United States
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, 2002 or
-----------------
[ ] Transition Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition Period From to
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COMMISSION FILE NUMBER 0-18091
RSI HOLDINGS, INC.
(Exact name of small business issuer as specified in its charter)
NORTH CAROLINA 56-1200363
- ---------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
28 East Court Street, 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, including area code)
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 - 23,464,820 shares outstanding as of April 08,
2002
Transitional Small Business Disclosure Format (check one):Yes [ ] No [X]
INDEX
RSI HOLDINGS, INC.
(A Development Stage Company)
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements (Unaudited)
Condensed Consolidated balance sheet - February 28, 2002 1
Condensed consolidated statement of operations - Three and Six Months ended
February 28, 2002, two months ended February 28, 2001 and cumulative
amounts for the period from January 1, 2001 through February 28, 2002
(period from inception as development stage company) 2
Condensed consolidated statement of cash flows - Six Months ended February
28, 2002, two months ended February 28, 2001 and cumulative amounts for the
period from January 1, 2001 through February 28, 2002 (period from
inception as development stage company) 3
Condensed consolidated statement of changes in net assets in liquidation -
One and Four Months ended December 31, 2000 4
Notes to condensed consolidated financial statements --
February 28, 2002 5
Item 2. Plan of operation 7
PART II. OTHER INFORMATION 10
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults upon senior securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
RSI Holdings, Inc.
(A Development Stage Company)
Condensed Consolidated Balance Sheet
(Unaudited)
February 28, 2002
Assets
Current Assets:
Cash $ 1,400,000
Accounts receivable 3,000
-----------
Total current assets 1,403,000
Property and equipment:
Cost 24,000
Less accumulated depreciation 19,000
-----------
5,000
-----------
$ 1,408,000
===========
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 6,000
Accrued expenses 38,000
-----------
44,000
Long-term debt - Note B 1,510,000
Shareholders' equity:
Common Stock, $.01 par value-authorized
25,000,000 shares, issued and outstanding
23,464,820 shares at February 28, 2002 235,000
Additional paid-in capital 4,789,000
Deficit related to liquidated operations (4,869,000)
Deficit accumulated during development stage
(beginning January 1, 2001) (301,000)
-----------
(146,000)
-----------
$ 1,408,000
===========
The accompanying notes are an integral part of these consolidated financial
statements.
1
RSI Holdings, Inc.
(A Development Stage Company)
Condensed Consolidated Statement of Operations (Unaudited)
Three and Six Months ended February 28, 2002
Two Months ended February 28, 2001
and Cumulative Amounts
For the Period from January 1, 2001 through February 28, 2002
(Period from Inception as Development Stage Company)
For the
For the For the For the Period from
Three Months Six Months Two Months January 1
Ended Ended Ended 2001 through
February 28 February 28 February 28 February 28
2002 2002 2001 2002
------------ ------------ ------------- ------------
Expenses:
Selling, general and
administrative $ 68,000 $125,000 $ 25,000 $ 251,000
-------- --------- --------- ---------
Loss from operations (68,000) (125,000) (25,000) $(251,000)
Other income (expense):
Interest income 1,000 3,000 0 7,000
Interest expense (14,000) (28,000) (6,000) (57,000)
-------- -------- --------- ---------
Total other income (expense) (13,000) (25,000) (6,000) (50,000)
-------- -------- --------- ---------
Net loss $(81,000) $(150,000) $(31,000) $(301,000)
======== ========= ======== =========
Net loss per share - basic
and diluted $ (.00) $ (.01) $ (.00) $ (.02)
======== ========= ======== =========
Weighted average number
of shares outstanding 19,612,969 18,197,786 16,625,740 17,364,192
========== =========== ========== ==========
Effective January 1, 2001, the Company changed its accounting presentation to
those standards that apply to development state enterprises from the liquidation
basis of accounting.
During the four months ended December 31, 2000, the Company reported its results
under the liquidation basis of accounting as found on page 4 of this report.
The Company changed its accounting presentation to the liquidation basis of
accounting from the going concern basis of accounting effective January 31, 2000
and presented its financial information under the liquidation basis of
accounting from February 1, 2000 through December 31, 2000.
The accompanying notes are an integral part of these consolidated financial
statements.
2
RSI Holdings, Inc.
(A Development Stage Company)
Condensed Consolidated Statement of Cash Flows (Unaudited)
Six Months ended February 28, 2002
Two Months ended February 28, 2001
and Cumulative Amounts
For the Period from January 1, 2001 through February 28, 2002
(Period from Inception as Development Stage Company)
For the
For the For the Period from
Six Months Two Months January 1,
Ended Ended 2001 through
February 28 February 28 February 28
2002 2001 2002
----------- ------------ -------------
Cash (used in) operating activities $ (175,000) $ (59,000) $ (321,000)
Investing activities
Proceeds from sale of equipment - 1,000 1,000
--------- --------- ---------
Net cash provided by investing
activities - 1,000 1,000
--------- --------- ---------
Financing activities
Proceeds from long-term note payable 1,260,000 - 1,510,000
--------- --------- ---------
Net cash provided by financing
Activities 1,260,000 - 1,510,000
--------- --------- ---------
Net (decrease) increase in cash 1,085,000 (58,000) 1,190,000
Cash, Beginning of Period 315,000 210,000 210,000
--------- --------- ---------
Cash, End of Period $1,400,000 $ 152,000 $1,400,000
========= ========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
3
RSI Holdings, Inc.
(A Development Stage Company)
Condensed Consolidated Statement of Changes in Net Assets in Liquidation
(Unaudited)
One and Four Months ended December 31, 2000
For the For the
One Month Four Months
Ended Ended
December 31 December 31
2000 2000
----------- -----------
Deficiency in net assets in
liquidation at beginning of period $(595,000) $(595,000)
Activity that provided net assets:
Conversion of debt to common stock 250,000 250,000
Accruals and costs during period of liquidation:
None - -
--------- ---------
Deficiency in net assets in
liquidation at December 31, 2000 $(345,000) $(345,000)
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
4
RSI Holdings, Inc.
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements (Unaudited) Note A -
Summary of significant accounting policies and activities
Nature of business
On January 18, 2002, RSI Holdings, Inc. (the "Company"), executed a
letter of intent to acquire substantially all of the assets of Employment
Solutions, LLC, a South Carolina limited liability company.
On March 4, 2002, the Company through a newly-formed, wholly-owned
subsidiary, Employment Solutions, Inc., a South Carolina corporation
("Employment Solutions"), acquired substantially all of the assets of Employment
Solutions, LLC, a South Carolina limited liability company. Employment Solutions
is in the business of locating and providing temporary labor primarily to
manufacturing concerns in the Southeastern United States. Most of Employment
Solutions' employees are foreign nationals. Prior to the asset purchase, the
Company had not conducted any business since January 31, 2000 other than seeking
acquisition opportunities and liquidating the assets of its prior business.
Prior to January 31, 2000, its principal operating subsidiary, HomeAdd
Financial Corporation ("HomeAdd"), was primarily engaged in the business of
originating and selling second mortgage residential loans.
The Company and HomeAdd experienced significant recurring losses during
the period of HomeAdd's operations and had a working capital deficiency on
January 31, 2000. Because of the increased difficulties of HomeAdd in
originating and selling its loans, the Company decided to cease all of HomeAdd's
business operations on January 31, 2000.
Effective with the decision to cease all of HomeAdd's operations, the
Company began the orderly liquidation of the assets of HomeAdd and the
settlement of its liabilities. The Company completed the liquidation of HomeAdd
during the eleven months from February 1, 2000 through December 31, 2000.
During the period from January 1, 2001 through March 4, 2002, the
Company searched for and investigated certain business opportunities.
Basis of Presentation
Development stage.
As of January 1, 2001, the Company adopted the accounting principles
generally accepted in the United States of America that apply to established
operating enterprises.
At January 1, 2001 all of HomeAdd's assets had been sold and
substantially all of HomeAdd's known liabilities had been settled. The Company
was looking for other business opportunities. As a result of the completion of
the liquidation of HomeAdd, the Company's only business, and the search that the
Company was conducting for other business opportunities, the Company began
reporting under those accounting principles that apply to development stage
enterprises. Accounting principles generally accepted in the United States of
America that apply to established operating enterprises govern the recognition
of revenue by a development stage enterprise and determine whether a cost
incurred by a development stage enterprise is to be charged to expense when
incurred or is to be capitalized or deferred.
5
The accompanying unaudited condensed consolidated financial statements
at February 28, 2002 have been prepared in accordance with generally accepted
accounting principles for interim financial information 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 have been included. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's annual report on Form 10-KSB for the year ended August 31, 2001.
Liquidated operations.
As of January 31, 2000, the Company adopted the liquidation basis of
accounting.
As a result of the decision to cease all of HomeAdd's business
operations, the Company changed its basis of accounting for its financial
statements as of January 31, 2000 from the going concern basis of accounting to
the liquidation basis of accounting in accordance with accounting principles
generally accepted in the United States of America. Consequently, assets were
valued at estimated net realizable value and liabilities were presented at their
estimated settlement amounts, including costs associated with carrying out the
liquidation. The Company liquidated HomeAdd during the period beginning February
1, 2000 through December 31, 2000.
Note B - Long-term debt
Unsecured note payable to the mother of the President and Chief
Executive Officer of the Company with interest payable
quarterly at 8.0 percent per year. The unpaid principal
balance is due on August 14, 2006. $ 250,000
Unsecured note payable to the mother of the President and
Chief Executive Officer of the Company with interest payable
annually at 7.0 percent per year. The unpaid principal
balance is due on February 14, 2007. 1,200,000
Unsecured notes payable to the President and Chief Executive
Officer of the Company and his two adult siblings in
the amount of $20,000 each with interest payable annually
at 7.0 percent per year. The unpaid principal balance is
due on February 25, 2007. 60,000
----------
$1,510,000
==========
Note C - Loss per share
Basic net loss per common share is computed on the basis of the
weighted average number of common shares outstanding in accordance with
Statement of Financial Standards (SFAS) No. 128, "Earnings per Share". The
treasury stock method is used to compute the effect of stock options on the
weighted average number of common shares outstanding for the diluted method.
Since the Company incurred a loss, the treasury stock method is anti-dilutive.
6
Item 2. Plan of Operation.
General
Special Cautionary Notice Regarding Forward-Looking Statements.
This Report on Form 10-QSB contains forward-looking statements within
the meaning of Section 27A of the Securities Act and 21E of the Exchange Act.
Forward-looking statements are indicated by such terms as "expects", plans",
"anticipates", and words to similar effect. Such forward-looking statements are
subject to known and unknown risks, uncertainties and other factors that may
cause the actual results, performance or achievements of the Company to be
materially different from future results, performance or achievements expressed
or implied by such forward-looking statements. Important factors ("Cautionary
Statements") that could cause the actual results, performance or achievements of
the Company to differ materially from the Company's expectations are disclosed
in this Report on Form 10-QSB. All written or oral forward-looking statements
attributable to the Company are expressly qualified in their entirety by the
Cautionary Statements.
Acquisition of business
On March 4, 2002, the Company, through Employment Solutions, its
newly-formed, wholly-owned subsidiary, acquired substantially all of the assets
of Employment Solutions, LLC, a South Carolina limited liability company.
Employment Solutions is in the business of locating and providing temporary
labor primarily to manufacturing concerns in the Southeastern United States.
Most of Employment Solutions' employees are foreign nationals. Prior to the
asset purchase, the Company had not conducted any business since January 31,
2000 other than seeking acquisition opportunities and liquidating the assets of
its prior business.
Changes in basis of accounting
As described in Note A to its unaudited Condensed Consolidated
Financial Statements included above, the Company changed its basis of accounting
for its financial statements at January 31, 2000 from the going concern basis of
accounting to the liquidation basis of accounting in accordance with accounting
principles generally accepted in the United States of America. The Company's
activities during the eleven months beginning February 1, 2000 consisted
primarily of selling the assets and paying the liabilities of HomeAdd Financial
Corporation, ("HomeAdd"). The Company completed the liquidation of HomeAdd, its
only business by December 31, 2000.
On January 1, 2001, the Company changed its basis of accounting for its
financial statements from the liquidation basis of accounting to the going
concern basis of accounting in accordance with accounting principles with
generally accepted in the United States of America. The Company's activities
since January 1, 2001 consisted of looking for and investigating business
opportunities.
The Company's financial statements as of and for the three and six
months ended February 28, 2002 have been prepared in accordance with disclosure
requirements applicable to a development stage entity because no planned
operations have commenced.
Development stage operations
As stated above, at January 1, 2001, the Company had completed the
liquidation of HomeAdd and began searching for other business opportunities.
During the three and six months ended February 28, 2002, the Company had no
revenues.
General and administrative expenses were $68,000 and $125,000 during
the three and six months ended February 28, 2002 as compared to $25,000 during
the two months ended February 28, 2001. These expenses during the six months
7
ended February 28, 2002 include salaries and related costs of $81,000; legal,
accounting, and shareholder related expenses of $21,000; rent of $11,000 and
other administrative expenses of $12,000.
Interest expense incurred during the three and six months ended
February 28, 2002 was $14,000 and $28,000, respectively as compared to $6,000
during the two months ended February 28, 2001. Interest income in the amount of
$1,000 and $3,000 was earned on cash investments during the three and six months
ended February 28, 2002.
Liquidation stage operations
The Company's activities during the eleven months beginning February 1,
2000 through December 31, 2000 consisted primarily of selling the assets and
paying the liabilities of HomeAdd. The accruals and costs incurred during this
liquidation period were recorded during the period ended August 31, 2000.
Liquidity and Capital Resources
Anticipated Liquidity Requirements
Certain of the Company's shareholders have advanced funds as discussed
under "Debt Arrangements". At February 28, 2002, the Company's liabilities
exceeded its assets by $146,000.
The Company anticipates that its cash balances and cash generated by
the operations of its newly acquired subsidiary, Employment Solutions will be
sufficient to fund its cash requirements during the next twelve months.
Cash and Cash Equivalents
The Company had cash and cash equivalents in the amount of $1,400,000
as of February 28, 2002. Cash includes proceeds of loans made to the Company in
anticipation of the acquisition of Employment Solutions in the aggregate amount
of $1,260,000 as discussed below.
Debt Arrangements
On August 31, 2001, Minor H. Mickel, the mother of Buck A. Mickel,
President and Chief Executive Officer of the Company loaned the Company $250,000
under the terms of an unsecured note payable bearing interest at 8% per year
with the principal balance due on August 14, 2006.
On February 14, 2002, Minor H. Mickel loaned the Company $1,200,000
under the terms of an unsecured note payable bearing interest at 7% per year
with the principal balance due on February 14, 2007. On February 25, 2002, Buck
A. Mickel and his two adult siblings each loaned the Company $20,000 under the
terms of an unsecured note payable bearing interest at 7% per year with the
principal balance due on February 25, 2002. Total proceeds of these loans,
aggregating $1,260,000, were used in the purchase of Employment Solutions.
Debt converted into common stock
On December 20, 2000, Minor H. Mickel the Company loaned the Company
$500,000 under terms of an 8% convertible note payable on December 20, 2005.
Under the terms of this note all principal and interest is convertible at the
conversion rate of $.075 per share at the option of either the Company or holder
of the convertible note. Effective January 21, 2002, the entire principal amount
of $500,000 was converted into 6,666,666 shares of the Company's common stock.
8
Acquisition debt
On March 4, 2002, the Company through its wholly-owned subsidiary,
Employment Solutions, purchased the assets of Employment Solutions, LLC for
total consideration of $2,060,000. Cash of $1,260,000 was paid at closing. The
remaining consideration of $800,000 was paid in the form of a five-year note
bearing interest at the rate of 6% per year secured by the Company's pledge of
all the outstanding stock of Employment Solutions.
9
PART II. Other information
ITEM 1. LEGAL PROCEEDINGS*
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 24, 2002.
Broker
Matter For Against Withheld Abstentions Nonvotes
------ --- ------- --------- ----------- --------
Election of
Directors
Buck A. Mickel 16,172,702 N/A 108,090 N/A 0
C. C. Guy 16,181,295 N/A 99,497 N/A 0
Charles M. Bolt 16,181,295 N/A 99,497 N/A 0
Joe F. Ogburn 16,172,702 N/A 108,090 N/A 0
Charles C. Mickel 16,181,295 N/A 99,497 N/A 0
Ratification of
Appointment of
Elliott, Davis &
Company L.L.P.
for fiscal 2002 16,182,541 1,776 N/A 96,475 0
ITEM 5. OTHER INFORMATION*
On April 2, 2002, the Greenwood, South Carolina office and warehouse facility of
Employment Solutions, the Company's newly acquired subsidiary, burned.
Substantially all the furniture and equipment and historical records contained
in the office were destroyed, including substantially all of the historical
financial records of Employment Solutions, LLC and its predecessor corporation.
The effect on operations was not material. The Company is currently assessing
its insurance coverage. The Company is also assessing whether the loss of
records will affect its ability to provide historical financial statements for
Employment Solutions.
*Items 1, 2, and 3 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
None
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K, dated January
21, 2002, with respect to the conversion of a $500,000
convertible note into 6,666,666 shares of the Company's
common stock. Also included were disclosures regarding
transfers of the Company's common stock to Buck A. Mickel and
his two adult siblings from their mother on January 28, 2002.
10
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 12, 2002 /s/ Joe F. Ogburn
- ----------------- ------------------------------
(Date) Joe F. Ogburn,
Treasurer and Chief Financial Officer
(Principal Accounting Officer)
11