RSI HOLDINGS INC, 10QSB, 1996-01-12

RSI HOLDINGS INC
10QSB, 1996-01-12
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 November 30, 1995 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
---------------------------------------------------------------
(Address of principal executive offices)

(803) 271-7171
---------------------------------------------------------------
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 January
12, 1996

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

2
<PAGE> 3

INDEX

RSI HOLDINGS, INC.

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

Condensed consolidated statement of net assets in liquidation --
November 30, 1995 4

Condensed consolidated statements of changes in net assets in liquidation --
Three months ended November 30, 1995 and 1994 5

Notes to condensed consolidated financial statements --
November 30, 1995 6

Item 2. Management's Discussion and Analysis of Financial Condition 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>

3
<PAGE> 4
PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RSI HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENT OF NET ASSETS IN
LIQUIDATION (Unaudited)

November 30, 1995

<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents -- Note A $1,357,000
Accounts receivable 28,000
Property and equipment 1,559,000
Other assets 3,000
----------
2,947,000

LIABILITIES
Trade accounts payable 5,000
Accrued expenses 338,000
Estimated costs during the period of liquidation 442,000
----------
785,000
Contingencies -- Note B ----------

Net assets in liquidation $2,162,000
==========

</TABLE>

See accompanying notes.

Page 4

<PAGE> 5
RSI HOLDINGS, INC.

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

Three Months Ended November 30, 1995 and 1994

<TABLE>
<CAPTION>
1995 1994
---------------------------
<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 (115,000) 563,000
Decrease in accrued expenses 31,000 227,000
Decrease in estimated costs during remaining period of liquidation 102,000 436,000
Increase (decrease) in estimated net realizable value of
accounts receivable 1,000 (670,000)
Decrease in trade accounts payable 553,000
Decrease in notes payable and capital lease obligation 1,599,000
Decrease in inventory floor plan debt resulting from sale of
inventory to supplier 4,123,000
Decrease in inventory resulting principally from sale of inventory
to suppliers and other dealers (5,782,000)
Sales of property and equipment (1,049,000)
---------------------------
Increase in net assets in liquidation 19,000 0
---------------------------
Net assets in liquidation at end of period $2,162,000 $ 1,930,000
===========================

</TABLE>

See accompanying notes.

Page 5

<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 November 30, 1995 for any
liability that may result upon ultimate resolution of these litigation
matters.

The statement of consolidated net assets in liquidation as of November
30, 1995 includes approximately $442,000 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 November 30, 1995 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 considered necessary for a fair presentation on the
liquidation basis have been included. 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.

6
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RSI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued

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.

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

7
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RSI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued

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, and is contesting
the case vigorously.

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 a settlement
conference is expected within the next few months.

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 quarterly report of NL on Form
10-Q for the fiscal quarter ended September 30, 1995 (the "September 10-Q").
The September 10-Q indicates that, at September 30, 1995, the working capital
of NL was $241,518,000 and that NL's working capital ratio was 2.0 to 1.0.

During 1994 NL reported to the California DTSC that it had discovered
additional contamination in the form of elevated levels of petroleum
hydrocarbons or VOC's 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

8
<PAGE> 9

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

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 three months ended November 30, 1995, the Company incurred
approximately $4,000 in legal and other 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. Six of these claims have been dismissed without prejudice with
respect to Wiegmann & Rose, and the applicable statute of limitations has
passed with respect to two of the dismissed claims. The six 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.

The one undismissed case, Hall v. Abex et al. (filed February 25,
1994), pending in the San Francisco Superior Court, seeks damages for personal
injuries allegedly due to asbestos exposure. The plaintiffs, husband and wife,
allege that the husband was exposed to asbestos in Wiegmann & Rose's products
and/or that he was exposed to asbestos on Wiegmann & Rose's

9
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RSI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued

premises. Demand has been made upon the plaintiffs to dismiss Wiegmann & Rose
from the action. Discovery is incomplete, and the plaintiff husband was
deposed in January 1995. Plaintiff husband testified that he was present on
Wiegmann & Rose premises on several occasions, to oversee repairs and
manufacturing being conducted by Wiegmann & Rose for his employer, Standard
Oil, and to conduct certain tests on the machines and equipment being repaired
by Wiegmann & Rose. Plaintiff husband, however, provided no testimony
establishing a nexus between Wiegmann & Rose and any alleged asbestos exposure,
other than his unsubstantiated belief. Discovery is incomplete, and the
Company intends to defend this case vigorously. Plaintiffs in this action have
made a settlement offer for a total of $2,998 to settle their claims against
Wiegmann & Rose, but Wiegmann & Rose has not yet responded to this offer.
Wiegmann & Rose is one of approximately one hundred defendants in this case.
Based upon financial information known to the Company, the Company believes
that, in each of the above cases, several of the other defendants have greater
financial resources than the Company.

As to the asbestos claims, the Company believes substantial defenses
are available. This belief is based upon the advice of the Company's counsel
as to the existence of defenses stemming from the failure of the plaintiffs to
establish asbestos exposure related to 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 is reimbursing the
Company for a portion of its defense costs related to the environmental matter
under a reservation of rights. Both insurance companies are also, under a
reservation of rights, reimbursing the Company for a portion of its defense
costs related to the asbestos claims. The Company has received $4,000 from its
insurers during the three months ended November 30, 1995 in payment of certain
of its defense costs incurred with respect to these claims. The Company
believes that the likelihood of continued recovery of defense costs relating to
these claims pursuant to its current arrangements with these insurance
companies 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

10
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RSI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued

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 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. Currently Holiday Inns, Inc. claims to
have paid the lessor in excess of $260,000 to date as a result of the lawsuit.
The Company has no independent information with respect to the particulars of
the payment of this sum.

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

11
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RSI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued

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.

The potential maximum amount of Holiday Inns, Inc.'s exposure for rent
under the lease, reduced to present value, has been estimated by counsel to be
approximately $3,500,000. 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.

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 lesser
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. 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 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

12
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RSI HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - continued

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.

13
<PAGE> 14

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

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 two substantial remaining real
estate holdings of the Company, described further below, as part of the
consummation of the Sale of Assets. Although these parcels are being offered
for sale, the Company has not yet been able to sell these properties at prices
deemed acceptable by the Company, and is unable to predict when and if these
parcels may be sold.

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 three months ended November 30, 1995. 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.

At August 31, 1994, management believed that it would be able to
complete the Sale of Assets by December 31, 1995, and the costs estimated at
that time by the Company to be incurred during the period of liquidation were
based upon that assumption. However, certain properties of the Company have
not been sold, and the Company has extended the period of liquidation.
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.

At the end of fiscal year 1995, net assets were higher than at the end
of fiscal year 1994 by

14
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION (continued)

$213,000. This increase reflects the changes in the Company's estimates of the
following items: increase of rental income of $280,000, increase of interest
earned of $58,000, increase in recovery from insurance companies of legal fees
paid in the amount of $134,000, increase in collections of accounts receivable
in the amount of $36,000, and an increase in estimated costs during the period
of liquidation of $295,000. The increase in estimated costs during the period
of liquidation results primarily from extending the period of liquidation from
December 31, 1995 to December 31, 1996.

The Company's estimate of net assets in liquidation increased $19,000
during the three months ended November 30, 1995. The principal reason for the
increase was the increase in estimated rental income relating to the unsold
property located in Fort Lauderdale, Florida and Tampa, Florida.

At November 30, 1995, the Company had accrued $338,000 to record all
known expenses incurred through November 30, 1995, but not yet paid. As of
November 30, 1995 the Company's estimated costs to be incurred during the
remaining period of liquidation through December 31, 1996 were $442,000 as
compared to $544,000 at August 31, 1995. This reduction of $102,000 resulted
primarily from payments made by the Company and adjustments to expense
categories based on costs incurred during the three months ended November 30,
1995. These costs include costs expected to be incurred in connection with the
consummation of the Sale of Assets during the liquidation period through
December 31, 1996, including anticipated legal fees ($93,000), accounting and
auditing fees ($29,000), salaries ($156,000), lease commitments ($25,000),
property taxes ($46,000), insurance and other overhead items ($36,000),
shareholder relation expenses ($15,000), administrative office expenses
($8,000), and the Company's estimate of unforeseen costs ($34,000) that the
Company expects to incur during the remaining liquidation period through
December 31, 1996. 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 NOVEMBER 30, 1996

The Company's activities during the period beginning in September of
1994 through November 1995 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 November 30, 1995.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents in the amount of $1,357,000 as of November
30, 1995 included United States treasury bills with a maturity of three months
when purchased and having a cost basis of $1,122,000. 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 $21,000 on its investments during the
three months ended November 30, 1995.

15
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION (continued)

ACCOUNTS RECEIVABLE

As of November 30, 1995, the Company's estimate of the net realizable
value of total accounts receivable was $28,000, as compared to $27,000 at
August 31, 1995. The $1,000 increase in the estimate of net realizable value
at November 30, 1995 as compared to August 31, 1995 is the result of amounts
collected subsequent to November 30, 1995. Collections of accounts receivable
during the three months ended November 30, 1995 were $11,000 ($4,000 from
former customers). The remaining accounts receivable as at November 30, 1995
have a face value of $118,000, but have been reduced by an aggregate of $90,000
to reflect the Company's estimate of the net realizable value of the accounts
receivable. Of these remaining accounts receivable, accounts receivable with a
face value of $92,000 were due from former customers, and the remaining $26,000
in face value of accounts receivable 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. Unpaid amounts at November
30, 1995 of approximately $89,000 in face value of accounts receivable are in
the hands of either attorneys or collection agencies to collect. The fees of
such attorneys and collection agencies 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 $29,000 in face value of accounts
receivable are the subject of 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 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,
which appraisals and market values have not been independently verified by the
Company (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.

16
<PAGE> 17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION (continued)

The Company has been unable to sell these properties to date at prices
deemed acceptable to the Company, but is actively engaged in marketing the
properties. The properties are listed for sale with Florida commercial real
estate brokers at prices somewhat higher than the market values indicated by
the Appraisal for each property. During fiscal 1995 the Company entered
letters of intent to sell the Fort Lauderdale property with two different
potential purchasers at prices somewhat below but comparable to the property's
value indicated by its Appraisal. These offers were deemed acceptable by the
Company, but were withdrawn due to failure to obtain the necessary rezoning in
one case and failure to obtain acceptable financing in the other. As reported
in the August 31, 1995 Form 10-KSB, the Company has negotiated with an
adjoining landowner with respect to sale of the Fort Lauderdale property at a
price comparable to the first two offers, but no agreements could be reached
with respect to selling price and negotiations have now discontinued with such
adjoining landowner with respect to the sale of such property. The Company is
currently holding discussions with another prospective buyer with respect to
the sale of the Fort Lauderdale property, but there is no assurance that the
current discussions will result in the sale of such property. With respect to
the Tampa property, during fiscal 1995 the Company engaged in negotiations with
two serious 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 is 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 continue to hold these properties in an
attempt to realize their market values. The level of interest in the
properties, as well as the nature of the markets in which the properties are
located, lead the Company to believe that, given adequate marketing time, there
is a reasonable likelihood that the Company will be able to realize sale prices
comparable to the values for the properties indicated by the Appraisals.
However, there can be no assurance that the Company will be successful in
locating buyers for these properties at such prices. Further, in the event
expenses and costs arising out of the Company's contingent liabilities or other
expenses of liquidation exceed its liquid resources, 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 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, 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.

17
<PAGE> 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION (continued)

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

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, and 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 Fort
Lauderdale property and Tampa property will be sold, but has estimated costs
during the remaining period of liquidation based on such sales 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 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

18
<PAGE> 19
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION (continued)

cash needs on a daily basis. The Company earned $21,000 on its investments
during the three months ended November 30, 1995.

DEBT ARRANGEMENTS

The Company's $500,000 revolving unsecured line of credit (the "Line
of Credit") expired on December 31, 1995. Terms of the Line of Credit
specified interest at the bank's prime rate and could only be used to meet the
Company's short-term obligations during the period of consummation of its Sale
of Assets. The Line of Credit was not used by the Company. The Line of Credit
did not contain any financial covenants, and was guaranteed by Mr. Buck Mickel,
Chairman of the Board of Directors, Chief Executive Officer, and a shareholder
of the Company. The Company does not believe that it will need a line of
credit during the remaining period of liquidation.

19
<PAGE> 20

RSI HOLDINGS, INC.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

WIEGMANN & ROSE

ENVIRONMENTAL LITIGATION

20
<PAGE> 21

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).

During 1994 NL reported to the California DTSC that it had discovered
additional

21
<PAGE> 22

contamination in the form of elevated levels of petroleum hydrocarbons or VOC's
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 three months ended November 30, 1995, the Company incurred
approximately $4,000 in legal and other expenses related to the Triple A
lawsuit.

ASBESTOS LITIGATION

The one undismissed case, Hall v. Abex et al. (filed February 25,
1994), pending in the

22
<PAGE> 23

San Francisco Superior Court, seeks damages for personal injuries allegedly due
to asbestos exposure. The plaintiffs, husband and wife, allege that the
husband was exposed to asbestos in Wiegmann & Rose's products and/or that he
was exposed to asbestos on Wiegmann & Rose's premises. Demand has been made
upon the plaintiffs to dismiss Wiegmann & Rose from the action. Discovery is
incomplete, and the plaintiff husband was deposed in January 1995. Plaintiff
husband testified that he was present on Wiegmann & Rose premises on several
occasions to oversee repairs and manufacturing being conducted by Wiegmann &
Rose for his employer, Standard Oil, and to conduct certain tests on the
machines and equipment being repaired by Wiegmann & Rose. Plaintiff husband,
however, provided no testimony establishing a nexus between Wiegmann & Rose and
any alleged asbestos exposure, other than his unsubstantiated belief.
Discovery is incomplete, and the Company intends to defend this case
vigorously. Plaintiffs in this action have made a settlement offer for a total
of $2,998 to settle their claims against Wiegmann & Rose, but Wiegmann & Rose
has not yet responded to this offer. Wiegmann & Rose is one of approximately
one hundred defendants in this case. Based upon financial information known to
the Company, the Company believes that, in each of the above cases, several of
the other defendants have greater financial resources than the Company.

INSURANCE

HOLIDAY INNS, INC. LITIGATION

23
<PAGE> 24

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.

24
<PAGE> 25

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.

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

25
<PAGE> 26

jurisdictional amount of the Court, exclusive of costs and interest, and
demanding costs of the 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.

26
<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 file 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.

27 Financial Data Schedule (For SEC use only)

(b) Reports on Form 8-K

The Company did not file any reports on Form 8-K during the
three months ended November 30, 1995.

27
<PAGE> 28

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

RSI HOLDINGS, INC.

January 12, 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>
<MULTIPLIER> 1

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> NOV-30-1995
<CASH> 1,357,000
<SECURITIES> 0
<RECEIVABLES> 28,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,559,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,947,000
<CURRENT-LIABILITIES> 785,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,162,000
<TOTAL-LIABILITY-AND-EQUITY> 2,947,000
<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
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<CHANGES> 0
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<EPS-PRIMARY> 0
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</TABLE>