<PAGE>
 
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-Q

                                   (Mark One)
              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
               For the quarterly period ended September 30, 1996
                                             -------------------

                                       OR
                                        
             [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                For the transition period from _______to_______


                     Commission file number  1-13700
                                             -------


                             RED LION HOTELS, INC.
                             ---------------------
            (Exact name of registrant as specified in its charter)


              Delaware                                 91-1634199
              --------                                 ----------
  (State or other jurisdiction of                   (I.R.S. Employer
   incorporation or organization)                  Identification No.)


4001 Main Street, Vancouver, Washington                  98663
---------------------------------------                  -----
(Address of principal executive offices)              (Zip Code)

                                 (360) 696-0001
                                 --------------
              (Registrant's telephone number, including area code)



         _________________________________________________________________
   (Former name, former address and former fiscal year, if changed since last
                                    report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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   .
                                        ---   ---        

Number of shares of registrant's common stock outstanding at October 11, 1996:
31,345,000

<PAGE>
 
                             RED LION HOTELS, INC.
                              REPORT ON FORM 10-Q
                   FOR THE QUARTER ENDED SEPTEMBER 30, 1996

                                     INDEX
<TABLE> 
<CAPTION> 

PART I - FINANCIAL INFORMATION                                            PAGE
<S>                                                                       <C> 
 
       Item 1  Consolidated Financial Statements (unaudited):
 
                  Consolidated Balance Sheets                               3
 
                  Consolidated Statements of Income                         4
 
                  Consolidated Statements of Stockholders' Equity           5
 
                  Consolidated Statements of Cash Flows                     6
 
                  Notes to Consolidated Financial Statements                8
 
       Item 2  Managemment's Discussion and Analysis of
               Financial Condition and Results of Operations               13
 

PART II - OTHER INFORMATION

       Item 6  Exhibits and Reports on Form 8-K                            19
 
</TABLE> 
                                       2
<PAGE>
 
                                     PART I

 ITEM 1  CONSOLIDATED FINANCIAL STATEMENTS
 -----------------------------------------

                             RED LION HOTELS, INC.
                          CONSOLIDATED BALANCE SHEETS
                       (in thousands, except share data)
                                  (unaudited)

<TABLE>
<CAPTION>

                                              SEPTEMBER 30, 1996  DECEMBER 31, 1995
                                              ------------------  -----------------
                                    ASSETS
                                    ------
<S>                                           <C>                 <C>
Current Assets:
  Cash and cash equivalents                         $ 18,706           $ 68,355
  Accounts receivable, net                            23,436             19,709
  Accounts receivable - affiliates                     4,662             12,096
  Inventories                                          6,317              6,339
  Prepaid expenses and other current assets            4,250              5,461
  Deferred income taxes                                2,616              2,306
                                                    --------           --------
      Total current assets                            59,987            114,266
 
Property and Equipment, net                          401,550            336,269
 
Investments in and Advances to Unconsolidated
   Joint Ventures                                     18,194             16,429
 
Goodwill, net                                         32,197             21,508
Deferred Income Taxes                                  2,098              6,571
Due From Affiliate                                    22,261             20,828
Other Assets, net                                     11,420             11,049
                                                    --------           --------
 
                                                    $547,707           $526,920
                                                    ========           ========
 
                     LIABILITIES AND STOCKHOLDERS' EQUITY
                     ------------------------------------
Current Liabilities:
  Accounts payable                                  $ 16,277           $ 23,618
  Accrued expenses                                    42,157             37,197
  Current portion of long-term debt                   48,620              7,759
                                                    --------           --------
     Total current liabilities                       107,054             68,574
 
Long-Term Debt, net of current portion               164,686            215,608
 
Other Long-Term Obligations                           11,697             11,169
 
Joint Venturers' Interest                                 --              1,290
                                                    --------           --------
     Total liabilities                               283,437            296,641
                                                    --------           --------
 
Commitments and Contingencies (Note 8)
 
Stockholders' Equity:
  Preferred stock, $.01 par value;
    10,000,000 shares authorized;
    0 shares issued and outstanding                       --                 --





  Common stock, $.01 par value;
    100,000,000 shares authorized;
    31,315,000 and 31,312,500 shares 
    issued and outstanding at September 30, 
    1996 and December 31, 1995, respectively             313                313
  Additional paid-in capital and net                 
    assets contributed                               214,408            214,361
  Retained earnings                                   49,549             15,605
                                                    --------           --------
      Total stockholders' equity                     264,270            230,279
                                                    --------           --------
 
                                                    $547,707           $526,920
                                                    ========           ========
 
</TABLE>
                See Notes to Consolidated Financial Statements.

                                       3
<PAGE>
 
                             RED LION HOTELS, INC.
                       CONSOLIDATED STATEMENTS OF INCOME
                (in thousands, except share and per share data)
                                  (unaudited)
<TABLE>
<CAPTION>
 
                                                        THREE MONTHS ENDED               NINE                 SEVEN
                                                          SEPTEMBER 30,              MONTHS ENDED          MONTHS ENDED
                                                     1996              1995       SEPTEMBER  30, 1996   SEPTEMBER 30, 1995
                                                     ----              ----       -------------------   ------------------
<S>                                             <C>            <C>                <C>                   <C>
Revenues:
  Rooms                                          $    88,572    $    53,332           $   236,017           $   53,332
  Food and beverage                                   38,889         26,351               120,278               26,351
  Other                                               14,377          9,591                43,510               13,012
                                                 -----------    -----------           -----------           ----------
     Total revenues                                  141,838         89,274               399,805               92,695

 
Operating Costs and Expenses:
  Departmental direct expenses:
    Rooms                                             20,428         11,805                57,419               11,805
    Food and beverage                                 30,715         19,791                94,349               19,791
    Other                                              4,920          3,146                14,999                3,146
  Property indirect expenses                          28,841         17,241                84,004               17,241
  Other costs                                          8,303          6,018                26,331                6,502
  Depreciation and amortization                        5,470          3,197                14,637                3,918
  Payments due to owners of managed hotels            13,805          9,124                39,983                9,124
  Expenses resulting from the Formation
     and Offering                                         --         14,662                    --               14,662
                                                 -----------    -----------           -----------           ----------
 
Operating Income                                      29,356          4,290                68,083                6,506
 
Equity in Earnings of Unconsolidated
  Joint Ventures                                        (146)           271                 1,277                  271
 
Other Income (Expense):
  Interest income                                        355            637                 1,630                  637
  Interest expense                                    (4,342)        (4,039)              (13,396)              (5,295)
                                                 -----------    -----------           -----------           ----------
      Total other expense                             (3,987)        (3,402)              (11,766)              (4,658)
                                                 -----------    -----------           -----------           ----------
 
Income Before Joint Venturers' Interests              25,223          1,159                57,594                2,119
 
Joint Venturers' Interests                              (376)          (500)               (1,354)              (1,070)
                                                 -----------    -----------           -----------           ----------
 
Income Before Income Taxes                            24,847            659                56,240                1,049
 
Income Tax Benefit (Expense)                          (9,739)         7,243               (22,296)               8,287
                                                 -----------    -----------           -----------           ----------
 
Net Income                                       $    15,108    $     7,902           $    33,944           $    9,336
                                                 ===========    ===========           ===========           ==========
 
Earnings Per Common Share                              $0.48          $0.38                 $1.08                $1.04
                                                 ===========    ===========           ===========           ==========
 
Weighted Average Common Shares Outstanding        31,312,600     20,875,000            31,312,500            8,946,500
                                                 ===========    ===========           ===========           ==========
 
</TABLE>
                See Notes to Consolidated Financial Statements.

                                       4
<PAGE>
 
                             RED LION HOTELS, INC.
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (in thousands)
                                  (unaudited)
<TABLE>
<CAPTION>


                                                                  ADDITIONAL
                                                                    PAID-IN
                                           COMMON STOCK           CAPITAL AND
                                          ----------------        NET ASSETS     RETAINED
                                          SHARES    AMOUNT        CONTRIBUTED    EARNINGS       TOTAL
                                          ------    ------        -----------    --------      -------
<S>                                       <C>       <C>           <C>            <C>          <C>
Balance at February 28, 1995                  --    $   --           $     --    $     --     $     --

Net assets contributed                    20,900       209             34,427          --       34,636

Net proceeds from initial public
 offering                                 10,063       101            173,287          --      173,388

Issuance of shares in conjunction with
  termination of an incentive unit plan      350         3              6,647          --        6,650

Net income                                    --        --                 --      15,605       15,605
                                          ------    ------           --------    --------     --------

Balance at December 31, 1995              31,313       313            214,361      15,605      230,279

Stock options exercised                        2        --                 47          --           47

Net income                                    --        --                 --      33,944       33,944
                                          ------    ------           --------    --------     --------

Balance at September 30, 1996             31,315    $  313           $214,408    $ 49,549     $264,270
                                          ======    ======           ========    ========     ========

</TABLE>



                See Notes to Consolidated Financial Statements.

                                       5
<PAGE>
 
                             RED LION HOTELS, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                  (unaudited)
<TABLE>
<CAPTION>
                                                       NINE                 SEVEN
                                                   MONTHS ENDED         MONTHS ENDED
                                               SEPTEMBER 30, 1996    SEPTEMBER 30, 1995
                                               ------------------    ------------------
<S>                                            <C>                   <C>
Cash Flows from Operating Activities:
  Net income                                         $ 33,944            $   9,336
  Adjustments to reconcile net income
   to cash
    provided by operating activities:
      Income attributable to joint            
       venturers' interest                              1,354                1,070
      Distributions to joint venturers                   (933)                (830)
      Equity in earnings of                           
       unconsolidated joint ventures                   (1,277)                (271)
      Depreciation and amortization                    14,637                3,918
      Amortization of other assets                        969                  763
      Deferred income tax provision                   
       (benefit)                                        4,163              (11,264)
      Issuance of common stock in
       connection with adjustments
         to the incentive unit plan                        --                6,650
     Changes in assets and liabilities:
         Accounts receivable                           (3,727)              (1,451)
         Accounts receivable - affiliates               7,434               (3,591)
         Inventories                                       22                 (247)
         Prepaid expenses and other current 
           assets                                       1,211                 (332)                 
        
         Accounts payable, accrued expenses and                     
           other long-term obligations                 (3,143)              11,880
                                                     --------            ---------
 
           Net cash provided by             
            operating activities                       54,654               15,631
                                                     --------            ---------
Cash Flows from Investing Activities:
  Purchase of property and equipment, net             (80,259)              (4,601)
  Additions to goodwill                               (11,236)                  --
  Net decrease (increase) in due from    
   affiliates                                          (1,433)                 348
  Net increase in other assets                           (452)              (1,449)
  Net decrease (increase) in
   investments in and advances to
     unconsolidated joint ventures                     (1,118)                 341
  Distributions from unconsolidated               
   joint ventures                                         209                   80
                                                     --------            ---------
            Net cash used in investing         
             activities                               (94,289)              (5,281)   
                                                     --------            ---------

Cash Flows from Financing Activities:
Cash received from contribution of                   
 assets                                                    --               10,480
Net proceeds from common stock issued                     
 in the Offering                                           --              177,279
Net proceeds from exercise of stock options                47                   --
Proceeds from long-term borrowings                      9,000              135,000
Repayments of long-term borrowings                    (19,381)            (255,051)
Increase in note payable                                  320                   65
Increase in deferred loan costs                            --               (6,957)
                                                     --------            ---------
            Net cash provided by (used               
             in) financing activities                 (10,014)              60,816
                                                     --------            ---------
Increase (Decrease) in Cash and Cash                
 Equivalents                                          (49,649)              71,166
Cash and Cash Equivalents at Beginning               
 of Period                                             68,355                   --
                                                     --------            ---------      
Cash and Cash Equivalents at End of Period           $ 18,706            $  71,166
                                                     ========            =========


</TABLE>

                                       6
<PAGE>
 
                             RED LION HOTELS, INC.
               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                 (in thousands)
                                  (unaudited)
<TABLE>
<CAPTION>
 
 
                                                         NINE                SEVEN
                                                     MONTHS ENDED         MONTHS ENDED
                                                  SEPTEMBER 30, 1996   SEPTEMBER 30, 1995
                                                  ------------------   ------------------
<S>                                               <C>                  <C> 
Supplemental Disclosure of Cash Flow Information:
Cash paid for:
      Interest                                        $11,873              $1,732
      Income taxes                                     16,155                  --
 
Noncash Investing and Financing Activities:
   Net liabilities (other than cash)
   contributed by Historical Red Lion
   (Note 1), including property and
   equipment of $45,006, long-term debt
   of $45,000, other assets of $859, joint
   venture interest of $412 and current
   liabilities of $546.                               $    --              $   93
 
</TABLE>



                  See Notes to Consolidated Financial Statements.

                                       7
<PAGE>
 
                             RED LION HOTELS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Nature of Operations

Red Lion Hotels, Inc. and subsidiaries ("Red Lion" or the "Company") is a full
service hospitality company operating 56 hotels in 10 western states.  The
Company was incorporated in Delaware in March 1994 as a wholly owned subsidiary
of Red Lion, a California Limited Partnership ("Historical Red Lion").  The
Company's operations commenced in March 1995 when Historical Red Lion
contributed to the Company a 49.4% interest in a joint venture (the "Santa
Barbara Joint Venture") which owns the Santa Barbara Red Lion Hotel in
California.

The Company had an initial public offering of a portion of its common stock on
July 26, 1995 (the "Offering"), which closed August 1, 1995, raising net
proceeds of approximately $173 million.  After giving effect to the Offering,
Historical Red Lion owns approximately 67% of the Company.

On August 1, 1995, prior to the closing of the Offering, Historical Red Lion
repaid certain of its outstanding indebtedness with existing cash balances and
contributed substantially all of its assets (excluding 17 hotels and certain
related obligations  (the "Leased Hotels"), certain minority joint venture
interests and certain current assets) and certain liabilities to the Company
(the "Formation").  Historical Red Lion subsequent to the Formation and
refinancing of the Company (the "Partnership") retained the Leased Hotels and
the related goodwill, deferred loan costs and mortgage debt, certain minority
joint venture interests and certain current assets.

On August 1, 1995, the Company refinanced or repaid substantially all of the
debt contributed pursuant to the Formation with the net proceeds of the
Offering, borrowings under a new term loan and existing cash (the
"Refinancing").  The Company also entered into a long-term master lease with the
Partnership for the Leased Hotels.

Pursuant to the contribution agreement entered into between the Company and the
Partnership at the time of Formation, the Partnership exercised its right to
require the Company to purchase the Partnership's retained joint venture
interests.  On September 12, 1996, the Company purchased the Partnership's joint
venture interests in seven joint ventures for approximately $1.3 million.

On September 12, 1996, the Company entered into an Agreement and Plan of  Merger
("Merger Agreement") with Doubletree Corporation ("Doubletree"), pursuant to
which the Company would be acquired by Doubletree through the merger of a wholly
owned subsidiary with and into the Company.  Consummation of the transaction is
subject to certain conditions and is expected to be completed during the fourth
quarter of 1996 (refer to Note 9, subsequent event).

Basis of Presentation

The accompanying consolidated financial statements reflect the contribution, at
Historical Red Lion's net book value, of the interest in the Santa Barbara Joint
Venture.  In connection with the Formation, the other assets and liabilities
contributed by Historical Red Lion have been recorded in the accompanying
consolidated financial statements at Historical Red Lion's net book value as of
August 1, 1995.

The Santa Barbara Joint Venture contribution did not transfer the right to
manage the operations of the Hotel to the Company.  Since the right to manage
the Santa Barbara Hotel had not been transferred to the Company, the financial
statements of the Company prior to the Formation do not include the operating
revenues and expenses of the Santa Barbara Hotel or that hotel's current assets
and current liabilities.  These amounts were included in the financial
statements of Historical Red Lion, which continued to manage the Santa Barbara
Hotel.  The right to manage the operations of the Santa Barbara Hotel was
transferred to the Company at Formation, and that hotel's operating revenues,
expenses and current assets and current liabilities are reflected in the
consolidated financial statements of the Company beginning August 1, 1995.

                                       8
<PAGE>
 
The accompanying consolidated financial statements for the three and seven
months ended September 30, 1995 reflect the results of the interest in the Santa
Barbara Joint Venture only for approximately one month and five months,
respectively.  Beginning August 1, 1995, the consolidated financial statements
reflect the results of the Formation and Offering and full commencement of the
Company's operations.

The consolidated financial statements include four joint ventures in which the
interests of the Company exceed 50%. In addition, the Company consolidates one
of its 50% owned joint ventures because the Company controls the joint venture
through contractual arrangements, has the majority of capital at risk through
its significant ownership percentage and has guaranteed 100% of the joint
venture's third party debt. The unconsolidated joint ventures, including two 50%
and one 10% owned joint venture, are accounted for on the equity method of
accounting.

In 1987, Historical Red Lion sold its interest in 10 hotels to Red Lion Inns
Limited Partnership, a publicly traded limited partnership (the "MLP").  Red
Lion Properties, Inc., the general partner of the MLP, was contributed to the
Company in connection with the Formation and is a wholly owned subsidiary of the
Company.  The MLP's public limited partners have an effective 98.01% ownership
interest in the MLP's hotels with the general partner retaining the remaining
1.99% ownership interest.  The Company operates the MLP's hotels under a
management agreement.

Operating revenues and expenses and current assets and current liabilities of
the MLP and other management contract hotels (including the three unconsolidated
joint ventures which are also managed by the Company) are included in the
accompanying consolidated financial statements because the operating
responsibilities associated with these hotels are substantially the same as
those for owned hotels.  The operating profit, net of management fee income
earned by the Company for the managed hotels, is recorded as an expense in the
accompanying consolidated statements of income.  The consolidated financial
statements include current assets and current liabilities of $8,638,000 and
$9,933,000 at September 30, 1996 and December 31, 1995, respectively, and
operating revenues of $48,769,000, $143,897,000 and $30,408,000 and operating
expenses of $31,512,000, $94,323,000 and $19,249,000 for the three months ended
September 30, 1996, nine months ended September 30, 1996 and both the three and
seven months ended September 30, 1995, respectively, related to the operation of
the MLP and other management contract hotels.

One wholly owned hotel was acquired by Historical Red Lion in 1989 subject to a
nonrecourse cash flow mortgage which requires interest payments contingent on
achieving certain levels of performance.  Because of the nonrecourse and cash
flow nature of the loan, the mortgage has not been recorded as an obligation and
the property and equipment of the hotel are excluded from the consolidated
financial statements.  The mortgage is in substance a management contract with a
purchase option.  Accordingly, the hotel is treated as a management contract in
the accompanying consolidated financial statements.

The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses and
the disclosure of contingent assets and liabilities.  While management endeavors
to make accurate estimates, actual results could differ from estimates.

All significant intercompany accounts and transactions have been eliminated in
consolidation.

The unaudited consolidated financial statements reflect, in the opinion of the
management, all adjustments, all of which are of a normal recurring nature,
necessary to present fairly the financial position of the Company at September
30, 1996 and the results of operations and cash flows for the three and nine
month periods ended September 30, 1996 and for the three and seven month periods
ended September 30, 1995.  Interim results are not necessarily indicative of
results to be expected for a full fiscal year.

Certain prior year amounts have been reclassified to conform to the current year
presentation.

The unaudited consolidated financial statements should be read in conjunction
with the Company's annual consolidated financial statements and notes thereto.

                                       9
<PAGE>
 
2.  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

The Company adopted Statement of Financial Accounting Standards No. 123 ("SFAS
No. 123"), "Accounting for Stock-Based Compensation," effective January 1, 1996.
SFAS No. 123 defines a fair value based method of accounting for employee stock
options or similar instruments and permits companies to adopt that method of
accounting for all of their employee stock compensation plans.  However, it also
allows a company to continue to measure compensation cost for those plans using
the intrinsic value based method of accounting prescribed by APB Opinion No. 25
("APB No. 25"), "Accounting for Stock Issued to Employees."  The Company elected
to continue to measure compensation cost in conformity with APB No. 25 and to
make pro forma disclosures of net income and earnings per share in its annual
report on Form 10-K for the year ended December 31, 1996, as if the fair value
based method of accounting defined in SFAS No. 123 had been applied.  Under the
terms of the Merger Agreement with Doubletree, which is expected to be
consummated during the fourth quarter of 1996, all outstanding vested and
unvested stock options will be converted into the right to receive cash and
common stock of Doubletree and canceled.

3.  LONG-TERM DEBT AND CREDIT FACILITIES

Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
 
                                                         September 30,   December 31,
                                                             1996           1995
                                                             ----           ----
<S>                                                      <C>             <C>
Term loan, LIBOR plus 2% (7.7% at September 30, 1996
  and 8.0% at December 31, 1995), payable through 2002     $123,869       $133,750
  
Mortgages, variable rates (6.5% -7.0% at
  September 30, 1996 and 7.0% -8.3% at                
    December 31, 1995), payable through 1998                 84,418         84,900
  
Note payable, 8.69%, payable through 2022                     5,019          4,717
                                                           --------       --------
                                                            213,306        223,367
Current portion of long-term debt                           (48,620)        (7,759)
                                                           --------       --------
 
Long-term debt, net of current portion                     $164,686       $215,608
                                                           ========       ========
</TABLE>
Interest Rate Swap Agreements

The Company enters into interest rate swap agreements in order to reduce its
exposure to interest rate fluctuations.  The agreements have effectively
converted floating rate debt, which is tied to LIBOR, to fixed rates.
Accordingly, the net interest received or paid on the interest rate swap is
recorded as an adjustment to interest expense.

At September 30, 1996, the Company had three interest rate swap agreements
outstanding which have substantially converted $75 million of debt from floating
LIBOR based rates to fixed rates ranging from 5.19% to 5.57%.  The agreements
expire from September 1997 to March 1998.  Interest income of $24,000 and
$49,000 was recognized by the Company relating to interest rate swap agreements
for the three and nine months ended September 30, 1996, respectively, and is
included as an adjustment to interest expense.

4.   RELATED PARTY TRANSACTIONS

Investments in and advances to unconsolidated joint ventures includes two notes
receivable from one joint venture in the amounts of $1,405,000 and $5,603,000 at
September 30, 1996 and $1,500,000 and $2,009,000 at December 31, 1995.  The
notes bear interest at a fixed rate of 10% and a rate based on prime plus 1.0%
(9.25% at September 30, 1996 and 9.5% at December 31, 1995), respectively.  In
addition, other assets, net, includes a note receivable from a joint venture in
the amount of $1,759,000 and $1,628,000 outstanding at September 30, 1996 and
December 31, 1995, respectively, which bears interest at a rate based on prime
(10.2% at September 30, 1996 and 10.5% at December 31, 1995).

                                       10
<PAGE>
 
Transactions with the MLP

Included in accounts receivable-affiliates and due from affiliate is $19,675,000
and $19,078,000 at September 30, 1996 and December 31, 1995, respectively,
representing amounts receivable from the MLP primarily for advances made by the
Company and Historical Red Lion for capital improvements which exceeded the 3%
reserve established in accordance with the provisions of the management
agreement.  Such amounts are presented net of current assets and current
liabilities related to the managed MLP hotels of $2,490,000 and $2,194,000 at
September 30, 1996 and December 31, 1995, respectively.  The current balance on
this receivable of $1,841,000 and $2,823,000 at September 30, 1996 and December
31, 1995, respectively, is included in accounts receivable-affiliates.  The
remaining balance of $17,834,000 and $16,255,000 at September 30, 1996 and
December 31, 1995, respectively, is classified as due from affiliate. Amounts
receivable from the MLP for capital improvement advances earn interest at the
rate of prime plus 0.5% (8.75% at September 30, 1996 and 9.0% at December 31,
1995).

Accounts receivable-affiliates and due from affiliate also include certain other
advances to and deferred incentive management fees receivable from the MLP.  A
total of $3,726,000 was advanced to the MLP to fund distributions during the
first 36 months of the MLP's operations and is classified as due from affiliate
at September 30, 1996 and December 31, 1995.  The advance is non-interest
bearing, has an unspecified term and is to be repaid out of available cash flow
or refinancing proceeds.  Additionally, non-interest bearing deferred incentive
management fees receivable of $6,000,000 were contributed to the Company in the
Formation.  The Company received $5,299,000 of such fees during the nine months
ended September 30, 1996.  The remaining balance of $701,000 is classified as
due from affiliate at September 30, 1996.

5.  INCOME TAXES

Since Historical Red Lion was a partnership, no deferred tax benefits had been
provided on the net assets contributed to the Company.  In accordance with
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes," the Company recorded net deferred tax assets of $1.2 million related to
the contribution of the Santa Barbara Joint Venture in March 1995 and $8.5
million related to the Formation on August 1, 1995.  Except for the tax benefit
associated with the contribution of the Santa Barbara Joint Venture and the
Formation, income taxes have been provided at an estimated effective income tax
rate of approximately 40%.

6.        INSURANCE PROCEEDS

On February 8, 1996, three of the Company's hotels were evacuated due to
flooding in northwestern Oregon and southwestern Washington.  Two of the hotels
were damaged by flood waters, have reopened and have been repaired.  The third
hotel was undamaged and reopened quickly. As the Company maintains flood and
business interruption insurance, management does not believe that the ultimate
outcome will have a material adverse effect on the results of operations or
financial position of the Company.  Moreover, as the Company's flood insurance
policy covers the replacement cost of the damaged property, insurance proceeds
will likely exceed the net book value of the underlying property, resulting in
the recognition of gains when such proceeds are received.

7.        EXPENSES RESULTING FROM THE FORMATION AND OFFERING

Expenses resulting from the Formation and Offering include certain Formation
costs of $1,314,000 and expenses resulting from the Offering of $11,348,000 and
$2,000,000 related to the termination of an incentive unit plan and assumption
of the obligation of a supplemental income retirement agreement, respectively,
for the three and seven months ended September 30, 1995.

8.        COMMITMENTS AND CONTINGENCIES

At September 30, 1996, the Company had commitments relating to capital
improvement projects aggregating approximately $10,395,000.

The Company is party to litigation arising in the ordinary course of business.
In the opinion of management, these actions will not have a material adverse
effect, if any, on the Company's financial position, results of operations or
liquidity.

                                       11
<PAGE>
 
9.  SUBSEQUENT EVENT

On September 12, 1996, the Company entered into a Merger Agreement with
Doubletree, pursuant to which the Company would be acquired by Doubletree
through the merger of a wholly owned subsidiary with and into the Company. The
purchase price for acquisition of all of the outstanding common stock of the
Company, which is subject to adjustment, is approximately $1 billion and will be
paid in a combination of cash and Doubletree common stock. Consummation of the
transaction is subject to certain conditions, including approval by the
stockholders of both the Company and Doubletree. The Company's stockholders are
scheduled to meet on November 8, 1996 in order to vote on approval of the Merger
Agreement and acquisition of the Company by Doubletree. The Partnership owns
approximately 67% of the outstanding voting stock of the Company and, therefore,
has sufficient voting power to constitute a quorum and approve and adopt the
Merger Agreement, regardless of the vote of any other stockholder. The
transaction is expected to be approved and become effective during the fourth
quarter of 1996.





                                       12
<PAGE>
 
ITEM 2   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
--------------------------------------------------------------------------------
          OF OPERATIONS
          -------------

RESULTS OF OPERATIONS

The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the financial statements and
accompanying notes appearing elsewhere in this document.  The Company believes
the comparison of actual results for the three and nine months ended September
30, 1996 to pro forma results for the three and nine months ended September 30,
1995 provides a more meaningful presentation than a comparison to actual 1995
operations which represent the results of one hotel until the Formation and
Offering when the Company's operations fully commenced.
<TABLE>
<CAPTION>

                                                               PRO FORMA (A)                           PRO FORMA (A)
                                           THREE MONTHS        THREE MONTHS        NINE MONTHS         NINE MONTHS
                                              ENDED               ENDED               ENDED               ENDED
                                          SEPTEMBER 30,       SEPTEMBER 30,       SEPTEMBER 30,       SEPTEMBER 30,
                                               1996                1995                1996                1995
                                          -------------       -------------       -------------       -------------
<S>                                       <C>                <C>                  <C>                <C>
Revenues:
  Rooms                                     $    88,572           $ 79,248          $   236,017           $215,166
  Food and beverage                              38,889             38,128              120,278            118,921
  Other                                          14,377             12,094               43,510             36,208
                                            -----------           --------          -----------           --------

     Total revenues                             141,838            129,470              399,805            370,295

Operating Costs and Expenses:
      Departmental direct expenses:
    Rooms                                        20,428             17,941               57,419             51,475
    Food and beverage                            30,715             29,587               94,349             93,060
    Other                                         4,920              4,578               14,999             13,738
  Property indirect expenses                     28,841             26,023               84,004             77,583
  Other costs                                     8,303              8,882 (b)/(f)       26,331             25,836 (b)/(f)
  Depreciation and amortization                   5,470              4,646               14,637             14,530
  Payments due to owners of managed hotels       13,805             12,733               39,983             36,591
  Expenses resulting from the Formation
   and Offering                                      --             14,662 (c)               --             14,662 (c)
                                            -----------           --------          -----------           --------

Operating Income                                 29,356             10,418               68,083             42,820

Equity in Earnings of
  Unconsolidated Joint Ventures                    (146)               196                1,277              1,885

Interest Expense, net                            (3,987)            (4,572) (d)         (11,766)           (14,613) (d)
                                            -----------           --------          -----------           --------

Income Before Joint Venturers' Interests         25,223              6,042               57,594             30,092

Joint Venturers' Interests                         (376)              (304)              (1,354)              (463)
                                            -----------           --------          -----------           --------

Income Before Income Taxes                       24,847              5,738               56,240             29,629

Income Tax Benefit (Expense)                     (9,739)             6,409 (e)/(f)      (22,296)            (3,147) (e)/(f)
                                            -----------           --------          -----------           --------

Net Income                                  $    15,108           $ 12,147          $    33,944           $ 26,482
                                            ===========           ========          ===========           ========

Earnings Per Common Share                   $      0.48           $   0.39          $      1.08           $   0.85
                                            ===========           ========          ===========           ========


Weighted Average Common Shares
 Outstanding                                 31,312,600         31,312,500 (g)       31,312,500         31,312,500 (g)
                                            ===========      =============          ===========      =============

Other Statistics:
  Gross operating profit                    $    56,934      $      51,341          $   149,034      $     134,439
  Gross operating profit margin                      40%                40%                  37%                36%

</TABLE>

                                       13
<PAGE>
 
(a)  On August 1, 1995, Historical Red Lion contributed substantially all of its
     assets (excluding the Leased Hotels, certain minority joint venture
     interests and certain current assets) and certain liabilities to the
     Company in the Formation.  Also effective August 1, 1995, the Company
     entered into a long-term master lease with the Partnership for the Leased
     Hotels.  The accompanying consolidated statements of income includes the
     pro forma results of Historical Red Lion for the three and nine months
     ended September 30, 1995 adjusted to give effect to the Formation, the
     leasing of the Leased Hotels and the repayment and refinancing of
     substantially all debt with borrowings under a new credit facility and the
     net proceeds of the public offering, assuming that such events were
     completed on January 1, 1995.

(b)  Pro forma other costs includes quarterly lease expense of $3,750,000
     associated with the Leased Hotels, offset by quarterly administrative costs
     of approximately $88,000 for which the Company is reimbursed by the
     Partnership.

(c)  Includes certain costs resulting from the Formation of $1,314,000 and
     expenses resulting from Offering of $11,348,000 and $2,000,000 related to
     the termination of an incentive unit plan and assumption of the obligation
     of a supplemental income retirement agreement, respectively.

(d)  Pro forma interest expense for the three and nine months ended September
     30, 1995 reflects the effects of the Formation and Refinancing as if those
     events had occurred on January 1, 1995.  Accordingly, pro forma interest
     expense does not include interest on debt associated with the Leased Hotels
     or repaid with the proceeds of the Offering.

(e)  Pro forma income taxes have been provided assuming an effective tax rate of
     40%.  Pro forma income taxes for the three and nine months ended September
     30, 1995, include a deferred income tax benefit of $9,736,000 resulting
     from the tax effect of the differences in the book and tax basis of the
     assets and liabilities transferred to the Company.

(f)  The expenses resulting from the Formation and Offering of $14,662,000 (pre-
     tax) and the deferred income tax benefit of $9,736,000 as discussed above
     result in a net negative effect on pro forma net income of $96,000 or less
     than $.01 on an earnings per share basis.

(g)  Based on the number of common shares issued in the Offering, as if the
     Offering occurred on January 1, 1995.

Comparison of Three Months Ended September 30, 1996 and Pro Forma Three Months
------------------------------------------------------------------------------
Ended September 30, 1995
------------------------

Revenues.  The Company's operating revenues for the three months ended September
---------                                                                       
30, 1996 were $141.8 million, an increase of $12.3 million or 9% from pro forma
operating revenues of $129.5 for the three months ended September 30, 1995.  The
change in operating  revenues is primarily a result of increased room revenues.

Room revenues increased 12% to $88.6 million for the three months ended
September 30, 1996 as compared to pro forma room revenues of $79.2 million for
the three months ended September 30, 1995. This increase was primarily due to a
7% rise in average daily room rates to $82.39. Actual occupancy of 79.3% during
the three months ended September 30, 1996 declined 1.4 percentage points as
compared to the pro forma occupancy rate for the three months ended September
30, 1995. Another component of the increase was the acquisition of three hotels
(previously unaffiliated with the Company) since September 30, 1995, which
contributed room revenues of approximately $3.8 million during the three months
ended September 30, 1996.

A summary of occupancy and room rates for the three months ended September 30 is
as follows:





<TABLE>
<CAPTION>
 
                              1996     1995
                             -------  -------
<S>                          <C>      <C>
     Occupancy percentage      79.3%    80.7%
     Average room rate        $82.39   $76.93
</TABLE>

Operating results are affected by seasonality.  The current quarter results
reflect late summer and early fall seasons in which revenues are typically
higher than in the second and fourth quarters.  There can be no assurance,
however, that such trends will continue.

                                       14
<PAGE>
 
Expenses.  Departmental direct expenses (expenses related to a specific
---------                                                              
function, such as rooms or food and beverage) for the three months ended
September 30, 1996 increased 8% over pro forma departmental direct expenses for
the three months ended September 30, 1995.   As a percentage of revenues and pro
forma revenues, departmental direct expenses and pro forma departmental direct
expenses remained constant at 40% for the three months ended September 30, 1996
and 1995.

Property indirect expenses for the three months ended September 30, 1996
increased 11% over pro forma property indirect expenses for the three months
ended September 30, 1995 and  remained constant as a percentage of revenues.
Indirect costs include expenses related to a hotel's general operation, such as
utilities, repairs and maintenance, promotional expenses and administrative
costs.

Gross Operating Profit.  The Company's gross operating profit for the three
-----------------------                                                    
months ended September 30, 1996 was $56.9 million, an increase of $5.6 million
or 11% from pro forma gross operating profit of $51.3 million for the three
months ended September 30, 1995.  The increase is primarily attributable to the
higher revenues discussed above.  Gross operating profit margin and pro forma
gross operating profit margin remained constant at 40% for the three months
ended September 30, 1996 and 1995.

Payments Due to Owners of Managed Hotels.  Revenues and expenses include
-----------------------------------------                               
operating revenues and expenses of unconsolidated managed properties since the
operating responsibilities associated with those hotels are substantially the
same as those for owned hotels.  Payments to owners of those hotels, net of the
Company's management fees, increased approximately $1.1 million for the three
months ended September 30, 1996 as compared to the pro forma payments to owners
of managed hotels for the three months ended September 30, 1995.  The increase
in payments due to owners of managed hotels is primarily attributable to
improved operating performance at the managed hotels.

Management fees in connection with the managed hotels increased moderately to
$3.2 million for the three months ended September 30, 1996 as compared to pro
forma management fees of $3 million for the three months ended September 30,
1995.

Operating Income.  The Company's operating income for the three months ended
-----------------                                                           
September 30, 1996 was $29.4 million, an increase of $19 million or 183% from
pro forma operating income of $10.4 million for the three months ended September
30, 1995.  The increase is primarily attributable to the higher revenues
discussed above and the $14.7 million of Formation and Offering costs incurred
in the third quarter of 1995.  Excluding the Formation and Offering costs,
operating income for the three months ended September 30, 1996 would have
increased $4.3 million or 17% over pro forma operating income for the three
months ended September 30, 1995.

Interest Expense.  Interest expense, net, decreased $600,000 to $4 million for
-----------------                                                             
the three months ended September 30, 1996 as compared to pro forma interest
expense of $4.6 million for the three months ended September 30, 1995.  The
decrease is primarily due to interest income earned during the third quarter of
1996 of approximately $360,000 and a lower average outstanding principal balance
on Company debt.

Income Tax Benefit (Expense). Income tax expense increased $16.1 million to $9.7
-----------------------------                                                   
million for the three months ended September 30, 1996 as compared to pro forma
income tax benefit of $6.4 million for the three months ended September 30,
1995.  The increase is due to the recognition of tax benefits in the third
quarter of 1995 resulting from the Formation and Offering.  Income taxes have
been provided assuming an effective tax rate of approximately 40% for both three
month periods.  In the third quarter of 1996, a benefit of $200,000 was recorded
in order to properly reflect the actual tax rate experienced in fiscal year
1995.

Net Income.  The Company's net income increased 24% to $15.1 million ($.48 per
-----------                                                                   
share) for the three months ended September 30, 1996 from pro forma net income
of $12.1 million ($.39 per share) for the three months ended September 30,
1995.  The increase in net income is primarily due to increased operating income
and decreased interest expense.

                                       15
<PAGE>
 
Comparison of Nine Months Ended September 30, 1996 and Pro Forma Nine Months
----------------------------------------------------------------------------
Ended September 30, 1995
------------------------

Revenues.  The Company's operating revenues for the nine months ended September
---------                                                                      
30, 1996 were $399.8 million, an increase of $29.5 million or 8% from pro forma
operating revenues of $370.3 for the nine months ended September 30, 1995.  The
change in operating revenues is primarily a result of increased room and other
revenues.

Room revenues increased 10% to $236 million for the nine months ended September
30, 1996 as compared to pro forma room revenues of $215.2 million for the nine
months ended September 30, 1995.  This increase was primarily due to a 7% rise
in average daily room rates to $80.72.  Actual occupancy of 73.8% during the
nine months ended September 30, 1996 declined 1.3 percentage points as compared
to the pro forma occupancy rate for the nine months ended September 30, 1995.
Another component of the increase was the acquisition of three hotels
(previously unaffiliated with the Company) since September 30, 1995 which
contributed additional room revenues of  approximately $8.1 million during the
nine months ended September 30, 1996.

A summary of occupancy and room rates for the nine months ended September 30 is
as follows:
<TABLE>
<CAPTION>
 
                         1996     1995
                        -------  -------
<S>                     <C>      <C>
Occupancy percentage      73.8%    75.1%
Average room rate        $80.72   $75.62
</TABLE>

Other revenues increased 20% to $43.5 million for the nine months ended
September 30, 1996 as compared to pro forma other revenues of $36.2 million for
the nine months ended September 30, 1995 due primarily to increased telephone
income, banquet rentals, ancillary banquet services and insurance proceeds
relating to two hotels which were affected by the February 1996 flood in the
Portland, Oregon area.

Expenses.  Departmental direct expenses (expenses related to a specific
---------                                                              
function, such as rooms or food and beverage) for the nine months ended
September 30, 1996 increased 5% over pro forma departmental direct expenses for
the nine months ended September 30, 1995.   As a percentage of revenues and pro
forma revenues, departmental direct expenses and pro forma departmental direct
expenses decreased to 42% from 43% for the nine months ended September 30, 1996
and 1995, respectively, primarily due to the increase in revenues.

Property indirect expenses for the nine months ended September 30, 1996
increased 8% over pro forma property indirect expenses for the nine months ended
September 30, 1995 and remained constant as a percentage of revenues.  Indirect
costs include expenses related to a hotel's general operation, such as
utilities, repairs and maintenance, promotional expenses and administrative
costs.

Gross Operating Profit.  The Company's gross operating profit for the nine
-----------------------                                                   
months ended September 30, 1996 was $149 million, an increase of $14.6 million
or 11% from pro forma gross operating profit of $134.4 million for the nine
months ended September 30, 1995.  The increase is primarily attributable to the
higher revenues discussed above.  Gross operating profit margin for the nine
months ended September 30, 1996 improved to 37% from pro forma gross operating
profit margin of 36% for the nine months ended September 30, 1995.

Payments Due to Owners of Managed Hotels.  Revenues and expenses include
-----------------------------------------                               
operating revenues and expenses of unconsolidated managed properties since the
operating responsibilities associated with those hotels are substantially the
same as those for owned hotels.  Payments to owners of those hotels, net of the
Company's management fees, increased approximately $3.4 million for the nine
months ended September 30, 1996 as compared to the pro forma payments to owners
of managed hotels for the nine months ended September 30, 1995.  The increase in
payments due to owners of managed hotels is primarily attributable to improved
operating performance at the managed hotels.

Management fees in connection with the managed hotels increased to $9.3 million
for the nine months ended September 30, 1996 as compared to pro forma management
fees of $8.4 million for the nine months ended September 30, 1995.

                                       16
<PAGE>
 
Operating Income.  The Company's operating income for the nine months ended
-----------------                                                          
September 30, 1996 was $68.1 million, an increase of $25.3 million or 59% from
pro forma operating income of $42.8 million for the nine months ended September
30, 1995.  The increase is primarily attributable to the higher revenues
discussed above and the $14.7 million of Formation and Offering costs incurred
in the third quarter of 1995.  Excluding the Formation and Offering costs,
operating income for the nine months ended September 30, 1996 would have
increased $10.6 million or 18% over pro forma operating income for the nine
months ended September 30, 1995.

Interest Expense.  Interest expense, net, decreased $2.8 million to $11.8
-----------------                                                        
million for the nine months ended September 30, 1996 as compared to pro forma
interest expense of $14.6 million for the nine months ended September 30, 1995.
The decrease is primarily due to interest income earned during the nine months
ended September 30, 1996 of approximately $1.6 million and a lower average
outstanding principal balance on Company debt.

Income Tax Expense.  Income tax expense increased $19.2 million to $22.3 million
-------------------                                                             
for the nine months ended September 30, 1996 as compared to pro forma income tax
expense of $3.1 million for the nine months ended September 30, 1995. The
increase is due to the recognition of tax benefits in the third quarter of 1995
resulting from the Formation and Offering.  Income taxes have been provided
assuming an effective tax rate of approximately 40% for both nine months
periods.

Net Income.  The Company's net income increased 28% to $33.9 million ($1.08 per
-----------                                                                    
share) for the nine months ended September 30, 1996 from pro forma net income of
$26.5 million ($.85 per share) for the nine months ended September 30, 1995.
The increase in net income is primarily due to increased operating income and
decreased interest expense.

LIQUIDITY AND CAPITAL RESOURCES

Cash decreased to $18.7 million at September 30, 1996 from $68.4 million at
December 31, 1995 primarily as a result of three acquisitions, ongoing capital
expenditures, repayment of term loan principal and seasonal working capital
fluctuations.  The Company's principal source of cash is hotel operations.  The
Company and Historical Red Lion historically have generated internal cash flow
to meet operating needs, make capital expenditures and reduce outstanding debt.
Absent the expected acquisition by Doubletree, the Company's future debt levels
may vary depending on, among other factors, the amount of cash provided by
operations and debt maturities.

At September 30, 1996, commitments relating to capital improvement projects were
approximately $10.4 million.  Pursuant to the Merger Agreement with Doubletree,
the Company has agreed not to authorize or make any additional capital
expenditures in excess of $10 million from September 12th through December 1996
and $2.5 million during January 1997.   As part of its capital expenditure
program, the Company budgets for costs incurred in connection with environmental
compliance at its properties.  These costs historically have not been material,
and the Company does not anticipate incurring material costs for environmental
compliance in the future.

In connection with the Formation, the Company repaid the majority of the debt
contributed to the Company by Historical Red Lion with the proceeds of the
equity offering and a new $135 million seven year term loan.  In addition, on
August 1, 1995, the Company obtained a $130 million credit line facility of
which $80 million is available for acquisitions and $50 million is available for
working capital requirements.  The credit line facility has a term of seven
years.  The term loan and credit line facility (collectively the "Credit
Facility") carry a variable interest rate based on LIBOR plus 2% (7.7% at
September 30, 1996). Quarterly mandatory prepayments which increase over the
term of the Credit Facility are required.  In addition, in March of each year a
mandatory prepayment of the Credit Facility is required in an amount equal to
50% of annual excess cash flow (as defined in the credit agreement) for the
prior fiscal year. Pursuant to the Merger Agreement with Doubletree, the Company
has agreed not to incur, assume or guarantee any new indebtedness, including
draw-downs on the existing line of credit, in an aggregate amount in excess of
$5 million.  It is anticipated that the outstanding term loan will be repaid and
the credit facility will be terminated in connection with the acquisition of the
Company by Doubletree.

At September 30, 1996, the current portion of long-term debt is comprised of
$39.4 million representing the final payment on a mortgage due in July 1997 and
$9.2 million representing the current amount due on the term loan.

                                       17
<PAGE>
 
Absent the expected acquisition by Doubletree, the Company believes that a
combination of its existing cash and cash equivalents, internally generated cash
flows and its borrowing ability under the Credit Facility will be sufficient to
fund its operations and capital outlays.


                                 **************

The statements contained in this report that are not statements of historical
fact may include forward-looking statements that involve a number of risks and
uncertainties.  Moreover, from time to time the Company may issue other forward-
looking statements.  The following factors are among those that could cause
actual results to differ materially from the forward-looking statements:
national or local economic conditions affecting the supply and demand for hotel
space, competition in hotel operations, including additional or improved
services or facilities of competitors, price pressures, continuing availability
of capital to fund growth and improvements and the consummation of the Merger
Agreement with Doubletree.  The forward-looking statements should be considered
in light of these factors.





                                       18
<PAGE>
 
                                    PART II

ITEM 6    EXHIBITS AND REPORTS ON FORM 8-K
------------------------------------------
    (a)   EXHIBITS:  The following document is filed herewith and made a part of
                     this report:

             Exhibit 2.1 -      Agreement and Plan of Merger dated as of
                                September 12, 1996 by and among exhibits).
                                Incorporated by reference to Exhibit 2.1 to the
                                September 12, 1996 Form 8-K.
 
             Exhibit 10.12 -    Purchase and Sale Agreement dated as of
                                September 12,1996 by and between Red Lion
                                Hotels, Inc. and Red Lion, a California Limited
                                Partnership.
 
             Exhibit 10.13 -    Assignment and Assumption of Joint Venture and
                                Partnership Interests as of September 12, 1996
                                by and between Red Lion Hotels, Inc. and Red
                                Lion, a California Limited Partnership.
  
             Exhibit 27 -       Article 5 Financial Data Schedule for 3rd
                                Quarter 10-Q.
 
    (b)   REPORTS ON FORM 8-K:  Two reports on Form 8-K were filed by the
                                Company during the third quarter of 1996. A Form
                                8-K, dated August 28, 1996, reported under Item
                                5 the issuance of a press release announcing a
                                possible acquisition of the Company by
                                Doubletree Corporation. A Form 8-K, dated
                                September 12, 1996, reported under Item 5 the
                                Agreement and Plan of Merger entered into
                                between the Company and Doubletree Corporation.







                                       19
<PAGE>
 
                                 SIGNATURES

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


                                 RED LION HOTELS, INC.


Date:   October 21, 1996         By /S/DAVID J. JOHNSON
                                    -------------------
                                    David J. Johnson
                                    President, Chief Executive Officer and
                                    Chairman of the Board



Date:   October 21, 1996         By /S/MICHAEL VERNON
                                    -----------------
                                    Michael Vernon
                                    Chief Financial Officer
                                    (Principal Financial and Accounting Officer)





                                       20