180
days or more after invoice date, plus (d) reserves specifically established
against the receivables described in (c) to the extent such reserves are
deducted in determining net income for the period in question. In connection
with the Line of Credit, the Company paid the financial institution a
commitment fee in the amount of $100. The Company is also obligated to pay an
unused facility fee on the daily average unused amount of the Line of Credit
equal to one-half of one percent (0.5%) per annum, calculated and payable
quarterly in arrears.

The Line of Credit is secured by substantially all of the assets of the Company
and its subsidiaries and the capital stock of such subsidiaries pursuant to a
Pledge and Security Agreement. The Line of Credit is guaranteed by the
subsidiaries of the Company pursuant to a Guaranty Agreement.

Under the Line of Credit, the financial institution has agreed to issue letters
of credit meeting the requirements of the financial institution set forth in
the Line of Credit for the benefit of the Company in an amount not to exceed
$2,000 in the aggregate, and subject to the amount of cash advanced under the
Line of Credit plus amounts outstanding under the letters of credit not being
in excess of the Credit Limit. Pursuant to the terms of the Line of Credit, for
each letter of credit issued by the financial institution, Home Solutions
agrees to pay a letter of credit fee equal to one and one-half percent (1.5%)
of the face amount of the letter of credit, but not less than $5, plus other
fees charged under the financial institution's then-current policies.

The Line of Credit contains covenants, including financial covenants, with
which the Company must comply. The financial covenants include current assets
to current liabilities ratio and a debt service coverage ratio. With certain
exceptions, the Company is prohibited under the Line of Credit from incurring
any debt or permitting any liens to be placed on its assets or the assets of
its subsidiaries. Under the terms of the Line of Credit, the Company has agreed
not to take certain actions, prior to the financial institution's approval, including
becoming a party to a merger or consolidation, acquiring assets, and subject to
certain exceptions, issuing securities.

The Company has not
utilized the Line of Credit as of May 12, 2006.

In January 2004, the Company raised $4,000 in a private
placement with Laurus Master Fund, Ltd. ("Laurus").  The placement included two
promissory notes -- a secured convertible minimum borrowing note in the
original principal amount of $1,500 (the "Convertible Note") and a secured
revolving note in the original principal amount of $2,500 (together, the
"Notes") and 476 warrants, including an additional 50 warrants issued in
November 2004 (see below).  The Notes earned interest at the prime rate plus
2.5%, were secured by all of the assets of the Company, and the Convertible
Note was convertible into shares of common stock at a conversion of price of
$1.88 per share, as amended in connection with certain antidilution provisions
as defined.  These Notes had a two-year term.  In January, 2006 the remaining
$898 of debt principal and $4 in accrued interest payable was converted into
480 shares of the Company's common stock.

12





HOME SOLUTIONS OF AMERICA, INC.NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS(Dollars and Shares in
Thousands, Except Per Share Data)March 31, 2006

NOTE
5 - DEBT (Cont'd)

Debt
consists of the following at March 31, 2006:

|Note
  payable to Southern Exposure seller, interest at 2% in excess of one-month
  LIBOR rate (adjusted on the first day of each calendar quarter totaling 6.83%
  at March 31, 2006), principal and interest payments due quarterly. The
  payments are equal to the greater of (i) the amount of principal and interest
  that would be payable under a 10-year amortization or (ii) 60% of free cash
  flow (as defined) of the calendar quarter that precedes the payment date by
  two calendar quarters. The note is secured by a security interest in all the
  assets and stock of Southern Exposure Unlimited of Florida, Inc. and SE Tops
  of Florida, Inc. and a first lien on 50% of the stock of SouthernStone
  Cabinets, Inc. | $ 
    1,578
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |             
|Note
  payable, non-interest bearing, payable in one installment August 2006 to the
  seller of Marble Man Stone Shapers (MMSS). The note was paid in full in April
  2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 525         
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |             

|Note
  payable, non-interest bearing, payable in $5 monthly installments until paid
  in full to the seller of Fiber Seal Systems of Los Angeles (FSSLA).                                                                                                                                                                    | 210    
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------
|                                                                                                                                                                                                                                                                                                                             |        
|Notes
  payable and leases payable to various financial institutions, collateralized
  by various equipment and automobiles, bearing interest at various annual
  interest rates ranging from prime plus 0.75% to 13.21% principal and interest
  payable in monthly installments ranging from $0.4 to $1 through March 2011 | 290    
|                                                                                                                                                                                                                                                                                                                             |        
|Total                                                                                                                                                                                                                                                                                                                        | 2,603  
|Less current portion                                                                                                                                                                                                                                                                                                         | (1,562)
|Non-current portion                                                                                                                                                                                                                                                                                                          | $1,041 

NOTE
6- EQUITY

Common
Stock

During the three months ended March 31, 2006, the Company issued 126 shares of common stock for $250 in connection with the
exercise of stock options.

During the three months ended March 31, 2006, the Company issued 7 shares of common stock in connection with the cashless exercise
of stock options.

During the three months ended March 31, 2006, the Company issued 480 shares of common stock in connection with the conversion of
$902 of convertible debt and accrued interest payable.

NOTE
7 - COMMITMENTS AND CONTINGENCIES

Litigation

The nature and scope of the
Company's business operations bring it into regular contact with the general
public, a variety of businesses and government agencies. These activities
inherently subject the Company to potential litigation, which are defended in
the normal course of business. At March 31, 2006, there were noclaims and disputes incidental to the
business that management believes will have a material affect on the financial
position or results of operation of the Company.

Indemnities and Guarantees

The Company has made certain
indemnities and guarantees, under which it may be required to make payments to
a guaranteed or indemnified party, in relation to certain transactions.  The
Company indemnifies its directors, officers, employees and agents to the maximum
extent permitted under the laws of the State of Delaware.  In connection with
its facility leases, the Company has indemnified its lessor for certain claims
arising from the use of the facilities.  In connection with certain of its
debt, stock purchase and other agreements, the Company has indemnified lenders,
sellers, and various other parties for certain claims arising from the
Company's breach of representations, warranties and other provisions contained
in the agreements.  Historically, the Company has not
been obligated to make any payments for these obligations and no liabilities
have been recorded for these indemnities and guarantees in the accompanying
consolidated balance sheets.

13





HOME SOLUTIONS OF AMERICA, INC.NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS(Dollars and Shares in
Thousands, Except Per Share Data)March 31, 2006

NOTE
7 - COMMITMENTS AND CONTINGENCIES (Cont'd)

Pursuant to a merger agreement, onMarch 31, 2005, the Company
acquired 100% of the capital stock ofCornerstone.
For each of three consecutive calendar years commencing with 2005, in the event
that Cornerstone produces earnings before interest, taxes, depreciation and
amortization ("EBITDA") in such calendar year in excess of $2,400, the Company agreed to issue to the seller additional shares of the Company's common stock
representing 30% of the EBITDA amount in excess of $2,400 (50% under certain
circumstances) and as specified in the merger agreement. In lieu of issuing
shares of common stock, the Company has the option of making a cash payment to
the seller equal to 30% of the excess EBITDA amount.  There were no amounts
earned under this earnout provision in 2005.

On September 27, 2005, HSR of Louisiana closed the purchase of substantially all of the assets of Florida Environmental
Services, Inc., a Florida corporation ("FERS"), a company engaged in recovery
services prior to the acquisition. The acquisition was effective on September 1, 2005. FERS is entitled to receive an amount (in cash or restricted
common stock, at the Company's option) equal to ten percent (10%) of the excess
of the HSR of Louisiana's earnings before interest, taxes, depreciation and
amortization with respect to the acquired assets related to the business, if
any, that exceeds $15,000 in each of fiscal years 2006 and 2007, subject to the
terms and provisions of the purchase agreement.

NOTE
8 - SEGMENT REPORTING

The Company reports its business segments based on industry classification, which are as follows:

|                                                            |                                                       
|----------------------------------------------------------- | ------------------------------------------------------
|                                                            | Three Months Ended
	
	                       March 31,
|                                                            |                                                       
|                                                            |                                                       
|Net sales:                                                  |                                                       
|Recovery/Restoration services                               | $                                                     
|Rebuilding/Remodeling                                       |                                                       
|Total segment net sales                                     | $                                                     
|                                                            |                                                       
|Operating income:                                           |                                                       
|Recovery/Restoration services                               | $                                                     
|Rebuilding/Remodeling                                       |                                                       
|Corporate                                                   |                                                       
|Total segment operating income                              | $                                                     
|                                                            |                                                       
|Depreciation and amortization included in operating income: |                                                       
|Recovery/Restoration services                               | $                                                     
|Rebuilding/Remodeling                                       |                                                       
|Corporate                                                   |                                                       
|Total segment depreciation and  amortization                | $                                                     
|                                                            |                                                       
|Identifiable assets:                                        |                                                       
|Recovery/Restoration services                               | $                                                     
|Rebuilding/Remodeling                                       |                                                       
|Corporate                                                   |                                                       
|Total segment identifiable assets                           | $                                                     
|                                                            |                                                       

There were no inter-segment
sales. Operating income is defined as third party sales less operating
expenses. All of the Company's business activities are conducted within the United States geographic boundaries.

NOTE 9 - RELATED PARTY TRANSACTIONS

The Company leases a
warehouse facility from a related party under a non-cancelable lease. The lease
is for one year through December 2005 for $10 monthly. The Company also leases administrative spaces from a
related party under a non-cancelable lease. The lease is through January 2015
for $12 monthly.

NOTE 10 - SUBSEQUENT EVENTS

In April and May 2006, the
Company issued 738 shares of common stock for $983 in connection with the
exercise of options.

In April and May 2006, the
Company issued 714 shares of common stock for $1,426 in connection with the
exercise of warrants.

In April and May 2006, the
Company issued 58 shares of common stock in connection with the cashless
exercise of warrants.

In April and May 2006, the Company issued 2 shares of
common stock in connection with the cashless exercise of options.

14





RISKS
ASSOCIATED WITH FORWARD-LOOKING STATEMENT INCLUDED IN THIS FORM 10-Q

This Form 10-Q contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended, which are
intended to be covered by the safe harbors created thereby. These statements
include the plans and objectives of management for future operations, including
plans and objectives relating to the Company's acquisition strategies and
availability of capital to fund such strategies. The forward-looking statements
included herein are based on current expectations that involve numerous risks
and uncertainties. Assumptions relating to the foregoing involve judgments with
respect to, among other things, future economic, competitive and market
conditions, regulatory framework, and future business decisions, all of which are
difficult or impossible to predict accurately and many of which are beyond the
control of the Company. We refer you to the section entitled "Trends, Risks and
Uncertainties" in Item 6 of Part II of our annual report on Form 10-KSB for the
year ended December 31, 2005, for a list of specific factors that could cause
actual results to differ materially from those indicated by our forward-looking
statements made herein and presented elsewhere by management. Although the
Company believes that the assumptions underlying the forward-looking statements
are reasonable, any of the assumptions could be inaccurate and, therefore,
there can be no assurance that the forward-looking statements included in this
Form 10-Q will prove to be accurate. In light of the significant uncertainties
inherent in the forward-looking statements included herein, the inclusion of
such information should not be regarded as a representation by the Company or
any other person that the objectives and plans of the Company will be achieved.
Furthermore, we do not undertake any obligation to update forward-looking
statements made herein.

Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations or
Plan of Operation (Dollars and shares in thousands
except per share data).

Overview

Home
Solutions is a providerof recovery, restoration and rebuilding/remodeling services to
commercial and residential areas that are (i) prone to flooding, hurricanes,
tornados, fires or other naturally occurring and repetitive weather
emergencies; and/or (ii) experiencing robust housing development.  With
operations in the South,Gulf Coast regions and California, we believe that
the Company is well positioned to capitalize on the growing demand for our
suite of Recovery, Restoration and Rebuilding/Remodeling services.  Home
Solutions is a Delaware corporation with principal
executive offices located at 1500 Dragon, Suite B, Dallas, Texas 75207.  Our website is located at www.HOMcorp.com.  Our Chairman of the Board, President and
Chief Executive Officer is Frank Fradella. Our Chief Operating Officer and
President is Rick O'Brien, and our Senior Vice President and Chief Financial
Officer, is Jeff Mattich.

Growth Strategy

Our
growth strategy is to target markets that are (i) prone to flooding,
hurricanes, tornados, fires or other naturally occurring and repetitive weather
emergencies; and/or (ii) experiencing robust housing development, and penetrate
these markets through internal growth of its existing operating subsidiaries and
a well-executed acquisition program to expand the Company's service offerings. 
We have closed five acquisitions since November of 2002.  We implemented our
initiative to expand into the hardest hit areas of the 2005 hurricane season by
forming HSR of Louisiana, a wholly-owned subsidiary, and acquiring
substantially all of the assets of FERS
in September of 2005.  Initially, the services provided by these operations involve
the drying, dehumidifying, clean up and removal of debris at many of the
hurricane-affected locations prior to commencing restoration services.  We
expect the recovery, restoration and rebuilding effort associated with the 2005
hurricanes to happen in stages and last between two to five years.  The Company
plans to take advantage of the opportunity to service these areas through each
stage with each of its Recovery, Restoration and Rebuilding/Remodeling service
offerings.

We also see the opportunity to further capitalize on the
robust growth in housing in our target markets through the Company's
relationship with CentexCorp. ("Centex"), a leading public homebuilder, as well as with the
expansion of our relationships with retailers including Home Depot, Inc. ("Home Depot").

Service Offerings

Our
business consists of three integrated service offerings:  (i) Recovery; (ii)
Restoration; and (iii) Rebuilding/Remodeling.  We believe that the natural
progression of our business offerings in markets affected by weather-related
emergencies, from Recovery, to Restoration, to Rebuilding/Remodeling, increases
our opportunities across all three service offerings.

Recovery

With its recent expansion into the Louisiana area as
well as with its completion of the FERS acquisition, the Company is a first
responder to clean up activities after weather-related emergencies.  It has
significant currently ongoing operations throughout impacted areas in Florida, Louisiana, Mississippi, and Texas.  The Company and FERS (prior to the acquisition
of its assets by HSR of Louisiana) also provided recovery services in Florida
during the 2004 hurricane season, which we believe will position the Company to
generate revenue in our Restoration and Rebuilding/Remodeling segments in the
Florida markets.  HSR of Louisiana provides trained employees who provide
onsite first response technical services in these markets through contracts
with commercial and residential clients.  Currently, the Company's Recovery
services include providing initial set up services in an impacted area (including
power, lodging, sustenance, and training) and then providing the drying,
dehumidification, cleanup and removal of debris from commercial and residential
areas to prepare the areas for the next stage of restoration.  We believe the
Recovery segment of our business to not only be of high growth and
profitability, but we also seek to capitalize on synergistic opportunities by
continuing to  provide these services in areas that need the full spectrum of
restoration, rebuilding and remodeling services that the Company can provide. 
Currently we provide these services on an hourly rate to our commercial and
residential clients, principally as a subcontractor to customers providing
additional services in these markets.  We intend to pursue bids on recovery
services contracts with insurance agencies and government branches and
agencies.  Although we believe that we will provide recovery services in the
future to insurers and government agencies, there is no assurance that we will win
any of these contracts.





15







Restoration

The following details the
types of restoration services we provide:

Fire and
Water Damage Restoration: We provide
trained employees to respond to fire, water and weather-related emergencies, to
inspect structural members and contents damaged by water, to determine the
likelihood or extent of mold growth, and to provide immediate cleaning, drying,
moving, storage, and deodorization, among other services.  As most cases of
mold are associated with excess moisture, we believe that our Recovery
services' response to event-related damage will provide significant additional
revenue opportunities for our Restoration segment.  The cost and time
requirements of restoration projects can vary dramatically from case-to-case.

Indoor Air Contamination: Through PWS,
we provide indoor air contamination services, including contamination from
mold, asbestos and lead paint to homeowners.  With increased media attention
regarding the health threat of mold, fewer insurance options, and property transfers
at risk, current market conditions have created significant demand for mold
inspections, certifications and remediation services.  These services consist
of property and system inspections, surface and air testing, project design,
microbial removal, light interior demolition, repair and specialized cleaning
work.  Home inspections and testing can range from $0.2 to $0.8.  For the
typical mold-contaminated house, a remediation project can last approximately
one week and cost $10 or more.  Customer opportunities are developed through a
regional sales force as well as through referrals by real estate firms,
insurance adjusters, mortgage companies, attorneys and nationally branded
retailers.  The Company believes it can use its industry experience to give
efficacy to its processes and provide homeowners with quality assurance.

Cleaning and Fabric Protection: Through FSS, we provide fabric protection services to
protect furniture, carpet and draperies from stains and daily wear through both
Company-owned locations as well as over forty licensed locations.  This niche
market is primarily targeted at above-average income homeowners with an average
ticket of approximately $0.400.  We also provide air duct cleaning services to
remove particulate (organic and inorganic) material, which can cause allergic
reactions and is often the breeding ground for many types of mold, from heating
and air conditioning systems.

Rebuilding/Remodeling

Through Southern
Exposure and Cornerstone, we offer cabinet and countertop installation
services.  Our wholly-owned subsidiary, Southern Exposure,
manufactures and installs a high-end product line of cabinets and countertops. 
Our position in this market was strengthened in March 2005 through the
acquisition of Cornerstone, which installs custom marble
and granite countertops for residential customers.  Currently, we manufacture
and install cabinets and kitchen countertops for Centex, a leading public
homebuilder, in its southwest Florida market.  We also install granite
countertops for Home Depot in Florida, Georgia, Alabama and South Carolina, and
for LowesCompanies, Inc., ("Lowes") in Florida.  It is expected that a portion of our
cabinet and countertop installation services will generate additional
opportunities across our other business segments.

Use
of Estimates and Critical Accounting Policies

In preparing our consolidated financial
statements, we make estimates, assumptions and judgments that can have a
significant effect on our revenues, income (loss) from operations, and net
income (loss), as well as on the value of certain assets on our balance sheet. 
We believe that there are several accounting policies that are critical to an
understanding of our historical and future performance as these policies affect
the reported amounts of revenues, expenses, and significant estimates and
judgments applied by management.  While there are a number of accounting
policies, methods and estimates affecting our financial statements, areas that
are particularly significant include accounts receivable allowance, revenue
recognition, stock-based compensation, and goodwill.  In addition, please refer
to Note 1 to the accompanying financial statements for further discussion of
our accounting policies.

Revenue
Recognition

Revenue is primarily recognized at the
time the contract and related services are performed.
On occasion the Company reports
revenue from fixed price contracts using the percentage of completion method
for financial reporting purposes. Under the percentage of completion method,
revenues with respect to individual contracts are recognized in the proportion
that costs incurred to date bear to total estimated costs. Revenue and costs
estimates are subject to revision during the terms of the contracts and any required
adjustment are made in the periods in which the revisions become known. General
and administrative costs are not allocated to contract costs and are charged to
expense as incurred.

Accounting for Stock-Based Incentive
Programs.

In accordance with Statement
of Financial Accounting Standards ("SFAS") No. 123R, "Share Based
Payment: An Amendment of FASB Statements No. 123 and 95" ("SFAS
123R"), in our first quarter of fiscal year 2006 we
started to recognize compensation expense related to stock options and
restricted stock purchase rights, which are equivalent to options granted to
employees based on: (a) compensation cost for all share-based payments granted
prior to, but not yet vested as of October 1, 2005, based on the grant date fair value estimated in accordance with SFAS No 123, "Accounting for
Stock-Based Compensation," ("SFAS 123"), adjusted for an estimated future
forfeiture rate, and (b) compensation cost for all share-based payments granted
subsequent to October 1, 2005, based on the grant-date fair value estimated in
accordance with the provisions of SFAS 123R.

Our assessment of the estimated fair value of the stock
options granted is affected by our stock price as well as assumptions regarding
a number of complex and subjective variables and the related tax impact.  We
utilize the Black-Scholes model to estimate the fair value of stock options
granted.  Generally, our calculation of the fair value for options granted
under SFAS 123R is similar to the calculation of fair value under SFAS 123 with
the with the exception of the treatment of forfeitures.  The fair value of
Restricted Stock Units granted is based on the grate date price of our common
stock.



16





The Black-Scholes option valuation model was
developed for use in estimating the fair value of traded options that have no
vesting restrictions and are fully transferable. This model also requires the
input of highly subjective assumptions including:

(a)   The expected volatility of our
common stock price, which we determine based on historical volatility of our
common stock over the prior eighteen month period;

(b)   Expected dividends, which are nil,
as we do not anticipate issuing dividends;

(c)   Expected life of the stock option,
which is estimated based on the historical stock option exercise behavior of
our employees; and

(d)   Expected forfeitures of stock
options, which is estimated based on the historical turnover of our employees
and expected turnover in the future.  Prior to adoption of SFAS 123R, we
recognized forfeitures under SFAS 123 as they occurred.

In the future, we may elect to use
different assumptions under the Black Scholes valuation model or a different
valuation model, which could result in a significantly different impact on our
net income or loss.

Goodwill

Goodwill represents the excess of
acquisition cost over the net assets acquired in a business combination.
Management reviews, on an annual basis, the carrying value of goodwill in order
to determine whether impairment has occurred. Impairment is based on several factors
including the Company's projection of future undiscounted operating cash flows.
If an impairment of the carrying value were to be indicated by this review, the
Company would adjust the carrying value of goodwill to its estimated fair value.

Results
of Operations (Dollars and Shares in Thousands)

Comparison
of three months ended March 31, 2006 to three months ended March 31, 2005

Net Sales

Recovery/Restoration Services

Sales for the three months ended March 31, 2006 was $8,621, compared to $5,137 for the three months ended March 31, 2005. The sales increase from the same period in 2005 is
due to HSR of Louisiana's acquisition completed September 2005 of substantially
all the assets of FERS and additional revenue generated from Louisiana operations.
The Company also generated over $3,000 in revenues from one of its major
restoration customers for services, including standby and mobilization of its
labor force, to be used on specific projects as specified in its master services
agreement  with the customer.  The contracts allow for billings up to
$40,000 for services, which are scheduled to be complete during 2006.

Rebuilding/Remodeling

The revenue for
the three months ended March 31, 2006 was $10,659 from continuing operations, compared to $4,200 for the three months ended March 31, 2005. The increase from the same period in 2005 is due to a 58% increase in Southern Exposure sales
and the Cornerstone acquisition effective March 31, 2005.The Southern Exposure sales increase resulted from increased demand from its primary customer to
complete certain projects during the first quarter of 2006.

Costs of Sales

Recovery/Restoration Services

Costs of sales for the three months
ended March 31, 2006 were $2,884, compared to $2,374 for the three months ended
 March 31, 2005. The increase in the total costs of sales from the same period in
2005 is due to sales from HSR of Louisiana operations. Costs of sales as a
percentage of sales for the three months ended March 31, 2006 and 2005 were 33.4% and 46.2%, respectively. HSR of Louisiana generated higher margin fees
associated with contracts to commit a portion of its labor force with its major
recovery/restoration customer.

Rebuilding/Remodeling

Costs of sales
for the three months ended March 31, 2006 were $6,448 from continuing operations, compared to $2,497 for the three months ended March 31, 2005. The increase in total costs of sales from the prior period in 2005 is due to a 58% increase in
Southern Exposure sales and the Cornerstone acquisition effective March 31, 2005. Segment costs of sales as a
percentage of sales for the three months ended March 31, 2006 and 2005 was 60% and 59%, respectively.

Selling, General and Administrative Expenses

Recovery/Restoration Services

Selling, general and administrative ("SG&A")
expenses were $3,168 for the three months ended March 31, 2006, compared to $1,719 for the three months ended March 31, 2005.  This represents an increase of $1,449 from the same period in 2005, primarily due to HSR of Louisiana operations. SG&A expenses as a
percentage of sales for the three months ended March 31, 2006 and 2005 were 37% and 33%, respectively. The Company also increased its
general reserve and allowances associated with its accounts receivable.



17





Rebuilding/Remodeling

SG&A were $1,782 from continuing
operations for the three months ended March 31, 2006 compared to $614 for the three months ended March 31, 2005.  Segment SG&A expenses for the three
months ended March 31, 2006 include expenses associated with
the Cornerstone acquisition, effective in March 2005. Southern
Exposure experienced increased SG&A expenses from the same period in 2005,
primarily due to the expansion of its operational
support and sales growth. Segment  SG&A as a percentage of segment sales
for the three months ended March 31, 2006 and 2005 were 17% and 15%, respectively, primarily due to expansion of its Home Depot markets.

Corporate

Corporate SG&A were $999 for the three months ended March 31, 2006, compared to $594 for the three months ended March 31, 2005. The increase from the same period in 2005 is due primarily to stock option expense of $154,
increased legal and professional fees and consulting fees of $184, and board of
director compensation of $87. Corporate SG&A for the three months ended March 31, 2006 and 2005 as a percentage of total sales were 5% and 6%, respectively.

Other Income (Expense)

Interest expense was $60 for the three
months ended March 31, 2006, compared to $279 for the three months ended March 31, 2005. In 2005, the Company amortized $99 in debt issue costs to interest expense
on the Laurus debt (see Note 5) and interest expense of $102 related to debt
principal that is now retired.  The Laurus debt principal and accrued interest
payable was converted to common stock in January 2006.

Income
Taxes

Income tax expense was $1,413 for the
three months ended March 31, 2006 compared to $82 for the three months ended March 31, 2005. In 2005, the Company utilized its net operating loss tax carry forward
provision to offset 2005 federal taxable income.

Discontinued
Operations

During
the year ended December 31, 2005, the Company's management committed to a plan
to dispose of certain assets and liabilities of its building and remodeling
division.  The disposal will allow the Company to focus on supporting
higher margin opportunities.

Net
sales from discontinued operations for the year ended March 31, 2006 were $514,
cost of sales were $662 and selling, general and administrative expenses were
$317.  There were no comparable amounts in 2005 as the division was
acquired effective March 31, 2005.

Liquidity
and Capital Resources

The Company's
existing capital resources as of March 31, 2006 consist of cash and accounts
receivable totaling $28,043, compared to cash and accounts receivable of $5,990
as of March 31, 2005. The Company believes that the financing arrangements the
Company currently and has planned are sufficient throughout the next twelve
months to finance its working capital needs.Implementation of the Company's strategic plan of acquiring
niche residential services companies will require additional capital, however.

In March
2006, the Company obtained a $10,000 revolving line of credit ("Line of
Credit") from a financial institution. The annual interest rate is at the
financial institution's prime rate of interest less one quarter of one percent
(0.25%). The initial interest rate on the Line of Credit on March 6, 2006 was equal to 7.25%. Interest payments on the outstanding principal balance of the Line
of Credit are due monthly beginning on April 1, 2006. The Line of Credit expires, and all outstanding principal must be repaid to the financial institution,
on September 1, 2007. The borrowings from the Line of Credit will be used for
working capital purposes.

Subject to the provisions of the Line of Credit, the
Company can borrow, repay and reborrow principal under the Line of Credit from
time to time during its term. The principal amount outstanding under the Line
of Credit may not exceed the lesser of (a) $10,000 or (b) an amount equal to
two times the Company's free cash flow for the immediately preceding two
calendar quarters ("the Credit Limit"). For purposes of the Line of Credit, the
Company's free cash flow is defined for each period of determination as (a) net
income plus the sum of interest, depreciation and amortization, less (b)
distributions or dividends, less (c) accounts receivable of the Company and its
subsidiaries unpaid 180 days or more after invoice date, plus (d) reserves
specifically established against the receivables described in (c) to the extent
such reserves are deducted in determining net income for the period in
question. In connection with the Line of Credit, the Company paid the financial
institution a commitment fee in the amount of $100. The Company is also
obligated to pay an unused facility fee on the daily average unused amount of
the Line of Credit equal to one-half of one percent (0.5%) per annum,
calculated and payable quarterly in arrears.

The Line of Credit is secured by substantially all of
the assets of the Company and its subsidiaries and the capital stock of such
subsidiaries pursuant to a Pledge and Security Agreement. The Line of Credit is
guaranteed by the subsidiaries of the Company pursuant to a Guaranty Agreement.

Under the Line of Credit, the financial institution has
agreed to issue letters of credit meeting the requirements of the financial
institution set forth in the Line of Credit for the benefit of the Company in
an amount not to exceed $2,000 in the aggregate, and subject to the amount of
cash advanced under the Line of Credit plus amounts outstanding under the
letters of credit not being in excess of the Credit Limit. Pursuant to the
terms of the Line of Credit, for each letter of credit issued by the financial
institution, Home Solutions agrees to pay a letter of credit fee equal to one
and one-half percent (1.5%) of the face amount of the letter of credit, but not
less than $5, plus other fees charged under the financial institution's
then-current policies.

The Line of Credit contains covenants, including
financial covenants, with which the Company must comply. The financial
covenants include current assets to current liabilities ratio and a debt service
coverage ratio. With certain exceptions, the Company is prohibited under the
Line of Credit from incurring any debt or permitting any liens to be placed on
its assets or the assets of its subsidiaries. Under the terms of the Line of
Credit, the Company has agreed not to take certain actions, prior to the
financial institution's approval, including becoming a party to a merger or
consolidation, acquiring assets, and subject to certain exceptions, issuing
securities.

The Company has not utilized the Line of Credit as of May 12, 2006.

During the three months ended March 31, 2006, the Company provided net cash from operating activities of $423, including
net income of $3,123.

The Company's investing activities
provided net cash of $640 primarily due to
payments on notes receivable and cash acquired in acquisitions, net of cash
paid.

The Company's net cash from financing
activities of $2,102 was primarily due to proceeds from cash exercise of
warrants and options. Cash flow outlays were for principal payments on
long-term debt and capital leases and distributions to a minority stockholder.





18





CONTRACTUAL
OBLIGATIONS

During the first quarter 2006, the Company entered into
a Master Services Agreement with a recovery/restoration contractor to provide
stand-by and mobilization services beginning January, 2006. Contracted work is
inclusive of emergency response remediation abatement and construction of both
residential and commercial projects. The Company will perform all work in accordance
with the plans and specifications identified by the contractor and furnish
labor, materials, equipment, and supplies in such quantities, and schedule such
hours as will be necessary to accomplish the work. If the contractor elects to
cease or postpone the its projects, the contractor may terminate the contract
by written notice.

Payments Due by PeriodLess than
  
  
  1-3
  
  
  4-5
  
  
  More thanContractual Obligations
  
  Total
  
  
  1 Year
  
  
  Years
  
  
  Years
  
  
  5 Years(In thousands)Capital
  Lease Obligations
  $
  186
  
  
  $
  52
  
  
  $
  133
  
  
  $
  1
  
  
  $
  -Short
  term note payable
  
  525
  
  
  
  525
  
  
  
  -
  
  
  
  -
  
  
  
  -Notes Payable
  
  2,603
  
  
  
  1,398
  
  
  
  1,170
  
  
  
  35
  
  
  
  -Operating
  Leases
  
  2,583
  
  
  
  634
  
  
  
  1,113
  
  
  
  387
  
  
  
  449Total
  $
  5,897
  
  
  $
  2,609
  
  
  $
  2,416
  
  
  $
  423
  
  
  $
  449


| |  |  | 
| |  |  | 

We believe that, for the period presented, inflation
has not had a material effect on our operations.

Item 3. Quantitative and Qualitative
Disclosures About Market Risk

Pursuant to the instructions to Item 305(c) of
Regulations S-1K, quantitative and qualitative disclosures about material risk
is not required until after the first fiscal year end in which Item 305 is
applicable, and thus, such information is not included.

Item 4. Controls and
Procedures

(a) Evaluation of Disclosure Controls and Procedures. The Company
carried out an evaluation under the supervision and with the participation of
the Company's management, including the Company's Chief Executive Officer
("CEO") and Chief Financial Officer ("CFO"), of the effectiveness of the
Company's disclosure controls and procedures. Based upon that evaluation, the
CEO and CFO concluded that as of March 31, 2006 our disclosure controls and procedures were effective in timely alerting them to the material information
relating to the Company (or the Company's consolidated subsidiaries) required
to be included in the Company's periodic filings with the Securities and
Exchange Commission ("the SEC"), such that the
information relating to the Company, required to be disclosed in SEC reports (i) is recorded, processed, summarized and reported within the time periods specified
in SEC rules and forms, and (ii) is accumulated and communicated to the
Company's management, including our CEO and CFO, as appropriate to allow timely
decisions regarding required disclosure.

(b) Changes in internal control over
financial reporting. There has been no change in the Company's internal control
over financial reporting that occurred during the three months ended March 31, 2006 that has materially affected, or is reasonably likely to materially affect,
the Company's internal control over financial reporting.

The Company's management, including the CEO and CFO,
does not expect that our disclosure controls and procedures or our internal
control over financial reporting will necessarily prevent all fraud and
material error. An internal control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of the control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any,
within the Company have been detected. These inherent limitations include the
realities that judgments in decision-making can be faulty, and that breakdowns
can occur because of simple error or mistake. Additionally, controls can be
circumvented by the individual acts of some persons, by collusion of two or
more people, or by management override of the internal control. The design of
any system of controls also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions.







19





PART II
OTHER INFORMATION(Dollars and shares in thousands, except for per share
data)

Item 1. Legal Proceedings.

The nature and scope of our business operations bring
us into regular contact with the general public, a variety of businesses and
government agencies.  These activities inherently subject us to potential
litigation, which we defend in the normal course of business. At March 31, 2006, there were no claims and
disputes incidental to the business.

Item
1A.  Risk Factors

There are no material changes from risk factors as
previously disclosed in our 10-KSB for the annual period ended December 31, 2005.

Item 2. Unregistered Sales
of Equity Securities and Use of Proceeds.

During the three months ended
 March 31, 2006 (any issuances previously disclosed by the Company on Form 8-K
are not repeated herein), the Company issued the following shares of its common
stock and other equity securities without registration
under the Securities Act of 1933, as amended (the "Securities Act") (dollars
and shares arereportedin
thousands, except per share data):

1. On January 23, 2006, the Company issued 480 shares of common stock related to the conversion of $902 in debt principal and
accrued interest payable at a conversion price of $1.88 per share;

2. On February 8, 2006 the Company issued 7 shares of common stock at
an exercise price of $2.00 per share in connection with the cashless exercise
of a  stock option; and

3. On February 8, 2006 the Company issued 26 shares of common stock for $40 (a conversion price of $1.50 per share) in connection with the exercise of 
options.

The above issuances were unregistered, as the Company
was relying on the exemptions from registration contained in Section 4(2) of
the Securities Act, and in certain cases, Regulation D
promulgated thereunder, on the basis that such transactions did not involve
public offerings of securities.

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

|3.1  | Certificate
of Incorporation of the Company, as restated on July 31, 2001 (filed as Exhibit A to the Company's Information Statement on Schedule 14C filed on July 9, 2001, and incorporated herein by reference).                                                                                                                                   
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.2  | Certificate
of Amendment to the Certificate of Incorporation of Nextgen Communications
Corporation, changing the corporation's name to "Home Solutions of America,
Inc.", as filed on December 23, 2002 (filed as Exhibit A to the Company's
Information Statement on Schedule 14C filed on December 22, 2002, and incorporated herein by reference).
|3.3  | Amended
and Restated Bylaws of the Company, as amended on April 4, 2006. +                                                                                                                                                                                                                                                                           
|10.1 | Employment
Agreement between Home Solutions of America, Inc. and Jeffrey M. Mattich, dated
 January 10, 2006 (filed as Exhibit 10.1 to the Company's Current Report on
Form 8-K filed on January 10, 2006, and incorporated herein by reference).                                                                                                    
|10.2 | Loan Agreement between Home Solutions of America, Inc. and
Texas Capital Bank, National Association, dated March 6, 2006 (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on March 10, 2006, and incorporated herein by reference).                                                                                          
|10.3 | Revolving
Credit Promissory Note issued by Home Solutions of America, Inc., to the order
of Texas Capital Bank, National Association in the principal amount of
$10,000,000.00 dated March 6, 2006 (filed as Exhibit 10.2 to the Company's
Current Report on Form 8-K filed on March 10, 2006, and incorporated herein by reference).                

21





|10.4 | Pledge and Security
Agreement among Cornerstone Building and Remodeling, Inc., Fiber-Seal Systems,
L.P., Home Solutions Restoration of Louisiana, Inc., P.W. Stephens, Inc.,
Southern Exposure Unlimited of Florida, Inc., S.E. Tops of Florida, Inc.,
Southern Exposure Holdings, Inc. and FSS Holding Corp. for the benefit of Texas
Capital Bank, National Association, dated March 6, 2006 (filed as Exhibit 10.3 to the Company's Current Report on Form 8-K filed on March 10, 2006, and incorporated herein by reference).
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.5 | Guaranty
Agreement among Cornerstone Building and Remodeling, Inc., Fiber-Seal Systems,
L.P., Home Solutions Restoration of Louisiana, Inc., P.W. Stephens, Inc.,
Southern Exposure Unlimited of Florida, Inc., S.E. Tops of Florida, Inc.,
Southern Exposure Holdings, Inc. and FSS Holding Corp. for the benefit of Texas
Capital Bank, National Association, dated March 6, 2006 (filed as Exhibit 10.4 to the Company's Current Report on Form 8-K filed on March 10, 2006, and incorporated herein by reference).           
|31.1 | Rule
13a-14(a)/15d-14(a) Certifications. +                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|32.1 | Section 1350
Certifications. +                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

+ Filed herewith

22





SIGNATURES

In accordance with the requirements of the
Exchange Act, the registrant caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.







|HOME SOLUTIONS OF AMERICA, INC.
|-------------------------------
|                               
|Dated:
  May 15, 2006          
|                               
|                               





|                    |                           
|------------------- | --------------------------
|                    |                           
|Dated: May 15, 2006 | By: /s/ Jeffrey M. Mattich
|                    | Jeffrey M. Mattich        
|                    | Chief Financial Officer