U. S. Securities and Exchange Commission
Washington, D. C. 20549

FORM 10-QSB

(MARK ONE)

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

For the Quarterly Period Ended February 28, 1997 or
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[ ] Transition Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

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

COMMISSION FILE NUMBER 0-18091

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

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

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

(864) 271-7171
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Issuer's telephone number

Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)

Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements for
the past 90 days. Yes [X] No [ ]

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

Common Stock, $.01 Par Value - 7,895,822 shares outstanding as of April 4, 1997

Transitional Small Business Disclosure Format (check one):

Yes No X
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INDEX

RSI HOLDINGS, INC.

PART I. FINANCIAL INFORMATION PAGE

Item 1. Financial Statements (Unaudited)

Condensed consolidated balance sheet -- February 28, 1997 4

Condensed consolidated statement of operations -- Three
and six months ended February 28, 1997 5

Condensed consolidated statement of cash flows -- Six
months ended February 28, 1997 6

Condensed consolidated statement of changes in net assets
in liquidation -- Six months ended February 28, 1996 7

Notes to condensed consolidated financial statements --
February 28, 1997 8

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11

PART II. OTHER INFORMATION 15

Item 1. Legal Proceedings 15

Item 2. Changes in Securities 19

Item 3. Default 19

Item 4. Submission of Matters to a Vote of Security Holders 19

Item 5. Other Information 20

Item 6. Exhibits and Reports on Form 8-K 20

SIGNATURES 21

RSI Holdings, Inc.
Condensed Consolidated Balance Sheet (Unaudited)
February 28, 1997

Assets

Current Assets:
Cash $ 1,623,000
Prepaid expenses 26,000
Other current assets 11,000
-----------
Total current assets 1,660,000

Property and equipment
Cost 39,000
Less accumulated depreciation 23,000
-----------
16,000

Other assets
Land and building held for sale, net of
accumulated depreciation of $301,000 248,000
Other 12,000
-----------
260,000
-----------
$ 1,936,000
===========

Liabilities and shareholders' equity
Current liabilities:
Trade accounts payable $ 30,000
Accrued expenses 103,000
-----------
133,000

Deferred compensation 143,000

Shareholders' equity:
Common Stock, $.01 par value - authorized
25,000,000 shares, issued and outstanding
7,895,822 shares at February 28, 1997 79,000
Excess of paid-in capital over par value 3,775,000
Deficit (2,194,000)
-----------
1,660,000
-----------
$ 1,936,000
===========

See accompanying notes.

RSI Holdings, Inc.
Condensed Consolidated Statement of Operations (Unaudited)
Three and Six Months ended February 28, 1997

Three months Six months
----------- -----------

Revenues:
Origination fees $ 39,000 $ 39,000
Gain on sale of loans 10,000 10,000
----------- -----------
Total revenues $ 49,000 $ 49,000

Expenses
Selling, general and administrative 266,000 411,000
----------- -----------
Loss from operations (217,000) (362,000)

Other income (expense)
Interest income 21,000 55,000
Rental income on asset held for sale 7,000 14,000
Interest expense (3,000) (7,000)
Cost to settle lawsuit (300,000)
----------- -----------
Total other income (expense) 25,000 (238,000)
----------- -----------
Net loss $ (192,000) $ (600,000)
=========== ===========

Net loss per share $ (.03) $ (.08)
=========== ===========

Weighted average number of shares outstanding 7,895,822 7,934,634
=========== ===========

See accompanying notes.

RSI Holdings, Inc.
Condensed Consolidated Statement of Cash Flows (Unaudited)
Six Months ended February 28, 1997

Cash used in operating activities $ (578,000)

Investing activities
Acquisition of outstanding stock of
CambridgeBanc, Inc. - Note B (15,000)
Purchase of common stock (25,000)
Organization expense (13,000)
Purchase of equipment (2,000)
-----------
Net cash used in investing activities (55,000)
-----------

Financing activities
Advances under bank lines of credit 552,000
Payments on bank line of credit (552,000)
-----------
Net cash provided by financing activities 0
-----------
Decrease in cash and cash equivalents (633,000)

Cash and cash equivalents at beginning of year 2,256,000
-----------
Cash and cash equivalents at end of quarter $ 1,623,000
===========

See accompanying notes.

RSI Holdings, Inc.
Condensed Consolidated Statement of Changes
in Net Assets in Liquidation (Unaudited)
Six months ended February 28, 1996

Net assets in liquidation at beginning of period $ 2,143,000

Changes in net assets in liquidation attributed to:
Decrease in cash and cash equivalents (214,000)
Decrease in trade accounts payable 4,000
Decrease in accrued expenses 51,000
Decrease in estimated costs during remaining period
of liquidation 195,000
Decrease in estimated net realizable
value of accounts receivable (4,000)
-----------
Increase in net assets in liquidation 32,000
-----------
Net assets in liquidation at end of period $ 2,175,000
===========

See accompanying notes.
7

RSI Holdings, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)

Note A - Basis of Presentation

The Company ceased all of its former business operations during August
of 1994 and since that time has been actively seeking to sell substantially all
of the assets of its former business. Concurrent with the decision to cease all
of its former business operations, the Company adopted the liquidation basis of
accounting. Generally accepted accounting principles for the liquidation basis
of accounting required that assets be valued at their estimated net realizable
value and liabilities be presented at their estimated settlement amounts and
also include estimated costs associated with carrying out the liquidation. The
Company's financial statements were prepared under the liquidation basis of
accounting through August 31, 1996.

During fiscal 1996, the Company substantially completed the sale of its
assets and during November of 1996 acquired the outstanding common stock of a
consumer finance company. Accordingly, effective September 1, 1996 the Company
adopted the going concern basis of accounting.

The accompanying unaudited condensed consolidated financial statements
at February 28, 1997 have been prepared in accordance with generally accepted
accounting principles for interim financial information under the going concern
basis of accounting and with the instructions to Form 10-QSB and Item 310(b)
of Regulation S-B. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments including
normal recurring accruals considered necessary for a fair presentation on the
going concern basis have been included. Operating results for the three and six
months ended February 28, 1997 are not necessarily indicative of the results
that may be expected for the year ended August 31, 1997. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-KSB for the year
ended August 31, 1996.

Note B - Acquisition

On November 4, 1996, the Company purchased for cash all of the
outstanding common stock of CambridgeBanc, Inc. from Emergent Group, Inc. for
the total purchase price of $15,000. The assets that were owned by
CambridgeBanc, Inc. consist of furniture and equipment that the Company believes
had a fair value of $15,000. Through CambridgeBanc, Inc., the Company has begun
to engage in the business of originating and selling home improvement and other
loans secured by liens on improved property.

In addition to the purchase agreement to acquire the common stock, the
Company executed a lease agreement with Emergent Group, Inc. in which the
Company paid $18,000 for the use of additional furniture and equipment for one
year. These assets were used by CambridgeBanc, Inc. in its previous
operations. The newly acquired subsidiary, CambridgeBanc, Inc. executed a
sublease agreement to rent for one year from Emergent Group, Inc. the office
space that CambridgeBanc, Inc. occupies at $1,757 per month. In March 1997,
CambridgeBanc, Inc. changed its name to HomeAdd Financial Corporation.

Mr. Buck Mickel, Chairman of the Board and Chief Executive Officer of
the Company and beneficial owner of more than 5% of its outstanding common
stock, also serves on the board of directors of Emergent Group, Inc. and
beneficially owns less than 5% of its outstanding common stock and C. Thomas
Wyche, Secretary of the Company and the beneficial owner of less than 5% of its
outstanding common stock, also serves as Secretary of Emergent Group, Inc. and
is a shareholder of Emergent Group, Inc., owning less than 5% of its outstanding
common stock. In addition, each of Minor H. Mickel, Buck A. Mickel, Charles C.
Mickel and Minor Mickel Shaw, beneficial owners of more than 5% of the Company's
outstanding common stock, are shareholders of Emergent Group, Inc., each owning
less than 5% of its outstanding common stock. Each of Buck A. Mickel, Charles C.
Mickel and Minor Mickel Shaw are the adult children of Buck Mickel and Minor H.
Mickel is the spouse of Buck Mickel.

Note C - Shareholders' equity

The financial statements as of August 31, 1996 included a consolidated
statement of net assets in liquidation which presented under the liquidation
basis of accounting the net assets that the Company expected to realize at the
end of its period of liquidation. The accompanying condensed consolidated
balance sheet presents on the going concern basis of accounting the
shareholders' equity at February 28, 1997. Below is a reconciliation of the net
asset in liquidation at August 31, 1996 to the shareholders' equity at February
28, 1997.

Net assets in liquidation at August 31, 1996 $ 2,285,000

Loss from operations during six months ended
February 28, 1997 (600,000)

Purchase of common stock for the treasury (25,000)
-----------
Shareholders' equity at February 28, 1997 $ 1,660,000
===========

Note D - Contingencies

On November 18, 1996, Wiegmann & Rose International Corp. ("Wiegmann &
Rose"), a wholly-owned subsidiary of the Company, entered into an agreement to
settle a lawsuit brought by Triple A Machine Shop, Inc. ("Triple A") relating to
environmental contamination on property formerly owned by Wiegmann & Rose and
sold to Triple A in 1987. Pursuant to the settlement agreement Wiegmann & Rose
paid to Triple A the sum of three hundred thousand ($300,000) dollars in
exchange for settlement of the lawsuit as well as Triple A's release of Wiegmann
& Rose and the Company from any further liability to Triple A in connection with
the property or under the agreement made at the time of sale of the property.

Wiegmann & Rose has also been sued, along with several other
defendants, in seven personal injury asbestos suits. Although, Wiegmann & Rose
has been dismissed without prejudice in each of the seven suits, Wiegmann could
be brought back into the litigation in five of these seven dismissed cases. As
to the substantive nature of the asbestos claims, the Company believes
substantial defenses would be available and for that reason the Company has been
successful in having all seven of these filed actions dismissed without
prejudice as against Wiegmann & Rose. No provisions have been made in the
accompanying financial statements for any liability which may result from this
matter.

9
10

In addition, the Company is one of several defendants in a lawsuit
filed in July 1993 claiming indemnification with respect to payments due and the
cost of performing certain covenants and obligations under a land lease
agreement allegedly in default. This agreement relates to a motel property
previously operated by the Company. The Company intends to defend this matter
vigorously. The ultimate outcome of this matter is not known. No provision has
been made in the accompanying financial statements for any liability which may
result from this matter.

In February 1994, an individual served a complaint against the Company
seeking damages in excess of $15,000 for injuries sustained while operating a
turf care product sold by the Company. The complaint also named the manufacturer
of the product. The manufacturer and its insurance carrier accepted defense of
the Company regarding this matter. This case was settled in February 1997 and
this case is now resolved in its entirety. The Company did not incur any
liability in the settlement of this matter.

In addition, in January 1995, a complaint against the Company seeking
damages in excess of the minimal jurisdictional amount was served. The plaintiff
in that case alleges that he was injured while operating a vehicle that was sold
by the Company. The Complaint also named the manufacturer of the vehicle. The
manufacturer has accepted defense of the Company regarding this matter. The
Company believes, based on the arrangements with the manufacturer and the
Company's own insurance, that this action should not have a material adverse
effect on the Company's financial position.

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

Results of Operations

Adjustment from Liquidation Basis to Going Concern Basis

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

The Company substantially completed its plan to sell substantially all
of its assets ("Sale of Assets Plan") during fiscal 1996 and purchased the
common stock of a company in the consumer finance business in November 1996.
Accordingly, on September 1, 1996, the Company adopted the going concern basis
of accounting. The effect of the change from the liquidation basis of accounting
to the going concern basis of accounting on net assets of the Company was to
reduce the carrying value of the real estate held for sale that is located in
Tampa, Florida from its estimated liquidation value of $430,000 to its
depreciated cost on September 1, 1996 of $263,000, a decrease in net assets of
$167,000; increase prepaid expenses by $15,000 and reduce the liabilities of the
Company by the estimated costs during the remaining period of liquidation of
$155,000.

New Business acquired

On November 4, 1996, the Company purchased the outstanding common stock
of CambridgeBanc, Inc., a small specialized consumer finance business that
originates and sells consumer finance receivables, substantially all of which
are loans secured by liens on improved property. On March 18, 1997, the name of
CambridgeBanc, Inc. was changed to HomeAdd Financial Corporation ("HomeAdd").

Revenues were $49,000 during the three and six months ended February
28, 1997 and consisted of loan origination fees and gain from the sale of the
loans made.

General and administrative expenses include expenses incurred by
HomeAdd of $138,000 and $182,000, respectively, during the three and six months
ended February 28, 1997.

The Company expects that HomeAdd will operate at a loss during fiscal
1997 and 1998, but based on its business plan, currently expects HomeAdd to
operate at a modest profit by fiscal 1999. The foregoing is a forward-looking
statement and the Company cautions that there can be no assurance that this goal
can be achieved. Factors which could cause the Company's results to differ
materially from the forward-looking statement include, but are not limited to,
lower origination volume due to market conditions that might affect the
appraised values of the property that would be used as collateral in that
HomeAdd's business might be reduced if values of the collateral increase and
HomeAdd's customers might then qualify for more traditional sources of credit
such as banks; adverse consequences of changes in interest

rate environment such as increases in rates that might reduce the number of
customers that would be willing to execute loans at the higher rates;
uncreditworthiness of borrowers and risk of default in that this would adversely
affect the ability of the Company to sell its loans; limited operating history
of lending operations in that HomeAdd has only had a Title I lending license
since November of 1995 and most of its personnel have been employed by HomeAdd
since the acquisition by the Company; general economic conditions in the
Company's market, including inflation, recession, interest rates and other
economic factors that might affect the credit rating of its customers in which
case HomeAdd would no longer be able to make loans to these customers with
reduced credit ratings because HomeAdd would not be able to sell the loans for
an amount that would be profitable for HomeAdd; loss of funding sources,
particularly since the Company currently only has arrangements for a credit
facility with one bank; loss of ability to sell loans since the Company does not
have sufficient resources to finance holding a substantial number of loans to
their maturity; general lending risks that might result in HomeAdd making
uncollectible loans or loans that it would be unable to sell; dependence on
Federal programs particularly since bills were introduced in Congress during
August of 1995 that would, in addition to other things as discussed below,
eliminate the Title I Loan program; impact of competition, particularly since
most of HomeAdd's competitors or potential competitors are substantially larger
and have significantly greater capital, experience and other resources than the
Company; regulation of lending activities in that HomeAdd, in addition to the
FHA Title I license discussed below, operates under the banking laws of each
State in which this business chooses to operate; changes in the regulatory
environment in that both the Federal government and each State in which HomeAdd
operates might make changes in the regulations under which HomeAdd operates at
any time; and dependence on key executives, particularly since HomeAdd and the
Company have a limited number of personnel.

As of April 1, 1997, HomeAdd had seven employees. The initial office in
Greenville, South Carolina includes sales, underwriting and administrative
personnel. An additional sales office in Charlotte, North Carolina opened on
April 1, 1997. If the Company is successful in the origination and resale of
consumer loans, the Company plans to open additional sales offices to target
certain major metropolitan areas of the Carolinas and southeastern United States
during fiscal 1998. Each sales office would be staffed by a loan closer.
Additional personnel will be added when and if the volume of loans increases to
a level that requires the additional personnel. If HomeAdd achieves its budgeted
operating results, the Company estimates that the new business would have
approximately 8 to 10 employees by August 31, 1997. There is no assurance,
however, that this goal can be accomplished.

HomeAdd is now offering Title I home improvement loans ("Title I
Loans") under the Title I program administrated by the Federal Housing
Administration ("FHA"). HomeAdd was approved by FHA as a Title I lender during
1995. The Title I program was established by Title I of the National Housing Act
of 1934. Loans made under the Title I program are 90% guaranteed by the United
States Department of Housing and Urban Development ("HUD"). In addition, HomeAdd
offers high loan-to-value loans ("HLTV Loans") to certain qualified borrowers
that in some case permit the loan proceeds to be used for purposes other than
home improvements. In addition to the FHA Title I license, HomeAdd will have to
apply for licenses to operate under the banking laws of each State in which this
business chooses to operate. HomeAdd is currently authorized to operate under
the banking laws of South Carolina and North Carolina. There can be no assurance
that any such additional licenses may be

obtained on a timely basis or at all. In addition, the new business is subject
to ongoing monitoring by regulatory authorities and the failure to comply with
applicable regulations could result in the forfeiture of licenses on which the
business is dependent.

Through HomeAdd, the Company intends to continue offering Title I loans
as well as HLTV Loans that permit the loan proceeds to be used for purposes
other than home improvements. The Company sells all its loans on a non recourse
basis in the secondary market. The Company's credit guidelines for this product
meet the underwriting criteria of the current purchasing investors. During the
three months ended February 28, 1997, the Company made loans aggregating
$599,000 of which $36,000 were made under the Title I Loan program and $563,000
were made under the HLTV Loan program. All of the loans were sold on a non
recourse basis in the secondary market during the three months ended February
28, 1997. The non recourse basis means that the Company represents that loans
were properly documented and made in accordance with applicable lending
criteria, but that the purchaser of the loans assumes the full credit risk.

The consumer finance market is highly competitive and fragmented.
HomeAdd competes with a number of finance companies that provide financing to
individuals who may not qualify for traditional financing, as well as
established home improvement lenders, other Title I lenders, existing mortgage
brokers and bankers that offer multi-purpose second mortgages. To a lesser
extent, HomeAdd competes with commercial banks, savings and loan associations,
credit unions, insurance companies, and captive finance arms of major
manufacturing companies that may apply more traditional lending criteria. Most
of these competitors or potential competitors are substantially larger and have
significantly greater capital, experience and other resources than the Company.

Home improvement loan volume generally tracks the seasonality of home
improvement contract work. Volume tends to build during the spring and early
summer months. A decline is typically experienced in late summer and early fall
until temperatures begin to drop. This change in seasons precipitates the need
for new siding, window and insulation contracts. Peak volume is experienced in
November and early December and declines dramatically from the holiday season
through the winter months. Debt consolidation and home equity loan volume
generally are not materially impacted by seasonal climate changes and, with the
exclusion of the holiday season, tend to be stable throughout the year.

HomeAdd attempts to sell, without recourse, all of its loans on the
secondary market to a licensed Title I wholesale buyer. HomeAdd does not have
the capital that would be necessary to make a significant volume of loans unless
it is able promptly to sell its loans on the secondary market. There can be no
assurance that the secondary market for loans will continue to be available to
HomeAdd. Adverse changes in the secondary market could impair HomeAdd's ability
to originate and sell loans on a favorable or timely basis. Delays in the sale
of a loan pool beyond a quarter-end could result in losses for such quarter. If
HomeAdd is unable to sell its loans on the secondary market, its growth could be
materially impaired and its results of operations and financial condition could
be materially adversely affected. See Liquidity and Capital Resources - Capital
Requirements for HomeAdd.

A substantial portion of HomeAdd's business is dependent on the
continuation of the Title I Loan program, which is federally funded. The Title I
Loan program provides that qualifying loans are eligible for FHA

insurance. In August of 1995, bills were introduced in both houses of the United
States Congress that would, among other things, abolish HUD, reduce federal
spending for housing and community development activities and eliminate the
Title I Loan program. Other changes to HUD have been proposed, which, if
adopted, could materially and adversely affect the operation of the Title I Loan
program. Discontinuation of or a significant reduction in the Title I Loan
program or HomeAdd's authority to originate loans under the Title I Loan program
would have a material adverse effect on HomeAdd's business.

Liquidity and Capital Resources

Anticipated Liquidity Requirements

As discussed below under "Cash and Cash Equivalents" and "Debt
Arrangements," the Company currently has substantial cash liquidity and,
although there can be no assurance in this regard, anticipates that such capital
resources will be sufficient to enable the Company to pay ordinary expenses
expected to arise for the remainder of fiscal 1997.

In addition to its ordinary expenses, the Company will continue to
incur legal expenses relating to its contingent liabilities. The Company plans
to continue to attempt to settle its contingent liabilities during fiscal 1997,
but it cannot estimate when these will be settled or the ultimate outcome of the
lawsuits described below under Item 1 of Part II, "Legal Proceedings" or of any
unknown contingencies. There can be no assurance that the Company's cash
balances will be sufficient to allow it to meet its recorded liabilities and any
known or unknown contingent liabilities. The ultimate outcome of these
contingencies is not known. No provision has been made in the accompanying
financial statements for any liability that may result from these matters.

Fiscal Year 1997 Activities

During fiscal 1997, the Company plans to continue with its efforts to
sell its office and warehouse facility in Tampa, Florida. Proceeds from the sale
of the Tampa facility will be applied first to the payment of expenses related
to the sale, next to pay or make provisions for the payment of contingent
liabilities of the Company as they are quantified, and any remaining proceeds
will be used for working capital. Since the amount required to settle the
contingent liabilities cannot be determined, there is no assurance that the
Company's proceeds from the sale of its remaining assets will be sufficient to
cover these expenses.

The Company currently intends to use the assets, if any, remaining
after the payment or provision for payment of the foregoing items to provide the
operating capital necessary for the operations of HomeAdd.

Cash and Cash Equivalents

Cash and cash equivalents in the amount of $1,623,000 as of February
28, 1997 included United States treasury bills with a maturity of three months
when purchased and having a market value of $1,413,000. Cash in excess of the
amounts invested in United States treasury bills is invested as available in a
money market account, which may be liquidated by the Company to meet its cash
needs on a daily basis. The Company earned $54,000 on its investments during the
six months ended February 28, 1997.

Debt Arrangements

During December of 1996, HomeAdd executed a warehouse line of credit
with a bank in the amount of $500,000 that is used to finance loans made to
third parties in connection with its consumer finance business. The loans made
by HomeAdd are collateral for this line of credit. This line of credit bears
interest at the bank's prime rate plus one percent. Under the terms of the loan
agreement and an agreement that the Company has executed with HomeAdd, HomeAdd
is required to maintain tangible net worth of at least $500,000. The bank also
requires that this tangible net worth include certain specified assets with
maturity of five years or less in the amount of $500,000.

Capital Requirements for HomeAdd

During the six months ended February 28, 1997, the Company invested
$700,000 in HomeAdd. The investment was used as follows: acquisition of common
stock - $15,000, equipment rental for first year - $18,000, purchase of U. S.
Treasury bill - $500,000, purchase of money market account - $25,000 and
operating capital of $142,000. The Company has reevaluated its previous plans to
attempt to arrange an additional borrowing facility of up to an additional
$500,000. Given its cash and cash equivalents position, the Company now believes
that it has the capacity to provide the additional capital that will be required
by HomeAdd during fiscal 1997. If and when HomeAdd's operations grow, it will
need external sources of capital.

PART II. Other information

ITEM 1. Legal Proceedings

Wiegmann & Rose

Environmental Litigation

Asbestos Litigation

Wiegmann & Rose is also one of numerous defendants with respect to
seven claims for exposure to asbestos, arising in the normal course of business.
All seven of these claims have been dismissed without prejudice with respect to
Wiegmann & Rose, and the applicable statute of limitations has passed with
respect to at least two of the dismissed claims. The dismissed claims are made
in the following lawsuits, in each case seeking unspecified damages for injury
allegedly due to asbestos exposure: (i) Brophy v. Abex et al. (filed April 9,
1992), pending in the San Francisco, California Superior Court, seeks damages
for wrongful death allegedly due to asbestos exposure. Wiegmann & Rose has been
dismissed without prejudice in this action and the applicable statute of
limitations has now passed, barring any subsequent action by the

plaintiff against Wiegmann & Rose. (ii) Canga v. Abex et al. (filed March 18,
1993), pending in the San Francisco Superior Court, seeks damages for personal
injuries allegedly due to asbestos exposure. Wiegmann & Rose has been dismissed
without prejudice in this action. (iii) Jordison v. Abex et al. (filed January
21, 1994), pending in the San Francisco Superior Court, seeks damages for
personal injuries allegedly due to asbestos exposure. The case against Wiegmann
& Rose has been dismissed without prejudice. (iv) Barnes v. Abex et al. (filed
December 3, 1993), pending in the San Francisco Superior Court, seeks damages
for wrongful death allegedly due to asbestos exposure. The case against Wiegmann
& Rose has been dismissed without prejudice, and the applicable statute of
limitation has passed, barring any subsequent action by plaintiff against
Wiegmann & Rose. (v) Richardson v. Abex et al. (filed August 5, 1993), pending
in the San Francisco Superior Court, seeks damages for personal injuries
allegedly due to asbestos exposure. The case against Wiegmann & Rose has been
dismissed without prejudice. (vi) Sorensen v. Abex et al. (filed July 20, 1993),
pending in the San Francisco Superior Court, seeks damages for personal injuries
allegedly due to asbestos exposure. The case against Wiegmann & Rose has been
dismissed without prejudice. (vii) Hall v. Abex et al. (filed February 25,
1994), pending in the San Francisco Superior Court, seeks damages for personal
injuries allegedly due to asbestos exposure. The case against Wiegmann & Rose
has been dismissed without prejudice.

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

No actions involving asbestos are currently pending.

Insurance

The Company has contacted its two primary insurance companies relating
to the environmental and asbestos claims against Wiegmann & Rose described
above. One insurance company has denied coverage with respect to the
environmental claims, but the other insurance company has reimbursed the Company
for a portion of its defense costs related to the environmental matter under a
reservation of rights. The two insurance companies, under a reservation of
rights, have reimbursed the Company for substantially all of its defense costs
related to the asbestos claims. The Company is communicating with its insurance
company with respect to reimbursement of defense costs paid by the Company
relating to the environmental claims. The Company is seeking reimbursement of
legal fees that have not been previously reimbursed and also reimbursement of
the $300,000 settlement discussed above, but there can be no assurance that
insurance coverage will be available to reimburse the Company for the remaining
legal fees or for the $300,000 settlement.

Holiday Inns, Inc. Litigation

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

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

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

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

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

During the first quarter of fiscal 1996, the Company reported a cross-
claim filed by Mr. Donald Roberts against all assignees of W. M. R., Inc.,
including RSI Corporation and Sparjax Corporation. Mr. Roberts was an
individual guarantor of W. M. R., Inc.'s obligations under the land lease.
Counsel for RSI Corporation and Sparjax Corporation have moved to dismiss Mr.
Roberts' cross-claims and the court has granted these motions, without
prejudice. Counsel for Sparjax Corporation and RSI Corporation have informed
the Company that the cross-claims do not raise any new substantive issues, but
merely seek indemnification from all assignees in the event that Mr. Roberts
is required to pay Holiday Inns, Inc. on his individual guaranty.

On December 16, 1996, Sam Spevak filed a Fifth Amended Complaint and
Demand for Jury Trial against Holiday Inns, Inc. Sam Spevak's counsel has
alleged in the Fifth Amended Complaint that effective January 1996, the monthly
minimum rent under the lease is $5,595.85.

With respect to RSI Corporation's maximum exposure in this case,
Holiday Inns has asserted that RSI Corporation and all other lessees are
obligated to reimburse it $259,201 for rent it paid to the landlord as a result
of AHI's failure to pay under the lease. This amount, however, only represents
delinquent rent through October 13, 1993, because Holiday Inns contends that the
lessee's obligations under the lease terminated on that date as a result of
James "Duke" Williams evicting AHI on behalf of the landlord. Mr. Spevak claims,
however, that as of January, 1995, he is entitled to past monthly rental and
interest (from October 13, 1993 through December 20, 1994) of $82,289 plus
future monthly rental through the end of the lease term in 2068 of $1,834,565
(which sum represents the present value using a 6.5% discount rate). If Mr.
Spevak is successful in proving his claim, RSI Corporation's exposure includes
these latter amounts. In addition, should the court determine that Holiday Inns,
Inc. has an obligation to pay the cost of repairs and maintenance incurred to
date and throughout the balance of the lease term, the amount of such costs
could be substantial but cannot be quantified with any reasonable degree of
accuracy. The Company believes the existing motel property is in a state of
disrepair such that it is not commercially usable. The City of Jacksonville has
recently sent notice, presumably to all parties involved in this lawsuit,
threatening to condemn the property and demolish the entire structure. If that
occurs, and the Court determines that the lessees have an obligation to maintain
the property during the lease term, RSI Corporation's exposure could also
include the costs of demolition and the expense of rebuilding the hotel. This
liability, of course, cannot be accurately estimated at this time, but no doubt
involves a very substantial amount.

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

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

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

under the lease or to reimburse any third party for any payments made under the
lease as a result of the lawsuit described above.

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

Other Litigation

On January 12, 1995, a Mr. Cesar A. Cuenca served a complaint against
the Company in the 11th Judicial Circuit Court, Dade County, Florida seeking
damages in excess of the minimal jurisdictional amount of the Court, exclusive
of costs and interest, and demanding costs of the action together with such
further relief as the Court shall deem fit. The Plaintiff alleges that he was
injured while operating a vehicle that was sold by the Company. The Complaint
also named the manufacturer of the vehicle. The manufacturer has agreed to
provide full and complete indemnification to the Company based on the facts
known to date. There has been no suggestion in the litigation that the Company
did anything other than sell what is alleged to have been a defective product.
Accordingly, unless additional allegations are made against the Company, the
Company expects to continue to receive full indemnity and defense from the
manufacturer. The Company believes, based on the arrangements with the
manufacturer of the vehicle and the Company's own insurance, that there is no
known exposure to the Company from this litigation.

On February 4, 1994, a Mr. Everette Moncur and Edwina Moncur, his wife,
served a complaint against the Company in the 17th Judicial Circuit Court,
Broward County, Florida seeking damages in excess of $15,000 for injuries
sustained while operating a turf care product sold by the Company. The complaint
also named the manufacturer of the product. The manufacturer and its insurance
carrier accepted defense of the Company regarding this matter. This case was
settled in February 1997 and this case is now resolved in its entirety. The
Company did not incur any liability in the settlement of this matter.

ITEM 2. CHANGES IN SECURITIES*

ITEM 3. DEFAULTS UPON SENIOR SECURITIES*

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

The following summarizes the votes at the Annual Meeting of the Company's
shareholders held on January 18, 1997.

Broker
Matter For Against Withheld Abstentions Nonvotes
------- ---- ------- -------- ----------- --------

Election of
Directors

C. C. Guy 7,322,339 0 9,682 0 0
Buck Mickel 7,322,339 0 9,682 0 0
Charles M. Bolt 7,322,339 0 9,682 0 0

Ratification of
appointment of
Ernst & Young LLP
Independent auditors
for fiscal 1997 7,328,808 2,442 0 771 0

ITEM 5. OTHER INFORMATION*

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

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Listing of Exhibits

27 Financial Data Schedule (electronic filing only)

(b) Reports on Form 8-K

There were no reports on Form 8-K filed during the second quarter ended
February 28, 1997.

SIGNATURES

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

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

April 14, 1997 /s/ Joe F. Ogburn
- ---------------- ------------------------------
(Date) Joe F. Ogburn,
Vice President and Treasurer
(Principal Accounting Officer)