RSI HOLDINGS INC, 10QSB, 1996-07-10

RSI HOLDINGS INC
10QSB, 1996-07-10
MACHINERY, EQUIPMENT & SUPPLIES

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<PAGE> 1
U. S. Securities and Exchange Commission
Washington, D. C. 20549

FORM 10 - QSB

(MARK ONE)

X Quarterly Report pursuant to Section 13 or 15 (d) of the
- Securities Exchange Act of 1934

For the Quarterly Period Ended May 31, 1996 or

Transition Report pursuant to Section 13 or 15 (d) of the
- Securities Exchange Act of 1934

For the Transition Period From to
----------------- ------------------

COMMISSION FILE NUMBER 0-18091

RSI HOLDINGS, INC.
------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)

NORTH CAROLINA 56-1200363
-------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)

245 E. Broad Street, Suite A, P. O. Box 6847
Greenville, South Carolina 29606
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(Address of principal executive offices)

(864) 271-7171
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Issuer's telephone number

Not Applicable
-------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report.

Check whether the issuer (1) has 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
--- ---

<PAGE> 2

State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:

Common Stock - $.01 Par Value -- 7,994,292 shares outstanding
as of June 25, 1996

Transitional Small Business Disclosure Format (check one);
Yes No X
----------------- --------------

<PAGE> 3

INDEX

RSI HOLDINGS, INC.

PART I. FINANCIAL INFORMATION PAGE
<S> <C>
Item 1. Financial Statements (Unaudited)

Condensed consolidated statement of net assets in liquidation --
May 31, 1996 4

Condensed consolidated statements of changes in net assets in liquidation --
Nine months ended May 31, 1996 and 1995 5

Notes to condensed consolidated financial statements --
May 31, 1996 6

Item 2. Plan of Operation 14

PART II. OTHER INFORMATION 20

Item 1. Legal Proceedings 20
Item 2. Changes in Securities 26
Item 3. Defaults upon Senior Securities 26
Item 4. Submission of Matters to a Vote of Security Holders 26
Item 5. Other Information 26
Item 6. Exhibits and Reports on Form 8-K 27

SIGNATURES 28
</TABLE>

<PAGE> 4
PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RSI HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENT OF NET ASSETS IN
LIQUIDATION (Unaudited)

May 31, 1996

<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents $1,179,000
Accounts receivable 59,000
Property and equipment 1,559,000
Other assets 3,000
----------

2,800,000

LIABILITIES
Trade accounts payable 1,000
Accrued expenses 300,000
Estimated costs during the period of liquidation -- Note A 244,000
----------

545,000

----------
Contingencies -- Note B

Net assets in liquidation -- Note A $2,255,000
==========
</TABLE>

See accompanying notes.

Page 4

<PAGE> 5
RSI HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF
CHANGES IN NET ASSETS IN LIQUIDATION (Unaudited)

Nine Months Ended May 31, 1996 and 1995

<TABLE>
<CAPTION>
1996 1995
-----------------------
<S> <C> <C>
Net assets in liquidation at beginning of period $2,143,000 $1,930,000

Changes in nets assets in liquidation attributed to:
(Decrease) increase in cash and cash equivalents (293,000) 1,059,000
Decrease in trade accounts payable 4,000 570,000
Decrease in accrued expenses 69,000 331,000
Decrease in estimated costs during remaining period of liquidation 300,000 969,000
Increase (decrease) in estimated net realizable value of
accounts receivable 32,000 (1,667,000)
Decrease in notes payable and capital lease obligation 2,202,000
Decrease in inventory floor plan debt resulting from sale of
inventory to supplier 4,123,000
Decrease in accrued compensation 54,000
Decrease in inventory resulting principally from sale of inventory
to suppliers and other dealers (5,873,000)
Sales of property and equipment (1,648,000)
Decrease in other assets (1,000)
-----------------------
Increase in net assets in liquidation 112,000 119,000
-----------------------
Net assets in liquidation at end of period $2,255,000 $2,049,000
=======================
</TABLE>

Page 5

See accompanying notes.

<PAGE> 6

RSI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE A - BASIS OF PRESENTATION

As of August 31, 1994, RSI Holdings, Inc. (the "Company") adopted the
liquidation basis of accounting. The Company had experienced significant
recurring losses and the Company was notified by its primary supplier of turf
care products that after October 31, 1994, the Company would no longer be
authorized to sell its products. Because substantially all of the Company's
assets were related to the turf care business and the Company would no longer
be authorized to sell the products of its major supplier, it was concluded by
the Board of Directors of the Company and announced on July 29, 1994 that the
Company should cease its existing business operations and sell its operating
assets as of August 31, 1994. Since August of 1994, the Company has been
actively seeking to sell its assets. The shareholders approved the sale of
substantially all its assets at its annual meeting held on January 17, 1995.

As a result of the decision to sell the operating assets of the Company
and the subsequent efforts to sell all of the operating assets, the Company
changed its basis of accounting for its financial statements at August 31, 1994
from the going concern basis of accounting to the liquidation basis of
accounting in accordance with generally accepted accounting principles.
Consequently, assets have been valued at estimated net realizable value and
liabilities are presented at their estimated settlement amounts, including
estimated costs associated with carrying out the liquidation. The valuation of
assets and liabilities necessarily requires many estimates and assumptions and
there are substantial uncertainties in carrying out the liquidation. The
actual realization of assets and settlement of liabilities could be higher or
lower than amounts indicated and is based upon management estimates as of the
date of the financial statements. In addition, as described in Note B,
significant uncertainties exist with respect to the outcome of litigation in
which the Company is a defendant. No provision has been made as of May 31,
1996 for any liability that may result upon ultimate resolution of these
litigation matters.

The statement of consolidated net assets in liquidation as of May 31,
1996 includes approximately $244,000 of costs that the Company estimates will
be incurred during the period of liquidation, based on management's assumption
that the liquidation process will be completed by December 1996. The Company's
estimate of the period required to sell its remaining assets and resolve the
remaining contingencies is based on management's best estimates, and the
liquidation period may be shorter than projected or it may be extended beyond
the projected period.

The accompanying unaudited condensed consolidated financial statements
at May 31, 1996 have been prepared in accordance with generally accepted
accounting principles for interim financial information under the liquidation
basis of accounting and with the instructions to Form 10 - QSB and Item 310(b)
of Regulation S-B. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments including
normal recurring accruals considered necessary for a fair presentation on the
liquidation basis have been included.

<PAGE> 7

For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's annual report on Form 10
- - KSB for the year ended August 31, 1995.

NOTE B - CONTINGENCIES

WIEGMANN & ROSE

ENVIRONMENTAL LITIGATION

In 1987, Triple A Machine Shop, Inc. ("Triple A") purchased property at
2801 Giant Road in Richmond, California from Wiegmann & Rose International
Corp. ("Wiegmann & Rose"), a wholly-owned subsidiary of the Company. As part
of this transaction, Wiegmann & Rose agreed to prepare a proposed plan of
abatement for environmental contamination at the property, submit it to the
Regional Water Quality Control Board, and upon approval, implement the
abatement plan. Soon afterwards, consultants for Wiegmann & Rose prepared a
proposed plan of abatement and submitted it to the Regional Board. However, the
California Department of Health Services asserted jurisdiction over the matter,
demanded that Wiegmann & Rose investigate the possibility of buried drums at
the property, and initiated a planning process that produced a Remedial
Investigation and Feasibility Study, Remedial Action Plan, and Community
Relations Plan. Buried drums, which contained various substances including
solvents and other volatile organic compounds ("VOCs") were found and removed
in 1988. Planning and remediation continued for solvents that had leaked from
the drums and for heavy metals that had also been disposed of at the property.

In 1988, Wiegmann & Rose filed suit against NL Industries, Inc. ("NL")
and Esselte Pendaflex Corporation ("Esselte"), and alleged that these two
defendants were responsible for the contamination on the property. NL and
Esselte filed third-party complaints against Triple A. This litigation was
resolved December 31, 1991 through the entry of a consent decree (the "1991
Decree") that required NL to abate the contamination at Site R on the property
diligently and to the satisfaction of the regulatory agencies. In effect, NL
took over Wiegmann & Rose's obligations under its agreement with Triple A with
respect to Site R. ("Site R" is the phrase used to describe the portion of the
property formerly owned by Wiegmann & Rose that by 1987 had been targeted by
the regulatory agencies for investigation and remediation.)

During July of 1993, Triple A sued Wiegmann & Rose and RSI Corporation,
the former parent corporation of Wiegmann & Rose and of the Company, and which
is now known as Delta Woodside Industries, Inc. ("Delta Woodside"), alleging
that Wiegmann & Rose breached the sales contract, breached the covenant of good
faith and fair dealing implied in the contract, and maintained a continuing
nuisance on the property as a result of a failure to abate the contamination
within a reasonable time. In connection with the distribution of the Company's
Common Stock to the shareholders of RSI Corporation in 1989, the Company
indemnified RSI Corporation against certain types of potential liabilities and
expenses, including those arising in connection with the lawsuit by Triple A.
Triple A's complaint seeks special damages in excess of $2,700,000, general
damages according to proof, and punitive damages of $1,000,000.

<PAGE> 8

The Triple A action, which was filed in the Contra Costa County,
California Superior Court on July 19, 1993, was removed to the federal district
court for the Northern District of California on August 25, 1993, and Wiegmann
& Rose answered the complaint. The court granted Wiegmann & Rose's motion to
reopen its previous litigation against NL, which was made with the intention of
obtaining from the court a determination that NL had complied with the 1991
Decree (and therefore that Wiegmann & Rose had complied with its obligations to
Triple A), or, failing that, that NL had failed to comply with the 1991 Decree
(and therefore is responsible for any damages for events following the entry of
the 1991 Decree).

Wiegmann & Rose did not cause any of the contamination on the site. In
addition, the Company had diligently proceeded to abate the contamination
through the date of the 1991 Decree, and the terms of the 1991 Decree required
NL, not the Company, to abate the contamination on Site R diligently and to the
satisfaction of regulatory agencies. Based upon these facts, management
believes that the allegations of Triple A are without merit, is contesting the
case vigorously, and filed a motion to dismiss the case during January of 1996.

In April 1994, the court granted Wiegmann & Rose's motion for partial
summary judgment, which effectively relieved Wiegmann & Rose from liability for
events occurring before the entry of the 1991 Decree with respect to Site R.
Wiegmann & Rose had argued, and the court apparently agreed, that in the 1991
Decree Triple A had released Wiegmann & Rose "for any and all liability for
costs paid and services performed . . . through the date of this Decree that
are related to remediation of hazardous substances at Site R or to this
action." For events occurring after the date of its entry, the 1991 Decree
provides that NL is principally responsible for the remediation of the portion
of the property known as Site R, although Wiegmann & Rose retains liability in
the event that NL does not perform. The 1991 Decree did not address the
liability of any party with respect to portions of the property outside Site R.

Resolution of this case has been delayed because of a disagreement
between Triple A and NL about which of them should be responsible for future
maintenance of a protective cap installed at Site R. Triple A has suggested
that it may dismiss the suit if this issue is resolved, and the parties are
currently discussing settlement of the lawsuit as well as resolution of
Wiegmann & Rose's responsibility under the purchase agreement with Triple A.
There is no assurance, however, that any settlement can be reached on terms
satisfactory to the Company.

Since the 1991 Decree, NL has been working towards completion of the
remediation of Site R, and during 1994 requested that the California
Environmental Protection Agency, Department of Toxic Substances Control
("California DTSC") declare that the remediation of Site R is complete. The
California DTSC has requested additional commitments from NL and Triple A on
future operation, maintenance, and sampling of Site R. The Company believes
that NL has the financial ability to remediate Site R. This belief is based
upon the Company's knowledge of the remediation of Site R that NL has performed
to date, and upon the Company's review of the annual report of NL for the year
ended December 31, 1995 (the "1995 Annual Report"). The 1995 Annual Report
indicates that, at December 31, 1995, the working capital of NL was
$249,000,000 and that NL's working capital ratio was 1.8 to 1.0.

<PAGE> 9

During 1994 NL reported to the California DTSC that it had discovered
additional contamination in the form of elevated levels of petroleum
hydrocarbons or VOCs on the property at issue but adjacent to Site R. Such
property is now owned by Triple A. Because the contamination is not within the
boundaries of Site R, NL has taken the position to the California DTSC that it
is not responsible for the remediation of this contamination. The extent of
the contamination, the estimated cost of its remediation, and Wiegmann & Rose's
responsibility for it have not yet been determined, but the cleanup costs and
legal expenses related to this additional contamination could be significant
and could materially and adversely affect the Company's financial position.
The California DTSC has not yet requested remediation of this area of
additional contamination. In the event that a claim is asserted against
Wiegmann & Rose in connection with this additional contamination, Wiegmann &
Rose expects to take the position that NL is primarily responsible for the
additional contamination. However, no assurance can be given that Wiegmann &
Rose will be successful in this matter and, if the matter were litigated, the
litigation could take years and be very expensive to the Company.

During the nine months ended May 31, 1996, the Company incurred
approximately $22,000 in legal expenses related to the Triple A lawsuit.

ASBESTOS LITIGATION

Wiegmann & Rose is also one of numerous defendants with respect to
seven claims for exposure to asbestos, arising in the normal course of
business. All seven of these claims have been dismissed without prejudice with
respect to Wiegmann & Rose, and the applicable statute of limitations has
passed with respect to at least two of the dismissed claims. The dismissed
claims are made in the following lawsuits, in each case seeking unspecified
damages for injury allegedly due to asbestos exposure: (i) Brophy v. Abex et
al. (filed April 9, 1992), pending in the San Francisco, California Superior
Court, seeks damages for wrongful death allegedly due to asbestos exposure.
Wiegmann & Rose has been dismissed without prejudice in this action and the
applicable statute of limitations has now passed, barring any subsequent action
by the plaintiff against Wiegmann & Rose. (ii) Canga v. Abex et al. (filed
March 18, 1993), pending in the San Francisco Superior Court, seeks damages for
personal injuries allegedly due to asbestos exposure. Wiegmann & Rose has been
dismissed without prejudice in this action. (iii) Jordison v. Abex et al.
(filed January 21, 1994), pending in the San Francisco Superior Court, seeks
damages for personal injuries allegedly due to asbestos exposure. The case
against Wiegmann & Rose has been dismissed without prejudice. (iv) Barnes v.
Abex et al. (filed December 3, 1993), pending in the San Francisco Superior
Court, seeks damages for wrongful death allegedly due to asbestos exposure.
The case against Wiegmann & Rose has been dismissed without prejudice, and the
applicable statute of limitation has passed, barring any subsequent action by
plaintiff against Wiegmann & Rose. (v) Richardson v. Abex et al. (filed August
5, 1993), pending in the San Francisco Superior Court, seeks damages for
personal injuries allegedly due to asbestos exposure. The case against
Wiegmann & Rose has been dismissed without prejudice. (vi) Sorensen v. Abex et
al. (filed July 20, 1993), pending in the San Francisco Superior Court, seeks
damages for personal injuries allegedly due to asbestos exposure. The case
against Wiegmann & Rose has been dismissed without prejudice. (vii) Hall v.
Abex et al. (filed February 25, 1994), pending in

<PAGE> 10

the San Francisco Superior Court, seeks damages for personal injuries
allegedly due to asbestos exposure. The case against Wiegmann & Rose has
been dismissed without prejudice.

As to the substantive nature of the asbestos claims, the Company believes
substantial defenses would be available and for that reason the Company has
been successful in having all seven of these filed actions dismissed without
prejudice as against Wiegmann & Rose.

INSURANCE

The Company has contacted its two primary insurance companies relating
to the environmental and asbestos claims against Wiegmann & Rose described
above. One insurance company has denied coverage with respect to the
environmental claims, but the other insurance company has reimbursed the
Company for a portion of its defense costs related to the environmental matter
under a reservation of rights. The two insurance companies, under a
reservation of rights, have reimbursed the Company for substantially all of its
defense costs related to the asbestos claims. The Company has received $27,000
from its insurers during the nine months ended May 31, 1996 and $41,000 during
June of 1996, substantially all relating to defense costs incurred with respect
to the asbestos claims. The Company is communicating with its insurance
company with respect to reimbursement of defense costs paid by the Company
relating to the environmental claims. The Company believes that the likelihood
of continued recovery of defense costs relating to these claims pursuant to its
current arrangements with its insurance company is probable, but there can be
no assurance that insurance coverage will be available to reimburse the Company
to any extent for any damages or costs it must pay as a result of the
settlement or adjudication of these claims.

HOLIDAY INNS, INC. LITIGATION

RSI Corporation (now Delta Woodside), the former parent corporation of
the Company, and Sparjax Corporation, RSI Corporation's now-dissolved
subsidiary, are among several defendants in a lawsuit filed on July 29, 1993 by
Holiday Inns, Inc. in the Circuit Court of the Fourth Judicial Circuit for
Duval County, Florida. In connection with the distribution of the Company's
Common Stock to the shareholders of RSI Corporation in 1989, the Company
indemnified RSI Corporation against certain types of potential liabilities and
expenses, including those arising in connection with the lawsuit by Holiday
Inns, Inc.

This suit seeks indemnification for payments made or to be made by
Holiday Inns, Inc., as the guarantor, to the lessor for obligations under a
land lease agreement allegedly in default. The lease agreement was commenced
in 1967 and has a term of ninety-nine years. The lessor under the lease
agreement was originally Fernandina Contractors, Inc., and by assignment is
currently Sam Spevak. Holiday Inns, Inc. was the original lessee under the
lease agreement. Payments under the lease agreement are the greater of $24,000
annually or the highest average annual payments during any five-year period
during the first twenty (20) years of the lease, using a percentage of income
formula.

The lessee's interest in the lease agreement has been assigned to a
series of parties

<PAGE> 11

including RSI Corporation and Sparjax Corporation. RSI Corporation was the
lessee under the lease agreement from June, 1979 to August, 1979, and Sparjax
Corporation was the lessee thereunder from August, 1979 to January, 1981. The
current lessee is American Hotel Investors, Inc. ("AHI"). AHI allegedly has
failed to make lease payments due under the lease agreement and otherwise to
comply with its obligations under the lease agreement.

Holiday Inns, Inc. has alleged that Sparjax Corporation, which is the
assignee of the lease agreement from RSI Corporation, is in breach of a written
Indemnification Agreement executed by Sparjax Corporation in favor of Holiday
Inns, Inc. upon its assumption of the lease agreement in 1979. All of the
outstanding common stock of Sparjax Corporation was acquired by RSI Corporation
during fiscal 1983, and Sparjax Corporation was dissolved by forfeiture during
fiscal 1990. In connection with such dissolution, no material assets were
distributed from Sparjax Corporation to RSI Corporation. Other than as
described herein, there is no contractual relationship whatsoever between RSI
Corporation and Holiday Inns, Inc.

On or about September 23, 1992, Sam Spevak filed a lawsuit against
Holiday Inns, Inc. for allegedly failing to pay monthly rent under the lease
agreement. This lawsuit is pending in the Circuit Court of the Fourth Judicial
Circuit, in and for Duval County, Florida. On May 4, 1993, Sam Spevak filed a
Second Amended Complaint seeking from Holiday Inns, Inc. unpaid rent, unpaid
taxes, interest, attorney fees and costs. On November 19, 1993, Sam Spevak
filed a Third Amended Complaint in the Court seeking from Holiday Inns, Inc.
unpaid rent, unpaid taxes, attorneys fees and costs, and seeking a declaratory
judgment against Holiday Inns, Inc. to establish whether or not Holiday Inns,
Inc. is liable for costs of repair and maintenance to the leased premises.
Holiday Inns, Inc. amended its complaint to assert similar claims against all
subsequent lessees (including RSI Corporation and Sparjax Corporation) under
the lease agreement, seeking indemnification against sums paid or to be paid to
Sam Spevak pursuant to his lawsuit.

The most recent activity in the case has been a cross-claim filed by
Mr. Donald Roberts against all assignees of W. M. R., Inc., including RSI
Corporation and Sparjax Corporation. Mr. Roberts was an individual guarantor
of W. M. R., Inc.'s obligations under the land lease. Counsel for RSI
Corporation and Sparjax Corporation have moved to dismiss Mr. Roberts'
cross-claims and the court has granted these motions, without prejudice.
Counsel for Sparjax Corporation and RSI Corporation have informed the Company
that the cross-claims do not raise any new substantive issues, but merely seek
indemnification from all assignees in the event that Mr. Roberts is required to
pay Holiday Inns, Inc. on his individual guaranty.

With respect to RSI Corporation's maximum exposure in this case,
Holiday Inns has asserted that RSI Corporation and all other lessees are
obligated to reimburse it $259,201 for rent it paid to the landlord as a result
of AHI's failure to pay under the lease. This amount, however, only represents
delinquent rent through October 13, 1993, because Holiday Inns contends that
the lessee's obligations under the lease terminated on that date as a result of
James "Duke" Williams evicting AHI on behalf on the landlord. Mr. Spevak
claims, however, that as of January, 1995, he is entitled to past monthly
rental and interest (from October 13, 1993 through December 20, 1994) of
$82,289 plus future monthly rental through the end of the lease term in 2068 of

<PAGE> 12

$1,834,565 (which sum represents the present value using a 6.5% discount
rate). If Mr. Spevak is successful in proving his claim, RSI Corporation's
exposure includes these latter amounts. In addition, should the court
determine that Holiday Inns, Inc. has an obligation to pay the cost of
repairs and maintenance incurred to date and throughout the balance of the
lease term, the amount of such costs could be substantial but cannot be
quantified with any reasonable degree of accuracy. The Company believes the
existing motel property is in a state of disrepair such that it is not
commercially usable. The City of Jacksonville has recently sent notice,
presumably to all parties involved in this lawsuit, threatening to condemn the
property and demolish the entire structure. If that occurs, and the Court
determines that the lessees have an obligation to maintain the property during
the lease term, RSI Corporation's exposure could also include the costs of
demolition and the expense of rebuilding the hotel. This liability, of
course, cannot be remotely estimated at this time, but no doubt involves a
very substantial number.

RSI Corporation denies its alleged liability to Holiday Inns, Inc. and
intends to defend this matter vigorously. Upon a motion of counsel for RSI
Corporation, Holiday Inns, Inc.'s claims against RSI Corporation were dismissed
without prejudice, but Holiday Inns, Inc. has filed an Amended Complaint to
reinstate certain of its claims, and to add a claim for equitable subrogation,
against RSI Corporation and Sparjax Corporation. Counsel for RSI Corporation
and Sparjax Corporation has answered the equitable subrogation claim, and has
moved for dismissal with prejudice with respect to the claims that have
previously been dismissed.

The deposition of James "Duke" Williams, a critical witness in the
case, has now been taken. Mr. Williams was involved in a contract to assume
the lease from Holiday Inns, Inc., which contract was later canceled by Holiday
Inns, Inc. The parties are presently scheduling the depositions of other
important fact witnesses. These include Mr. Spevak and several of the other
officers of Holiday Inns, Inc. who were involved in the negotiations to cancel
the lease with Mr. Williams. The mediation conference held in January, 1995
was not successful. No trial date has been set.

If found liable for any sum as a result of Holiday Inns, Inc.'s claims,
the Company believes RSI Corporation and Sparjax Corporation would have a claim
in equity against AHI, the current and allegedly defaulting lessee under the
lease agreement, and its principal shareholders, who guaranteed AHI's
obligations under the lease for up to $150,000 each. AHI is a private
corporation and the Company has no information regarding the financial ability
of AHI or its principal shareholders to perform AHI's obligations under the
lease or to reimburse any third party for any payments made under the lease as
a result of the lawsuit described above.

The ultimate outcome of this matter is not known. No provision has
been made in the accompanying financial statements for any liability which may
result from this matter.

OTHER LITIGATION

On January 12, 1995, a Mr. Cesar A. Cuenca served a complaint against
the Company in the 11th Judicial Circuit Court, Dade County, Florida seeking
damages in excess of the minimal jurisdictional amount of the Court, exclusive
of costs and interest, and demanding costs of the

<PAGE> 13

action together with such further relief as the Court shall deem fit.
The Plaintiff alleges that he was injured while operating a vehicle that was
sold by the Company. The Complaint also named the manufacturer of the
vehicle. The manufacturer has accepted, under reservation of rights, defense
of the Company regarding this matter. This matter is still in the discovery
stage. The plaintiff recently amended the complaint to add the School Board of
Dade County as a defendant for negligent maintenance of the subject premises.
The Company believes, based on the arrangements with the manufacturer of the
vehicle and the Company's own insurance, that this action should not have a
material adverse effect on the Company's financial position.

On February 4, 1994, a Mr. Everette Moncur and Edwina Moncur, his wife,
served a complaint against the Company in the 17th Judicial Circuit Court,
Broward County, Florida seeking damages in excess of $15,000 for injuries
sustained while operating a turf care product sold by the Company. The
complaint also named the manufacturer of the product. The manufacturer and its
insurance carrier have accepted defense of the Company regarding this matter.
The Company believes, based on the arrangements with the manufacturer, the
manufacturer's insurance company, and the Company's own insurance, that this
action should not have a material adverse effect on the Company's financial
position.

<PAGE> 14

ITEM 2. PLAN OF OPERATION

SALE OF ASSETS

During July of 1994, the Company was notified by the Jacobsen Division
of Textron, Inc. ("Jacobsen"), its principal supplier of turf care products,
that after October 31, 1994 the Company would no longer be authorized to sell
Jacobsen products. Because substantially all of the Company's assets were
related to the turf care business and the Company would no longer be authorized
to sell the products of its primary supplier, the Board of Directors determined
in July of 1994 that the Company should cease its existing business operations
and sell the operating assets of the Company. Accordingly, the Company ceased
substantially all of its existing business operations by August 31, 1994. The
Company received shareholder approval of its plan to sell substantially all of
the Company's assets (the "Sale of Assets") at its annual meeting of
shareholders held on January 17, 1995.

As discussed below, the Sale of Assets plan has not yet been fully
consummated. The holders of an aggregate of 167,591 shares of Common Stock
dissented from the Sale of Assets. These holders are entitled under North
Carolina law to receive the "fair value" of their shares of Common Stock as
determined in accordance with North Carolina law. The Company has not yet
determined the "fair value" of these shares. It intends to make this
determination promptly following the sale of the Fort Lauderdale property
described further below as part of the consummation of the Sale of Assets.

ADJUSTMENT TO LIQUIDATION BASIS

Because the Company decided in 1994 that it should cease its existing
business operations and sell substantially all of its operating assets, the
Company has reported its financial position on the liquidation basis of
accounting for the nine months ended May 31, 1996. In the liquidation basis of
accounting, assets are valued at their net realizable value (rather than at
their net historical cost), and liabilities include estimated costs associated
with carrying out the sale of substantially all of the assets of the Company.

Management currently estimates that it will be able to complete the
Sale of Assets by December 31, 1996, though there can be no assurance that this
goal will be achieved. See the section entitled "Property and Equipment" for a
discussion of the Company's efforts to sell its remaining properties.

The Company's estimate of net assets in liquidation increased $112,000
during the nine months ended May 31, 1996 from the estimated value at the end
of fiscal 1995. The principal reason for the increase in net assets in
liquidation was the increase in rental income estimated to be received from the
lessees during the period of liquidation relating to the unsold property
located in Fort Lauderdale, Florida and Tampa, Florida.

At May 31, 1996, the Company had accrued $300,000 to record all known
expenses

<PAGE> 15

incurred through May 31, 1996, but not yet paid. In addition to those
expenses that have been accrued at May 31, 1996 but not paid, the Company's
estimated costs to be incurred during the remaining period of liquidation from
May 31, 1996 through December 31, 1996 were $244,000 as compared to $544,000
expected to be incurred from August 31, 1995 through December 31, 1996. This
reduction of $300,000 during the nine months ended May 31, 1996 resulted
primarily from payments made and adjustments to expense categories based on
actual costs (net of estimated rental income) as compared to costs estimated at
August 31, 1995 to be incurred during the remaining period of liquidation.
Costs expected to be incurred in connection with the consummation of the Sale
of Assets from May 31, 1996 through the remainder of the liquidation period
include anticipated legal fees ($49,000), accounting and auditing fees
($27,000), salaries ($80,000), lease commitments ($13,000), property taxes
($11,000), insurance and other overhead items ($9,000), shareholder relation
expenses ($8,000), and the Company's estimate of unforeseen costs ($47,000)
that the Company expects to incur during the remaining liquidation period.
These amounts are only estimates, however, and there is no assurance that
management will be able to complete the Sale of Assets during this period or
that known and unknown contingencies will not require the Company to make
significant additional expenditures.

FINANCIAL POSITION AT MAY 31, 1996

The Company's activities during the period beginning in September of
1994 through May of 1996 have consisted primarily of implementing the Sale of
Assets. The following paragraphs describe such activities and the composition
of the net assets of the Company at May 31, 1996.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents in the amount of $1,179,000 as of May 31,
1996 included United States treasury bills with a maturity of three months when
purchased and having a cost basis of $1,019,000. Cash in excess of the amounts
invested in United States treasury bills is invested as available in a bank
master note, which may be liquidated by the Company to meet its cash needs on a
daily basis. The Company earned $53,000 on its investments during the nine
months ended May 31, 1996.

ACCOUNTS RECEIVABLE

As of May 31, 1996, the Company's estimate of the net realizable value
of total accounts receivable was $59,000, as compared to $27,000 at August 31,
1995. The $32,000 increase in the estimate of net realizable value at May 31,
1996 as compared to August 31, 1995 is a result of $41,000 in reimbursements of
defense costs that related to the asbestos matters, offset by a decrease of
$9,000 in accounts receivable as a result of collections net of uncollected
billings during the nine months ended May 31, 1996. Collections of accounts
receivable balances at August 31, 1995 during the nine months ended May 31,
1996 were $16,000 ($7,000 from former customers). The accounts receivable as
at May 31, 1996 have a face value of $143,000, but have been reduced by an
aggregate of $84,000 to reflect the Company's estimate of the net realizable
value of the accounts receivable. The face value of accounts receivable
consist of $84,000 which

<PAGE> 16

were due from former customers, and $59,000 (including $41,000
insurance reimbursement referred to above) in face value of accounts
receivable which consists of miscellaneous receivables arising in the ordinary
course of business.

The Company is using its best efforts to collect the remaining amounts
owed to it. There is no assurance, however, that the Company will be
successful in its collection efforts. The Company has experienced difficulty
in collecting these remaining accounts receivable. Amounts due from former
customers at May 31, 1996 of approximately $84,000 in face value are in the
hands of attorneys to collect. The fees of such attorneys for collection are
up to approximately 40% of the amount recovered. The Company will attempt to
recover its collection costs from the customers, but there is no assurance that
it will be successful in these efforts. The remaining $59,000 in face value of
accounts receivable includes $10,000 of sales tax deposits made to the State of
Florida that are being reduced each month through sales tax collected on rents
charged on the two remaining properties and $41,000 insurance reimbursement
described above that was received during June of 1996. The uncollected amount
of sales tax deposits remaining at the expiration of the lease period will be
refundable from the State of Florida. The remaining $8,000 of miscellaneous
receivables are not past due, and are subject to the Company's collection
efforts.

PROPERTY AND EQUIPMENT

The Company's remaining unsold real properties are owned by RSI
Holdings of Florida, Inc. ("RSI Florida"), and consist of 2.5 acres of land
with a 59,000 square foot building in Fort Lauderdale, Florida, and 2.03 acres
of land with a 22,000 square foot building in Tampa, Florida. These properties
were utilized by RSI Florida as warehouse, office and showroom space for the
sale of turf care equipment prior to the cessation of the Company's business
activities in August of 1994. The properties have an estimated liquidation
value of $1,559,000 (net of estimated selling expenses), and are not subject to
any material debt. The estimated liquidation values are based in part upon an
independent appraisal of the Fort Lauderdale property, dated March 11, 1994,
indicating a market value for that property of $1,200,000, and an independent
appraisal of the Tampa property, dated March 21, 1994 (updated effective
October 10, 1995), indicating a market value for that property of $530,000 (the
"Appraisals"), which appraisals and market values have not been independently
verified by the Company. The Company is not aware of any material changes in
the market value of the property since the respective dates of the Appraisals.
The Appraisals each assume a "reasonable" marketing time for each property
(assumed to be six months to one year by the Fort Lauderdale appraisal and one
year with respect to the Tampa property), as well as various other material
assumptions set forth in the Appraisals, as bases for the estimated value of
each property. There is no assurance that the Company will realize sales
prices for the properties comparable to the values estimated for each property
by the Appraisals or that the other assumptions set forth in the Appraisals
will prove to be accurate to any extent. In this regard, shareholders should
note that the properties have been offered for sale by the Company for a period
far in excess of the marketing periods assumed in the Appraisals with no sale
yet consummated.

The Company has been unable to sell these properties at prices deemed
acceptable to the Company, but has a sales contract to sell the Fort Lauderdale
property and is actively engaged in

<PAGE> 17

marketing the Tampa property. The properties have been listed for
sale with Florida commercial real estate brokers at prices somewhat higher
than the market values indicated by the Appraisal for each property. The
Company executed on February 6, 1996 a contract to sell the Fort Lauderdale
property whereby the prospective buyer will purchase effective August 1, 1996
the Fort Lauderdale property for $1,221,190 less allowances and selling
expenses that the Company currently estimates will total approximately
$103,000. This agreement was subject to a due diligence period that has now
expired and the Company expects the sale of the Fort Lauderdale property will
be effective August 1, 1996. The prospective buyer has paid the Company's real
estate broker a $50,000 deposit and the real estate broker is holding this
deposit in escrow.

With respect to the Tampa property, the property is listed for sale
with a Florida commercial real estate broker at a price somewhat higher than
the market values indicated by the Appraisal for the property. During fiscal
1995 the Company engaged in negotiations with two potential buyers out of a
number of interested parties, but one of these parties has located an
alternative site and the other party has discontinued negotiations with the
Company for the property. In addition, the Company has received oral
expressions of interest from Tresca Industries, the current lessee of the Tampa
property, and has received a written offer from another potential buyer, but
neither of these offers was at a price deemed acceptable by the Company.

The Company believes, in light of the fact that its current liquidity
requirements are met by its existing cash and cash equivalents, that it is in
the best interest of the Company to consummate the sale of the Fort Lauderdale
property effective August 1, 1996 and continue to hold the Tampa property in an
attempt to realize a sales price approximating its market value. The level of
interest in the property, as well as the nature of the market in which the
property is located, lead the Company to believe that, given adequate marketing
time, there is a reasonable likelihood that the Company will be able to realize
a sale price comparable to the value for the Tampa property indicated by its
Appraisal. However, there can be no assurance that the Company will be
successful in locating a buyer for the property at such price. Further, in the
event that expenses and costs arising out of the Company's contingent
liabilities or other expenses of liquidation exceed its liquid resources, and
if the contract to sell the Fort Lauderdale property on August 1, 1996 is not
consummated, the Company may be forced to reduce the price of either or both of
these properties in order to induce a rapid sale. There is no assurance that
any buyer will be available even at such reduced prices. See Part II, Item 1 -
"Legal Proceedings."

PLANNED ACTIVITIES DURING THE REMAINING PERIOD OF LIQUIDATION

During the remainder of the period of liquidation (currently estimated
to end December 31, 1996), proceeds of the Sale of Assets will continue to be
applied first to the payment of expenses related to the liquidation of the
Company's assets and debts of the Company, next to pay or make provisions for
the payment of contingent liabilities of the Company, and next to pay "fair
value" to the holders of the 167,591 shares of Common Stock dissenting from the
Sale of Assets. There is no assurance that the Company's proceeds from the
sale of its remaining assets will be sufficient to cover these expenses.

The Company currently intends to use the assets, if any, remaining after
the consummation

<PAGE> 18

of the Sale of Assets and the payment or provision for payment of the
foregoing items to acquire, invest in, or commence another business
enterprise. In addition to continuing to implement the liquidation of the
Company's assets, the Company plans during the remainder of the period of
liquidation to continue to seek to identify a suitable new business in which
to engage or invest. The Company has reviewed a number of potential business
opportunities, and has held discussions with respect to certain of such
opportunities, but to date no suitable business enterprise has been identified
by the Company.

LIQUIDITY AND CAPITAL RESOURCES

ANTICIPATED LIQUIDITY REQUIREMENTS

Proceeds from the consummation of the Sale of Assets Plan have been or
will be applied first to satisfy debt associated with the particular assets
sold, next to the general debts of the Company, next to pay for or make
provision for the payment of contingent liabilities of the Company and next to
pay "fair value" to the holders of Common Stock dissenting from the Sale of
Assets Plan. All material debts associated with the remaining assets to be sold
have been paid and the general debts of the Company have been paid as they
became due. There is no assurance that the Company's proceeds from the sale of
its remaining assets will be sufficient to cover the contingent liabilities and
the remaining debts and expenses. The Company expects to pay "fair value" to
the holders of the 167,591 shares of Common Stock dissenting from the Sale of
Assets Plan following the consummation of the expected sale of the Fort
Lauderdale property in August of 1996. The Company expects to follow the
procedures for determining "fair value" in accordance with North Carolina law.

As discussed below under "Cash and Cash Equivalents," the Company has
substantial cash liquidity, and anticipates that such cash resources will be
sufficient to enable the Company to pay ordinary expenses expected to arise
during the remaining period of liquidation of Company assets and identification
of a new business enterprise in which to engage or invest. Further, the
Company currently anticipates that it will be able to sell its remaining assets
(other than cash and cash equivalents) by December 31, 1996, which sales will
provide additional liquidity to the Company. There can be no assurance,
however, that the Company will be able to sell the remainder of its assets or
to identify a suitable business in which to engage or invest during this
period. If this transition period is extended, the Company may not have
sufficient proceeds to cover its anticipated expenses. It also may be required
to register under the Investment Company Act of 1940, as amended, during such
period. The Company is unable to predict with certainty when the Tampa
property will be sold, but has estimated costs during the remaining period of
liquidation based on such sale occurring by December 31, 1996.

In addition to its ordinary expenses, the Company will continue to
incur legal expenses relating to its contingent liabilities. The Company plans
to continue to attempt to settle its contingent liabilities during the
remainder of its period of liquidation, but it cannot estimate when these will
be settled or the ultimate outcome of the lawsuits or environmental matters
described below under Item 1 of Part II, "Legal Proceedings" or of any unknown
contingencies. There can be no assurance that the Company's cash balances will
be sufficient to allow it to meet its

<PAGE> 19

recorded liabilities and any known or unknown contingent liabilities. The
ultimate outcome of these contingencies is not known. No provision has
been made in the accompanying financial statements for any liability which may
result from these matters, except for an estimate of the legal costs that the
Company expects to incur in the defense of these matters.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents in the amount of $1,179,000 as of May 31,
1996 included United States treasury bills with a maturity of three months
when purchased and having a cost basis of $1,019,000. Cash in excess of the
amounts invested in United States treasury bills is invested as available in a
bank master note, which may be liquidated by the Company to meet its cash needs
on a daily basis. The Company earned $53,000 on its investments during the
nine months ended May 31, 1996.

DEBT ARRANGEMENTS

The Company's $500,000 revolving unsecured line of credit (the "Line of
Credit") expired on December 31, 1995. The Line of Credit was not used by the
Company. The Company does not believe that it will need a line of credit
during the remaining period of liquidation, but may need sources of credit when
and if the Company identifies one or more suitable businesses in which to
engage or invest. The Company intends to explore sources of credit at such
time in the future as it may be necessary.

<PAGE> 20

RSI HOLDINGS, INC.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

WIEGMANN & ROSE

ENVIRONMENTAL LITIGATION

<PAGE> 21

<PAGE> 22

During the nine months ended May 31, 1996, the Company incurred
approximately $22,000 in legal expenses related to the Triple A lawsuit.

ASBESTOS LITIGATION

Wiegmann & Rose is also one of numerous defendants with respect to
seven claims for exposure to asbestos, arising in the normal course of
business. All seven of these claims have been dismissed without prejudice
with respect to Wiegmann & Rose, and the applicable statute of limitations has
passed with respect to at least two of the dismissed claims. The dismissed
claims are made in the following lawsuits, in each case seeking unspecified
damages for injury allegedly due to asbestos exposure: (i) Brophy v. Abex et
al. (filed April 9, 1992), pending in the San Francisco, California Superior
Court, seeks damages for wrongful death allegedly due to asbestos exposure.
Wiegmann & Rose has been dismissed without prejudice in this action and the
applicable statute of limitations has now passed, barring any subsequent action
by the plaintiff against Wiegmann & Rose. (ii) Canga v. Abex et al. (filed
March 18, 1993), pending in the San Francisco Superior Court, seeks damages for
personal injuries allegedly due to asbestos exposure. Wiegmann & Rose has been
dismissed without prejudice in this action. (iii) Jordison v. Abex et al.
(filed January 21, 1994), pending in the San Francisco Superior Court, seeks
damages for personal injuries allegedly due to asbestos exposure. The case
against Wiegmann & Rose has been dismissed without prejudice. (iv) Barnes v.
Abex et al. (filed December 3, 1993), pending in the San Francisco Superior
Court, seeks damages for wrongful death allegedly due to asbestos exposure.
The case against Wiegmann & Rose has been dismissed without prejudice, and the
applicable statute of limitation has passed, barring any subsequent action by
plaintiff against Wiegmann & Rose. (v) Richardson v. Abex et al. (filed August
5, 1993), pending in the San Francisco Superior Court, seeks damages for
personal injuries allegedly due to asbestos exposure. The case against
Wiegmann & Rose has been dismissed without prejudice. (vi) Sorensen v. Abex et
al. (filed July 20, 1993), pending in the San Francisco Superior Court, seeks
damages for personal injuries allegedly due to asbestos exposure. The case
against Wiegmann & Rose has been dismissed without prejudice. (vii) Hall v.
Abex et al. (filed February 25, 1994), pending in

<PAGE> 23

the San Francisco Superior Court, seeks damages for personal injuries
allegedly due to asbestos exposure. The case against Wiegmann & Rose has
been dismissed without prejudice.

As to the substantive nature of the asbestos claims, the Company
believes substantial defenses would be available and for that reason the
Company has been successful in having all seven of these filed actions
dismissed without prejudice as against Wiegmann & Rose.

INSURANCE

HOLIDAY INNS, INC. LITIGATION

The lessee's interest in the lease agreement has been assigned to a series
of parties

<PAGE> 24

including RSI Corporation and Sparjax Corporation. RSI Corporation was
the lessee under the lease agreement from June, 1979 to August, 1979, and
Sparjax Corporation was the lessee thereunder from August, 1979 to January,
1981. The current lessee is American Hotel Investors, Inc. ("AHI"). AHI
allegedly has failed to make lease payments due under the lease agreement and
otherwise to comply with its obligations under the lease agreement.

<PAGE> 25

$1,834,565 (which sum represents the present value using a 6.5% discount
rate). If Mr. Spevak is successful in proving his claim, RSI Corporation's
exposure includes these latter amounts. In addition, should the court
determine that Holiday Inns, Inc. has an obligation to pay the cost of
repairs and maintenance incurred to date and throughout the balance of the lease
term, the amount of such costs could be substantial but cannot be quantified
with any reasonable degree of accuracy. The Company believes the existing motel
property is in a state of disrepair such that it is not commercially usable.
The City of Jacksonville has recently sent notice, presumably to all parties
involved in this lawsuit, threatening to condemn the property and demolish the
entire structure. If that occurs, and the Court determines that the lessees
have an obligation to maintain the property during the lease term, RSI
Corporation's exposure could also include the costs of demolition and the
expense of rebuilding the hotel. This liability, of course, cannot be remotely
estimated at this time, but no doubt involves a very substantial number.

The deposition of James "Duke" Williams, a critical witness in the case,
has now been taken. Mr. Williams was involved in a contract to assume the lease
from Holiday Inns, Inc., which contract was later canceled by Holiday Inns,
Inc. The parties are presently scheduling the depositions of other important
fact witnesses. These include Mr. Spevak and several of the other officers of
Holiday Inns, Inc. who were involved in the negotiations to cancel the lease
with Mr. Williams. The mediation conference held in January, 1995 was not
successful. No trial date has been set.

The ultimate outcome of this matter is not known. No provision has been
made in the accompanying financial statements for any liability which may result
from this matter.

OTHER LITIGATION

<PAGE> 26

action together with such further relief as the Court shall deem fit. The
Plaintiff alleges that he was injured while operating a vehicle that was
sold by the Company. The Complaint also named the manufacturer of the vehicle.
The manufacturer has accepted, under reservation of rights, defense of the
Company regarding this matter. This matter is still in the discovery stage.
The plaintiff recently amended the complaint to add the School Board of Dade
County as a defendant for negligent maintenance of the subject premises. The
Company believes, based on the arrangements with the manufacturer of the vehicle
and the Company's own insurance, that this action should not have a material
adverse effect on the Company's financial position.

ITEM 2. CHANGES IN SECURITIES*

ITEM 3. DEFAULTS UPON SENIOR SECURITIES*

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS*

ITEM 5. OTHER INFORMATION*

*Items 2, 3, 4 and 5 are not presented as they are not applicable or
the information required thereunder is substantially the same as
information previously reported.

<PAGE> 27

ITEM 6. EXHIBITS AND REPORTS ON FORM 8- K

(a) Listing of Exhibits

3.1 Articles of Incorporation of RSI Holdings, Inc., as amended:
Incorporated by reference to Exhibits 3.2 and 3.2.2 to the
Registration Statement on Form S-4 of RSI Corporation and Porter
Brothers, Inc., File No. 33-30247 (the "Form S-4").

3.1.1 Articles of Amendment and Certificate of Reduction of Capital of
Porter Brothers, Inc.: Incorporated by reference to Exhibit 4.1 to
the Form 8-K of the Registrant filed with the Securities and Exchange
Commission on November 28, 1989, File No. 0-7067.

3.2.1 By-laws of RSI Holdings, Inc., as amended: Incorporated by
reference to Exhibit 3.2.1 to the Form S-4.

3.2.2 Amendment to By-laws of RSI Holdings, Inc. Incorporated by
reference to Exhibit 4.2.2 to the Form 10-QSB of the Registrant filed
with the Securities and Exchange Commission on January 13, 1995

4.1 Specimen of Certificate for RSI Holdings, Inc., common stock:
Incorporated by reference to Exhibit 4.1.2 to the Form S-4.

4.2 See Exhibits 3.1, 3.1.1, 3.2.1 and 3.2.2.

10.1 Agreement by and between the Company and Treadco, Inc. dated as
of February 6, 1996. Incorporated by reference to Exhibit 10.1 to
the Form 10-QSB of the Registrant filed with the Securities and
Exchange Commission on April 12, 1996.

27 Financial Data Schedule (electronic filing only)

(b) Reports on Form 8-K

The Company did not file any reports on Form 8-K during the three
months ended May 31, 1996.

<PAGE> 28

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.

RSI HOLDINGS, INC.
------------------

July 10, 1996 /s/ Joe F. Ogburn
- ------------- --------------------------------------------
(Date) Joe F. Ogburn, Vice President and Treasurer
(Principal Accounting Officer)

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENT. THE AFOREMENTIONED
STATEMENT IS UNCLASSIFIED AND STATES THE NET ASSETS IN LIQUIDATION BUT DOES NOT
CONTAIN EQUITY ACCOUNTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> MAY-31-1996
<CASH> 1,179,000
<SECURITIES> 0
<RECEIVABLES> 59,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,559,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,800,000
<CURRENT-LIABILITIES> 545,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,255,000
<TOTAL-LIABILITY-AND-EQUITY> 2,800,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0

</TABLE>