Form 10-QSB

                     SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549

(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 _______________
For Quarter Ended _____________     Commission File Number 1-12668

                              HOLLY PRODUCTS, INC.
           (Exact name of registrant as specified in its charter)
     
         New Jersey                                  22-3172149
(State or other jurisdiction of                    I.R.S. Employer
incorporation or organization)                     Identification Number


        200 Monument Road, Suite 10, Bala Cynwyd, Pennsylvania    19004
              (Address of principal executive offices)          (Zip Code)

Registrant's telephone number, including area code (610) 617-0400

_________________________________________________________________
(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 and 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      

Indicate the number of shares outstanding of each of the issuer's classes of 
common stock, as of September 30, 1996:  40,481,570

<PAGE>

HOLLY PRODUCTS, INC. AND SUBSIDIARIES

INDEX


Part I:     FINANCIAL INFORMATION

Item 1:  Financial Statements

         Consolidated Balance Sheets as of
               September 30, 1996 [Unaudited]                         1, 2

         Consolidated Statements of Operations for
               the three and six months ended
               September 30, 1996 and 1995 [Unaudited]                3

         Consolidated Statements of Cash Flows for
               the six months ended September 30, 1996
               and 1995 [Unaudited]                                   4, 5

         Notes to Consolidated Financial Statements [Unaudited]       6, 7

Item 2:  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                          8, 9, 10


Part II:     OTHER INFORMATION

Items 1:  Legal Proceedings                                           11

Item 2:   Exhibits & Reports on Form 8-K                              11

          Signature Page                                              12

<PAGE>

HOLLY PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1996 (UNAUDITED)

Assets:
Current Assets:
     Cash and Cash Equivalents                                   $  2,104,592
     Accounts Receivable Trade - [Net of Allowance
          for Doubtful Accounts of $153,982]                        1,640,687
     Inventory                                                        690,274
     Prepaid Expenses                                                 617,885

     Total Current Assets                                           5,053,408

Property and Equipment - [Net of Accumulated 
     Depreciation and Amortization of $226,336]                    11,328,403

Deposits                                                               51,582

Intangible Assets - Net                                               585,583

Other Assets                                                          175,531

Deferred Financing Costs                                              500,000

     Total Assets                                               $  17,694,507


See Notes to Consolidated Financial Statements.

<PAGE>

HOLLY PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1996 (UNAUDITED)

Liabilities and Stockholders' Equity:
Current Liabilities:
     Notes Payable - Related Party                               $  2,001,165 
     Demand Notes Payable - Bank                                    1,443,972
     Notes Payable - Others                                         5,413,446 
     Accounts Payable                                               1,439,102
     Accrued Expenses                                                 868,816
     Payroll Taxes Payable                                             48,190 
     Current Portion of Long-Term Debt                                143,083 
     Current Portion of Capital Lease Obligations                      61,237 
     Net Liabilities of Discontinued Operations                       110,771 

     Total Current Liabilities                                     11,529,782 

Long-Term Debt                                                        529,779 

Long-Term Portion of Capital Lease Obligations                        563,281 

Minority Interest                                                   2,108,450 

Commitments and Contingencies                                             ---  

Stockholders' Equity:
     Preferred Stock - Authorized 2,000,000 Shares:

          Series D: Convertible $10.00 Par Value, $1.00
                    Per Share Per Annum Cumulative
                    Dividends, 389,975 Shares Issued
                    and Outstanding                                 3,899,750 

          Series E: Convertible $10.00 Par Value, 115,000
                    Shares Issued and Outstanding                   1,150,000 

          Series Z: Convertible $0.25 Par Value, 1,013,628
                    Shares Issued and Outstanding                     253,407 

     Additional Paid-in Capital [Preferred]                        (1,318,640)
     Common Stock - No Par Value, Authorized 50,000,000
                    Shares, 40,481,570 Shares Issued
                    and Outstanding                                16,175,299 

     Additional Paid-in Capital [Common]                              (83,947)

     Accumulated [Deficit]                                        (17,112,654)

     Total Stockholders' Equity                                     2,963,215 

     Total Liabilities and Stockholders' Equity                 $  17,694,507


See Notes to Consolidated Financial Statements

<PAGE>
<TABLE>
HOLLY PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<CAPTION>

                                                  Three months ended               Six months ended
                                                     September 30,                    September 30,   
                                                 1996           1995              1996           1995 
<S>                                           <C>            <C>               <C>            <C>
 
Net Sales                                     $1,244,036     $1,392,098        $3,038,233     $2,389,874

Cost of Sales                                    683,799      1,772,335         2,000,569      2,616,512 
     Gross Profit [Loss]                         560,237       (380,237)        1,037,664       (266,648)

Operating Expenses:
     General, Selling and Administrative       1,532,682        809,579         2,771,609      1,596,661
     Operating [Loss]                           (972,445)    (1,189,816)       (1,733,945)    (1,823,309)

Other [Expense]:
     Other Income                                 38,943         29,212            43,438         52,866
     Interest Expense                           (137,611)       (65,245)         (221,784)      (150,650)

     Other [Expense] - Net                       (98,668)       (36,033)         (178,346)       (97,874)

Minority Interest Share in Loss of Subsidiary     46,944         37,153           106,071         70,935 

[Loss] Income from Continuing Operations      (1,024,169)    (1,188,696)       (1,806,220)   
(1,850,155)

Discontinued Operations:
     Income [Loss] from Operations of
          Woodworking Business                   336,267     (1,026,269)          327,664     (2,196,078)

Estimated [Loss] on disposal of
          Woodworking Business                        --       (841,423)               --       (841,423)

     Net [Loss]                                 (687,902)    (3,056,388)       (1,478,556)    (4,887,656)

     Preferred Stock Dividends                         0              0                 0        100,625 

     Net [Loss] Available to Common
          Stockholders                        $ (687,902)   $(3,056,388)     $ (1,482,556)   $(4,988,281)


Loss Per Common Share:
     [Loss] from Continuing Operations        $     (.03)   $      (.23)     $       (.07)   $      (.35)
     Income [Loss] from Discontinued
          Operations                          $      .01    $      (.19)     $        .01    $      (.42)
     Estimated Loss on Disposal of
          Woodworking Business                $       --    $      (.16)     $         --    $      (.16)

     Net [Loss] Per Common Share              $     (.02)   $      (.58)     $       (.06)   $      (.93)


Weighted Average Number of
     Common Shares Outstanding                34,536,701      5,279,554        25,088,081      
5,279,554

</TABLE>
See Notes to Consolidated Financial Statements

<PAGE>
<TABLE>
HOLLY PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

<CAPTION>                                                                     Six months ended
                                                                                September 30,
                                                                           1996             1995
<S>                                                                   <C>             <C>
Operating Activities:
     [Loss] From Continuing Operations                               $ (1,806,220)    $ (1,188,696)
          Adjustments to Reconcile Net [Loss] to Net Cash 
          [Used for] Operating Activities:
          Depreciation and Amortization                                    73,485               --
          Amortization of Deferred Financing Activities                    37,866               --
          Minority Interest                                               (46,944)              --

     Changes in Assets and Liabilities:
          [Increase] Decrease in:
               Accounts Receivable                                     (1,264,237)        (253,384)
               Inventory                                                  225,238         (308,368)
          Other Current Assets                                              4,534            2,702
               Due from Stockholders & Related Parties                         --           25,000
               Note Receivable                                                 --        1,050,000
               Deposits                                                   194,880               --
               Prepaid Expenses                                           239,000               --
               Other Assets                                               167,905
          Increase [Decrease] in:
     Accounts Payable and Accrued Expenses                               (321,343)         783,544
               Payroll Taxes Payable                                      (33,633)          30,098
               Other Current Liabilities                                  (14,182)              --

          Total Adjustments                                              (737,431)       1,408,605

     Net Cash - Continuing Operations - Forward                        (2,543,651)         219,909

Discontinued Operations:
     Net [Loss] From Discontinued Operations                                   --       (2,196,078)
     Adjustments to Reconcile Net [Loss] to Net Cash Operations:
          Depreciation and Amortization                                        --           59,540
          Changes in Net Assets, Liabilities and Losses                   336,267          371,753
          Estimated Loss in Disposal of Woodworking Business                   --         (841,423)          

     Net Cash - Discontinued Operations - Forward                         336,267       (2,606,208)

Investing Activities - Continuing Operations:
     Acquisition of Assets                                                (12,610)               0
     Purchase of Navtech - Net of Cash                                          0           (8,081)

Net Cash - Investing Activities - Continuing Operations - Forward         (12,610)                 
(8,081)
</TABLE>

See Notes to Consolidated Financial Statements

<PAGE>
<TABLE>
HOLLY PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS [UNAUDITED]
<CAPTION>

                                                                              Six months ended
                                                                                 September 30,
                                                                           1996              1995
<S>                                                                  <C>                 <C> 
     Net Cash - Continuing Operations - Forwarded                   ($  2,543,651)      $   219,909

     Net Cash - Discontinued Operations - Forwarded                       336,267        (2,606,208)

     Net Cash - Investing Activities - Continuing
                Operations - Forwarded                                    (12,610)           (8,081)

Financing Activities - Continuing Operations:
     Proceeds from Notes Payable-Other                                  3,740,980           560,019 
     Payment of Notes Payable - Other                                    (150,000)               --
     Proceeds from Demand Notes Payable - Stockholders
          and Related Parties                                                  --           297,000
     Payment of Demand Notes Payable - Stockholders
          and Related Parties                                          (1,925,339)               --
     Proceeds of Demand Note Payable - Banks                              585,164           975,000 
     Proceeds from Issuance of Preferred Stock                          1,139,319                 0
     Dividends Paid                                                            --          (100,625) 

     Net Cash - Financing Activities - Continuing Operations            3,390,124         1,731,394 

Financing Activities - Discontinued Operations:
     Proceeds from Demand Note Payable                                         --           511,035 

     Net Cash - Financing Activities - Discontinued Operations                 --           511,035 

     Net Increase in Cash and Cash Equivalents                          1,170,130          (151,951)

Cash and Cash Equivalents - Beginning of Periods                          934,462           189,180

     Cash and Cash Equivalents - End of Periods                       $ 2,104,592       $    37,229 
     
Supplemental Disclosures of Cash Flow Information:
     Cash paid during the years for:
          Interest                                                        170,871       $   225,443 
          Income Taxes                                                         --       $        --

Supplemental Schedule of Non-Cash Investing and Financing Activities:
     See notes to consolidated financial statements for details of certain 
     non-cash investing and financing activities.

See Notes to Consolidated Financial Statements.
</TABLE>

<PAGE>

HOLLY PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [UNAUDITED]

[1] Summary of Significant Accounting Policies

Significant accounting policies of Holly Products, Inc. are set forth in the 
Company's Form 10-KSB for the period ended March 31, 1996, as filed with the 
Securities and Exchange Commission.

[2]     Business of Reporting

The accompanying unaudited condensed financial statements 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, such statements include 
all adjustments [consisting of normal recurring items] which are considered 
necessary for a fair presentation.  Operating results for the three and six 
months ended September 30, 1996 and 1995 are not necessarily indicative of the 
results that may be expected for the year ended March 31, 1997.  It is 
suggested that these financial statements be read in conjunction with the 
financial statements and notes for the period ended March 31, 1996, included 
in the Holly Products, Inc. Form 10-KSB.

[3]     Inventory

At September 30, 1996 inventory consisted of the following:

          Work-in-Process          $   55,320      
          Raw Materials               972,954

          Total                     1,028,274 
          Less Reserve               (338,000)

          Total                     $ 690,274 

Inventory is stated at the lower of cost [first-in, first-out method] or 
market.

[4]     Earnings Per Share

Earnings per share are based on 35,536,701 and 5,279,554 shares outstanding 
for the three months ended September 30, 1996 and 1995, respectively, and 
25,088,081 and 5,279,554 for the six months ended September 30, 1996 and 1995, 
respectively.  Such amounts of shares represent the weighted average number of 
shares outstanding for the periods.  Shares in escrow and the effect of 
outstanding warrants were not included in the calculations, as their effect 
would be anti-dilutive.

[5]     Equity Transactions

During the quarter, 270,000 shares of Series E Preferred Stock were converted 
pursuant to the terms thereof into 11,476,393 shares of Company common stock.  
In August and September 1996, the Company issued 115,500 shares of Series E 
Preferred Stock resulting in gross proceeds of $1,150,000.  In September 1996, 
the Company issued 573,333 shares of Common Stock to N & A Promotions in 
return for certain services performed for the company.  In September 1996, 
$30,000 of debt owed to Sunrise, Inc. was converted into 30,000 shares of 
Series C Preferred Stock and pursuant to the terms thereof into 120,000 shares 
of Common stock.

<PAGE>



Item 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS


General

     The Company experienced a substantial loss for the year ended March 31, 
1996, such loss was attributable primarily to its woodworking business, which 
was conducted through its wholly owned subsidiary, HollyWood Manufacturing, 
Inc. ("HollyWood"). The Company explored ways to reduce future losses, 
including divesting itself of its woodworking business while continuing the 
sales operations.  The Company held discussions with potential purchasers of 
its woodworking business.  An offer had been presented but, the potential 
buyer was unable or unwilling to make a firm commitment regarding same. The 
Company  was unsuccessful in its attempts to divest itself of its woodworking 
business or find a suitable manufacturer for its products and consequently, 
ceased ongoing operations of the woodworking business to reduce its losses.  
The Company dismissed the entire staff and management of its woodworking 
operation and has liquidated its assets.  The lease for the facility housing 
HollyWood expired on December 31, 1995 at which time the Company vacated the 
premises. The Company used the funds raised through the liquidation of assets 
and collection of outstanding receivables to satisfy a secured credit facility 
with Riviera Finance of Chicago, Illinois.

     In April 1996, the company moved its wholly owned subsidiary, Navtech 
Industries, Inc., from Blanding, Utah to Shiprock, New Mexico.  The move 
allowed Navtech to operate from one facility totaling 54,000 square feet in 
lieu of three facilities totaling 20,000 square feet.  This will enable the 
company to operate with greater efficiency and substantial less cost through 
consolidation of functions, elimination of transportation and reduction in 
management and supervisory staff.  In its new location in Shiprock, New 
Mexico, Navtech is located on the Navajo Reservation which allows for rebates 
in employing Native Americans, reduced energy costs and a forgiveness of rent 
payments on the new facility until such time as the move and refurbishing 
costs to the building are fully paid.  It is estimated that this process will 
take approximately 10 years.  It is anticipated that the new facility would 
allow Navtech to expand its revenues substantially.  Additionally, during the 
Company's first quarter of 1996 (April - June) the Company had changed the 
management of the Company with a lean and qualified group of professionals to 
carry out Navtech's  plan and meet targeted budgets for the upcoming year.  
The six months results for this subsidiary show a significant turnaround to 
its income statement as compared to a $2 million loss last year.

     With the closing of the $5 million financing package for Country World 
Casinos, Inc., in May 1996, it is anticipated that Country World will be able 
to emerge from Chapter 11 proceedings in the immediate future, therefore 
eliminating substantial legal, travel and management expense associated with 
these proceedings.  Further, with the simultaneous settlement of all 
outstanding State litigation (see Part II, Item 1) as a part of the Chapter 11 
proceedings, it is anticipated that Country World will recover monetary 
damages and be able to move forward with its plans to construct the Casino.  
Additionally, Country World has moved to smaller, less expensive quarters 
substantially reducing its operating costs and plans to eliminate its office 
requirements in Denver during this fiscal year.

     In late October 1995, Country World petitioned the U.S. Bankruptcy Court 
for the District of Colorado for protection under the rules of Chapter 11 of 
the Bankruptcy Code in order to stop the foreclosure on the property 
identified as Millsites 12, 13 and the Smith Mining Claim by Tommyknocker, a 
subsidiary of New Allied Development Corporation ("New Allied"). In May 1995, 
Country World filed suit against New Allied in State Court for amongst other 
things, failure to satisfy a first deed of trust obligation, overcharges in 
conjunction with an EPA remediation plan and action taken by a New Allied 
officer and related parties requiring Securities and Exchange Commission 
sanctions which in turn could jeopardize Country World's ability to obtain a 
gaming license. In June 1995, New Allied filed a counterclaim to this action.
     
     The Company, on behalf of Country World, has obtained a financing 
commitment for 5 million dollars ($5,000,000) which will enable Country World 
to repay all of its outstanding indebtedness and emerge from Bankruptcy.  This 
financing proposal has been approved by the Bankruptcy Court and the Company 
has acquired the funds and distribution will be made in accordance with the 
Court's order.  Final settlement hearings were held in late September and the 
company received final rulings from the court.  The Court's order finds that 
Tommyknocker Casino Corporation/New Allied Development Corporation is not 
entitled to default interest at the rate of 18%, however Country World is 
ordered to pay 8% per annum on the unpaid balance due Tommyknocker and Country 
World is not obligated to pay attorneys fees, as each party has been directed 
by the court to pay their own accordingly.

<PAGE>

Item 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

     The Court further finds that Country World Casinos, Inc. is not in 
default of its Agreement with Tommyknocker/New Allied Development Corporation 
with regard to filing a registration statement for its preferred stock and 
until Tommyknocker/NADC files such registration statement and Country World 
fails to pay for its cost, Country World is not in breach of the agreement.

     Lastly, the Court's order upheld Tommyknockers/New Allied's claim that 
Country World was not entitled to an offset on the environmental clean up as 
the work had been completed and Country World paid all clean up costs without 
objection prior to the take over by Holly Products, Inc.

     Both parties are ordered to confer and agree on a specific dollar amount 
by November 15th else the Court will set forth a hearing, determining the 
amount and assess costs and attorneys' fees to the prevailing party.

     Country World anticipates that it will require an additional 
approximately $27,350,000 to construct an operational and licensed Casino.  At 
present, a letter of intent for the permanent financing is in place to fund 
the Casino after construction, however there can be no assurance that the 
closing of such financing will be obtained.


Results of Operations

Six Months Ended September 30, 1996 Compared to Six Months Ended September 30, 
1995

     Based on the following results of operations and the substantial losses 
attributable to HollyWood, the Company decided to cease ongoing operations of 
this segment of the Company's business.  Due to the plan of discontinuance for 
HollyWood, revenues and net losses have been eliminated from the statement of 
operations.  The following comparison, therefore, does not include the results 
attributable to HollyWood, but contains the costs of discontinued operations.

     Revenues for the six months ended September 30, 1996 were $3,038,233 as 
compared to $2,389,874 for the six months ended September 30, 1995. The 
increase in revenues is a result of the ability of the Company to fund 
increased sales through funds raised earlier this year.
     
     Cost of sales for the six months ended September 30, 1996 was $2,000,569 
as compared to $2,616,512 for the six months ended September 30, 1995.  This 
decrease was primarily the result of selling items with a higher gross profit 
margin.

     Gross profit was $1,037,664 for the six months ended September 30, 1996, 
as compared to a $266,648 gross loss for the six months ended September 30, 
1995.  This increase of $1,304,312 in gross profit is attributable to 
increased sales for the period, as well as the improvements and adjustments in 
cost of sales.

     Total operating expenses for the six months ended September 30, 1996 were 
$2,771,609 as compared to $1,596,661 for the comparable period ended September 
30, 1995.  The majority of these expenses are attributable to one time costs 
associated with the reorganization of Navtech, closing costs for the $5 
million funding associated with the Country World Chapter 11 Proceedings, 
increased legal and other professional fees, raising of working capital, 
consulting, stock expenses, as well as promotional fees.

     Operating losses totaled $1,733,945 for the six months ended September 
30, 1996, as compared to an operating loss of $1,823,309 for the same period 
in 1995 for the reasons described above.

     Discontinued operations showed a income of $327,664 for the six months 
ended September 30, 1996 as compared to a loss of $2,196,078 for the six 
months ended September 30, 1995.  The change was a result of the  close down 
of this aspect of operations during the prior year.  In the current period, 
income was primarily a result of the Company being able to settle past debt of 
the closed down operations at a substantial discount.

     Interest expense for the six months ended September 30, 1996 was $221,784 
as compared to $150,650 for the six months ended September 30, 1995.  This 
cost is primarily attributable to the Navtech revolving line of credit with a 
local lending institution in Farmington, New Mexico.

<PAGE> 

Item 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Three Months Ended September 30, 1996 Compared to Three Months Ended September 
30, 1995

     Revenues for the three months ended September 30, 1996 were $1,244,036 as 
compared to $1,392,098 for the three months ended September 30, 1995.  The
decrease in revenues is a result of the Company focusing in on products with a
higher gross profit margin.

     Cost of sales for the three months ended September 30, 1996 was $683,799 
as compared to $1,722,335 for the three months ended September 30, 1995.  This 
decrease was primarily the result of selling items with a higher gross profit 
margin and the decrease in sales.

     Gross profit was $560,237 for the three months ended September 30, 1996, 
as compared to a $380,237 gross loss for the three months ended September 30, 
1995.  This increase in gross profit is attributable to increased gross profit 
percentage for the period due to a better selection of product sales.

     Total operating expenses for the three months ended September 30, 1996 
was $1,532,682, as compared to $809,579 for the three months ended September 
30, 1995.  This increase of $723,103 is attributable to costs associated with 
increase legal and professional fees, raising of working capital, consulting, 
stock expenses, as well as promotional fees.

     Operating losses totaled $1,024,169 for the three months ended September 
30, 1996 as compared to an operating  loss of $1,188,696 for the period ended 
September 30, 1995, a decrease of $164,527.

     Interest expense for the three months ended September 30, 1996 was 
$137,611 as compared to $65,245 for the comparable period in 1995.  The 
increase is primarily attributable to the Navtech revolving line of credit 
with a local lending institution in New Mexico.
 
     Discontinued operations showed a income of $336,267 for the three months 
ended September 30, 1996 as compared to a loss of $1,026,269 for the three 
months ended September 30, 1995.  The change was a result of the  close down 
of this aspect of operations during the prior year.  In the current period, 
income was primarily a result of the Company being able to settle past debt of 
the closed down operations at a substantial discount.

Liquidity and Capital Resources

     To date, the Company has met its cash requirements through funds 
generated by the IPO, the offerings of the Series D and Series E Preferred 
Stock, borrowings and other equity investments.  The Company experienced a 
severe cash shortage and sustained substantial operating losses.  Additional 
funds will be required during the current fiscal year to satisfy the Company's 
cash requirements.  To the extent the Company has ceased operations of its 
woodworking business, its cash requirements have diminished accordingly, and 
an extended line of credit has been secured to fund Navtech's operations with 
The First National Bank of Farmington in Farmington, New Mexico.  The terms of 
this facility are for a receivable and inventory line of credit in an amount 
not to exceed $1,500,000 with a monthly floating interest rate of 1.5% over 
prime.  Additionally, the Company raised $8,995,000 through a private equity 
placement of the Company's Series E Preferred Stock.  Unless and until the 
Company improves its financial results sufficiently and maintains such 
improved results, the Company may have to borrow or raise additional capital 
to fund any cash shortages as a result of the Company's continuing losses.

     In May 1995, the Company borrowed $500,000 from the Calvin Black Trust, 
which was due October 1, 1995. The note paid 2% interest per month, payable 
monthly. The Company defaulted in its obligation to repay the debt to the 
Calvin Black Trust by October 1, 1995 and was subsequently declared to be in 
default of its obligation under the terms of the note and agreement. The 
Calvin Black Trust filed a complaint in Federal Court in the District of Utah 
for repayment of the debt. On January 15, 1996 the Company, The Calvin Black 
Trust and Norlar, Inc., a corporation owned by Mr. Larry Berman, the Chairman 
and Chief Executive Officer of the Company, and his spouse, entered into a 
Sale and Forbearance Agreement pursuant to which The Calvin Black Trust sold 
to Norlar $250,000 of the indebtedness owed by the Company in exchange for 
$250,000 from Norlar and Norlar agreed to deliver to the Calvin Black Trust 
upon the effectiveness of this Registration Statement either 250,000 shares of

<PAGE>

Item 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS



the Company's Common Stock or $500,000 worth of the Company's Common Stock 
whichever be greater.  In exchange, The Calvin Black Trust agreed to forbear 
from taking any further actions for a period of six months from the date of 
the Sale and Forbearance.  The Company will repay Norlar the $250,000 and 
replace the shares of the Company's Common Stock that Norlar is required to 
deliver to The Calvin Black Trust.  In April 1996, the Agreement was amended 
and the Trust was paid an additional $150,000 and Norlar agreed to deliver to 
the Trust, upon effectiveness of a registration statement, either 200,000 
shares of the Company's Common Stock or $348,000 worth of the Company's Common 
Stock, whichever be greater, for an extension of time to file a registration 
statement.  The Company failed to comply with the terms of the amended 
agreement.  The Trust put the Company on notice that it intended to pursue 
this matter and seek collection of the remaining balance due under the note.  
The Company believed that the delay in filing the Registration Statement was 
in part caused by the Trustee and defended itself vigorously.  Following 
extensive negotiations, the company and The Trust reached settlement by the 
Company delivering shares of stock in RoomSystems, Inc. in lieu of payments.  
Upon such delivery, the lawsuit was dismissed.

     In January 1995, the Company borrowed, on an unsecured basis, an 
aggregate of $1,000,000 from three individuals and entities at 15% annual 
interest. In lieu of such interest, the Company issued to such note holders an 
aggregate of 150,000 shares of Common Stock. The principal amount of such 
notes was due and payable on January 13, 1996, and in March 1996, the Company 
entered into an extension agreement with the three individuals whereas the 
Company made a partial payment of $500,000 and Mr. Larry Berman, the Company's 
Chairman, gave 370,000 shares of his personal stock for an extension until 
August 9, 1996 at which time a balance payment of $400,000 was due.  It has 
been agreed between the parties to extend the August 9th deadline until such 
time as Country World emerges from the Chapter 11 Proceedings.  The Company 
utilized the $1,000,000 to make a loan to Country World, which indebtedness 
was canceled in exchange for the issuance of 5,000,000 shares of Country World 
common stock to the Company. The Company plans to invest up to an additional 
$35 million to develop and construct the casino and hotel complex in Black 
Hawk, Colorado. At present, a letter of intent for the permanent financing is 
in place to fund the Casino after construction, however, there can be no 
assurance that the closing of such financing will be obtained.

     The Company consummated a Private Placement of 767,000 shares of its 
Series E Convertible Preferred Stock in March of 1996, resulting in gross and 
net proceeds of $7,670,000 and $6,628,000, respectively.  The proceeds of this 
offering were utilized for repayment of debt, settlement of litigation fees 
associated with securing financing for Country World Casinos, Inc. and working 
capital for the Company and Navtech.  Each share of Series E Preferred Stock 
is convertible into shares of the Company's Common Stock at the rate 
determined by dividing $10.00 by the lesser of 75% of the closing bid price as 
reported by NASDAQ, of the Company's Common Stock on the date of the closing 
of the subscription or 65% of the average closing bid price for the five (5) 
trading days immediately preceding the date of conversion.  In August and 
September 1996, the Company consummated a second placement of 115,000 shares 
of its Series E Convertible Preferred Stock under the same terms described 
above.
     
     In February 1996, the Company hired Martin Janis & Company to act as 
agent for the Company in providing additional public relations services for a 
three month period.  The Company issued 35,000 shares of its Common Stock for 
such services and in May 1996, paid an additional fee of approximately $24,000 
for such three month period.  Additionally, the Company will retain limited 
services from Martin Janis & Company for the next nine months at a fee of 
$3,000 per month.

     In April 1996, the State of New Jersey approved the issuance of 555,000 
shares of Series Z Preferred Stock in accordance with the Company's 
Certificate of designation.  In September 1996, such authorization was 
increased to 1,050,000 shares and issued in exchange for debt.

     In June 1996, the Company issued an aggregate of 1,300,000 shares of its 
Common Stock to Messrs. Irwin Schneider, Eugene Lombardo and Scott Schneider 
in return for certain services performed by these individuals on behalf of  
the Company.

     In August 1996, the Company received formal notification from the 
Securities and Exchange Commission with regard to its majority owned 
subsidiary, Country World Casinos, Inc., that a formal investigation, which 
began in June 1994, had been terminated and no enforcement action is 
forthcoming.

<PAGE>

Item 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS


     In September 1996, the Company issued 573,333 shares of Common Stock to N 
& A Promotions in return for certain services performed for the Company.

     In September 1996, a debt of $30,000 owed to Sunrise, Inc. was converted 
into 30,000 shares of Series C Preferred Stock and pursuant to the terms 
thereof, into 120,000 shares of Common Stock.

<PAGE>

HOLLY PRODUCTS, INC. AND SUBSIDIARIES

PART II - OTHER INFORMATION



Item 1 - Legal Proceedings

      On May 26, 1995, the Company's majority owned subsidiary Country World 
Casinos, Inc. ("CWC") commenced a lawsuit against Tommyknocker Casino Corp. 
("Tommyknocker") and New Allied Development Corporation ("New Allied") in the 
District Court of Denver, County of Denver, Colorado, case number 95CV 2310. 
This action is primarily for breach of contract in connection with the 
acquisition of certain real property by CWC from the defendants. CWC is 
seeking monetary damages and declaratory relief.

     On August 15, 1995, Tommyknocker and New Allied filed a counterclaim in 
the aforementioned action against CWC, the Company, Ronald Nathan, Sal Lauria 
and David Singer who are former board members of CWC, Roger LeClerc, President 
of CWC and William Patrowicz director of CWC. The counterclaim alleges that 
CWC is in default under the Promissory Note issued by CWC to Tommyknocker in 
connection with the acquisition of the real property, CWC failed to register sto
ck on behalf of Tommyknocker and that the Company has acquired control of CWC 
to the detriment of Tommyknocker and New Allied.

     In a related action on June 28, 1995, Tommyknocker filed a Rule 120 
Motion in the District Court, City and County of Denver, Colorado, case number 
95CV 2799. This motion sought foreclosure of the real property discussed 
above. On October 4, 1995, the magistrate in this case granted Tommyknocker's 
motion and authorized the sale of the property pursuant to the foreclosure on 
October 12, 1995.

     On October 12, 1995, CWC filed a bankruptcy petition under Chapter 11 of 
Title 11 of the United States Code. The case was filed in the United States 
Bankruptcy Court, District of Colorado, case number 95-20563rjb. Pursuant to 
the filing of the Bankruptcy, an automatic stay went into effect pursuant to 
11 U.S.C. Section 362 prohibiting the foreclosure sale. Tommyknocker filed a 
Motion for Relief from the stay and a hearing on this matter was held on 
December 22, 1995.  On January 3, 1996, the Court ruled that CWC should be 
given an opportunity to proceed with its Bankruptcy proceedings in a diligent 
and timely fashion.  The Court conditioned continuation of the stay pending 
the approval or denial as the case may be of CWC's financing proposal and 
certain other conditions.  In March 1996, the Court approved CWC's financing 
proposal and in May 1996, CWC submitted a plan of reorganization to the Court 
which is pending.  In September 1996, the Court heard testimony in a claims 
hearing between the parties.  In early November 1996, the Company received 
final rulings from the Court.

     The Court's order finds that Tommyknocker Casino Corporation/New Allied 
Development Corporation is not entitled to default interest at the rate of 
18%, however Country World is ordered to pay 8% per annum on the unpaid 
balance due Tommyknocker and Country World is not obligated to pay attorneys 
fees as each party has been directed by the court to pay their own 
accordingly.

     The Court further finds that Country World Casinos, Inc. is not in 
default of its Agreement with Tommyknocker/New Allied Development Corporation 
with regard to filing a registration statement for its preferred stock and 
until Tommyknocker/NADC files such registration statement and Country World 
fails to pay for its cost, Country World is not in breach of the agreement.

     Lastly, the Court's order upheld Tommyknockers/New Allied's claim that 
Country World was not entitled to an offset on the environmental clean up as 
the work had been completed and Country World paid all clean up costs without 
objection prior to the take over by Holly Products, Inc.

     Both parties are ordered to confer and agree on a specific dollar amount 
by November 15th else the Court will set forth a hearing, determining the 
amount and assess costs and attorneys' fees to the prevailing party.

     On October 10, 1995, Phil B. Acton, Trustee of the Calvin Black Trust 
commenced a lawsuit against the Company in the United States District Court 
for the District of Utah, Central Division, case number 95CV 09305. This 
action seeks repayment of a promissory note in the principal amount of 
$500,000.  On January 15, 1996 the Company, the Calvin Black Trust and Norlar, 
Inc. a corporation owned by Mr. Larry Berman, the Chairman and Chief Executive 
Officer of the Company and his spouse entered into a Sale and Forbearance 
Agreement pursuant to which The Calvin Black Trust sold to Norlar $250,000 of 
the indebtedness owed by the Company in exchange for $250,000 in cash from 
Norlar and Norlar agreed to deliver to the Calvin Black Trust upon the 
effectiveness of a Registration Statement either 250,000 shares of the 
Company's Common Stock or $500,000 worth of the 

<PAGE>

HOLLY PRODUCTS, INC. AND SUBSIDIARIES

PART II - OTHER INFORMATION



Company's Common Stock whichever be greater.  In exchange, The Calvin Black 
Trust agreed to forbear from taking any further actions for a period of six 
months from the date of the Sale and Forbearance. The Company will repay 
Norlar the $250,000 and replace the shares of the Company's Common Stock that 
Norlar is required to deliver to The Calvin Black Trust pursuant to the terms 
of the Sale and Forbearance Agreement in either cash or the Company's 
securities as determined by the Company's Board of Directors.  In April 1996, 
the Agreement was amended and the Trust was paid an additional $150,000 and 
Norlar agreed to deliver to the Trust, upon effectiveness of a Registration 
Statement, either 200,000 shares of the Company's Common Stock or $348,000 
worth of the Company's Common Stock, whichever be greater, for an extension of 
time to file a registration statement.  The Company has failed to comply with 
the terms of the amended agreement.  The Plaintiff has put the Company on 
notice that it intends to pursue this matter and seek collection of the 
remaining balance due under the Note.  The Company believes that the delay in 
filing the Registration Statement was in part caused by the Trustee and 
intends on defending itself vigorously.  Following extensive negotiations, the 
Company and the Trust reached settlement by the Company delivering shares of 
stock in RoomSystems, Inc. in lieu of payment.  Upon such delivery, the 
lawsuit was dismissed.

     The negative outcome of any of these actions will have a material impact 
on the operations of the Company and would result in a disruption of the 
Company's business.



Item 2 - Exhibits & Reports on Form 8-K

(A)     There are no exhibits to be filed at this time.
(B)     No reports on Form 8-K were filed during the quarter for which this 
report is filed.

<PAGE>

HOLLY PRODUCTS, INC. AND SUBSIDIARIES

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.



                              HOLLY PRODUCTS, INC.





                              
  __/s/ William H. Patrowicz_____________________________
By: William H. Patrowicz
    President, Chief Operating Officer, Treasurer 
    (Principal Financial and Accounting Officer) and Director

Date:     November 19, 1996