<PAGE>   1

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


                                  FORM 10 - QSB




(MARK ONE)

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

For the Quarterly Period Ended  May 31, 1998 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 0-18091

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

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

                      28 East Court Street, P. O. Box 6847
                        Greenville, South Carolina 29606
 ------------------------------------------------------------------------------
                    (Address of principal executive offices)

                                 (864) 271-7171
  -----------------------------------------------------------------------------
                            Issuer's telephone number


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

Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports) and (2)
has been subject to such filing requirements for the past 90 days.

Yes  X    No
   -----     -----

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

Common Stock, $.01 Par Value - 7,900,822 shares outstanding as of July 8, 1998

         Transitional Small Business Disclosure Format (check one):

         Yes         No    X
             -------    -------


<PAGE>   2


                                      INDEX


                               RSI HOLDINGS, INC.




PART I.  FINANCIAL INFORMATION                                           PAGE

Item 1.  Financial Statements (Unaudited)

     Condensed consolidated balance sheet -- May 31, 1998                  4

     Condensed consolidated statement of operations -- Three
     and nine months ended May 31, 1998 and 1997                           5

     Condensed consolidated statement of cash flows -- Nine
     months ended May 31, 1998 and 1997                                    6

     Notes to condensed consolidated financial statements --
     May 31, 1998                                                          7

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                               9


PART II. OTHER INFORMATION                                                14

Item 1.  Legal Proceedings                                                14

Item 2.  Changes in Securities                                            14

Item 3.  Defaults upon Senior Securities                                  15

Item 4.  Submission of Matters to a Vote of Security Holders              15

Item 5.  Other Information                                                15

Item 6.  Exhibits and Reports on Form 8-K                                 15

SIGNATURES                                                                16



                                        3


<PAGE>   3


                               RSI Holdings, Inc.
                Condensed Consolidated Balance Sheet (Unaudited)
                                  May 31, 1998


Assets

Current Assets:
     Cash                                                   $  249,000
     Notes receivable - held for sale                          675,000
     Accounts receivable                                       119,000
     Prepaid expenses                                           63,000
                                                            ----------
Total current assets                                         1,106,000

Property and equipment:
     Cost                                                      231,000
     Less accumulated depreciation                              48,000
                                                            ----------
                                                               183,000
Other assets:
     Restricted investment                                     500,000
     Other                                                      13,000
                                                            ----------
                                                               513,000
                                                            ----------
                                                            $1,802,000
                                                            ==========
Liabilities and shareholders' equity

Current liabilities:
     Trade accounts payable                                 $   43,000
     Accrued expenses                                          160,000
     Note payable - bank                                       613,000
                                                            ----------
                                                               816,000

Deferred compensation                                           74,000

Shareholders' equity:
     Common Stock, $.01 par value-authorized
       25,000,000 shares, issued and outstanding
       7,900,822 shares at May 31, 1998                         79,000
     Excess of paid-in capital over par value                3,776,000
     Deficit                                                (2,943,000)
                                                            ----------
                                                               912,000


Contingencies (Note C)

                                                            ----------
                                                            $1,802,000
                                                            ==========

See accompanying notes.

                                       4


<PAGE>   4

                               RSI Holdings, Inc.
           Condensed Consolidated Statement of Operations (Unaudited)
               Three and Nine Months ended May 31, 1998 and 1997


<TABLE>
<CAPTION>
                                                  Three Months                                Nine Months
                                         --------------------------------          --------------------------------
                                             1998                 1997                 1998                 1997
                                         -----------          -----------          -----------          -----------
<S>                                        <C>                <C>                 <C>                   <C>        
Revenues:
     Origination fees                      $ 218,000          $    87,000         $    476,000          $   126,000
     Gain on sale of loans                    35,000               23,000               93,000               33,000
                                         -----------          -----------          -----------          -----------
Total revenues                               253,000              110,000              569,000              159,000


Expenses:
     Selling, general and
         administrative                      402,000              254,000            1,193,000              665,000
                                         -----------          -----------          -----------          -----------

     Loss from operations                   (149,000)            (144,000)            (624,000)            (506,000)

Other income (expense):
     Interest income                          20,000               21,000               54,000               76,000
     Rental income                                 0                8,000                6,000               22,000
     Gain on sale of real estate               1,000                    0               76,000                    0
     Insurance recovery (Note C)             100,000                    0              100,000                    0
     Interest expense                         (8,000)              (5,000)             (18,000)             (12,000)
     Cost to settle lawsuit                        0                    0              (42,000)            (300,000)
                                         -----------          -----------          -----------          -----------
Total other income (expense)                 113,000               24,000              176,000             (214,000)
                                         -----------          -----------          -----------          -----------
Net loss                                 $   (36,000)         $  (120,000)         $  (448,000)         $  (720,000)
                                         ===========          ===========          ===========          ===========

Net loss per share                       $      (.00)         $      (.02)         $      (.06)         $      (.09)
                                         ===========          ===========          ===========          ===========
Weighted average number
     of shares outstanding                 7,900,822            7,895,822            7,900,822            7,921,554
                                         ===========          ===========          ===========          ===========
</TABLE>



See accompanying notes.

                                        5


<PAGE>   5

                               RSI Holdings, Inc.
           Condensed Consolidated Statement of Cash Flows (Unaudited)
                     Nine Months ended May 31, 1998 and 1997



<TABLE>
<CAPTION>
                                                                1998                 1997
                                                            -----------          -----------
<S>                                                         <C>                  <C>         
Cash used in operating activities                           $(1,253,000)         $  (809,000)

Investing activities:
     Proceeds from sale of property                             327,000                 --
     Purchase of U. S. Treasury bill                               --               (502,000)
     Acquisition of outstanding stock of
         HomeAdd Financial Corporation                             --                (15,000)
     Purchase of equipment                                     (186,000)             (18,000)
     Purchase of common stock                                      --                (25,000)
     Organization expense                                          --                (13,000)
     Other                                                        8,000                 --
                                                            -----------          -----------
Net cash provided by (used in) investing activities             149,000             (573,000)
                                                            -----------          -----------

Financing activities:
     Advances under bank line of credit                       5,695,000            1,655,000
     Payments on bank line of credit                         (5,101,000)          (1,579,000)
                                                            -----------          -----------

Net cash provided by financing activities                       594,000               76,000
                                                            -----------          -----------
Decrease in cash and cash equivalents                          (510,000)          (1,306,000)

Cash and cash equivalents at beginning of year                  759,000            2,256,000
                                                            -----------          -----------
Cash and cash equivalents at end of period                  $   249,000          $   950,000
                                                            ===========          ===========
</TABLE>


See accompanying notes.

                                        6


<PAGE>   6

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

Note A - Basis of Presentation 

         The accompanying unaudited condensed consolidated financial statements
at May 31, 1998 have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10 -QSB and Item 310(b) of Regulation S-B. Accordingly,
they do not include all the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments including normal recurring accruals considered
necessary for a fair presentation have been included. Operating results for the
nine months ended May 31, 1998 are not necessarily indicative of the results
that may be expected for the year ending August 31, 1998. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10 - KSB for the year
ended August 31, 1997.

Note B - Sale of Real Property

         On November 19, 1997, the Company sold a parcel of real estate that was
located in Tampa, Florida for $425,000 less selling expenses of approximately
$28,000. The depreciated cost of the property was $248,000. The purchase price
was paid in a combination of cash and a $75,000 promissory note. The note is
secured by a second mortgage and bears interest at 8.5% per annum and is payable
by the purchaser over ten years. The gain on the sale is recognized under the
cost recovery method. The gain to date recognized on the sale of the property of
$76,000 is included in the results of operations for the period ended May 31,
1998.

         The principal balance of the note receivable is offset in the
accompanying balance sheet by the gain that will be recognized as income as the
principal amount of the note receivable is collected. Such amounts that have
been deferred are as follows:

              Due within one year                          $ 5,000
              Due after one year                            68,000
                                                           -------
                                                           $73,000
                                                           =======
Note C - Contingencies

         The Company is one of several defendants in a lawsuit filed in July
1993 claiming indemnification with respect to payments due and the cost of
performing certain covenants and obligations under a land lease agreement
allegedly in default. During December 1997, an agreement in principal was
reached among the parties to settle this lawsuit. The proposed settlement
involves the payment by the Company of $42,000 to end claims by all parties to
this litigation. The Company understands that settlement documents have been
circulated to all counsel for review. The settlement amount of $42,000 is
accrued in the accompanying statements as of May 31, 1998.

         In addition, in January 1995, a complaint against the Company seeking
damages in excess of the minimal jurisdictional amount was served. The plaintiff
in that case alleges that he was injured while operating a vehicle


                                        7


<PAGE>   7

that was sold by the Company. The Complaint also named the manufacturer of the
vehicle. The manufacturer has accepted defense of the Company regarding this
matter. The Company believes, based on the arrangements with the manufacturer
and the Company's own insurance, that this action should not have a material
adverse effect on the Company's financial position.

         During fiscal year 1997, the Company paid Triple A Machine Shop, Inc.
("Triple A") $300,000 in settlement of a lawsuit brought by Triple A against a
subsidiary of the Company. During the third quarter of fiscal 1998, the
Company's insurance carrier agreed to pay the Company $100,000 to resolve the
Company's claim for reimbursement of the Triple A settlement expense.
Accordingly, the Company recorded this $100,000 amount during the third quarter
of fiscal 1998. The Company received actual payment of the $100,000 in June
1998.

Note D - Earnings (loss) per common share

         In 1997, The Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 128, Earnings per Share. Statement No. 128
replaced the previously reported primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. Diluted earnings per share
are not presented as the Company has experienced losses from continuing
operations for all periods presented and the exercise of outstanding options
would be antidilutive. All earnings (loss) per share amounts for all periods
have been presented, and where necessary, restated to conform to the Statement
No. 128 requirements.




                                        8


<PAGE>   8


Item 2. 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-QSB contains forward-looking statements within
the meaning of Section 27A of the Securities Act and 21E of the Exchange Act.
Forward-looking statements are indicated by such terms as "expects", "plans",
"anticipates", and words to similar effect. Such forward-looking statements are
subject to known and unknown risks, uncertainties and other factors that may
cause the actual results, performance or achievements of the Company to be
materially different from future results, performance or achievements expressed
or implied by such forward-looking statements. Important factors ("Cautionary
Statements") that could cause the actual results, performance or achievements of
the Company to differ materially from the Company's expectations are disclosed
in this Report on Form 10-QSB including, without limitation, those factors
discussed in the paragraph immediately preceding the heading "Liquidity and
Capital Resources" on page 12 and otherwise herein. All written or oral
forward-looking statements attributable to the Company are expressly qualified
in their entirety by the Cautionary Statements. The Company does not undertake
to publicly update or revise its forward-looking statements even if experience
or future changes make it clear that any projected results expressed or implied
herein will not be realized.

Results of Operations

         The Company acquired a consumer loan business during fiscal year 1997.
The Company has no other business operations. The following discussion of the
results of operations during the three and nine months ended May 31, 1998 as
compared to the three and nine months ended May 31, 1997 relates to the consumer
loan business.

         Revenues were $253,000 and $569,000, respectively, during the three and
nine months ended May 31, 1998 and consisted of loan origination fees and gain
from the sale of the loans made. Revenues were $110,000 and $159,000 during the
three and nine months ended May 31, 1997.

         Selling, general and administrative expenses include expenses incurred
by HomeAdd of $312,000 and $879,000, respectively, during the three and nine
months ended May 31, 1998 as compared to $212,000 and $394,000, respectively,
during the three and nine months ended May 31, 1997. The remaining general and
administrative expenses primarily consist of salaries, legal, audit and other
administrative expenses incurred by the Company. The HomeAdd expenses primarily
relate to advertising, salaries, and various administrative expenses of HomeAdd.

         During the third quarter of fiscal 1998, the Company and its insurance
company reached an agreement whereby the insurance company would pay $100,000 to
the Company. Accordingly, the Company recorded the recovery of $100,000 during
the third quarter of fiscal 1998. The Company received actual payment of the
$100,000 in June 1998.

         The real property located in Tampa, Florida was sold during November
1997 for $425,000 less selling expenses of $28,625. The depreciated cost of the
property was $248,000. The purchase price was paid in a combination of cash and
a $75,000 promissory note. The note is secured by a second mortgage

                                        9


<PAGE>   9

on the property. The property is subject to a first mortgage with a bank that is
payable by the purchaser of the property in the amount of approximately
$319,000. Because of the purchaser's relatively small equity in the property,
there can be no assurance that the Company would be able to recover the
principal amount of the note if the purchaser were to default on the note.
Neither can there be any assurance that the Company will receive timely payments
on the note. Gain to the extent of the proceeds represented by the note
receivable is deferred and will be recognized as income as the principal amount
of the note receivable is collected. The remaining gain on sale of the property
of $76,000 is included in the results of operations for the period ended May 31,
1998.

         The results of operations for the nine months ended May 31, 1998
include $42,000 accrued as the amount expected to be paid to settle the lawsuit
relating to Holiday Inns, Inc. litigation involving RSI Corporation, the former
parent corporation of the Company, and Sparjax Corporation, RSI Corporation's
now-dissolved subsidiary. Under the terms of an agreement in principle that was
reached during December 1997, the Company will be required to pay $42,000 to end
claims by all parties to this litigation against the Company, RSI Corporation or
Sparjax Corporation. For further discussion of the settlement of the lawsuit,
reference is made to Part II, Item 1, "Legal Proceedings," which is incorporated
herein by reference.

         HomeAdd offers high loan-to-value loans ("HLTV Loans") to certain
qualified borrowers that permit the loan proceeds to be used for debt
consolidation and home improvements. Under the terms of these HLTV loans,
HomeAdd will make loans secured by a second or third mortgage in which the total
loans outstanding on that property can be up to 125% of the estimated fair value
of the real property. A qualified borrower is required to be a homeowner with
acceptable levels of income and have an acceptable credit history. Substantially
all of the loan volume during the nine months ended May 31, 1998 consisted of
HLTV Loans. The Company expects that most of the loans made during fiscal 1998
will be HLTV Loans.

         HomeAdd also offers Title I home improvement loans ("Title I Loans")
under the Title I program administrated by the Federal Housing Administration
("FHA"). HomeAdd was approved by FHA as a Title I lender during 1995. The Title
I program was established by Title I of the National Housing Act of 1934. Loans
made under the Title I program are 90% guaranteed by the United States
Department of Housing and Urban Development ("HUD"). In addition to the FHA
Title I license, HomeAdd has to apply for licenses to operate under the banking
laws of each State in which it intends to operate. Less than 1% of HomeAdd's
loan volume during the nine months ended May 31, 1998 were Title I home
improvement loans. The Company made no Title I home improvement loans during the
third quarter of fiscal year 1998.

         HomeAdd is currently authorized to operate under the laws of South
Carolina, North Carolina and Florida. HomeAdd is subject to ongoing monitoring
by state banking authorities and the failure to comply with applicable
regulations could result in the forfeiture of licenses on which the business is
dependent.

         The Company sells substantially all of the loans it originates on a
non-recourse basis in the secondary market. The non-recourse basis means that
the Company represents that loans were properly documented and made in
accordance with applicable lending criteria, but that the purchaser of the loans
assumes the full credit risk. The Company's credit guidelines for the Company's
loans currently meet the underwriting criteria of the current loan purchasers.


                                       10


<PAGE>   10

During the nine months ended May 31, 1998, the Company made loans aggregating
$6,254,000 of which $42,000 in loans were made under the Title I Loan program
and $6,212,000 in loans were made under the HLTV Loan program. Substantially all
of the loans were sold on a non-recourse basis in the secondary market ($675,000
of these were sold during the fourth quarter of fiscal 1998).

         As of May 31, 1998, HomeAdd had fourteen employees located in its
office in Greenville, South Carolina that included sales, underwriting and
administrative personnel. During the third quarter of fiscal 1998, the Company
solicited loans throughout South Carolina and North Carolina and during May 1998
began soliciting in the northern counties of Florida. The Company faces stiff
competition in these markets. The future plans of HomeAdd include plans to
attempt to increase its volume of loans through direct mail solicitations in
certain other Southeast States. HomeAdd will apply for authorization to operate
under the banking laws of those states. Management of the Company has determined
that additional sales personnel should be added if it is to meet its growth
objectives and three additions sales trainees were hired during June of 1998.
The Company expects to increase its direct mail solicitations during the fourth
quarter in order to attempt to increase its loan origination volume and to
offset the reduction in response rate that is expected during the summer
vacation season. There is no assurance, however, that its direct mail
advertising will solicit sufficient responses in order for its operating goals
to be accomplished.

         The consumer finance market is highly competitive and fragmented.
HomeAdd competes with a number of finance companies that provide financing to
individuals who may not have sufficient equity in their homes to qualify for
traditional second mortgage financing. HomeAdd also competes with established
home improvement lenders, other Title I lenders (many of whom are now making
HLTV Loans), existing mortgage brokers and bankers that offer multi-purpose
second mortgages. To a lesser extent, HomeAdd competes with commercial banks,
savings and loan associations, credit unions, insurance companies, and captive
finance arms of major manufacturing companies that may apply more traditional
lending criteria and require greater equity in the underlying real property
assets. Almost all of these competitors or potential competitors are
substantially larger and have significantly greater capital, experience and
other resources than the Company.

         The Company expects that during the next twelve months the increase in
its business, if any, will be in HLTV Loans. Title I home improvement loans are
not expected to be a material factor in its business during the next twelve
months.

         Debt consolidation and home equity loan volume generally are not
materially impacted by seasonal climate changes and, with the exclusion of
slowdowns during the holiday and vacation seasons, tends to be relatively stable
throughout the year.

         HomeAdd attempts to sell, on a non-recourse basis, all of its loans on
the secondary market to wholesale buyers. HomeAdd does not have the capital that
would be necessary to make a significant volume of loans unless it is able
promptly to sell its loans on the secondary market. There can be no assurance
that the secondary market for loans will continue to be available to HomeAdd.
Adverse changes in the secondary market could materially impair HomeAdd's
ability to originate and sell loans on a favorable or timely basis. Delays in
the sale of a loan pool beyond a quarter-end could result in greater losses for
such quarter. If HomeAdd is unable to sell its loans on the secondary market,
its ability to grow could be materially impaired and its

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<PAGE>   11

results of operations and financial condition could be materially and adversely
affected. See Liquidity and Capital Resources - Capital Requirements for
HomeAdd.

         The Company expects that HomeAdd will continue to operate at a loss
during, at a minimum, fiscal year 1998, but based on its business plan,
currently expects HomeAdd to operate at a modest profit by fiscal 1999.
Management expects that the Company as a whole will operate at a loss during
fiscal 1999. The foregoing are forward-looking statements and the Company
cautions that there can be no assurance that the goal of profitability can be
achieved. An important factor which could cause the Company's results to differ
materially from these current estimates include lower origination volume due to
real estate market conditions that might affect the appraised values of the real
property that would be used as collateral for the loans that HomeAdd plans to
originate. HomeAdd's business might be reduced if values of the collateral
increase and HomeAdd's customers thereby qualify for more traditional sources of
credit such as banks. Rising property values also might lead to an increase in
prepayments which would reduce the profitability in the secondary market for
HomeAdd's loans and might have a negative impact on the ability of HomeAdd to
sell its loans. Another important factor is the adverse consequences of changes
in the interest rate environment such as increases in rates that might reduce
the number of customers that would be willing to execute loans. Other factors
that could cause the Company's results to differ materially from these
forward-looking statements include, but are not limited to, the following:
changes in economic conditions which could (i) increase the default rate for
loans originated by the Company and adversely affect the Company's ability to
sell its loans and (ii) reduce the Company's potential customer base by
decreasing the credit worthiness of potential customers below the minimum levels
at which it is profitable for the Company to make and sell loans; the limited
operating history of HomeAdd (which has been in business only since 1995)
available for reference in attempting to gauge the prospects of the Company's
lending business; inability to sell loans or the loss of outside funding sources
(currently limited to a single line of credit with a bank), either of which
could severely and adversely affect the lending operations because the Company
does not have sufficient internal resources to finance holding a substantial
number of loans until their maturity; the adverse effects of competition,
particularly in light of the existing customer relationships and greater
capital, experience and other resources of the Company's competitors and
potential competitors, especially banks; changes in substance, enforcement or
interpretation of applicable federal and state laws and regulations, which could
impose requirements which the Company would be unable to meet; and the loss of
key executives which the Company might be unable to replace due to its limited
number of personnel.

Liquidity and Capital Resources

                  Anticipated Liquidity Requirements

         As discussed below under "Cash and Cash Equivalents" and "Debt
Arrangements," the Company currently has substantial cash liquidity and,
although there can be no assurance in this regard, anticipates that such capital
resources will be sufficient to enable the Company to meet its liquidity
requirement during the next twelve months.

         Refer to Item 1 of Part II, "Legal Proceedings" for a discussion of the
Company's contingent liabilities.



                                       12

<PAGE>   12

         Sale of real property

         The Company executed a contract to sell its office and warehouse
facility in Tampa, Florida for $425,000, less certain selling expenses, during
August of 1997. The sale was consummated on November 19, 1997. Under the terms
of the agreement, the Company financed $75,000 of this sales price over ten
years and holds a second mortgage on the Tampa property bearing interest at 8.5%
interest. The Company can offer no guarantee as to the creditworthiness of the
purchaser of the building. Proceeds from the sale of the Tampa facility were
applied first to the payment of expenses related to the sale, and remaining
proceeds were used to provide operating capital for HomeAdd.

         Cash and Cash Equivalents

         The Company had cash and cash equivalents in the amount of $249,000 as
of May 31, 1998. Cash excess of amounts required for operations is invested in
interest bearing accounts which may be liquidated by the Company to meet its
cash needs on a daily basis. The Company earned approximately $18,000 on its
cash and cash equivalents investments during the nine months ended May 31, 1998.

         Restricted investment

         The Company is required as described in the following paragraph to
maintain an investment in HomeAdd of $500,000. On May 31, 1998, HomeAdd owned a
Federal Home Loan Bank Bond that matures on June 19, 1998 in the amount of
$500,000 and bears interest at 5.9%. The $500,000 investment is pledged as
collateral to the warehouse line of credit as described in the following
paragraph. The investments of HomeAdd earned approximately $20,000 during the
nine months ended May 31, 1998.

         Debt Arrangements

         Effective April 30, 1998, HomeAdd renewed its warehouse line of credit
with a bank and increased the amount of the line of credit from $500,000 to
$1,500,000. The warehouse line of credit is used to finance loans made to third
parties in connection with its consumer finance business. The loans made by
HomeAdd are collateral for this line of credit. In addition to the loans made by
HomeAdd, the $500,000 investment described in the above paragraph is pledged as
collateral to this $1,500,000 warehouse line of credit. This line of credit
bears interest at the bank's prime rate. The line of credit agreement, among
other things, requires the repayment of an advance within twenty-five days from
the date of the advance. Under the terms of the loan agreement and an agreement
that the Company has executed with HomeAdd, HomeAdd is required to maintain
tangible net worth of at least $500,000. See the next paragraph for the amount
of net worth required by HUD. The bank also requires that this tangible net
worth include certain specified assets with maturity of five years or less in
the amount of $500,000 and this asset has been pledged as collateral to the
warehouse line of credit as described above. This line of credit expires on
December 31, 1999.

         Capital Requirements for HomeAdd

         The Company invested $924,000 in HomeAdd during the fiscal year ended
August 31, 1997 and an additional $384,000 during the nine months ended May 31,
1998. The investment was used as follows: acquisition of common stock - $15,000,
equipment rental for first year - $18,000, purchase of U. S. Treasury

                                       13


<PAGE>   13

bill - $500,000, purchase of money market account - $25,000 and operating
capital of $750,000. HUD requires that HomeAdd have an adjusted net worth of at
least $250,000. Given its cash and cash equivalents position, the Company
believes that it has the capacity to provide the additional capital that will be
required by HomeAdd during fiscal 1998. The Company presently anticipates that
with the increase in its line of credit, it will have sufficient capital to fund
its operations through fiscal year 1999.

         Year 2000

         Many existing hardware and software computer systems were designed to
accept only two-digit date entries for the year, assuming that the first two
digits of every year are "19." When confronted with a date in the year 2000 or
beyond, such systems may react by malfunctioning or failing entirely. The
Company has assessed key financial, informational and operational systems.
Management does not anticipate that the Company will encounter significant
operational issues relating to the Year 2000 problem. Furthermore, the financial
impact of making required systems changes is not expected to be material to the
Company's consolidated financial position, results of operations or cash flows.


PART II.  Other information

ITEM 1. Legal Proceedings

                  Holiday Inns, Inc. Litigation

         RSI Corporation (now Delta Woodside), the former parent corporation of
the Company, and Sparjax Corporation, RSI Corporation's now-dissolved
subsidiary, are among several defendants in a lawsuit filed on July 29, 1993 by
Holiday Inns, Inc. in the Circuit Court of the Fourth Judicial Circuit for Duval
County, Florida. This lawsuit is described in detail in the Company's annual
report on Form 10-KSB for the fiscal year ended August 31, 1997.

         During December 1997, an agreement in principle was reached to settle
the Holiday Inn's claim against the Company, RSI Corporation and Sparjax
Corporation as well as all other defendants. The settlement involves the payment
by the Company of $42,000 to end claims by all parties to this litigation
against the Company, RSI Corporation and Sparjax Corporation. The Company is
informed that settlement documents have been circulated to all counsel for
review and comment. There can be no assurance that the settlement will be
consummated. The $42,000 settlement has been accrued in the accompanying
financial statements.

         Insurance recovery

         During fiscal year 1997, the Company paid Triple A Machine Shop, Inc.
("Triple A") $300,000 in settlement of a lawsuit brought by Triple A against a
subsidiary of the Company. This settlement is described in detail in the
Company's annual report on Form 10-KSB for the fiscal year ended August 31,
1997. During the third quarter of fiscal 1998, the Company's insurance carrier
agreed to pay the Company $100,000 to resolve the Company's claim for
reimbursement of the Triple A settlement expense. Accordingly, the Company
recorded this $100,000 amount during the third quarter of fiscal 1998. The
Company received actual payment of the $100,000 in June 1998.

ITEM 2.   CHANGES IN SECURITIES*


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<PAGE>   14

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES*

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

ITEM 5.   OTHER INFORMATION*

*Items 2, 3, 4 and 5 are not presented as they are not applicable or the
information required thereunder is substantially the same as information
previously reported.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

         (a)    Listing of Exhibits

  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         First Amended and Restated Loan Agreement dated to be
              effective April 30, 1998 by and among the Company, HomeAdd
              Financial Corporation and First Union National Bank, together
              with related documents.

  27          Financial Data Schedule (electronic filing only)

         (b)      Reports on Form 8-K

         There were no reports on Form 8-K filed during the third quarter ended
May 31, 1998.



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<PAGE>   15



                                   SIGNATURES



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




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



 July 14, 1998                        /s/ Joe F. Ogburn
---------------                       ------------------------------
     (Date)                                    Joe F. Ogburn,
                                      Vice President and Treasurer
                                      (Principal Accounting Officer)



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