As filed with the Securities and Exchange Commission on February 20, 1997
Registration No. ______________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

-------------------------------

FORM SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933

-------------------------------

WELLINGTON HALL, LIMITED
(Exact name of registrant as specified in its charter)

-------------------------------

56-0815012 North Carolina 4010
(I.R.S. Employer Identification (State or other jurisdiction of (Primary Standard Industrial
No.) incorporation or organization) Classification Code Number)

ROUTE 1, U.S. HIGHWAY NO. 29 AND NO. 70
LEXINGTON, NORTH CAROLINA 27292
(910) 249-4931
(Address, including zip code, and telephone number, including
area code, of registrants principal executive offices)

-------------------------------

HOYT M. HACKNEY
PRESIDENT
WELLINGTON HALL, LIMITED
ROUTE 1, U.S. HIGHWAY NO. 29 AND NO. 70
LEXINGTON, NORTH CAROLINA 27292
(910) 249-4931
(Name, address, including zip code, and telephone
number, including area code, of
agent for service)

-------------------------------

with copies to.

KENNETH N. SHELTON
SCHELL BRAY AYCOCK ABEL & LIVINGSTON P.L.L.C.
POST OFFICE BOX 21847
GREENSBORO, NORTH CAROLINA 27403
(910) 370-8800

-------------------------------

Approximate date of commencement of proposed distribution of the securities to
the public: As soon as practicable after the Registration Statement becomes
effective.

-------------------------------

CALCULATION OF REGISTRATION FEES

=============================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SHARE PRICE REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------

Common Stock 1,689,887 $.50 $844,943.50 $292
=============================================================================================================

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION (DATED FEBRUARY 20, 1997)
PROSPECTUS
1,689,887 Shares of Common Stock
WELLINGTON HALL, LIMITED

Wellington Hall, Limited (the "Company") is offering to the holders of
its outstanding Common Stock of record on __________, ___ 1997 (the
"Shareholders") the nontransferable right to subscribe (a "Right") for one
additional share of Common Stock, no par value, for each share of Common Stock
held on the record date, with certain limited exceptions (the "Rights
Offering").

Each Shareholder may subscribe for shares in addition to those shares
that his Rights entitle him to purchase. If the Shareholders in the aggregate
do not subscribe for the maximum number of shares to which they are entitled in
the Rights Offering, such remaining shares will be sold to Shareholders who
have subscribed therefor, with certain limited exceptions (the "Subscription
Offering"). To the extent more shares are subscribed for than are available,
the available shares will be pro rated among the subscribing Shareholders
therefor based on the percentage that the amount of shares that each
Shareholder subscribed for over those which his Rights entitled him to purchase
in the Rights Offering bears to the total amount of shares that all
Shareholders in the aggregate subscribed for over those which their Rights
entitled them to purchase in the Rights Offering, with certain limited
exceptions.

Any of the 1,689,887 shares offered hereby that are not sold in the
Rights Offering and the Subscription Offering may be sold to persons who are
not directors, officers or Shareholders of the Company (the "Public Offering").
The Rights Offering, the Subscription Offering and the Public Offering are
sometimes referred to herein as the "Offerings." Directors and officers of the
Company who are Shareholders have indicated that they intend to subscribe for
approximately 105,000 shares in the Offerings.

Shareholders desiring to participate in the Offerings must subscribe
for a minimum of 1,000 shares of Common Stock. A subscriber in the Public
Offering must subscribe for a minimum of 10,000 shares. Any subscription in
excess of 100,000 shares is subject to the approval of the Board of Directors
of the Company, except to the extent that a Shareholder is entitled to
subscribe for such shares in the Rights Offering.

Certain persons are not eligible to participate in the Offerings. No
shares will be offered to certain Shareholders or other persons who reside in
any foreign country or in a state of the United States where compliance by the
Company with the securities laws of such jurisdiction would be impractical for
reasons of cost or otherwise. See "The Offerings." In addition, following the
employment on September 1, 1996 of Arthur F. Bingham as the Company's Senior
Executive Vice President of Sales and Marketing, Mr. Bingham purchased a total
of 600,000 shares of Common Stock at a price of $.50 per share. In connection
therewith, Mr. Bingham and the Company agreed that Mr. Bingham would not be
eligible to participate in the Rights Offering or Subscription Offering.

The Offerings will commence concurrently and subscriptions may be made
beginning on the date of this Prospectus. The Rights Offering and Subscription
Offering expire at 5:00 p.m., Eastern Standard Time, on _______________, 1997,
unless extended (the "Expiration Time"). The Public Offering will terminate
within 30 days of the expiration of the Rights Offering and Subscription
Offering, unless extended (the "Public Offering Termination Time").

FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
SHAREHOLDERS AND OTHER SUBSCRIBERS IN THE OFFERINGS, SEE "RISK FACTORS"
BEGINNING ON PAGE 9 OF THIS PROSPECTUS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

------------------------------

- ----------------------------------------------------------------------------------------------------------
Underwriting discounts and
Price to Public commissions. Proceeds to Company (1)
- ----------------------------------------------------------------------------------------------------------

PER SHARE $.50 n/a $.50
- ----------------------------------------------------------------------------------------------------------
Total $844,943.50 (2) n/a $844,943.50 (2)
- ----------------------------------------------------------------------------------------------------------

(1) Before deduction of expenses payable by the Company estimated to be
$45,000.
(2) Assumes that the Offerings are fully subscribed and all shares offered
hereby are sold.

Certificates for shares sold in the Rights Offering and Subscription
Offering will be delivered promptly after the Expiration Time and certificates
for shares sold in the Public Offering will be delivered promptly after the
Public Offering Termination Time.

The date of this Prospectus is February, _____ 1997.

TABLE OF CONTENTS

AVAILABLE INFORMATION . . . . . . . . . . . . . 2 MANAGEMENT . . . . . . . . . . . . . . . . . . 30

PROSPECTUS SUMMARY . . . . . . . . . . . . . . 3 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT . . . . . . . . . . . . . . 31
RISK FACTORS . . . . . . . . . . . . . . . . . 9
EXECUTIVE COMPENSATION . . . . . . . . . . . . 32
THE OFFERINGS . . . . . . . . . . . . . . . . . 11
DESCRIPTION OF SECURITIES . . . . . . . . . . . 36
USE OF PROCEEDS . . . . . . . . . . . . . . . . 17
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER
CAPITALIZATION . . . . . . . . . . . . . . . . 17 MATTERS . . . . . . . . . . . . . . . . . 38

SELECTED FINANCIAL DATA . . . . . . . . . . . . 18 INDEMNIFICATION FOR SECURITIES ACT LIABILITIES. 38

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL LEGAL OPINIONS . . . . . . . . . . . . . . . . 38
CONDITION AND RESULTS OF OPERATIONS . . . . 19 INDEPENDENT AUDITORS . . . . . . . . . . . . . 38

BUSINESS . . . . . . . . . . . . . . . . . . . 23 INDEX TO FINANCIAL STATEMENTS . . . . . . . . F-1

AVAILABLE INFORMATION

The Company is subject to the information requirements of the
Securities and Exchange Act of 1934, as amended, and in according therewith
files reports, proxy statements, information statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements, information statements and other information concerning the
Company may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. and at
the Commission's Regional Offices at Citicorp Center, 500 West Madison Street,
Suite 1500, Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor,
New York, New York 10048. Copies of such material can also be obtained from
the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates, and also can be obtained
electronically through the Commission's Electronic Data Gathering, Analysis and
Retrieval system at the Commission's web site (http:\\www.sec.gov).

This Prospectus constitutes a part of a Registration Statement on Form
SB-2 (the "Registration Statement") filed by the Company with the Commission
under the Securities Act of 1933 (the "Securities Act"). This Prospectus omits
certain of the information contained in the Registration Statement in
accordance with the rules and regulations of the Commission. Reference is
hereby made to the Registration Statement and related exhibits for further
information with respect to the Company and the Common Stock. Statements
contained herein concerning the provisions of any document are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission. Each such statement is qualified in its entirety by such
reference.

2
4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and consolidated historical financial statements (including the
notes thereto) included elsewhere in this Prospectus. See "Risk Factors" for
certain factors that should be considered by Shareholders and other subscribers
before subscribing for shares of Common Stock. Unless the context requires
otherwise, the term "the Company" includes Wellington Hall, Limited and its
subsidiaries.

THE COMPANY

The Company manufactures high quality wooden home furniture. The
manufacturing operation involves the machining, sanding, assembling and
finishing of components and other raw materials. The Company's products are
distributed nationally through full-service retail stores and unaffiliated
trade showrooms that service the professional designer.

The Company owns a lumber processing mill and furniture manufacturing
facility located in San Pedro Sula, Honduras, Central America (the "Honduran
Facilities"). Wellington Hall Caribbean Corporation ("WHCC"), a wholly-owned
subsidiary of the Company, serves as a sales and distribution company for the
Honduran Facilities. WHCC is a North Carolina corporation organized in
December, 1988 and is located in Lexington, North Carolina. Muebles Wellington
Hall, S.A. ("MWH"), the Honduran subsidiary of WHCC, located in San Pedro
Sula, manages and operates the Honduran Facilities.

The Company has recently adopted specific strategies designed to improve
its results of operations and financial condition. These strategies involve a
more aggressive program of product development, improving marketing and
strengthening management, as well as increasing capital and reducing
indebtedness.

The Company has developed and adopted a comprehensive marketing plan that
includes strategic measures such as (i) augmenting the Company's traditional
product lines with more casual designs of furniture that management believes
reflect trends in consumer tastes, (ii) exploring new opportunities for its
Honduran Facilities and other offshore resources with designs employing
materials such as leather, marble, metal, wicker, bamboo and rattan, (iii)
updating and upgrading catalogs and other sales aids in all distribution
channels and (iv) developing more targeted programs with selected retail
distributors that include promotions, stock reserves for quicker shipments and
sales contests. See "Business--Markets."

In addition to the foregoing, the Company has recruited an experienced
senior executive to lead its sales and marketing function. In September 1996,
the Company employed Arthur F. Bingham for the newly created position of Senior
Executive Vice President of Sales and Marketing. Mr. Bingham directs and
oversees all aspects of the Company's sales and marketing activities with the
goal of assuring continuing growth in profitable sales. Mr. Bingham's
employment arrangement provides for several incentives for him to assist the
Company in increasing sales revenues. See "Management."

Management believes that the highly leveraged position of the Company has
impeded its ability to pursue strategies designed to improve its results of
operations. In response, the Company also is pursuing a number of strategies
to improve its financial condition by raising equity capital, reducing
indebtedness and increasing working capital. The Offerings are the primary
means of accomplishing these goals. See "Use of Proceeds" and
"Capitalization." In addition, Mr. Bingham purchased 600,000 shares of Common
Stock at $.50 per share, and the Company has used these funds to reduce its
indebtedness and provide working capital. The Company also has granted stock
options to Mr Bingham and to Mr. Ralph Eskelsen, manager of the Honduran
Facilities, that will provide incentives to these key employees and may result
in additional contributions to capital. Mr. Eskelsen has indicated that he is
likely to purchase between $135,000 and $150,000 of Common Stock during
calendar year 1997

3
5

through exercise of his options at $.50 per share. Because this purchase is at
the option of Mr. Eskelsen, the proceeds therefrom have not been reflected in
the "Capitalization" section of this Prospectus.

The Company has been negotiating with its lenders to amend its loan
agreements to provide more favorable terms. On January 10, 1997, the Company
received a commitment letter from the Overseas Private Investment Corporation
("OPIC") to restructure its loan to reduce principal payments until July 1997
(with the deferred payments to be made in a larger balloon payment at the end
of the term of the loan in 1999) and to lower the interest rate. The OPIC
loan restructuring is subject to finalizing the corresponding loan documents to
reflect the revised terms and conditions. The effect of the restructured loan
is a reduction to the Company's cash requirements for scheduled principal
payments for fiscal 1997 and 1998 of $247,748 and $123,874, respectively, which
will contribute significantly to improving the Company's working capital and
cash flow for these years. The restructured OPIC loan also will reduce
scheduled interest expense by $9,910 in fiscal 1997 and $18,900 in fiscal 1998.
In addition, on January 16, 1997, the Company obtained an additional $250,000
line of credit from Lexington State Bank. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

The Offerings, if fully subscribed, would increase the Company's equity
capital by about $800,000 and reduce indebtedness by a corresponding amount.
Interest expense would have been reduced by $79,744 and $83,201 in fiscal 1995
and 1996, respectively, and by $40,438 in the first half of fiscal 1997, on a
pro forma basis, if the Offerings were fully subscribed and consummated at the
beginning of the period. In addition to achieving a reduction in interest
expenses, management believes that the increase in equity and reduction of debt
service requirements in 1997 and 1998 that the foregoing strategies are
designed to achieve would make working capital and other funds available to
pursue its marketing and sales strategies more aggressively with the goal of
increasing funds generated by operations to fund future growth and debt service
requirements.

The Company's business was founded in 1964, and the Company is incorporated
in North Carolina The Company's principal office is located at Route 1, U.S.
Highway 29 and 70 North, Lexington, North Carolina 27292, telephone (910)
249-4931.

THE OFFERINGS

The Offerings . . . . . . . . . . . . . . The Company is offering to holders of its Common Stock of record at the
close of business on the Record Date (as defined) the nontransferable
Right to subscribe for one share of Common Stock at the Offering Price
for each share of Common Stock then held.

The issuance of shares pursuant to the Rights Offering is not
conditioned upon the sale of any minimum number of shares of Common
Stock pursuant thereto. No Shareholder is required to subscribe for any
shares.

4
6

Each Shareholder may subscribe for shares in addition to those
shares that his Rights entitle him to purchase. If the
Shareholders in the aggregate do not subscribe for the maximum
number of shares to which they are entitled in the Rights
Offering, such remaining shares will be sold in the Subscription
Offering to Shareholders who have subscribed therefor. To the
extent more shares are subscribed for than are available, the
available shares will be pro rated among the subscribing
Shareholders therefor based on the percentage that the amount of
shares that each Shareholder subscribed for over those which his
Rights entitled him to purchase in the Rights Offering bears to
the total amount of shares that all the subscribing Shareholders
in the aggregate subscribed for over those which their Rights
entitled them to purchase in the Rights Offering, with certain
limited exceptions.

Any available shares that are not sold in the Rights Offering
and Subscription Offering may be sold in the Public Offering to
persons not officers, directors or Shareholders of the Company,
provided that in no event shall shares be sold to such persons
prior to the Expiration Time (as defined) or after the Public
Offering Termination Time (as defined).

Shareholders desiring to participate in the Offerings must
subscribe for a minimum of 1,000 shares of Common Stock. A
subscriber in the Public Offering must subscribe for a minimum
of 10,000 shares. Any subscription in excess of 100,000 shares
is subject to the approval of the Board of Directors of the
Company, except to the extent that a Shareholder is entitled to
subscribe for such shares in the Rights Offering.

Commencement of Offerings . . . . . . . The Offerings will commence concurrently and subscriptions may
be made beginning on the date of this Prospectus.

Expiration Time; Public Offering The Rights Offering and Subscription Offering will expire at
Termination Time . . . . . . . . . . . 5:00 P.M. Eastern Standard Time, on ______________ ________,
1997, unless extended, and the Public Offering will expire
within 30 days thereafter, unless extended.

Record Date; Eligible Shareholders . . The record date for purposes of determining Shareholders who are
eligible to receive Rights is ____________ ___, 1997 (the
"Record Date"). Certain Shareholders and other persons are not
eligible to participate in the Offerings. See "The Offerings."

Offering Price . . . . . . . . . . . . The Offering Price is $.50 per share of Common Stock.

Subscription Agent . . . . . . . . . . Lexington State Bank.

5
7

Method of Exercising Rights or Rights may be exercised by Shareholders in the Rights Offering
Otherwise Subscribing for Shares and and additional shares subscribed for in the Subscription
Payment . . . . . . . . . . . . . . . . Offering by completing and signing the Stock Order Form accompanying
this Prospectus and mailing or delivering to the Subscription Agent
the Stock Order Form, together with payment in full (in United
States dollars, by check or money order payable to the order of
Lexington State Bank) for all shares subscribed for in the
Rights Offering and Subscription Offering.

Persons not officers, directors or Shareholders of the Company
may subscribe in the Public Offering for any available shares by
completing and signing the Stock Order Form and mailing or
delivering to the Subscription Agent the Stock Order Form,
together with payment for all shares subscribed for, in the same
manner described hereinabove for the purchase of shares by
Shareholders.

The risk of delivery of all documents and payments is on
subscribers and not on the Company or the Subscription Agent.
If the mail is used, it is recommended that insured registered
mail be used and that a sufficient number of days be allowed to
ensure delivery to the Subscription Agent before the Expiration
Time or the Public Offering Termination Time as the case may be.

Except as described under "The Offerings - Late Delivery of
Subscription and Payment in Rights Offering and Subscription
Offering," completed and executed Stock Order Forms must be
received by the Subscription Agent by the Expiration Time (in
the case of the Rights Offering and Subscription Offering) or
the Public Offering Termination Time (in the case of the Public
Offering). SUBSCRIBERS WILL NOT HAVE ANY RIGHT TO REVOKE THEIR
SUBSCRIPTIONS AFTER DELIVERY IS MADE TO THE SUBSCRIPTION AGENT.

6
8

Escrow Arrangements . . . . . . . . . . All funds received by the Subscription Agent will be held in an
escrow account until the completion of the Rights Offering and
the Subscription Offering. In the event that shares for which
payment has been made by subscribing Shareholders in the
Subscription Offering are not available, payment attributable to
those shares shall be refunded to such subscribing Shareholders.
Any refund due a subscribing Shareholder will be mailed without
reduction or interest to the address designated on the
appropriate Stock Order Form promptly following the Expiration
Time.

If shares are available in the Public Offering, then funds will
be held by the Subscription Agent until acceptance of the
subscriptions therefor at or prior to the Public Offering
Termination Time. If no shares are available in the Public
Offering such that no subscriptions will be accepted in the
Public Offering, or a subscription is otherwise rejected,
payment for such subscriptions will be refunded to the
appropriate subscriber. Any such refund will be mailed without
reduction or interest to the address designated on the
appropriate Stock Order Form promptly following rejection of the
subscription.

Rights of Subscribers . . . . . . . . . Subscribers will have no rights as shareholders of the Company
with respect to the shares of Common Stock subscribed for until
stock certificates representing such shares are issued to them.

Certain Federal Tax Considerations. . . Subject to limited exceptions, the Company believes that, as of
the date hereof, the Common Stock to be issued in the Offerings
would be "qualified small business stock" within the meaning of
Section 1202 of the Internal Revenue Code, and accordingly, a
noncorporate subscriber who holds Common Stock purchased in the
Offerings for more than five years would be able to exclude from
his gross income 50% of any gain from a sale or other taxable
disposition of such Common Stock.

Shares to be Outstanding . . . . . . . 3,979,774, assuming that the Offerings are fully subscribed, and
all shares offered hereby are sold.

Use of Proceeds . . . . . . . . . . . . The net proceeds from the sale of 1,689,887 shares of Common
Stock offered hereby by the Company are estimated at $800,000,
assuming all shares are sold and after payment of expenses of
the Offerings. If all shares are sold, approximately $550,000
of the net proceeds will be used to reduce the outstanding
borrowings under the Company's primary line of credit with
Lexington State Bank and the remaining $250,000 of the net
proceeds will be used to reduce the principal amount of the loan
from OPIC. If all shares are not sold, the net proceeds will
first be allocated to reduce the Company's outstanding
borrowings under the primary line of credit with Lexington State
Bank up to $550,000 and any remainder will be used to reduce the
principal amount of the loan from OPIC. The line of credit may
be used for future working capital and other liquidity needs.

7
9

SUMMARY CONSOLIDATED FINANCIAL DATA

The following financial data should be read in conjunction with the
information set forth under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the audited and unaudited Consolidated
Financial Statements included elsewhere in this Prospectus.

Six Months Six Months
Years Ended April 30 Ended Ended
-------------------- Oct. 31, Oct. 31,
1995 1996
1992 1993 1994 1995 1996 (Unaudited) (Unaudited)
---- ---- ---- ---- ---- ----------- -----------

INCOME STATEMENT DATA:

Net Revenue $6,369,602 $6,884,589 $7,296,892 $7,260,491 $5,989,959 $3,087,862 $2,849,726

Gross Profit 1,445,583 2,091,018 2,288,471 2,203,412 1,846,267 1,010,645 932,656

Income (Loss) From
Continuing Operations
before Extraordinary
Items and Cumulative
Effect of Change in
Accounting Principal (304,713) 226,137 300,514 222,655 73,574 58,117 36,859

Net Income (Loss) (304,713) 288,236(1) 384,398(2) 22,655 73,574 58,117 36,839

Per Common Share:
Net Income (Loss)
Primary 0.18 0.17 0.23 0.13 0.04 0.03 0.02
Net Income (Loss)
Fully diluted 0.18 0.17 0.23 0.13 0.04 0.03 0.02
Cash Dividends
Declared 0 0 0 0 0 0 0

BALANCE SHEET DATA:
Working Capital $2,365,060 $2,466,214 $3,182,938 $3,206,220 $2,920,606 $3,115,825 $3,347,955

Total Assets 6,904,303 7,403,705 7,234,384 7,108,221 6,601,314 7,175,906 6,794,595

Total Debt 3,276,681 3,456,298 3,262,893 3,013,612 2,892,360 3,019,332 3,157,586

Shareholder Equity 2,603,388 2,832,508 2,802,872 2,838,105 2,660,859 2,797,357 2,541,030

(1) Reflects an income tax benefit of $62,099 resulting from operating losses
carried forward from prior years.

(2) Reflects the cumulative effect of a change in accounting method for income
taxes of $83,884.

8
10

RISK FACTORS

A Shareholder should consider all the information contained in this
Prospectus before deciding whether to purchase shares of the Common Stock
offered hereby. In particular, Shareholders should carefully consider the
following factors:

1. DETERMINATION OF OFFERING PRICE; ABSENCE OF ACTIVE TRADING MARKET.

The Company's Common Stock is traded on a limited basis on the NASD's
over-the-counter bulletin board. On February 12, 1997, the closing bid and
asked quotations were $.281 and $.437, respectively. The price to the public
of the Common Stock offered hereby (the "Offering Price") was the product of
the private negotiation between the Company and Arthur F. Bingham following the
employment of Mr. Bingham as of September 1, 1996 as Senior Executive Vice
President of Sales and Marketing of the Company. The Company has issued
600,000 shares of Common Stock to Mr. Bingham at a price of $.50 per share.
The Offering Price bears no relationship to the Company's assets, net earnings,
book value or recent market quotations for the Common Stock or any other
generally accepted criteria of value. The Offering Price of $.50 per share is
substantially lower than the net tangible book value of $1.02 per share
derived from the Company's October 31, 1996 balance sheet.

2. DIVIDEND LIMITATIONS.

Since its formation in 1964, the Company has not paid any cash
dividends on its Common Stock and does not anticipate that any such dividends
will be paid in the foreseeable future. Pursuant to the terms of its
line-of-credit and long-term loan agreements with Lexington State Bank, the
Company may not pay any dividends, purchase, redeem or otherwise retire any of
its capital stock, or otherwise make any distributions of its assets resulting
in the reduction of its capital without the prior written consent of Lexington
State Bank. See "Market For Common Equity and Related Shareholder Matters."

3. DEPENDENCY ON KEY MANAGEMENT PERSONNEL.

The Company believes that it is highly dependent on the services of
its present executive officers. If any of these officers should die or
otherwise become inactive in the Company's business, the loss of such officer
could have a material adverse effect on the Company's business prospects. The
Company carries two key man life insurance policies on its President, Hoyt M.
Hackney, in an aggregate amount of $1,825,000 payable to the Company in the
event of Mr. Hackney's death. Approximately $1.4 million of the amount
payable has been assigned to the Company's lenders for payment in the event of
Mr. Hackney's death and the remainder would be used to pay death benefits to
Mr. Hackney's survivors. The Company also carries a key man life insurance
policy on its Senior Executive Vice President of Sales and Marketing, Arthur F.
Bingham, in an aggregate amount of $1,000,000, $500,000 of which has been
assigned to the Company's lenders for payment in the event of Mr. Bingham's
death with the remainder to be used to pay death benefits to Mr. Bingham's
survivors.

4. COMPETITION.

The furniture industry is characterized by highly intense competition.
The Company, while unranked in any known comparative study of the industry,
competes with many nationally recognized and financially successful
manufacturers of high quality furniture. Many companies with which the Company
competes, both domestic and foreign, have substantially larger production
capacities, distribution networks and greater financial resources than has the
Company.

The furniture industry is a segmented industry whereby design, quality
and price place each manufacturer

9
11

into one or more competitive market niches. The Company competes in the
medium-high price market, which normally requires a larger number of items in
the product line, smaller production lot sizes and higher inventory
requirements to maintain a competitive delivery cycle. While the Company
believes its pricing structure, product design and product quality to be
competitive with those of its competitors, the Company's limited financial
resources negatively affect its ability to compete effectively in its market
niche.

5. INDUSTRY CONDITIONS.

The furniture industry historically has been cyclical, fluctuating
sharply with the business cycle of the national economy. During economic
downturns, the furniture industry tends to experience longer periods of
recession and greater declines than does the general economy. The Company
believes that the industry is influenced significantly by economic conditions
generally and more specifically by consumer behavior and confidence, the level
of personal discretionary spending, housing activity, interest rates and credit
availability. These factors affect not only the ultimate consumer, but also
furniture retailers, the industry's primary direct customers. The cyclical
nature of the industry has contributed historically to fluctuations in the
Company's results of operations, and such fluctuations can be expected to occur
in the future.

6. GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL CONSIDERATIONS.

The Company's domestic operations must meet extensive federal,
state and local regulatory standards in the areas of safety, health and
environmental pollution controls. Historically, these standards have not had
any material adverse effect on the Company's sales or operations. The
furniture industry currently anticipates increased federal and state
environmental regulation, particularly with respect to emissions from paint and
finishing operations and wood dust levels in manufacturing operations. The
industry and its suppliers are attempting to develop water-based finishing
materials to replace commonly-used organic-based finishes which are a major
source of regulated emissions. The Company cannot at this time estimate the
impact of these new standards on the Company's operations or the cost of
compliance thereof (including future capital expenditure requirements).

7. FOREIGN MANUFACTURING FACILITY.

The Company currently devotes substantial financial and management
resources to its lumber processing mill and hardwood furniture manufacturing
facility located in San Pedro Sula, Honduras (the "Honduran Facilities"). The
Company's growth and future profitability are materially dependent upon the
growth, profitability and overall success of the Honduran Facilities.

In general, Central American countries tend to be susceptible to
substantial economic and political instability. While Honduras is more
politically and economically stable than some other Central American countries,
it is susceptible to the same types of instability characteristic of the
region. This political and economic instability could have a materially
adverse impact on the operations and profitability of the Honduran Facilities.
There can be no assurance that the Company will be able to continue to operate
the Honduran Facilities profitably or that the long-term profit potential of
the Honduran Facilities can be realized. The loss of the Honduran Facilities
as a source of wood and/or supplies for the Company's proprietary products
would have a materially adverse affect on the Company's operations, financial
condition, competitiveness and future prospects.

The adequacy of the long-term supply of mahogany in Honduras is
uncertain. The agency of the Honduran government responsible for forest
resources in Honduras is not able to provide accurate information on the
current supply of mahogany available in Honduras. However, other types of wood
such as pine, laurel and cedar, are available and may be used in manufacturing
furniture products. These alternative types of wood may help to diminish the
Company's need for mahogany in the event the supply of mahogany proves
inadequate. Additionally,

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a supplemental supply of mahogany is readily and abundantly available from
import sources at prices somewhat higher than those found in the Honduran
market.

8. HIGH DEGREE OF FINANCIAL LEVERAGE.

The Company has substantial leverage. As of October 31, 1996, the
Company's total indebtedness was 46.5% of total capitalization. Although the
net proceeds of the Offerings will be used to reduce indebtedness, there can be
no assurance that significant proceeds will be raised in the Offerings. The
degree to which the Company is leveraged may adversely affect the Company's
ability to finance its future operations, to compete effectively against better
capitalized competitors and to withstand downturns in its business or in the
economy generally, and could limit its ability to pursue business opportunities
that may be in the interests of the Company and its Shareholders. In addition,
although the Company has been able in the past to meet its debt service
obligations and believes it will continue to do so in the future either through
repayment or refinancings, there can be no assurance that the Company will be
able to meet such obligations or that any refinancing would be on terms
favorable to the Company.

9. ADDITIONAL AUTHORIZED SHARES AVAILABLE FOR ISSUANCE.

The Company is authorized to issue 6,000,000 shares of its Common
Stock. If all of the 1,689,887 shares offered hereby are sold, there will be a
total of 3,979,774 shares issued and outstanding. There is presently a total
of 900,000 shares of Common Stock subject to outstanding options granted under
the Company's 1997 Stock Option and Restricted Stock Plan and another 300,000
shares reserved for future issuance thereunder. Even after reserving these
shares, the Company will, after the Offerings, have at least 820,226 shares of
authorized but unissued Common Stock available for issuance without further
Shareholder approval. The issuance of any additional shares of Common Stock
would reduce the percentage of ownership of the Company held by the investors
who purchase shares of Common Stock pursuant to this offering.

The Board of Directors also has the authority to issue up to 5,000,000
shares of $5.00 Par Preferred Stock ("Preferred Stock") from time to time in
one or more series and with such voting powers, preferences and relative
rights, designations, qualifications and limitations as the Board may fix by
resolution, without shareholder approval. It is not possible to state the
actual effect of the authorization of Preferred Stock upon the rights of
holders of the Common Stock unless and until the Board of Directors determines
the specific rights of the holders of a series of the Preferred Stock. Such
effects might include, however, (i) restrictions on dividends on the Common
Stock if dividends on Preferred Stock have not been paid; (ii) dilution of the
voting power of the Common Stock to the extent that the Preferred Stock has
voting rights; (iii) dilution of the equity interest of the Common Stock unless
the Preferred Stock is redeemed by the Company; and (iv) the Common Stock not
being entitled to share in the Company's assets upon liquidation until
satisfaction of any liquidation preference granted the Preferred Stock. See
"Description of Securities-Preferred Stock."

THE OFFERINGS

PURPOSE OF THE OFFERINGS

The Rights Offering, the Subscription Offering and the Public Offering
(together, the "Offerings") are intended to strengthen the Company's capital
structure by increasing shareholders' equity and reducing indebtedness. The
proceeds from the sale of shares of Common Stock will improve the Company's
debt to equity ratio, increase working capital, reduce interest expense and
improve cash flow. The Rights Offering and

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Subscription Offering enable the Company's Shareholders to purchase shares of
Common Stock at the same price paid by Mr. Bingham for his shares in a private
purchase from the Company.

THE OFFERINGS

The Company is offering to holders of its Common Stock of record at
the close of business on __________ _____, 1997 (the "Shareholders") the
nontransferable right to subscribe (a "Right") for one share of Common Stock at
the offering price of $.50 per share (the "Offering Price") for each share of
Common Stock held on that date (the "Record Date").

The issuance of shares pursuant to the Rights Offering is not
conditioned upon the sale of any minimum number of shares of Common Stock
pursuant thereto. No Shareholder is required to subscribe for any shares, but
a subscribing Shareholder must subscribe for a minimum of 1,000 shares.

Each Shareholder may subscribe for more shares than his Rights entitle
him to purchase. If the Shareholders in the aggregate do not subscribe for the
maximum number of shares to which they are entitled in the Rights Offering,
such remaining shares will be sold in the Subscription Offering to Shareholders
who have subscribed therefor. To the extent more shares are subscribed for
than are available, the available shares will be pro rated among the
subscribing Shareholders therefor based on the percentage that the amount of
shares that each Shareholder subscribed for over those which his Rights
entitled him to purchase in the Rights Offering bears to the total amount of
shares that all the subscribing Shareholders in the aggregate subscribed for
over those which their Rights entitled them to purchase in the Rights Offering.
Notwithstanding the foregoing, for purposes of calculating the above-referenced
percentage, all Shareholders who subscribe for the minimum number of 1,000
shares in the Offerings will be treated together as a single Shareholder, with
their excess subscriptions aggregated. Each such Shareholder will then be
allocated an equal portion of the percentage of available shares as calculated.

Any shares that remain unsubscribed for at the Expiration Time may be
sold in the Public Offering to persons not officers, directors or Shareholders
of the Company, provided that in no event shall shares be sold to such persons
prior to the Expiration Time (as defined) or after the Public Offering
Termination Time (as defined). A subscriber in the Public Offering must
subscribe for a minimum of 10,000 shares.

Any subscription pursuant to the Offerings in excess of 100,000 shares
is subject to the approval of the Board of Directors of the Company, except to
the extent that a Shareholder is entitled to subscribe for such shares in the
Rights Offering.

EXPIRATION TIME

The Rights Offering and Subscription Offering will expire at 5:00 P.M.
Eastern Standard Time, on ______________ ________, 1997 (the "Expiration
Time"), unless extended, and the Public Offering will expire with 30 days
thereafter, unless extended by the Company (the "Public Offering Termination
Time").

OFFERING PRICE

The Offering Price is $.50 per share of Common Stock. The Offering
Price was the product of the negotiation between the Company and Arthur F.
Bingham of a private purchase of Common Stock by Mr. Bingham and bears no
relationship to the Company's assets, net earnings, book value or recent market
quotations for the Common stock or any other generally accepted criteria of
value.

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SUBSCRIPTION AGENT

The Subscription Agent for this offering is Lexington State Bank.

SHARES HELD BY NOMINEE

Banks, trust companies, securities dealers and brokers that hold
Common Stock as nominees for more than one beneficial owner may, upon proper
showing to the Subscription Agent, exercise their Rights on the same basis as
if the beneficial owners were record holders on the Record Date. The Company
reserves the right to deny any division of Rights if in its opinion the result
would be inconsistent with the intent of this privilege.

METHOD OF EXERCISING RIGHTS OR OTHERWISE SUBSCRIBING FOR SHARES AND PAYMENT

Rights may be exercised in the Rights Offering and shares subscribed
for in the Subscription Offering by completing and signing the Stock Order Form
accompanying this Prospectus and mailing or delivering the Stock Order Form,
together with payment in full (in United States dollars, by check or money
order payable to the order of Lexington State Bank) for all shares subscribed
for in both the Rights Offering and the Subscription Offering, to the
Subscription Agent in the manner indicated below.

Persons who are not officers, directors or Shareholders of the Company
and desiring to subscribe for shares in the Public Offering must complete and
sign a Stock Order Form in the form accompanying this Prospectus and mailing or
delivering such Stock Order Form, together with payment in full (in United
States dollars, by check or money order payable to the order of Lexington State
Bank) for all shares subscribed for in the Public Offering, to the Subscription
Agent in the manner indicated below.

Stock Order Forms may be mailed or delivered to:

Lexington State Bank

By Mail: Trust Department By Delivery: Trust Department
Post Office Box 867 38 West First Avenue
Lexington, North Carolina 27293-0867 Lexington, North Carolina 27292

A STOCK ORDER FORM ONCE RECEIVED BY THE SUBSCRIPTION AGENT, IS
IRREVOCABLE AND CANNOT BE AMENDED, MODIFIED, OR RESCINDED BY THE SUBSCRIBER
WITHOUT THE CONSENT OF THE COMPANY.

The risk of delivery of all documents and payments is on subscribers
and not on the Company or the Subscription Agent. If the mail is used, it is
recommended that insured registered mail be used and that a sufficient number
of days be allowed to ensure delivery to the Subscription Agent before the
Expiration Time or the Public Offering Termination Date as the case may be.

All funds received by the Subscription Agent will be held in an escrow
account until the completion of the Rights Offering and the Subscription
Offering. In the event that shares for which payment has been made by
subscribing Shareholders in the Subscription Offering are not available,
payment attributable to those shares shall be refunded to such subscribing
Shareholders. Any refund due a subscribing Shareholder will be mailed without
reduction or interest to the address designated on the appropriate Stock Order
Form promptly following the Expiration Time.

If shares are available in the Public Offering, then funds will be
held by the Subscription Agent until

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acceptance of the subscriptions therefor at or prior to the Public Offering
Termination Time. If no shares are available in the Public Offering such that
no subscriptions will be accepted in the Public Offering, or a subscription is
otherwise rejected, payment for such subscriptions will be refunded to the
appropriate subscriber. Any such refund will be mailed without reduction or
interest to the address designated on the appropriate Stock Order Form promptly
following rejection of the subscription.

The instructions to the Stock Order Form should be read carefully and
strictly followed. Questions relating to the method of subscription and
requests for additional copies of the Prospectus should be directed to Hoyt M.
Hackney, telephone (910) 249-4931. All persons should carefully follow all
instructions. DO NOT SEND SUBSCRIPTION DOCUMENTS OR PAYMENT TO THE COMPANY.
All questions with respect to the validity, form and eligibility of any
exercise of Rights or other subscriptions will be determined solely by the
Company. The Company in its sole discretion may waive any defect or
irregularity, permit a defect or irregularity to be corrected within such time
as it may determine, or reject the exercise of any Right or other
subscriptions. Subscriptions will not be deemed to have been made until all
irregularities have been waived or cured within such time as the Company
determines in its sole discretion. Neither the Company nor the Subscription
Agent shall be under any duty to give notification of defects in subscription
or incur any liability for failure to give such notification.

LATE DELIVERY OF STOCK ORDER FORM AND PAYMENT IN RIGHTS OFFERING AND
SUBSCRIPTION OFFERING

Except as provided immediately hereinafter, the failure of the
Subscription Agent for any reason to actually receive by the Expiration Time a
properly completed and executed Stock Order Form, accompanied by full payment,
from any Shareholder shall be deemed a waiver and release by such Shareholder
of all subscription rights held. However, if prior to the Expiration Time,
the Subscription Agent has received a written or telegraphic guarantee from a
commercial bank, a trust company having an office in the United States, or a
member firm of the New York Stock Exchange, another registered national
securities exchange or the National Association of Securities Dealers, Inc.,
stating the name of the subscribing Shareholder, the number of Rights to which
the subscribing Shareholder is entitled and the number of shares of Common
Stock subscribed for and guaranteeing that the Stock Order Form and the
appropriate payment will be promptly delivered to the Subscription Agent, such
subscription will be accepted subject to withholding the stock certificates for
such shares of Common Stock until receipt of the duly completed and executed
Stock Order Form and payment of the Subscription Price within five business
days of the Expiration Time.

RIGHTS OF SUBSCRIBERS

Subscribers will have no rights as Shareholders of the Company with
respect to the shares of Common Stock subscribed for until stock certificates
representing such shares are issued to them. Subscribers will not have any
right to revoke their subscriptions after delivery is made to the Subscription
Agent.

NONTRANSFERABILITY OF RIGHTS

The Rights are nontransferable and may not be purchased or sold.

LIMITATIONS ON PURCHASES OF SHARES

The Company will make reasonable efforts to register, qualify, or
exempt from registration the shares of Common Stock offered hereby pursuant to
the securities laws of all jurisdictions of the United States in which
Shareholders reside. However, shares will not be offered to any person who
resides in a foreign country, or who resides in any jurisdiction in the United
States if (i) a small number of Shareholders reside in such jurisdiction; (ii)
the issuance of Rights or the offer or sale of shares of Common Stock under the
securities laws of such jurisdiction would require the Company to register as a
broker or dealer or otherwise qualify the shares of Common Stock for

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sale in such jurisdiction; and (iii) such registration or qualification
described in clause (ii) above would be impracticable for reasons of cost or
otherwise.

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

General

The following is a summary of the anticipated material effects on
Federal income tax of the purchase, ownership and disposition of shares of
Common Stock by a subscriber in the Offerings. The summary is based upon the
Internal Revenue Code of 1986, as amended (the "Code"), and existing
regulations thereunder, all as in effect and existing on the date hereof and
all of which are subject to change at any time (possibly with retroactive
effect) and to different interpretations. This summary assumes that the shares
of Common Stock are (and will be) held by subscribers as "capital assets"
within the meaning of Section 1221 of the Code. This summary does not address
the tax consequences to subscribers who are subject to special rules (such as
financial institutions, tax exempt organizations, dealers in securities and
insurance companies) or aspects of Federal income taxation that may be relevant
to a particular subscriber based upon his individual tax situation.

Common Stock

A subscriber who purchases Common Stock in the Offerings will have an
initial tax basis in the Common Stock equal to its purchase price. Upon a sale,
exchange or other taxable disposition of shares of Common Stock, a subscriber
generally will recognize gain or loss for United States Federal income tax
purposes in an amount equal to the difference between (i) the sum of the amount
of cash and the fair market value of any property received upon such sale,
exchange or other disposition and (ii) the subscriber's tax basis in the shares
of Common Stock being sold. If, at the time of the sale or exchange, the Common
Stock was held as a capital asset for more than one year, such gain or loss
generally will be long-term capital gain or loss.

Potential 50% Exclusion of Capital Gain

Section 1202 of the Code provides that noncorporate taxpayers may
exclude from their gross income 50% of any gain from the sale or exchange of
"qualified small business stock" (as defined below) that has been held for more
than five years. Qualified small business stock generally means any stock in a
C corporation that is originally issued (i) after August 10, 1993, (ii) by an
issuing corporation that, both before and after the issuance, has aggregate
gross assets of $50,000,000 or less and (iii) in exchange for money or other
qualifying property. In addition to the foregoing requirements, Section 1202
contains certain limitations and requirements relating to, among other things,
(A) limitations on a taxpayer having an offsetting short position with respect
to the stock that may be the subject of the exclusion and (B) application of
the exclusion to pass-through entities that hold qualified small business
stock.

The Company believes that, as of the date hereof, the Common Stock to
be issued in the Offerings would be "qualified small business stock" within the
meaning of Section 1202. If the requirements of Section 1202 are met, a
noncorporate subscriber who holds Common Stock purchased in the Offerings for
more than five years would be able to exclude from his gross income 50% of any
gain from a sale or other taxable disposition of such Common Stock.

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One-half of any gain excluded under Section 1202 is treated as a
preference in computing alternative minimum taxable income.

SECTION 1202 OF THE CODE HAS SPECIFIC EXCEPTIONS AND LIMITATIONS THAT
MAY APPLY TO EACH SUBSCRIBER DIFFERENTLY. EACH SUBSCRIBER SHOULD CONSULT HIS
OR HER OWN TAX ADVISORS WITH RESPECT TO THE POSSIBLE APPLICATION OF SECTION
1202 TO ANY GAIN ON A SALE OR EXCHANGE OF COMMON STOCK BY SUCH SUBSCRIBER.

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USE OF PROCEEDS

The net proceeds from the sale of 1,689,887 shares of Common Stock
offered hereby by the Company are estimated at $800,000, assuming all shares
are sold and after payment of expenses of the Offerings. If all shares are
sold, approximately $550,000 will be used to reduce the loans representing the
Company's primary revolving line of credit from Lexington State Bank and the
remaining $250,000 of the net proceeds will be used to reduce the principal
amount of the Company's OPIC loan.

The Company's primary line of credit with Lexington State Bank bears
interest at the rate of prime plus 1%. The line of credit is reviewed for
renewal annually. The Company has used this line of credit within the last
twelve months for working capital. The balance outstanding under this line of
credit was $944,000 at October 31, 1996 compared to $1,186,000 at October 31,
1995.

The OPIC loan presently bears interest at a rate of 12% per annum and
matures on October 31, 1999, with final balloon payment of $185,812. The
Company has received from OPIC a commitment letter to, among other things,
reduce the interest rate to 10% effective November 1, 1996, and defer principal
payments with a final balloon payment of $557,438 due on October 31, 1999. See
"Business---General" and "Management's Discussion and Analysis of Results of
Operations and Financial Condition."

The line of credit may be used for future working capital and other
liquidity needs. If all shares are not sold, the net proceeds will first be
allocated to reducing the line of credit up to $550,000 and any additional
proceeds would be used to reduce the OPIC loan.

CAPITALIZATION

The following table sets forth as of October 31, 1996 (i) the actual
consolidated capitalization of the Company, (ii) the pro forma capitalization
of the Company after giving effect to the sale of 600,000 to Arthur F. Bingham
shares of Common Stock at $.50 per share after October 31, 1996 and (iii) the
pro forma as adjusted capitalization of the Company as adjusted to giving
effect to the consummation of the Offerings and the application of the gross
proceeds therefrom, assuming all shares offered hereby are sold. There can be
no assurance any shares will be sold in the Offerings. This table should be
read in conjunction with the Company's consolidated financial statements and
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" appearing elsewhere in this Prospectus.

Actual Pro Forma Pro Forma As
------ --------- ------------
As of Adjusted
------- --------
October 31, Maximum
----------- -------
1996
----

DEBT(2)
Due on Demand Note . . . . . . . . . . . . . . . . . $ 25,000 $ 25,000 $ 25,000

Short-Term Lines of Credit . . . . . . . . . . . . . 1,447,809 1,447,809 897,809

Long-term debt, including current portion . . . . . . 1,684,777 1,399,082 1,149,082

Total debt . . . . . . . . . . . . . . . . . . . . 3,157,588 2,871,891 2,071,891
----------- ------------ -----------

STOCKHOLDERS EQUITY -- --
Preferred stock; authorized and
unissued 5,000,000 shares; $5.00 par;

Common Stock; authorized 6,000,000
shares; no par; issued and outstanding 1,669,887;
Pro Forma 2,289,887; Pro Forma as adjusted
3,979,779 3,054,431 3,354,431 4,154,431
Retained earnings . . . . . . . . . . . . . . . . . . 1,314,431 1,314,431 1,314,431

Translation Adjustments . . . . . . . . . . . . . . . (1,827,679) (1,827,679) (1,827,679)

Total common Shareholders' equity . . . . . . . 2,541,029 2,841,029 3,641,029
----------- ------------ -----------

Total capitalization . . . . . . . . . . . . . . $ 6,794,595 $ 6,794,595 $ 6,794,595
=========== ============ ===========

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SELECTED FINANCIAL DATA

The following table presents selected financial data for the periods
indicated. The financial data presented should be read in conjunction with the
information set forth under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the audited and unaudited Consolidated
Financial Statements included elsewhere in this Prospectus.

INCOME STATEMENT DATA:

Net Revenue $6,369,602 $6,884,589 $7,296,892 $7,260,491 $5,989,959 $3,092,130 $2,849,726

Gross Profit 1,848,731 2,203,412 2,288,471 203,412 1,846,267 1,014,913 932,656

Income (Loss) From
Continuing Operations
before Extraordinary
Items and Cumulative
Effect of Change in
Accounting Principal (304,713) 226,137 300,514 222,655 73,574 58,117 36,859

Net Income (Loss) (304,713) 288,236(1) 384,398(2) 222,655 73,574 58,117 36,839

Per Common Share:
Net Income (Loss)
Primary 0.18 0.17 0.23 0.13 0.04 0.03 0.02
Net Income (Loss)
Fully diluted 0.18 0.17 0.23 0.13 0.04 0.03 0.02

Declared 0 0 0 0 0 0 0

BALANCE SHEET DATA:
Working Capital $2,365,060 $2,466,214 $3,182,938 $3,206,220 $2,920,606 $3,115,825 $3,347,955

Total Assets 6,904,303 7,403,705 7,234,384 7,108,221 6,601,314 7,175,906 6,794,595

Total Debt 3,276,681 3,456,298 3,262,893 3,013,612 2,892,360 3,019,332 3,157,588

Shareholder Equity 2,603,388 2,832,508 2,802,872 2,838,105 2,660,859 2,797,357 2,541,030

(1) Reflects an income tax benefit of $62,099 resulting from operating losses
carried forward from prior years.

(2) Reflects the cumulative effect of a change in accounting method for income
taxes of $83,884.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Six Months Ended October 31, 1996 Compared to the Six Months Ended October 31,
1995

Consolidated revenues were down approximately $254,500 or 8.2% for the
first six months of fiscal 1996 compared to the first six months of fiscal
1995. This decline was largely the result of the current recession within the
furniture segment of the national economy, a shrinking distribution base and
possibly a permanent resistance by the consumer to purchasing the higher
quality and higher priced furniture of the type that historically has been the
Company's principal product line. Sales for domestically produced products
were down about 18% percent for the half year. Sales of foreign produced goods
increased by about 28.9% for the six month period.

New orders received during the six month period amounted to
approximately $3,273,000 in future sales up slightly from the same period last
year. During the period the Company was without a salesmen in its territory
encompassing North Carolina, South Carolina and Virginia (the "North Carolina
territory"), its most productive, for almost three months while negotiations
with Mr. Bingham to fill the slot as exclusive representative and sales and
marketing manager. The Company's backlog of orders at October 31, 1996 was
approximately $1.997,000 versus $1,690,000 at that time last year and
$1,853,000 on April 30, 1996.

Cost of Sales were down approximately $160,400 or 8% for the six-month
period as compared with last year, reflecting the reduced level of sales.

Selling, General and Administrative Expenses decreased about $55,000
or 7% for the half year, primarily as a result of a reduction in the
commissions paid to the Company's sales representatives because of reduced
sales.

Interest Expenses were $193,220 for the first six months of the
current fiscal year, up slightly ($1,364) from the six month period of the
prior year, primarily as a result of increased borrowings against foreign
lines-of-credit to support production increases at the Honduran Facilities.

For the six month period ending October 31, 1996, operating income
(earnings before interest and taxes) was $230,096, 13.6 cents per share,
compared to $257,315, 15.2 cents per share, for the same period of the prior
year. Net income was $36,463, or $.02 per share, compared to $58,117, or $.03
per share for the same period of fiscal 1996.

Fiscal Year ended April 30, 1996 compared to Fiscal Year Ended April 30, 1995

Consolidated revenues for the fiscal year ended April 30, 1996 were
down $1,271,682 or 17.5 % as compared to those reported for the previous year.
This decline is primarily the result of a soft furniture economy that affected
the fourth quarter of the prior year and persisted throughout fiscal 1996.

Cost of Sales was down approximately $913,000 or about 18% for the
year as compared with the prior year, reflecting management's efforts to
curtail production as a reaction to the slow economy and to reduce inventories
to manage the Company's cash position.

Selling, General and Administrative Expenses decreased about $246,000
or approximately 15% during the year, primarily as a result of reduced sales
commissions.

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Operating income (earnings before interest and taxes) for the year was
$458,338 (27 cents per share), down from $577,639 (34 cents per share)
reported for fiscal 1995. As a percent of sales, this income represented 7.6%
and 7.9% respectively.

Interest Expenses for the year were $388,829, up 15.7% from $335,951
as a result of increased borrowing against foreign lines-of-credit and, to
lesser extent, higher interest rates being applied to domestic borrowings as
compared to last year.

Net income was $73,574, or $.04 per share, for the year ended April
30, 1996 as compared to $222,655, or $.13 per share, for the prior year.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal long-term capital resources are stockholders'
equity, the term loan of Wellington Hall with Lexington State Bank and the term
loan of WHCC with the Overseas Private Investment Corporation (OPIC). As of
October 31, 1996, total stockholders' equity was $2,846,724 and the outstanding
principal amounts of the Lexington State Bank loan and the OPIC loan were
$408,084 and $990,999, respectively.

The Lexington State Bank loan bears interest at the prime rate plus
1.5% and is payable in monthly installments of $7000 until maturity on April
10, 2002. It is secured by substantially all of the Company's domestic assets.
The net proceeds of the loan were used to refinance indebtedness used to
purchase and expand the Company's Lexington, North Carolina facility.

Since July 1996, the Company has been negotiating with OPIC to amend
the OPIC loan agreement to provide more favorable terms. Principal payments
were scheduled to double from approximately $31,000 per quarter to approximately
$62,000 per quarter beginning on July 31, 1996 with a final balloon payment of
$185,812 due on October 31, 1999. Under the present loan agreement, WHCC is
also obligated to make quarterly interest payments at the rate of 12% per annum.
On January 10, 1997, WHCC received a commitment letter to amend the loan
agreement to, among other things, lower the interest rate to 10% annum as of
November 1, 1996 and to suspend principal payments from July 31, 1996 until July
31, 1997, at which time quarterly payments of approximately $31,000 would be due
and payable. Principal payments would increase to approximately $62,000 on July
31, 1998 with a balloon payment of approximately $557,438 due on October 31,
1999. The amendment to the loan documents is expected to be completed by March
31, 1997. Upon execution of the amended documents, WHCC would pay OPIC a
rescheduling fee of 1% of the principal balance and reimburse OPIC for its legal
and other out-of-pocket costs incurred to effectuate the amendment. The
proceeds from the OPIC loan, together with funds generated internally by
Wellington Hall, were used to acquire and improve the Honduran Facilities.

The OPIC loan prohibits the payment of dividends and other
distributions by Wellington Hall and requires that it maintain a stated amount
of tangible net worth as well as certain financial ratios, including current
assets to current liabilities and total indebtedness to tangible net worth. In
addition, WHCC is prohibited from paying dividends or making other
distributions to Wellington Hall and is required to maintain a stated amount of
current assets in excess of current liabilities, and WHCC and MWH are required
to maintain stated ratios of current assets to current liabilities and
indebtedness to tangible net worth. WHCC also is required to generate operating
income sufficient to service the OPIC loan for a least four consecutive
quarters beginning July 31, 1996. The amendment effectively would extend this
date to the four quarters preceding maturity on July 31, 1999. Wellington
Hall, WHCC and MWH are each in compliance with the requirements of the OPIC
loan.

Under the OPIC loan arrangement, Wellington Hall, Limited is obligated
to supply any necessary funds to

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22

WHCC to meet WHCC's obligations thereunder, and MWH has also guaranteed the
obligations of WHCC. The OPIC loan is secured by substantially all of the
tangible assets of the Honduran Facilities.

The Company's primary sources of liquidity are bank lines of credit
and cash flow from operations. For its domestic operations, the Company has
two lines of credit with Lexington State Bank. Under its primary line, the
Company may borrow the lesser of (i) $1,200,000 or (ii) the sum of 70% of the
Wellington Hall's accounts receivable less than 60 days old, 50% of its
finished good inventories and 10% of work in process and raw material
inventories. As of October 31, 1996, the Company had $944,000 in borrowings
under this line of credit, leaving $166,000 available for future borrowings.
The Company pays interest monthly at the rate of prime plus 1% on outstanding
borrowings under the facility. Principal payments are due on demand. The line
of credit also contains restrictive covenants that prohibit Wellington Hall
from paying dividends and making other distributions with respect to its
capital stock and require it to maintain certain financial ratios, including
current assets to current liabilities and total liabilities to total net worth.
The Company is in compliance with all requirements of the line of credit. The
line of credit is reviewed annually for renewal.

On January 16, 1996, Wellington Hall executed the loan documents that
increased its line of credit from Lexington State Bank in the amount of
$250,000. No borrowings have been made to date. Outstanding borrowings under
this facility will bear interest at the rate of prime plus 1 1/2%, payable
monthly. Principal payments will be due on demand.

Wellington Hall is also indebted to Lexington State Bank under a
demand loan for $100,000 borrowed in 1993 to finance working capital. The loan
bears interest at the prime rate plus 1% payable monthly and the outstanding
balance as of October 31, 1996 was $100,000.

The Lexington State Bank lines of credit and demand loan are secured
by substantially all of the Company's domestic assets.

MWH has lines of credit with two Honduran banks in an aggregate amount
of $500,000. As of October 31, 1996, an aggregate of $404,000 had been
borrowed under these lines, leaving approximately $96,000 for future
borrowings. Borrowings as bear interest at 25% payable quarterly and principal
is payable on demand. The lines are secured by a second lien on the fixed
assets of MWH and current assets.

The Company's other primary source of liquidity is net cash provided
by operating activities which was $97,517 and $295,289 in fiscal 1996 and 1995,
respectively. However, operations used $305,910 during the first six months of
the current fiscal year, primarily as a result of the increases in inventories
and accounts receivable discussed below.

As of October 31, 1996, accounts receivable had increased by
approximately $132,000 since the beginning of the fiscal year, mostly as a
result of an increase in sales during the second quarter ended that date. The
receivables represented a turnover rate of about fifty-one days, an increase of
about five days when compared to the turnover rate reported at April 30, 1996.

Inventories increased by about $284,000 during the first six months of
the current fiscal year primarily as a result of increased production to meet
an increased backlog of orders. The Company believes that the renewed and
revised marketing effort that it put in place in early 1996 has had some
positive effect on the Company's level of incoming orders and has resulted in a
backlog of orders of approximately $1,997,000 at October 31, 1996 versus
$1,666,000 on the same date in 1995 and versus $1,853,000 at April 30, 1996.
The increased inventories consisted primarily of inventory in transit from the
Honduran Facilities to the Lexington NC facility, which at quarter's end was
about $200,000 versus about $74,000 at year end April 30, 1996, and the
inventory of raw materials and

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23

supplies in transit to the Honduran Facilities from Lexington at October 31,
1996, which was about $52,000 versus about $5,000 on hand at April 30, 1996.

Property and Equipment is reported to be down about $49,000 as of
October 31, 1996 compared to year-end but, when expenditures of approximately
$29,000 are added, the decrease is actually about $78,000. The decline is
mostly the result of the devaluation of the Honduran currency relative to the
prior fiscal year end of approximately 14%. The historical value of the
Company's Honduran assets are carried on the subsidiaries' books in the local
currency, the lempira. Lempiras are converted to dollars at the "spot" rate in
effect at period end when the Company's financial statements are consolidated,
and the reduction to the reported value of these assets appears as part of the
translation adjustment.

There are no significant capital expenditures planned for the balance
of this fiscal year and expenditures for the remainder of the year will be
limited to maintenance needs which develop from time to time. The Company's
total outlay for capital improvements for the fiscal year ended April 30, 1996
was approximately $39,000.

As of September 1, 1996, the Company executed an Employment and Stock
Purchase Agreement with Arthur F. Bingham (the "Agreement"). On October 10,
1996, Mr. Bingham loaned the Company $285,694 at terms included in an addendum
to the Agreement. These terms, among other things, allowed the Company two
years to repay the loan. On February 12, 1997, the Company issued to Mr.
Bingham 600,000 shares of stock as repayment of that loan and for his
additional investment of $14,306. Mr. Bingham has also been granted options to
purchase 600,000 additional shares at option prices ranging from $.50 to $1.30
per share, 450,000 of which are subject to certain performance conditions. See
"Management."

In 1989, the Company acquired the Honduran Facilities and anticipated
raising $1,500,000 through the sale of the Company's stock by the board of
directors. The private placement ended early in 1990 having produced about
one-half the funds anticipated. The result of not raising all the funds has
been that the Company has had to incur more debt and restrict capital
expenditures that were both in its original plans at the time of the
acquisition and that have developed since the acquisition. Because of this
debt, sales needed to grow rapidly from the time of the acquisition to a level
at which operating incomes would be adequate to service the debt and to fund
capital needs if the Company was to grow. Maintaining an adequate level of
sales since the acquisition has been possible only for limited periods of time,
mostly as a result of a sluggish furniture economy that has existed over much
of that time, a period that includes two recessions. The sluggish furniture
economy has also reduced the industry's distribution base, especially the base
of mid to small retailers more committed to using smaller manufacturers, such
as the Company, as a resource. Furthermore, management believes that the
consumer taste in home furnishings has swung away from the more formal designs
and execution that the Company has marketed to more informal designs and
execution.

Management believes that the resulting situation is that the Company
has too much debt service, given its sales volume most recently achieved, and
has inadequate funds for its plans to restoring and growing its sales to a
level where its operating profits can accommodate its needs. The Company's
cash position was tight during all of fiscal 1996, having experienced excessive
wood deliveries early in the year and then a slow economy and lower sales
during the balance of the year while the Company continued to service its high
level of indebtedness. The sale of stock to Mr. Bingham has assisted the
Company in meeting its working capital and other cash needs and management
believes that the net proceeds of the Offerings will further improve the
Company's liquidity. However, a significant portion of the Company's backlog
and orders expected to be received in the near future carry delayed payment
terms and/or will require reserved inventories. These terms will further
stretch the Company's cash resources until the payment for these sales becomes
due. Delayed payment terms have become expected within the industry and
therefore necessary for the Company to attract new distribution.

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24

Having initiated in early 1996 a marketing effort to achieve sales
growth, and having begun to see results from this effort, the Company
formulated a strategy that addresses means of securing the necessary funding
and solving its debt-equity problem in general. The plan consists primarily of
(i) the private placement of stock to Mr. Bingham and the grants of options to
Mr. Bingham and Mr. Eskelsen, (ii) the Offerings and (iii) the Company's debt
restructuring, all as discussed elsewhere in this Prospectus.

The success to date in the execution of this plan has removed some
immediate pressure on working capital, is making funds available to support
marketing requirements and slowed the effect of servicing the debt for the near
term. The balance of the plan is essentially aimed at reducing debt and the
corresponding costs thereof.

BUSINESS

GENERAL

The Company owns a lumber processing mill and furniture manufacturing
facility located in San Pedro Sula, Honduras, Central America (the "Honduran
Facilities"). Wellington Hall Caribbean Corporation ("WHCC"), a wholly-owned
subsidiary of the Company, serves as a sales and distribution company for the
Honduran Facilities. WHCC is a North Carolina corporation organized in
December, 1988 and is located in Lexington, North Carolina. Muebles Wellington
Hall, S.A. ("MWH"), the Honduran subsidiary of WHCC, located in San Pedro Sula,
manages and operates the Honduran Facilities.

The Company has recently adopted specific strategies designed to
improve its results of operations and financial condition. These strategies
involve a more aggressive program of product development, improving marketing
and strengthening management, as well as increasing capital and reducing
indebtedness.

The Company has developed and adopted a comprehensive marketing plan
that includes strategic measures such as (i) augmenting the Company's
traditional product lines with more casual designs of furniture that management
believes reflect trends in consumer tastes, (ii) exploring new opportunities
for its Honduran Facilities and other offshore resources with designs employing
materials such as leather, marble, metal, wicker, bamboo and rattan, (iii)
updating and upgrading catalogs and other sales aids in all distribution
channels and (iv) developing more targeted programs with selected retail
distributors that include promotions, stock reserves for quicker shipments and
sales contests. See "Business--Markets."

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25

"Capitalization." In addition, Mr. Bingham purchased 600,000 shares of Common
Stock at $.50 per share, and the Company has used these funds to reduce its
indebtedness and provide working capital. The Company also has granted stock
options to Mr Bingham and to Mr. Ralph Eskelsen, manager of the Honduran
Facilities, that will provide incentives to these key employees and may result
in additional contributions to capital. Mr. Eskelsen has indicated that he is
likely to purchase between $135,000 and $150,000 of Common Stock during
calendar year 1997 through exercise of his options. Because this purchase is
at the option of Mr. Eskelsen, the proceeds therefrom have not been reflected
in the "Capitalization" section of this Prospectus.

The Offerings, if fully subscribed, would increase the Company's
equity capital by about $800,000 and reduce indebtedness by a corresponding
amount. Interest expense would have been reduced by $79,744 and $83,201 in
fiscal 1995 and 1996, respectively, and by $40,438 in the first half of fiscal
1997, on a pro forma basis, if the Offerings were fully subscribed and
consummated at the beginning of the period. In addition to achieving a
reduction in interest expenses, management believes that the increase in equity
and reduction of debt service requirements in 1997 and 1998 that the foregoing
strategies are designed to achieve would make working capital and other funds
available to pursue its marketing and sales strategies more aggressively with
the goal of increasing funds generated by operations to fund future growth and
debt service requirements.

The Company's business was founded in 1964, and the Company is
incorporated in North Carolina. The Company's principal office is located at
Route 1, U.S. Highway 29 and 70 North, Lexington, North Carolina 27292,
telephone (910) 249-4931.

PRODUCTS

The Company's products include occasional living room tables, dining
room, and bedroom furniture, modular wall systems, entertainment cabinets (for
storage of televisions, stereo equipment and video cassette recorders),
bar/server cabinets, console tables, mirrors, and other occasional and accent
pieces. The product line generally represents an eclectic collection of
reproductions or renderings of 18th century English and French styles. Most of
the Company's 18th century English and French reproductions and other designs
are offered exclusively by the Company.

The Company imports certain of its designs for finishing when the
domestic production costs for such designs are prohibitive. The Company's
imported line is assembled in the Honduran Facilities and finished in the
Company's Lexington, North Carolina facility and includes solid mahogany dining
chair frames, occasional items and poster beds. Sales of imported designs have
increased over time as a result of the Company's acquisition of the Honduran
Facilities. During fiscal year 1996, imported designs accounted for
approximately 45% of the Company's consolidated sales.

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26

WHCC, the Company's North American subsidiary, markets to the U.S.
furniture industry (including the Company) three categories of unfinished
products manufactured by the Honduran Facilities, including: (i) raw materials
in the form of wooden dimension stock (rough parts); (ii) unfinished assembled
items for furniture such as occasional tables and dining chair frames; and
(iii) components (turnings and carvings) utilized in domestic production (OEM
sales). The majority of sales utilize solid mahogany, but the Company also
uses laurel, primarily in the production of its French designs, pine and San
Juan Areno. In April of 1996, the Company successfully introduced items of
furniture which employ leather as part of their finish, such as inserts in desk
tops or fully wrapped chest, and the first pine occasional item for its
domestic production.

WHCC also markets directly to the retail trade a bedroom, dining room
and occasional table group fully produced and finished in the Honduran
Facilities. By assembling and finishing the group in Honduras, significantly
greater advantage of plentiful, less costly labor and lower overhead can be
realized which result in a lower retail purchase price for the group ( as well
as that of the other Honduran - produced products). This lower price, along
with the utilization of solid "Honduran Mahogany," recognized by the world
trade as one of the premier hardwoods, allows the Company to compete within its
market niche. All of the wood utilized by the Company's Honduran Facilities
comes from forests under sustainable management programs.

MARKETS

The Company utilizes several different avenues of distribution. The
Company distributes its finished products to the designer trade, retail stores,
trade showrooms, buyers' clubs and consumer catalogues. The following
discussion describes the views of the Company regarding each avenue of
distribution for its finished products.

Designer Trade

The Company believes that the designer trade has become one of the
more viable outlets for its primary product niche, traditional, high-end
furniture. From the Company's perspective, the advantage of this outlet is
that virtually all sales are "special order," negating the need for promotional
discounts, and the disadvantages are the relatively low sales volume, the
requirement that it grant credit and the inadequate means the designer normally
has available to receive delivery and service his customer. Since decorators do
not generally stock or display products, they are largely dependent on the
availability and quality of the Company's sales materials, and as such, it is
important for the Company to create and/or improve and maintain its sales aids,
including but not limited to photography and catalogs for the Company's dining
room pieces and occasional program and for WHCC's bedroom pieces.

As part of the Company's strategy to increase its sales, the Company
plans to produce a new product catalog by April 1997 for a portion of its
product line. New finish samples have been completed and furnished the
Company's wall unit dealers and finish samples for the balance of the line will
be ready in the early spring of 1997.

Retail Stores

Retail stores are a desirable outlet for the Company's products
because the potential volume of sales is relatively high and certain retail
stores do stock and display the Company's products. However, the Company's use
of this outlet has declined over several years for various reasons, including
but not limited to the fact that many of its dealers have gone out of business
and the fact that it has been unable to compete effectively with the invoice
dating policy employed by larger manufacturers. The Company believes that this
latter reason has induced many dealers not to consider the Company's products
when assigning available floor space. Accordingly, a growing percentage of the
Company's distribution to retail stores are special orders, necessitating the
creation and/or

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improvement and maintenance of the Company's sales aids. See--"Designer Trade."

The Company is having some success in expanding it retail distribution
though a program of "Target Accounts." The primary elements of the program is
a stock reserve program to assure the participating dealer of quicker delivery,
promotions, better in store training and service, and sales incentive contests
for the dealer's "floor" sales personnel. The stock reserve program consists
of maintaining a reserve stock between production runs for about one-third of
the products normally offered and in only one finish. The dealer is required to
purchase and display essential all of these products. The sales contest are for
resort, weekend or holiday trips given to retail sales persons who sell minimum
specified amounts of the Company's product within a set time frame.

Early in 1996 the Company added its own Home Page to the Internet
[firniture.com] and has experienced a much higher level of hits (site visits)
and resulting inquiries than was anticipated. These inquiries are forwarded to
the Company's appropriate area sales representative and to a local dealer when
possible. Priority for referral is given to the dealers participating in the
Company's "Target Account" program.

Trade Showrooms

The Company maintains a showroom in High Point, North Carolina to
display its product line during the semiannual International Furniture Market
held in that city in the fall and spring of each year and is affiliated with
trade showrooms that service the professional designer in all the major markets
and design centers around the country. Trade showrooms generally target the
affluent customer, which tends to be the Company's ultimate customer, and as
such, they are an important outlet for the Company. However, the Company
believes that this outlet has diminished in importance somewhat over the last
decade because of "Gallery Programs" sponsored by the larger manufacturers and
retailers under which retail stores act in large part as competing showrooms,
inducing decorators to stock their floors by offering greater discounts It is
the opinion of the Company, however, trade showrooms are still viable when
markups of wholesale prices can be held to 250%.

In April 1996, the Company received commitments from two major,
national showroom chains to display its products. One of the commitments
involved only the Company's modular wall units, while the others involved the
balance of the domestic product (regular line) lines. Most of the floor samples
purchased reached the showroom floors early in the fall of 1996, and management
believes such floor displays are having a favorable impact on sales.

Buyers Clubs

The Company became a vendor for the United Consumers Club ("UCC")
approximately two years ago. The UCC's members are required to pay an annual
fee, and the UCC distributes to them through its ninety catalog outlets (Clubs)
and its quarterly mailers. In order to succeed in this particular means of
distribution, it is imperative that the Company create and/or improve and
maintain high-quality photography in its mailers, as well as a large supply of
catalogs at the various clubs. See--"Designer Trade."

Similarly, consumer catalogs are a means of distribution that has not
been available to or utilized by the Company in the past. At the October 1996
Furniture Market held in High Point N.C., the Company received a commitment
from a major catalog company to include its products in its catalogs. The first
test will come in an April 1997 edition of the catalog and the Company expects
that other pieces selected from its products to be included in future editions.

OEM Sales

Following the acquisition and expansion of the Honduran Facilities in
1990, the Company aggressively sought to sell to other manufactures dimension
stock, wood components (carvings and turnings), and unfinished

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assemblies with significant success. In 1993 and early 1994, the Company's
sales of its proprietary products grew to such a level that it appeared that it
would be more profitable to use the majority, if not all, of the capacity of
the Honduran Facilities for the exclusive production of the Company's products.
However, very late in 1996 the market for the Company's products became soft
and, without the OEM sales, it became necessary about mid-1995 and through much
of calender 1996 to curtail production to avoid additional increases in
inventory. For all of 1996, the Company's has directed efforts of establishing
distribution for its proprietary line with some success but at the same time to
rebuild a dealer base for OEM sales. In the future, the Company will maintain a
presence in this area of distribution to assure its presence in a more
diversified market.

RESEARCH AND DEVELOPMENT

While neither the Company nor WHCC has a full-time employee or
facility devoted exclusively to research and development, the Company's
President and sales and marketing personnel, in consultation with design firms,
devote substantial time to the design and development of new products. The
competition in and the fashion orientation of the home furnishings market
requires that the Company's product line be continually updated by the
introduction of new products. Many of the Company's products may, however,
because of the nature of the Company's designs, remain marketable for a
significant period of time.

SALES

The Company's sales function is led by Arthur F. Bingham, its Senior
Executive Vice President of Sales and Marketing. The Company employs 16
independent, commissioned sales representatives who sell to retail stores and
service trade showrooms in the United States and Canada. The Company generally
sells its products on a net 30-day basis. The Company has advertised
nationally, to a limited extent, to improve its name recognition.

WHCC employs one independent, commissioned sales representative for
products sold to U.S. furniture manufacturers (other than the Company), and
that commissioned sales representative covers the two eastern states in which
the majority of the U.S. furniture industry is located. WHCC utilizes the
Company's independent representatives for products finished in the Honduran
Facilities and marketed directly to the retail trade.

BACKLOG

The Company's firm backlog of orders on October 31, 1996 was
1,997,000, a 6% increase from its backlog of $1,878,000 on October 31, 1995.
The October 31, 1996 backlog included $1,498,000 of domestically-manufactured
products, as opposed to $1,587,000 included in the 1995 backlog, which decrease
reflects the slow down in the economy in general and in the home furnishings
industry in particular. The backlog for WHCC and Honduran-produced products,
less inter company orders, was $499,000 on October 31, 1996 versus $291,000 on
October 31, 1995. While the backlog is always subject to cancellation, the
Company expects to ship substantially all of its backlog during fiscal year
1997.

SOURCES AND AVAILABILITY OF RAW MATERIALS

The Company's principal raw material is wood purchased in the form of
dimension stock (rough parts), components (turnings and carvings) and plywood.
Plywood is generally available in adequate supply from domestic resources.
Dimension stock and components are generally supplied to the Company by its
Honduran Facilities. These same raw materials are available from domestic
sources but generally at higher prices and lower quality. Accordingly, the
loss of the Honduran Facilities as the Company's primary source of wood and as
its sole supplier of the Company's proprietary line of assembled items of
furniture would have a significant adverse effect on the Company's operations,
financial condition, competitiveness and future prospects.

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Though the agency of the Honduran government responsible for forest
resources is not able to provide an accurate inventory of the supply of
mahogany or other species of wood available in Honduras and large quantities of
mahogany have previously been harvested from Honduras over the years, the
Company believes based upon all available information that an adequate supply
of mahogany is available and will be available for many years to come. In
addition to mahogany, the Company currently utilizes laurel, pine, San Juan
Areno and Spanish cedar and continually researches other species of wood
available in commercial quantities for manufacturing in order to expand its
resource base.

The Honduran government has established programs such that all timber
harvested is in areas of forest under sustainable management. The use of the
timber harvested is being designated primarily for consumption by the Honduran
wood-working industry, which includes the Company's Honduran Facilities.

SEASONALITY

As is typical in the furniture industry, the Company's greatest volume
of incoming orders is received in the spring and fall of each year. This is
due primarily to the International Furniture Market held each April and October
in High Point, North Carolina. Careful scheduling of production minimizes the
effects of such seasonality on the Company's production and shipments. Orders
are generally shipped within 30 to 90 days of receipt.

COMPETITION

The furniture industry is highly competitive, and no single company
dominates the industry. The Company, while unranked in any known comparative
study of the industry, competes with many nationally-recognized manufacturers
of quality furniture. Many furniture manufacturers have substantially larger
production capabilities, and distribution networks, as well as greater
financial resources than has the Company. The Company's principal method of
competing is by product design (including items or categories of items not
available from other manufacturers), product quality (including high-grade
hardwoods and other materials used in construction and quality-constructed
cabinetry and finish) and price. Most of the Company's designs are offered by
the Company exclusively. The Company believes its pricing structure, product
design and product quality to be competitive with those of its competitors.

The furniture industry is a segmented industry in which design,
quality and price place each manufacturer into a competitive market niche. The
Company competes in the medium-to-high price market, which normally requires a
larger number of items comprising the product line, smaller production lot
sizes and higher inventory requirements to maintain a competitive delivery
cycle. The Company estimates that there approximately 12 to 15 furniture
manufacturers directly competing with the Company in the medium-to-high price
market for case goods. The Company's limited financial resources restrict its
ability to compete effectively in its market niche.

ENVIRONMENTAL CONTROL FACILITIES

The Company's domestic operations must meet extensive federal, state
and local regulatory standards in the areas of safety, health and
environmental pollution controls. Historically, these standards have not had
any material adverse effect on the Company's sales or operations. The
furniture industry currently anticipates increased federal and state
environmental regulation, particularly with respect to emissions from paint and
finishing operations and wood dust levels in manufacturing operations. The
industry and its suppliers are attempting to develop water-based finishing
materials to replace commonly-used organic-based finishes which are a major
source of regulated emissions. The Company cannot at this time estimate the
impact of these new standards on the Company's operations or the cost of
compliance thereof (including future capital expenditure requirements).

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EMPLOYEES

As of February 10, 1997, the Company had approximately 375 employees,
including approximately 300 people currently employed at the Honduran
Facilities. Approximately 325 of the Company's employees are full-time
employees.

DESCRIPTION OF PROPERTY

The Company owns and operates one plant housing its United States
production facilities and general offices located on 17 acres of land in
Lexington, North Carolina. The 82,500 square foot facility is of brick, steel,
concrete and concrete block construction and is well-maintained and in adequate
condition. The Company's manufacturing facilities generally operate on a
40-hour week. Substantially all of the Company's physical properties located
in Lexington, North Carolina are pledged as collateral under the Company's loan
agreements with Lexington State Bank of North Carolina, the Company's primary
bank lender.

The Company's Honduran Facilities consist of seven and one-half acres
of land located in San Pedro Sula, Honduras, a 21,120 square-foot, equipped
dimension mill, a 7,840 square-foot wood resaw operation, two dry kilns and
boilers and related processing equipment, two buildings for dry lumber storage
and a 6,408 square-foot building for "green" lumber storage. In July 1996, the
Company completed construction of a 45,000 square-foot addition to the
manufacturing facility and a 2,600 square-foot office building.

The Company believes its properties are generally suitable and
adequate to meet its intended uses and, in the opinion of management, it is
adequately covered by insurance.

The Honduran Facilities are pledged to secure a loan from the OPIC.
The loan proceeds were used to finance completion of capital improvements to
the Honduran Facilities. In addition, Banchas, the Company's Honduran bank
lender, holds a second mortgage on the assets of the Honduran Facilities.

The lumber dimension mill, as well as the furniture manufacturing
operations of the Honduran Facilities, operate on a 44-hour work week (a
standard work week in Honduras). The Company believes that the mill and
furniture manufacturing facilities are in adequate condition and suitable for
its intended uses.

The Company leases a 8,800 square-foot showroom located in High Point,
North Carolina. The space is utilized to display the Company's products,
particularly new product introductions, during the semi-annual International
Furniture Markets. The Company believes the showroom is in good condition and
suitable for its intended use.

LEGAL PROCEEDINGS

There is no pending material litigation involving the Company or any
of its subsidiaries. To the best of management's knowledge, no legal
proceedings or proceedings by any governmental authorities are contemplated.

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MANAGEMENT

The following table sets forth information concerning each director
and executive officer of the Company:

POSITION WITH THE COMPANY; PRINCIPAL OCCUPATION DURING
------------------------------------------------------
NAME AGE THE PRECEDING FIVE YEARS (IF DIFFERENT)
- ---- --- ---------------------------------------

Hoyt M. Hackney, Jr. 59 President, Chief Executive Officer, Chief Financial Officer and
Treasurer, Director since 1978

Donald W. Leonard (1) 77 Chairman of the Board of Directors, Director since 1965; Private
Investor

Ernst B. Kemm 60 Executive Vice President, Director since 1978

William W. Woodruff (1) 72 Secretary, Director since 1977; President and Owner of Woodruff Shoe
Store

Arthur F. Bingham 42 Senior Executive Vice President of Sales and Marketing, Director since
1996; Sales Representative for Lexington Furniture Industries (1978-1996)

Ralph L. Eskelsen, Jr. 50 General Manager and Director of Muebles Wellington Hall, S.A.

- ----------------------------------------

(1) Messrs. Leonard and Woodruff are related by marriage.

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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding directors
and executive officers of the Company, as well as those persons known by the
Company to own beneficially more than 5% of the outstanding Common Stock of the
Company, as of February 10, 1997 and after the Offerings assuming all shares
offered hereby are sold:

Before Offerings After Offerings
-------------------------------------------- ---------------------------------
Name and Address Amount and Nature Percent Amount and Nature Percent
of Beneficial of Beneficial of Class of Beneficial of Class
Owner Ownership (1) Ownership (1)
- -------------------------------------------------------------------------------------------------------------

Hoyt M. Hackney, Jr. 226,958 (1) 9.9 302,958 7.6
409 Edgedale Drive
High Point, N.C. 27262

Ernst B. Kemm 297,280 (1) 13.0 298,280 7.5
1211 Lancaster Place
High Point, N.C. 27260

Donald W. Leonard 26,862 (1) 1.2 46,862 1.2
105 Westover Drive
Lexington, N.C. 27292

William W. Woodruff 16,000 (1) 0.7 24,000 0.06
320 Maegeo Drive
Lexington, N.C. 27292

Arthur F. Bingham 605,437 (2,3) 26.4 605,437 (2,3) 15.2
315 3rd Avenue N. W.
Hickory, N.C. 28601

Ralph L. Eskelsen, Jr. -- (3) -- -- (3) --
Tacao River
San Pedro Sula
Honduras, Central America

All executive officers 1,172,537 (3) 51.2 1,277,537 (3) 32.1
and Directors as a Group
(6 Persons)

- -----------------------------

(1) To the best of the Company's knowledge, all persons listed above own the
shares listed directly and have sole voting and investment power with respect
thereto unless otherwise noted.

(2) Mr. Bingham's shares include 605,000 shares owned in a retirement plan of
which he is beneficiary.

(3) Excludes options to purchase shares that have been granted but are not
currently exercisable and do not become exercisable within 60 days.

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33

EXECUTIVE COMPENSATION

The following table sets forth information concerning compensation paid
to the Chief Executive Officer of the Company during the last three fiscal
years.

Fiscal Annual Compensation All Other
------ ------------------- ---------
Name/Positions Year Salary($) Bonus($) Compensation (1)
- ------------------------------------------------------------------------------------

Hoyt M. Hackney, Jr. 1996 128,878 0 26,577
President 1995 166,918 37,728 27,203
Treasurer, 1994 160,285 36,712 25,104
Chief Executive Officer
Chief Financial Officer

(1) The amounts reported in this column consist of the Company's matching
contribution under its 401(k) plan and deferred compensation plan.

Non-salaried directors are paid $100 for each meeting of the Board of
Directors they attend and a $1,000 annual directors' fee. The Company does not
pay Directors any additional amounts for committee participation.

Effective January 1, 1987, the Company entered into a 5-year employment
agreement with Mr. Hackney (the "Employment Agreement") that is automatically
extended for successive one-year terms unless and until either party to the
Employment Agreement gives written notice of' termination. Throughout the term
of the Employment Agreement, Mr. Hackney is to serve as President, Chief
Executive Officer and Chief Financial Officer of the Company, is to be
nominated for election as a Director of the Company and is to devote his full
time and attention to the Company's business affairs. If, for any reason other
than the termination of his employment "for cause," Mr. Hackney does not
continue in these positions, Mr. Hackney may elect to terminate the Employment
Agreement and receive as severance compensation an amount equal to one and
one-half times his then annual compensation. Under the Employment Agreement,
Mr. Hackney may be terminated only "for cause," which is defined to mean (1)
willful material breach of his obligations under the Employment Agreement; (2)
willful gross misconduct in the course of his employment that is substantially
injurious to the Company; or (3) conviction in any court of a felony which
results in incarceration for more than 90 consecutive days.

In conjunction with the execution of the Employment Agreement, the
Company and Mr. Hackney entered into an executive deferred compensation
agreement, effective May 8, 1987 (the "Deferred Compensation Agreement"), which
provides for the payment of $50,000 per year for a period of 10 years payable
in equal monthly installments, upon Mr. Hackney's retirement at age 62. The
monthly installment payments shall be paid to Mr. Hackney's beneficiary if he
dies prior to retirement or after retirement but prior to the expiration of the
ten-year payout period. $24,000 in deferred payments were accrued pursuant to
the Deferred Compensation Agreement for the benefit of Mr. Hackney during
fiscal 1996.

If the Company is (1) merged, liquidated, consolidated or otherwise
combined with any other company, or (2) if substantially all the assets or
shares of stock of the Company are acquired by any other person or entity (1
and 2 above hereinafter a "Change of Control Event"), the Employment Agreement
will, pursuant to its terms, automatically remain in full force and effect
until the end of the two-year period immediately following the date of the
Change of Control Event. If the Employment Agreement is extended beyond
December 31, 1991 due to the occurrence of a Change of Control Event, Mr.
Hackney is to be paid an annual salary of $155,000 throughout the term of
extension. Upon the occurrence of a Change of Control Event. the Company or
its successor in interest may terminate the Employment Agreement upon the
payment to Mr. Hackney of a cash amount equal to 1 1/2 times his then annual
compensation. The Company or its successor may terminate the Deferred
Compensation Agreement following the occurrence of a Change of Control event
upon the payment to Mr. Hackney of (a) $100,000 in cash or

32
34

(b) a cash amount for each share of the Company stock then owned by Mr. Hackney
equal to or greater than the lesser of (i) four times the book value per share
of such stock or (ii) 15 times the net after tax profits per share of such
stock, computed as of the Company's most recent fiscal year end in accordance
with Generally Accepted Accounting Principles.

Effective September 1, 1996, the Company entered into a 10-year
employment agreement with Arthur F. Bingham ("the Employment Agreement") that
is automatically extended for successive one-year terms unless and until either
party to the Employment Agreement gives written notice of termination pursuant
to the terms therein. Throughout the term of the Employment Agreement, Mr.
Bingham is to serve as Senior Executive Vice President of Sales and Marketing
and as an exclusive sales representative of the Company and is to devote his
full time and attention to such positions. The Employment Agreement
contemplates that, for the term thereof, Mr. Bingham shall also serve as a
Director of the Company. If, for any reason other than the termination of his
employment "for cause," Mr. Bingham does not continue in these positions, Mr.
Bingham may elect to terminate the Employment Agreement and receive as
severance compensation an amount equal to one and one-half times his then
annual compensation. Under the Employment Agreement, Mr. Bingham may be
terminated only "for cause," which is defined to mean (1) willful material
breach of his obligations under the Employment Agreement, which breach is not
substantially cured by Mr. Bingham within ten business days after the Company
gives to him written notice of the specific alleged breach (it being understood
that Mr. Bingham's failure to perform or discharge his duties and
responsibilities hereunder as a result of his incapacity due to physical or
mental illness or injury or accident or death shall not be deemed such a
breach); (2) willful gross misconduct in the course of his employment that is
substantially injurious to the Company; or (3) conviction in any court of a
felony that results in incarceration for more than ninety consecutive days
(unless such conviction is reversed in any final appeal thereof).

Pursuant to the Employment Agreement, Mr. Bingham is to be compensated
in an amount equal to a commission of 5% of all sales of products of WHCC and
6% of all sales of products of the Company, both to exclude what is commonly
referred to as OEM sales, a commission of 5% on all orders considered "House"
orders, a commission of 5% on inventory sales used to raise capital and reduce
inventory, annual compensation of $30,000 and an annual bonus equal to the
amount that 2% of the sales in the territory from WHCC and 1% of the sales in
the territory from the Company exceeds $30,000 for each fiscal year beginning
September 1, 1996 through August 31, 1997.

If the Company is merged, liquidated, consolidated or otherwise combined
with any other company, or if substantially all the assets of the Company are
acquired by any other person or entity, or if the control of the Company shall
pass to any other person or entity not presently in control, the Employment
Agreement shall remain in full force and effect or, at the option of the
Company, upon the occurrence of any such event described hereinabove, the
Company or its successor may terminate this Employment Agreement upon the
payment to Mr. Bingham of an amount equal to 1 1/2 times his earnings for the
last fiscal year prior to termination, such payment to be made within thirty
days after the date of termination. For purposes of determining Mr. Bingham's
earnings, there shall be included both the commissions paid under Mr. Bingham's
sales territory and the annual compensation paid for Mr. Bingham's service as
Senior Executive Vice President of Sales and Marketing.

STOCK OPTION AND RESTRICTED STOCK PLAN

On February 10, 1997, the Board of Directors of the Company adopted,
subject to shareholder approval, the 1997 Stock Option and Restricted Stock
Plan (the "Plan"). The Plan has a ten year term and, unless sooner terminated
as provided in the Plan, will terminate on February 9, 2007.

The Plan will be administered by an option committee (the "Committee")
appointed by the Board of Directors of the Company. The Committee must consist
of no fewer than two directors appointed by the Board, none of whom is a
current employee of the Company, a former employee that receives compensation
for prior

33
35

services rendered during the taxable year, an individual receiving direct or
indirect remuneration from the Company in any capacity other than as a director
or a former or current officer of the Company, all with the intent of complying
Section 162(m) of the Internal Revenue Code of 1988, as amended (the "Code").

Under the Plan, the Company may grant incentive stock options ("ISOs"),
nonqualified stock options or restricted stock awards up to an aggregate of
1,200,000 shares of the Company's common stock, no par value (the "Common
Stock"). No individual may receive options or restricted stock under the Plan
aggregating more than 600,000 shares of Common Stock over the ten-year life of
the Plan. The number and class of shares available under the Plan will be
adjusted appropriately in the event of stock splits and combinations, share
dividends and similar changes in the capitalization of the Company. Any shares
of Common Stock that are subject to incentive stock options or nonqualified
stock options granted under the Plan and that are not issued, and any shares of
Common Stock that are issued pursuant to restricted stock awards under the Plan
and that are subsequently forfeited, may again be the subject of grants or
awards under the Plan.

Awards may be granted under the Plan only to key employees (including
statutory employees within the meaning of Section 3121(d)(3) of the Code),
officers or directors of the Company, whether or not employees. The Committee
will determine those persons who will receive ISOs, nonqualified stock options
and restricted stock awards under the Plan.

The Plan provides that the Board of Directors may terminate, amend or
revise the terms of the Plan at any time, except that no amendment or revision
shall (i) increase the maximum aggregate number of shares subject to the Plan,
except as permitted by the Plan in order to make appropriate adjustments for
stock splits, share dividends or similar changes in the Common Stock; (ii)
change the minimum purchase price for shares subject to options granted under
the Plan; (iii) extend the maximum duration of ten years established under the
Plan for any option or for a restricted stock award; or (iv) permit the
granting of an option or a restricted stock award to anyone other than eligible
recipients under the terms of the Plan.

With respect to nonqualified stock options or restricted stock awards,
the Committee is authorized under the terms of the Plan, in its discretion, to
make loans or payments to optionees or restricted stock award recipients for
the purpose of assisting such persons with payment of personal income taxes
incurred upon exercise of nonqualified stock options or the lapse of
restrictions to which restricted stock is subject.

If the Company becomes a party to any merger or consolidation in which
it is not the surviving entity or pursuant to which the shareholders of the
Company exchange their Common Stock, or if the Company dissolves or liquidates
or sells all or substantially all of its assets, the Committee may, in its
discretion, cause all ISOs and nonqualified stock options outstanding under the
Plan to become immediately exercisable and, to the extent not exercised, such
options will terminate on the effective date of such transaction. In addition,
the Committee may, in its discretion, cause all restricted stock awards that
are still subject to any restrictions or conditions to become fully vested, and
no longer subject to forfeiture, on such effective date, unless otherwise
provided in the applicable restricted stock agreement.

The price of shares subject to stock options granted under the Plan will
be determined by the Committee at the time of grant of the option, but may not
be less than 100% of the fair market value of the Common Stock at the time of
the grant. The Committee will determine at the time of grant the dates on
which stock options will become exercisable and may accelerate the scheduled
exercise date of an option if deemed appropriate. The Committee may, in its
discretion, make any ISO or nonqualified stock option subject to the
satisfaction of such corporate or individual performance or other vesting
standards as the Committee deems appropriate. No stock option may expire later
than ten years from the date of grant. ISOs granted under the Plan are subject
to the following additional conditions: (i) no ISO may be granted to a person
who owns, at the time of grant, stock representing more than 10% of the total
voting power of all classes of stock of the Company unless the option

34
36

price for the shares subject to such ISO is at least 110% of the fair market
value on the date of grant and such ISO award is exercisable only within five
years after its date of grant; and (ii) the total fair market value of shares
subject to ISOs which are exercisable for the first time by an optionee in a
given calendar year may not exceed $100,000, valued as of the date of the ISO's
grant.

Restricted stock may be issued under the terms of the Plan to eligible
recipients who are selected from time to time by the Committee. Such
restricted stock will be subject to such restrictions and conditions as may be
determined by the Committee at the time of the award. These restrictions and
conditions may include (but are not required to include) restrictions on
transfer of the awarded shares of Common Stock, vesting conditions based on
continued employment with the Company for a specified period of time following
the award or satisfaction of individual or corporate performance criteria, or
satisfaction of other vesting standards. The lapse of restrictions and
conditions with respect to restricted stock may be accelerated at any time by
the Committee in its discretion. Restrictions and conditions imposed on shares
of restricted stock shall lapse, in whole or in part, as provided in the
applicable agreement evidencing the restricted stock award, but must lapse, if
at all, not later than ten years from the date of the award.

On February 10, 1997 the Company granted stock options to Ralph L.
Eskelsen and Arthur F. Bingham pursuant to the Plan. These options may not be
exercised prior to shareholder approval of the Plan. Eskelsen was granted an
ISO to purchase 300,000 shares of Common Stock at $0.50 per share. Eskelsen
may exercise the ISO to the extent of 200,000 on or after September 1, 1997 up
to and including February 1, 1998 and may exercise the ISO in full on or after
January 1, 1998 up to and including February 1, 1998. If not sooner
terminated, the ISO will terminate three months after Eskelsen's termination of
employment with the Company for any reason other than death or three months
after Eskelsen's death. In no event will the ISO be exercisable after it
expires by its terms. The option price may be paid in U.S. dollars or in
Honduran currency at the exchange rate on the date of exercise.

Bingham received the following ISOs to purchase shares of Common Stock:

Option A. Option to purchase 150,000 shares of Common Stock
at an exercise price of $0.50 per share. Option A becomes exercisable
on September 1, 1998 up to and including February 9, 2004, if
Commissioned Retail Sales in the Territory (both as defined in the
option agreement) from May 1, 1997 through April 30, 1998 equal or
exceed $2,500,000.

Option B. Option to purchase 150,000 shares of Common Stock
at an exercise price of $0.80 per share. Option B becomes exercisable
on September 1, 1999 up to and including February 9, 2004, if
Commissioned Retail Sales in the Territory from May 1, 1998 through
April 30, 1999 equal or exceed $2,700,000.

Option C. Option to purchase 150,000 shares of Common Stock
at an exercise price of $0.50 per share. Option C becomes exercisable
on September 1, 2000 up to and including February 9, 2004, if
Commissioned Retail Sales in the Territory from May 1, 1999 through
April 30, 2000 equal or exceed $3,000,000.

Bingham also received nonqualified options to purchase 150,000 shares of
Common Stock at an exercise price of $1.30 per share. The options may be
exercised at any time from the date of grant until February 9, 2004.

If not sooner terminated, the options will terminate three months after
Bingham's termination of employment with the Company for any reason other than
death or twelve months after Bingham's death. In no event will any option be
exercisable after such option expires by its terms.

35
37

DESCRIPTION OF SECURITIES

The authorized capital stock of the Company consists of 6,000,000 shares
of Common Stock with no par value and 5,000,000 shares of $5.00 Par Preferred
Stock ("Preferred Stock"). There are issued and outstanding 2,289,887 shares
of common Stock. No shares of Preferred Stock are issued and outstanding.

COMMON STOCK

Subject to prior rights of the holders of any Preferred Stock then
outstanding, the holders of outstanding shares of Common Stock are entitled to
receive dividends, if any, as may be declared and paid from time to time by the
Board of Directors, in its discretion, from funds legally available therefor.
See "Market For Common Equity and Related Shareholder Matters." Upon
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to receive pro rata all assets remaining available for
distribution to shareholders after satisfaction of creditors, subject to the
rights, if any, of the holders of any Preferred Stock then outstanding. There
are no conversion rights or redemption or sinking fund provisions applicable to
shares of Common Stock. Holders of Common Stock have no preemptive or other
subscription rights. All of the outstanding shares of Common Stock are fully
paid and nonassessable, and the shares of Common Stock to be outstanding upon
completion of this offering will be, when issued and delivered in the manner
contemplated hereby, fully paid and nonassessable.

Shareholders are entitled to one vote for each share of Common Stock
held of record on all matters submitted to a vote of shareholders.
Shareholders are not entitled to vote cumulatively in the election of
directors.

The Transfer Agent for the Common Stock is Wachovia Bank and Trust
Company, N.A., Winston-Salem, North Carolina.

PREFERRED STOCK

The Company's charter authorizes the Board of Directors to issue
Preferred Stock in one or more series from time to time, without action by the
shareholders. The terms of any such Preferred Stock may be fixed by the Board
of Directors and may be senior to the Common Stock with respect to dividends,
voting rights and redemption and liquidation preferences.

It is not possible to state the actual effect of the authorization of
Preferred Stock upon the rights of holders of the Common Stock unless and until
the Board of Directors determines the specific rights of the holders of a
series of the Preferred Stock. Such effects might include, however, (i)
restrictions on dividends on the Common Stock if dividends on Preferred Stock
have not been paid; (ii) dilution of the voting power of the Common Stock to
the extent that the Preferred Stock has voting rights; (iii) dilution of the
equity interest of the Common Stock unless the Preferred Stock is redeemed by
the Company; and (iv) the Common Stock not being entitled to share in the
Company's assets upon liquidation until satisfaction of any liquidation
preference granted the Preferred Stock. Issuance of Preferred Stock, while in
the judgment of the Company's Board of Directors desirable in order to provide
flexibility in connection with possible acquisitions and other corporate
purposes, could impede an attempt by a third party to acquire a majority of the
outstanding voting stock of the Company. The Board of Directors has no present
plans to authorize the issuance of any shares of Preferred Stock.

CERTAIN NORTH CAROLINA LEGISLATION

Article 9 of the North Carolina Business Corporation Act ("NCBCA") sets
forth the North Carolina Shareholder Protection Act (the "Shareholder
Protection Act"). The Shareholder Protection Act requires the

36
38

affirmative vote of the holders of 95% of the voting shares of a corporation,
voting as one class, for the adoption or authorization of a business
combination with any other entity if, as of the record date for the
determination of shareholders entitled to vote on such business combination,
the other entity is the beneficial owner, directly or indirectly, of more than
20% of the voting shares of the corporation. This 95% voting requirement is
not applicable if certain "fair price" standards are met or certain other
provisions relating to the other entity's control of the corporation have been
satisfied.

The Shareholder Protection Act originally allowed a 90-day period after
the effective date of the statute, such 90-day period to expire on July 22,
1987, during which the directors of an affected corporation could adopt an
opt-out bylaw stating that the provisions of the Shareholder Protection Act
would not be applicable to the corporation. The Shareholder Protection Act
expressly provides that an opt-out bylaw adopted during such 90-day period
continues to be effective unless it was rescinded on or before September 30,
1990. On July 20, 1987, the Board of Directors of the Company adopted such an
opt-out bylaw for the Company, and such bylaw has not been rescinded.

Article 9A of the NCBCA sets forth the North Carolina Control Share
Acquisition Act (the "Control Share Acquisition Act"). The Control Share
Acquisition Act generally prohibits an acquiring person from voting control
shares (as described below) of a North Carolina corporation acquired pursuant
to a control share acquisition (as described below), unless voting rights for
such shares shall have been approved by the shareholders of the corporation by
the affirmative vote of at least a majority of all outstanding shares entitled
to vote for the election of directors (other than interested shares as
described below), or, among other exceptions, the corporation's articles or
bylaws are amended to permit the voting of such shares prior to the acquiring
person's acquisition thereof. If the acquiring person so requests, the
corporation is required to hold a special meeting of its shareholders to
consider the authorization of voting rights of control shares within 50 days
after demand is made by the acquiring person, provided that, among other
things, such acquiring person has delivered to the corporation a statement
representing that the acquiring person has the financial capacity to make the
proposed control share acquisition and undertaking to pay certain expenses of
the special meeting of shareholders.

"Control shares" generally means shares of a corporation that, when
added to all other shares of the corporation beneficially owned by a person,
would entitle that person to voting power in the election of directors that is
equal or greater than any of the following levels of voting power: (i)
one-fifth of all voting power, (ii) one-third of all voting power, or (iii) a
majority of all voting power. "Control share acquisition" generally means the
acquisition by any person of beneficial ownership of control shares.
"Interested shares" generally means shares of a corporation in respect of which
an acquiring person, an officer of the corporation or an employee of the
corporation who is also a director of the corporation is entitled to exercise
voting power.

The Control Share Acquisition Act originally allowed a 90-day period
after the effective date of the statute, such 90-day period to expire on
November 10, 1987, during which the directors of an affected corporation could
adopt an opt-out bylaw stating that the provisions of the Control Share
Acquisition Act would not be applicable to the corporation. On July 20, 1987,
the Board of Directors of the Company adopted such an opt-out bylaw for the
Company. On November 12, 1987, the Board of Directors deleted from said bylaw
any reference to the Control Share Acquisition Act and to opting-out thereof
with the intent of subjecting the Company to the provisions thereof.

37
39
MARKET FOR COMMON EQUITY AND
RELATED SHAREHOLDER MATTERS

Until October 1995, the Common Stock of the Company traded in the NASDAQ
over-the-counter market system. Since that time, the Company's Common Stock
has traded on the NASD's over-the-counter bulletin board. According to the
information furnished by Anderson & Strudwick, a market maker in the Company's
Common Stock, the high and low bid quotations for each quarterly period within
the last two fiscal years and the current fiscal year to date is as follows:

Quarter Ending High Low Quarter Ending High Low
- -------------- ---- --- -------------- ---- ---

January 1995 1.25 1.25 April 1996 0.50 0.25
April 1995 1.25 1.00 July 1996 0.344 0.25
July 1995 1.00 1.00 October 1996 0.50 0.281
October 1995 0.75 0.75 January 1997 0.375 0.187
January 1996 0.75 0.25 April 1997
(through February 12)0.437 0.281

These market quotations represent inter-dealer prices, without retail
mark-up, mark-down or commission, and do not necessarily represent actual
transactions.

As of February 10, 1997, there were approximately 572 holders of record
of the Company's Common Stock.

The Company has not paid any dividends since its inception. Pursuant to
the terms of its line-of-credit and long-term loan agreements with Lexington
State Bank, the Company may not pay any dividends, purchase, redeem or
otherwise retire any of its capital stock or otherwise make any other
distribution of its assets resulting in the reduction of its capital without
the prior written consent of Lexington State Bank. See "Management's Discussion
and Analysis of Results of Operations and Financial Condition."

INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

The Amended and Restated Bylaws of the Company provide that any person
who serves or has served as a director or officer of the Company or any
wholly-owned subsidiary (a "Claimant") shall have the right to be indemnified
and held harmless by the Company against all liabilities and litigation
expenses resulting from any claim, action, suit or proceeding, whether civil,
criminal, administrative or investigative, seeking to hold the Claimant liable
by reason of the fact that he is or was serving in such capacity, provided that
such indemnification shall not be effective with respect to any liabilities or
litigation expenses if the activities of the Claimant leading to such
liabilities or litigation expenses were at the time they were taken known or
believed by such Claimant to be clearly in conflict with the best interests of
the Company. This indemnification includes the right upon demand by the
Claimant to the advancement of litigation expenses, subject to receipt by the
Company of the Claimant's undertaking to repay such expenses if it is
ultimately determined that he was not entitled to indemnification.

The Amended and Restated Bylaws of the Company define (a) "liabilities"
to include without limitation, payments in satisfaction of any judgment, money
decree, excise tax, fine or penalty for which a Claimant had become liable in
any proceeding and (b) "litigation expenses" to include without limitation,
reasonable costs and expenses of attorneys' fees and expenses actually and
reasonably incurred by the Claimant in connection with any proceeding and
reasonable costs and expenses and attorneys' fees and expenses in connection
with the enforcement of rights to the indemnification granted hereby or by
applicable law, if such enforcement is successful in whole or in part.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.

LEGAL OPINIONS

The validity of the Offerings will be passed upon for the Company by
Schell Bray Aycock Abel & Livingston P.L.L.C., Greensboro, North Carolina.

INDEPENDENT AUDITORS

The audited financial statements included in this Prospectus have been
audited by Turlington and Company, L.L.P., independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said report.

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40

WELLINGTON HALL, LIMITED AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS

INTERIM FINANCIAL STATEMENTS PAGE
----

Consolidated Balance Sheet as of October 31, 1996 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Statements of Operations for the six months ended October 31, 1996, 1995 (unaudited) . . . . . . . F-3
Consolidated Statements of Cash Flows for the six months ended October 31, 1996, 1995 (unaudited) . . . . . . . F-4
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5

ANNUAL FINANCIAL STATEMENTS
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7
Consolidated Balance Sheets as of April 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8
Consolidated Statements of Stockholders' Equity for the years ended April 30, 1996 and 1995 . . . . . . . . . . F-9
Consolidated Statements of Income for the years ended April 30, 1996 and 1995 . . . . . . . . . . . . . . . . F-10
Consolidated Statements of Cash Flows for the years ended April 30, 1996 and 1995 . . . . . . . . . . . . . . F-11
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12-F-21

F-1
41

WELLINGTON HALL, LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

October 31,
ASSETS 1996
----------

Current assets:
Cash:
Cash on hand $ 400
Cash in demand deposits 30,075
Accounts receivable:
Trade 881,715
Less, allowance for doubtful accounts (43,800)
Note receivable - officer 27,908
Inventories (Note 3) 4,710,467
Prepaid expenses 159,122
Deferred income taxes 14,327
----------
5,780,214
Property and equipment:
Cost 2,134,953
Less, accumulated depreciation (1,242,293)
892,660
Other assets:
Deferred income taxes 94,537
Other 27,184
----------
121,721
----------
$6,794,595
==========
LIABILITIES
Current liabilities:
Current maturities on long-term debt $ 130,776
Notes payable - other 1,447,809
Accounts payable - trade 454,768
Customer deposits 109,973
Other current liabilities 303,238
----------
2,446,565
Noncurrent liabilities:
Long-term debt, less current maturities 1,579,001
Deferred compensation accrual 228,000
----------
4,253,565

STOCKHOLDERS' EQUITY
Common stock; authorized 6,000,000 shares; no par;
shares issued and outstanding - 2,289,887 3,054,531
Preferred stock; authorized 5,000,000 shares; $5 par;
no shares issued and outstanding -0-
Cumulative translation adjustments (1,827,679)
Retained earnings 1,314,178
----------
2,541,030
$6,794,595

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

F-2
42

WELLINGTON HALL LIMITED, AND SUBSIDIARIES

STATEMENTS OF OPERATIONS

(UNAUDITED)

Six Months Ended
October 31,
1996 1995
---- ----

Revenue:
Sale of furniture $2,833,407 $3,087,862
Other income 16,321 4,268
---------- ----------

2,849,728 3,092,130
---------- ----------

Costs and expenses:
Cost of furniture sold 1,917,072 2,077,217
Other operating, selling, general,
and administrative expenses 702,578 757,598
Interest expense 193,220 191,856
---------- ----------
2,812,870 3,026,671
--------- ----------

Income before income taxes (benefits) 36,858 65,459

Income taxes (benefits) 396 7,342
---------- ----------

Net income for the period $ 36,462 $ 58,117
========== ==========

Earnings per share of common stock:
Primary and assuming full dilution:

Net income for the years $ .02 $ .03
========== ==========

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

F-3
43

WELLINGTON HALL LIMITED, AND SUBSIDIARIES

STATEMENTS OF CASH FLOW

(UNAUDITED)

Six Months Ended October 31,
1996 1995

Cash flows from operating activities:
Net income for the years $ 36,425 $ 58,565

Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation 48,531 63,374
Deferred compensation 12,000 12,000
Deferred income taxes 0 0

Changes in assets and liabilities:
Accounts receivable (132,396) 31,175
Note receivable, officer 0 0
Inventories (284,396) (332,838)
Prepaid expenses (27,904) 36,248
Other assets (3,014) 2,960
Accounts payable, customer deposits,
and other current liabilities 44,843 101,112
Net cash provided by operating activities (305,909) (27,404)

Cash flows from investing activities:
Purchase of equipment (33,159) (7,097)

Cash flows from financing activities:
Short-term borrowings 58,016 97,229
Long-term borrowings (237,148) (82,171)
Proceeds from Equity Capital 300,000 0
Net cash used for financing activities 309,470 15,058
Effect of exchange rate changes on cash 20,093 9,908
Net increase (decrease) in cash (23,811) (9,535)
Cash, beginning of years 54,287 30,908
Cash, end of Period 30,475 21,375

Cash paid during the years for:
Income taxes $ 0 $ 7,342
Interest $ 193,220 $ 191,856

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

F-4
44

WELLINGTON HALL, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments statements contain all
adjustments (consisting of only normal recurring accruals) necessary
to present fairly the financial position of the Company for the
interim period presented.

2. Promotional costs are expensed as they are incurred.

3. The Company takes a physical inventory at the end of the second quarter
(October 31,) and at year-end (April 30). At the end of each month and
at the end of the first quarter (July 31) and the third quarter
(January 31), inventories are adjusted to purchases, production and
shipments.

4. The financial statements of the Company's foreign subsidiary, Muebles
Wellington Hall, S.A., have been translated into U.S. dollars in
accordance with FASB Statement No. 52. All balance sheet accounts have
been translated using the current ("spot") exchange rates at the
balance sheet date or 12.59 Lempiras to 1 U.S. Dollar. Income
statement amounts have been translated using the weighted average
exchange rate which for the period was 12.22 Lempira to 1 U.S. Dollar.
The gains and losses resulting from the change in exchange rates
during the quarter have been reported separately as a component of
stockholders' equity entitled "Cumulative Translation Adjustments".
Net currency transaction gains or losses which occur during the
quarter are included in net earnings.

5. Subsequent significant events and changes following the second quarter
ended October 31, 1996 have occurred:

The Company and the Overseas Private Investment Corporation ("OPIC") have
executed a commitment letter as to the terms and conditions of the
restructuring of the Loan Agreement between Wellington Hall Caribbean
Corporation and OPIC. The restructuring is expected to be completed by
March 31, 1997. The more significant elements of the restructuring are:

A. A grace period on principal payments for one year beginning on
July 31, 1996
B. Reducing the amount of quarterly principal payments from
$61,937 to 30,969 beginning with the payment due on July 31,
1997.
C. The interest rate on the loan will be changed from 12% per annum
to 10% effective November 1, 1996.

As a result of the foregoing, "Current Maturities on Long Term Debt"
was reduced by $309,666 and added to "Long-Term Debt Less Current
Maturities" as reflected on the October 31, 1996 balance sheet.

As of September 1, 1996, the Company and Mr. Arthur F. Bingham entered
into an agreement that was amended as of February 10, 1997.
Pursuant to the agreement which Mr. Bingham advanced $285,694 to the
Company in October 1996 to be repaid within two years. As of February
12, 1997, the Company issued to Mr. Bingham 600,000 shares of the
Company's common stock at a price of $.50 per share in repayment of the
loan and following an additional $14,306 investment by Mr. Bingham.

As a result of this transaction, "Long Term Debt, Less Current
Maturities" will be reduced $285,304, "Other Current Liabilities" will
be reduced $14.306 and paid in capital will be increased by $300,000,
all during the quarter ended January 31, 1997. The total shares of
common stock outstanding will be increased by 600,000 shares to a
total of 2,289,887 shares.

F-5
45

On January 16, 1996, Wellington Hall executed the loan documents that
increased its line of credit from Lexington State Bank in the amount
of $250,000. No borrowings have been made to date. Outstanding
borrowings under this facility will bear interest at the rate of prime
plus 1 1/2%, payable monthly. Principal payments will be due on
demand. The facility is secured by all of the present and future
personal property assets of Wellington Hall.

On February 10, 1997, the Board of Directors of the Company adopted,
subject to shareholder approval, the 1997 Stock Option and Restricted
Stock Plan (the "Plan") that permits the Company to grant incentive
stock options ("ISO's"), nonqualified stock options or restricted
stock awards up to an aggregate of 1,200,000 shares of the Company's
common stock. The Plan has a ten-year term, and will be administered
by an option committee of nonemployee directors (the "Committee").

On February 10, 1997 the Company granted stock options to Ralph L.
Eskelsen and Arthur F. Bingham pursuant to the Plan. These options
may not be exercised prior to shareholder approval of the Plan.
Eskelsen was granted an ISO to purchase 300,000 shares of Common Stock
at $0.50 per share. Eskelsen may exercise the ISO to the extent of
200,000 on or after September 1, 1997 up to and including February 1,
1998 and may exercise the ISO in full on or after January 1, 1998 up
to and including February 1, 1998. If not sooner terminated, the ISO
will terminate three months after Eskelsen's termination of employment
with the Company for any reason other than death or three months after
Eskelsen's death. In no event will the ISO be exercisable after it
expires by its terms. The option price may be paid in U.S. dollars or
in Honduran currency at the exchange rate on the date of exercise.

Bingham received the following ISOs to purchase shares of Common
Stock:

Bingham also received nonqualified options to purchase 150,000 shares
of Common Stock at an exercise price of $1.30 per share. The options
may be exercised at any time from the date of grant until February 9,
2004.

If not sooner terminated, the options will terminate three months
after Bingham's termination of employment with the Company for any
reason other than death or twelve months after Bingham's death. In no
event will any option be exercisable after such option expires by its
terms.

F-6
46

INDEPENDENT AUDITORS' REPORT

To the Stockholders
Wellington Hall, Limited and Subsidiaries
Lexington, North Carolina

We have audited the accompanying consolidated balance sheets of Wellington
Hall, Limited and Subsidiaries as of April 30, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows for the
years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

We did not audit the financial statements of Muebles Wellington Hall, S.A., a
wholly-owned subsidiary, which statements reflect total assets of $1,693,959
and $1,852,435, respectively, as of April 30, 1996 and 1995, and total revenues
of $1,273,301 and $1,897,449, respectively, for the years ended April 30, 1996
and 1995. These statements were audited by other auditors whose report has
been furnished to us, and our opinion, insofar as it relates to the amounts
included for Muebles Wellington Hall, S.A., is based solely on the report of
the other auditors.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits and the report of other auditors provide a reasonable basis for our
opinion.

In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Wellington Hall, Limited and
Subsidiaries as of April 30, 1996 and 1995, and the results of their
operations, and their cash flows for the years then ended in conformity with
generally accepted accounting principles.

TURLINGTON AND COMPANY, L.L.P.

July 12, 1996

F-7
47

WELLINGTON HALL, LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

April 30
ASSETS 1996 1995

Current assets:
Cash:
Cash on hand $ 400 $ 400
Cash in demand deposits 55,356 30,892
Accounts receivable:
Trade 756,872 915,013
Less, allowance for doubtful accounts (43,800) (28,000)
Note receivable - officer (Note 2) 27,908 40,909
Inventories (Note 3) 4,571,015 4,718,867
Prepaid expenses 134,076 175,688
Deferred income taxes 14,327 10,967
------------ -----------
5,516,154 5,864,736
------------ -----------
Property and equipment:
Cost 2,173,110 2,258,950
Less, accumulated depreciation 1,218,540 1,142,886
------------ -----------
954,570 1,116,064
------------ -----------
Other assets:
Deferred income taxes 94,537 91,230
Other 36,053 36,197
------------ -----------
130,590 127,427
------------ -----------
$ 6,601,314 $ 7,108,227
============ ===========

LIABILITIES
Current liabilities:
Current maturities on long-term debt (Note 6) $ 347,755 $ 218,840
Notes payable - other (Note 5) 1,415,698 1,375,226
Accounts payable - trade 481,797 649,258
Customer deposits 74,139 104,370
Other current liabilities 276,159 310 ,822
------------ -----------
2,595,548 2,658,516
Noncurrent liabilities:
Long-term debt, less current maturities (Note 6) 1,128,907 1,419,606
Deferred compensation accrual 216,000 192,000
------------ -----------
3,940,455 4,270,122
------------ -----------
STOCKHOLDERS' EQUITY
Common stock; authorized 6,000,000 shares; no par;
shares issued and outstanding 1996 and 1995
- 1,689,887 3,054,531 3,054,531

Preferred stock; authorized 5,000,000 shares; $5 par;
no shares issued and outstanding for 1996 and 1995 -0- -0-

Cumulative translation adjustments (1,669,945) (1,419,125)
Retained earnings 1,276,273 1,202,699
------------ -----------
2,660,859 2,838,105
------------ -----------
$ 6,601,314 $ 7,108,227
============ ===========

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

F-8
48

WELLINGTON HALL, LIMITED AND SUBSIDIARIES
CONSOLIDATED STOCKHOLDERS' EQUITY

Years Ended April 30
1996 1995
---- ----

Common stock:
Authorized 6,000,000 shares; no par;

Balances, beginning and end of years
with no change during the years $ 3,054,531 $ 3,054,531
------------ ------------

Preferred stock:
Authorized 5,000,000 shares; $5 par;
issued and outstanding beginning and
end of years -0- -0-
------------ ------------

Cumulative translation adjustments:
Balances, beginning of years (1,419,125) (1,231,705)
Translation of foreign currency statements (250,820) (187,420)
------------ ------------
Balances, end of years (1,669,945) (1,419,125)
------------ ------------

Retained earnings:
Balances, beginning of years 1,202,699 980,044
Net income for the years 73,574 222,655
------------ ------------
Balances, end of years 1,276,273 1,202,699
------------ ------------

$ 2,660,859 $ 2,838,105
============ ============

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

F-9
49

WELLINGTON HALL, LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

Years Ended April 30,
1996 1995
------ -----

Revenue:
Sale of furniture $ 5,989,959 $ 7,260,491
Other income 2,464 3,614
----------- -----------
5,992,423 7,264,105
----------- -----------
Costs and expenses:
Cost of goods sold 4,143,692 5,057,079
Other operating, selling, general,
and administrative expenses 1,390,392 1,629,387
Interest expense 388,829 335,951
----------- -----------
5,922,913 7,022,417
----------- -----------

Income before income taxes (benefits) 69,510 241,688

Income taxes (benefits) (4,064) 19,033
----------- -----------

Net income for the years $ 73,574 $ 222,655
=========== ===========

Earnings per share of common stock:
Primary and assuming full dilution:

Net income for the years $ .04 $ .13
=========== ===========

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

F-10
50

WELLINGTON HALL, LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended April 30,
1996 1995
---------- ----------

Cash flows from operating activities:
Net income for the years $ 73,574 $ 222,655
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation 111,149 120,568
Deferred compensation 24,000 24,000
Deferred income taxes (6,667) 9,491
Changes in assets and liabilities:
Accounts receivable 164,231 98,130
Note receivable, officer 13,001 21,047
Inventories (71,750) (289,599)
Prepaid expenses 37,297 (2,866)
Other assets (6,363) (16,033)
Accounts payable, customer deposits,
and other current liabilities (240,955) 107,896
---------- ----------
Net cash provided by operating activities 97,517 295,289
---------- ----------

Cash flows from investing activities:
Purchase of equipment (26,947) (73,705)
---------- ----------

Cash flows from financing activities:
Short-term borrowings 69,533 (80,771)
Payments on long-term debt (125,354) (157,622)
---------- ----------

Net cash used for financing activities (55,821) (238,393)
---------- ----------

Effect of exchange rate changes on cash 9,715 6,416
---------- ---------

Net increase (decrease) in cash 24,464 (10,393)

Cash, beginning of years 31,292 41,685
---------- ---------

Cash, end of years $ 55,756 $ 31,292
========== =========

Cash paid during the years for:
Income taxes $ 10,499 $ 16,443
========== =========

Interest $ 415,494 $ 334,689
========== =========

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

F-11
51

WELLINGTON HALL, LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of and for the Years Ended April 30, 1996 and 1995

1. Summary of Significant Accounting Policies:
These consolidated financial statements were prepared on the basis
of generally accepted accounting principles. The more significant
of these principles are described as follows:

Inventories are stated at the lower of cost or market with cost
computed by use of the first-in, first-out method. Provision has
been made for obsolete and slow moving inventory.

Property and equipment is carried at cost less accumulated
depreciation. New assets and expenditures which substantially
increase the useful lives of the existing assets are capitalized.
Maintenance and repairs are expensed as incurred. Depreciation is
computed by use of the straight-line method over the estimated
useful lives of the assets.

The weighted average number of shares of common stock outstanding
and "common stock equivalents" are totaled in determining both
primary and fully diluted earnings per share.

The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, Wellington Hall Caribbean
Corp. and Muebles Wellington Hall, S.A. All intercompany accounts
and transactions have been eliminated in consolidation. The Muebles
Wellington Hall, S.A. subsidiary was formed during the year ended
April 30, 1990 and accounted for as a purchase.

The financial statements of foreign subsidiaries have been
translated into U.S. dollars in accordance with Statement of
Financial Accounting Standards No. 52. All balance sheet accounts
have been translated using the current exchange rates at the balance
sheet date. Income statement amounts have been translated using the
average exchange rate for the year. The gains and losses resulting
from the change in exchange rates during the year have been reported
separately as a component of stockholders' equity entitled
"Cumulative Translation Adjustments". Net currency transaction
gains and (losses) which occur during the year are included in net
earnings and amounted to approximately $11,969 and ($690),
respectively, during the years ended April 30, 1996 and 1995.

The preparation of consolidated financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

F-12
52

WELLINGTON HALL, LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. Note Receivable - Officer:
On January 30, 1992, Hoyt Hackney, President and Chief Executive
Officer, exercised options and awards for 180,000 shares of common
stock at the option price of $.80 per share resulting in a net
increase in common stock of $144,000. This increase was
accomplished by cash of $40,000 being paid over to the Company
along with the issuance of a demand note to the Company by Hoyt
Hackney of $104,000. The note receivable - officer is
collateralized by the assignment of the interest the officer has in
the Company's deferred compensation accrual account and bears
interest at the federal rate as issued from time to time.

The note balance at April 30, 1996 and 1995 was $27,908 and $40,909,
respectively.

3. Inventories:
Inventories consisted of the following:

1996 1995
---- ----

Finished goods $1,642,115 $1,820,214
Work-in-process 2,057,076 1,734,905
Raw materials 871,824 1,163,748
---------- ----------
$4,571,015 $4,718,867
========== ==========

4. Property and Equipment:
The major classes are as follows:

1996 1995
---- ----

Land and buildings $1,121,207 $1,145,345
Machinery and equipment 887,479 932,840
Furniture, fixtures and other equipment 164,424 180,765
---------- ----------
$2,173,110 $2,258,950
========== ==========

Depreciation expense for the years ended April 30, 1996 and 1995
amounted to $111,149 and $120,568, respectively.

5. Short-term Loans:
The Company has a demand loan payable to Lexington State Bank for
$90,000 and $100,000, respectively, at April 30, 1996 and 1995.

The Company has a line of credit agreement for short-term debt with
Lexington State Bank. The bank agreed to extend to the Company in
the form of a line of credit the lesser of $1,200,000 or 70% of the
Company's accounts receivable less than 60 days old, 50% of the
finished goods inventory, and 10% of the work-in-process and raw
materials inventories which sum amounted to $973,964 at April 30,
1996 and $1,503,542 at April 30, 1995. The Company executed a
$1,200,000 demand promissory note against which the

F-13
53

WELLINGTON HALL, LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. Short-term Loans (Continued):

bank shall advance funds at the Company's request. Interest is at
the rate of 1% above prime. This agreement is reviewed annually for
renewal.

At April 30, 1996 and 1995, $1,113,000 and $1,099,000, respectively,
was advanced under this agreement. This loan is secured by all
present and future personal property assets of the Company.

The Company had short-term loans with two Honduran banks with
interest rates of 25% in the amount of $212,698 and $176,226,
respectively, at April 30, 1996 and 1995. The banks have a second
mortgage on fixed assets as security for these loans.

6. Long-term Debt:
Long-term debt consisted of the following:

1996 1995
---- ----

E. Kemm:
Interest payable monthly at 1%
above prime $ 25,000 $ 25,000

Overseas Private Investment Corporation:
Interest rate 12.00%, payable in
quarterly installments of $61,937
plus interest 1,021,968 1,145,844

Lexington State Bank:
Interest rate 9.75% and 8.25%,
payable in monthly installments
of $7,000 with interest at 1.5%
above prime 429,694 467,602
---------- ----------
1,476,662 1,638,446
Less, current maturities 347,755 218,840
---------- ----------
$1,128,907 $1,419,606
========== ==========

The weighted average interest rate paid E. Kemm amounted to 9.61% and
9.00%, respectively, for the years ended April 30, 1996 and 1995.

E. Kemm is a stockholder and an officer of the Company.

The Overseas Private Investment Corporation loan is secured by a first
lien on all real estate and all current and future fixed assets of
Muebles Wellington Hall, S.A. and a security interest in the Sales
Agreement between Muebles Wellington Hall, S.A. and Wellington Hall
Caribbean Corp.

F-14
54

WELLINGTON HALL, LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. Long-term Debt (Continued)
The Lexington State Bank loan is secured by a first lien on all assets
of Wellington Hall, Limited.

The projected payments of long-term debt in each of the five years
subsequent to April 30, 1996 are:

Year Ending April 30 Amount
-------------------- ------

1997 $347,755
1998 296,277
1999 301,226
2000 306,687
2001 64,941

7. Stock Option Plan:
In 1981, the stockholders approved the Executive Stock Plan whereby
officers and key employees can be issued stock options ("options") and
restrictive stock purchase awards ("awards"). The Company reserved
200,000 shares of common stock for issuance under the Plan; however,
no more than 75,000 shares may be issued pursuant to awards. Options
and awards may be granted within fifteen years from the effective date
of the Plan. Stock options are granted at the fair market value of a
share of common stock at the date of grant exercisable for a period
determined by the Compensation Committee of the Board of Directors
(maximum 15 years) and may be exercised in whole at any time or in
part from time to time after the date of grant. The per share
purchase price of stock subject to an award shall be $0.80 and be paid
in full to the Company within 30 days after the date of award.

No award for any shares will be granted to the President of the
Company until after the expiration of a minimum of 61 days from the
date that such awards are requested by the President. Upon
termination of employment of the grantee for any reason other than
death, retirement, or permanent total disability, all shares acquired
by the grantee pursuant to an award will be repurchased by the Company
for $0.80 per share.

The following is a summary of changes in stock awards:

1996 1995
---- ----

Available for awards at beginning of years $7,500 $7,500
Awards purchase -0- -0-
------ ------
Available for awards at end of years $7,500 $7,500
====== ======

8. Capital Stock:
The Company, in accordance with its long-term loan agreement and line
of credit with Lexington State Bank, is restricted from paying
dividends on its capital stock without prior written consent of the
bank.

F-15
55

WELLINGTON HALL, LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. Income Taxes:
At April 30, 1996, the Company had federal operating loss
carryforwards of $62,373 that expire in 2010 and 2011, and state net
operating loss carryforwards of $975,358 that expire in 1997, 1998,
2000, and 2001. For financial reporting purposes, a valuation
allowance of $116,734 has been recognized to offset the deferred tax
assets related to the carryovers and certain other deferred tax
assets.

At April 30, 1995, the Company had a federal operating loss
carryforward of $24,282 that expires in 2010, and state net
operating loss carryforwards of $884,657 that expire in 1997, 1998,
and 2000. For financial reporting purposes, a valuation allowance
of $45,737 has been recognized to offset the deferred tax assets
related to the state net operating loss carryforwards.

Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred tax
assets and liabilities are as follows:

1996 1995
---- ----

Deferred tax assets:
Book over tax amortization $ 10,059 $ 16,024
Book allowance for doubtful accounts 14,327 10,967
Tax over book inventory 42,402
Deferred compensation 84,478 75,206
State net operating loss carryforward 49,938 45,737
Federal net operating loss carryforward 24,394
--------- --------
225,598 147,934
Valuation allowance for deferred
tax assets (116,734) (45,737)
--------- --------
Deferred tax assets $ 108,864 $102,197
========= ========

Classification of the Company's Consolidated Balance Sheets is as
follows:

1996 1995
---- ----

Current $ 14,327 $ 10,967
Noncurrent 94,537 91,230
-------- --------
$108,864 $102,197
======== ========

There follows reconciliations of the income taxes per the income tax
returns with the income tax deductions per the Consolidated Statements of
Income:

1996 1995
---- ----

Amounts shown by returns (net) $ 2,603 $ 9,542
Deferred income taxes (6,667) 9,491
-------- -------
(4,064) $19,033
======== =======
Effective income tax rates (5.8%) 7.8%
======== =======

F-16
56

WELLINGTON HALL, LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. Income Taxes (Continued):

No provision has been made for U. S. income taxes on unremitted
earnings of the foreign subsidiary (approximately $1,094,000 and
$1,072,000, respectively, at April 30, 1996 and 1995) since it is
the present intention of management to indefinitely reinvest these
earnings.

The components of income before income taxes are as follows:

1996 1995
------- ---------

Domestic $47,499 $(134,286)
Foreign 22,011 375,974
------- ---------
$69,510 241,688
======= =========

Federal, foreign, and state income taxes consisted of the
following:

1996 1995
------- --------

Federal $(5,809) $ 9,491
Foreign 36 1,122
State 1,709 8,420
------- --------
$(4,064) $ 19,033
======= ========

The following schedule reconciles the differences between the U. S.
federal income tax rate and the effective tax rate:

1996 1995
-------- --------

Tax computed at the U. S. federal rate 34.0% 34.0%
Increases (decreases) resulting from:
State income tax, net of federal benefit 2.4 2.3
Foreign income taxed at
different rates (10.7) (34.0)
Deferred income taxes (9.6) 4.0
Nondeductible expenses and benefit
of domestic net operating loss (17.4)
Other (4.5) 1.5

(5.8%) 7.8%
----- ------

At April 30, 1994, the Company had the following carryovers subject
to certain restrictions of the tax laws and regulations. Generally,
jobs credits may be carried over for fifteen years subject to the
provisions in the Tax Reform Act of 1986:

Year Ended Jobs
April 30 Credits
-------------- -------

1985 $1,914
1986 2,754
1987 2,270
------
$6,938
======

F-17
57

WELLINGTON HALL, LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. Financial Information Relating to Foreign and Domestic Operations and
Export Sales:

1996 1995
------------ --------------

Sales to unaffiliated customers:
United States $5,985,826 $7,226,030
Republic of Honduras 4,133 34,461
---------- ----------
Total sales $5,989,959 $7,260,491
========== ==========

Sales (export sales) or transfers between
geographic areas:
Sales from Republic of Honduras subsidiary
to United States parent company, at market
value (export sales) $1,269,168 $1,851,165
========== ==========

Transfers from United States parent
company to Republic of Honduras subsidiary
of materials and supplies, at cost $ 211,206 $ 316,244
========== ==========

1996 1995
---- ----
Operating profit:
United States $ 333,693 $ 129,033
Republic of Honduras 124,646 448,606
---------- ----------

Income before interest and
income taxes $ 458,339 $ 577,639
========== ==========

Identifiable assets:
United States $4,907,355 $5,255,792
Republic of Honduras 1,693,959 1,852,435
---------- ----------
Total assets $6,601,314 $7,108,227
========== ==========

11. Leases:
The Company leases showroom space and office equipment under
noncancelable leases expiring April 14, 1999.

Net minimum annual lease payments on the foregoing leases amount to
$104,066 for 1997, $103,007 for 1998, and $34,218 for 1999.

Net lease expenses of the foregoing leases for the years are
summarized as follows:

1996 1995
--------- ----------

Lease expense $ 86,478 $ 103,717
========= ==========

F-18
58

WELLINGTON HALL, LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. Contingent Liability:
In accordance with the Honduran Labor Code, the Company has the
obligation to pay severance compensation to its employees in the
event of dismissal under certain specific circumstances. It is the
policy of the Company to pay such severance payments in accordance
with the Law. At April 30, 1996 and 1995, the estimated contingent
liability aggregated approximately $133,488 and $74,242,
respectively.

13. Earnings Per Share:
Earnings per share of common stock are based on the average number
of shares of common stock outstanding during each period.

For the years ended April 30, 1996 and 1995, the equivalents were
dilutive and the primary earnings per share were computed based on
the average number of common shares and common share equivalents
outstanding. When dilutive, stock options are included as share
equivalents using the treasury stock method. The number of shares
used in computing primary earnings per share were 1,689,887. The
number of shares used in computing fully diluted earnings per share
were 1,689,887.

14. Incentive Plan:
The Company has an Incentive Plan covering certain officers and key
employees who have the greatest opportunities to contribute to
current earnings and the future success of the Company's operations.
The amount determined under the Incentive Plan is based upon profits
of the Company.

On January 1, 1987, the President of the Company executed a new
employment contract and forfeited his rights under the Incentive
Plan as one of the conditions of the new contract.

15. Deferred Compensation Agreement:
On May 8, 1987, the Company adopted a Deferred Compensation
Agreement with the President of the Company which will provide for
the payment of $50,000 per year for 10 years in monthly installments
when the President reaches age 62 and retires. The Agreement
provides that if he dies before he has received the total payments
or if he dies before retirement, then his beneficiary shall receive
the benefit balance thereof in monthly installments. In future
years, the deferred compensation will be accrued over the remaining
term of service by the President on a present value basis. The
accruals for the years ended April 30, 1996 and 1995 were $24,000.

16. Profit Sharing Plan:
During the year ended April 30, 1987, the Company adopted a combined
Profit Sharing and Salary Reduction Plan. The Company contributes
50% of the employee contributions with a 2% maximum Company
contributions on each employee's salary. The Plan also has a
feature whereby the Directors can set aside certain profits as
determined annually by the Directors. The Profit Sharing and Salary
Reduction Plans are tax exempt under applicable sections of the
Internal Revenue Code. The contributions by the Company for the
years ended April 30, 1996 and 1995 were $8,143 and $9,650,
respectively.

F-19
59

WELLINGTON HALL, LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

17. Quarterly Financial Data (Unaudited):
The following is a summary of the quarterly results of operations
for the years ended April 30, 1996 and 1995:

Fiscal 1996 Quarters
--------------------
First Second Third Fourth
----- ------ ----- ------

Net Sales $1,473,474 $1,614,388 $1,496,387 $1,405,710

Cost of goods sold 981,741 1,095,476 1,111,108 955,367

Net income (loss) 44,756 13,361 (31,015) 46,472

Net income (loss) per
common share (primary
and fully diluted) .03 .01 (.02) .03

Quarterly Financial Data (Unaudited):

Fiscal 1995 Quarters

First Second Third Fourth
----- ------ ----- ------

Net Sales $1,823,644 $1,848,345 $1,975,615 $1,612,887

Cost of goods sold 1,192,351 1,161,284 1,356,594 1,346,850

Net income (loss) 131,891 170,660 113,678 (193,574)

Net income (loss) per
common share (primary
and fully diluted) .08 .10 .07 (.12)

18. Nature of Operations and Concentration of Credit Risk:
Wellington Hall, Limited and Subsidiary, Muebles Wellington Hall,
S.A., are manufacturers of wall systems, dining room, bedroom and
accent and occasional furniture, with plant facilities located in
Lexington, North Carolina and San Pedro Sula, Honduras. The accent
and occasional furniture accounts for approximately 40% of the
Company's total sales. The remaining 60% of total sales is split
about evenly over the other three product lines. Wellington Hall
Caribbean Corp., the other subsidiary, is a sales organization
located in Lexington, North Carolina that is responsible for selling
Muebles Wellington Hall, S.A.'s products to both the general public
and Wellington Hall, Limited. The Company grants credit to customers
who are located primarily in the United States.

The Company's policy is to maintain its cash balances in reputable
financial institutions insured by the Federal Deposit Insurance
Corporation which provides $100,000 of insurance coverage on each
customer's cash balances.

F-20
60

WELLINGTON HALL, LIMITED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

19. Disclosures About Fair Value of Financial Instruments:
Statement of Financial Accounting Standards No. 107, "Disclosure
About Fair Value of Financial Instruments", requires that the
Company disclose estimated fair values for its financial
instruments. The following methods and assumptions were used to
estimate the fair value of each class of financial instruments for
which it is practicable to estimate that value:

Cash:
The carrying amount approximates fair value.

Notes receivable - officer:
The carrying amount approximates fair value.

Note payable - other:
Due to the fact that these are short-term notes payable within
one year, the carrying amount approximates fair value.

Long-term debt:
The fair value of long-term debt is estimated based on the
current rates the Company could obtain on debt of the same
remaining maturities.

The estimated fair values of the Company's financial instruments as
of April 30, 1996 are as follows:

Carrying Fair
Amount Value
------ -----

Cash $ 55,756 $ 55,756
Note receivable - officer 27,908 27,908
Notes payable - other 1,415,698 1,415,698
Long-term debt 1,476,662 1,520,652

F-21
61

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Article IX of the Company's Amended and Restated Bylaws provides:

ARTICLE IX

Indemnification of Officers and Directors

Section 1. Indemnification Provisions. Any person who at any time
serves or has served as a director or officer, employee or agent of the
corporation or of any wholly-owned subsidiary of the corporation, or in any
such capacity at the request of the corporation for any other corporation,
partnership, joint venture, trust or other enterprise, or as a trustee or
administrator under any employee benefit plan of the corporation or of any
wholly-owned subsidiary thereof (a "Claimant"), against whom a claim shall be
made after September 25, 1986, in any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
and whether or not brought by or on behalf of the corporation, including all
appeals therefrom (a "proceeding"), seeking to hold the Claimant liable by
reason of the fact that he is or was serving in such capacity (whether the
basis of such proceeding is alleged action in such official capacity or in any
other capacity while serving in such official capacity), shall have a right to
be indemnified and held harmless by the corporation against all liabilities and
litigation expenses (as hereinafter defined); provided that such
indemnification shall not be effective with respect to (a) that portion of any
liabilities or litigation expenses with respect to which the Claimant is
entitled to receive payment under any insurance policy other than a directors'
and officers' insurance policy maintained by the corporation or (b) any
liabilities or litigation expenses if the activities of the Claimant leading to
such liabilities or litigation expenses were at the time taken by such Claimant
known or believed by him to be clearly in conflict with the best interests of
the corporation.

Section 2. Definitions. As used in this Article, (a) "liabilities"
shall include, without limitation, (1) payments in satisfaction of any
judgment, money decree, excise tax, fine or penalty for which a Claimant had
become liable in any proceeding and (2) payments in settlement of any such
proceeding, subject, however, to Section 4 hereof; and (b) "litigation
expenses" shall include, without limitation, (1) reasonable costs and expenses
and attorneys' fees and expenses actually and necessarily incurred by the
Claimant in connection with any proceeding and (2) reasonable costs and
expenses and attorneys' fees and expenses in connection with the enforcement of
rights to the indemnification granted hereby or by applicable law, if such
enforcement is successful in whole or in part. The term "disinterested
directors," as used in this Article IX, shall mean directors who are not party
to the proceeding in question.

Section 3. Litigation Expense Advances. (a) Any litigation expenses
shall be advanced to any Claimant within 15 days of receipt by the Secretary of
the corporation of his demand therefor, together with his undertaking to repay
to the corporation such amount unless it is ultimately determined that Claimant
is entitled to be indemnified by the corporation against such expenses. The
Secretary shall forward notice of such demand and undertaking immediately to
all directors of the corporation. Any disinterested director may then, if
desired, call a meeting of a committee which shall include all disinterested
directors. No such advance shall be made if a majority of the disinterested
directors shall have determined that the litigation expenses are or have been
incurred on account of activities which at the time taken by such Claimant were
known or believed by him to be clearly in conflict with the best interests of
the corporation.

(b) No such advance of any particular items of litigation expenses
shall be made if a majority of the disinterested directors affirmatively
determines that such particular items are unreasonable. In any such case, such
directors must determine the excessive amount by which such item or items of
expense were unreasonable and the corporation shall withhold advances of
expenses only in the excessive dollar amount so determined unreasonable.

Section 4. Settlements. The corporation shall not be liable to
indemnify the Claimant for any amounts paid in settlement of any proceeding
effected without the corporation's written consent. The corporation will not
unreasonably withhold its consent to any proposed settlement.

Section 5. Approval of Indemnification Payments. Except as may be
determined in an action brought pursuant to Section 6 below, indemnification
payments by the corporation for liabilities and litigation expenses (or a
termination of the undertaking required under Section 3 above with respect to
advanced expenses) may be made only following a determination that the
activities of the Claimant were not of the kind described in Section 1(b),
which determination shall be made (a) by a majority of the disinterested
directors (if there are at least two such directors), (b) if there are not two
such directors, or if a majority of the disinterested directors so directs, by
independent legal counsel in a written opinion, (c) by a majority of the
shareholders or (d) in accordance with any other reasonable procedures
prescribed by the Board of Directors prior to the assertion of the claim for
which indemnification is sought. The reasonableness of amounts of settlements
and litigation expenses may be approved by a majority of the Board of
Directors.

Section 6. Right of Claimant to Bring Suit. If a claim under Section
1 is not paid in full by the corporation within ninety days after a written
claim has been received by the corporation, or a demand for advances is not
paid within 15 days of receipt by the corporation thereof with an undertaking
as described in Section 3, the Claimant may at any time thereafter bring suit
against the corporation to recover the unpaid amount of the claim or demand.
It shall be a defense to any such action that the Claimant's liabilities or
litigation expenses were incurred on account of activities which were at the
time taken known or believed by him to be clearly in conflict with the best
interests of the corporation, or were unreasonable, but the burden of proving
such defense shall be on the corporation. Neither the failure of the
corporation (including its

disinterested directors, independent legal counsel, or shareholders) to have
made a determination prior to the commencement of such action that
indemnification of the Claimant is proper in the circumstances nor an actual
determination by the corporation (including its disinterested directors,
independent legal counsel, or its shareholders) that the Claimant had not met
such applicable standard of conduct shall be a defense to the action or create
a presumption that Claimant has not met the applicable standard of conduct.

Section 7. Consideration; Personal Representatives and Other Remedies.
Any person who during such time as this Article IX of the Bylaws is in effect
serves or has served in any of the aforesaid capacities for or on behalf of the
corporation shall be deemed to be doing so or to have done so in reliance upon,
and as consideration for, the right of indemnification provided herein. The
right of indemnification provided herein shall inure to the benefit of the
legal representatives of any person who qualifies or would qualify as a
Claimant hereunder and such right shall not be exclusive of any other rights to
which such person or legal representative may be entitled apart from these
resolutions.

The North Carolina General Statutes contain provisions prescribing the
extent to which directors and officers shall or may be indemnified. These
statutory provisions are set forth below:

CH. 55 N.C. BUSINESS CORPORATION ACT

Part 5. Indemnification.

Section 55-8-50. Policy Statement and Definitions.

(a) It is the public policy of this State to enable corporations
organized under this Chapter to attract and maintain responsible, qualified
directors, officers, employees and agents, and, to that end, to permit
corporations organized under this Chapter to allocate the risk of personal
liability of directors, officers, employees and agents through indemnification
and insurance as authorized, in this Part.

(b) Definitions in this Part:

(1) "Corporation" includes any domestic or foreign
predecessor entity of a corporation in a merger or other transaction
in which the predecessor's existence ceased upon consummation of the
transaction.

(2) "Director"means an individual who is or was a director of
a corporation or an individual who, while a director of a corporation,
is or was serving at the corporation's request as a director, officer,
partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan,
or other enterprise. A director is considered to be serving an
employee benefit plan at the

corporation's request if his duties to the corporation also impose
duties on, or otherwise involve services by, him to the plan or to
participants in or beneficiaries of the plan. "Director" includes,
unless the context requires otherwise, the estate or personal
representative of a director.

(3) "Expenses" means expenses of every kind incurred in
defending a proceeding, including counsel fees.

(4) "Liability" means the obligation to pay a judgment,
settlement, penalty, fine (including an excise tax assessed with
respect to an employee benefit plan) or reasonable expenses incurred
with respect to a proceeding.

(5) "Official capacity" means: (i) when used with respect to
a director, the office of director in a corporation; and (ii) when
used with respect to an individual other than a director, as
contemplated in G.S. 55-8-56, the office in a corporation held by the
officer or the employment or agency relationship undertaken by the
employee or agent on behalf of the corporation. "Official capacity"
does not include service for another foreign or domestic corporation
or any partnership, joint venture, trust, employee benefit plan, or
other enterprise.

(6) "Party" includes an individual who was, is, or is
threatened to be made a named defendant or respondent in a proceeding.

(7) "Proceeding" means any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative,
or investigative and whether formal or informal.

Section 55-8-51. Authority to Indemnify.

(a) Except as provided in subsection (d), a corporation may
indemnify an individual made a party to a proceeding because he is or was a
director against liability incurred in the proceeding if:

(1) He conducted himself in good faith; and

(2) He reasonably believed (i) in the case of conduct in
his official capacity with the corporation, that his conduct was in
its best interests; and (ii) in all other cases, that his conduct was
at least not opposed to its best interests; and

(3) In the case of any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful.

(b) A director's conduct with respect to an employee benefit plan
for a purpose he

reasonably believed to be in the interests of the participants in and
beneficiaries of the plan is conduct that satisfies the requirement of
subsection (a)(2)(ii).

(c) The termination of a proceeding by judgment, order,
settlement, conviction, or upon a plea of no contest or its equivalent is not,
of itself, determinative that the director did not meet the standard of conduct
described in this section.

(d) A corporation may not indemnify a director under this section:

(1) In connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the
corporation; or

(2) In connection with any other proceeding charging improper
personal benefit to him, whether or not involving action in his
official capacity, in which he was adjudged liable on the basis that
personal benefit was improperly received by him.

(e) Indemnification permitted under this section in connection
with a proceeding by or in the right of the corporation that is concluded
without a final adjudication on the issue of liability is limited to reasonable
expenses incurred in connection with the proceeding.

(f) The authorization, approval or favorable recommendation by the
board of directors of a corporation of indemnification, as permitted by this
section, shall not be deemed an act or corporate transaction in which a
director has a conflict of interest, and no such indemnification shall be void
or voidable on such ground.

Section 55-8-52. Mandatory Indemnification.

Unless limited by its articles of incorporation, a corporation shall
indemnify a director who was wholly successful, on the merits or otherwise, in
the defense of any proceeding to which he was a party because he is or was a
director of the corporation against reasonable expenses incurred by him in
connection with the proceeding.

Section 55-8-53. Advance For Expenses.

Expenses incurred by a director in defending a proceeding may be paid
by the corporation in advance of the final disposition of such proceeding as
authorized by the board of directors in the specific case or as authorized or
required under any provision in the articles of incorporation or bylaws or by
any applicable resolution or contract upon receipt of an undertaking by or on
behalf of the director to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the corporation against
such expenses.

Section 55-8-54. Court-ordered indemnification.

Unless a corporation's articles of incorporation provide otherwise, a
director of the corporation who is a party to a proceeding may apply for
indemnification to the court conducting the proceeding or to another court of
competent jurisdiction. On receipt of an application, the court after giving
any notice the court considers necessary may order indemnification if it
determines:

(1) The director is entitled to mandatory indemnification under G.S.
55-8-52, in which case the court shall also order the corporation to pay the
director's reasonable expenses incurred to obtain court-ordered
indemnification; or

(2) The director is fairly and reasonably entitled to indemnification
in view of all the relevant circumstances, whether or not he met the standard
of conduct set forth in G.S. 55-8-51 or was adjudged liable as described in
G.S. 55-8-51(d), but if he was adjudged so liable his indemnification is
limited to reasonable expenses incurred.

Section 55-8-55. Determination and Authorization of Indemnification.

(a) A corporation may not indemnify a director under G.S. 55-8-51
unless authorized in the specific case after a determination has been made that
indemnification of the director is permissible in the circumstances because he
has met the standard of conduct set forth in G.S. 55-8-51.

(b) The determination shall be made:

(1) By the board of directors by majority vote of a quorum consisting
of directors not at the time parties to the proceeding;

(2) If a quorum cannot be obtained under subdivision (1), by majority
vote of a committee duly designated by the board of directors (in
which designation directors who are parties may participate),
consisting solely of two or more directors not at the time parties to
the proceeding;

(3) By special legal counsel (i) selected by the board of directors
or its committee in the manner prescribed in subdivision (1) or (2);
or (ii) if a quorum of the board of directors cannot be obtained under
subdivision (1) and a committee cannot be designated under subdivision
(2), selected by majority vote of the full board of directors (in
which selection directors who are parties may participate); or

(4) By the shareholders, but shares owned by or voted under the
control of directors who are at the time parties to the proceeding may
not be voted on the determination.

made in the same manner as the determination that indemnification is
permissible, except that if the determination is made by special legal counsel,
authorization of indemnification and evaluation as to reasonableness of
expenses shall be made by those entitled under subsection (b)(3) to select
counsel.

Section 55-8-56. Indemnification Of Officers, Employees, and Agents.

Unless a corporation's articles of incorporation provide otherwise:

(1) An officer of the corporation is entitled to mandatory
indemnification under G.S. 55-8-52, and is entitled to apply for court-ordered
indemnification under G.S. 55-8-54, in each case to the same extent as a
director.
(2) The corporation may indemnify and advance expenses under this
Part to an officer, employee, or agent of the corporation to the same extent as
to a director; and

(3) A corporation may also indemnify and advance expenses to an
officer, employee, or agent who is not a director to the extent, consistent
with public policy, that may be provided by its articles of incorporation,
bylaws, general or specific action of its board of directors, or contract.

Section 55-8-57. Additional Indemnification and Insurance.

(a) In addition to and separate and apart from the indemnification
provided for in G.S. 55-8-51, 55-8-52, 55-8-54, 55-8-55 and 55-8-56, a
corporation may in its articles of incorporation or bylaws or by contract or
resolution indemnify or agree to indemnify any one or more of its directors,
officers, employees, or agents against liability and expenses in any proceeding
(including without limitation a proceeding brought by or on behalf of the
corporation itself) arising out of their status as such or their activities in
any of the foregoing capacities; provided, however, that a corporation may not
indemnify or agree to indemnify a person against liability or expenses he may
incur account of his activities which were at the time taken known or believed
by him to be clearly in conflict with the b interests of the corporation. A
corporation may likewise and to the same extent indemnify or agree to indemnify
a person who, at the request of the corporation, is or was serving as a
director, officer, partner, trustee, employee, agent of another foreign or
domestic corporation, partnership, joint venture, trust or other enterprise or
as a trust or administrator under an employee benefit plan. Any provision in
any articles of incorporation, bylaw, contract, resolution permitted under this
section may include provisions for recovery from the corporation of reasonable
costs, expenses, and attorneys' fees in connection with the enforcement of
rights to indemnification granted therein and may further include provisions
establishing reasonable procedures for determining and enforcing the rights
granted therein.

(b) The authorization, adoption, approval, or favorable
recommendation by the board of directors of a public corporation of any
provision in any articles of incorporation, bylaw, contract

or resolution, as permitted in this section, shall not be deemed an act or
corporate transaction in which a director has a conflict of interest, and no
such articles of incorporation or bylaw provision or contract or resolution
shall be void or voidable on such grounds. The authorization, adoption,
approval, or favorable recommendation by the board of directors of a nonpublic
corporation of any provision in any articles of incorporation, bylaw, contract
or resolution, as permitted in this section which occurred prior to July 1,
1990, shall not be deemed an act or corporate transaction in which a director
has a conflict of interest, and no such articles of incorporation, bylaw
provision, contract or resolution shall be void voidable on such grounds.
Except as permitted in G.S. 55-8-31, no such bylaw, contract, or resolution not
adopted, authorized, approved or ratified by shareholders shall be effective as
to claims made or liabilities asserted again any director prior to its
adoption, authorization, or approval by the board of directors.

(c) A corporation may purchase and maintain insurance on behalf of an
individual who is or was a director, officer, employee or agent of the
corporation, or who, while a director, officer, employee, or agent of the
corporation, is or was serving at the request of the corporation as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan, or other
enterprise, against liability asserted against or incurred by him in that
capacity or arising from his status as a direct officer, employee, or agent,
whether or not the corporation would have power to indemnify him against the
same liability under any provision of this Chapter.

Section 55-8-58. Application of Part.

(a) If articles of incorporation limit indemnification or advance for
expenses, indemnification and advance for expenses are valid only to the extent
consistent with the articles.

(b) This Part does not limit a corporation's power to pay or
reimburse expenses incurred by a director in connection with his appearance as
a witness in a proceeding at a time when he has not been made a name defendant
or respondent to the proceeding.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

Other expenses of issuance and distribution are estimated as follows:

Registration Fees $292

*Subscription Agent Fees $

*Costs of Printing $

*Legal Fees and Expenses $

*Accounting Fees and Expenses $

*Miscellaneous Expenses $

*Total Expenses $

-----------------------

*To be filed by amendment

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

In connection with the employment of Arthur F. Bingham as Senior
Executive Vice President of Sales and Marketing, Mr. Bingham made a loan to the
Company of $285,694 at terms included in an addendum to his Employment and
Stock Purchase Agreement with the Company. On February 12, 1997, the Company
issued to Mr. Bingham 600,000 shares of Common Stock as repayment of that loan
and for his additional investment of $14,306. Inasmuch as Mr. Bingham is an
executive officer of the Company and had access to all available information
about the Company, the Company relied on Section 4(2) of the Securities Act to
exempt said offer and sale from registration.

ITEM 27. EXHIBITS.

The following exhibits, listed in accordance with the number assigned
to each in the exhibit table of Item 601 of Regulation S-B, are included in
Part II of this Registration Statement. Exhibit numbers omitted are not
applicable.

EXHIBIT NO. EXHIBIT
- ----------- -------

*3(a) Amended and Restated Charter of Wellington Hall, Limited, filed as Exhibit 3.1 to the Company's Annual
Report on Form 10-K for the fiscal year ended April 30, 1987

*3(b) Amended and Restated Bylaws of Wellington Hall, Limited, filed as Exhibit 3.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended April 30, 1987

5 Form of Opinion of Schell Bray Aycock Abel & Livingston P.L.L.C.

*10(a) Wellington Hall Executive Stock Plan, filed as Exhibit 10.1 to the Company's Annual Report on Form 10-K
for the fiscal year ended April 30, 1986

*10(b) Employment and Executive Deferred Compensation Agreement between the Company and Hoyt M. Hackney Jr.,
effective January 1, 1987 and May 8, 1987, respectively, filed as Exhibit 10.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended April 30, 1987

*10(c) Note - Security Agreement dated April 23, 1986 between the Company and Lexington State Bank, filed as
Exhibit 4.2 to the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 1987

*10(d) Loan Agreement dated April 15, 1987 between the Company and Lexington State Bank, filed as Exhibit 4.2
to the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 1987

*10(e) Note - Security and North Modification Agreements dated April 26, 1988 between the Company and
Lexington State Bank, filed as Exhibit 4.3 to the Company's Annual Report on Form 10-K for the fiscal
year ended April 30, 1988

*10(f) Loan Agreement dated December 22, 1989, as amended on July 19, 1990, between Wellington Hall Caribbean
Corporation and the Overseas Private Investment Corporation, filed as Exhibit 10.6 to the Company's
Annual Report on Form 10-K for the fiscal year ended April 30, 1990

*10(g) Subordination Agreement, dated December 22, 1989 between Wellington Hall Limited, Wellington Hall
Caribbean Corporation, Muebles Wellington Hall, S.A., and the Overseas Private Investment Corporation,
filed as Exhibit 10.7 to the Company's Annual Report on Form 10-K for the fiscal year ended April 30,
1990

10(h) Loan Agreement dated July 24, 1990 between the Company and Lexington State Bank

*10(i) Amendment to Loan Agreement dated February 1, 1991 between the Company and Lexington State Bank, filed
as Exhibit 10.14 to the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 1991

*10(j) Loan Agreement dated August 20, 1991 between Muebles Wellington Hall, S.A. and Banco de Honduras, S.A.,
filed as Exhibit A to the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 1991

*10(k) Amendment to Loan Agreement dated April 10, 1992 between the

Company and Lexington State Bank, filed as Exhibit 10.11 to the Company's Annual Report on Form 10-K for
the fiscal year ended April 30, 1992

*10(l) Promissory Note dated January 23, 1992 between the Company and Hoyt M. Hackney, Jr., filed as Exhibit
10.12 to the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 1992

*10(m) Amendment to Executive Deferred Compensation Agreement dated January 23, 1992 between the Company and
Hoyt M. Hackney, Jr., filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K for the fiscal
year ended April 30, 1992

*10(n) Loan Agreement, dated June 28, 1993, between the Company and Lexington State Bank, filed as Exhibit
10.14 to the Company's Annual Report on Form 10-KSB for the fiscal year ended April 30, 1993

*10(o) Lease Agreement dated November 1, 1993 by and between North Hamilton Corporation and the Company, filed
as Exhibit 10.14 to the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 1994

*10(p) Amendment to the Loan Agreement dated September 1, 1994 between Wellington Hall Caribbean Corporation
and the Overseas Private Investment Corporation, filed as Exhibit 10.16 to the Company's Annual Report
on Form 10-KSB for the fiscal year ended April 30, 1995

10(q) Promissory Note dated January 16, 1997 between the Company and Lexington State Bank

10(r) Letter dated January 31, 1997 of the Overseas Private Investment Corporation to the Company

*10(s) Employment and Stock Purchase Agreement dated September 1, 1996 between the Company and Arthur F.
Bingham, filed as Exhibit 10.17 to the Company's Quarterly Report on Form 10-QSB for the quarterly
period ended July 31, 1996.

10(t) Employment Agreement dated December 1, 1997 between the Company and Ralph L. Eskelsen

10(u) Addenda to Employment and Stock Purchase Agreement dated September 1, 1996 between the Company and
Arthur F. Bingham dated February 10,

1997

10(v) 1997 Stock Option and Restricted Stock Plan

10(w) Nonqualified Stock Option Agreement dated as of February 10, 1997 between the Company and Arthur F.
Bingham

10(x) Incentive Stock Option Agreement dated as of February 10, 1997 between the Company and Arthur F.
Bingham

10(y) Incentive Stock Option Agreement dated as of February 10, 1997 between the Company and Ralph L.
Eskelsen

10(z) Form of Letter Agreement between the Company and Lexington State Bank

11 Statement re Computation of Per Share Earnings

*22 Subsidiaries of the Registrant, filed as Exhibit 22 to the Company's Annual Report on Form 10-KSB for
the fiscal year ended April 30, 1996

23(a) Consent of Schell Bray Aycock Abel & Livingston P.L.L.C. is contained in its opinion filed as Exhibit 5

23(b) Consent of Turlington & Company, L.L.P.

25 Power of Attorney (included on Signature Page)

99(a) Form of Stock Order Form

99(b) Form of Transmittal Letter to Shareholders

- ----------------------------------
* Incorporated by reference to the statement or report indicated

ITEM 28. UNDERTAKINGS.

The undersigned registrant hereby undertakes: (1) To file, during any
period in which offers or sales are being made, a post-effective amendment to
this registration statement: (i) to include any prospectus required by section
10(a)(3) of the Securities Act of 1933, as amended; (ii) to reflect in the
prospectus any facts or events which, individually or together, represent a
fundamental change from the information included in this registration
statement; and (iii) to include any additional or changed material information
with respect to the plan of distribution from that which is included in this
registration statement. (2) That, for the purpose of

determining liability under the Securities Act of 1933, as amended, each such
post-effective amendment shall be treated as a new registration statement
relating to the securities offered therein, and the offering of such securities
at such time shall be treated as the initial bona fide offering thereof. (3)
To remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.

The undersigned registrant undertakes to, before any unsubscribed for
shares of Common Stock are offered and sold to the public, supplement the
Prospectus to include the results of the subscription offer and the terms of
any later reoffering. If the registrant makes any public offering of the
securities on terms different from those on the cover page of the Prospectus,
the Registrant will file a post-effective amendment to state the terms of such
offering.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by a controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form SB-2 and authorizes this registration
statement to be signed on its behalf by the undersigned, in the City of
Lexington, State of North Carolina, on February 19, 1997.

WELLINGTON HALL, LIMITED

By: /s/ Hoyt M. Hackney
-------------------------------------
Hoyt M. Hackney, President, Chief
Executive Officer, Chief Financial
Officer, Treasurer and Director

POWER OF ATTORNEY

Each executive officer or director whose signature appears below
hereby appoints Hoyt M. Hackney as his true and lawful attorney-in-fact to sign
on his behalf, as an individual and in the capacity stated below, any amendment
or post-effective amendment to this Registration Statement which said
attorney-in-fact may deem appropriate or necessary.

In accordance with the requirements of the Securities Act of 1933,
this registration statement was signed by the following persons in the
capacities and on the dates indicated.

SIGNATURE TITLE DATE
--------- ----- ----

/s/ Hoyt M. Hackney President, Chief Executive February 19, 1997
------------------------------------- Officer, Chief Financial
Hoyt M. Hackney Officer, Treasurer and Director

/s/ Ernst B. Kemm Executive Vice President February 19, 1997
------------------------------------- and Director
Ernst B. Kemm

/s/ Donald W. Leonard Chairman of the Board February 19, 1997
------------------------------------- of Directors
Donald W. Leonard

/s/ William W. Woodruff Secretary and Director February 19, 1997
-------------------------------------
William W. Woodruff

/s/ Arthur F. Bingham Senior Executive Vice President February 19, 1997
------------------------------------- of Sales and Marketing and Director
Arthur F. Bingham

EXHIBIT INDEX

EXHIBIT NO. EXHIBIT
- ----------- -------

*3(a) Amended and Restated Charter of Wellington Hall, Limited, filed as Exhibit 3.1 to the Company's Annual
Report on Form 10-K for the fiscal year ended April 30, 1987

*3(b) Amended and Restated Bylaws of Wellington Hall, Limited, filed as Exhibit 3.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended April 30, 1987

5 Form of Opinion of Schell Bray Aycock Abel & Livingston P.L.L.C.

*10(a) Wellington Hall Executive Stock Plan, filed as Exhibit 10.1 to the Company's Annual Report on Form 10-K
for the fiscal year ended April 30, 1986

*10(d) Loan Agreement dated April 15, 1987 between the Company and Lexington State Bank, filed as Exhibit 4.2
to the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 1987

10(h) Loan Agreement dated July 24, 1990 between the Company and Lexington State Bank

*10(k) Amendment to Loan Agreement dated April 10, 1992 between the Company and Lexington State Bank, filed
as Exhibit 10.11 to the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 1992

*10(l) Promissory Note dated January 23, 1992 between the Company and Hoyt M. Hackney, Jr., filed as Exhibit
10.12 to the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 1992

*10(n) Loan Agreement, dated June 28, 1993, between the Company and Lexington State Bank, filed as Exhibit
10.14 to the Company's Annual Report on Form 10-KSB for the fiscal year ended April 30, 1993

10(q) Promissory Note dated January 16, 1997 between the Company and Lexington State Bank

10(r) Letter dated January 31, 1997 of the Overseas Private Investment Corporation to the Company

10(t) Employment Agreement dated December 1, 1997 between the Company and Ralph L. Eskelsen

10(u) Addenda to Employment and Stock Purchase Agreement dated September 1, 1996 between the Company and
Arthur F. Bingham dated February 10, 1997

10(v) 1997 Stock Option and Restricted Stock Plan

10(w) Nonqualified Stock Option Agreement dated as of February 10, 1997 between the Company and Arthur F.
Bingham

10(x) Incentive Stock Option Agreement dated as of February 10, 1997 between the Company and Arthur F.
Bingham

10(y) Incentive Stock Option Agreement dated as of February 10, 1997 between the Company and Ralph L.
Eskelsen

10(z) Form of Letter Agreement between the Company and Lexington State Bank

11 Statement re Computation of Per Share Earnings

*22 Subsidiaries of the Registrant, filed as Exhibit 22 to the Company's Annual Report on Form 10-KSB for
the fiscal year ended April 30, 1996

23(a) Consent of Schell Bray Aycock Abel & Livingston P.L.L.C. is contained in its opinion filed as Exhibit 5

23(b) Consent of Turlington & Company, L.L.P.

25 Power of Attorney (included on Signature Page)

99(a) Form of Stock Order Form

99(b) Form of Transmittal Letter to Shareholders

- ----------------------------------
* Incorporated by reference to the statement or report indicated