UNITED STATES
                             SECURITIES AND EXCHANGE
                                   COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

X    ANNUAL REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

            For the Fiscal Year Ended August 31, 2001

     TRANSITION REPORT UNDER 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.
                 (Name of small business issuer 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, Post Office Box 6847, Greenville, South Carolina 29606
               (Address of principal executive offices) (Zip Code)

Issuer's telephone number (864) 271-7171

Securities registered under Section 12(b) of the Exchange Act:

                                         (Name of each exchange on
         (Title of each class)               which registered)

               None                               None

Securities registered under Section 12(g) of the Exchange Act:

                          Common Stock, par value $.01

                                (Title of Class)

     Check  whether  the issuer (1) 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 [ ]

     Check  if  disclosure  of  delinquent  filers  in  response  to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

         State issuer's revenues for its most recent fiscal year.

         The issuer's revenues from operations during fiscal year 2001 were $0.

     State the aggregate market value of the voting and non-voting common equity
held by  non-affiliates  computed by  reference to the price at which the common
equity was sold, or the average bid and asked price of such common equity, as of
a specified  date within the past 60 days.  The  aggregate  market  value of the
voting stock held by non-affiliates as of November 1, 2001 was $41,000.

     State the number of shares  outstanding of each of the issuer's  classes of
common equity, as of the latest practicable date (November 1, 2001).

         Common Stock, par value             16,798,154 shares outstanding
             $.01 per share

DOCUMENTS INCORPORATED BY REFERENCE:  Portions of the Company's definitive Proxy
Statement,  to be filed pursuant to Regulation 14A for the annual  shareholders'
meeting currently  scheduled to be held on January 17, 2002, are incorporated by
reference into Part III.

         Transitional Small Business Disclosure Format: Yes [ ] No [X]



<PAGE>

PART I.

Item 1. Description of Business

     RSI Holdings,  Inc. (the  "Company") was  incorporated in North Carolina in
1978. The Company's  wholly-owned  subsidiary,  HomeAdd  Financial  Corporation,
engaged through January 31, 2000 in the consumer finance business and originated
and sold consumer  finance  receivables,  substantially  all of which were loans
secured by mortgages on improved real estate.

     Effective at January 31,  2000,  the Company  decided  that HomeAdd  should
cease all business  activities  and begin the orderly  liquidation of its assets
and  settlement of its  liabilities.  The Company  completed the  liquidation of
HomeAdd  during  December 2000 and currently  has no business  operations.  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 a development stage enterprise.  As a development stage enterprise
the Company is investigating other business opportunities, but at this time none
have been identified.

     Through   January  31,   2000,   HomeAdd  made  high   loan-to-value   debt
consolidation  and home improvement loans ("HLTV Loans") secured by mortgages to
customers  in South  Carolina,  North  Carolina,  Georgia,  Kentucky,  Maryland,
Connecticut,  Delaware  and  Florida.  HomeAdd  made  loans  secured  by  second
mortgages in which the total loans  outstanding  on the property  could be up to
125% of the estimated fair value of the real  property.  HomeAdd also made loans
that were  secured by first  mortgages in which the loans could be up to 100% of
the  estimated  fair value of the real  property.  These  loans were sold on the
secondary  market.  HomeAdd's  primary means of generating  business was through
direct mail solicitation, outgoing telephone solicitation and leads generated by
internet sources.

     The Company  competed  with finance  companies,  banks and other  financial
institutions,  many of which also  solicited  loan business  through direct mail
solicitation.  In  addition  to direct  mail  solicitations,  these  competitors
advertised through various other advertising media.

     The Company did not have the financial resources to make the loans and hold
them until their  maturity;  thus the Company was dependent  upon its ability to
sell customer's loans to third party  purchasers.  The Company sold to a limited
number of  wholesale  lenders.  Most of the  Company's  competitors  generated a
greater  volume  of loans  than the  Company  and this gave the  competitors  an
advantage when dealing with the loan  purchasers  because the  purchasers  could
purchase in bulk from these large  originators  which reduced  their  processing
costs.  The Company  attempted to compete  primarily on the basis of service and
competitive  pricing.  The  Company  believes  that  it was a  relatively  small
competitor in its market.

     The Company was approved by the Federal Housing Administration ("FHA") as a
FHA Title I lender and  accordingly  complied with Federal  regulations  for FHA
Title I lenders.  In addition,  HomeAdd complied with the banking regulations of
the various States in which it did business.  For further  information about the
operations  of  HomeAdd,  see  Part II,  Item 6,  "Management's  Discussion  and
Analysis  of  Financial   Condition  and  Results  of   Operations,"   which  is
incorporated herein by reference.

     The  Company's  executive  offices  are  located at 28 East  Court  Street,
Greenville,  South Carolina,  29601. Its telephone number is (864) 271-7171.  At
August 31, 2001 the Company and its  operating  subsidiary  had a total of three
(3) employees, only one of which is considered full-time.

                                       1
<PAGE>

Environmental Matters

     The Company is subject to federal,  state and local  environmental laws and
regulations,  however,  due to the nature of the Company's  current  activities,
such  laws and  regulations  do not have a  direct,  substantial  impact  on the
Company's business operations.

Item 2. Description of Property

     The Company leases  approximately  3,000 square feet of floor space located
at 28 East Court Street,  Greenville,  South  Carolina to serve as its principal
executive  offices.  The Company  believes  that the  property  is adequate  and
suitable for executive office space. The monthly rental expense is $1,500.  This
lease includes office furniture and equipment. The office space at 28 East Court
Street is leased from CTST, LLC. CTST, LLC is owned by three shareholders,  with
two being beneficial  owners of more than 5% of the outstanding  common stock of
the Company.  One of the shareholders is the President,  Chief Executive Officer
and a  director  of the  Company  and the other two  shareholders  are his adult
siblings,  one of whom is also a director of the Company.  The Company  believes
that this lease  contains  provisions  as  favorable  to the Company as could be
obtained from a third-party landlord.

     The  Company  has no plans to invest  in real  estate  or  persons  engaged
primarily  in real estate  activities,  nor does it have any formal  policy with
respect to such  investments.  As  discussed in Part I, Item 1  "Description  of
Business" and Part II, Item 6 "Management's Discussion and Analysis of Financial
Condition and Results of  Operations",  which  information  is  incorporated  by
reference  herein,  HomeAdd made loans secured by first and second  mortgages in
the ordinary course of business prior to discontinuing its operations.

     The  Company  carries  such  insurance  as  is  considered  reasonable  and
necessary  to cover its casualty and  liability  exposures.  The lessor pays the
insurance on the facility described above.


Item 3. Legal Proceedings

         None.

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

     No matters were submitted to a vote of securities holders during the fourth
quarter of the Company's 2001 fiscal year.




                                       2
<PAGE>

PART II

Item 5.  Market for Common Equity and Related Stockholder Matters.

     The Company's Common Stock is thinly traded in the over-the-counter  market
by NASDAQ. The high and low bid quotations of the Company's Common Stock are set
forth below for the fiscal  quarters  indicated,  as reported by NASDAQ for such
periods.  These quotations reflect inter-dealer prices,  without retail mark-up,
mark-down or commission, and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>

                                                                2001                      2000

                  Fiscal                                   High         Low          High           Low

                  <S>                                      <C>        <C>          <C>             <C>
                  First Quarter                            .07        .015         .16             .05

                  Second Quarter                           .015       .015         .12             .05

                  Third Quarter                            .02        .01          .32             .05

                  Fourth Quarter                           .01        .01          .09             .03
</TABLE>

     As of November 1, 2001, the Company had  approximately  566 shareholders of
record.

     The Company paid no cash  dividends with respect to its Common Stock during
fiscal  2001,  2000 and 1999,  and does not intend to pay cash  dividends in the
foreseeable future.

     The Company issued  5,557,333 shares of its common stock on August 31, 2000
and 3,333,333  shares of its common stock on January 4, 2001 to Minor H. Mickel.
Minor H. Mickel is the mother of the  President and Chief  Executive  Officer of
the Company.  This common stock has not been registered under the Securities Act
of 1933 and was  issued  in  exchange  for  convertible  debt in the  amount  of
$650,000 plus accrued  interest in the amount of $16,800 at $.075 per share. The
convertible debt was issued by the Company in exchange for cash advances made to
the Company for working capital.







                                       3
<PAGE>

Item 6.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

General

         Special Cautionary Notice Regarding Forward-Looking Statements.

     This Report on Form 10-KSB 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-KSB.  All written or oral  forward-looking  statements
attributable  to the Company are  expressly  qualified in their  entirety by the
Cautionary Statements.

Results of Operations

     On January 31, 2000 the Board of Directors of the Company  decided to cease
the  business  of its  consumer  loan  business  that was  conducted  by HomeAdd
Financial  Corporation  ("HomeAdd").  Effective  immediately,  HomeAdd began the
orderly   liquidation  of  its  assets  and   settlement  of  its   liabilities.
Accordingly,  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.  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  generally
accepted in the United States of America.  The Company's  activities  during the
eight months ended  August 31, 2001  consisted of looking for and  investigating
business  opportunities.  Although the Company has considered certain businesses
in which it might engage, it has been unable to make an appropriate  acquisition
or identify a business that would be a viable  opportunity for it to pursue. The
Company's  financial  statements as of and for the eight months ended August 31,
2001 have been prepared in accordance with disclosure requirements applicable to
a  development  stage  entity  because  no  business   opportunities  have  been
identified and no operations have commenced.

Development stage operations

     As stated  above,  at  January 1,  2001,  the  Company  had  completed  the
liquidation of HomeAdd and began searching other business opportunities.  During
the eight months ended August 31, 2001, the Company had no revenues.

     General and  administrative  expenses were $126,000 during the eight months
ended August 31, 2001.  These  expenses  include  salaries and related  costs of
$80,000; legal, accounting, and shareholder related expenses of $18,000; rent of
$15,000 and other administrative expenses of $13,000.

     Interest expense incurred during the eight months ended August 31, 2001 was
$29,000.  Interest income in the amount of $4,000 was earned on cash investments
during the eight months ended August 31, 2001.

                                       4
<PAGE>
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  following  paragraphs  describe  such
activities  during the last seven  months of the year ended  August 31, 2000 and
the first four months of the year ended August 31, 2001.

         Restricted Investment

     At January 31, 2000 the Company was required to maintain an  investment  in
HomeAdd of $250,000. In compliance with this agreement, at January 31, 2000, the
assets of the Company  included a  certificate  of deposit  with a face value of
$250,000.  At the  maturity  date of March 22, 2000 the loan  facility  had been
satisfied and the $250,000 certificate of deposit was liquidated.

         Mortgage Notes Receivable Held for Sale

     At January 31, 2000 HomeAdd's net assets included mortgage notes receivable
in the amount of $353,000,  net of deferred  loan fees of $20,000.  HomeAdd sold
all of its outstanding  loans during the seven months  subsequent to January 31,
2000.

         Property and equipment

     At January 31, 2000 HomeAdd's net assets  included  furniture and equipment
with an original cost of approximately  $315,000 and net book value of $211,000.
HomeAdd sold furniture and equipment having book value of approximately $182,000
for approximately $51,000 and gave furniture and equipment having net book value
of  approximately  $24,000 in  settlement  of the July and August  2000 net rent
aggregating approximately $12,000. Furniture and equipment having net book value
of approximately $5,000 was retained for use by the Company.

         Adjustment to Liquidation Basis

     Because the Company  decided in January 2000 that it should cease HomeAdd's
existing business  operations and sell substantially all of HomeAdd's  operating
assets, the Company has reported its financial position on the liquidation basis
of accounting at August 31, 2000. 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 HomeAdd.

     At  February  1,  2000,  in  accordance  with  the  liquidation   basis  of
accounting,  assets were restated to estimated realizable value net of estimated
costs of sale,  and  liabilities  were adjusted to include all  estimated  costs
associated with carrying out the liquidation of HomeAdd.  The total accruals and
costs required to convert from the going concern  (historical cost) basis to the
liquidation  basis of accounting was $564,000.  The adjustment to record the net
amount realized from the property and equipment was $143,000.  Additional  costs
of  $421,000  were  recorded  to include  additional  expenses  that the Company
expected to incur during the period of  liquidation  through  December 31, 2000.
These costs  included  anticipated  legal fees,  accounting  and auditing  fees,
salaries,  lease  payments  that included the $60,000 paid to settle the HomeAdd
lease through the expiration of its lease, insurance and other expenses that the
Company expected to incur prior to December 31, 2000.

                                       5
<PAGE>
Leased Properties

     For a description of the Company's arrangements with respect to its current
and prior lease obligations  reference is made to Part I, Item 2. - "Description
of Property," which is incorporated herein by this reference.

Financing

     The liquidation  period began on February 1, 2000 and was completed  before
December  31,  2000.  As of January 1, 2001 the  development  stage  began.  The
following paragraphs describe the financing  arrangements during the liquidation
and development stage periods.

     Proceeds from the sale of HomeAdd's  mortgage notes receivable and the sale
of HomeAdd's property and equipment were applied to the payment of HomeAdd's and
the Company's liabilities.  In addition to these proceeds,  funds made available
from the debt facilities as described in the following  paragraphs are available
for use during the liquidation period.

     During  February  2000,  Minor H.  Mickel,  the  mother of Buck A.  Mickel,
President  and Chief  Executive  Officer  of the  Company,  loaned  the  Company
$400,000 under the terms of an 8% convertible note payable on February 16, 2005.
Under the terms of this debt,  all principal and unpaid  interest is convertible
into the Company's common stock at the conversion rate of $.075 per share at the
option of either the Company or the holder of the  convertible  note.  Effective
August 31,  2000,  the entire  principal  amount of  $400,000  plus all  accrued
interest aggregating $16,800 relating to the convertible note was converted into
5,557,333 shares of the Company's  common stock.  The Company issued  previously
unissued and unregistered stock to Mrs. Mickel.

     The Company used the proceeds of the $400,000  convertible  note in part to
pay off the Company's  working  capital line of credit with a bank in the amount
of $150,000 and its $75,000 capital line of credit with another bank.

     During  the year ended  August 31,  1999,  the Estate of Buck  Mickel,  the
former  Chairman of the Board and Chief  Executive  Officer of the Company  (and
Buck A. Mickel's  father),  loaned the Company $250,000 bearing interest at 8.5%
per year payable quarterly. Proceeds from the loan were used for working capital
and the  principal  was  payable  ten years  from the date of the  loan.  During
October 2000, the Company issued a note that was  convertible  into Common Stock
of the Company in exchange for this debt.  Effective January 4, 2001, the entire
principal  amount  of  $250,000  was  converted  into  3,333,333  shares  of the
Company's common stock.

     The  Company  had a  $500,000  loan  facility  with a bank that  expired on
January  1,  2001.  A  corporation  that is owned  by the  President  and  Chief
Executive Officer,  his mother and his two adult siblings  guaranteed payment of
the loan and pledged certain securities as collateral to the loan. At August 31,
2000 the  outstanding  principal  balance  payable  under this  $500,000  credit
facility was $250,000.

     On December 20, 2000, Minor H. Mickel loaned the Company $500,000 under the
terms of an 8% convertible note payable on December 20, 2005. Under the terms of
this debt, all principal and unpaid  interest is convertible  into the Company's
common stock at the  conversion  rate of $.075 per share at the option of either
the  Company  or the  holder  of the  convertible  note.  The  proceeds  of this
convertible note was used to pay the then outstanding  balance ($295,000) of the
loan facility with a bank described in the above paragraph.

                                       6
<PAGE>
Historical Results of Operations

     Revenues  were  $753,000  during the five months  ended  January 31,  2000.
Revenues consisted  primarily of loan origination fees and gain from the sale of
the loans made.

     Selling,  general and  administrative  expenses were $1,187,000  during the
first five months of fiscal 2000. These expenses  include  expenses  incurred by
HomeAdd of $1,057,000 during the five months ended January 31, 2000. The HomeAdd
expenses primarily related to advertising,  salaries, and various administrative
expenses of HomeAdd. The remaining general and administrative expenses primarily
consisted of salaries,  legal, audit and other administrative  expenses incurred
by the Company. The expenses of fiscal 2000 included HomeAdd's expenses incurred
to attempt to  increase  the volume of its loan  originations  during the fiscal
2000 period when HomeAdd was experiencing  increased difficulties in selling its
loans.

     During  fiscal  year 2001 and 2000,  net  deferred  tax  benefits  were not
recorded relating to temporary differences since the Company is not assured that
the resulting additional deferred tax assets will be realized.

     HomeAdd  offered HLTV Loans to certain  qualified  borrowers that permitted
the loan proceeds to be used for debt consolidation and home improvements. Under
the terms of these HLTV Loans, HomeAdd made loans secured by second mortgages in
which the total loans  outstanding  on that property  could be up to 125% of the
estimated fair value of the real property.  A qualified borrower was required to
be a homeowner with  acceptable  levels of income and have an acceptable  credit
history.  Substantially  all of the loan  volume  during the five  months  ended
January 31, 2000 consisted of HLTV Loans.

     The  Company  sold  substantially  all  of the  loans  it  originated  on a
non-recourse  basis in the secondary market.  The non-recourse  basis means that
the  Company  represented  that  loans  were  properly  documented  and  made in
accordance with applicable lending criteria, but that the purchaser of the loans
assumed the full credit risk. The Company's credit  guidelines for its loans met
the underwriting  criteria of the loan purchasers.  During the five months ended
January 31, 2000,  the Company  made loans  aggregating  $9,300,000.  All of the
mortgage notes were sold in the secondary market.

     During fiscal 2000 the Company  solicited  loans in South  Carolina,  North
Carolina,   Georgia,  Florida,  Kentucky,   Maryland,   Connecticut,   Delaware,
Massachusetts, Minnesota, Missouri, Oregon, Utah and Wisconsin.

     HomeAdd attempted to sell, on a non-recourse basis, all of its loans on the
secondary  market to  wholesale  buyers.  HomeAdd did not have the capital  that
would be necessary to originate a significant  volume of loans without  promptly
selling its loans on the secondary market.  During fiscal 2000 a federal bank in
California  to whom HomeAdd had sold a  substantial  number of its loans reduced
the number of loans that it would buy, which caused  increased  difficulties for
HomeAdd in selling  its loans.  Although  HomeAdd  sought to replace the bank in
California with other purchasers of mortgages and to operate profitably,  it was
unable to do so.

     The Company  experienced  the  effects of higher  credit  standards  in the
resale  market for its loans during the first five months of fiscal  2000.  This
was caused by an investor market that was becoming more conservative and also by
banking  regulators  that were exercising a greater degree of oversight over the
federal banks that were purchasing  HomeAdd's  products in the secondary market.
These  factors  resulted in higher  credit  requirements  for its  customers and
reduced  premiums that the Company was able to receive on the sale of its loans.
This had an adverse effect on the loan origination  volume and  profitability on
the loans originated during the first five months of fiscal 2000.


                                       7
<PAGE>

Liquidity and Capital Resources

         Anticipated Liquidity Requirements

     Certain of the Company's  shareholders  have advanced  funds and guaranteed
debt under the debt  arrangements as discussed below under "Debt  Arrangements".
At August 31, 2001, the Company's liabilities exceeded its assets by $496,000.

         Cash and Cash Equivalents

     The Company had cash and cash  equivalents  in the amount of $315,000 as of
August 31,  2001.  The  Company  earned  $4,000 and $12,000 on its cash and cash
equivalents and the restricted investment described under restricted investments
above  during the eight  months  ended  August 31,  2001 and five  months  ended
January 31, 2000, respectively.

         Debt Arrangements

     On December 20, 2000, Minor H. Mickel loaned the Company $500,000 under the
terms of an 8% convertible note payable on December 20, 2005. Under the terms of
this debt, all principal and unpaid  interest is convertible  into the Company's
common stock at the  conversion  rate of $.075 per share at the option of either
the Company or the holder of the convertible note.

     On August 14, 2001,  Minor H. Mickel 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.

Item 7. Financial Statements

     The  response  to this  Item is set  forth on page F-2 and  submitted  as a
separate section of this report.

Item 8. Changes  in and  Disagreements  with  Accountants  on   Accounting  and
        Financial Disclosure

         None



                                       8
<PAGE>

PART III

Item 9.   Directors, Executive Officers, Promoters and Control Persons;
          Compliance with Section 16(a) of the Exchange Act

Item 10.  Executive Compensation

Item 11.  Security Ownership of Certain Beneficial Owners and Management

Item 12.  Certain Relationships and Related Transactions

     Information  required  under  Items  9,  10,  11  and  12 of  Part  III  is
incorporated  herein  by  reference  to the  portions  of the  definitive  Proxy
Statement to be filed with the Securities and Exchange Commission on or prior to
120 days following the end of the Company's fiscal year.

Item 13. Exhibits, and Reports on Form 8-K
<TABLE>
<CAPTION>

(a)           Listing of Exhibits

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

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

3.2.1         By-laws of RSI Holdings, Inc., as amended: Incorporated by reference to Exhibit 3.1.1 to the Form S-4.

3.2.2         Amendments to By-laws: Incorporated by reference to Exhibit 3.2.2 to the Form 10-KSB of the Registrant filed with the
              Securities and Exchange Commission for the fiscal year ended August 31, 1996, File No. 0-18091.

4.1           See Exhibits 3.1, 3.1.1, 3.2.1 and 3.2.2.

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

*10.1         RSI Holdings, Inc., Stock Option Plan, including an amendment: Incorporated by reference to Exhibit 10.9 to the Form
              10-K of the Registrant filed with the Securities and Exchange Commission for the fiscal year ended August 31, 1990,
              File No. 0-18091   (the "1990 Form 10-K").

*10.1.1       Amendment No. 2 to Stock Option Plan: Incorporated by reference to Exhibit 10.9.1 to the Form 10-K of the Registrant
              filed with the Securities and Exchange Commission for the fiscal year ended August 31, 1992, as amended, File No.
              0-18091 (the "1992 Form 10-K").

*10.1.2       Amendment No. 3 to Stock Option Plan: Incorporated by reference to Exhibit 99.1 to the Company's Registration
              Statement on Form S-8 filed with the Securities and Exchange Commission on September 9, 1998 (Commission File No.
              333-63109).

*10.1.3       Amendment No. 4 to Stock Option Plan: Incorporated by reference to Exhibit 99.1 to the Company's Registration
              Statement on Form S-8 filed with the Securities and Exchange Commission on February 10, 1999 (Commission File No.
              333-72101).

                                       9
<PAGE>

*10.1.4        Amendment No. 5 to Stock Option Plan: Incorporated by reference to Exhibit A to the Company's Definitive Proxy
              Statement filed with the Securities and Exchange Commission on December 30, 1999 (Commission File No. 333-72101).

*10.2         RSI Holdings, Inc. Incentive Stock Award Plan, including an amendment: Incorporated by reference to Exhibit 10.8 to
              the 1990 Form 10-K.

*10.2.1       Amendment to Incentive Stock Award Plan: Incorporated by reference to Exhibit 10.8.1 to the 1992 Form 10-K.

*10.3         Stock Option Agreement by and between the Registrant and Charles M. Bolt dated as of July 2, 1997: Incorporated by
              reference to the Form 10-KSB of the Registrant filed with the Securities and Exchange Commission for the year ended
              August 31, 1997, File No. 0-18091.

*10.4         Stock Option Agreement by and between the Registrant and C. C. Guy dated as of April 22, 1998: Incorporated by
              reference to the Form 10-KSB of the Registrant filed with the Securities and Exchange Commission for the year ended
              August 31, 1998, File No. 0-18091.

*10.5         Stock Option Agreement by and between the Registrant and Charles M. Bolt dated as of April 22, 1998: Incorporated by
              reference to the Form 10-KSB of the Registrant filed with the Securities and Exchange Commission for the year ended
              August 31, 1998, File No. 0-18091.

*10.6         Stock Option Agreement by and between the Registrant and C. Thomas Wyche dated as of April 22, 1998: Incorporated by
              reference to the Form 10-KSB of the Registrant filed with the Securities and Exchange Commission for the year ended
              August 31, 1998, File No. 0-18091.

*10.7         Stock Option Agreement by and between the Registrant and C. C. Guy dated as of August 18, 1999: Incorporated by
              reference to the Form 10-KSB of the Registrant filed with the Securities and Exchange Commission for the year ended
              August 31, 1999, File No. 0-18091.

*10.8         Stock Option Agreement by and between the Registrant and Charles M. Bolt dated as of August 18, 1999: Incorporated by
              reference to the Form 10-KSB of the Registrant filed with the Securities and Exchange Commission for the year ended
              August 31, 1999, File No. 0-18091.

*10.9         Stock Option Agreement by and between the Registrant and C. Thomas Wyche dated as of August 18, 1999: Incorporated by
              reference to the Form 10-KSB of the Registrant filed with the Securities and Exchange Commission for the year ended
              August 31, 1999, File No. 0-18091.

10.10         Convertible note dated December 20, 2000 issued by the Company payable to Minor H. Mickel: Incorporated by reference
              to the Form 10-QSB of the Registrant filed with the Securities and Exchange Commission for the fiscal quarter ended
              November 30, 2000, File No. 0-18091).

21.           Subsidiaries of the Registrant.

23.           Consent of Independent Certified Public Accountants.

* Management contract or compensatory plan required to be filed as an exhibit pursuant to Item 13 of Form 10-KSB.

</TABLE>
                                       10
<PAGE>

         (b)      Reports on Form 8-K:

                  None.










                                       11
<PAGE>


                                   SIGNATURES




In  accordance  with  Section 13 or 15 (d) of the Exchange  Act, the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

RSI HOLDINGS, INC.                                                     TITLE


/s/ Buck A. Mickel   November 21, 2001   President and Chief Executive Officer
Buck A. Mickel       (Date)              (Principal Executive Officer)

In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on behalf of the  registrant and in the capacities and on the
dates indicated.

/s/ Buck A. Mickel     November 21, 2001  Director, President and Chief
Buck A. Mickel        (Date)              Executive Officer
                                          (Principal Executive Officer)

/s/ Charles C. Mickel  November 21, 2001  Director
Charles C. Mickel      (Date)


/s/ C. C. Guy          November 21, 2001  Director
C. C. Guy              (Date)


/s/ Charles M. Bolt    November 21, 2001  Director
Charles M. Bolt        (Date)



/s/ Joe F. Ogburn      November 21, 2001    Director, Vice President and
Joe F. Ogburn          (Date)               Treasurer (Principal Financial
                                            and Accounting Officer)








                                       12
<PAGE>




                          ANNUAL REPORT ON FORM 10-KSB

                   ITEM 7, ITEM 14(A)(1) AND (2), (C) AND (D)

                          LIST OF FINANCIAL STATEMENTS

                              FINANCIAL STATEMENTS

                           YEAR ENDED AUGUST 31, 2001

                               RSI HOLDINGS, INC.

                           GREENVILLE, SOUTH CAROLINA





























                                       F-1


<PAGE>


                               RSI HOLDINGS, INC.

                        FORM 10-KSB-ITEM 14(A)(1) AND (2)

                          INDEX OF FINANCIAL STATEMENTS


The  following  consolidated  financial  statements  of RSI  Holdings,  Inc. are
included in Item 7:

     Consolidated balance sheet - August 31, 2001

     Consolidated  statements  of operations - For the eight months ended August
     31, 2001 and five months ended January 31, 2000

     Consolidated  statements  of  shareholders'  deficit - For the years  ended
     August 31, 2001 and 2000

     Consolidated  statements  of cash flows - For the eight months ended August
     31, 2001 and five months ended January 31, 2000

     Consolidated  statements  of changes in net assets in  liquidation - Period
     from  September 1, 2000 through  December 31, 2000 and period from February
     1, 2000 through August 31, 2000

     Notes to consolidated financial statements - August 31, 2001

























                                       F-2


<PAGE>



                          INDEPENDENT AUDITOR'S REPORT



To the Board of Directors
RSI HOLDINGS, INC.
Greenville, South Carolina

     We have audited the balance sheet of RSI HOLDINGS, INC. AND SUBSIDIARIES as
of August 31, 2001, the related consolidated  statement of operations,  and cash
flows for the periods from January 1, 2001 to August 31, 2001 and from September
1, 1999 to January 31, 2000. We have audited the related consolidated statements
of changes in net assets in  liquidation  of the Company  for the  periods  from
September 1, 2000 to December  31, 2000 and from  February 1, 2000 to August 31,
2000. We have also audited the related statements of consolidated  shareholders'
deficit  for the  years  ended  August  31,  2001 and 2000.  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 conducted our audits in accordance  with  auditing  standards  generally
accepted in the United States of America.  Those standards  require that we plan
and  perform  the  audit  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 consolidated  financial statement
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.

     In our opinion,  the consolidated  financial  statements referred to in the
first  paragraph  present fairly,  in all material  respects,  the  consolidated
financial position of RSI HOLDINGS, INC. AND SUBSIDIARIES as of August 31, 2001,
and the  related  consolidated  results  of  operations,  and cash flows for the
periods  from  January 1, 2001 to August 31, 2001 and from  September 1, 1999 to
January 31, 2000, the related  consolidated changes in net assets in liquidation
for the periods from  September  1, 2000 to December  31, 2000,  and the related
consolidated  statements of shareholders' deficit for the years ended August 31,
2001 and 2000, in conformity with accounting  principles  generally  accepted in
the United States of America.


                                                  /s/ Elliott Davis, LLP

Elliott Davis, LLP
Greenville, South Carolina
October 5, 2001



                                       F-3


<PAGE>
<TABLE>
<CAPTION>

                                                          RSI HOLDINGS, INC.
                                                    (A DEVELOPMENT STAGE COMPANY)
                                                      CONSOLIDATED BALANCE SHEET
                                                           AUGUST 31, 2001


                                                                ASSETS

<S>                                                                                                             <C>
CURRENT ASSETS
    Cash                                                                                                         $ 315,000
    Accounts receivable                                                                                              4,000
                                                                                                                ----------

                Total current assets                                                                               319,000


PROPERTY AND EQUIPMENT, net of accumulated depreciation of $18,000                                                   7,000
                                                                                                                 ---------

                                                                                                                 $ 326,000
                                                                                                                 =========

                                             LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT LIABILITIES
    Accounts payable                                                                                            $    3,000
    Accrued expenses and other liabilities - Note 2                                                                 69,000
                                                                                                               -----------

                Total current liabilities                                                                           72,000

LONG-TERM NOTES PAYABLE - Note 3                                                                                   750,000

COMMITMENTS AND CONTINGENCIES - Note 7

SHAREHOLDERS' DEFICIT - Notes 4 and 6
    Common stock - $.01 par value; 25,000,000 shares
       authorized; 16,798,154 shares issued and outstanding                                $    168,000
    Additional paid-in capital                                                                4,356,000
    Deficit related to liquidated operations                                                 (4,869,000)
    Deficit accumulated during development stage
       (beginning January 1, 2001)                                                             (151,000)          (496,000)
                                                                                       ----------------------    ----------

                                                                                                                 $ 326,000
                                                                                                                 =========






       The accompanying notes are an integral part of this consolidated financial statement.
</TABLE>

                                                                 F-4


<PAGE>
<TABLE>
<CAPTION>
                                                          RSI HOLDINGS, INC.
                                                    (A DEVELOPMENT STAGE COMPANY)
                                                CONSOLIDATED STATEMENTS OF OPERATIONS
                                            FOR THE EIGHT MONTHS ENDED AUGUST 31, 2001 AND
                                                  FIVE MONTHS ENDED JANUARY 31, 2000



                                                                                            FOR THE           FOR THE
                                                                                             EIGHT             FIVE
                                                                                         MONTHS ENDED      MONTHS ENDED
                                                                                           AUGUST 31        JANUARY 31
                                                                                               2001             2000
                                                                                       -----------------   -----------------


<S>                                                                                    <C>                 <C>
REVENUES
    Origination fees                                                                   $               -   $        648,000
    Gain on sale of loans                                                                              -            105,000
                                                                                       -----------------   ----------------
       Total revenues                                                                                  -            753,000

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                                                     126,000          1,187,000
                                                                                       -----------------   ----------------
Loss from operations                                                                            (126,000)          (434,000)
                                                                                       -----------------   ----------------

OTHER INCOME (EXPENSES)
    Interest income                                                                                4,000             91,000
    Interest expense                                                                             (29,000)           (51,000)
                                                                                       ------------------  ----------------
       Total other income                                                                        (25,000)            40,000
                                                                                       -----------------   ----------------
       Net loss before income taxes                                                             (151,000)          (394,000)
       Income taxes                                                                                    -                  -
                                                                                       -----------------   ----------------

NET LOSS                                                                               $        (151,000)  $      (394,000)
                                                                                       =================   ===============

NET LOSS PER COMMON SHARE - BASIC AND DILUTED                                          $            (.01)  $          (.05)
                                                                                       =================   ===============

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING                                                 16,743,284         7,905,914
                                                                                       =================   ===============













       The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                                               F-5


<PAGE>
<TABLE>
<CAPTION>


                                                          RSI HOLDINGS, INC.
                                                    (A DEVELOPMENT STAGE COMPANY)
                                           CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
                                         FOR THE YEARS ENDED AUGUST 31, 2001 AUGUST 31, 2000




                                               COMMON STOCK          ADDITIONAL    DEFICIT -      DEFICIT -
                                               --------------         PAID-IN     LIQUIDATED    DEVELOPMENT
                                        SHARES             AMOUNT     CAPITAL     OPERATIONS      STAGE         TOTAL
                                        -----------        -------   --------   -------------   ------------   ----------


<S>                                      <C>         <C>         <C>            <C>              <C>           <C>
BALANCE, AUGUST 31, 1999                 7,903,322   $  79,000     $3,777,000   $(3,910,000)                   $  (54,000)

     Proceeds from stock options
         exercised                           4,166           -          1,000                                       1,000
     Conversion of debt to
         common stock                    5,557,333      56,000        361,000                                     417,000
     Accruals and costs during
         Period of liquidation                                                     (564,000)                     (564,000)
     Net loss                                                                      (395,000)                     (395,000)
                                      ------------  ----------  -------------      ---------      --------       --------

BALANCE, AUGUST 31, 2000                13,464,821     135,000      4,139,000    (4,869,000)             -       (595,000)

     Conversion of debt to
         common stock                    3,333,333      33,000        217,000                                     250,000
     Net loss                                                                                    $(151,000)      (151,000)
                                      ------------  ---------- --------------   ------------     ---------      ---------

BALANCE, AUGUST 31, 2001                16,798,154    $168,000 $    4,356,000   $(4,869,000)     $(151,000)     $(496,000)
                                      ============  ========== ==============   ===========      =========      =========






















          The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                                                 F-6


<PAGE>
<TABLE>
<CAPTION>


                                                          RSI HOLDINGS, INC.
                                                    (A DEVELOPMENT STAGE COMPANY)
                                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                                            FOR THE EIGHT MONTHS ENDED AUGUST 31, 2001 AND
                                                  FIVE MONTHS ENDED JANUARY 31, 2000



                                                                                             FOR THE             FOR THE
                                                                                              EIGHT                FIVE
                                                                                           MONTHS ENDED        MONTHS ENDED
                                                                                            AUGUST 31           JANUARY 31
                                                                                                  2001             2000
                                                                                       -----------------   -------------------
<S>                                                                                    <C>                 <C>
OPERATING ACTIVITIES
    Net loss                                                                           $       (151,000)         $(394,000)
    Adjustments to reconcile net loss to net
       cash provided by (used for) operating activities
       Depreciation and amortization                                                              2,000             24,000
       Changes in operating assets and liabilities
           Mortgage notes receivable                                                                  0          1,352,000
           Prepaid expenses and other                                                                 0             70,000
           Accounts payable, accrued expenses and other liabilities                               3,000             (7,000)
                                                                                       ----------------    ---------------
              Net cash (used for) provided by operating activities                             (146,000)         1,045,000
                                                                                       ----------------    ---------------
INVESTING ACTIVITIES
    Proceeds from sale of property and equipment                                                  1,000                  0
    Reduction of certificate of deposit                                                               0            250,000
    Purchase of property and equipment                                                                0            (40,000)
                                                                                       ----------------    ---------------

              Net cash provided by investing activities                                           1,000            210,000
                                                                                       ----------------    ---------------
FINANCING ACTIVITIES
    Advances under bank lines of credit                                                               0          6,308,000
    Payments on bank lines of credit                                                                  0         (7,319,000)
    Proceeds from long-term note payable                                                        250,000                  0
    Payment of deferred compensation                                                                  0            (25,000)
    Other                                                                                             0              1,000
                                                                                       ----------------    ---------------
              Net cash provided by (used for) financing activities                              250,000         (1,035,000)
                                                                                       ----------------    ---------------
              Net increase in cash                                                              105,000            220,000
CASH, BEGINNING OF PERIOD                                                                       210,000             23,000
                                                                                       ----------------    ---------------
CASH, END OF PERIOD                                                                    $        315,000    $       243,000
                                                                                       ================    ===============

CASH PAID FOR
    Interest                                                                           $          7,000    $        52,000
                                                                                       ================    ===============
    Income taxes                                                                       $              -    $             -
                                                                                       ================    ===============

NON-CASH TRANSACTION
    Conversion of debt to stock                                                        $        250,000    $             -
                                                                                       ================    ===============

           The accompanying notes are an integral part of these consolidated financial statements.

</TABLE>
                                                               F-7


<PAGE>
<TABLE>
<CAPTION>


                                                          RSI HOLDINGS, INC.
                                                    (A DEVELOPMENT STAGE COMPANY)
                                    CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
                                        PERIOD FROM SEPTEMBER 1, 2000 THROUGH DECEMBER 31, 2000
                                         PERIOD FROM FEBRUARY 1, 2000 THROUGH AUGUST 31, 2000







                                                                                             Period From         Period From
                                                                                          September 1, 2000   February 1, 2000
                                                                                              Through             Through
                                                                                          December 31, 2000    August 31, 2000
                                                                                          -----------------    ---------------
<S>                                                                                          <C>               <C>
Shareholders' deficit at beginning of period                                                 $ (595,000)       $   (448,000)

Activity that provided net assets:
     Conversion of debt to common stock                                                               -             417,000

Accruals and activities that used net assets:
     Adjustment of property and equipment to estimated net realizable value                           -             143,000
     Compensation and related expenses                                                                -             146,000
     Interest expense                                                                                 -              58,000
     Professional fees                                                                                -              39,000
     Rent                                                                                             -             132,000
     Other                                                                                            -              46,000
                                                                                          -------------          ----------

         Total accruals and costs during period of liquidation                                        -            (564,000)
                                                                                          -------------          ----------

Deficiency in net assets in liquidation at end of period                                  $    (595,000)         $ (595,000)
                                                                                          =============          ==========


















The accompanying notes are an integral part of this consolidated financial statement.
</TABLE>

                                                                 F-8


<PAGE>


                               RSI HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ACTIVITIES

NATURE OF BUSINESS
     RSI  Holdings,  Inc.  (the  "Company")  has no  operations.  Its  principal
operating  subsidiary,   HomeAdd  Financial  Corporation  and  its  wholly-owned
subsidiary,  HomeAdd Financial Services Corporation (collectively referred to as
HomeAdd),  were  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.

     Since January 1, 2001,  the Company has been looking for and  investigating
other  business  opportunities.  Although  the  Company has  considered  certain
businesses in which it might engage,  it has been unable to make an  appropriate
acquisition or identify a business that would be a viable  opportunity for it to
pursue.  The  Company  has a  deficiency  in net assets and any future  business
endeavors  would  require  additional  funds  from  either  loans  or a  capital
infusion.

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.  Under
the development stage  accounting,  the financial  statements  represent results
from  January  1,  2001  (date of  inception  of  development  stage  enterprise
accounting.  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.

LIQUIDATING 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  values  and  liabilities  were  presented  at  their  estimated
settlement   amounts,   including   costs   associated  with  carrying  out  the
liquidation.  The Company  carried  out the  liquidation  of HomeAdd  during the
period from  February 1, 2000  through  December  31, 2000.

                                      F-9
<PAGE>

PRINCIPLES  OF CONSOLIDATION
     The consolidated  financial  statements include the accounts of the Company
and  its  subsidiaries  (all  of  which  are   wholly-owned).   All  significant
intercompany balances and transactions have been eliminated in consolidation.

CASH AND CASH EQUIVALENTS:
     Cash and cash equivalents consist of highly liquid  investments,  which are
readily  convertible  into cash and have  maturities  of three months or less at
date of  acquisition.  The Company  places  temporary  cash  investments in high
credit  quality  financial  institutions.  At times such  investments  may be in
excess of FDIC insurance limits.

PROPERTY AND EQUIPMENT
     Property and  equipment  consists of office  furniture and equipment and is
stated at cost. Depreciation is computed principally by the straight-line method
over the  estimated  useful life of the assets.  The life of the  furniture  and
office  equipment  when the asset is  acquired  is  estimated  to be five years.
Depreciation was not expensed during the liquidation period of eleven months.

FAIR VALUE OF FINANCIAL INSTRUMENTS
     The  carrying  amounts  reported  in the  balance  sheet  for cash and cash
equivalents, accounts receivable, accounts payable and notes payable approximate
their fair values.

NET LOSS PER COMMON 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  Accounting 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.

INCOME TAXES
     The  consolidated  financial  statements  have been prepared on the accrual
basis.  When  income and  expenses  are  recognized  in  different  periods  for
financial  reporting  purposes  than for  purposes  of  computing  income  taxes
currently  payable,  deferred taxes are provided on such temporary  differences.
The  Company  accounts  for  income  taxes in  accordance  with  SFAS  No.  109,
Accounting  for  Income  Taxes.  Under  SFAS No.  109,  deferred  tax assets and
liabilities  are recognized for the expected  future tax  consequences of events
that  have been  recognized  in the  consolidated  financial  statements  or tax
return.  Deferred tax assets and  liabilities are measured using the enacted tax
rates expected to apply to taxable income in the years in which those  temporary
differences are expected to be realized or settled.

STOCK OPTIONS
     The Company  accounts  for and will  continue to account for stock  options
under  Accounting  Principles  Board Opinion 25,  Accounting for Stock Issued to
Employees. Applying SFAS No. 123, Accounting for Stock-Based Compensation, would
not materially affect net loss and loss per share for fiscal 2001 and 2000.

USE OF ESTIMATES
     The  preparation  of the financial  statements of the Company in accordance
with accounting  principles  generally  accepted in the United States of America
requires  management to make  estimates  and  assumptions  that affect  reported
amounts.  These  estimates are based on information  available as of the date of
the  financial  statements.  Therefore,  actual  results could differ from those
estimates.



                                      F-10
<PAGE>

NOTE 2 - ACCRUED EXPENSES AND OTHER LIABILITIES

     Accrued expenses and other liabilities at August 31, 2001 are as follows:

         Payroll taxes                                                 $   4,000
         Interest                                                         30,000
         Legal and accounting                                             22,000
         Other                                                            13,000
                                                                       ---------

                                                                       $  69,000
                                                                       =========

NOTE 3 - NOTES PAYABLE

<TABLE>

<S>                                                                                                              <C>
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  convertible note payable to the mother of the President and Chief Executive  Officer of the
    Company with interest payable  annually at 8.0 percent per year. The unpaid  principal  balance is
    due on December 20, 2005.  This note is  convertible  by either  party into the  Company's  common
    stock at the rate of $.075 per share                                                                           500,000
                                                                                                                ----------

                                                                                                                $  750,000
                                                                                                                ==========
</TABLE>


     The Company  incurred  interest  cost as follows  during eight months ended
August 31, 2001 and during the five months ended January 31, 2000.
<TABLE>
<CAPTION>

                                                                                                 2001       2000
                                                                                            ---------    ----------
<S>                                                                                          <C>          <C>
Interest incurred during years ended August 31
    Notes payable to the mother of the President and Chief Executive Officer                 $ 37,000     $ 38,000
    Arrangements in connection with loan facilities with banks                                  8,000       53,000
    Deferred compensation                                                                           -        1,000
                                                                                             --------    ---------

                                                                                              45,000        92,000
    Less interest incurred during periods of liquidation                                      16,000        41,000
                                                                                            ---------    ---------

                                                                                             $ 29,000     $ 51,000
                                                                                            =========    =========

</TABLE>











                                                                 F-11
<PAGE>

NOTE 4 - STOCK OPTION PLAN

     During 1991,  the Company  adopted a Stock Option Plan that  authorized the
Board of Directors  to grant  options of up to 250,000  shares of the  Company's
common stock.  On January 27, 2000,  January 21, 1999 and January 15, 1998,  the
shareholders of the Company approved increases in the aggregate number of shares
issuable  in the Stock  Option  Plan in the  amount of  500,000 on each of these
dates. Accordingly, the Board of Directors was authorized to grant options of up
to  1,750,000  shares of the  Company's  common  stock.  The Stock  Option  Plan
terminated on June 27, 2000 and no options of the Company's  common stock can be
granted thereafter,  but this termination does not affect the options previously
granted to the plan participants.  As of August 31, 2001, 555,000 shares (net of
755,000 shares forfeited) have been awarded to plan participants.

     The  Company  also has an  informal  stock  option  plan under  which stock
options can be granted to certain  non-employee  officers and  directors.  Under
this plan 110,000 options have been granted.

     All options under the plans were granted at not less than fair market value
at dates of grant. Stock option  transactions  during the two years ended August
31 were as follows:
<TABLE>
<CAPTION>

                                                                                        2001             2000
                                                                                  -------------    -------------

<S>                                                                               <C>              <C>
Options outstanding at September 1                                                      653,334        1,347,500
Options granted                                                                               -                -
Options exercised                                                                             -           (4,166)
Options forfeited                                                                             -         (690,000)
                                                                                  -------------    -------------
Options outstanding at August 31                                                        653,334          653,334
                                                                                  =============    =============
Options exercisable at August 31                                                        528,334          357,500
                                                                                  =============    =============

                                                                                        2001             2000
                                                                                  -------------     ------------
Outstanding options issued under Stock Option Plan at August 31                         543,334          543,334
                                                                                  =============    =============

Outstanding options issued under informal Stock Option Plan                             110,000          110,000
                                                                                  =============    =============

Options available for grant under Stock Option Plan at August 31                              0                0
                                                                                  =============    =============
Option price ranges per share:
   Granted                                                                                    -                -
   Exercised                                                                                  -     $0.19 - $0.375
   Forfeited                                                                                  -     $0.05 - $0.375
Weighted average option price per share:
   Granted                                                                                    -             -
   Exercised                                                                                  -             $0.301
   Forfeited                                                                                  -             $0.150
   Outstanding at August 31                                                              $0.129             $0.129
</TABLE>

     The options at August 31, 2001 had a weighted average remaining contractual
life  of  approximately   5.5  years.   There  were  528,334  options  currently
exercisable  with  option  prices  ranging  from $0.05 to $0.375 with a weighted
average exercise price of $0.14.

     The Company also has an Incentive  Award Plan that  authorizes the Board of
Directors to grant up to 250,000 shares to key management  employees.  At August
31, 2001 there were no shares granted under the Incentive Award Plan.

                                      F-12
<PAGE>

NOTE 5 - INCOME TAXES

     During fiscal 2001, net deferred tax benefits were not recorded relating to
temporary  differences  since the  Company  is not  assured  that the  resulting
additional deferred tax assets will be realized.  Significant  components of the
Company's deferred tax assets and liabilities are as follows:

    ASSETS
       Net operating loss carryforward                      $     4,685,000
       Other                                                          8,000
                                                            ---------------
                                                                  4,693,000
       Valuation allowance                                        4,692,000
                                                            ---------------
       Deferred tax assets                                            1,000
    LIABILITIES
       Depreciation                                                   1,000
                                                            ---------------
       Net deferred taxes                                   $             -
                                                            ===============

     At August 31,  2001,  the  Company  has net  operating  loss  carryforwards
available   for  income  tax  purposes  of   approximately   $12,661,000.   Such
carryforwards  expire in 2006 through  2021.  The  Company's  ability to use its
existing net  operating  loss  carryforward  may be  jeopardized  or lost if the
Company undergoes an "ownership change" as defined by the Internal Revenue Code.

     The  valuation  allowance  increased  $62,000,  net during  2001 due to the
uncertainty of the Company's  ability to generate taxable income and realize the
benefits of deferred tax assets.  The recognition of a net deferred tax asset is
dependent upon a "more likely than not"  expectation  of the  realization of the
deferred  tax asset,  based  upon the  analysis  of the  available  evidence.  A
valuation allowance is required to sufficiently reduce the deferred tax asset to
the amount that is expected to be realized through future realization of profits
on a "more  likely  than not"  basis.  The  analysis  of  available  evidence is
performed on an ongoing  basis  utilizing the "more likely than not" criteria to
determine  the  amount,  if any,  of the  deferred  tax  asset  to be  realized.
Adjustments  to the valuation  allowance are made  accordingly.  There can be no
assurance that additional valuation allowances may not be recorded in the future
periods.

NOTE 6 -  CONVERSION OF DEBT TO COMMON STOCK

     Effective  January 4, 2001,  the  Company  issued  3,333,333  shares of its
common stock to the mother of the President and Chief  Executive  Officer of the
Company in exchange for convertible  debt in the principal amount of $250,000 at
the conversion rate of $.075 per share.

     Effective  August 31,  2000,  the Company  issued  5,557,333  shares of its
common stock to the mother of the President and Chief  Executive  Officer of the
Company in exchange for $416,800 in convertible debt and accrued interest at the
conversion rate of $.075 per share. The principal debt of $400,000 was issued in
February 2000 in exchange for a cash advance.

NOTE 7 - CONTINGENCIES

     Loans sold  subject to recourse at August 31,  2001  totaled  approximately
$103,000.  The  Company may be  required  to  repurchase  these loans if certain
criteria are not met. These recourse  obligation  agreements will  substantially
expire by May 2002.





                                      F-13
<PAGE>
NOTE 8 - SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

     Selling, general and administrative expenses consisted of the following for
the eight months ended August 31, 2001 and five months ended January 31, 2000:

                                                           2001        2000
                                                     ------------  ------------
    Salaries, wages and benefits                     $     80,000  $    544,000
    Advertising                                                 0       318,000
    Legal and professional                                 18,000         7,000
    Rent                                                   15,000        47,000
    Underwriting and loan closing                               0       117,000
    Telephone and utilities                                 8,000        37,000
    Depreciation                                            2,000        24,000
    Other                                                   3,000        93,000
                                                     ------------  ------------

                                                     $    126,000  $  1,187,000
                                                     ============  ============

NOTE 9 - AFFILIATED PARTY TRANSACTIONS

     The  secretary of the Company  until January 18, 2001 was a member of a law
firm that represented the Company. Legal fees for services rendered by this firm
to the Company  amounted to  approximately  $7,000 during the eight months ended
August 31, 2001 and $4,000 during the five months ended January 31, 2000.  Legal
fees for services  rendered by this firm to the Company  during the  liquidation
period  beginning   February  1,  2000  through  August  31,  2000  amounted  to
approximately  $6,000 and from  September  1, 2000  through  December  31,  2000
amounted to approximately $3,000.

     See Note 3  concerning  notes  payable with  affiliated  parties and Note 6
concerning conversion of debt to common stock.

     The Company leases its principal  executive  offices under a month-to-month
lease  arrangement  from a  corporation  that is owned by the  President,  Chief
Executive  Officer and a director  of the  Company  and his two adult  siblings.
Under the lease  arrangement,  the monthly  rent was $1,500 per month during the
fiscal year ended  August 31, 2001 and $2,250  during the first seven  months of
the fiscal  year ended  August 31, 2000 when the rent was reduced to $1,500 each
month.  Accounts  receivable of $4,000 at August 31, 2001 consisted primarily of
the  reimbursement  of expenses  incurred during August 2001 between the Company
and a company that is owned by the President of the Company,  his mother and his
two adult siblings.

NOTE 10 - RECENTLY ISSUED ACCOUNTING STANDARDS

     In June 2001, the Financial  Accounting  Standards Board (FASB) issued SFAS
No. 141- Business Combinations. This FASB addresses accounting and reporting for
all business combinations and defines the purchase method as the only acceptable
method.  This  statement is effective  for all business  combinations  initiated
after June 30, 2001.

     In June 2001, the FASB issued SFAS No. 142 - Goodwill and Other  Intangible
Assets.  This SFAS addresses how goodwill and other intangible  assets should be
accounted  for at their  acquisition  (except  for those  acquired in a business
combination)  and after they have been  initially  recognized  in the  financial
statements.  The  statement is effective  for all fiscal years  beginning  after
December 15, 2001. The impact of this SFAS will not be material to the Company's
financial statements.

     Additional  accounting  standards  that have been issued or proposed by the
FASB that do not require adoption until a future date are not expected to have a
material impact on the consolidated financial statements upon adoption.


                                      F-14
<PAGE>
<TABLE>
<CAPTION>

                                INDEX OF EXHIBITS

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

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

3.2.1         By-laws of RSI Holdings, Inc., as amended: Incorporated by reference to Exhibit 3.1.1 to the Form S-4.

3.2.2         Amendments to By-laws: Incorporated by reference to Exhibit 3.2.2 to the Form 10-KSB of the Registrant filed with the
              Securities and Exchange Commission for the fiscal year ended August 31, 1996, File No. 0-18091.

4.1           See Exhibits 3.1, 3.1.1, 3.2.1 and 3.2.2.

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

*10.1         RSI Holdings, Inc., Stock Option Plan, including an amendment: Incorporated by reference to Exhibit 10.9 to the Form
              10-K of the Registrant filed with the Securities and Exchange Commission for the fiscal year ended August 31, 1990,
              File No. 0-18091   (the "1990 Form 10-K").

*10.1.1       Amendment No. 2 to Stock Option Plan: Incorporated by reference to Exhibit 10.9.1 to the Form 10-K of the Registrant
              filed with the Securities and Exchange Commission for the fiscal year ended August 31, 1992, as amended, File No.
              0-18091 (the "1992 Form 10-K").

*10.1.2       Amendment No. 3 to Stock Option Plan: Incorporated by reference to Exhibit 99.1 to the Company's Registration
              Statement on Form S-8 filed with the Securities and Exchange Commission on September 9, 1998 (Commission File No.
              333-63109).

*10.1.3       Amendment No. 4 to Stock Option Plan: Incorporated by reference to Exhibit 99.1 to the Company's Registration
              Statement on Form S-8 filed with the Securities and Exchange Commission on February 10, 1999 (Commission File No.
              333-72101).

*10.1.4        Amendment No. 5 to Stock Option Plan: Incorporated by reference to Exhibit A to the Company's Definitive Proxy
              Statement filed with the Securities and Exchange Commission on December 30, 1999 (Commission File No. 333-72101).

*10.2         RSI Holdings, Inc. Incentive Stock Award Plan, including an amendment: Incorporated by reference to Exhibit 10.8 to
              the 1990 Form 10-K.

*10.2.1       Amendment to Incentive Stock Award Plan: Incorporated by reference to Exhibit 10.8.1 to the 1992 Form 10-K.

*10.3         Stock Option Agreement by and between the Registrant and Charles M. Bolt dated as of July 2, 1997: Incorporated by
              reference to the Form 10-KSB of the Registrant filed with the Securities and Exchange Commission for the year ended
              August 31, 1997, File No. 0-18091.
<PAGE>

*10.4         Stock Option Agreement by and between the Registrant and C. C. Guy dated as of April 22, 1998: Incorporated by
              reference to the Form 10-KSB of the Registrant filed with the Securities and Exchange Commission for the year ended
              August 31, 1998, File No. 0-18091.

*10.5         Stock Option Agreement by and between the Registrant and Charles M. Bolt dated as of April 22, 1998: Incorporated by
              reference to the Form 10-KSB of the Registrant filed with the Securities and Exchange Commission for the year ended
              August 31, 1998, File No. 0-18091.

*10.6         Stock Option Agreement by and between the Registrant and C. Thomas Wyche dated as of April 22, 1998: Incorporated by
              reference to the Form 10-KSB of the Registrant filed with the Securities and Exchange Commission for the year ended
              August 31, 1998, File No. 0-18091.

*10.7         Stock Option Agreement by and between the Registrant and C. C. Guy dated as of August 18, 1999: Incorporated by
              reference to the Form 10-KSB of the Registrant filed with the Securities and Exchange Commission for the year ended
              August 31, 1999, File No. 0-18091.

*10.8         Stock Option Agreement by and between the Registrant and Charles M. Bolt dated as of August 18, 1999: Incorporated by
              reference to the Form 10-KSB of the Registrant filed with the Securities and Exchange Commission for the year ended
              August 31, 1999, File No. 0-18091.

*10.9         Stock Option Agreement by and between the Registrant and C. Thomas Wyche dated as of August 18, 1999: Incorporated by
              reference to the Form 10-KSB of the Registrant filed with the Securities and Exchange Commission for the year ended
              August 31, 1999, File No. 0-18091.

10.10         Convertible note dated December 20, 2000 issued by the Company payable to Minor H. Mickel: Incorporated by reference
              to the Form 10-QSB of the Registrant filed with the Securities and Exchange Commission for the fiscal quarter ended
              November 30, 2000, File No. 0-18091).

21.           Subsidiaries of the Registrant.

23.           Consent of Independent Certified Public Accountants.

* Management contract or compensatory plan required to be filed as an exhibit pursuant to Item 13 of Form 10-KSB.

</TABLE>