Edgar Filing: HOME SOLUTIONS OF AMERICA INC

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-QSB

(Mark One)

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

For the quarterly period ended September 30, 2003

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

For the transition period from ___________ to ___________

Commission file number 0-22388
---------------------------------------------

HOME SOLUTIONS OF AMERICA, INC.
--------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)

Delaware 99-0273889
------------------------------ -------------------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)

11850 Jones Road, Houston, Texas 77070
--------------------------------------------------------------------------------
(Address of Principal Executive Offices)

(281) 970-9859
--------------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)

--------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)

Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
--- ---
The number of shares outstanding of the registrant's common stock, $.001
par value per share, as of November 13, 2003 was 12,524,991 shares.

Transitional Small Business Disclosure Format: Yes No X
------ ------

PART I
FINANCIAL INFORMATION

Item 1. Financial Statements.

HOME SOLUTIONS OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Per Share Data)

Sept. 30,
2003
-----------
(unaudited)
ASSETS
Current assets:
Cash $ 216
Accounts receivable, net of allowance for doubtful
accounts of $67 2,662
Inventories 128
Prepaid expenses and other current assets 469
-------
Total current assets 3,475

Property and equipment, net of accumulated depreciation of $297 2,457

Goodwill 12,428

Deferred income taxes 32

Due from related party 49

Other assets 266
-------

$18,707
=======

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 2,023
Due to related party 12
Line of credit borrowings 522
Current portion of long-term debt 1,404
Current portion of capital lease obligations 133
Notes payable 664
Notes payable to related party 1,000
-------
Total current liabilities 5,758

Long-term liabilities:
Long-term debt, net of current portion 4,546
Capital lease obligations, net of current portion 123
-------
Total liabilities 10,427
-------

Commitments and contingencies

Stockholders' equity:
Common stock, $0.001 par value, 50,000 shares authorized;
12,525 shares issued and outstanding 12
Additional paid-in capital 30,463
Accumulated deficit (22,195)
-------
Total stockholders' equity 8,280

$18,707
=======

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

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

Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
-------------------- ---------------------
2003 2002 2003 2002
------ ------ ------ ------

Net Sales $ 3,583 $ -- $ 10,565 $ --
------ ------ ------ ------

Costs and expenses
Cost of sales
1,734 -- 5,518 --
Selling, general and administrative
expenses 1,658 434 4,881 1,331
------ ------ ------ ------
3,392 434 10,399 1,331
------ ------ ------ ------

Operating income (loss) 191 (434) 166 (1,331)
------ ------ ------ ------

Other income (expense):
Gain (loss) on sale of assets (30) (7) 34 (7)
Interest income -- 60 1 123
Interest expense (125) (9) (483) (13)
Other income 7 115 163 1,220
------ ------ ------ ------
Total other income (expense) (148) 159 (285) 1,323
------ ------ ------ ------

Income (loss) from continuing
operations before income taxes 43 (275) (119) (8)

Income taxes -- -- -- --

Loss from discontinued operations
(including loss on
disposal of $104) -- -- -- (247)
------ ------ ------ ------

Net income (loss) $ 43 $ (275) $ (119) $ (255)
====== ====== ====== ======

Income (loss) per share from
continuing operations
Basic and diluted $ 0.00 $ (0.03) ($ 0.01) $ 0.00
Loss from discontinued operations
Basic and diluted $ -- $ -- $ -- $ (0.03)

Net income (loss) per share
Basic and diluted $ 0.00 $ (0.03) ($ 0.01) $ (0.03)

Weighted average number of common shares
outstanding
Basic 12,400 9,272 11,610 9,593
Diluted 14,285 9,272 11,610 9,593
------ ------ ------ ------

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

HOME SOLUTIONS OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)

Nine Months Ended
Sept. 30,
--------------------
2003 2002
--------- ---------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (119) $ (255)
Adjustments to reconcile net loss to net cash
provided by (used in)
operating activities:
Depreciation and amortization 427 15
Provision (benefit) for doubtful accounts (27) --
Loss on sale of assets -- 7
Loss on sale of PTP -- 104
(Gain) loss on sale of assets (34) --
Gain on extinguishment of debt (152) --
Stock-based compensation 102 --
Changes in operating assets and
liabilities, net of acquisitions
and divestitures-
Accounts receivable 1,066 284
Costs and estimated earnings in
excess of billings on jobs in
progress, net -- 6
Prepaid expenses and supplies 39 (89)
Other assets (58) --
Accounts payable and accrued
liabilities (88) (1,547)
Due to related party (75) --
--------- ---------

Net cash provided by (used in) operating
activities 1,081 (1,475)
--------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
Principal payments received on notes receivable -- 123
Proceeds from sale of property and equipment 64 --
Cash transferred in sale of PTP -- (198)
Acquisition of Fiber Seal Systems, LP, net of
cash acquired of $6 (134) --
Acquisition of Central Texas Residential
Services, Inc. (140) --
Fees paid for pending acquisitions (30) (450)
Advances from related party, net 11 --
Purchases of property and equipment (101) (169)
--------- ---------

Net cash used in investing activities (330) (694)
--------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments on line of credit (6) --
Proceeds from notes payable to related party 250 --
Proceeds from notes payable 250 200
Principal payments on notes payable (158) --
Principal payments on long-term debt and capital
leases (1,136) (227)
--------- ---------

Net cash used in financing activities (800) (27)
--------- ---------

NET DECREASE IN CASH (49) (2,196)

CASH AT BEGINNING OF PERIOD 265 2,210
--------- ---------

CASH AT END OF PERIOD $ 216 $ 14
======= =======

Supplemental disclosures of cash flow information
Cash paid for:
Interest $ 115 $ 13
Income taxes $ -- $ --

Supplemental schedule of non-cash investing and
financing activities:
Fixed assets acquired through capital lease
obligations $ 15 $ --
Fixed assets acquired through notes payable $ 100 $ --
Issuance of stock for settlement of obligations $ 2,242 $ --
Disposal of assets for settlement of obligations $ 786 $ --
Disposal of capital lease obligations for $ 101 $ --
settlement of obligations
Interest expense converted to long-term debt $ 124 $ --
Fair market value of warrant issued for American
Stock Exchange listing fees $ 49 $ --
Issuance of stock for acquisitions $ 1,327 $ --
Issuance of note payable for acquisition $ 520 $ --
Insurance policy financed $ 53 $ --
Common stock returned as settlement $ -- $ 2,628

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

HOME SOLUTIONS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(Dollars and Shares in Thousands, Except Per Share Data)

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

Company Description and Nature of Operations

Home Solutions of America, Inc. ("we," "us," "Home Solutions," or the "Company")
is a Delaware corporation that was incorporated in 1998. Our growth strategy is
to become a leading provider of specialty residential services that protect the
homeowner's single largest investment - their home. We seek a dominant market
position through the acquisition of strategic, specialized, profitable and
well-managed residential service companies, and through the above average
internal growth of these operations. Home Solutions will provide services such
as cleaning and fabric protection, fire and water restoration, and residential
renovation sales.

In November 2002, Home Solutions acquired PW Stephens, Inc. ("PWS"), a provider
of residential and light commercial indoor air remediation services, for
$13,402, consisting of cash, the exchange of certain assets, seller notes,
commissions and other costs. These operations are included in our 2003 financial
results. In July 2003, the Company closed the acquisition of Central Texas
Residential Services, Inc. ("CTRS") and Fiber Seal Systems, LP ("FSS"). CTRS and
FSS operations are included in our 2003 financial results, beginning July 2003.
Currently, a letter of intent is outstanding for Quality Interiors, Inc. and for
Southern Exposure (See Note 2). The Company is aggressively acquiring
complementary specialty residential services businesses as part of its announced
strategy.

The accompanying unaudited, interim consolidated financial statements have been
prepared by the Company in accordance with accounting principles generally
accepted in the United States of America and Regulation S-B, as promulgated by
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in audited financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America have been condensed or omitted. Accordingly, these interim consolidated
financial statements should be read in conjunction with the Company's
consolidated financial statements and related notes as contained in the
Company's annual report on Form 10-KSB for the year ended December 31, 2002. In
the opinion of management, the interim consolidated financial statements reflect
all adjustments, including normal recurring adjustments, necessary for fair
presentation of the interim periods presented. The results of operations for the
three and nine months ended September 30, 2003 are not necessarily indicative of
results of operations to be expected for the full year.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Home
Solutions of America, Inc. and its wholly owned subsidiaries. All significant
intercompany transactions and balances have been eliminated in consolidation.

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 receivable, property and equipment
and goodwill, and valuation of deferred tax assets. Actual results could differ
from these estimates.

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". 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.

Long-Lived Assets

The Company's management assesses the recoverability of its long-lived assets 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 September 30, 2003, 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.

Other Assets

During the nine months ended September 30, 2003, the Company prepaid cash of
$60, accrued $7 in accounts payable and issued a warrant to purchase 50 shares
of the Company's stock at $3 per share for American Stock Exchange initial
listing fees and related consulting fees. The warrant vests immediately, expires
in July 2007, and is valued at $49 (using the Black-Scholes option pricing model
on the date of grant). The Company will amortize this total prepaid cost of $116
over a 3-year period, which is the management's estimate of the period of
benefit. During the nine months ended September 30, 2003, the Company amortized
$10 of this prepaid cost to selling, general and administrative expenses in the
accompanying consolidated statements of operations.

HOME SOLUTIONS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(Dollars and Shares in Thousands, Except Per Share Data)

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

Revenue Recognition

Since the purchase of PWS, revenue is recognized at the time the contract and
related services are performed.

Prior to that time, the Company reported revenues from fixed priced contracts
using the percentage of completion method for financial reporting purposes.
Under the percentage of completion method, revenues with respect to individual
contracts were recognized in the proportion that costs incurred to date bore to
total estimated costs. Revenue and cost estimates were subject to revision
during the terms of the contracts, and any required adjustments were made in the
periods in which the revisions become known. Provision was made, where
applicable, for the entire amount of future estimated losses on contracts in
progress when such losses were determined. General and administrative costs were
not allocated to contract costs and were charged to expense as incurred.

The Company recognized revenues from time and materials contracts and consulting
services as those services were performed. Advance payments made under these
contracts were recorded as deferred revenue and recognized when the related
services were performed.

Stock-Based Compensation

The Company uses the intrinsic value method of accounting for stock-based
compensation to employees in accordance with Accounting Principles Board Opinion
("APB") No. 25, as amended, "Accounting for Stock Issued to Employees." The
Company accounts for non-employee stock-based compensation under SFAS No. 123,
"Accounting for Stock-Based Compensation." At September 30, 2003, the Company
has two stock-based employee compensation plans, which are described more fully
in Note 4. During the nine months ended September 30, 2003 and 2002, no
compensation expense was recognized in the accompanying consolidated statements
of operations for options issued to employees pursuant to APB 25. No other
stock-based employee compensation cost is reflected in the three and nine months
ended September 30, 2003 and 2002, as all options granted in these periods ended
under those plans had either exercise prices equal to or greater than the market
value of the underlying common stock on the date of grant or the vesting period
starts after the three and nine months ended September 30, 2003 and 2002. The
following table illustrates the effect on net loss and loss per share if the
Company had applied the fair value recognition provisions of SFAS No. 123 to
stock-based employee compensation:

Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
---------------------- -----------------------
2003 2002 2003 2002
-------- -------- -------- ---------

Net income (loss) as
reported $ 43 $ (275) $ (119) $ (255)

Deduct: Total stock-based employee
compensation expense under APB 25 -- -- -- --

Add: Total stock-based employee
compensation expense under fair value
based method for all awards, net of
related tax effects -- (55) (77) (226)
-------- -------- -------- ---------
Pro forma net income
(loss) $ 43 $ (330) $ (196) $ (481)
======== ======== ======== =========
Basic and diluted
income (loss) per share
- as reported $ 0.00 $ (0.03) $ (0.01) $ (0.03)
======== ======== ======== =========
Basic and diluted loss
per share - pro forma $ 0.00 $ (0.04) $ (0.02) (0.05)
======== ======== ======== =========

Other Income

During the nine months ended September 30, 2003, the Company recognized income
of $152 from extinguishment of old accounts payable balances of the Company's
inactive subsidiary that is no longer legally collectible by the vendors. The
income is recorded in other income in the accompanying consolidated statements
of operations.

Comprehensive Income

During the periods presented, the Company had no items of comprehensive income
and, therefore, has not presented a statement of comprehensive income.

HOME SOLUTIONS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(Dollars and Shares in Thousands, Except Per Share Data)

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

Per Share Data

Basic earnings per share ("BEPS") is computed by dividing income (loss)
available to common stockholders by the weighted average number of outstanding
common shares during the period of computation. Diluted earnings per share
("DEPS") gives effect to all dilutive potential 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 antidilutive
effect on earnings. As of September 30, 2002, the Company had the following
potentially dilutive securities that would affect loss per share if they were to
be dilutive:

2002
-------
Options 347
Warrants 18
-------

365
=======

Business Segments

The Company currently operates in two segments, restoration services, including
indoor air contaminate abatement for residential and light commercial
properties, and cleaning and fabric protection services, including selling and
franchising the Fiber-Seal(R) furniture care system. For the periods presented,
cleaning and fabric protection services revenues are less than 10% of total
revenues; therefore, segment disclosures are not presented herein.

NOTE 2 - DISPOSITIONS AND ACQUISITIONS

On February 22, 2002, the Company sold all of its shares of Point To Point
Network Services, Inc. ("PTP") to Point to Point of Louisiana, Inc., a Louisiana
corporation (the "Buyer"). The sale price was $1,000, which the Buyer paid by
issuing a Secured Promissory Note (the "Note") to the Company. The Note had
interest at 6.5% per annum, and required a payment of accrued interest on
February 22, 2003, and a payment of accrued interest and $100 of principal on
February 22, 2004, and all remaining principal and interest accrued thereon on
February 22, 2005. The Note was secured by the stock sold, pursuant to a Stock
Pledge Agreement dated February 22, 2002. The Note was assigned to the former
stockholder of PWS in connection with the acquisition of PWS on November 1,
2002. PTP had revenues of $253 and incurred a loss from operations of $143
during the first quarter of 2002. The loss on sale of PTP is comprised of the
following:

Current assets $ 811
Property and equipment 476
Goodwill 837
Current liabilities (1,066)
Long-term liabilities (12)
------

Net book value of net assets sold 1,046
Legal and other transaction costs 58
Sale price (1,000)
------

$ (104)
======

Prior to the sale of PTP, the Company entered into a settlement agreement with a
former employee and stockholder of PTP. The agreement required the former
stockholder to transfer 1,800 of the 2,000 shares of the Company's common stock
issued in the acquisition of PTP back to the Company. As a result, the Company
reduced previously recorded goodwill related to PTP by $2,628, the value of the
shares on the date of acquisition.

Commensurate with the announcement in August 2002 of the Company's strategy of
acquiring companies in the specialty residential services industry, on December
27, 2002, pursuant to a stock purchase agreement, the Company purchased 100% of
the outstanding stock of PWS. The sale was effective November 1, 2002, and has
been accounted for as a purchase. The purchase price was comprised of the
following:

Cash $ 1,000
Notes payable 8,809
Assignment of notes receivable 1,175
Cancellation of note receivable 1,154
Value of warrants 425
Commissions, legal, accounting and other costs 839

-------
13,402
=======

HOME SOLUTIONS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(Dollars and Shares in Thousands, Except Per Share Data)

The purchase price was allocated as follows:

Current assets $ 4,386
Property and equipment 2,022
Other long-term assets 160
Current liabilities (2,552)
Long-term liabilities
(1,429)
-------
Estimated fair value of tangible net assets acquired 2,587
Goodwill and other intangible assets 10,815
-------
13,402
=======

The Company has classified the excess of the purchase price over the estimated
fair value of the tangible net assets acquired as goodwill as of September 30,
2003, in the accompanying consolidated balance sheet. The Company is in the
process of analyzing the components of the intangible assets and will have an
appraisal performed by a third party during 2003 to determine final purchase
price allocation.

In July 2003, the Company acquired Central Texas Residential Services, Inc
("CTRS") for 850 shares of common stock, 600 shares of which are held in escrow
pending CTRS reaching certain financial targets. The 600 shares are not
considered outstanding by the Company as the contingency has not been satisfied.

In July 2003, the Company acquired Fiber Seal Systems, LP ("FSS") for 300 shares
of common stock, a promissory note of $520, and a warrant to purchase 250
additional shares of the Company. The 250 warrants are subject to FSS meeting
certain financial targets. In the event the Company either does not repay the
$520 note on December 31, 2003 or does not raise $2,000 in debt or equity
capital, the seller of FSS can exercise a repurchase option in exchange for
canceling the $520 note and returning the 250 warrants. This repurchase option
is valid for one day, January 2, 2004. In addition, the Company would then have
a 30-day option to purchase the undeveloped Houston market franchise from FSS
for $125.

The purchase price of CTRS and FSS was comprised of the following:

550 shares of the Company's common stock $ 1,327
Notes payable (see Note 3) 520
Commissions and other costs 280

-------
2,127
=======

The purchase price of CTRS and FSS was allocated as follows:

Current assets $ 105
Property and equipment 432
Current liabilities (23)
-------
Estimated fair value of tangible net assets acquired 514
Goodwill and other intangible assets 1,613
-------

$ 2,127
=======

The accompanying consolidated financial statements include the operations of PWS
from November 1, 2002 forward and CTRS and FSS since July 2003. The following
unaudited pro forma information presents the results of operations for the three
and nine months ended September 30, 2003 and 2002, as though the acquisitions
had occurred on January 1, 2002:

Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
-------- -------- -------- ------

Revenue $ 3,781 $ 4,035 $ 11,135 11,456
Net income (loss) 60 6 (184) 771
Earnings (loss) per share 0.00 0.00 (0.01) 0.06

HOME SOLUTIONS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(Dollars and Shares in Thousands, Except Per Share Data)

Letters of Intent

The following letters of intent are currently outstanding at the time of this 10
Q filing:

Quality Interiors, Inc. In June 2003, the Company entered into a letter of
intent to acquire Quality Interiors, Inc., a company that provides restoration
services, for $6,750 in total consideration, including: (i) 1,333 common shares
of Home Solutions and (ii) $2,750 in cash or seller note.

SE, Inc. In October 2003, the Company entered into a letter of intent to acquire
SE, Inc. and related companies. SE, Inc. provides specialty interior
installation services in the southeastern portion of the United States. The
purchase price is $9,500 in total consideration, including: (i) 1,000 common
shares of Home Solutions; (ii) $4,500 in seller notes and (iii) $2,500 in cash.

These acquisitions are expected to close in the fourth quarter of 2003; however,
they are subject to the satisfactory completion of our due diligence review, and
the successful negotiation and execution of definitive purchase and/or loan
agreements, which will contain numerous conditions to closing. There can be no
assurance that we will be able to consummate these transactions.

We will continue to aggressively pursue the acquisition of companies that
provide specialty residential services as we proceed with our growth strategy.
Our ability to acquire such businesses will be dependent upon, among other
factors, our ability to obtain outside financing and/or issue shares of the
Company's common stock as a portion of the purchase price.

NOTE 3 - SHORT-TERM AND LONG-TERM DEBT

Short-Term Debt

In the nine months ended September 30, 2003, the Company borrowed a total of
$500, of which $250 was from an affiliate of a stockholder of the Company and
$250 from two unrelated entities, to fund general working capital. Of this
amount, $153 has been repaid to the unrelated entity. The remaining balance of
$250 from a related party has been renewed and extended until December 2003 and
the balance of $97 to unrelated entities was renewed and extended until December
2003. These notes bear interest at rates between 8% and 18%.

The Company has a $750 note payable to a related party, dated October 29, 2002,
secured by a deed of trust, which bears interest of 12% per annum, payable
monthly and the balance due on October 29, 2003. This note was extended until
December 2003

The Company is currently negotiating a new credit facility to re-finance its
existing indebtedness of $1,255 (line of credit borrowings of $522 and term loan
of $733) at a financial institution, which expired January 28, 2003 (see below).

The Company has a $520 note to Amherst Merritt International, the seller of FSS,
due at the earlier of 12/31/03 or the date in which the Company completes a debt
or equity offering of at least $2,000. Interest is computed at the prime rate.

In June 2003, the Company converted $2,242 in seller debt from the PWS
transaction into 862,479 shares of common stock of the Company. In addition, the
Company renewed and extended a $1,500 payment due in March 2003 to the seller of
PWS into a $1,554 promissory note payable quarterly over the next five years
with an interest rate of 6%. In addition, as part of this transaction, the
Company sold $823 in non-essential assets back to the seller of PWS in exchange
for a $786 reduction in debt owed to the seller and an assumption of $101 in
capital lease obligations, recognizing a gain of $64.

HOME SOLUTIONS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(Dollars and Shares in Thousands, Except Per Share Data)

NOTE 3 - SHORT-TERM AND LONG-TERM DEBT, continued

Long-Term Debt
Long-term debt consists of the following as of September 30, 2003:

Note payable to seller, interest at 6%,
interest due monthly beginning July 1,
2003, principal payments of $74 due
quarterly beginning November 1, 2003, $1,514
with final payment of remaining principal
plus unpaid interest on November 1, 2008
secured by substantially all the assets
of the Company. The note guaranteed by
PWS and is subordinated to PWS's credit
facility of $1,500 or any other loan of
up to $3,500 obtained by PWS or the
seller.

Note payable to seller, net of discount
of $110, zero coupon, imputed interest at
5%, principal and interest due in equal 1,070
monthly installments of $24 through
October 2007, secured by substantially
all the assets of the Company.

Note payable to seller, interest starting
June 5, 2003 at one-month LIBOR (1.31% at
June 30, 2003) plus 1%, principal
payments of $107 due quarterly plus
interest beginning November 1, 2003, with 2,242
final payment of $107 plus unpaid
interest on November 1, 2008, secured by
substantially all of the assets of the
Company. The note is convertible into the
Company's common stock at market, is
guaranteed by PWS, and is subordinated to
PWS's credit facility of $1,500 or any
other loan of up to $3,500 obtained by
PWS or the seller.

Note payable to a financial institution,
bearing interest at prime (4.25% at June
30, 2003) plus 0.75%, monthly principal
payments of $18 plus interest, maturing
on January 28, 2007. The Company expects
to replace the note payable through 733
additional financing from another
institution. The Company must maintain
certain financial and non-financial
covenants. This note is guaranteed by
the former stockholder of PWS.

Note payable to seller, interest at
2.25%, principal payments due as accounts
receivable securing the note are
collected, remaining amount (if any) due 213
April 1, 2003. The Company is currently
in the process of renegotiating the terms
of this note to extend the maturity date.

Note payable to various financial
institutions, collateralized by various
automobiles, bearing interest at various
annual interest rates ranging from prime
plus 0.75% to 7.66%, principal and 178
interest payable in monthly installments ------
ranging from $0.70 to $1.7 through March
28, 2009.

5,950

Less current portion
(1,404)
------

Total $4,546
======

HOME SOLUTIONS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(Dollars and Shares in Thousands, Except Per Share Data)

NOTE 4 - EQUITY

Common Stock

During the nine months ended September 30, 2003, the Company issued 1,446 shares
of common stock (862 shares for the conversion of seller debt, 34 net shares
issued to warrant holders who utilized a cashless exercise, as defined, 300
shares to the seller of FSS and 250 shares to the seller of CTRS, not
considering the 600 shares that are currently held in escrow).

In June 2003, the Company listed its common shares with the American Stock
Exchange under the ticker symbol "HOM". On June 30, 2003, the Company filed a
registration statement on Form S-3 to register 6,698 shares of common stock
(some of which could be issued pursuant to warrant exercises and the conversion
of debt) on behalf of selling stockholders, pursuant to contractual registration
rights with such stockholders. The Company will not receive any proceeds from
the sale of such shares, other than the exercise prices of any warrants
exercised by warrant holders who do not utilize a cashless exercise.

Stock Options

The Company's Board of Directors approved the 2001 Stock Plan (the "2001 Plan")
on April 2, 2001. The 2001 Plan provides for awards of incentive stock options,
non-qualified stock options, and restricted stock purchase rights. The Company
has reserved 3,000 shares of common stock under the 2001 Plan. The exercise
price of the awards shall be determined by the Plan administrator at the date of
grant, but shall not be less than the fair market value of the stock on the date
of grant for employees, or 85 percent of the fair market value for
non-employees. The exercise period shall be no more than 10 years and the awards
will vest over a period of time determinable by the Board of Directors. The
number of options under the 2001 Plan available for grant at September 30, 2003
was 1,410. At the Company's 2003 annual stockholders' meeting, which was held on
May 20, 2003, the Company's stockholders approved an amendment to the 2001 Plan
that increased the options available for grant under the 2001 Plan by 1,000,
bringing the total to 3,000.

The Company's Board of Directors approved the 1998 Stock Option Plan (the "1998
Plan"). The 1998 Plan covers two types of options: incentive stock options and
non-qualified stock options. The aggregate number of shares that may be issued
pursuant to the 1998 Plan may not exceed 2,000 shares. The exercise price for
the options shall be determined by the Plan administrator at the date of grant,
but shall not be less than the fair market value of the stock at the date of
grant. The option period can be no more than 10 years and the options will vest
over a period of time determinable by the Board of Directors. The number of
options under the 1998 Plan available for grant at September 30, 2003 was 867.
At the Company's 2003 annual stockholders' meeting, which was held on May 20,
2003, the Company's stockholders approved an amendment to the 1998 Plan that
increased the options available for grant under the 1998 Plan by 1,000, bringing
the total to 2,000.

During the nine months ended September 30, 2003, the Company issued options to
purchase 500 shares of the Company's common stock (at $2.00 to $2.10) (fair
value on the date of grant) to its officers under the 1998 Plan, and options to
purchase 300 shares (at $1.65 to $1.75 per share, the fair values on the date of
grant) to each of the three new directors of the Company, with all such options
vesting over a three-year period, under the 2001 Plan. The Company also amended
an officer's 170 options to fully vest all options in the event that the officer
is terminated prior to the expiration of his employment agreement.

Warrants

From time to time, the Company issues warrants pursuant to various consulting
and third party agreements.

During the nine months ended September 30, 2003, the Company recorded a
consulting expense of $102 related to warrants issued in the year ended December
31, 2002, and which fair value is recognized over the period of service.

During the nine months ended September 30, 2003, the Company recorded a prepaid
expense of $49 for the fair value of warrant issued for consulting fees related
to American Stock Exchange listing (see Note 1).

During the nine months ended September 30, 2003, the Company cancelled 125
warrants to purchase shares of the Company's common stock at $1.50 per share.

During the nine months ended September 30, 2003, 67 warrants were exercised as a
cashless exercise for a net 34 shares of the Company's common stock.

NOTE 5 - 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 September
30, 2003, there were various claims and disputes incidental to the business. The
Company believes that the disposition of all such claims and disputes,
individually or in the aggregate, should not have a material adverse affect upon
the Company's financial position, results of operations or cash flows.

HOME SOLUTIONS OF AMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(Dollars and Shares in Thousands, Except Per Share Data)

NOTE 5 - COMMITMENTS AND CONTINGENCIES, continued

On or about August 1, 2002, National Union Fire Insurance commenced an adversary
proceeding against us entitled National Union Fire Ins. Co. v. QHI Stephens
Contractors, Inc., EIF Holdings, Inc., P.W. Stephens Contracts, Inc., P.W.
Stephens Contractors, Inc. (CA), P.W. Stephens Services, Inc., P.W. Stephens
Residential, Inc., American Temporary Sanitation, Inc. in the United States
District Court for the Northern District of California. The Company believes its
costs for this proceeding will be covered under an indemnification agreement
with Spruce MacIntyre Holding Corp. ("Spruce") and in no case will be more than
$150.

On or about October 3, 2002, in the Superior Criminal Court of Los Angeles
County, California a misdemeanor claim was filed against the Company and two
employees alleging that certain events violated state and local regulations. The
Company settled these claims for $30 due November 15, 2003.

Pursuant to an indemnification agreement between the Company and Spruce
MacIntyre Holding Corp. ("Spruce"), the Company settled claims brought by CIT
Group/Equipment Financing, Inc. and Ackstar Insurance Company, both filed in the
United States District Court for the Eastern District of Missouri. The CIT
settlement agreement requires Spruce to make certain payments to the plaintiffs.
In the event that Spruce fails to make the remaining settlement payments, the
plaintiffs could seek satisfaction of their $713 consent judgment against the
Company, in which case the Company would have to seek indemnification from
Spruce. At this time, Spruce owes a payment of $40 to CIT, which the Company has
been put on notice as not having been received. If this payment is not paid by
November 21, 2003, the plaintiff will seek their consent judgment against the
Company.

In September 2003, Missouri State Bank and Trust commenced and adversary
proceeding against us entitled Missouri State Bank and Trust, a banking
corporation v. PW Stephens Contractors, Inc., PW Stephens, Inc., and Mary Ennis
in the Circuit Court for St. Louis County, State of Missouri. The plaintiff
seeks approximately $58 plus interest and attorneys fees. The Company believes
the indemnification agreement between the Company and Spruce applies to this
proceeding and is pursuing that indemnification.

The Company has accrued $96 in the accompanying consolidated financial
statements related to the above proceedings. Based on management's analysis, the
Company believes that this amount will be sufficient to cover any potential
losses that may occur.

Indemnities and Guarantees

During the normal course of business, the Company has made certain indemnities
and guarantees under which it may be required to make payments in relation to
certain transactions. These indemnities include certain agreements with the
Company's officers, under which the Company may be required to indemnify such
person for liabilities arising out of their employment relationship. The
duration of these indemnities and guarantees varies and, in certain cases, is
indefinite. The majority of these indemnities and guarantees do not provide for
any limitation of the maximum potential future payments the Company could be
obligated to make. Historically, the Company has not been obligated to make
significant payments for these obligations and no liabilities have been recorded
for these indemnities and guarantees in the accompanying consolidated balance
sheet.

Item 2. Management's Discussion and Analysis or Plan of Operation.

Overview

Home Solutions of America, Inc. ("we," "us," "Home Solutions," or the
"Company") is a Delaware corporation that was incorporated in 1998. Our growth
strategy, developed in 2002, is to become a leading provider of specialty
residential services that protect the homeowner's single largest investment -
their home. We seek a dominant market position through the acquisition of
strategic, specialized, profitable and well-managed residential service
companies and through the above average internal growth of these operations.
Home Solutions will provide services such as cleaning and fabric protection,
restoration services, and residential renovation sales.

Growth Strategy

Home Solutions seeks to acquire companies or internally generate projects
that will focus on providing specialty residential services to homeowners.
Effective November 1, 2002, we closed our first acquisition as part of this
strategy, acquiring PW Stephens, Inc. ("PWS"), a provider of indoor air
contaminate removal services for homeowners in California. In July 2003 we
acquired Central Texas Residential Services, Inc. and Fiber-Seal Systems, L.P.
We expect to continue our aggressive growth strategy with additional
acquisitions. The following is a list of the targeted services that we are
pursuing:

Cleaning and Fabric Protection: We will provide fabric protection services
to protect furniture, carpet and draperies from stains and daily wear and tear.
This niche market is primarily targeted at above-average income homeowners with
an average ticket of approximately $400 or more. We will provide our customers
with an annual fabric protection service agreement that will allow them to have
on-site spill clean up during the life of the agreement. In addition, using
well-tested methods of cleaning carpet, we will offer maintenance and emergency
response services to our customer base to repair carpet damaged by common
stains, pet dander, bacteria and dust. This procedure will extend the life of
the homeowners' carpets and make the carpet look its finest. Furthermore, air
duct cleaning is another under-developed market the Company will approach.
Particulate (organic and inorganic) material within a home's heating and air
conditioning systems and the transfer air ducts can cause allergic reactions and
generally indicate poor air quality. Furthermore, the conditions of these
systems, high moisture content and heat are often the breeding ground for many
types of mold. It is expected that a portion of our cleaning operations will
generate additional opportunities across our other business segments.

Restoration Services: As part of Home Solutions' specialty residential
services strategy, we will provide highly trained technicians 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. Indoor air contamination, including contamination from
mold, asbestos and lead paint, is a growing concern for the homeowner. 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 $300 to several thousand dollars. 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. As most cases of mold are associated with excess moisture, we believe
that response to this type of event-related damage will provide significant
additional revenue opportunities. The cost and time requirements of these
projects can vary dramatically from case-to-case. It is expected that a portion
of our fire/water damage restoration operations will generate additional
opportunities across our other business segments.

Residential Renovation Sales: Home Solutions seeks out exceptional home
buying opportunities by marketing to homeowners in need of quick closings on the
sale of their home. In addition, the foreclosure market provides substantial
opportunities for Home Solutions to purchase its inventory of homes. Moreover,
often these homes are in need of a few thousand dollars in repairs which the
Company provides through its existing sister companies by providing such
services as mold remediation and carpet cleaning or through its approved network
of residential service providers. Typically, the inventory of homes turns over
in three to four months and results in a gain of approximately five percent to
ten percent of the purchase price. Home Solutions has identified several
regional operators that are available for acquisition in this industry.

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 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 recognized at the time the contract and related services are
performed.

Stock-Based Compensation

The Company uses the intrinsic value method of accounting for stock-based
compensation to employees in accordance with Accounting Principles Board Opinion
("APB") No. 25, as amended, "Accounting for Stock Issued to Employees." The
Company accounts for non-employee stock-based compensation under Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation." At September 30, 2003, the Company had two stock-based employee
compensation plans, which are described more fully in Note 4 of the accompanying
consolidated financial statements. The Company accounts for those plans under
the recognition and measurement principles of APB 25, and related
interpretations. The Company has applied the disclosure provisions in SFAS No.
148 in its consolidated financial statements and the accompanying notes. The
Company does not anticipate adopting the fair value based method of accounting
for stock-based compensation.

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 In Thousands)

Comparison of Three Months ended September 30, 2003 to Three Months ended
September 30, 2002

Revenue

The revenue of $3,583 for the three months ended September 30, 2003 is
comprised of revenue from PWS and FSS. The Company had no revenue during the
three months ended September 30, 2002.

Costs of Sales

Costs of sales were $1,734 for the three months ended September 30, 2003.
The Company had no cost of sales during the three months ended September 30,
2002.

Selling, General and Administrative Expenses:

Selling, general and administrative expenses were $1,658 for the three
months ended September 30, 2003 compared to $434 for the three months ended
September 30, 2002. This represents an increase of $1,224 over 2002. This
increase is due to the addition of PWS and FSS' administrative costs together
with Home Solutions' administrative costs.

Other Income (Expense):

Interest income decreased from $60 in 2002 to $0 in 2003. This is primarily
a result of lower cash balances during 2003. Interest expense was $125 in 2003
compared to $9 in 2002, which is largely due to the debt incurred with the
acquisition of PWS and interest on the line of credit and long-term debt at PWS.
Other income was $115 in 2002 and $7 in 2003, which represents a gain on
extinguishment of debt.

Comparison of Nine Months ended September 30, 2003 to Nine Months ended
September 30, 2002

Revenue

The revenue of $10,565 for the nine months ended September 30, 2003 is
comprised of revenue from PWS and FSS. For the nine months ended September 30,
2002, the Company had no revenue during this period other than revenue earned by
PTP, the Company's former wholly-owned subsidiary that was divested in February
2002, which revenue is included in the "Income (loss) from discontinued
operations" line item on the consolidated statements of operations.

Costs of Sales

Costs of sales were $5,518 for the nine months ended September 30, 2003.
For the nine months ended September 30, 2002, the Company had no cost of sales
during this period other than from the Company's divested subsidiary PTP, which
is included in the "Income (loss) from discontinued operations" line item on the
consolidated statements of operations.

Selling, General and Administrative Expenses:

Selling, general and administrative expenses were $4,881 for the nine
months ended September 30, 2003 compared to $1,331 for the nine months ended
September 30, 2002. This represents an increase of $3,550 over 2002. This
increase is due to the addition of PWS and FSS' administrative costs together
with Home Solutions' administrative costs.

Other Income (Expense):

Interest income decreased from $123 in 2002 to $1 in 2003. This is
primarily a result of lower cash balances during the first nine months of 2003.
Interest expense was $483 in 2003 compared to $13 in 2002. This is largely due
to the debt incurred with the acquisition of PWS and interest on the line of
credit and long-term debt at PWS. Other income was $163 in 2003 compared to
$1,220 in 2002, which represents a gain on extinguishment of debt.

Liquidity and Capital Resources

The Company's existing capital resources as of September 30, 2003,
consisted of cash and accounts receivable totaling $2,878, compared to cash and
notes receivable of $2,292 as of September 30, 2002. The Company believes that
the financing arrangements the Company currently has in place 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.

The Company has a credit agreement with a financial institution. The credit
agreement includes a $733 term loan, a revolving line of credit and an equipment
line of credit. The credit agreement is guaranteed by the former stockholder of
PWS, secured by substantially all PWS assets and contains a provision that
requires PWS to maintain certain financial covenants. The revolving line of
credit expired on January 28, 2003, and the institution is not willing to extend
the credit facility. The Company is currently negotiating with other financial
institutions to refinance this line, the equipment line and the $733 term loan.
The balance on the revolving line of credit was $499 at September 30, 2003.

The equipment line of credit bears interest at the prime rate plus 1.00%
per annum, payable monthly. The terms of the agreement provide for borrowings up
to $200. The equipment line of credit expired on January 31, 2003, at which time
all outstanding amounts will be repaid over 36 equal monthly installments
including principal and interest through February 28, 2006. The balance at
September 30, 2003 was $23.

During the nine months ended September 30, 2003, the Company generated net
cash from operating activities of $1,081, including a net loss of $(119).

The Company's investing activities used net cash of $(330), primarily due
to the purchase of property and equipment and payment of fees for closed and
pending acquisitions.

The Company's financing activities used net cash of $(800), primarily due
to principal payments made on long-term debt and capital leases.

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

This Form 10-QSB 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 residential services acquisition strategy and availability of capital
to fund such strategy. 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, 2002, 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-QSB 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 3. Controls and Procedures.

As of September 30, 2003, an evaluation was carried out under the
supervision and with the participation of the Company's management, including
our Chief Executive Officer and our Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures. Based upon that evaluation, the Chief Executive Officer and the
Chief Financial Officer concluded that the design and operation of these
disclosure controls and procedures were effective. No significant changes were
made in our internal controls or in other factors that could significantly
affect these controls subsequent to September 30, 2003.

PART II
OTHER INFORMATION

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 September 30, 2003, there were
various claims and disputes incidental to the business. The Company believes
that the disposition of all such claims and disputes, individually or in the
aggregate, should not have a material adverse affect upon our financial
position, results of operations or cash flows.

Pursuant to an indemnification agreement between the Company and Spruce
MacIntyre Holding Corp. ("Spruce"), the Company settled claims brought by CIT
Group/Equipment Financing, Inc. and Ackstar Insurance Company, both filed in the
United States District Court for the Eastern District of Missouri. The CIT
settlement agreement requires Spruce to make certain payments to the plaintiffs.
In the event that Spruce fails to make the remaining settlement payments, the
plaintiffs could seek satisfaction of their $713,000 consent judgment against
the Company, in which case the Company would have to seek indemnification from
Spruce. At this time, Spruce owes a payment of $40,000 to CIT, which the Company
has been put on notice as not having been received. If this payment is not paid
by November 21, 2003, the plaintiff will seek their consent judgment against the
Company.

On or about August 1, 2002, National Union Fire Insurance commenced an
adversary proceeding against us entitled National Union Fire Ins. Co. v. QHI
Stephens Contractors, Inc., EIF Holdings, Inc., P.W. Stephens Contracts, Inc.,
P.W. Stephens Contractors, Inc. (CA), P.W. Stephens Services, Inc., P.W.
Stephens Residential, Inc., American Temporary Sanitation, Inc. in the United
States District Court for the Northern District of California. The Company
believes its costs for this proceeding will be covered under an indemnification
agreement with Spruce MacIntyre Holding Corp. ("Spruce") and in no case will be
more than $150,000.

In September 2003, Missouri State Bank and Trust commenced and adversary
proceeding against us entitled Missouri State Bank and Trust, a banking
corporation v. PW Stephens Contractors, Inc., PW Stephens, Inc., and Mary Ennis
in the Circuit Court for St. Louis County, State of Missouri. The plaintiff
seeks approximately $58,000 plus interest and attorneys fees. The Company
believes the indemnification agreement between the Company and Spruce applies to
this proceeding and is pursuing that indemnification.

Item 2. Changes In Securities.

The Company issued the following shares of its common stock without
registration under the Securities Act of 1933, as amended (the "Securities
Act"):

1. In July 2003, the Company issued 300,000 shares of common stock, at a
price of $2.00 per share, and a warrant to purchase 250,000 shares of the
Company's stock at $2.00 per share, to finance the acquisition of FSS. This
warrant is contingent upon FSS meeting certain financial targets.

2. In July 2003, the Company issued 850,000 shares of common stock, at
approximately $2.35 per share, to finance the acquisition of CTRS. Of these
shares, 600,000 are currently held in escrow contingent upon CTRS meeting
certain financial targets.

3. In July 2003, the Company issued approximately 14,000 common shares
pursuant to the exercise of outstanding warrant agreements at prices between
$2.86 and $3.23 .

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 Regulation D promulgated thereunder, on the basis that such transactions did
not involve public offerings of securities.

Item 5. Other Information.

On September 16, 2003, the Company's Board of Directors re-appointed Frank
J. Fradella, the Company's Chairman of the Board and former Chief Executive
Officer, as the Company's Chief Executive Officer.

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits

2.1 Agreement for Sale of Shares, dated as of February 22, 2002, between
Nextgen Communications Corporation, a Delaware corporation, and Point to
Point of Louisiana, Inc., a Louisiana corporation (filed as Exhibit 2.1 to
the Company's Current Report on Form 8-K filed on March 19, 2002, and
incorporated herein by reference).

2.2 First Amendment to Agreement for Sale of Shares, executed to be effective
as of February 22, 2002, by and between Nextgen Communications Corporation
and Point to Point of Louisiana, Inc. (filed as Exhibit 2.2 to the
Company's Current Report on Form 8-K filed on March 19, 2002, and
incorporated herein by reference).

2.3 Secured Promissory Note, dated February 22, 2002, issued by Point to Point
of Louisiana to Nextgen Communications Corporation. (filed as Exhibit 2.3
to the Company's Current Report on Form 8-K filed on March 19, 2002, and
incorporated herein by reference).

2.4 First Amendment to Secured Promissory Note, executed to be effective as of
February 22, 2002, by and between Point to Point of Louisiana, Inc. and
Nextgen Communications Corporation (filed as Exhibit 2.4 to the Company's
Current Report on Form 8-K filed on March 19, 2002, and incorporated
herein by reference).

2.5 Stock Pledge Agreement, executed to be effective as of February 22, 2002,
by and between Point to Point of Louisiana, Inc. and Nextgen
Communications Corporation (filed as Exhibit 2.5 to the Company's Current
Report on Form 8-K filed on March 19, 2002, and incorporated herein by
reference).

2.6 Settlement Agreement and Mutual Release of Claims, executed to be
effective as of February 20, 2002, by and among Point To Point Network
Services, Inc., Nextgen Communications Corporation, and W. Michael
Sullivan (filed as Exhibit 2.6 to the Company's Current Report on Form 8-K
filed on March 19, 2002, and incorporated herein by reference).

2.7 Repurchase Option Agreement, executed to be effective as of February 20,
2002, by and between Nextgen Communications Corporation and W. Michael
Sullivan (filed as Exhibit 2.7 to the Company's Current Report on Form 8-K
filed on March 19, 2002, and incorporated herein by reference).

2.8 Stock Purchase Agreement dated November 1, 2002, by and between Nextgen
Communications Corporation and Jane C. Barber (filed as Exhibit 2.1 to the
Company's Current Report on Form 8-K filed on January 17, 2003, and
incorporated herein by reference).

2.9 Promissory Note dated November 1, 2002, in the original principal amount
of $1,500,000, issued by Nextgen Communications Corporation to Jane C.
Barber (filed as Exhibit 2.2 to the Company's Current Report on Form 8-K
filed on January 17, 2003, and incorporated herein by reference).

2.10 Promissory Note dated November 1, 2002, in the original principal amount
of $1,000,000, issued by Nextgen Communications Corporation to Jane C.
Barber (filed as Exhibit 2.3 to the Company's Current Report on Form 8-K
filed on January 17, 2003, and incorporated herein by reference).

2.11 Promissory Note dated November 1, 2002, in the original principal amount
of $1,444,100, issued by Nextgen Communications Corporation to Jane C.
Barber (filed as Exhibit 2.4 to the Company's Current Report on Form 8-K
filed on January 17, 2003, and incorporated herein by reference).

2.12 Secured Promissory Note dated November 1, 2002, in the original principal
amount of $5,200,000, issued by Nextgen Communications Corporation to Jane
C. Barber (filed as Exhibit 2.5 to the Company's Current Report on Form
8-K filed on January 17, 2003, and incorporated herein by reference).

2.13 Assignment of Promissory Notes, dated November 1, 2002, by and between
Nextgen Communications Corporation and Jane C. Barber (filed as Exhibit
2.6 to the Company's Current Report on Form 8-K filed on January 17, 2003,
and incorporated herein by reference).

2.14 Warrant Purchase Agreement, dated November 15, 2002, by and between
Nextgen Communications Corporation and Jane C. Barber. (filed as Exhibit
2.16 to the Company's Annual Report on Form 10-KSB for the year ended
December 31, 2002, and incorporated herein by reference).

2.15 First Amendment to Stock Purchase Agreement dated June 5, 2003, by and
between Home Solutions of America, Inc. and Jane C. Barber (filed as
Exhibit 2.1 to the Company's Current Report on Form 8-K filed on June 6,
2003, and incorporated herein by reference).

2.16 Registration Rights Agreement dated June 5, 2003, by and between Home
Solutions of America, Inc. and Jane C. Barber (filed as Exhibit 2.2 to the
Company's Current Report on Form 8-K filed on June 6, 2003, and
incorporated herein by reference).

2.17 Amended and Restated Secured Convertible Note dated June 5, 2003, in the
original principal amount of $2,242,446, issued by Home Solutions of
America, Inc. to Jane C. Barber (filed as Exhibit 2.3 to the Company's
Current Report on Form 8-K filed on June 6, 2003, and incorporated herein
by reference).

2.18 Amended and Restated Secured Promissory Note dated June 5, 2003, in the
original principal amount of $1,553,750, issued by Home Solutions of
America, Inc. to Jane C. Barber (filed as Exhibit 2.4 to the Company's
Current Report on Form 8-K filed on June 6, 2003, and incorporated herein
by reference).

2.19 Pledge and Security Agreement dated June 5, 2003, by and among Jane C.
Barber, Home Solutions of America, Inc., P.W. Stephens, Inc., and
Kirkpatrick & Lockhart LLP (filed as Exhibit 2.5 to the Company's Current
Report on Form 8-K filed on June 6, 2003, and incorporated herein by
reference).

2.20 Guaranty Agreement dated June 5, 2003, given by P.W. Stephens, Inc. to
Jane C. Barber (filed as Exhibit 2.6 to the Company's Current Report on
Form 8-K filed on June 6, 2003, and incorporated herein by reference).

2.21 Stock Purchase Agreement and Plan of Reorganization dated July 10, 2003,
by and among Home Solutions of America, Inc., Jeffrey Hawkins, and CTRS
Holding Corp. (filed as Exhibit 2.1 to the Company's Current Report on
Form 8-K filed on July 22, 2003, and incorporated herein by reference).

2.22 Partnership Interest Purchase Agreement, dated July 31, 2003, by and among
Home Solutions of America, Inc., FSS Holding Corp., Grassmere Computer
Products, Inc., and Merritt Computer Products, Inc. (filed as Exhibit 2.15
to the Company's Quarterly Report on Form 10-QSB for the quarter ended
June 30, 2003, and incorporated herein by reference).

2.23 Repurchase Option Agreement, dated July 31, 2003, by and among Home
Solutions of America, Inc., FSS Holding Corp., Grassmere Computer
Products, Inc., and Merritt Computer Products, Inc. (filed as Exhibit 2.16
to the Company's Quarterly Report on Form 10-QSB for the quarter ended
June 30, 2003, and incorporated herein by reference).

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 Bylaws of the Company, as amended on April 2, 2001 (filed as Exhibit 3.2
to the Company's Quarterly Report on Form 10-QSB for the quarter ended
June 30, 2001, and incorporated herein by reference).

10.1 * 1998 Stock Option Plan (filed as Exhibit 4.1 to the Company's Annual
Report on Form 10-KSB for the year ended September 30, 1998, and
incorporated herein by reference).

10.2 * First Amendment to 1998 Stock Option Plan, dated May 20, 2003. (filed as
Exhibit 10.2 to the Company's Quarterly Report on Form 10-QSB for the
quarter ended June 30, 2003, and incorporated herein by reference).

10.3 *2001 Stock Plan (filed as Exhibit B to the Company's Information
Statement on Schedule 14C filed on July 9, 2001, and incorporated herein
by reference).

10.4 * First Amendment to 2001 Stock Plan, dated May 20, 2003. (filed as
Exhibit 10.4 to the Company's Quarterly Report on Form 10-QSB for the
quarter ended June 30, 2003, and incorporated herein by reference).

10.5 * Registration Rights Agreement by and between Frank J. Fradella and U S
Industrial Services, Inc., dated April 2, 2001. (filed as Exhibit 10.8 to
the Company's Quarterly Report on Form 10-QSB for the quarter ended June
30, 2001, and incorporated herein by reference).

10.6 * Stock Option Agreement executed December 27, 2001, to be effective as of
October 3, 2000, by and between Frank J. Fradella and Nextgen
Communications Corporation (filed as Exhibit 2 to Amendment No. 3 to
Schedule 13D of Frank J. Fradella filed on January 3, 2002, and
incorporated herein by reference).

10.7* Stock Option Agreement by and between R. Andrew White and Nextgen
Communications Corporation, dated February 1, 2002 (filed as Exhibit 10.8
to the Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 2002, and incorporated herein by reference).

10.8* First Amendment to Stock Option Agreement by and between R. Andrew White
and Nextgen Communications Corporation, dated September 2, 2002 (filed as
Exhibit 10.10 to the Company's Quarterly Report on Form 10-QSB for the
quarter ended September 30, 2002, and incorporated herein by reference).

10.9* Restricted Stock Purchase Agreement by and between Frank J. Fradella and
US Industrial Services, Inc. dated April 2, 2001 (filed as Exhibit 10.11
to the Company's Annual Report on Form 10-KSB for the year ended December
31, 2002, and incorporated herein by reference).

10.10*Employment Agreement by and between P.W. Stephens, Inc., a California
corporation, and Scott Johnson, effective September 1, 2001 (filed as
Exhibit 10.12 to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 2002, and incorporated herein by reference).

10.11 Form of Registration Rights Agreement between Nextgen Communications
Corporation and each of four accredited investors, dated November 19, 2002
(filed as Exhibit 10.13 to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 2002, and incorporated herein by reference).

10.12 Form of Warrant Purchase Agreement between Nextgen Communications
Corporation and each of four accredited investors, dated November 19, 2002
(filed as Exhibit 10.14 to the Company's Annual Report on Form 10-KSB for
the year ended December 31, 2002, and incorporated herein by reference).

10.13 * Executive Employment Agreement by and between R. Andrew White and Home
Solutions of America, Inc., dated March 15, 2003 (filed as Exhibit 10.15
to the Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 2003, and incorporated herein by reference).

10.14 * First Amendment to Stock Option Agreement by and between R. Andrew White
and Home Solutions of America, Inc., dated March 15, 2003 (filed as
Exhibit 10.16 to the Company's Quarterly Report on Form 10-QSB for the
quarter ended March 31, 2003, and incorporated herein by reference).

10.15 * Second Amendment to Stock Option Agreement by and between R. Andrew
White and Home Solutions of America, Inc., dated March 15, 2003 (filed as
Exhibit 10.17 to the Company's Quarterly Report on Form 10-QSB for the
quarter ended March 31, 2003, and incorporated herein by reference).

10.16 * Consulting Agreement by and between Frank J. Fradella and Home Solutions
of America, Inc., dated March 15, 2003 (filed as Exhibit 10.18 to the
Company's Quarterly Report on Form 10-QSB for the quarter ended March 31,
2003, and incorporated herein by reference).

10.17 * First Amendment to Restricted Stock Purchase Agreement by and between
Frank J. Fradella and Home Solutions of America, Inc., dated March 15,
2003 (filed as Exhibit 10.19 to the Company's Quarterly Report on Form
10-QSB for the quarter ended March 31, 2003, and incorporated herein by
reference).

10.18 * First Amendment to Stock Option Agreement by and between Frank J.
Fradella and Home Solutions of America, Inc., dated March 15, 2003 (filed
as Exhibit 10.20 to the Company's Quarterly Report on Form 10-QSB for the
quarter ended March 31, 2003, and incorporated herein by reference).

10.19 Revolving Line of Credit Note dated June 4, 2003, in the original
principal amount of $1,500,000, issued by P.W. Stephens, Inc. to The
Vantage Group Ltd. (filed as Exhibit 10.1 to the Company's Current Report
on Form 8-K filed on June 6, 2003, and incorporated herein by reference).

10.20 Security Agreement dated June 4, 2003, by and between P.W. Stephens, Inc.
and The Vantage Group Ltd. (filed as Exhibit 10.2 to the Company's Current
Report on Form 8-K filed on June 6, 2003, and incorporated herein by
reference).

10.21 * Executive Employment Agreement by and among Home Solutions of America,
Inc., Fiber-Seal Systems, L.P., and Rick J. O'Brien, dated July 31, 2003.
(filed as Exhibit 10.19 to the Company's Quarterly Report on Form 10-QSB
for the quarter ended June 30, 2003, and incorporated herein by
reference).

10.22 * Stock Option Agreement by and between Home Solutions of America, Inc.
and Rick J. O'Brien, dated July 31, 2003. (filed as Exhibit 10.20 to the
Company's Quarterly Report on Form 10-QSB for the quarter ended June 30,
2003, and incorporated herein by reference).

31.1 Certification of Principal Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.+

31.2 Certification of Principal Financial Officer pursuant to Section 301 of
the Sarbanes-Oxley Act of 2002.+

32.1 Certification of Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.+

32.2 Certification of Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.+

* Denotes a management contract or compensatory plan or arrangement.
+ Filed herewith.

(b) Reports on Form 8-K

On July 22, 2003, the Company filed a Current Report on Form 8-K,
for an event that occurred on July 10, 2003, to report the acquisition of
Central Texas Residential Services, Inc.

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: November 14, 2003 By: /s/ FRANK J. FRADELLA
------------------------------------
Frank J. Fradella
Chairman, Chief Executive Officer

HOME SOLUTIONS OF AMERICA, INC.

Dated: November 14, 2003 By: /s/ R. ANDREW WHITE
------------------------------------
R. Andrew White
Chief Financial Officer