<PAGE>
As filed with the Securities and Exchange Commission on August 20, 1996
Registration No. 333-
===============================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM SB-2
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
--------------------
ROOM PLUS, INC.
(Name of small business issuer in its charter)
New York 5700
(State or jurisdiction of (Primary Standard Industrial 11-2622051
incorporation or organization) Classification Code Number) (I.R.S. Employer
Identification No.)
91 Michigan Avenue
Paterson, New Jersey 07503
(201) 523-4600
(Address and telephone number of principal executive
offices) (Address of principal place of business or intended
principal place of business)
Marc Zucker
Chairman and Chief Executive Officer
Room Plus, Inc.
91 Michigan Avenue
Paterson, New Jersey 07503
(201) 523-4600
(Name, address and telephone number of agent for service)
--------------------
Copies of Communications to:
C. Kenneth Shank, Esq. Jay M. Kaplowitz, Esq.
Wilentz, Goldman & Spitzer, P.A. Gersten, Savage, Kaplowitz & Curtin, LLP
90 Woodbridge Center Drive 575 Lexington Avenue
Woodbridge, New Jersey 07095 New York, New York 10022
(908) 855-6145 (212) 752-9700
--------------------
Approximate date of proposed sale to the public: As soon as practicable
after this Registration Statement becomes effective.
<PAGE>
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
---------
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
--------
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
--------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================================
Proposed
Maximum Proposed Maximum
Title of Each Class of Securities to be Amount to be Offering Price Aggregate Offering Amount of
Registered Registered per Unit(1) Price(1) Registration Fee
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock ($.00133 par value)(2)... 1,265,000 $5.00 $ 6,325,000 $ 2,181.03
- -----------------------------------------------------------------------------------------------------------------------------------
Redeemable Warrants(3)................ 2,530,000 $0.10 $ 253,000 $ 87.24
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock ($.00133 par value)
issuable upon exercise of the
Redeemable Warrants(4)................ 2,530,000 $5.50 $13,915,000 $ 4,798.28
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock
($.00133 par value)(5)................ 670,000 $5.00 $ 3,350,000 $ 1,155.17
- -----------------------------------------------------------------------------------------------------------------------------------
Representative's Warrants(6).......... 110,000 $0.00009 $ 10 $ 0
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock ($.00133 par value)
issuable upon exercise of
Representative's Warrants(7).......... 110,000 $5.50 $ 605,000 $ 208.62
- -----------------------------------------------------------------------------------------------------------------------------------
Redeemable Warrants included
in the Representative's
Warrants(8)........................... 220,000 $0.11 $ 24,200 $ 8.34
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock ($.00133 par value)(9)... 220,000 $5.50 $ 1,210,000 $ 417.24
- -----------------------------------------------------------------------------------------------------------------------------------
Total Registration Fee................ $25,682,210 $ 8,855.92
===================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Includes 165,000 shares of Common Stock subject to the Underwriters'
over-allotment option.
(3) Includes 330,000 Redeemable Warrants subject to the Underwriters'
over-allotment option.
(4) Issuable upon exercise of the Redeemable Warrants to be offered to the
public and includes 330,000 shares of Common Stock issuable upon exercise
of the Redeemable Warrants subject to the Underwriters' over-allotment
option. Assumes the Underwriter's over-allotment option is exercised in
full. Pursuant to Rule 416, this Registration Statement also covers any
additional shares of Common Stock which may become issuable by virtue of
the anti-dilution provisions of the Redeemable Warrants.
(5) Shares held by Selling Security Holders. Certain of such shares are
subject to contractual restrictions on resale. See "Shares Eligible for
Future Sale".
(6) Pursuant to Rule 457(g) no separate registration fee is required in
connection with the registration of the Representative's Warrants.
<PAGE>
(7) Issuable upon exercise of the Representative's Warrants to purchase
110,000 shares of Common Stock identical to the Common Stock offered to
the public. Pursuant to Rule 416, this Registration Statement also covers
any additional Securities which may become issuable by virtue of the
anti-dilution provisions of the Representative's Warrants.
(8) Issuable upon exercise of the Representative's Warrants to purchase
220,000 Redeemable Warrants identical to the Redeemable Warrants offered
to the public. Pursuant to Rule 416, this Registration Statement also
covers any additional Securities which may become issuable by virtue of
the anti-dilution provisions of the Representative's Warrants.
(9) Issuable upon exercise of Redeemable Warrants included in the
Representative's Warrants. Pursuant to Rule 416, this Registration
Statement also covers any additional Securities which may become issuable
by virtue of the anti-dilution provisions of the Representative's
Warrants.
--------------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
===============================================================================
SUBJECT TO COMPLETION, DATED ____ __, 1996
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any jurisdiction in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of any such
jurisdiction.
ROOM PLUS, INC.
[LOGO]
1,100,000 Shares of Common Stock and
2,200,000 Redeemable Warrants
--------------------
Room Plus, Inc., a New York corporation (the "Company") hereby offers
1,100,000 shares of the Company's common stock, $.00133 par value per share (the
"Common Stock"), and 2,200,000 redeemable common stock purchase warrants of the
Company (the "Redeemable Warrants"). The Common Stock and the Redeemable
Warrants offered hereby (sometimes hereinafter collectively referred to as the
"Securities") will be separately tradeable immediately upon issuance and may be
purchased separately. Investors will not be required to purchase shares of
Common Stock and Redeemable Warrants together or in any particular ratio. The
shares of Common Stock offered hereby include 100,000 shares held by the four
directors of the Company (the "Directors Shares"). The Directors Shares are
being underwritten in this Offering; however, the Company will not receive any
proceeds from the sale of the Directors Shares. Each Redeemable Warrant entitles
the holder to purchase one share of Common Stock at a price of $5.50 per share
[110% of the Initial Public Offering Price ("IPO Price")], subject to adjustment
as described herein, commencing _______ __, 1997 [one year from date of
Prospectus] until _______ __, 2001 [five years from the date of this Prospectus]
and is redeemable by the Company at a redemption price of five cents ($.05)
commencing _______ __, 1997 [one year from the date of this Prospectus] on 30
days' prior written notice, provided that the average closing bid price of the
Common Stock equals or exceeds $7.50 per share [150% of IPO Price], subject to
adjustment as described herein, for thirty (30) consecutive trading days ending
on the fifteenth trading day immediately prior to the notice of redemption. See
"Description of Securities."
Prior to this Offering, there has been no public market for the Common
Stock or the Redeemable Warrants and there can be no assurance that a market
will develop after completion of this Offering or if a market develops, it will
be sustained. The initial public offering price of the Common Stock will be
$5.00 per share and the initial public offering price of the Redeemable Warrants
will be $.10 per warrant. See "Risk Factors" and "Underwriting" for a discussion
of the factors considered in determining the initial public offering prices of
the Securities and the terms of the Redeemable Warrants. The Company has applied
to have the Common Stock and the Redeemable Warrants approved for quotation on
the National Association of Securities Dealers Automated Quotation System
SmallCap Market ("NASDAQ SmallCap") under the symbols "[PLUS]" and "[PLUSW],"
respectively, and approved for listing on the Boston Stock Exchange ("BSE")
under the symbols ["PLS"] and "[PLSW]," respectively.
--------------------
INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH
DEGREE OF RISK AND IMMEDIATE SUBSTANTIAL
DILUTION. SEE "RISK FACTORS" ON PAGE 5 AND "DILUTION."
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
Proceeds to
Underwriting Holders of
Price to Discounts and Proceeds to Directors
Public Commissions(1) Company(2) Shares
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.................. $5.00 $0.50 $4.50 $4.50
- -------------------------------------------------------------------------------------------------------------------
Per Redeemable
Warrant.................... $0.10 $0.01 $0.09 $0
- -------------------------------------------------------------------------------------------------------------------
Total(3)................... $5,720,000 $572,000 $4,698,000 $450,000
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
(1) Does not include additional compensation to the Representative consisting
of (i) a non-accountable expense allowance equal to 3% of the aggregate
purchase price of the Securities, or $171,600 ($197,340 if the
Representative's over-allotment option is exercised in full), of which
$25,000 has been paid to date; (ii) warrants to purchase 110,000 shares of
Common Stock at $5.50 per share and/or 220,000 Redeemable Warrants at $.11
per Warrant; and (iii) a two-year consulting agreement providing for fees
totalling $114,400, which is payable to the Representative in full on the
closing of this Offering. For additional information concerning further
agreements between the Company and the Representative, including an
agreement to indemnify the Representative against certain civil
liabilities, including liabilities under the Securities Act of 1933, see
"Underwriting."
(2) Before deducting estimated expenses of $671,600 payable by the Company,
including the non-accountable expense allowance.
(3) The Company has granted to the Underwriters an option to purchase up to
165,000 additional shares of Common Stock
<PAGE>
and/or 330,000 additional Redeemable Warrants, upon the same terms and
conditions as set forth above, solely to cover over-allotments, if any. If
such option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions, Proceeds to Company and Proceeds to Holders of
Directors Shares will be $6,578,000, $657,800, $5,470,200, and $450,000,
respectively. See "Underwriting."
--------------------
This Prospectus also relates to the registration by the Company, at its
expense, for the account of certain security holders (the "Selling Security
Holders") of an aggregate of 670,000 shares of Common Stock (which do not
include the 100,000 Directors Shares). None of the shares of Common Stock held
by the Selling Security Holders are being underwritten in this Offering, and the
Company will not receive any proceeds from their sale.
The Securities are being offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by the Underwriters, and subject
to approval of certain legal matters by their counsel and subject to certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify this Offering and to reject any order in whole or in part. It is expected
that delivery of the Securities offered hereby will be made against payment at
the offices of The Thornwater Company, L.P., New York, New York on or about
______ __, 1996.
--------------------
THE THORNWATER COMPANY, L.P.
______ __, 1996
<PAGE>
[Pictures, if any, to be inserted here]
Inside front cover of Prospectus contains 2 pictures of the Company's products,
which are complete settings of bedroom furniture.
The Company is not currently a reporting company for purposes of the
Securities Exchange Act of 1934. The Company intends to furnish its stockholders
with annual reports containing audited financial statements certified by an
independent public accounting firm and quarterly reports for the first three
quarters of each fiscal year containing unaudited financial statements.
--------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE BOSTON STOCK EXCHANGE, THE OVER-THE-COUNTER
MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial data appearing elsewhere in this Prospectus. Unless
otherwise indicated, all share and per share data give effect to a 4 to 3
reverse split of the shares of Common Stock of the Company which occurred on
July 1, 1996. In addition, unless otherwise indicated, the information in this
Prospectus does not give effect to the exercise of (i) the Redeemable Warrants
offered hereby, (ii) the Underwriters' over-allotment option to purchase
additional shares of Common Stock and/or Redeemable Warrants, (iii) the
Representative's Warrants to purchase shares of Common Stock and/or Redeemable
Warrants, (iv) certain warrants issued by the Company to the three principals of
the Company (the "Principals Warrants"), (v) certain warrants issued by the
Company to Kirlin Securities, Inc. in connection with a private placement by the
Company consummated in September 1995 (the "Kirlin Warrants"), (vi) certain
warrants issued by the Company to Mark Rubin (the "Rubin Warrants"), and (vii)
certain options issued by the Company to McCormick & Company (the "McCormick
Options"). See "Description of Securities" and "Underwriting." See "Risk
Factors" for a discussion of certain factors that should be considered in
connection with an investment in the Securities offered hereby.
The Company
Room Plus, Inc. (the "Company") is a fully-integrated manufacturer and
retailer of high-pressure, mica-laminated furniture for residential uses,
primarily bedroom furniture for children ages three to 16 years old. The
Company's products are of a modular design and are intended to be
multi-functional, interchangeable and space-saving.
The Company distributes its products through its own distribution network
of 11 retail showrooms located in the greater New York City metropolitan area.
The Company uses standard component pieces to manufacture furniture for
children's and adult's bedrooms and home offices. The approximately 300 standard
components can be finished in various colors and textures and combined in
various configurations to produce a finished product which is personalized to
the customer's taste, space and budget. The use of standard components also
permits the Company's furniture to be reconfigured as the customer's needs or
tastes change. For example, a loft bed can be converted into separate beds, a
desk, a dresser and a bookcase, and a baby's changing table can be converted
into a child's play table and a dresser.
Unlike many of its direct competitors, the Company uses high quality raw
materials in the manufacture of its products, including high-pressure mica
laminate that is more resistent to impact and engineered wood that has been
laminated on both sides to provide greater stability and protection against
warping. The quality of materials and manufacturing processes used by the
Company enable it to offer a limited lifetime warranty against structural
defects.
Because the Company's finished products are manufactured from standard
components and personalized to the customer's needs, the Company does not
maintain a large inventory of finished products (other than showroom display
models). Finished products are manufactured to meet a specified delivery date,
which is generally fixed at the time of the order and is within two to six weeks
thereafter.
The Company's manufacturing operations are conducted in a 78,000 square
foot facility located in Paterson, New Jersey. In the past year, the Company has
implemented numerous changes to its manufacturing facility and processes in
order to significantly reduce the direct costs of manufacturing and to produce
more contemporary styles of high quality, mica-laminated furniture.
The Company's existing manufacturing facility currently operates on a
single shift and has sufficient capacity to more than double its manufacturing
volume without substantially increasing indirect costs of manufacture. The
Company plans to use a substantial portion of the proceeds of this Offering to
establish 12 to 14 additional retail showrooms, primarily in the New York to
Washington, D.C. corridor, to increase demand for its products, and to continue
to upgrade and automate its manufacturing process and further reduce direct
manufacturing costs.
The Company is a New York corporation that was organized in 1982 under the
name RPF Holding Corp. ("RPF Holding") and was engaged in the retail sale of
mica-laminated furniture. From 1979 to 1982, the founders of the Company had
engaged in the same business under other corporate names. In March 1995, Bunk
Trunk Manufacturing Company, Inc. ("Bunk Trunk"), which was the principal
manufacturer of the furniture sold by RPF Holding, was merged into RPF Holding.
The surviving entity in such merger, which was named TAM Industries, Inc.,
changed its name to Room Plus, Inc. in June 1995. The Company's principal
offices are located at 91 Michigan Avenue, Paterson, New Jersey 07503, and its
telephone number at that address is (201) 523-4600.
<PAGE>
The Offering
<TABLE>
<CAPTION>
<S> <C>
Securities Offered ...............................1,100,000 shares of Common Stock and 2,200,000
Redeemable Warrants. The shares of Common Stock
being offered hereby include 100,000 Directors
Shares. The Company will not receive any proceeds
from the sale of the Directors Shares. See
"Description of Securities" and "Selling Security
Holders".
Redeemable Warrants ..............................Each Redeemable Warrant entitles the holder to
purchase one share of Common Stock at a price of $5.50 [110% of IPO Price],
subject to adjustment, commencing ______ __, 1997 [one year from date of
Prospectus], until ______ __, 2001 [five years from the date of this Prospectus]
and is redeemable by the Company at a redemption price of five cents ($.05)
commencing _____ __, 1997 [one year from the date of this Prospectus] on 30
days' prior written notice, provided that the average closing bid price of the
Common Stock equals or exceeds $7.50 per share [150% of IPO Price], subject to
adjustment, for thirty (30) consecutive trading days ending on the fifteenth
trading day immediately prior to the notice of redemption. See "Description of
Securities -- Redeemable Warrants."
Securities Being Registered for the
Account of Selling Security Holders...............670,000 shares of Common Stock. None of the
shares of Common Stock held by the Selling Security
Holders (which do not include the 100,000 Directors
Shares) are being underwritten in this Offering and
the Company will not receive any proceeds from their
sale. See "Selling Security Holders."
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Shares of Common Stock Outstanding
Before Offering..........................3,220,000(1)
After Offering...........................4,220,000(1)
Use of Proceeds...................................Costs of opening new retail showrooms, renovation
of existing retail showrooms, repayment of bank
borrowings, purchase and/or lease of machinery and
equipment, marketing and advertising and general
corporate purposes and working capital. See "Use of
Proceeds".
Risk Factors......................................Investment in the Securities offered hereby involves
a high degree of risk and immediate substantial
dilution. See "Risk Factors" and "Dilution."
</TABLE>
<TABLE>
<CAPTION>
PROPOSED NASDAQ PROPOSED BSE
SMALLCAP SYMBOL(2) SYMBOL(2)
<S> <C> <C>
Common Stock [PLUS] [PLS]
Redeemable Warrants [PLUSW] [PLSW]
</TABLE>
- -------------------
(1) Includes 100,000 Directors Shares. Does not include (i) up to 2,200,000
shares of Common Stock issuable upon exercise of the Redeemable
Warrants offered hereby, (ii) up to 165,000 shares of Common Stock
and/or 330,000 Redeemable Warrants issuable upon exercise of the
Underwriters' over-allotment option, (iii) up to 330,000 shares of
Common Stock issuable upon exercise of the Redeemable Warrants included
in the Underwriters' over-allotment option, (iv) up to 110,000 shares
of Common Stock and/or 220,000 Redeemable Warrants issuable upon
exercise of the Representative's Warrants, (v) up to 220,000 shares of
Common Stock issuable upon exercise of the Redeemable Warrants included
in the Representative's Warrants, (vi) up to 750,000 shares of Common
Stock issuable upon the exercise of the Principals Warrants at an
exercise price of $3.00 per share, (vii) up to 750,000 shares of Common
Stock issuable upon exercise of the Kirlin Warrants at an exercise
price of $1.20 per share, (viii) up to 56,250 shares of Common Stock
issuable upon exercise of the Rubin Warrants at an exercise price of
$2.00 per share, and (ix) up to 25,000 shares of Common Stock issuable
upon exercise of the McCormick Options at $3.00 per share.
(2) There is currently no market for the Common Stock or the Redeemable
Warrants and there can be no assurance that a market for the Common
Stock or the Redeemable Warrants will develop after this Offering. The
Company anticipates that, upon completion of this Offering, the Common
Stock and the Redeemable Warrants will be listed on NASDAQ SmallCap and
the BSE. However, there can be no assurance that such listing will be
maintained. See "Risk Factors -- No Prior Public Market; Arbitrary
Determination of Offering Prices; Possible Volatility of Securities"
and "Risk Factors -- Possible Delisting of Securities."
3
<PAGE>
Summary Financial Data
Statement of Operations Data:
<TABLE>
<CAPTION>
Year Ended Year Ended Six Months Ended
December 31, 1994 December 31, 1995 June 30,
------------------------
1995 1996
---- ----
<S> <C> <C> <C> <C>
Revenues....................................$13,215,387 $13,149,018 $6,325,885 $6,671,082
Cost of goods sold.......................... 6,003,314 6,922,500 3,780,917 2,919,695
Operating expenses.......................... 7,424,579 7,791,397 3,926,102 3,733,369
----------- ----------- ---------- ----------
Earnings (loss) from operations............. (212,506) (1,564,879) (1,381,134) 18,018
Interest expense............................ ( 16,576) ( 82,705) (40,260) (23,426)
Miscellaneous income........................ 16,661 23,033 734 6,783
----------- ----------- ---------- ----------
Earnings (loss) before income
tax benefits.............................. (212,421) (1,624,551) (1,420,660) 1375
Pro forma income tax (benefits)(1).......... (30,963) (386,488) (292,150) 300
----------- ----------- ---------- ----------
Pro forma net earnings (loss)............... (181,458) (1,238,063) (1,128,510) 1075
=========== =========== ========== ==========
Pro forma net earnings (loss) per equivalent
common stock..............................$ (0.06) $ (0.37) $ (0.35) --
=========== =========== ========== ==========
Common stock and equivalent
common stock outstanding.................. 3,180,735 3,386,985 3,180,735 3,691,667
=========== =========== ========== ==========
</TABLE>
- ---------------------
(1) From inception through September 27, 1995, the Company elected to be
taxed as an S Corporation under the applicable provisions of the
Internal Revenue Code of 1986, as amended. Effective September 27,
1995, the Company's S Corporation election was voluntarily revoked,
subjecting the Company to corporate income taxes subsequent to that
date. Pro forma income tax (benefits), pro forma net income (loss) per
equivalent common stock and common stock and equivalent common stock
outstanding represent the Company's income tax position had the Company
been a C Corporation for all periods presented other than the six
months ended June 30, 1996.
Balance Sheet Data:
<TABLE>
<CAPTION>
June 30, 1996
December 31, -----------------------------------------------
1995 Actual Pro Forma(1) Pro Forma
--------------- ------- ---------- As Adjusted(1)(2)
-----------
<S> <C> <C> <C> <C>
Working capital (deficit) $(1,246,590) $(1,230,113) $(897,613) $3,348,787
Total assets 2,382,173 2,887,106 3,219,606 7,466,006
Total liabilities 3,176,669 3,424,452 3,424,452 3,424,452
Stockholders' equity (deficit) (794,496) (537,346) (204,846) 4,041,554
</TABLE>
- ----------------
(1) Reflects the issuance of an additional 500,000 shares of Common Stock
subsequent to June 30, 1996. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources".
(2) Reflects the receipt and initial application of the net proceeds from the
sale of the Common Stock (excluding the Directors Shares) and Redeemable
Warrants offered hereby. See "Use of Proceeds."
4
<PAGE>
RISK FACTORS
The Securities offered hereby involve a high degree of risk.
Prospective investors should consider carefully the following factors, in
addition to other information and financial data contained in this Prospectus,
in evaluating an investment in the Securities offered hereby.
No Assurance of Profitability; Going Concern Qualification in Certified Public
Accountant's Report
The Company incurred a net loss for the fiscal years ended December 31,
1994 and 1995 and realized only modest net earnings for the six months ended
June 30, 1996. There can be no assurance that the Company will be profitable in
the future. As of June 30, 1996, the Company had a working capital deficit of
($1,230,113). In connection with the audit of the Company's financial statements
for the fiscal year ended December 31, 1995, the Company has received a report
from its independent public accountants, Ehrenkrantz and Company, that includes
an explanatory paragraph describing the uncertainty as to the ability of the
Company to continue as a going concern. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
financial statements (and the related notes thereto) included elsewhere in this
Prospectus.
Possible Need for Additional Financing
The Company expects that cash flow from operations, together with the
net proceeds of this Offering, will fund its cash requirements for at least the
24 months following the consummation of the Offering. However, additional
financing may be required in the event the Company incurs operating losses in
the future or new retail showrooms do not generate sufficient cash. In addition,
additional financing may be required in order to increase the number of the
Company's retail showrooms as planned by management. Because there can be no
assurance that adequate additional financing will be available on acceptable
terms if at all, the Company may be forced to limit such planned expansion or
reduce its operations. Any future financings that involve the sale of the
Company's equity securities may result in dilution to then current stockholders.
See "Use of Proceeds."
Possible Adverse Effect of Geographic Concentration
All of the Company's currently operating retail showrooms are located
in the states of New York and New Jersey. The Company intends to open retail
showrooms in Pennsylvania, Maryland, Washington, DC and Virginia in the next
three to four years. Accordingly, the Company is susceptible to fluctuations in
its business caused by adverse economic conditions in those markets. See
"Business - Expansion Strategy."
Availability of Retail Showroom Locations
The Company intends to open retail showrooms in Pennsylvania, Maryland,
Washington, DC and Virginia in the next three to four years. There can be no
assurance that the Company will be able to locate suitable showroom sites,
arrange acceptable leases for new retail showrooms or open such showrooms in a
timely manner. The inability of the Company to locate suitable sites, enter into
acceptable leases or open new retail showrooms in a timely manner may have a
material adverse effect on the Company's financial condition.
Uncertainty of Market Acceptance in New Markets
The Company intends to expand its retail showrooms, all of which are
presently located in the metropolitan New York area, into Pennsylvania,
Maryland, Washington, DC and Virginia, areas in which the Company has not
previously advertised. As a result, the Company will have to advertise
extensively and develop name recognition among consumers. Moreover, the
consumers in these expansion areas may have different preferences for furniture
or may otherwise not be as receptive to the Company's products as consumers in
the metropolitan New York area. For these reasons, as well as factors normally
associated with expansion, there can be no assurance that retail showrooms to be
opened in these new markets will generate sales sufficient to compensate for the
increase in overhead, or generate sales or earnings consistent with those
generated by retail showrooms in the Company's existing markets.
5
<PAGE>
Cyclical Nature of Retail Furniture Industry
The retail furniture industry historically has been cyclical and
directly affected by, among other things, housing starts, existing home sales,
consumer confidence and general economic conditions. Furniture purchases are
generally discretionary and, in light of the fact that they represent a
significant expenditure to the average consumer, they are often deferred during
times of economic uncertainty. Accordingly, any period of economic uncertainty
may have a material adverse effect on the Company's financial condition.
Competition
The home furnishings industry is a highly competitive and fragmented
market with annual U.S. sales of over $45 billion in 1994 and estimated annual
U.S. sales of $48 billion in 1995.
The Company is the largest retailer of mica-laminated home furniture in
the New York metropolitan area. Several small retailers, such as Atlantic
Furniture and Kids' Room, and large retailers, such as IKEA, also sell
mica-laminated furniture similar to that sold by the Company in the same
geographic region. The Company also competes directly or indirectly with all
manufacturers and retailers of home furniture, including Huffman Koos, Levitz,
Thomasville and Drexel Heritage. In addition, there are no significant barriers
to prevent the entry of additional competitors in the home furniture industry
generally or in the mica-laminated furniture market itself. Many of the
Company's current and potential competitors have substantially greater
financial, manufacturing, marketing, distribution and sales resources than the
Company, and there can be no assurance that the Company will be able to compete
successfully in the future. See "Business -- Competition."
Dependence on Key Personnel
The Company is largely dependent on the continued service of Marc
Zucker, its Chairman and Chief Executive Officer, Allan Socher, its President
and Director of Marketing, and Theodore Shapiro, its Executive Vice President
and Director of Manufacturing. The loss of the services of any of Messrs.
Zucker, Socher or Shapiro could have a material adverse effect on the Company's
operations and financial condition. The Company has entered into employment
agreements with each of Messrs. Zucker, Socher and Shapiro, which agreements may
be terminated by the Company by not less than three years' notice or by the
respective employee on not less than three months' notice. See "Management --
Employment Agreements."
Control by Certain Shareholders
As of the date of this Prospectus, the three largest stockholders of
the Company, Messrs. Zucker, Socher and Shapiro, each owned 15.0% (an aggregate
of 45.0%) of the outstanding shares of Common Stock, excluding any outstanding
warrants owned by such individuals. After giving effect to this Offering, each
of Messrs. Zucker, Socher and Shapiro will own 10.7% (an aggregate of 32.1%) of
the outstanding shares of Common Stock, excluding any outstanding warrants owned
by such individuals. Accordingly, if Messrs. Zucker, Socher and Shapiro were to
vote in the same manner on the election of members of the Board of Directors
(the "Board") or on any other matter requiring approval of a majority of the
outstanding shares of Common Stock, such matter would likely be approved or
defeated, as the case may be, depending on the vote of such stockholders. See
"Principal Stockholders."
Broad Discretion in Use of Funds
Approximately 23.0% of the net proceeds of this Offering will be
applied to working capital and other general corporate purposes. Accordingly,
management of the Company will have broad discretion as to the application of
such proceeds. See "Use of Proceeds."
Management of Growth
The Company's business plan contemplates a significant expansion of its
level of operations in all areas, including a substantial increase in the number
of the Company's retail showrooms. Such expansion may cause significant strain
on the Company's management, financial, marketing and distribution resources. To
manage its growth effectively, the Company must continue to improve and expand
its existing resources and attract, train and
6
<PAGE>
motivate qualified employees. If the Company is unable to manage growth
effectively, its business, operating results and financial condition will be
materially adversely affected. See "Business" and "Management".
Potential Dilutive Effect of Warrants and Options
For the life of the Representative's Warrants, the Redeemable Warrants,
the Rubin Warrants, the Kirlin Warrants, the Principals Warrants and the
McCormick Options, the holders thereof are given the opportunity to profit from
a rise in the market price of the Common Stock. Any rise in the market price of
the Common Stock may encourage the holders to exercise such warrants or options,
which may result in a dilution of the interests of other stockholders. As a
result, the Company may find it more difficult to raise additional equity
capital if it should be needed for the business of the Company while such
warrants and options are outstanding. See "Description of Securities."
Immediate Substantial Dilution
The proposed initial public offering price of the Common Stock is
substantially higher than the book value per share of Common Stock. Investors
purchasing the Common Stock offered hereby will incur immediate substantial
dilution of $4.01 per share in net tangible book value. See "Dilution."
No Prior Public Market; Arbitrary Determination of Offering Prices; Possible
Volatility of Securities
Prior to this Offering, there has been no public market for the
Company's Securities. Accordingly, there can be no assurance that an active
trading market will develop or, if developed, that it will be sustained upon the
completion of this Offering or that the market prices of the Securities will not
decline below the initial public offering prices. The initial public offering
prices of the Securities and the terms of the Redeemable Warrants have been
arbitrarily determined by negotiations between the Company and the
Representative and do not necessarily bear any relationship to the Company's
assets, book value, net earnings, net sales or other established criteria of
value, and should not be considered indicative of the actual value of the
Securities. See "Underwriting." The stock market has, from time to time,
experienced extreme price and volume fluctuations, which often have been
unrelated to the operating performance of particular companies. Regulatory
developments and economic and other external factors, as well as
period-to-period fluctuations in financial results of the Company, may have a
significant impact on the market prices of the Securities.
Possible Delisting of Securities
Prior to this Offering, there has been no established trading market
for the Company's Securities and there is no assurance that a trading market for
such Securities will develop after the completion of this Offering. If a trading
market does in fact develop for the Securities offered hereby, there can be no
assurance that it will be sustained. The Company has applied to have the Common
Stock and the Redeemable Warrants listed for trading on NASDAQ SmallCap and the
BSE. If the listings are approved, the continued trading of the Common Stock and
the Redeemable Warrants on NASDAQ SmallCap and the BSE is conditioned upon the
Company meeting certain criteria. If the Company fails to meet any of these
criteria, the Common Stock and/or the Redeemable Warrants could be delisted from
trading on NASDAQ SmallCap or the BSE, which delisting could materially
adversely affect the trading market for the Common Stock and/or the Redeemable
Warrants. There can be no assurance that the Securities will not be delisted.
See "Underwriting."
Penny Stock Regulation
In the event the Common Stock is delisted from trading on NASDAQ
SmallCap and the trading price of the Common Stock is less than $5.00 per share,
trading in the Common Stock would also be subject to the requirements of Rule
15g-9 promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange
7
<PAGE>
Act"). Under such rule, broker/dealers who recommend such low-priced securities
to persons other than established customers and accredited investors must
satisfy special sales practice requirements, including a requirement that they
make an individualized written suitability determination for the purchaser and
receive the purchaser's written consent prior to the transaction. The Securities
Enforcement Remedies and Penny Stock Reform Act of 1990 also require additional
disclosure in connection with any trades involving a stock defined as a "penny
stock" (generally, according to recent regulations adopted by the Securities and
Exchange Commission (the "Commission"), any non-NASDAQ equity security that has
a market price of less than $5.00 per share, subject to certain exceptions),
including the delivery, prior to any penny stock transaction, of a disclosure
schedule explaining the penny stock market and the risks associated therewith.
Such requirements could severely limit the market liquidity of the Common Stock
and the ability of purchasers in this Offering to sell their securities in the
secondary market. There can be no assurance that the Common Stock will not be
treated as a penny stock.
No Dividends Anticipated
The holders of Common Stock are entitled to receive dividends when, as
and if declared by the Board, out of funds legally available therefor. The
Company does not anticipate paying any dividends on its Common Stock in the
foreseeable future. See "Dividend Policy" and "Description of Securities."
Shares Eligible for Future Sale
Sale of a substantial number of shares of the Common Stock in the
public market following this Offering could materially adversely affect the
market price of the Common Stock. In addition to the Common Stock offered
hereby, (i) approximately 75,000 shares of Common Stock being registered for the
account of Selling Security Holders will be available for sale on the date of
this Prospectus, (ii) approximately 520,000 shares of Common Stock will be
available for sale in the public market commencing six months after the date of
this Prospectus unless released earlier by the Representative, (iii)
approximately 825,000 shares of Common Stock will be available for sale in the
public market commencing 12 months after the date of this Prospectus unless
released earlier by the Representative, and (iv) approximately 1,700,000
additional shares of Common Stock will be available for sale in the public
market commencing 24 months after the date of this Prospectus, unless released
earlier by the Representative. See "Shares Eligible For Future Sale." Sales of
these shares are subject, in the case of shares held by directors, officers and
other affiliates of the Company, to certain volume limitations and other
requirements of Rule 144 under the Securities Act of 1933 (the "Act").
Each of the Company's directors and officers (all such stockholders
holding an aggregate of 1,500,000 shares of Common Stock, including the
Directors Shares, and warrants and options to purchase an aggregate of 775,000
shares of Common Stock), have agreed not to publicly offer, sell or otherwise
dispose of any Common Stock (other than the 100,000 Directors Shares and 3,334
shares of Common Stock being registered for the account of Edmund J. McCormick,
Jr. as a Selling Security Holder) for a period of 24 months after the date of
this Prospectus without the prior written consent of the Representative. See
"Shares Eligible For Future Sale."
Lack of Experience of Representative
The Thornwater Company, L.P. (the "Representative") commenced
operations in 1995 and it does not have extensive experience as a managing
underwriter of public offerings of securities. The Representative is a
relatively small firm and no assurance can be given that it will be able to
adequately support trading of the Common Stock or the Redeemable Warrants in the
aftermarket.
8
<PAGE>
Potential Anti-Takeover Effects of New York Law
Certain provisions of New York law could delay and impede the removal
of incumbent directors and could make a merger, tender offer or proxy contest
involving the Company more difficult, even if such event could be beneficial, in
the short term, to the interests of the stockholders. Such provisions could
limit the price that certain investors might be willing to pay in the future for
the Company's Securities.
Potential Adverse Effect of Redemption of Warrants
The Redeemable Warrants are subject to redemption by the Company.
Redemption of the Redeemable Warrants could force the holders to exercise the
Redeemable Warrants and pay the exercise price at a time when it may be
disadvantageous for the holders to do so, to sell the Redeemable Warrants at the
current market price when they might otherwise wish to hold the Redeemable
Warrants, or to accept the redemption price, which may be substantially less
than the market value of the Redeemable Warrants at the time of redemption. The
holders of the Redeemable Warrants will automatically forfeit their rights to
purchase the shares of Common Stock issuable upon exercise of such Redeemable
Warrants unless the Redeemable Warrants are exercised before they are redeemed.
The holders of Redeemable Warrants will not possess any rights as stockholders
of the Company unless and until the Redeemable Warrants are exercised. See
"Description of Securities -- Redeemable Warrants."
Current Prospectus and State Blue Sky Registration in Connection with Exercise
of Redeemable Warrants
The Company will be able to issue shares of its Common Stock upon
exercise of the Redeemable Warrants only if there is a then current prospectus
relating to the Common Stock issuable upon the exercise of the Redeemable
Warrants under an effective registration statement filed with the Commission and
only if such Common Stock is then qualified for sale or exempt from
qualification under applicable state securities laws of the jurisdictions in
which the various holders of Redeemable Warrants reside. Although the Company
will use its best efforts to meet such requirements, there can be no assurance
that the Company will be able to do so. The failure of the Company to meet such
requirements may deprive the Redeemable Warrants of any value and cause the
resale or other disposition of Common Stock issued upon the exercise of the
Redeemable Warrants to become unlawful. See "Description of Securities."
USE OF PROCEEDS
At assumed initial public offering prices of $5.00 per share of Common
Stock and $.10 per Redeemable Warrant, the net proceeds to be received by the
Company from the sale of the Securities offered hereby, after deducting expenses
payable by the Company in connection with this Offering, are estimated to be
$4,026,400 ($4,787,860 if the Underwriters' over-allotment option is exercised
in full).
The Company intends to use the net proceeds of this Offering
substantially as follows: (i) approximately $2,100,000 for the cost of opening
twelve to fourteen new retail showrooms, (ii) approximately $400,000 for
improvements to existing retail showrooms, including, but not limited to,
painting, new signs and new carpeting, (iii) approximately $250,000 to repay,
upon completion of this Offering, the outstanding balance of the Company's bank
borrowings which bear interest at the rate of 10.25% per annum, (iv)
approximately $200,000 to lease and/or purchase machine tools for its factory
and office and computer equipment, (v) approximately $150,000 for marketing and
advertising of the Company's products, and (vi) approximately $926,400 for
general corporate purposes and working capital.
The amounts and timing of these expenditures may vary depending upon
numerous factors, including the ability of the Company to enter into acceptable
leases for the opening of new retail showrooms.
9
<PAGE>
The foregoing represents the Company's best estimate of the allocation
of the net proceeds of this Offering based on both the expected utilization of
funds necessary to finance the Company's existing activities and the Company's
current objectives, as well as current economic conditions. The Company may
reallocate funds from time to time among the uses discussed above or to new uses
if it believes such reallocation to be in its best interest.
Prior to the application of the net proceeds of this Offering to the
purposes discussed above, the Company intends to invest such net proceeds in
short-term, investment grade, interest-bearing obligations, certificates of
deposit, or direct obligations of, or obligations unconditionally guaranteed by,
the United States of America.
The Company expects that cash flow from operations, together with the
net proceeds of this Offering, will fund its cash requirements for at least the
24 months following the consummation of the Offering.
Any proceeds from the exercise of the Redeemable Warrants and/or the
Underwriters' over-allotment option will be included in the Company's working
capital.
DILUTION
As of June 30, 1996, the Company had a negative net tangible book value
of ($383,146) or ($0.14) per share. Net tangible book value per share is
determined by dividing the number of shares of Common Stock outstanding as of
June 30, 1996 into the net tangible book value of the Company. Without taking
into account any changes in net tangible book value after June 30, 1996 other
than to give effect to the issuance of an additional 500,000 shares of Common
Stock and the estimated net proceeds from the sale and issuance of the
Securities being offered hereby (at assumed initial public offering prices of
$5.00 per share of Common Stock and $0.10 per Redeemable Warrant), and the
application of the net proceeds therefrom, the pro forma net tangible book value
of the Company as of June 30, 1996 would be $4,195,754 or $0.99 per share,
representing an immediate increase in net tangible book value of $1.13 per share
to existing stockholders and an immediate dilution of $4.01 per share to
purchasers of the Common Stock in this Offering. The number of shares of Common
Stock outstanding used in the calculation of the pro forma net tangible book
value per share gives effect to this Offering.
The following table illustrates the per share dilution of a new
investor's equity in a share of Common Stock at June 30, 1996:
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed initial public offering price per share $5.00
Negative net tangible book value per share at June 30, 1996 (0.14)
Increase per share attributable to new investors $1.13
------
Pro forma net tangible book value per share after giving effect to this Offering 0.99
-----
Dilution in net tangible book value per share to new investors $4.01 (80%)
</TABLE>
If the Underwriter's over-allotment option is exercised in full, the
increase per share attributable to new investors, the pro forma net tangible
book value per share and the dilution in net tangible book value per share to
new investors would be $1.29, $1.15 and $3.85 (77%), respectively.
The following table sets forth, as of the date of this Prospectus on a
pro forma basis, giving effect to this Offering (at an assumed initial public
offering price of $5.00 per share of Common Stock), the number of shares
10
<PAGE>
of Common Stock purchased from the Company, the total cash consideration paid to
the Company and the average price per share paid by the existing stockholders
and the purchasers of the Common Stock in this Offering.
<TABLE>
<CAPTION>
Shares Cash
Purchased Consideration
--------------------- ----------------------- Average Price
Number Percent Amount Percent Per Share
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders 3,220,000 76.3% $ 1,460,175 22.6% $ 0.45
New investors 1,000,000 23.7 5,000,000 77.4% $ 5.00
--------- ---- -------------- ------
Total 4,220,000 100.0% $ 6,460,175 100.0%
========= ====== ============== ======
</TABLE>
The foregoing table assumes no exercise of the Underwriters'
over-allotment option or the Representative's Warrants. In addition, the above
calculations assume no exercise of any stock options or warrants outstanding as
of June 30, 1996 and assume no value attributable to the Redeemable Warrants
included in this Offering.
11
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
June 30, 1996, actual, pro forma and pro forma as adjusted. The information
presented in the table below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's financial statements (and the related notes thereto) included
elsewhere in the Prospectus. See also "Use of Proceeds" and "Selected Financial
Data."
<TABLE>
<CAPTION>
June 30, 1996
-----------------------------------------------------------
Pro Forma
Actual Pro Forma(1) As Adjusted(1)(2)
------ ------------ -----------------
<S> <C> <C> <C>
Stockholders equity:
Common Stock; Par Value $.00133, 10,000,000
shares authorized; 2,720,000
issued and outstanding actual,
3,220,000 issued and outstanding pro forma and
4,220,000 shares issued and outstanding
pro forma as adjusted(3) $3,618 $4,283 $5,613
Common stock warrants; 2,200,000
warrants issued and outstanding
pro forma as adjusted 0 0 220,000
Additional paid-in capital 1,366,478 1,698,313 5,723,338
Deficit (1,907,442) (1,907,442) (1,907,442)
------------ ------------ ------------
Total stockholders' equity (537,346) (204,846) 4,041,554
============ ============ ===========
</TABLE>
- -----------------
(1) Gives effect to issuance of an additional 500,000 shares of Common Stock
subsequent to June 30, 1996. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources."
(2) Reflects the receipt and initial application of the net proceeds of the
Common Stock and Redeemable Warrants offered hereby. See "Use of
Proceeds."
(3) Shares of Common Stock issued and outstanding actual, pro forma and pro
forma as adjusted do not include (i) up to 2,200,000 shares of Common
Stock issuable upon exercise of the Redeemable Warrants offered hereby,
(ii) up to 165,000 shares of Common Stock and/or 330,000 Redeemable
Warrants issuable upon exercise of the Underwriters' over-allotment
option, (iii) up to 330,000 shares of Common Stock issuable upon exercise
of the Redeemable Warrants included in the Underwriters' over-allotment
option, (iv) up to 110,000 shares of Common Stock and/or 220,000
Redeemable Warrants issuable upon exercise of the Representative's
Warrants, (v) up to 220,000 shares of Common Stock issuable upon exercise
of the Redeemable Warrants included in the Representative's Warrants, (vi)
up to 750,000 shares of Common Stock issuable upon the exercise of the
Principals Warrants at an exercise price of $3.00 per share, (vii) up to
750,000 shares of Common Stock issuable upon exercise of the Kirlin
Warrants at an exercise price of $1.20 per share, (viii) up to 56,250
shares of Common Stock issuable upon exercise of the Rubin Warrants at an
exercise price of $2.00 per share, and (ix) up to 25,000 shares of Common
Stock issuable upon exercise of the McCormick Options at $3.00 per share.
See "Description of Securities" and "Underwriting."
DIVIDEND POLICY
The Company does not anticipate paying any dividends on its Common
Stock in the foreseeable future. The Board of the Company currently anticipates
retaining all available earnings for the growth and expansion of the Company's
business. The declaration and payment of future cash dividends, if any,
generally would depend upon the Company's earnings, financial condition, results
of operations, current and anticipated capital requirements, plans for
expansion, if any, future prospects, restrictions under then existing credit and
other debt instruments and arrangements and other factors deemed relevant by the
Board. See "Description of Securities -- Common Stock" and "Risk Factors -- No
Dividends Anticipated."
12
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data presented below for the Company's
statements of operations for the years ended December 31, 1994 and 1995 and the
balance sheet data at December 31, 1995 are derived from the Company's financial
statements which have been audited by Ehrenkrantz and Company, independent
public accountants, and which appear elsewhere in this Prospectus. The statement
of operations data for the six months ended June 30, 1995 and 1996 and the
balance sheet data at June 30, 1996 are derived from unaudited financial
statements which appear elsewhere in this Prospectus. Management believes that
all adjustments necessary for a fair presentation have been made in such interim
periods. However, the results of operations for the most recent interim period
are not necessarily indicative of the Company's financial results for the entire
current fiscal year.
Statement of Operations Data:
<TABLE>
<CAPTION>
Year Ended Year Ended Six Months Ended
December 31, 1994 December 31, 1995 June 30,
---------------------
1995 1996
---- ----
<S> <C> <C> <C> <C>
Revenues.................................... $13,215,387 $13,149,018 $6,325,885 $6,671,082
Cost of goods sold.......................... 6,003,314 6,922,500 3,780,917 2,919,695
Operating expenses.......................... 7,424,579 7,791,397 3,926,102 3,733,369
----------- ----------- ---------- ----------
Earnings (loss) from operations............. (212,506) (1,564,879) (1,381,134) 18,018
Interest expense............................ ( 16,576) ( 82,705) (40,260) (23,426)
Miscellaneous income........................ 16,661 23,033 734 6,783
----------- ----------- ---------- ----------
Earnings (loss) before income
tax benefits.............................. (212,421) (1,624,551) (1,420,660) 1,375
Pro forma income tax (benefits)(1).......... (30,963) (386,488) (292,150) 300
----------- ----------- ---------- ----------
Pro forma net earnings (loss)............... (181,458) (1,238,063) (1,128,510) 1,075
=========== =========== ========== ==========
Pro forma net earnings (loss) per equivalent
common stock.............................. $ (0.06) $ (0.37) $ (0.35) --
=========== =========== ========== ==========
Common stock and equivalent
common stock outstanding.................. 3,180,735 3,386,985 3,180,735 3,691,667
=========== =========== ========== ==========
</TABLE>
- ---------------------
(1) From inception through September 27, 1995, the Company elected to be
taxed as an S Corporation under the applicable provisions of the
Internal Revenue Code of 1986, as amended. Effective September 27,
1995, the Company's S Corporation election was voluntarily revoked,
subjecting the Company to corporate income taxes subsequent to that
date. Pro forma income tax (benefits), pro forma net income (loss) per
equivalent common stock and common stock and equivalent common stock
outstanding represent the Company's income tax position had the Company
been a C Corporation for all periods presented aother than the six
months ended June 30, 1996.
Balance Sheet Data:
<TABLE>
<CAPTION>
June 30, 1996
December 31, ------------------------------------------------
1995 Actual Pro Forma(1) Pro Forma
--------------- ------- ---------- As Adjusted(1)(2)
-----------
<S> <C> <C> <C> <C>
Working capital (deficit) $(1,246,590) $(1,230,113) $(897,613) $3,348,787
Total assets 2,382,173 2,887,106 3,219,606 7,466,006
Total liabilities 3,176,669 3,424,452 3,424,452 3,424,452
Stockholders' equity (deficit) (794,496) (537,346) (204,846) 4,041,554
</TABLE>
- ---------------
(1) Reflects the issuance of an additional 500,000 shares of Common Stock
subsequent to June 30, 1996. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources".
(2) Reflects the receipt and initial application of the net proceeds from the
sale of the Common Stock (excluding the Directors Shares) and Redeemable
Warrants offered hereby. See "Use of Proceeds."
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the Company's financial statements (and the related notes thereto) included
elsewhere in this Prospectus.
Results of Operations - Ratios
The following tables set forth, for the periods indicated, certain
items from the Company's Statements of Operations, presented as a percentage of
revenues. The operating results for any period are not necessarily indicative
of results that can be expected for any future period.
<TABLE>
<CAPTION>
Year ended Six Months
December 31 ended June 30
----------- -------------
1994 1995 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 45.4% 52.6% 59.8% 43.8%
Gross profit 54.6% 47.4% 40.2% 56.2%
Selling, general & administrative expenses 56.2% 59.3% 62.1% 56.0%
Earnings (loss) from operations (1.6)% (11.9)% (21.8)% .2%
Other income (deductions) 0% (.5)% (.6)% (.2)%
Pro forma net earnings (loss) (1.4)% (9.4)% (17.8)% -
</TABLE>
Results of Operations
Six Months Ended June 30, 1996 and 1995
- ---------------------------------------
Revenues for the six months ended June 30, 1996 totaled $6,671,082 as
compared to $6,325,885 for the six months ended June 30, 1995, or an increase of
$345,197 or 5.5%. This increase is primarily the result of an increase in the
average price received by the Company for its products.
Cost of goods sold totaled $2,919,695 or 43.8% of revenues for the
first six months of 1996 as compared to $3,780,917 or 59.8% of revenues for the
first six months of 1995. This reduction of $861,222 or 22.8% was primarily the
result of reductions of labor costs and material costs and manufacturing
overhead. The overall decrease in direct manufacturing costs was the result of
changes made to the method of manufacturing recommended and implemented by a
newly hired plant operations manager and the Target Team, which consists of
senior management of the Company and management consultants. See "Business -
Manufacturing Process".
As a result of the foregoing, the Company realized an increase in gross
profit in 1996 as compared to 1995, with a gross profit of $3,751,387 or 56.2%
of revenues in the first six months of 1996 as compared to $2,544,968 or 40.2%
of revenues achieved during the same period in 1995.
Selling, general and administrative expenses totaled $3,733,369 for the
first six months of 1996, as compared to $3,926,102 for the first six months of
1995. The decrease of $192,733 or 4.9% was primarily the result of decreased
administrative expenses after the merger of Bunk Trunk and RPF Holding and
reduced delivery expenses associated with a change in the furniture delivery
company used by the Company. The Company also achieved other reductions in
selling, general and administrative expenses through the elimination of states
sales tax late payment penalties.
14
<PAGE>
Operating income for the period ended June 30, 1996 was $18,018 or .2%
of revenues as compared to an operating loss of $1,381,134 or 21.8% of revenues
during the period ended June 30, 1995.
Other income and expenses for the period ended June 30, 1996 was
($16,643) as compared to ($39,526) for June 30, 1995. The decrease in other
expenses of $22,883 is primarily due to decreased interest expense attributable
to the New Jersey sales tax amnesty program that forgave all interest and
penalties on delinquent taxes.
Due to the combination of the preceding factors, the Company realized
pro forma net earnings of $1,075 during the six months ended June 30, 1996 as
compared to a pro forma net loss of $1,128,510 or 17.8% of revenues during the
six months ended June 30, 1995.
Twelve Months Ended December 31, 1995 and 1994
- ----------------------------------------------
During the fiscal year ended December 31, 1995, the Company introduced
several new styles of mica-laminated furniture featuring a more rounded modern
look. The new line of rounded-edged furniture gained customer acceptance and
grew to represent more than 30% of the Company's furniture sales in the first
six months of 1996. However, this new line of rounded-edged furniture proved to
be more costly to produce than originally anticipated. As a result of the high
costs to manufacture these products, in March 1995 the Company implemented many
manufacturing processes and management changes. These changes included the
hiring of management consultants, the replacement of the operations manager of
the manufacturing facility and the establishment of the Target Team.
Revenues remained relatively stable at $13,149,018 for the twelve
months ended December 31, 1995 as compared to $13,215,387 for the twelve months
ended December 31, 1994.
Cost of goods sold for the fiscal year ended December 31, 1995 were
$6,922,500 or 52.6% of revenues as compared to $6,003,314 or 45.4% of revenues
for the same period in 1994. This increase is primarily due to the introduction
of the new rounded-edged product line and the associated increase in
manufacturing costs. In October 1995, the Company began implementing changes to
the manufacturing processes recommended by the Target Team, which changes have
resulted in reductions in such costs.
As a result of the foregoing, the Company realized a decrease in gross
profit in 1995 as compared to 1994, with a gross profit of $6,226,518 or 47.4%
of revenues in the twelve months ended December 31, 1995 as compared to
$7,212,073 or 54.6% of revenues achieved during the same period in 1994.
Selling, general and administrative expenses amounted to $7,791,397 or
59.3% of revenues in fiscal year 1995 as compared to $7,424,579 or 56.2% of
revenues in fiscal year 1994. Such increase is due primarily due to higher
compensation for sales personnel resulting from a new bonus commission program
and an $85,000 write-off relating to a dispute with a delivery company
previously used by the Company.
Operating loss for the fiscal year ended December 31, 1995 was
$1,564,879 or 11.9% of revenues as compared to an operating loss of $212,506 or
1.6% of revenues during the fiscal year ended December 31, 1994.
Other income and expenses for the fiscal year ended December 31, 1995
was ($59,672) as compared to $85 in fiscal year ended December 31, 1994. The
primary reason for the $59,757 net increase in other expenses was the payment
of interest and penalties relating to delinquent states sales taxes.
In September 1995, the Company's S corporation status was changed to a
C corporation under the applicable sections of the Internal Revenue Code of
1986, as amended, as a result of the private placement of 750,000 shares of the
Company's Common Stock. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources." This
change caused a revised tax treatment so that federal income taxes thereafter
became the direct responsibility of the Company and not of the stockholders.
This change gave rise to pro forma tax benefits of $386,488 and $30,963 in the
fiscal years ended December 31, 1995 and 1994, respectively, as a result of the
operating loss incurred by the Company during those periods.
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<PAGE>
The preceding factors combined to show an increase in pro forma net
loss totaling $1,056,605 in the fiscal year ended December 31, 1995 as compared
to the fiscal year ended December 31, 1994. There was a pro forma net loss of
$1,238,063 or 9.4% of revenues in 1995 as compared to a pro forma net loss of
$181,458 or 1.4% of revenues in 1994.
Liquidity and Capital Resources
The Company had a working capital deficit of $1,230,113 at June 30,
1996 which represented a decrease in the deficit of $16,477 or 1.0% from the
working capital deficit of $1,246,590 at December 31, 1995. The decrease in the
deficit was mainly due to an increase in inventory levels at June 30, 1996 as
compared to December 31, 1995. The Company's cash position increased from
($61,436) on December 31, 1995 to $22,802 on June 30, 1996. This was primarily
related to borrowings from the Company's line of credit discussed below.
From inception, the Company's operations have been funded by operating
revenues, capital contributions, loans from corporate officers and bank debt. In
addition, in September 1995 and July 1996, the Company consummated private
placements of 750,000 and 500,000 shares of its Common Stock, respectively. The
Company's operating activities provided or (used) cash of ($1,185,961) and
$491,424 for the fiscal years ended December 31, 1995 and 1994, respectively,
and ($200,350) for the six months ended June 30, 1996. In fiscal year 1995, cash
was used to primarily finance an approximately 15% decrease in accounts payable
relating to obtaining more favorable terms with raw material suppliers and an
increase in cost of goods sold relating to the introduction of the new line of
rounded-edged furniture. In fiscal year 1994, cash was provided primarily by an
increase in accounts payable, accrued expenses and other liabilities due to a
deficiency in working capital. In addition, cash was provided by an increase in
payroll and sales tax payable due to an agreement to pay deferred states sales
tax. Such increases were offset by a decrease in prepaid expenses and inventory
due to the timing of payments for liability and workman's compensation insurance
and normal fluctuations in work in process inventory levels. In the first six
months of 1996, cash was used primarily to finance payments of payroll taxes
through an employee leasing arrangement on a weekly basis rather than on a
quarterly basis as in the past. In addition, cash was used to finance the
exchange of inventory for future advertising of the Company's products.
The Company's investing activities provided (used) cash of $195,094,
($302,401) and ($194,496) for the fiscal years ended December 31, 1995 and 1994
and the six months ended June 30, 1996, respectively. The principal source of
the cash provided in 1995 was loans from officers in the amount of $254,465, and
the principal use of the cash in 1994 was loans to officers of $158,488 and
purchases of property and equipment of $135,791. The principal use of cash for
the period ended June 30,1996 was the purchase of leasehold improvements and
manufacturing machinery.
The Company's financing activities provided (used) cash of $916,916,
($122,255) and $479,084 for the fiscal years ended December 31, 1995 and 1994
and the six months ended June 30, 1996, respectively. The cash provided by the
Company's financing activities for the fiscal year 1995 primarily resulted from
the 1995 Private Placement (as defined below). The cash used by the Company's
financing activities in 1994 primarily consisted of the deferral of rent on
retail showrooms and payments made in connection with closed showroom locations.
The cash provided by financing activities for the period ended June 30, 1996 was
the result of bank borrowings more fully discussed in the following paragraph.
In March 1996, the Company obtained a bank line of credit in the amount
of $350,000, which bears interest at the rate of prime rate plus 2% per annum
and must be repaid by April 1997. As of the date of this Prospectus, the
outstanding balance on this line of credit is $200,000. In June 1996, the
Company obtained a bank loan in the amount of $50,000, which bears interest at
prime rate plus 2% per annum and must be repaid by September 1996. As of the
date of this Prospectus, the outstanding balance on this bank loan is $50,000.
The Company intends to use a portion of the net proceeds from this Offering to
repay the outstanding balances on such bank borrowings. See "Use of Proceeds."
In June 1995, the Company obtained a bridge loan in the amount of
$300,000 from several investors. The loan was non-interest bearing and was fully
repaid in September 1995 with the proceeds of the 1995 Private
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<PAGE>
Placement discussed below. In connection with the bridge loan, the Company
issued to the investors warrants to purchase an aggregate of 75,000 shares of
Common Stock at a purchase price of $0.001 per share. Such warrants were
exercised in June 1996.
In September 1995, the Company issued 750,000 shares of Common Stock in
a private placement at a price of $1.33 per share and received net proceeds of
approximately $831,000 (the "1995 Private Placement"). The proceeds from this
private placement were utilized for deposits on leased machinery for the
Company's manufacturing facility, the development of additional retail showrooms
and working capital.
In connection with the 1995 Private Placement, the Company granted to
the placement agent a warrant to purchase 75,000 shares of Common Stock at a
purchase price of $.00133, which warrant was exercised in September 1995, and
the Kirlin Warrants to purchase 750,000 shares of Common Stock at a purchase
price of $1.20 per share. See "Description of Securities - The Kirlin Warrants".
In June 1996, a bridge loan in the amount of $150,000 was obtained from
four investors. The loan bears interest at the rate of 13% per annum and is due
on June 18, 1997. In connection with this bridge loan, the Company issued an
aggregate of 20,000 shares of Common Stock to the investors.
In July 1996, a private placement of 500,000 shares of Common Stock at
a purchase price of $.80 per share was completed by the Company (the "1996
Private Placement"). The Company received net proceeds of $332,500 from the 1996
Private Placement and such proceeds were utilized for expenses relating to this
Offering, repayment of a portion of the Company's bank borrowings and working
capital.
The Company expects that cash flow from operations, together with the
net proceeds of this Offering, will fund its cash requirements for at least the
24 months following the consummation of the Offering. However, there can be no
assurance that a sufficient level of sales will be attained to fund such
operations, to provide for continuing working capital or to pay for any
unanticipated costs that may be incurred by the Company in pursuing its
objectives. In the event that the net proceeds of this Offering, together with
cash flow from operations will not be sufficient to fund the Company's
anticipated cash requirements, the Company may seek to raise funds through bank
borrowings and private placements of its securities. It is also the Company's
intention to apply for lines of credit that may be utilized to cover any
variations in cash availability that may occur on a day-to-day basis. However,
there can be no assurance that such borrowings or placements can be completed on
terms acceptable to the Company, if at all.
Historically, demand for the Company's products has been seasonal, with
demand increasing in the third and fourth quarters, corresponding to the
beginning of the school year and the holiday season. The Company generally
realizes 60% of its annual revenues during those quarters.
The Company's operations have not been materially affected by the
impact of inflation.
BUSINESS
General
The Company is a fully-integrated manufacturer and retailer of
high-pressure, mica-laminated furniture for residential uses, primarily bedroom
furniture for children ages three to 16 years old. The Company's products are of
a modular design and are intended to be multi-functional, interchangeable and
space-saving.
The Company distributes its products through its own distribution
network of 11 retail showrooms located in the greater New York City metropolitan
area. Management believes that stores located in strip malls and densely
populated areas offer the highest visibility of the Company's products and ease
of access for the Company's
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<PAGE>
targeted customers. The Company's retail showrooms range from approximately
2,000 to 5,000 square feet and yield average annual sales of $320 per square
foot as compared to the median annual sales of $220 per square foot reported for
52 other furniture stores by Furniture/Today, an industry publication.
The Company uses standard component pieces to manufacture furniture for
children's and adult's bedrooms and home offices. The approximately 300 standard
components can be finished in various colors and textures and combined in
various configurations to produce a finished product which is personalized to
the customer's taste, space and budget. The use of standard components also
permits the Company's furniture to be reconfigured as the customer's needs or
tastes change. For example, a loft bed can be converted into separate beds, a
desk, a dresser and a bookcase, and a baby's changing table can be converted
into a child's play table and a dresser.
Unlike many of its direct competitors, the Company uses high quality
raw materials in the manufacture of its products, including high-pressure mica
laminate that is more resistant to impact and engineered wood that has been
laminated on both sides to provide greater stability and protection against
warping. The quality of materials and manufacturing processes used by the
Company enable it to offer a limited lifetime warranty against structural
defects.
Because the Company's finished products are manufactured from standard
components and personalized to the customer's needs, the Company does not
maintain a large inventory of finished products (other than showroom display
models). Finished products are manufactured to meet a specified desired delivery
date, which is generally fixed at the time of the order and is generally within
two to six weeks thereafter.
The Company's manufacturing operations are conducted in a 78,000 square
foot facility located in Paterson, New Jersey. In the past year, the Company has
implemented numerous changes to its manufacturing facility and processes in
order to significantly reduce the direct costs of manufacturing and to produce
more contemporary styles of high quality, mica-laminated furniture.
The Company's existing manufacturing facility currently operates on a
single shift and has sufficient capacity to more than double its manufacturing
volume without substantially increasing indirect costs of manufacture. The
Company plans to use a substantial portion of the proceeds of this Offering to
establish 12 to 14 additional retail showrooms, primarily in the New York to
Washington, D.C. corridor, to increase demand for its products, and to continue
to upgrade and automate its manufacturing process and to further reduce direct
manufacturing costs.
The residential furniture industry is cyclical, fluctuating with the
general economy. While the Company believes that furniture sales are influenced
by a number of macroeconomic factors including existing home sales, housing
starts, consumer confidence, interest rates and demographic trends, the Company
believes that it is less affected by industry economic trends because of its
focus on furniture for children. The Company believes that regardless of
economic trends, parents will place a high priority on furnishing their
children's rooms with affordable, high quality furniture.
The Company is a New York corporation that was organized in 1982 under
the name RPF Holding Corp. ("RPF Holding") and was engaged in the retail sale of
mica-laminated furniture. From 1979 to 1982, the founders of the Company had
engaged in the same business under other corporate names. In March 1995, Bunk
Trunk Manufacturing Company, Inc. ("Bunk Trunk"), which was the principal
manufacturer of the furniture sold by RPF Holding, was merged into RPF Holding.
The surviving entity in such merger, which was named TAM Industries, Inc.,
changed its name to Room Plus, Inc. in June 1995. The Company's principal
offices are located at 91 Michigan Avenue, Paterson, New Jersey 07503, and its
telephone number at that address is (201) 523-4600.
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<PAGE>
Manufacturing Process
The Company manufactures its products in a 78,000 square foot plant
located in Paterson, New Jersey. The plant currently operates on one shift five
days per week utilizing a "Just In Time" manufacturing process that allows the
Company to reduce expenses associated with the maintenance of inventory. The
plant has sufficient capacity to enable the Company to more than double its
manufacturing volume without substantially increasing indirect manufacturing
costs.
Many of the current production processes used by the Company in the
manufacture of its products are highly labor intensive as is traditional in the
furniture manufacturing industry. The Company intends to utilize a portion of
the net proceeds of this Offering to lease and/or purchase machine tools to
further automate the manufacture of the Company's products in order to decrease
the costs associated with such manufacturing. Management believes that
additional shifts of workers, together with the continued automation of the
manufacturing process, will permit the Company to meet its manufacturing
requirements over the foreseeable future without the necessity of expanding its
manufacturing facility beyond its current size. The Company is also exploring
the possibility of using any excess manufacturing capacity to provide
independent retailers with a private label of the Company's products.
In March 1995, the Company established the Target Team program as a
method of engaging the participation of all Company employees in Company-wide
improvements. The Target Team solicits individual employee and group ideas as to
how to reduce costs and make the Company more profitable. Groups are created to
establish and meet aggressive targets in all phases of the manufacturing
process, such as the time it takes to build a piece of furniture and the amount
of raw materials utilized. The Target Team consists of senior management of the
Company and management consultants who review employee suggestions and provide
recommendations that have resulted in the significant reduction of manufacturing
costs. For example, the Target Team recommended the establishment of work cells
into the production line under which employees are assigned to the manufacture
of certain products, thereby increasing productivity and enhancing the skills of
workers.
Raw Materials and Suppliers
The raw materials used by the Company in manufacturing its products
include laminate, lumber, plywood, fiberboard, engineered wood, hardware,
adhesives, finishing materials and mirrored glass. Management believes that such
raw materials are readily available.
The Company has no long-term supply contracts for its raw materials and
generally purchases its raw materials from a small number of suppliers. Although
the Company has strategic reasons such as price, quality and delivery for using
a limited number of suppliers, the Company believes that sufficient other
sources of raw materials are available should its current supply sources be
disrupted. Raw materials prices fluctuate over time depending on factors such as
supply and demand and increases in prices may have a short-term negative impact
on the Company's financial condition.
Products
The Company manufactures and sells multi-functional high quality
mica-laminated furniture designed both to make small spaces larger and to be
convertible into other uses. The furniture offered by the Company is primarily
made of engineered wood covered on the interior with low-pressure mica laminate
and on the exterior with high-pressure mica laminate. The Company has recently
test marketed a thinner, low-pressure laminated furniture line that sells at
lower prices, and management believes that there is sufficient demand for this
product line to warrant further test marketing. In addition, the Company
recently introduced a new contemporary modular furniture design that has rounded
(post-formed) edges on tops and drawers. The benefits of rounded edges to the
consumer include enhanced visual appeal and elimination of hard edges, which is
an important safety consideration, since the Company principally targets the
children's furniture market.
The Company manufactures approximately 300 standard components that can
be combined in various
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<PAGE>
configurations to meet a customer's space limitations or storage needs, and such
components can be finished in hundreds of colors and textures. In addition, the
Company offers numerous options and features to personalize its products for
each customer. For example, telephone jacks can be added to bedroom headboards,
dividers can be included in drawers and night tables can be manufactured with a
tray that slides away when not in use. Such features allow customers to have the
look and utility of customized furniture at a lower cost.
The Company maintains an open stock policy, which enables customers to
add additional matching pieces over time to previously purchased furniture
products and to change the look of their furniture by replacing door and drawer
fronts and other accent pieces. The Company believes that such flexibility
enhances the value of the furniture to the customer and encourages repeat
business.
A substantial majority of the Company's sales relate to bedroom
furniture for children and young adults. The Company offers a wide range of beds
for children with matching desks and dressers, including multi-functional bunk
and storage modules. One of the most popular models for children is the loft bed
that utilizes space more efficiently than conventional bedroom furniture. It is
able to sleep one or two people and has a built-in desk and storage drawers.
Since a child's room is often the smallest room in the house, the Company's
children's furniture line is designed to save space through modular designs and
filling space vertically, leading to the Company's motto "A LOT OF LIVING in a
Little Space". See "Business - Advertising and Promotion."
In addition, a portion of the Company's sales relate to adult bedroom
furniture and home office furniture. The Company offers, among other items,
night tables, headboards, armoires, bookcases, computer stations and desks.
Approximately 5% of the Company's sales are comprised of accessory furnishings
such as lamps, bed coverings, bookends, picture frames and other small items
that given the Company the ability to complete the design of the room in the
showroom.
Gallery/Specialty Format
Two formats widely used by retailers of furniture to market their
products are the gallery format and the specialty format. The gallery format
displays products in complete room settings, including furnishings, wall decor,
window treatments, accents and accessories and typically feature the products of
one manufacturer, such as Ethan Allen, La-Z-Boy, Thomasville and Drexel
Heritage. The specialty format specializes in a category of merchandise such as
bedding, sofas or lighting and is utilized by retailers such as Pier 1 Imports,
Sleepy's and The Bombay Company.
The Company utilizes a combination gallery/specialty format as its
high-pressure mica-laminated furniture is displayed in settings designed to
allow the consumers to envision the look of a complete room in their homes. Each
retail showroom features approximately 10-12 room settings. This presentation
format encourages consumers to purchase an entire room of furniture and
accessories from the Company, instead of individual pieces from different
manufacturers and results in an average sale per customer of approximately
$2,000. The Company believes that distributing its products through dedicated
Company owned stores strengthens brand awareness, provides well-informed and
focused sales personnel and encourages the purchase of multiple items per visit.
Advertising and Promotion
The Company's marketing effort is supported by extensive advertising
and promotion featuring the Company's slogan "Just Round the Corner" and "A LOT
OF LIVING in a Little Space" motto. Management believes that advertising on
broadcast and cable television has made the Company a household name in the area
of children's furniture in the New York metropolitan area.
For fiscal year ended December 31, 1995, the Company's advertising
budget was approximately $1,000,000 or 7% of revenues. The Company achieves
savings in advertising costs through its use of an affiliated entity to purchase
advertising at discounts and its strategy of making long-term advance
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<PAGE>
purchases and purchasing in time blocks in bulk to achieve discounted rates. The
Company also advertises to a lesser extent in newspapers and has begun a direct
mail campaign to selected target markets.
The Company's primary target market is women in the 24 to 50 age
bracket, since the Company believes they most strongly influence the buying
decision for children's furniture. Much of the Company's advertising is also
shown during programming for children because children may influence their
parents' decision on what type of furniture to have in their rooms.
The three principals of the Company established Retail Media Plus, Inc.
("Retail Media Plus") in June 1995. Retail Media Plus places all of the
Company's advertising and bills the Company only for the actual cost of such
advertising, without any additional expenses or mark-ups. See "Certain
Transactions."
Expansion Strategy
The Company's expansion strategy is primarily focused on opening
additional retail showrooms in the existing markets of New York and New Jersey
and in new markets such as Pennsylvania, Maryland, Washington, DC and Virginia
at a rate of three to four showrooms per year. Management currently has
identified three sites in the metropolitan New York area which will be evaluated
for possible expansion in the last six months of 1996 and the first quarter of
1997. The Company intends to use approximately 50% of the proceeds from this
Offering to open twelve to fourteen new retail showrooms in the next 24 months.
See "Use of Proceeds."
Customer Satisfaction
The Company is committed to providing high-quality customer service in
all phases of its business, including offering instant store credit, a
decorating service and professional delivery. The Company offers no interest,
deferred payment plans to qualified purchasers, which the Company believes gives
customers the flexibility to structure their purchases of the Company's
furniture according to their budget.
The Company is generally able to offer delivery and in-home set-up of
its products within two to six weeks from the date of the order. Delivery is
provided by an independent professional furniture delivery company whose
delivery personnel are trained by the Company in the set-up of its products. The
Company also offers free in-home decorating service with a minimum purchase of
$1,000. A trained salesperson will travel to a customer's home with pictures of
the Company's products, floor plans and charts of available colors and finishes,
assist the customer in the selection of products and take measurements to ensure
that the furniture selected will fit properly in the intended location.
In addition to its sales personnel, skilled customer satisfaction
representatives are available to answer customer questions during business
hours. The Company believes that its commitment to customer service has
contributed to the number of repeat purchases by the Company's customers.
Government Regulation
The Company's manufacturing operations are subject to a wide range of
federal, state and local laws and regulations relating to the protection of the
environment, worker health and safety and the emission, discharge, storage,
treatment and disposal of hazardous materials. These laws include the Clean Air
Act of 1970, as amended, the Resource Conservation and Recovery Act, the Federal
Water Pollution Control Act and the Comprehensive Environmental, Response,
Compensation and Liability Act. Certain of the Company's operations use glues
and coating materials that contain chemicals that are considered hazardous under
various environmental laws. Accordingly, management closely monitors the
Company's environmental performance at its manufacturing facility. The Company
is also a voluntary participant in the Occupational Safety and Health
Administration ("OSHA") Consultation Program in which OSHA periodically inspects
the Company's facilities and makes recommendations on how to eliminate unsafe
conditions in the manufacturing process before a complaint is filed.
The Company's retail operations are not subject to material federal,
state and local laws and regulations
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<PAGE>
other than consumer protection laws. Management believes that the Company is in
substantial compliance with all laws and regulations affecting its business.
Competition
The home furniture industry is a highly competitive and fragmented
market with annual U.S. sales of over $45 billion in 1994 and estimated annual
U.S. sales of $48 billion in 1995.
The Company is the largest retailer of mica-laminated home furniture in
the New York metropolitan area, where its eleven retail showrooms are located.
Several small retailers such as Atlantic Furniture and Kids' Room, and large
retailors, such as IKEA, also sell mica-laminated furniture similar to that sold
by the Company in the same geographic region, but generally through only one or
two retail outlets. The Company also competes with many companies, including
much larger and diverse furniture companies, such as Huffman Koos, Levitz,
Thomasville and Drexel Heritage, that sell primarily wood furniture that is not
mica-laminated. The Company believes that it will face similar competitive
conditions (a few small retailers specializing in mica-laminated furniture and
many retailers, both large and small, of home furniture that is not
mica-laminated) in the market areas in which it plans to open additional retail
showrooms.
Many of the Company's competitors and potential competitors have
substantially greater financial, manufacturing, marketing, distribution and
other resources than the Company, and there is no assurance that the Company
will be able to compete successfully in the future.
Retail Showrooms
The Company distributes substantially all of its products through a
network of Company-owned retail showrooms dedicated solely to the display of the
Company's products. All of such showrooms are located in premises leased by the
Company. As of the date of this Prospectus, the Company operates 11 retail
showrooms in New York and New Jersey, which showrooms are set forth below:
Month and Year Square Feet
Location Opened (Approximate)
-------- -------------- -------------
Manhattan (3rd. Ave.), NY June 1981 3,500
Manhattan (Lexington Ave.), NY November 1995 2,700
Scarsdale, NY January 1982 3,500
Farmingdale, NY February 1995 3,700
Carle Place, NY August 1987 4,400
Forest Hills, NY October 1987 2,000
Paramus, NJ (Rt.4) March 1983 5,000
Paramus, NJ (Rt.17) February 1988 5,000
East Hanover, NJ August 1983 4,000
East Brunswick, NJ August 1985 3,350
Union, NJ October 1995 3,900
The leases for the Company's retail showrooms have terms ranging from
five to 13 years, and some leases contain optional renewal provisions for
additional five year periods.
The Company's retail showrooms are open seven days a week, generally
from 10 a.m. to 9 p.m. Monday through Saturday and 12 p.m. to 5 p.m. on Sundays.
The two retail showrooms located in Paramus, New Jersey are closed on Sundays.
In July 1996, the Company entered into a lease for a 5,000 square foot
showroom in Manhattan on Broadway between 18th Street and 19th Street. The
Company expects that renovations will be completed and such showroom will be
open in September 1996. From June 1991 to November 1995, the Company closed
seven retail
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showrooms to reduce costs and consolidate selling efforts.
In addition to its retail showrooms, the Company currently leases a
78,000 square foot plant in Paterson, New Jersey, which houses its
administrative offices, executive staff, sales and marketing staff and its
manufacturing and shipping facilities. The Company leases for the facility at a
monthly rent of approximately $23,000, subject to annual adjustment as more
fully set forth in such lease. The lease expires on May 31, 1999, and the
Company has the option to renew the lease for an additional 15 year period on
the same terms and conditions as the original lease, including annual
adjustments in rent. The owner of the Paterson facility is M & S Realty Company,
which is owned by Theodore Shapiro, the Company's Executive Vice President and
Director of Manufacturing. See "Certain Transactions."
Employees
In January 1996, all Company employees became employees of Corporate
Management Group Recruiting, Inc. ("CMGR") and their services were then leased
back to the Company pursuant to an employee leasing agreement (the "Employee
Leasing Agreement") between the Company and CMGR. All references to employees in
this Prospectus refer to employees whose services are leased by the Company from
CMGR pursuant to the Employee Leasing Agreement.
Pursuant to the Employee Leasing Agreement, CMGR is responsible for
payment of all federal, state and local employment taxes and providing workers'
compensation and disability coverage and other mandated employee benefits for
the employees. The Company retains the right to make all decisions concerning
the hiring and termination of employees. The Employee Leasing Agreement provides
that it shall continue in full force and effect unless terminated by (i) either
party for cause, as described in such agreement, (ii) the Company on thirty (30)
days prior notice, or (iii) CMGR on ninety (90) days prior notice.
The Company provides intensive two-week, 100-hour training program to
all sales personnel. Topics include merchandising, room layout, product
knowledge and salesmanship and are taught by a full-time professional trainer.
The Company believes that a well-trained sales force helps increase sales,
encourages repeat customers and minimizes employee turnover. The Company
attempts to select its retail managers from the pool of sales personnel employed
by the Company. The average store manager has been with the Company for
approximately seven years, and the sales manager has been with the Company for
over 13 years.
As of June 30, 1996, the Company had approximately 141 employees, of
whom four were executive officers, 51 were engaged in sales, 66 were engaged in
manufacturing and 20 were administrative staff. Approximately 50 of the
Company's manufacturing employees are covered by a collective bargaining
agreement with a local division of the International Union of Electronic,
Electrical, Salaried, Machine and Furniture Workers, AFL-CIO (the "Union"). The
Company entered into a three-year collective bargaining agreement with the Union
in September 1994. The Company has never experienced a material work stoppage
and believes that its relationship with its employees is generally satisfactory.
Legal Proceedings
The Company is not a party to any material pending legal proceedings,
nor, to the Company's knowledge, is any material legal proceeding threatened.
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MANAGEMENT
The directors, executive officers and significant employees of the
Company are as follows:
<TABLE>
<CAPTION>
Name Age Position with Company
---- --- ---------------------
<S> <C> <C>
Marc Zucker 48 Chairman of the Board and Chief Executive Officer
Allan Socher 46 President, Director of Marketing and Director
Theodore Shapiro 61 Executive Vice President, Director of Manufacturing
and Director
Edmund J. McCormick, Jr. 54 Director
William Halpern 42 Chief Financial Officer
</TABLE>
Marc Zucker has been the Chairman of the Board and Chief Executive
Officer of the Company since March 1995. He was a co-founder of RPF Holding and
was its president from 1982 until its merger with Bunk Trunk in March 1995. In
addition, he was Vice President and General Manager of Bunk Trunk from its
inception in 1984 until the merger with RPF Holding. Prior to that, Mr. Zucker
worked in other areas of the retail furniture business for 10 years.
Allan Socher has been the President, Director of Marketing and a
Director of the Company since March 1995. Mr. Socher is also the Company's
spokesperson in its extensive television commercials. He was a Vice- President,
Secretary and a co-founder of RPF Holding from 1982 until its merger with Bunk
Trunk in March 1995 and was a Vice-President and Secretary of Bunk Trunk from
its inception in 1984 until the merger with RPF Holding. Prior to that, Mr.
Socher worked in other areas of the retail furniture business for 10 years.
Theodore Shapiro has been the Executive Vice President, Director of
Manufacturing and a Director of the Company since March 1995. He was one of the
original founders of Bunk Trunk in 1982 and was its President from inception
until the merger with RPF Holding in March 1995. Mr. Shapiro had worked in the
retail furniture business for over 12 years before founding his own retail
furniture chain, Mr. Sandman Furniture, in 1960.
Edmund J. McCormick, Jr. has been a Director of the Company since March
1995. He has been the Chairman of McCormick & Company, an international
management consulting firm, since 1985.
William Halpern, CPA, has been the Chief Financial Officer of the
Company since March 1995. Prior to that, Mr. Halpern was Chief Financial Officer
of Bunk Trunk and RPF Holding from December 1989 until their merger in March
1995. Prior to that, he served for over 12 years in diversified financial
positions with several corporations, including Xerox Corporation, Colt
Industries and Household International. He holds a BA degree in accounting from
Brooklyn College.
Mr. Zucker and Mr. Socher are brothers-in-law and Mr. Shapiro is the
uncle of their spouses.
The Representative is entitled to designate one member of the Board for
a period of three years after the date of this Prospectus, subject to the
Company's good faith approval. In the event the Representative elects not to
exercise this right, it may designate one person to attend all meetings of the
Board for a period of three years. Directors are elected to serve until the next
annual meeting of stockholders and until their successors are elected and
qualified. Officers serve at the discretion of the Board.
24
<PAGE>
Employment Agreements
The Company has entered into employment agreements effective June 30,
1995, as amended on August 1, 1996, with each of Marc Zucker, Allan Socher and
Theodore Shapiro (the "Principals"). Pursuant to each employment agreement,
Messrs. Zucker, Socher and Shapiro will act as Chairman and Chief Executive
Officer, President and Director of Marketing, and Executive Vice President and
Director of Manufacturing, respectively, and each will be entitled to receive,
among other things, (a) a salary of $125,000 per annum, (b) such further sum by
way of bonus or otherwise as determined by the Compensation Committee of the
Board in each year of the employment agreement, (c) $1,000,000 life and
disability insurance, and (d) pension contributions as set forth in any future
plan adopted by the Company.
In addition, pursuant to his employment agreement, Allan Socher is
entitled to a performance bonus of .75% of revenues. Marc Zucker and Theodore
Shapiro are each entitled to a performance bonus of 1.5% of gross profit
pursuant to their respective employment agreements.
Each employment agreement shall continue unless terminated by the
Company for cause, as described in such employment agreement, or terminated by
not less than three (3) years written notice if given by the Company or not less
than three (3) months written notice if given by the respective Principal.
In the event any person shall become beneficially entitled to 50% plus
one share or more of the issued and outstanding Common Stock of the Company
pursuant to an offer, the terms of which are not recommended by the Board, each
of the Principals shall be permitted to terminate his employment agreement
within one week of the completion of the change in control or such later date as
may be agreed upon by such Principal and the Company. In the event of such
termination, the Principal shall be entitled to payment from the Company of an
amount calculated in accordance with the provisions of his employment agreement.
For a period of one year following the termination of each employment
agreement, such Principal shall not solicit or endeavor to entice away any
employee, director or agent of the Company or any entity affiliated with the
Company. In addition, such Principal may not, at any time after the termination
of the employment agreement, use the names or slogans "Room Plus", "Just 'Round
the Corner" or "A LOT OF LIVING in a Little Space" or any similar name for the
purpose of a business competing with the Company or any entity affiliated with
the Company.
Executive Compensation
The following table sets forth the cash compensation paid by the
Company to, as well as any other compensation paid to or earned by, the Chairman
and Chief Executive Officer of the Company and those executive officers
compensated at or greater than $100,000 for services rendered to the Company in
all capacities during the fiscal year ended December 31, 1995.
25
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
-------------------------------- ----------------------
Awards
----------------------
Securities
Other Underlying
Name of Individual Annual Options/
and Principal Position Year Salary Compensation SARS(#)
---- ------- ------------ -------
<S> <C> <C> <C> <C>
Marc Zucker
Chairman (Chief Executive Officer) 1995 $223,684 -- 250,000(1)
Allan Socher
President and Director of Marketing 1995 $214,361 -- 250,000(1)
Theodore Shapiro
Executive Vice President and
Director of Manufacturing 1995 $219,059 -- 250,000(1)
</TABLE>
- ---------------------
(1) Includes warrants to purchase 250,000 shares of Common Stock at a price of
$3.00 per share. Such warrants are exercisable at any time until __________,
2001 [five years from the date of this Prospectus].
The following table sets forth certain information with respect to
options granted to the named executive officers during the fiscal year ended
December 31, 1995, and the aggregated number and value of options exercisable
and unexercisable by the named executive officers as of December 31, 1995.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
<TABLE>
<CAPTION>
Percent of
Total
Number of Options/
Securities SAR's Exercise
Underlying Granted To or Base
Options/SAR's Employees in Price
Name Granted (#) Fiscal Year ($/Share) Expiration Date
---- ----------- ----------- --------- ---------------
<S> <C> <C> <C> <C>
Marc Zucker
Chairman (Chief Executive Officer) 250,000 33.3% $3.00 ________, 2001(1)
Allan Socher
President and Director of Marketing 250,000 33.3 3.00 ________, 2001(1)
Theodore Shapiro
Executive Vice President and
Director of Manufacturing 250,000 33.3 3.00 ________, 2001(1)
</TABLE>
- ---------------------
(1) Warrants are exercisable for a period of five years from the date of this
Prospectus.
Limitation of Liability and Indemnification of Directors and Officers
The Certificate of Incorporation of the Company provides that no
director of the Company shall be personally liable to the Company or its
shareholders for damages for any breach of duty in such capacity, except as
otherwise provided in the Business Corporation Law of the State of New York, as
amended from time to time.
Section 722 of the New York Business Corporation Law empowers a New
York corporation to
26
<PAGE>
indemnify any person, made, or threatened to be made, a party to an action or
proceeding other than one by or in the right of the corporation to procure a
judgment in its favor, whether civil or criminal, including an action by or in
the right of any other corporation of any type or kind, domestic or foreign, or
any partnership, joint venture, trust, employee benefit plan or other
enterprise, which any director or officer of the corporation served in any
capacity at the request of the corporation, by reason of the fact that he, his
testator or intestate, was a director or officer of the corporation, or served
such other corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise in any capacity, against judgments, fines, amounts paid in
settlement and reasonable expenses, including attorney's fees actually and
necessarily incurred as a result of such action or proceeding, or any appeal
therein, if such director or officer acted, in good faith, for a purpose which
he reasonably believed to be in, or in the case of service for any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise, not opposed to, the best interests of the corporation and, in
criminal actions or proceedings, in addition, had no reasonable cause to believe
that his conduct was unlawful.
In addition, Section 722 of the New York Business Corporation Law
states that a New York corporation may indemnify any person made, or threatened
to be made, a party to an action by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he, his testator or
intestate, is or was a director or officer of the corporation, or is or was
serving at the request of the corporation as a director or officer of any other
corporation of any type or kind, domestic or foreign, of any partnership, joint
venture, trust, employee benefit plan or other enterprise, against amounts paid
in settlement and reasonable expenses, including attorneys' fees, actually and
necessarily incurred by him in connection with the defense or settlement of such
action, or in connection with an appeal therein if such director or officer
acted, in good faith, for a purpose which he reasonably believed to be in, or,
in the case of service for any other corporation or any partnership, joint
venture, trust, employee benefit plan or other enterprise, not opposed to, the
best interests of the corporation, except that no indemnification under this
paragraph shall be made in respect of (1) a threatened action, or a pending
action which is settled or otherwise disposed of, or (2) any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation, unless and only to the extent that the court on which the action
was brought, or, if no action was brought, any court of competent jurisdiction,
determines upon application that, in view of all the circumstances of the case,
the person is fairly and reasonably entitled to indemnity for such portion of
the settlement amount and expenses as the court deems proper.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to the foregoing provisions, or otherwise, the Company has been advised that in
the opinion of the Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
Compensation of Directors
Outside Directors of the Company are currently entitled to receive $250
for attendance at each Board meeting.
27
<PAGE>
PRINCIPAL STOCKHOLDERS
<TABLE>
<CAPTION>
Percent Ownership of
Number of Shares of Common Stock
Common Stock Outstanding
Name and Address of Beneficially -------------------------------------
Beneficial Owner Owned Before Offering Before Offering After Offering(1)
------------------- --------------------- --------------- ----------------
<S> <C> <C> <C>
Marc Zucker 733,334 (2) 21.1% 15.7%
91 Michigan Avenue
Paterson, NJ 07503
Allan Socher 733,333 (3) 21.1% 15.7%
91 Michigan Avenue
Paterson, NJ 07503
Theodore Shapiro 733,333 (4) 21.1% 15.7%
91 Michigan Avenue
Paterson, NJ 07503
Edmund J. McCormick, Jr. 78,334 (5) 2.4% 1.6%
91 Michigan Avenue
Paterson, NJ 07503
Swan Alley (Nominees) Limited 775,000 (6) 20.8% 16.4%
40 Queen Street
London ECR IDD England
Frank Terzo 500,000 (7) 14.4% 11.2%
26 Tunnel Street
Floral Park, NY 11001
Kirlin Securities, Inc. 224,687 (8) 7.0% 5.3%
6901 Jericho Turnpike
Syosset, NY 11791
Mark Rubin 192,396 (9) 5.9% 4.5%
17 Cardinal Drive
East Hills, NY 11576
All Directors and Officers as a
Group (4 Persons) 2,278,334(10) 57.0% 43.5%
</TABLE>
- -------------------
(1) Gives effect to the sale of shares of Common Stock in connection with an
offering by the holders of the Directors Shares and the Selling Security
Holders which is being made concurrently with this Offering.
(2) Includes warrants to purchase 250,000 shares of Common Stock which Marc
Zucker is eligible to exercise on the date of this Prospectus.
(3) Includes warrants to purchase 250,000 shares of Common Stock which Allan
Socher is eligible to exercise on the date of this Prospectus.
(4) Includes warrants to purchase 250,000 shares of Common Stock which
Theodore Shapiro is eligible to exercise on the date of this Prospectus.
(5) Includes currently exercisable options to purchase 25,000 shares of Common
Stock.
(6) Includes an option to purchase that portion of the Kirlin Warrants
entitling the holder thereof to purchase 500,000 shares of Common Stock.
(7) Includes an option of Small Cap. Consulting International, Inc. to
purchase that portion of the Kirlin Warrants entitling the holder thereof
to purchase 250,000 shares of Common Stock. Frank Terzo is the President
of Small Cap. Consulting International, Inc.
(8) Includes (i) 88,125 shares of Common Stock owned by Kirlin Holding Corp.,
(ii) 75,000 shares of Common Stock owned by Kirlin Securities, Inc., (iii)
56,250 shares of Common Stock owned by Kirlin Securities Corp., and (iv)
5,312 shares of Common Stock owned by David Lindner, the President of
Kirlin Securities, Inc. Does not include the Kirlin Warrants to purchase
750,000 shares of Common Stock as to which Kirlin Securities Corp. has
granted options to purchase to Small Cap. Consulting International, Inc.
and Swan Alley (Nominees) Limited.
(9) Includes currently exercisable warrants to purchase 56,250 shares of
Common Stock.
(10) Includes an aggregate of 775,000 shares of Common Stock issuable upon
exercise of outstanding options and warrants.
28
<PAGE>
SELLING SECURITY HOLDERS
The 100,000 Directors Shares and an aggregate of 670,000 shares of
Common Stock are being registered in this Offering at the expense of the Company
for the account of the holders of the Directors Shares and the Selling Security
Holders, respectively. An aggregate of 75,000 shares of Common Stock being
registered for the account of the Selling Security Holders are not subject to
any contractual restrictions on resale and can be offered for immediate sale on
the date of this Prospectus. Sales of the shares held by the Selling Security
Holders may depress the price of the Common Stock or the Redeemable Warrants in
any market that may develop for such securities.
The following tables set forth certain information with respect to the
holders of the Directors Shares and the Selling Security Holders. The 670,000
shares of Common Stock being registered for the account of the Selling Security
Holders are not being underwritten by the Underwriters in connection with this
Offering. However, the 100,000 Directors Shares are being underwritten by the
Underwriters in connection with this Offering. The Company will not receive any
proceeds from the sale of the Directors Shares or the shares held by the Selling
Security Holders. Except as indicated below, none of the Selling Security
Holders has had any position, office or other material relationship with the
Company within the past 3 years.
Directors Shares Being Underwritten in this Offering
<TABLE>
<CAPTION>
Beneficial Ownership of Beneficial Ownership of
Shares of Common Stock Securities Shares of Common Stock
Name Prior to Sale to be Sold After Sale(1)
---- ----------------------- ---------- -----------------------
<S> <C> <C> <C>
Edmund J. McCormick, Jr. 78,334 8,334(2) 70,000(2)
Theodore Shapiro 733,333 31,667 701,666(3)
Allan Socher 733,333 31,667 701,666(4)
Marc Zucker 733,334 31,666 701,668(5)
</TABLE>
- -------------------
(1) The percentage of the outstanding shares of Common Stock to be owned by
the holders of the Directors Shares upon the completion of the sale of the
Common Stock offered hereby is as follows: Edmund J. McCormick (1.6%);
Theodore Shapiro (15.7%); Allan Socher (15.7%); and Marc Zucker (15.7%).
(2) Also reflects sale of 3,334 shares of Common Stock being registered for
the account of Edmund J. McCormick, Jr. as a Selling Security Holder,
which are not being underwritten in this Offering and are subject to a six
month contractual restriction on resale. See "Selling Security Holders -
Shares Being Registered for the Account of Selling Security Holders." The
70,000 shares of Common Stock owned by Mr. McCormick includes currently
exercisable options to purchase 25,000 shares of Common Stock and such
shares are subject to a 24 month contractual restriction on resale. See
"Shares Eligible for Future Sale." Mr. McCormick is a director of the
Company.
(3) Includes warrants to purchase 250,000 shares of Common Stock which
Theodore Shapiro is eligible to exercise on the date hereof. Such shares
are subject to a 24 month contractual restriction on resale. See "Shares
Eligible for Future Sale." Mr. Shapiro is the Executive Vice President,
Director of Manufacturing and a director of the Company.
(4) Includes warrants to purchase 250,000 shares of Common Stock which Allan
Socher is eligible to exercise on the date hereof. Such shares are subject
to a 24 month contractual restriction on resale. See "Shares Eligible for
Future Sale." Mr. Socher is the President, Director of Marketing and a
director of the Company.
(5) Includes warrants to purchase 250,000 shares of Common Stock which Marc
Zucker is eligible to exercise on the date hereof. Such shares are subject
to a 24 month contractual restriction on resale. See "Shares Eligible for
Future Sale." Mr. Zucker is the Chairman of the Board and Chief Executive
Officer of the Company.
29
<PAGE>
Shares Being Registered for the Account of Selling Security Holders
<TABLE>
<CAPTION>
Beneficial Ownership of Beneficial Ownership of
Shares of Common Stock Securities Shares of Common Stock
Name Prior to Sale to be Sold After Sale(1)
---- ----------------------- ----------- -----------------------
<S> <C> <C> <C>
Atlantis Capital 25,000 25,000(2) 0
K. Barton 25,000 25,000(2) 0
M. Behner 25,000 25,000(2) 0
Ronald Bibbo 25,000 25,000(2) 0
Monica Carreca 50,000 50,000(2) 0
Allen Cohen 12,500 12,500(2) 0
Jeffrey Godin 25,000 25,000(2) 0
Greg Khononov 12,500 12,500(2) 0
Kirlin Securities, Inc. 224,687 89,687(3) 135,000
Edmund J. McCormick, Jr. 78,334 8,334(4) 70,000(8)
Allan Lyons 3,333 3,333(2) 0
A.C. Providenti 4,250 4,250(2) 0
A. Rella 4,250 4,250(2) 0
Marco Rossi 6,250 6,250(2) 0
Mark Rubin 192,396 48,646(5) 143,750(6)
D. Scaringella 4,000 4,000(2) 0
The Clinton Company 10,000 10,000(2) 0
Robert Starr 50,000 50,000(2) 0
Swan Alley (Nominees) Limited 775,000 200,000(2) 575,000(9)
Peter Lontai 6,250 6,250(7) 0
Ronald Heineman 3,125 3,125(7) 0
Peter J. Lehrman and
Laura L. Lehrman JTWROS 3,125 3,125(7) 0
Susan Cohen, Claudene Bonanno and
Robyn Cohn JTWROS 3,125 3,125(7) 0
Anthony Agnello and
Annemarie Agnello JTWROS 2,500 2,500(7) 0
Michael Madden and Juliette Madden JTWROS 3,125 3,125(7) 0
Anthony Demetroulakos 25,000 25,000(7) 0
</TABLE>
- -------------------
(1) The percentage of the outstanding shares of Common Stock to be owned by
each Selling Security Holder upon completion of the Offering is less than
1%, except in the cases of Kirlin Securities, Inc. (3.2%); Edmund J.
McCormick, Jr. (1.6%); Mark Rubin (3.3%); and Swan Alley (Nominees)
Limited (12.1%).
(2) Shares are subject to a six month contractual restriction on resale. See
"Shares Eligible for Future Sale."
(3) Includes (i) 13,125 shares of Common Stock owned by Kirlin Holding Corp.,
(ii) 75,000 shares of Common Stock owned by Kirlin Securities, Inc., and
(iii) 1,562 shares of Common Stock owned by David Lindner, the President
of Kirlin Securities, Inc. 44,843 shares of Common Stock are not subject
to any contractual restrictions on resale and can be offered for immediate
sale on the date of this Prospectus. 44,844 shares of Common Stock are
subject to a 12 month contractual restriction on resale. See "Shares
Eligible for Future Sale." Kirlin Securities, Inc. acted as placement
agent for the Company's 1995 Private Placement.
(4) Also reflects the sale of 5,000 Directors Shares being underwritten in
this Offering. See "Selling Security Holders - Directors Shares Being
Underwritten in this Offering."
(5) 7,031 shares of Common Stock are not subject to any contractual
restrictions on resale and can be offered for immediate sale on the date
of this Prospectus. An additional 34,583 and 7,032 shares of Common Stock
are subject to a six and a 24 month contractual restriction on resale,
respectively. See "Shares Eligible for Future Sale." Mark Rubin is a
management consultant to the Company.
(6) Includes currently exercisable options to purchase 56,250 shares of Common
Stock.
(7) 50% of such shares of Common Stock are not subject to any contractual
restrictions on resale and can be offered for immediate sale on the date
of this Prospectus. 50% of such shares of Common Stock are subject to a 24
month contractual restriction on resale. See "Shares Eligible for Future
Sale."
(8) Includes currently exercisable options to purchase 25,000 shares of Common
Stock.
(9) Includes an option to purchase that portion of the Kirlin Warrants
entitling the holder thereof to purchase 500,000 shares of Common Stock.
30
<PAGE>
The sale of the shares of Common Stock held by the Selling Security
Holders may be effected from time to time in transactions (which may include
block transactions by or for the account of the Selling Security Holders) in the
over-the-counter market or in negotiated transactions, through a combination of
such methods of sale, or otherwise. Sales may be made at fixed prices which may
be changed, at market prices prevailing at the time of sale, or at negotiated
prices. If any shares held by the Selling Security Holders, or options thereon,
are sold pursuant to this Prospectus at a fixed price or at a negotiated price
which is in either case other than the prevailing market price or in a block
transaction to a purchaser who resells, or if any Selling Security Holder pays
compensation to a broker-dealer that is other than the usual and customary
discounts, concessions or commissions, or if there are any arrangements either
individually or in the aggregate that would constitute a distribution of the
shares held by the Selling Security Holders, a post-effective amendment to the
Registration Statement of which this Prospectus is a part would need to be filed
and declared effective by the Commission before such Selling Security Holder
could make such sale, pay such compensation or make such distribution. The
Company is under no obligation to file a post-effective amendment to the
Registration Statement of which this Prospectus is a part under such
circumstances.
The Selling Security Holders may effect transactions in their
securities by selling their securities directly to purchasers, through
broker-dealers acting as agents for the Selling Security Holders or to
broker-dealers who may purchase the Selling Security Holders' securities as
principals and thereafter sell such securities from time to time in the
over-the-counter market, in negotiated transactions, or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Security Holders and/or the
purchasers for whom such broker-dealers may act as agents or to whom they may
sell as principals or both.
The Selling Security Holders and broker-dealers, if any, acting in
connection with such sales might be deemed to be underwriters within the meaning
of Section 2(11) of the Securities Act and any commission received by them and
any profit on the resale of such securities might be deemed to be underwriting
discounts and commissions under the Securities Act.
CERTAIN TRANSACTIONS
The Company leases its manufacturing facility located in Paterson, New
Jersey from M&S Realty Company, which is owned by Theodore Shapiro, a director
and the Executive Vice President and Director of Manufacturing of the Company.
The lease pursuant to which the Company leases the facility expires May 31, 1999
(subject to extension at the option of the Company) and provides for an annual
rental of approximately $277,000. See "Business - Properties."
In fiscal year 1994, the Company advanced $158,488 on open account to
the three principals of the Company, Marc Zucker, Allan Socher and Theodore
Shapiro. Such advances were non-interest bearing and increased the total net
amount receivable to the Company from the three principals to $373,410. At
December 31, 1995, the three principals' aggregate indebtedness to the Company
had been reduced to $118,945 as a result of net payments to the Company by the
principals aggregating $254,465 during fiscal year 1995. Such $118,945 balance
bears interest at the rate of 8% per annum and matures in January 1997. During
the six months ended June 30, 1996, the aggregate amount due to the Company from
the three principals increased by $45,649 to $164,594. Such increase consisted
of additional advances to the principals in the amount of $39,318 and accrued
interest in the amount of $6,331.
During 1995, the Company agreed to pay $150,000 to the owner of a
commercial property in which the Company had previously leased retail showroom
space in settlement of claims in respect of unpaid rent and related items. In
connection with such settlement, Messrs. Zucker and Socher, who had been members
of the partnership that owned such commercial property, transferred their
interests in such partnership to the remaining partner in exchange for a release
of certain claims against them.
Retail Media Plus was incorporated by the three principals of the
Company in June 1995. Retail Media Plus places all of the Company's advertising
and passes through any cost savings to the Company. In fiscal year 1995 and the
first six months of 1996, the Company reimbursed Retail Media Plus $65,695 and
approximately $440,000, respectively, for advertising costs.
In 1995, as partial payment for consulting and advisory services to the
Company, the three principals of the Company contributed an aggregate of 50,000
shares of Common Stock to Edmund J. McCormick, a director of the Company, which
shares were valued at $1.00
31
<PAGE>
per share for purposes of the Company's financial statements. In addition, the
Company paid Mr. McCormick $15,400 for such services.
In June 1996, Edmund J. McCormick loaned the Company $25,000 in
connection with the Company's $150,000 bridge loan. Such loan bears interest at
the rate of 13% per annum and is due on June 18, 1997. Mr. McCormick also
received 3,334 shares of Common Stock in connection with his participation in
the bridge financing. Mr. McCormick is also a party to a consulting agreement
with the Company pursuant to which he makes recommendations aimed at reducing
the Company's operating costs. Pursuant to such consulting agreement, Mr.
McCormick is entitled to receive 10% of any cost savings realized by the Company
in its manufacturing processes during the period of September 1, 1995 to
November 1, 1996. The amount of such cost savings cannot be determined with any
certainty as of the date of this Prospectus. However, the Company has accrued
$48,000 with respect to such obligation as of the date hereof.
All future transactions and/or loans between the Company and officers
and directors will be on terms no less favorable than could be obtained from
independent, third parties and will be approved by a majority of the
disinterested directors of the Company.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has been no public market for securities
of the Company, and no prediction can be made as to the effect, if any, that
public market sales of shares or the availability of such shares for sale will
have on the market price of the Common Stock. Nevertheless, sales of a
substantial number of shares of Common Stock in the public market may have a
material adverse impact on their market price.
Upon completion of this Offering, the Company will have 4,220,000
shares of Common Stock outstanding. Of these shares, the 1,100,000 being
underwritten in this Offering and 75,000 shares being registered for the account
of certain Selling Security Holders will be freely transferable without
restriction under the Securities Act.
Of the remaining 3,045,000 shares held by the existing shareholders of
the Company, 1,700,000 shares will be "restricted" securities within the meaning
of Rule 144 under the Securities Act and will be available for sale in the
public market commencing 24 months after the date of this Prospectus unless
released earlier by the Representative.
The remaining 1,345,000 shares will be freely transferrable without
restriction under the Securities Act, however, they are subject to certain
contractual restrictions on resale. 520,000 and 825,000 of such shares will be
available for sale in the public market commencing six months and twelve months,
respectively, after the date of this Prospectus unless released earlier by the
Representative.
Each of the Company's current officers and directors (all such
stockholders holding an aggregate of 1,500,000 shares of Common Stock, including
the Directors Shares, and warrants and options to purchase an aggregate of
775,000 shares of Common Stock), have agreed not to publicly offer, sell or
otherwise dispose of any Common Stock (other than the Directors Shares and 3,334
shares of Common Stock being registered for the account of Edmund J. McCormick,
Jr. as a Selling Security Holder) for a period of 24 months after the date of
this Prospectus without the prior written consent of the Representative.
In general, under Rule 144 as currently in effect, a person who has
beneficially owned restricted shares of Common Stock for at least two years
(including the holding period of any prior owner other than an affiliate) is
entitled to sell in a broker's transaction or to a market maker, within any
three-month period commencing 90 days after the date of this Prospectus, a
number of shares that does not exceed the greater of (i) one percent of the then
outstanding shares of Common Stock (approximately 42,200 shares based on the
number of shares expected to be outstanding after this Offering), or (ii) the
average weekly trading volume in the public market during the four calendar
weeks preceding the filing of a Form 144. Sales under Rule 144 are also subject
to certain requirements as to the manner and notice of sale and the availability
of public information concerning the Company. A person who is not an affiliate
of the Company at the time of sale, and has not been an affiliate at any time
during the 90 days preceding a sale, and who has beneficially owned the
restricted shares for at least
32
<PAGE>
three years, would be entitled to sell shares under Rule 144(k) without regard
to the volume limitations, manner of sale provisions, notice or public
information requirements described above.
DESCRIPTION OF SECURITIES
Common Stock
The Company is authorized to issue up to 10,000,000 shares of Common
Stock having a par value of $.00133 per share. As of the date of this
Prospectus, 3,220,000 shares of Common Stock were issued and outstanding and
were held of record by 117 stockholders. An additional 1,581,250 shares of
Common Stock are reserved for issuance upon the exercise of various options and
warrants as of the date of this Prospectus. The holders of Common Stock are
entitled to one vote for each share on all matters submitted to a vote of
stockholders and do not have any cumulative voting rights. Accordingly, the
holders of the majority of the Common Stock entitled to vote in any election of
Directors may elect all of the Directors standing for election. The holders of
Common Stock are entitled to receive such dividends, if any, as may be declared
by the Board from time to time out of legally available funds. Upon liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to share in all assets of the Company that are legally available for
distribution, after payment of all debts and other liabilities of the Company.
The holders of Common Stock have no preemptive, subscription, redemption or
conversion rights. The outstanding shares of Common Stock are, and the shares to
be issued in this Offering will be, when issued, legally issued, fully paid and
non-assessable.
Redeemable Warrants
Each Redeemable Warrant entitles the registered holder thereof to
purchase one share of Common Stock at a price of $5.50 per share [110% of IPO
Price], subject to adjustment, commencing on _______, 1997 [one year from the
date of this Prospectus]. The Redeemable Warrants expire on ____ ___, 2001 [five
years from the date of this Prospectus]. The Redeemable Warrants will be subject
to redemption at a price of $.05 per Redeemable Warrant commencing ____ ___,
1997 [one year from the date of this Prospectus] on 30 days' written notice
provided the average closing bid price of the Common Stock as reported by NASDAQ
SmallCap (or the last sale price if listed on a national securities exchange),
equals or exceeds $7.50 per share [150% of IPO price], subject to adjustment,
for 30 consecutive trading days ending on the fifteenth trading day prior to the
date of the notice of redemption. The holder of a Redeemable Warrant will lose
his right to purchase Common Stock if such right is not exercised prior to
redemption by the Company on the date for redemption specified in the Company's
notice of redemption or any later date specified in a subsequent notice. Notice
of redemption by the Company shall be given by first class mail to the holders
of the Redeemable Warrants at their addresses set forth in the Company's
records.
The exercise price of the Redeemable Warrants and the number and kind
of shares of Common Stock or other securities and property to be obtained upon
exercise of the Redeemable Warrants are subject to adjustment in certain
circumstances including stock splits, stock dividends, subdivisions,
combinations, reclassifications, or issuances of stock at a price lower than the
current market price. Additionally, an adjustment would be made upon the sale of
all or substantially all of the assets of the Company so as to enable Redeemable
Warrant holders to purchase the kind and number of shares of stock or other
securities or property (including cash) receivable in such event by a holder of
the number of shares of Common Stock that might otherwise have been purchased
upon exercise of such Redeemable Warrant.
The Redeemable Warrants do not confer upon the holder any voting or any
other rights of a stockholder of the Company. Upon notice to the Redeemable
Warrant holders, the Company has the right to reduce the exercise price or
extend the expiration date of the Redeemable Warrants.
The Redeemable Warrants may be exercised upon surrender of the
Redeemable Warrant certificate on or prior to the respective expiration date (or
earlier redemption date) of such Redeemable Warrants at the offices of American
Stock Transfer & Trust Company (the "Warrant Agent"), with the form of "Election
to Purchase" on the reverse side of the Redeemable Warrant certificate completed
and executed as indicated, accompanied by payment of the full exercise price (by
certified check payable to the order of the Warrant Agent) for the number of
Redeemable Warrants being exercised.
33
<PAGE>
The Rubin Warrants
The Rubin Warrants are obligations of the Company to Mark Rubin in
connection with the provision of financial consulting services to the Company.
The Rubin Warrants consist of the right to purchase up to 56,250 shares of
Common Stock at any time until August 15, 2000 at a purchase price of $2.00 per
share. The Rubin Warrants do not contain any anti-dilution provisions and do not
confer any voting or other rights as a stockholder of the Company.
The Kirlin Warrants
The Kirlin Warrants were issued by the Company to Kirlin Securities
Corp. in connection with serving as placement agent for the Company's 1995
Private Placement. The Kirlin Warrants consist of the right to purchase up to
750,000 shares of Common Stock at any time until _________, 2001 [5 years from
the date of this Prospectus] at a purchase price of $1.20 per share. The
exercise price and the number of shares of Common Stock purchasable upon
exercise of the Kirlin Warrants are subject to adjustment upon the occurrence of
certain events, including stock dividends, stock splits, reverse stock splits,
recapitalizations, reclassifications, merger or consolidation of the Company
with another corporation or a sale of all or substantially all of the Company's
assets, and the exercise price and the number of shares of Common Stock
purchasable pursuant to the Kirlin Warrants shall be proportionately adjusted
after such event. The Kirlin Warrants do not confer any voting or other rights
as a stockholder of the Company.
The Principals Warrants
The Principals Warrants were collectively issued by the Company to Marc
Zucker, Allan Socher and Theodore Shapiro as compensation for such individuals
serving as officers of the Company. See "Management- Executive Compensation".
The Principals Warrants consist of the right to purchase up to 750,000 shares of
Common Stock at any time until __________, 2001 [5 years from the date of this
Prospectus] at a purchase price of $3.00 per share. The exercise price and the
number of shares of Common Stock purchasable upon exercise of the Principals
Warrants are subject to adjustment upon the occurrence of certain events,
including stock dividends, stock splits, reverse stock splits,
recapitalizations, reclassifications, merger or consolidation of the Company
with another corporation or a sale of all or substantially all of the Company's
assets, and the exercise price and the number of shares of Common Stock
purchasable pursuant to the Principals Warrants shall be proportionately
adjusted after such event. The Principals Warrants do not confer any voting or
other rights as a stockholder of the Company.
The McCormick Options
The McCormick Options were issued by the Company to McCormick & Company
in connection with a June 1995 agreement for payment of consultant and advisory
services. The McCormick Options consist of the right to purchase up to 25,000
shares of Common Stock at any time at a purchase price of $3.00 per share. The
McCormick Options do not contain any anti-dilution provisions and do not confer
any voting or other rights as a stockholder of the Company.
Transfer and Warrant Agent
The Company has appointed American Stock Transfer & Trust Company as
the transfer agent and registrar for its Common Stock and warrant agent for the
Redeemable Warrants.
34
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, each of the Underwriters named below, for whom The Thornwater
Company, L.P. is acting as Representative, has severally agreed to purchase from
the Company, and the Company has agreed to sell to the Underwriters, on a firm
commitment basis, the respective number of shares of Common Stock and/or
Redeemable Warrants set forth below opposite each such Underwriter's name:
<TABLE>
<CAPTION>
Number of
Number of Redeemable
Underwriter Shares Warrants
----------- --------- ----------
<S> <C> <C>
The Thornwater Company, L.P...........................................
Total 1,100,000 2,200,000
========= =========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Securities are subject to
certain conditions precedent, and that the several Underwriters will purchase
all of the Securities shown above if any of such Securities are purchased.
The Representative has advised the Company that the Underwriters
propose initially to offer the Securities directly to the public at the initial
public offering prices set forth on the cover page of this Prospectus and to
certain dealers who are members in good standing with the National Association
of Securities Dealers, Inc. ("NASD") at such prices less a concession not in
excess of $_____ per share of Common Stock and $_____ per Redeemable Warrant.
The Underwriters may allow, and such dealers may reallow, a concession not in
excess of $_____ per share of Common Stock and $_____ per Redeemable Warrant to
certain other dealers. After the initial public offering, the public offering
prices, concessions and re-allowances may be changed.
The Company has granted to the Underwriters an option, exercisable
during the 45-day period after the date of this Prospectus, to purchase from the
Company at the initial public offering prices less underwriting discounts and
the non-accountable expense allowance, an aggregate of 165,000 additional shares
of Common Stock and/or an aggregate of 330,000 additional Redeemable Warrants
for the purpose of covering over-allotments, if any. To the extent that such
option is exercised in whole or in part, each Underwriter will have a firm
commitment, subject to certain conditions, to purchase the number of additional
Securities proportionate to such Underwriter's initial commitment.
The Company has agreed to pay to the Representative a non-accountable
expense allowance equal to three percent (3%) of the gross proceeds of this
Offering, $25,000 of which has already been paid to date.
Upon the exercise of any Redeemable Warrants more than one year after
the date of this Prospectus, which exercise was solicited by the Representative,
and to the extent not inconsistent with the guidelines of the NASD and the Rules
and Regulations of the Commission, the Company has agreed to pay the
Representative a commission which shall not exceed five percent of the aggregate
exercise price of such Redeemable Warrants in connection with bona fide services
provided by the Representative relating to any warrant solicitation. In
addition, the individual must designate the firm entitled to payment of such
warrant solicitation fee. However, no compensation will be paid to the
Representative in connection with the exercise of the Redeemable Warrants if (a)
the market price of the Common Stock is lower than the exercise price, (b) the
Redeemable Warrants were held in a discretionary account, or (c) the Redeemable
Warrants are exercised in an unsolicited transaction. Unless granted an
exemption by the Commission from Rule 10b-6 under the Exchange Act, the
Representative will be prohibited from engaging in any market-making activities
with regard to the Company's securities for the period from nine business days
(or other such applicable periods as Rule 10b-6 may provide) prior to any
solicitation of the exercise of the Redeemable Warrants until the later of their
termination of such solicitation activity or the termination (by waiver or
otherwise) of any right the Representative may have to
35
<PAGE>
receive a fee. As a result, the Representative may be unable to continue to
provide a market for the Company's Securities during certain periods while the
Redeemable Warrants are exercisable. If the Representative has engaged in any of
the activities prohibited by Rule 10b-6 during the periods described above, the
Representative undertakes to waive unconditionally its right to receive a
commission on the exercise of such Redeemable Warrants.
Pursuant to the Underwriting Agreement, the Company has agreed that,
for three years from the effective date of the Registration Statement of which
this Prospectus is a part, the Representative may designate one person to the
Board of the Company subject to the Company's good faith approval. In the event
the Representative elects not to exercise this right, it may designate one
person to attend all meetings of the Board for a period of three years.
The Underwriters have informed the Company that they do not expect any
sales of shares of Common Stock and Redeemable Warrants to be made to
discretionary accounts.
The Company has also agreed to retain the Representative as the
Company's financial consultant for a period of 24 months from the date hereof
and to pay the Representative the amount of $114,400 for such services, all
payable in advance on the closing date of this Offering as set forth in the
Underwriting Agreement.
The Company and the Underwriters have agreed to indemnify each other
against, or to contribute to losses arising out of, certain civil liabilities in
connection with this Offering, including liabilities under the Securities Act.
Prior to this Offering there has been no public trading market for the
Company's Securities. The initial public offering prices of the Securities and
the terms of the Redeemable Warrants have been determined by negotiation between
the Company and the Representative. Factors considered in determining the
initial public offering prices of the Securities and the terms of the Redeemable
Warrants, in addition to prevailing market conditions, included the history of
and prospects for the industry in which the Company competes, an assessment of
the Company's management, the prospects of the Company, its capital structure
and such other factors that were deemed relevant.
In connection with this Offering, the Company has agreed to sell to the
Representative, for nominal consideration, warrants to purchase from the Company
110,000 shares of Common Stock and/or 220,000 Redeemable Warrants (the
"Representative's Warrants"). The Representative's Warrants are initially
exercisable at a price of $5.50 [110% of IPO Price] per share of Common Stock
and $0.11 [110% of IPO Price] per Redeemable Warrant. The shares of Common Stock
and Redeemable Warrants issuable upon exercise of the Representative's Warrants
are identical to those offered to the public. The Representative's Warrants
contain anti-dilution provisions providing for adjustment of the number of
warrants and exercise price under certain circumstances. The Representative's
Warrants grant to the holders thereof certain rights of registration of the
securities issuable upon exercise of the Representative's Warrants.
The foregoing includes a summary of the principal terms of the
Underwriting Agreement and does not purport to be complete. Reference is made to
the copy of the Underwriting Agreement that is on file as an exhibit to the
Registration Statement of which this Prospectus is a part. See "Additional
Information."
36
<PAGE>
LEGAL MATTERS
Certain legal matters in connection with this Offering will be passed
upon for the Company by Wilentz, Goldman & Spitzer, P.A., 90 Woodbridge Center
Drive, Woodbridge, New Jersey. Certain legal matters will be passed upon for the
Underwriters by Gersten, Savage, Kaplowitz & Curtin, LLP, New York, New York.
EXPERTS
The financial statements of the Company appearing in this Prospectus
and Registration Statement have been audited by Ehrenkrantz and Company,
independent public accountants, to the extent and for the periods indicated in
their report appearing elsewhere herein and in the Registration Statement. Such
financial statements have been included herein in reliance upon the authority of
such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed a Registration Statement on Form SB-2 under the
Securities Act with the Commission in Washington, D.C. with respect to the
Securities offered hereby. This Prospectus, which is part of the Registration
Statement, omits certain information set forth in the Registration Statement,
and reference is made to the Registration Statement and the exhibits and
schedules thereto for further information with respect to the Company and the
Securities offered hereby. Statements contained in this Prospectus as to the
contents of any contract or other document referred to herein are not
necessarily complete and in each instance reference is made to the copy of such
contract or document filed as an exhibit to the Registration Statement, each
such statement being qualified in all respects by such reference. The
Registration Statement and such exhibits and schedules may be inspected without
charge at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
regional offices of the Commission located at Seven World Trade Center, New
York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such materials may be obtained from the Public Reference
Section of the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and its public reference facilities in New York, New
York and Chicago, Illinois, at prescribed rates.
37
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
----
INDEPENDENT AUDITORS' REPORT............................................... F-2
BALANCE SHEETS AS OF DECEMBER 31, 1995 AND JUNE 30, 1996 (Unaudited)....... F-3
STATEMENTS OF OPERATIONS AND DEFICIT FOR THE YEARS ENDED
DECEMBER 31, 1994 AND 1995 AND THE SIX MONTHS ENDED
JUNE 30, 1995 AND 1996 (Unaudited)....................................... F-4
STATEMENTS OF CHANGES IN DEFICIENCY IN ASSETS FOR THE YEARS
ENDED DECEMBER 31, 1994 AND 1995 AND THE SIX MONTHS ENDED
JUNE 30, 1996 (Unaudited)............................................... F-5
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1994
AND 1995 AND THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996
(Unaudited)............................................................. F-6
NOTES TO FINANCIAL STATEMENTS.............................................. F-7
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
and Shareholders of Room Plus, Inc.
Paterson, New Jersey
We have audited the accompanying balance sheet of Room Plus, Inc. as of December
31, 1995, and the related statements of operations, changes in deficiency in
assets and cash flows for each of the two years in the period ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Room Plus, Inc. as of December
31, 1995, and the results of its operations and cash flows for each of the two
years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.
Certain conditions indicate that the Company may be unable to continue as a
going concern. The accompanying financial statements do not include any
adjustments to the financial statements that might be necessary should the
Company be unable to continue as a going concern. Management's plans with regard
to this matter are described in Note 3.
/s/ EHRENKRANTZ AND COMPANY
----------------------------
EHRENKRANTZ AND COMPANY
Roseland, New Jersey
April 25, 1996
(Except for Notes 12, 13 and 14, as to which
the date is July 1, 1996)
F-2
<PAGE>
ROOM PLUS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
------------ -----------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 66,863 $ 22,802
Accounts receivable, less allowance for
doubtful accounts of $77,000 in 1995 165,163 113,470
Inventories 1,229,561 1,266,928
Notes receivable, officers -- 164,594
Prepaid expenses 144,844 330,577
Deferred income taxes 102,000 102,000
----------- -----------
TOTAL CURRENT ASSETS 1,708,431 2,000,371
----------- -----------
PROPERTY AND EQUIPMENT, at cost 2,003,872 2,110,530
Less: Accumulated depreciation 1,617,197 1,669,734
----------- -----------
386,675 440,796
----------- -----------
OTHER ASSETS
Security deposits 107,000 146,635
Deferred charges -- 243,800
Deferred income taxes 52,500 52,200
Notes receivable, officers 118,945 --
Miscellaneous assets 3,304 3,304
Cash surrender value, officers' life insurance,
net of loans of $163,089 in 1995 5,318 --
----------- -----------
287,067 445,939
----------- -----------
$ 2,382,173 $ 2,887,106
=========== ===========
LIABILITIES AND DEFICIENCY IN ASSETS
CURRENT LIABILITIES
Cash overdraft $ 128,299 $ --
Current portion of long-term debt 163,440 125,129
Notes payable, bank -- 395,000
Notes payable, other -- $ 150,000
Due to related companies 107,156 290,734
Accounts payable and accrued expenses 1,783,145 1,491,461
Payroll and sales taxes payable 186,931 118,251
Customer deposits and other advances 586,050 659,909
----------- ----------
TOTAL CURRENT LIABILITIES 2,955,021 3,230,484
----------- ----------
LONG-TERM DEBT, less current portion 221,648 193,968
----------- ----------
COMMITMENTS AND CONTINGENCY -- --
DEFICIENCY IN ASSETS
Capital stock
Authorized, 10,000,000 shares at
$.00133 par value, issued and outstanding,
2,325,000 and 2,720,000 shares in 1995 and 1996 3,092 3,618
Additional paid-in capital 1,110,929 1,366,478
Deficit (1,908,517) (1,907,442)
----------- -----------
(794,496) (537,346)
----------- -----------
$ 2,382,173 $ 2,887,106
=========== ===========
</TABLE>
See notes to financial statements.
F-3
<PAGE>
ROOM PLUS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31 Six Months Ended June 30
-------------------------- -------------------------
1994 1995 1995 1996
----------- ----------- ------------ ----------
(Unaudited)
<S> <C> <C> <C> <C>
REVENUES $13,215,387 $13,149,018 $ 6,325,885 $6,671,082
COST OF GOODS SOLD 6,003,314 6,922,500 3,780,917 2,919,695
----------- ----------- ------------ ----------
GROSS PROFIT 7,212,073 6,226,518 2,544,968 3,751,387
----------- ----------- ------------ ----------
EXPENSES
Selling 4,480,587 4,491,812 2,616,146 2,755,425
General and administrative 2,943,992 3,299,585 1,309,956 977,944
----------- ----------- ------------ ----------
7,424,579 7,791,397 3,926,102 3,733,369
----------- ----------- ------------ ----------
EARNINGS (LOSS) FROM OPERATIONS (212,506) (1,564,879) (1,381,134) 18,018
----------- ----------- ------------ ----------
OTHER INCOME (DEDUCTIONS)
Interest expense (16,576) (82,705) (40,260) (23,426)
Miscellaneous income 16,661 23,033 734 6,783
----------- ----------- ------------ ----------
85 (59,672) (39,526) (16,643)
----------- ----------- ------------ ----------
EARNINGS (LOSS) BEFORE INCOME TAXES
(BENEFITS) (212,421) (1,624,551) (1,420,660) 1,375
INCOME TAXES (BENEFITS) (7,865) (118,103) (28,261) 300
----------- ----------- ------------ ----------
NET EARNINGS (LOSS) $ (204,556) $(1,506,448) $ (1,392,399) $ 1,075
=========== =========== ============ ==========
PRO FORMA NET LOSS DATA
(UNAUDITED):
Loss before provision for income tax
benefits $ (212,421) $(1,624,551) $ (1,420,660) $ --
Pro forma income tax benefits (30,963) (386,488) (292,150)
----------- ----------- ------------ ----------
--
Pro forma net loss $ (181,458) $(1,238,063) $ (1,128,510) $ --
=========== =========== ============ ==========
PRO FORMA NET LOSS PER
COMMON SHARES OUTSTANDING $ (0.06) $ (0.37) $(0.35) $ --
=========== =========== ============ ==========
PRO FORMA COMMON SHARES
OUTSTANDING 3,180,735 3,386,985 3,180,735 --
=========== =========== ============ ==========
</TABLE>
See notes to financial statements.
F-4
<PAGE>
ROOM PLUS, INC.
STATEMENTS OF CHANGES IN DEFICIENCY IN ASSETS
YEAR ENDED DECEMBER 31, 1995
AND SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
Common Stock Additional
------------------------------- Paid-in
Shares Amount Capital Deficit
------------- -------------- ---------------- ------------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1994 1,500,000 $ 1,992 $ 230,082 $ (402,069)
STOCK SPLIT -- -- 58,000 --
ISSUANCE OF COMMON STOCK 825,000 1,100 822,847 --
NET LOSS -- -- -- (1,506,448)
------------- -------------- ---------------- ------------------
BALANCE, December 31, 1995 2,325,000 3,092 1,110,929 (1,908,517)
ISSUANCE OF COMMON STOCK 395,000 526 255,549 --
NET EARNINGS -- -- -- 1,075
------------- -------------- ---------------- ------------------
BALANCE, June 30, 1996
(Unaudited) 2,720,000 $ 3,618 $ 1,366,478 $ (1,907,442)
============= ============== ================ ==================
</TABLE>
See notes to financial statements.
F-5
<PAGE>
ROOM PLUS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31 Six Months Ended June 30
-------------------------------- ---------------------------------
1994 1995 1995 1996
-------------- ------------- ---------------- --------------
(Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net earnings (loss) $ (204,556) $ (1,506,448) $ (1,392,399) $ 1,075
Adjustments to reconcile net
earnings (loss) to net cash provided
by (used in) operating activities
Depreciation 127,131 136,849 77,619 52,537
Loss on sale of equipment -- 1,335 -- 2,554
Reserve for bad debts -- 77,412 -- --
Deferred income taxes (9,826) (121,300) (31,400) 300
(Increase) decrease in operating assets
Accounts receivable 20,282 (191,438) (21,928) 51,693
Inventories (20,941) 510,394 435,404 (37,367)
Prepaid expenses (59,980) (17,331) 674 (89,733)
Deferred charges -- -- -- (83,800)
Increase (decrease) in operating liabilities
Accounts payable, accrued
expenses and other liabilities 588,929 (153,984) 187,389 (34,247)
Payroll and sales taxes payable 51,179 78,074 100,613 (68,680)
Cash surrender value,
officers' life insurance (794) 476 -- 5,318
-------------- ------------- ---------------- --------------
Net cash provided by
(used in) operating activities 491,424 (1,185,961) (644,028) (200,350)
-------------- ------------- ---------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (135,791) (59,124) (21,373) (109,212)
Net loans (to) from officers (158,488) 254,465 338,588 (45,649)
Increase in security deposits
and other assets (8,122) (247) (3,154) (39,635)
-------------- ------------- ---------------- --------------
Net cash provided by (used in)
investing activities (302,401) 195,094 314,061 (194,496)
-------------- ------------- ---------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from (repayment of) short-term
debt (34,133) -- 227,490 545,000
Net proceeds (repayment) of long-term debt (88,122) 34,969 13,089 (65,991)
Additional paid in capital
from private placement and officers -- 880,847 -- (25)
Proceeds from issuance of common stock -- 1,100 -- 100
-------------- ------------- ---------------- --------------
Net cash provided by
(used in) financing activities (122,255) 916,916 240,579 479,084
-------------- ------------- ---------------- --------------
NET INCREASE (DECREASE) IN CASH 66,768 (73,951) (89,388) 84,238
CASH (OVERDRAFT), beginning of period (54,253) 12,515 12,515 (61,436)
-------------- ------------- ---------------- --------------
CASH (OVERDRAFT), end of period $ 12,515 $ (61,436) $ (76,873) $ 22,802
============== ============= ================ ==============
</TABLE>
See notes to financial statements.
F-6
<PAGE>
ROOM PLUS, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The Company was established in 1982 under the name RPF Holding Corp.
In March 1995, Bunk Trunk Manufacturing Company, Inc. ("Bunk Trunk")
was merged into the Company. Three months later, the surviving
entity, which was named TAM Industries, Inc., changed its name to
Room Plus, Inc.
The Company is located in Paterson, New Jersey, and manufactures high
quality mica furniture. Substantially all sales are made through its
11 retail showrooms located in New York and New Jersey, under the
trade name of Room Plus Furniture.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
INVENTORIES
Inventories are stated at the lower of cost determined by the
first-in, first-out method or market.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization are computed on the straight-line and
various accelerated methods over the estimated useful lives of the
related assets as follows:
Automobiles 3-5 years
Showroom furniture, fixtures and equipment 5-7 years
Factory machinery and equipment 5-10 years
Leasehold improvements 10-39 years
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's assets and liabilities which
constitute financial instruments as defined in Statement of Financial
Accounting Standards No. 107 approximate their recorded value.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-
LIVED ASSETS TO BE DISPOSED OF
In March 1995, Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and the
Long-Lived Assets to be Disposed of" ("SFAS 121"), was issued. This
statement, which will be required in 1996, establishes accounting
standards for the impairment of long-lived assets, certain
indentifiable intangibles and goodwill related to those assets to be
held and used and for long-lived assets and certain identifiable
intangibles to be disposed of. The Company does not expect that the
adoption of SFAS 121 will have a material impact on the financial
statements.
(Continued on following page)
F-7
<PAGE>
Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING
The Company expenses the production costs of advertising the first
time the advertising takes place.
Advertising expense was $960,990 and $996,602 in 1994 and 1995,
respectively.
PRO FORMA NET LOSS PER COMMON SHARE
Pro forma net loss per common share has been computed by dividing pro
forma net loss by the pro forma number of common shares outstanding.
As required by the Securities and Exchange Commission rules, all
warrants, options and shares issued within one year of the public
offering at less than the public offering price are assumed to be
outstanding for each year presented for purposes of the per share
calculation. Such incremental shares were determined utilizing the
treasury stock method as if they were outstanding for all periods
presented.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The financial statements as of June 30, 1996 and for the six months
ended June 30, 1996 include, in the opinion of management, all
adjustments consisting only of normal recurring adjustments,
necessary for a fair presentation of the financial position and
results of operations for these periods. The results for the interim
period ended June 30, 1996 are not necessarily indicative of the
results that may be expected for the entire year.
Note 2: MERGER
The merger of Bunk Trunk into the Company in March 1995 has been
accounted for as a pooling of interests and, accordingly, the
Company's financial statements have been restated to include the
accounts and operations of Bunk Trunk for all periods prior to the
merger.
Results of operations for the periods prior to the merger with Bunk
Trunk for the year ended December 31, 1995 are as follows:
NET SALES
Room Plus, Inc. $ 12,978,052
Bunk Trunk 170,966
----------------
$ 13,149,018
================
NET LOSS
Room Plus, Inc. $ (1,311,757)
Bunk Trunk (194,691)
----------------
$ (1,506,448)
================
F-8
<PAGE>
Note 3: GOING CONCERN
The financial statements have been prepared assuming the Company will
continue as a going concern. The Company has incurred working capital
deficiencies in each of the last three fiscal years and has a
deficiency in assets of approximately $794,500 at December 31, 1995,
which raises substantial doubt about the Company's ability to
continue as a going concern. The Company intends to raise additional
capital through short term borrowings, a private placement and an
initial public offering (see Note 14).
Note 4: INVENTORIES
Inventories consist of the following:
December 31, June 30,
1995 1996
----------- -----------
(Unaudited)
Showrooms $ 957,259 $ 960,185
Raw materials 261,111 296,645
Work-in-process 11,191 10,098
----------- ----------
$1,229,561 $1,266,928
========== ==========
Note 5: PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
December 31, June 30,
1995 1996
------------ ----------
(Unaudited)
Automobiles $ 20,304 $ 20,304
Showroom office furniture, fixtures
and equipment 410,110 428,194
Factory machinery and equipment 663,353 695,205
Leasehold improvements 910,105 966,827
---------- ----------
$2,003,872 $2,110,530
========== ==========
F-9
<PAGE>
Note 6: LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
------------ -----------
(Unaudited)
<S> <C> <C>
Obligations under capital leases are payable in monthly installments of $3,206
maturing in 1999 and bear interest at rates between 10.70% and 19.70%. The
obligations are collateralized by machinery and equipment and guaranteed by
three executive officers (see Note 7) $ 98,494 $101,616
Obligation payable to New York State Department of Finance, with interest,
payable in monthly installments of $9,650 until December, 1996 121,739 61,626
Various unsecured obligations payable to landlords of
showrooms leased by Room Plus, Inc. and maturing
through September, 2001 150,000 141,000
A note due a spouse of an executive officer bearing
interest at 8%, due January 15, 1997 14,855 14,855
-------- --------
385,088 319,097
Less: Current portion, including obligations under
capital leases of $26,701 in 1995 163,440 125,129
-------- --------
$221,648 $193,968
======== ========
</TABLE>
Annual payments of long-term debt are as follows:
Years Ending
December 31 Amount
----------------- --------------------
1996 $ 163,440
1997 63,653
1998 47,335
1999 68,160
2000 36,000
2001 6,500
--------------------
$ 385,088
====================
F-10
<PAGE>
Note 7: OBLIGATIONS UNDER CAPITAL LEASES
The Company leases certain machinery and equipment under capital
leases with a capitalized cost of $170,628 less accumulated
depreciation of $84,106.
The following is a schedule of future minimum payments required under
the leases together with their present value as of December 31, 1995:
Years Ending
December 31 Amount
-------------------- --------------------
1996 $ 38,472
1997 38,472
1998 35,948
1999 9,008
--------------------
121,900
Less: Amount representing
interest 23,406
--------------------
$ 98,494
====================
Note 8: RELATED PARTY TRANSACTIONS
In 1995, the Company received $254,465, net of advances from three
officers. The balance due from the officers has been reduced to an
aggregate of $118,945 at December 31, 1995. The amounts, represented
by promissory notes, bear interest at 8% per annum and mature in
January 1997.
During the year ended December 31, 1995, the Company accrued
approximately $150,000 for unpaid rent on retail showroom space in
which certain executive officers of the Company previously had an
ownership interest. In addition, the Company incurred advertising
costs of approximately $66,000 payable to a related company.
Employment contracts between the Company and three executive officers
through 1998 provide for minimum annual salaries, adjusted for
incentives based on the Company's attainment of specified levels of
sales. In addition, the executive officers receive an allowance for
certain expenses.
See Notes 6, 10, 12, 13 and 14 for other related party transactions.
F-11
<PAGE>
Note 9: INCOME AND DEFERRED TAXES
The Company was an "S" Corporation for Federal and New York state
income tax purposes through September 30, 1995. The stockholders
accounted for their share of the Company's earnings, losses,
deductions and credits on their income tax returns. Accordingly,
these statements do not include any provision for Federal and New
York state income taxes prior to September 30, 1995. The Company was
subject to New Jersey income taxes for the year ended December 31,
1995.
The accompanying statements of operations include unaudited pro forma
adjustments for income tax expense which would have been recorded
prior to September 30, 1995 had the Company been subject to Federal
and New York income taxes based on the tax laws in effect during
those periods.
A deferred tax asset results from timing differences in the
recognition of depreciation for tax and financial reporting purposes
and the recognition of net operating loss carryforwards for financial
statement purposes in 1995 of approximately $400,000 and $1,300,000.
The carryforwards expire between 1998 and 2010. The Company has
provided a valuation reserve of approximately $155,000 in 1995
against the future benefits of the net operating loss carryforwards.
The Federal and State income tax expense (benefit) is comprised of
the following:
<TABLE>
<CAPTION>
December 31,
------------------------------------- June 30,
1994 1995 1996
----------------- ----------------- ---------------
<S> <C> <C> <C>
Current income tax expense
Federal $ -- $ -- $ --
State 9,267 3,197 --
----------------- ----------------- ---------------
9,267 3,197 --
----------------- ----------------- ---------------
Deferred income tax (benefit)
Federal -- (79,400) 234
State (17,132) (41,900) 66
----------------- ----------------- ---------------
(17,132) (121,300) 300
----------------- ----------------- ---------------
$ (7,865) $ (118,103) $ 300
================= ================= ===============
</TABLE>
Note 10: COMMITMENTS AND CONTINGENCY
COMMITMENTS
Leases for retail showrooms in New York and New Jersey expire at
various dates through October 2005. The leases require the Company to
pay certain operating expenditures including real estate taxes, while
certain leases contain provisions for rent escalations.
The Company leases its manufacturing facility from M & S Realty
Company, a related party, under two leases which expire May 31, 1999
at an annual rental of approximately $277,000. The leases require the
Company to pay certain operating expenses of the facility, including
real estate taxes and insurance. In addition, the leases contain
provisions for rent escalations and an optional renewal term of
fifteen years.
(Continued on following page)
F-12
<PAGE>
Note 10: COMMITMENTS AND CONTINGENCY (CONTINUED)
COMMITMENTS
Rent expense for retail showrooms and the manufacturing facility
totaled $1,440,700 and $1,409,500 in 1995 and 1994, respectively.
The Company has automotive and other equipment leases expiring
through December 2000, with future minimum lease payments of
approximately $197,000. Rent expense for these leases totaled
approximately $47,000 and $32,000 in 1995 and 1994, respectively.
Approximate future minimum rentals under all operating lease
arrangements are due as follows:
Years Ending
December 31 Amount
--------------------- -------------------
1996 $ 1,069,300
1997 1,079,200
1998 930,000
1999 628,700
2000 385,000
Thereafter 838,000
-------------------
$ 4,930,200
===================
LITIGATION
The Company is subject to legal proceedings and claims which arise in
the ordinary course of its business. In the opinion of management,
the amount of ultimate liability with respect to these actions will
not materially affect the financial position of the Company.
Note 11: PENSION PLAN
The Company funds a union sponsored defined contribution pension plan
which covers its union employees. Contributions totaled $16,311 in
1995 and $16,375 in 1994.
The Company has a deferred compensation plan under section 401(k) of
the Internal Revenue Code. Under the plan, which may be funded at the
employer's discretion, all non-union employees may elect to defer a
portion of their salary. No contributions were made by the Company in
1995 and 1994.
Note 12: CAPITAL TRANSACTIONS
In addition to the merger with Bunk Trunk Manufacturing Company, Inc.
(see Note 2) the following occurred in June 1995:
1. The stockholders of the Company approved amendments to its
Certificate of Incorporation increasing the number of
authorized shares to 10,000,000 with a designated par value of
$.001.
(Continued on following page)
F-13
<PAGE>
Note 12: CAPITAL TRANSACTIONS (CONTINUED)
2. The Company approved a 33,333 for 1 stock split whereby
1,999,940 additional shares of common stock were issued and
additional paid-in capital was increased by approximately
$58,000.
3. As payment for consulting and advisory services to the Company,
three executive officers contributed an aggregate 50,000 shares
of common stock to a Director as additional compensation. In
connection with the transaction, professional fees related to
these services charged to expenses totaled $50,000 with a
corresponding credit to additonal paid-in capital. In addition,
the Company granted an option to this Director of 25,000 common
shares at $3 per share.
In September 1995, the Company, through a private placement, sold
750,000 shares of common stock to unrelated investors at $1.33 per
share and received net proceeds of approximately $831,000. The
proceeds were utilized for deposits on leased machinery in the
factory, development of additional retail showrooms and to provide
working capital. In connection with the private placement, the
following other events occurred;
1. Three executive officers of the Company received warrants to
purchase 750,000 shares of common stock exercisable at $3 per
share any time up to five years after the Company's shares of
common stock are first offered to the public pursuant to a
valid registration statement (see Note 14).
2. Warrants were granted to several lenders in connection with
prior bridge loan financing to purchase 75,000 shares of common
stock at $.001 per share and were exercised in June 1996.
3. A warrant was granted to the placement agents to purchase
100,000 shares at $.001 per share which was exercised at the
closing of the private placement.
4. Warrants to purchase 750,000 additional common shares
exercisable at $1.20 per share were issued to the placement
agents exercisable any time up to five years after the
Company's shares of common stock are first offered to the
public pursuant to a valid registration statement.
5. An unrelated individual who provided financial consulting,
received warrants to purchase 56,250 shares of common stock at
$2.00 per share.
On July 1, 1996, the Board of Directors and the shareholders approved
a 4 for 3 reverse stock split of the Company's common stock with an
increase in par value to $.00133.
All references in the accompanying financial statements to the number
of common shares for December 31, 1994 have been restated to reflect
the stock splits.
F-14
<PAGE>
Note 13: SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Years Ended
December 31, Six Months
------------------------------------- Ended June 30,
1994 1995 1996
------------------ --------------- --------------------
<S> <C> <C> <C> <C>
Cash paid during the year for (Unaudited)
Interest $ 50,686 $ 79,065 $ 22,326
Income taxes 9,267 3,198 --
NON CASH FINANCING ACTIVITY
Three executive officers contributed
50,000 common shares at
$1 per share to a director as $ -- $ 50,000 $ --
additional compensation.
Issuance of 300,000 common
shares at $.80 per share -- -- 240,000
to two consultants
Issuance of 20,000 common
shares to unrelated parties and
a Director at $.80 per share for
fees in connection with receiving -- -- 16,000
four bridge loans.
</TABLE>
Note 14: SUBSEQUENT EVENTS
LINE OF CREDIT AND BANK LOAN In March and June 1996, the Company
received proceeds from a $350,000 line of credit and a $50,000 note,
from BSB Bank and Trust Company bearing interest at prime plus 2% per
annum and maturing in April 1997 and September 1996, respectively.
Substantially all of the Company's assets collateralize the loans,
along with personal guarantees by three executive officers of the
Company. Both loans will be repaid from the proceeds of the initial
public offering.
Proceeds from the line were used to open a new retail showroom and
provide working capital. The additional proceeds received in June
1996 will fund deposits on two new retail showrooms.
PRIVATE PLACEMENT In July 1996, the Company expects to complete an
additional private placement of 500,000 shares of common stock which
will raise approximately $400,000 in capital, before expenses. The
proceeds will be utilized for the payment of fees incurred in
connection with the public offering and provide for working capital.
(Continued on following page)
F-15
<PAGE>
Note 14: SUBSEQUENT EVENTS (CONTINUED)
AGREEMENTS UNDER NEGOTIATION
In June 1996, the Company entered into a letter of intent with an
underwriting firm with respect to an initial public offering of
common stock and warrants to purchase common stock of the Company,
which offering, if consummated on the terms contemplated by such
letter of intent would result in proceeds to the Company of
$5,220,000 before expenses. There is no assurance that the offering
will be completed.
The Board has approved consulting agreements with two individuals for
which an aggregate of 300,000 shares of common stock were issued in
June 1996 at $.80 per share.
In June 1996, the Company received four bridge loans totaling
$150,000 from unrelated parties and a Director in the form of
promissory notes which will bear interest at 13% and mature in June
1997. In addition, the Company issued 20,000 shares of common stock
to the holders of the notes. The proceeds of the bridge loans will be
used to finance anticipated costs of a new retail showroom.
F-16
<PAGE>
[Pictures to be included]
Inside back cover of Prospectus contains 3 pictures of the Company's products,
which are complete settings of bedroom furniture
<PAGE>
No dealer, salesperson or any other person has been authorized to give any
information or to make any representation not contained in this Prospectus and,
if given or made, such information or representation must not be relied upon as
having been authorized by the Company or the Underwriters. This Prospectus does
not constitute an offer to sell or the solicitation of an offer to buy any
security other than the Securities offered by this Prospectus, nor does it
constitute an offer to sell or a solicitation of an offer to buy any of the
Securities by anyone in any jurisdiction in which such offer or solicitation is
not authorized, or in which the person making such offer or solicitation is not
qualified to do so, or to any person to whom it is unlawful to make such offer
or solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that the
information contained herein is correct as of any time subsequent, to the date
hereof, or that there has been no change in the affairs of the Company since the
date hereof.
---------------------------
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY........................................ 1
RISK FACTORS.............................................. 5
USE OF PROCEEDS........................................... 9
DILUTION.................................................. 10
CAPITALIZATION............................................ 12
DIVIDEND POLICY........................................... 12
SELECTED FINANCIAL DATA................................... 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............ 14
BUSINESS.................................................. 17
PRINCIPAL STOCKHOLDERS.................................... 28
SELLING SECURITY HOLDERS.................................. 29
CERTAIN TRANSACTIONS...................................... 31
SHARES ELIGIBLE FOR FUTURE SALE........................... 32
DESCRIPTION OF SECURITIES................................. 33
UNDERWRITING.............................................. 35
LEGAL MATTERS............................................. 37
EXPERTS................................................... 37
ADDITIONAL INFORMATION.................................... 37
FINANCIAL STATEMENTS...................................... F-1
---------------------------
Until , 1996 (25 days after the date of this Prospectus), all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
<PAGE>
1,100,000 Shares of Common Stock
and
2,200,000 Redeemable Warrants
[LOGO]
ROOM PLUS, INC.
------------------
PROSPECTUS
-----------------
THE THORNWATER COMPANY, L.P.
_______ __, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
The Certificate of Incorporation of the Company provides that no
director of the Company shall be personally liable to the Company or its
shareholders for damages for any breach of duty in such capacity, except as
otherwise provided in the Business Corporation Law of the State of New York, as
amended from time to time.
Section 722 of the New York Business Corporation Law empowers a New
York corporation to indemnify any person, made, or threatened to be made, a
party to an action or proceeding other than one by or in the right of the
corporation to procure a judgment in its favor, whether civil or criminal,
including an action by or in the right of any other corporation of any type or
kind, domestic or foreign, or any partnership, joint venture, trust, employee
benefit plan or other enterprise, which any director or officer of the
corporation served in any capacity at the request of the corporation, by reason
of the fact that he, his testator or intestate, was a director or officer of the
corporation, or served such other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise in any capacity, against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorney's fees actually and necessarily incurred as a result of such action or
proceeding, or any appeal therein, if such director or officer acted, in good
faith, for a purpose which he reasonably believed to be in, or in the case of
service for any other corporation or any partnership, joint venture, trust,
employee benefit plan or other enterprise, not opposed to, the best interests of
the corporation and, in criminal actions or proceedings, in addition, had no
reasonable cause to believe that his conduct was unlawful.
In addition, Section 722 of the New York Business Corporation Law
states that a New York corporation may indemnify any person made, or threatened
to be made, a party to an action by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he, his testator or
intestate, is or was a director or officer of the corporation, or is or was
serving at the request of the corporation as a director or officer of any other
corporation of any type or kind, domestic or foreign, of any partnership, joint
venture, trust, employee benefit plan or other enterprise, against amounts paid
in settlement and reasonable expenses, including attorneys' fees, actually and
necessarily incurred by him in connection with the defense or settlement of such
action, or in connection with an appeal therein if such director or officer
acted, in good faith, for a purpose which he reasonably believed to be in, or,
in the case of service for any other corporation or any partnership, joint
venture, trust, employee benefit plan or other enterprise, not opposed to, the
best interests of the corporation, except that no indemnification under this
paragraph shall be made in respect of (1) a threatened action, or a pending
action which is settled or otherwise disposed of, or (2) any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation, unless and only to the extent that the court on which the action
was brought, or, if no action was brought, any court of competent jurisdiction,
determines upon application that, in view of all the circumstances of the case,
the person is fairly and reasonably entitled to indemnity for such portion of
the settlement amount and expenses as the court deems proper.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to the foregoing provisions, or otherwise, the Company has been advised that in
the opinion of the Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.
II-1
<PAGE>
Item 25. Other Expenses of Issuance and Distribution
The expenses, other than Underwriters' discounts and commissions, in
connection with this Offering which will be paid by the Company are estimated to
be substantially as follows:
<TABLE>
<CAPTION>
Amount
Payable
Item by Company
---- ----------
<S> <C>
Registration fee...................................................................... $8,856
NASDAQ Filing Fee..................................................................... *
National Association of Securities Dealers, Inc. filing fee........................... 2,884
Blue Sky fees and expenses............................................................ *
Directors and Officers Insurance...................................................... *
Printing and engraving expenses....................................................... *
Legal fees and expenses (other than Blue Sky fees and expenses)....................... *
Accountant's fees and expenses........................................................ *
Representative's non-accountable expenses............................................. *
Transfer agent fees and expenses...................................................... *
Miscellaneous......................................................................... *
--------
TOTAL................................................................................ $ *
========
</TABLE>
- ---------------
* To be filed by amendment.
Item 26. Recent Sales of Unregistered Securities
The following table sets forth all securities issued and sold by the
Company since 1993.
<TABLE>
<CAPTION>
DATE OF AMOUNT OF PERSONS TO
ISSUE TITLE SECURITIES CONSIDERATION WHOM SOLD
------- ----- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C>
September 27, 1995 Common Stock 7,500 $1.00/share Nicoll Bills Borrow
7,500 Maria L. Finley, M.D.
7,500 Allen J. Fishman
7,500 Richard L. and Ricki Hoffman
7,500 Stanley Konchinski
3,750 Marc Wolfman
3,750 Arthur S. and Rene Brenner
5,250 Robert Cash
3,750 Angelo and Olen Dias
7,500 Ottavio Fazio
3,750 Vito and Maria Giroffi
3,750 Charles and Estelle Goldfard
3,000 Jeffrey Gross
3,750 Murray and Lorie Jonas
3,750 Alfred and Aurora Kramer
4,000 Martin Newman
3,750 Emmett O'Hare
II-2
<PAGE>
DATE OF AMOUNT OF PERSONS TO
ISSUE TITLE SECURITIES CONSIDERATION WHOM SOLD
------- ----- ---------- ------------- ----------
September 27, 1995 Common Stock 7,500 $1.00/share Milton and Blanche Prane
7,500 Adam I. Ferguson
3,750 James Keagan and Marilyn
Pickel
750 Lavoisier Dsa
3,750 William and Anita Baron
3,750 Alfred M. Weiss
7,500 N.E.P. Trading Corp.
3,750 Joseph Sterrantino
7,500 Alan Royter
3,750 Louis Fountas, Jr.
3,750 Frank and Joann Aguis
3,750 Robert Lyons
4,500 Helen and Salvatore Cerrito
7,500 Keogh Plan of Francis H.
McNamara
3,750 Beth and Marc Abrams
7,500 Andrea Garavuso and Andrew
Adlerstein
3,750 Sylvia and Andrew Adlerstein
7,500 Gerald and Gina Benedetto
3,750 Angelo D'Avino
3,750 Kim A. Donop
3,750 Robert J. Lehrman
3,750 David Lindner
3,750 Robert Lyons FBO Pearl Lyons
3,750 Michael and Juliette Madden
7,500 Christopher Parker
7,500 Robert Rosenberg
3,750 Ronald Wong
7,500 Peter A. Wutzer
3,750 Sarah Giambattista
3,750 Marilyn Reif
7,500 David Dorman
3,750 Donald Berger
7,500 Salvatore Mingoia
3,750 Elihu Zucker
3,750 Summer Family Trust
3,750 Alfred A. Gelfond
1,875 Josephine Falco
3,750 Harvey Jablon
3,750 Larry Dorfman
1,875 Marguerite McGrady
3,750 David Silver
3,750 Esther and Edward Corneilson
3,750 Michael Boxer
3,750 Herman Gross
3,750 Robert Chapman
7,500 Allan R. Lyons
15,000 Jomalco Promotions, Inc.
1,500 Bela Lakra
3,750 Joseph Scerra
750 Loeffler DSA
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
DATE OF AMOUNT OF PERSONS TO
ISSUE TITLE SECURITIES CONSIDERATION WHOM SOLD
------- ----- ---------- ------------- ----------
<S> <C> <C> <C> <C>
September 27, 1995 Common Stock 1,500 $1.00/share Rebecca and Jay Karp
1,500 Joan Boczkus
1,875 Seena and Fred Leavitt
3,750 George Walsh
7,500 John and Gertrude Klinger
7,500 John B. Klinger
18,750 Mark Rubin Keogh
18,750 Mark Rubin
3,750 Frederic Laffie
3,750 Robert and Phyllis Levine
750 Doris Bader
22,500 Noury & Sons Oriental Rugs
7,500 Elliott Lichtstein
75,000 Kirlin Holding Corp.
75,000 Swan Alley (Nominees) Limited
37,500 The Clinton Company
3,750 Arthur Del Savio
75,000 Kirlin Securities, Inc.
October 16, 1995 Common Stock 2,250 $1.00/share Michael and Rhonda Wach
2,250 Betty Zarro
2,250 Larry Dorfman
1,875 Daniel and Antoinette Carbonaro
938 Marguerite McGrady
938 Josephine Falco
3,750 Simone and Justine Souquet
3,750 Justine Souquet and Vito Lucento
1,875 Michel and Linda Buscio
3,000 James Aitkenhead
18,750 Scott Rudolph
3,000 Arnold and Marsha Kanarek
2,250 Harvey Jablon
18,750 G.G. Management Co., Inc.
56,250 Kirlin Securities, Corp.
November 22, 1995 Common Stock 7,500 $1.00/share Karen Balkin
3,750 Robert Uhler ACF Kjersten
Bunker
3,750 Ocrena and Lloyd Turner
June 17, 1996 Common Stock 50,000 -0- Mark Rubin
250,000 Frank Terzo
June 18, 1996 Common Stock 3,333 -0- Mark Rubin
3,333 Allan Lyons
3,334 Edmund J. McCormick
10,000 The Clinton Company
June 30, 1996 Common Stock 14,063 $.001/share Mark Rubin
13,125 Kirlin Holding Corp.
6,250 Peter Lontai
3,125 Ronald Heineman
1,562 David Lindner
II-4
<PAGE>
DATE OF AMOUNT OF PERSONS TO
ISSUE TITLE SECURITIES CONSIDERATION WHOM SOLD
------- ----- ---------- ------------- ----------
June 30, 1996 Common Stock 3,125 $.001/share Robert J. Lehrman and
Laura L. Lehrman JTWROS
3,125 Susan Cohen, Claudene Bonanno
and Robyn Cohn JTWROS
2,500 Anthony Agnello and Annemarie
Agnello JTWROS
3,125 Michael Madden and Juliette
Madden JTWROS
25,000 Anthony Demetroulakos
July 25, 1996 Common Stock 25,000 $ .80/share Atlantis Capital
25,000 K. Barton
25,000 M. Behner
25,000 Ronald Bibbo
50,000 Monica Carreca
12,500 Allen Cohen
25,000 Jeffrey Godin
12,500 Greg Khononov
4,250 A.C. Providenti
4,250 A. Rella
6,250 Marco Rossi
31,250 Mark Rubin
4,000 D. Scaringella
50,000 Robert Starr
200,000 Swan Alley (Nominees) Limited
</TABLE>
All of the securities listed above were issued in reliance on the
exemption provided by Section 4(2) of the Securities Act of 1933 (the
"Securities Act") and no public offer was involved. All of the purchasers
acquired the securities for investment, and there was no general advertising or
general solicitation in connection with the offer and sale of the securities.
The Company believes that each purchaser was given or had access to detailed
financial and other information with respect to the Company and in connection
with these sales. Other than the transactions listed above, the Company has
carried out no other unregistered sales of securities since 1993.
Item 27. Exhibits
See Exhibit Index on Page II-9
Item 28. Undertakings
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the provisions set forth in the Company's
Certificate of Incorporation or otherwise, the small business issuer has been
advised that in the opinion of the Securities and Exchange Commission (the
"Commission"), such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the small
business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding), is asserted by such director, officer or
controlling person in connection with the securities being registered, the small
business issuer will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit
II-5
<PAGE>
to a court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes as follows:
(1) To provide the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in such
names as required by the Underwriters to permit prompt delivery to each
purchaser.
(2) That for purposes of determining any liability under the Securities
Act, treat the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the small business issuer under Rule 424(b)(1), or (4) or
497(h) under the Securities Act as part of this registration statement as of the
time the Commission declares it effective.
(3) That for purposes of determining any liability under the Securities
Act, treat each post-effective amendment that contains a form of prospectus as a
new registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial bona
fide offering of those securities.
(4) To file, during any period in which it offers or sells securities,
a post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) Include any additional or changed material information
on the plan of distribution.
(5) To file a post effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
II-6
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of
Paterson, State of New Jersey, on August 20, 1996.
ROOM PLUS, INC.
By: /s/ Marc Zucker
------------------------------------------
Marc Zucker
Chairman and Chief Executive Officer
II-7
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints Marc Zucker and Allan Socher, and each of them individually, each with
full power to act without the other, his true and lawful attorneys-in-fact and
agents, each with full power of substitution and resubstitution, for him and in
his name, place and stead in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
each of said attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that each of said
attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
/s/ Marc Zucker Dated: August 20, 1996
- ----------------------------------------
Marc Zucker
Chairman and Chief Executive Officer
(Principal Executive Officer)
/s/ William Halpern Dated: August 20, 1996
- ----------------------------------------
William Halpern
Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ Allan Socher Dated: August 20, 1996
- ----------------------------------------
Allan Socher
Director, President and
Director of Marketing
/s/ Theodore Shapiro Dated: August 20, 1996
- ----------------------------------------
Theodore Shapiro
Director, Executive Vice President
and Director of Manufacturing
/s/ Edmund J. McCormick, Jr. Dated: August 20, 1996
- -------------------------------------
Edmund J. McCormick, Jr.
Director
II-8
<PAGE>
EXHIBIT INDEX
TO REGISTRATION STATEMENT
OF ROOM PLUS, INC.
<TABLE>
<CAPTION>
<S> <C>
*1 Form of Underwriting Agreement among the Company, the holders of the Directors Shares and The Thornwater
Company, L.P.
3.1 Certificate of Incorporation of the Company, as amended(P)
3.2 Restated and Amended By-laws of the Company
*4.1 Form of Representative Warrant Agreement between the Company and The Thornwater Company, L.P.,
with form of Warrant attached
*4.2 Form of Warrant Agreement between the Company and American Stock Transfer & Trust Company, with
form of Warrant attached
4.3 Form of Warrant issued by the Company to Allan J. Socher, Theodore Shapiro, Marc I. Zucker and Kirlin
Securities Corp.
4.4 Form of Warrant issued by the Company to Mark Rubin
*5 Opinion of Wilentz, Goldman & Spitzer, P.A.
*10.1 Employment Agreement dated June 16, 1995 between the Company and Allan J. Socher
*10.2 Employment Agreement dated June 16, 1995 between the Company and Theodore Shapiro
*10.3 Employment Agreement dated June 16, 1995 between the Company and Marc I. Zucker
10.4 Lease dated June 1, 1984 between M&S Realty Company and Bunk Trunk Manufacturing Company, Inc.,
as amended on December 1, 1988 and January 2, 1996(P)
10.5 Lease dated June 6, 1996 between Milford Management Corp., as agent, and the Company(P)
10.6 Lease dated November 1, 1991 between Dilstan Realty Corporation and Room Plus Furniture of
Westchester, Inc.(P)
10.7 Indenture of Lease dated October 1, 1988 between Daper Realty, Inc. and RPF Holding Corporation(P)
10.8 Lease dated June 1, 1983 between Hannon's and the Company, as modified by an Extension of Lease dated
July 31, 1993(P)
10.9 Agreement of Lease dated August 9, 1985 between Patrician Equities Corp. and Room Plus Furniture of
East Brunswick, as modified by a Lease Extension Agreement dated August 25, 1995(P)
10.10 Lease dated August 26, 1987 between County Glen Associates and Room Plus Furniture, Inc.(P)
10.11 Agreement of Lease between Austin Mall Associates and Room Plus Furniture of Forest Hills, Inc.(P)
10.12 Sublease Agreement dated February 5, 1988 between NYNEX Business Information Systems Company
and RPF Holding Corporation, as modified by a letter agreement dated March 25, 1993(P)
10.13 Shopping Center Agreement of Lease dated October 1, 1995 between Alexander Carpet Company and the Company(P)
10.14 Lease dated November 21, 1995 between 205/215 Lexington Limited Partnership and the Company(P)
10.15 Assignment of Lease dated June 26, 1996 between Reliable Broadway, Inc. and the Company(P)
10.16 Lease dated January 11, 1996 between Comalgri Holding Corp. and the Company(P)
11 Calculation of Net Income (Loss) per Common Share
23.1 Consent of Ehrenkrantz and Company
23.2 Consent of Wilentz, Goldman & Spitzer, P.A. (included in Exhibit 5)
24 Power of Attorney (included in the Registration Statement following the signature page)
27 Financial Data Schedule
</TABLE>
- -----------------
* To be filed by amendment
(P) Exhibit is filed in paper pursuant to a continuing or temporary hardship
exemption.
II-9
<PAGE>
Exhibit 3.2
RESTATED AND AMENDED BYLAWS
OF
ROOM PLUS, INC.
Adopted: June 22, 1995
ARTICLE I
OFFICES
1. Principal Place of Business.--The principal place of
business of the Corporation is 91 Michigan Avenue, Paterson, New Jersey.
2. Other Places of Business.--Branch or subordinate places of
business or offices may be established at any time by the Board of Directors
(hereinafter the "Board") at any place or places where the Corporation is
qualified to do business.
ARTICLE II
SHAREHOLDERS
1. Annual Meeting.--The annual meeting of shareholders shall
be held upon not less than ten nor more than sixty days' written notice of the
time, place, and purposes of the meeting at 10:00 o'clock A.M. on the 24th day
of the month of March of each year, or at such other time and place as shall be
specified in the notice of meeting, in order to elect directors and transact
such other business as shall come before the meeting. If that date is a legal
holiday, the meeting shall be held at the same hour on the next succeeding
business day.
2. Special Meetings.--A special meeting of shareholders may be
called for any purpose by the president, any vice president or the Board. A
special meeting shall be held upon not less than ten nor more than sixty days'
written notice of the time, place, and purposes of the meeting.
3. Action Without Meeting.--The shareholders may act without a
meeting if, prior or subsequent to such action, each shareholder who would have
been entitled to vote upon such action shall consent in writing to such action.
Such written consent shall be filed in the minutes book.
<PAGE>
4. Quorum.--The presence at a meeting, in person or by proxy,
of the holders of shares entitled to cast a majority of the votes shall
constitute a quorum.
ARTICLE III
BOARD OF DIRECTORS
1. Number and Term of Office.--The number of directors
constituting the Board of the Corporation shall be not less than three (3) nor
more than seven (7). Each director shall be elected by the shareholders at each
annual meeting and shall hold office until the next annual meeting of
shareholders and until that director's successor shall have been elected and
qualified. The number of directors, who need not be shareholders, may be
increased or decreased by amendment to these ByLaws by a majority of the Board
of Directors or by the shareholders. The number of directors may be less than
three only when shares are owned by less than three shareholders, but in such
event the number of directors may not be less than the number of shareholders.
In the case of one (1) director, such director must be the sole shareholder.
2. Regular Meetings.--A regular meeting of the Board shall be
held without notice immediately following and at the same place as the annual
shareholders meeting for the purposes of electing officers and conducting such
other business as may come before the meeting. The Board, by resolution, may
provide for additional regular meetings which may be held without notice, except
to members not present at the time of the adoption of the resolution.
3. Special Meetings.--A special meeting of the Board may be
called at any time by the president, by any vice president or by any director
for any purpose. Such meeting shall be held upon five days' notice if given
orally (either by telephone or in person) or by telegraph, or by seven days'
notice if given by depositing the notice in the United States mails, postage
prepaid. Such notice shall specify the time and place of the meeting.
4. Action Without Meeting.--The Board may act without a
meeting if, prior or subsequent to such action, each member of the Board shall
consent in writing to such action. Such written consent or consents shall be
filed in the minutes book.
5. Quorum.--A majority of the entire Board shall constitute a
quorum for the transaction of business.
-2-
<PAGE>
6. Vacancies in Board of Directors.--Any vacancy in the Board,
including a vacancy caused by an increase in the number of directors, may be
filled by the affirmative vote of a majority of the Board or a majority of the
outstanding shares.
7. Loans.--The Corporation may lend money to, or guarantee any
obligation of, or otherwise assist any director of the Corporation who is also
an officer or employee, upon the authorization of, and under such terms and
conditions as shall be determined by, a majority of the entire Board.
ARTICLE IV
WAIVERS OF NOTICE
Any notice required by these bylaws, by the certificate of
incorporation, or by the New York Business Corporation Law, hereinafter "BCL,"
may be waived in writing by any person entitled to notice. The waiver or waivers
may be executed either before or after the event with respect to which notice is
waived. Each director or shareholder attending a meeting without protesting,
prior to its conclusion, the lack of proper notice shall be deemed conclusively
to have waived notice of the meeting.
ARTICLE V
OFFICERS
1. Election.--At its regular meeting following the annual
meeting of shareholders, the Board shall elect a president, a vice president, a
secretary and a treasurer. Additionally, the Board may elect such other
officers, including a Chairman of the Board of Directors, additional vice
presidents and assistant secretaries, as it shall deem necessary. One person may
hold two or more offices.
2. Duties and Authorities of the Chairman of the Board.--The
Chairman of the Board of Directors, if one be elected, shall preside at all
meetings of the Board and shall perform such other duties as may be assigned by
the Board.
3. Duties and Authorities of President.--The president shall
be chief executive officer of the Corporation and shall have general charge and
supervision over, and responsibility for, the business and affairs of the
Corporation. Unless otherwise directed by the Board, all other officers shall be
subject to authority and supervision of the president. The president may enter
into and execute, in the name of the Corporation, contracts or other instruments
-3-
<PAGE>
in the regular course of business or contracts or other instruments not in the
regular course of business which are authorized, either generally or
specifically, by the Board.
4. Duties and Authorities of Vice President.--The vice
president shall perform such duties and have such authority as from time to time
may be delegated to him by the president or by the Board. In the absence of the
president or in the event of his death, inability, or refusal to act, the vice
president shall perform the duties and be vested with the authority of the
president.
5. Duties and Authority of Treasurer.--The treasurer shall
have the custody of the funds and securities of the Corporation and shall keep,
or cause to be kept, regular books of account for the Corporation. The treasurer
shall perform such other duties and possess such other powers as are incident to
that office or as shall be assigned by the president or the Board.
6. Duties and Authority of Secretary.--The secretary shall
cause notices of all meetings to be served as prescribed in these bylaws and
shall keep, or cause to be kept, the minutes of all meetings of the shareholders
and the Board. The secretary shall have charge of the seal of the Corporation.
The secretary shall perform such other duties and possess such other powers as
are incident to that office or as are assigned by the president or the Board.
ARTICLE VI
AMENDMENTS TO AND EFFECT OF BYLAWS; FISCAL YEAR
1. Force and Effect of Bylaws.--These bylaws are subject to
the provisions of the BCL and the Corporation's certificate of incorporation, as
it may be amended from time to time. If any provision in these bylaws is
inconsistent with a provision in the BCL or the certificate of incorporation,
the provision of the BCL shall govern.
2. Wherever in these bylaws references are made to more than
one incorporator, director or shareholder, they shall, if this is a sole
incorporator, director, or shareholder corporation, be construed to mean the
solitary person; and all provisions dealing with the quantum of majorities or
quorums shall be deemed to mean the action by the one person constituting the
corporation.
-4-
<PAGE>
3. Amendments to Bylaws.--These bylaws may be altered, amended
or repealed by vote of the shareholders holding a majority of the outstanding
shares having voting power or by a majority vote of the entire Board, except
that any bylaws so made by the Board may be altered or repealed by the
shareholders.
4. Fiscal Year.--The fiscal year of the Corporation shall
begin on the first day of January in each year.
END OF BYLAWS
-5-
<PAGE>
Exhibit 4.3
Void after 4:00 p.m. Warrant to Purchase
New York Time __________ Shares
on ______________
(subject to adjustment)
of Common Stock of
Room Plus, Inc.
ROOM PLUS, INC.
Stock Purchase Warrant
1. Grant of Warrant. THIS IS TO CERTIFY THAT, for value
received, upon due exercise of this Warrant, ______________ is entitled to
purchase from ROOM PLUS, INC., a New York corporation (hereinafter called the
"Company") at any time during the period commencing on the effective date of a
valid Registration Statement filed by the Company with the Securities and
Exchange Commission for the issuance of the Company's shares to the public and
ending at 4:00 P.M., New York local time, on _________________________________
(hereinafter called the "Expiration Date") all or any part of ___________ shares
of fully paid and nonassessable Common Stock of the Company (hereinafter
referred to as the "Shares"), at a purchase price (the "Purchase Price") equal
to ______________, both the Purchase Price and number of shares being subject to
possible adjustment as provided herein.
2. Restriction on Assignment. This Warrant has been taken
for investment and not for resale or distribution. The holder, by receipt of
this Warrant, acknowledges that he is aware such Warrant has not been registered
-1-
<PAGE>
under the Securities Act of 1933, as amended (the "Act"). If it becomes possible
under the appropriate sections of the Act to assign this Warrant, any such
assignment shall be made by surrendering this Warrant to the Company at the
address indicated in Section 6 hereof, together with an assignment thereof in
the form provided at the end of this Warrant duly executed by the assignor. Upon
such surrender, the Company will execute and deliver, in the case of an
assignment in whole, a new Warrant in the name of the assignee or, in the case
of an assignment in part, a new Warrant in the name of the assignee named in
such instrument of assignment and a new Warrant in the name of assignor
entitling such assignor to subscribe for and purchase the balance of the shares
underlying the Warrant so surrendered and not assigned to the assignee.
3. Exercise of Warrant. In case the holder of this Warrant
shall desire to exercise all or any part of the purchase right evidenced by
this Warrant, the holder shall surrender this Warrant with the form of
subscription at the end hereof duly executed by the holder to the Company at the
address indicated in Section 6 hereof, accompanied by payment of the Purchase
Price. This Warrant may be exercised in whole or in part. In case of the
exercise in part only, the Company will deliver to the holder a new Warrant of
like tenor in the name of the holder, evidencing the right to purchase the
number of shares as to which this Warrant has not been exercised.
-2-
<PAGE>
4. The holder of this Warrant, by acceptance hereof, agrees to
give written notice (the "Notice") to the Company, before exercising this
Warrant, of its intention to do so, describing briefly the holder's intention as
to the disposition to be made of the Shares deliverable on such proposed
exercise hereof. The Company shall not be obligated, pursuant to such proposed
exercise of this Warrant, to deliver any Shares upon exercise hereof unless (i)
if the Shares are acquired for the purpose of immediate resale, a Registration
Statement registering the Shares under the Act, setting forth the proposed terms
of the disposition of such Shares shall have been declared effective by the
Securities and Exchange Commission (the "Commission") or (ii) if the Shares
deliverable upon exercise hereof are being acquired to be held for investment,
the holder of this Warrant shall represent and warrant in writing that such
Shares are then being acquired for investment and without intent of public
reoffering, and that such Shares will not be offered publicly until they have
been registered or an opinion of counsel received stating that they are exempt
from registration, and the certificates representing the Shares may be legended
to that effect.
-3-
<PAGE>
5. Stock Dividends, Reclassification, Reorganization;
Anti-Dilution Provisions. This Warrant is subject to the
following further provisions:
(a) In case, prior to the expiration of this Warrant by
exercise or by its terms, the Company shall issue any shares of its Common Stock
as a stock dividend in excess of 2% in any one fiscal year or subdivide the
number of outstanding shares of Common Stock into a greater number of shares
then, in either of such cases, the Purchase Price per share of the Shares
purchasable pursuant to this Warrant in effect at the time of such action shall
be proportionately reduced and the number of Shares at that time purchasable
pursuant to this Warrant shall be proportionately increased; and, conversely, in
the event the Company shall contract the number of outstanding shares of Common
Stock by combining such shares into a smaller number of shares then, in such
case, the Purchase Price per share of the Shares purchasable pursuant to this
Warrant in effect at the time of such action shall be proportionately increased
and the number of Shares at that time purchasable pursuant to this Warrant shall
be proportionately decreased. If the Company shall, at any time during the life
of this Warrant, declare a dividend payable in cash on its Common Stock and
shall, at substantially the same time, offer to its stockholders a right to
purchase new Common Stock from the proceeds of such dividend or for an amount
-4-
<PAGE>
substantially equal to the dividend, all Common Stock so issued shall, for the
purposes of this Warrant, be deemed to have been issued as a stock dividend. Any
dividend paid or distributed upon the Common Stock in stock of any other class
or securities convertible into shares of Common Stock shall be treated as a
dividend paid in Common Stock to the extent that shares of Common Stock are
issuable upon the conversion thereof.
(b) In case, prior to the expiration of this Warrant by
exercise or by its terms, the Company shall be recapitalized by reclassifying
its outstanding Common Stock, without par value, into stock with a different par
value or by changing its outstanding Common Stock without par value to stock
with par value or the Company, or a successor corporation, shall consolidate or
merge with or convey all or substantially all of its, or of any successor
corporation's, property and assets to any other corporation or corporations (any
such corporation being included within the meaning of the term "successor
corporation" in the event of any consolidation or merger of any such corporation
with, or sale of all or substantially all of the property of any such
corporation to, another corporation or corporations), the holder of this Warrant
shall thereafter have the right to purchase, upon the terms and conditions and
during the time specified in this Warrant, in lieu of the Shares theretofore
purchasable upon the exercise of this Warrant, the kind and amount of shares
-5-
<PAGE>
of stock and other securities receivable upon such recapitalization or
consolidation, merger or conveyance by a holder of the number of shares of
Common Stock which the holder of this Warrant might have purchased immediately
prior to such recapitalization or consolidation, merger or conveyance.
(c) Upon the occurrence of each event requiring an adjustment
of the Purchase Price and of the number of Shares purchasable pursuant to this
Warrant in accordance with, and as required by, the terms of subdivision of this
Section 5, the Company shall forthwith employ a firm of certified public
accountants (who may be regular accountants for the Company) who shall compute
the adjusted Purchase Price and the adjusted number of Shares purchasable at
such adjusted Purchase Price by reason of such event in accordance with the
provisions of subdivision (a) and shall prepare a certificate setting forth such
adjusted Purchase Price and the adjusted number of Shares and showing in detail
the facts upon which such conclusions are based. The Company shall mail
forthwith to the holder of this Warrant a copy of such certificate and,
thereafter, said certificate shall be conclusive and shall be binding upon such
holder unless contested by such holder by written notice to the Company within
ten (10) days after receipt of the certificate of the public accountants by
such holder.
-6-
<PAGE>
(d) In case:
(A) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend
payable otherwise than in cash, or any other distribution in respect of
the Common Stock (including cash) pursuant to, without limitation, any
spin-off, split-off or distribution of the Company's assets; or
(B) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to subscribe for or
purchase any shares of stock of any class or to receive any other
rights; or
(C) of any classification, reclassification or other
reorganization of the capital stock of the Company, consolidation or
merger of the Company with or into another corporation, or conveyance
of all, or substantially all, of the assets of the Company; or
(D) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company then, and in any such case, the Company
shall mail to the holder of this Warrant, at least fifteen (15) days
prior thereto, a notice stating the date, or expected date, on which a
record is to be taken for the purpose of such dividend, distribution or
rights, or the date on which such classification, reclassification,
reorganization, consolidation, merger, conveyance, dissolution,
-7-
<PAGE>
liquidation or winding up is to take place, as the case may be. Such
notice shall also specify the date, or expected date, if any is to be
fixed, as of which holders of Common Stock of record shall be
entitled to participate in such dividend, distribution or rights or
shall be entitled to exchange their shares of Common Stock for
securities or any other property deliverable upon such classification,
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up, as the case may be.
(e) In case the Company, at any time while this Warrant shall
remain unexpired and unexercised, shall sell all, or substantially all, of its
property or dissolve, liquidate or wind up its affairs, the holder of this
Warrant may thereafter receive, upon exercise hereof, in lieu of each share of
Common Stock of the Company which it would have been entitled to receive, the
same kind and amount of any securities or assets as may be issuable,
distributable or payable upon any such sale, dissolution, liquidation or winding
up with respect to each share of Common Stock of the Company.
6. Mailing of Notices, Etc. All notices and other
communications from the Company to the holder of this Warrant shall be mailed
by first-class registered or certified mail, postage prepaid, to the address
furnished to the Company in writing by the holder of this Warrant. All notices
-8-
<PAGE>
from the holder of this Warrant to the Company shall be mailed to the Company
at 91 Michigan Avenue, Paterson, New Jersey 07503.
7. Law Governing. This Warrant shall be construed and
enforced in accordance with, and governed by the laws of, the
State of New Jersey.
IN WITNESS WHEREOF, the Company has caused this
instrument to be signed by its Chairman as of the _______________ day of
_________, 1995.
ROOM PLUS, INC.
By:_____________________________________
Marc Zucker
Chairman
-9-
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To: Room Plus, Inc.
The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise the purchase rights represented by said Warrant
for, and to purchase thereunder, ________ shares of Common Stock of the Company,
and herewith makes payment of $_________, therefore, and requests that the
certificate(s) for such shares be issued in the name of and be delivered to
whose address is
and if such shares shall not be all of the shares purchased hereunder, that a
new Warrant of like tenor for the balance of shares purchasable hereunder be
delivered to the undersigned.
Dated:
_____________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant.)
-10-
<PAGE>
FORM OF ASSIGNMENT
(To be signed only upon such assignment)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ___________________________________________________ the right
represented by the within Warrant to purchase, from the Company, ________ shares
of the Common Stock of the Company, to which the within Warrant relates, and
appoints
attorney to transfer said right, with full power of substitution in the
premises.
Dated:
_____________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant.)
In the presence of
__________________________________________
-11-
<PAGE>
Exhibit 4.4
Void after 4:00 p.m. Warrant to Purchase
New York Time ______________ Shares
(subject to adjustment)
of Common Stock of
Room Plus, Inc.
ROOM PLUS, INC.
Stock Purchase Warrant
1. Grant of Warrant. THIS IS TO CERTIFY THAT, for value
received, upon due exercise of this Warrant, Mark Rubin is entitled to purchase
from ROOM PLUS, INC., a New York corporation (hereinafter called the "Company")
at any time during the period commencing on the date hereof and ending at 4:00
P.M., New York local time, on August 15, 2000 (hereinafter called the
"Expiration Date") all or any part of ____________ shares of fully paid and
nonassessable Common Stock of the Company (hereinafter referred to as the
"Shares"), at a purchase price (the "Purchase Price") of $__________ per share.
2. Restriction on Assignment. This Warrant has been taken for
investment and not for resale or distribution. The holder, by receipt of this
Warrant, acknowledges that he is aware such Warrant has not been registered
under the Securities Act of 1933, as amended (the "Act"). If it becomes possible
under the appropriate sections of the Act to assign this Warrant, any such
assignment shall be made by surrendering this Warrant to the Company at the
-1-
<PAGE>
address indicated in Section 5 hereof, together with an assignment thereof in
the form provided at the end of this Warrant duly executed by the assignor. Upon
such surrender, the Company will execute and deliver, in the case of an
assignment in whole, a new Warrant in the name of the assignee or, in the case
of an assignment in part, a new Warrant in the name of the assignee named in
such instrument of assignment and a new Warrant in the name of assignor
entitling such assignor to subscribe for and purchase the balance of the shares
underlying the Warrant so surrendered and not assigned to the assignee.
3. Exercise of Warrant. In case the holder of this Warrant
shall desire to exercise all or any part of the purchase right evidenced by this
Warrant, the holder shall surrender this Warrant with the form of subscription
at the end hereof duly executed by the holder to the Company at the address
indicated in Section 5 hereof, accompanied by payment of the Purchase Price.
This Warrant may be exercised in whole or in part. In case of the exercise in
part only, the Company will deliver to the holder a new Warrant of like tenor in
the name of the holder, evidencing the right to purchase the number of shares
as to which this Warrant has not been exercised.
4. The holder of this Warrant, by acceptance hereof, agrees to
give written notice (the "Notice") to the Company, before exercising this
Warrant, of his intention to do so, describing briefly the holder's intention as
-2-
<PAGE>
to the disposition to be made of the Shares deliverable on such proposed
exercise hereof. The Company shall not be obligated, pursuant to such proposed
exercise of this Warrant, to deliver any Shares upon exercise hereof unless (i)
if the Shares are acquired for the purpose of immediate resale, a Registration
Statement registering the Shares under the Act and setting forth the proposed
terms of the disposition of such Shares shall have been declared effective by
the Securities and Exchange Commission (the "Commission") or (ii) if the Shares
deliverable upon exercise hereof are being acquired to be held for investment,
the holder of this Warrant shall represent and warrant in writing that such
Shares are then being acquired for investment and without intent of public
reoffering, and that such Shares will not be offered publicly until they have
been registered or an opinion of counsel received stating that they are exempt
from registration, and the certificates representing the Shares may be legended
to that effect.
5. Mailing of Notices, Etc. All notices and other
communications from the Company to the holder of this Warrant shall be mailed
by first-class registered or certified mail, postage prepaid, to the address
furnished to the Company in writing by the holder of this Warrant. All notices
from the holder of this Warrant to the Company shall be mailed to the Company
at 91 Michigan Avenue, Paterson, New Jersey 07503.
-3-
<PAGE>
6. Law Governing. This Warrant shall be construed and
enforced in accordance with, and governed by the laws of, the
State of New Jersey.
IN WITNESS WHEREOF, the Company has caused this instrument to
be signed by its Chairman and Chief Executive Officer as of the 15th day of
August, 1995.
ROOM PLUS, INC.
By:_____________________________________
Marc Zucker
Chairman and Chief Executive Officer
-4-
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To: Room Plus, Inc.
The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise the purchase rights represented by said Warrant
for, and to purchase thereunder, ________ shares of Common Stock of the Company,
and herewith makes payment of $_________, therefore, and requests that the
certificate(s) for such shares be issued in the name of and be delivered to
whose address is
and if such shares shall not be all of the shares purchased hereunder, that a
new Warrant of like tenor for the balance of shares purchasable hereunder be
delivered to the undersigned.
Dated:
_____________________________________
Mark Rubin
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant.)
-5-
<PAGE>
FORM OF ASSIGNMENT
(To be signed only upon such assignment)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto _____ the right represented by the within Warrant to purchase,
from the Company, _____ shares of the Common Stock of the Company, to which the
within Warrant relates, and appoints
attorney to transfer said right, with full power of substitution
in the premises.
Dated:
_____________________________________
Mark Rubin
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant.)
In the presence of
__________________________________________
-6-
<PAGE>
EXHIBIT 11
Calculation of Net Income (Loss) per Common Share
Six Months
Year Ended Ended
December 31, 1995 June 30, 1996
----------------- -------------
Historical net income (loss) ($1,506,448) $1,075
Increase in pro forma income
tax benefits (268,385) --
----------- ---------
Pro forma net income (loss) ($1,238,063) $1,075
=========== =========
Historical number of common
shares outstanding 1,706,250 2,357,917
Stock options and warrants issued
to outside consultants and
employees within one year of the
Offering at less than the initial
public offering price 1,585,735 1,333,750
----------- ---------
Total historical common shares
and equivalent common shares 3,291,985 3,691,667
Additional shares considered in
pro forma per share data:
Issuance of shares in connection
with bridge financing 95,000 --
----------- ---------
Pro forma weighted average number
of common shares 3,386,985 3,691,667
=========== =========
Earnings (loss) per share:
Historical net (loss) income ($0.46) --
Pro forma net (loss) income ($0.37) --
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
As independent auditors, we hereby consent to the use of our reports
and to all references to our firm included in or made a part of this
registration statement.
/s/ Ehrenkrantz and Company
--------------------------------------
EHRENKRANTZ AND COMPANY
Roseland, New Jersey
August 20, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Room Plus, Inc. and is qualified in its entirety by
reference as to such financial statements.
</LEGEND>
<RESTATED>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> JUN-30-1996 JUN-30-1995
<CASH> 22,802 (76,873)
<SECURITIES> 0 0
<RECEIVABLES> 278,064 0
<ALLOWANCES> 77,000 0
<INVENTORY> 1,266,928 0
<CURRENT-ASSETS> 2,000,371 0
<PP&E> 2,110,530 0
<DEPRECIATION> 1,669,734 0
<TOTAL-ASSETS> 2,887,106 0
<CURRENT-LIABILITIES> 3,230,484 0
<BONDS> 0 0
0 0
0 0
<COMMON> 3,618 0
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 2,887,106 0
<SALES> 6,671,082 6,325,885
<TOTAL-REVENUES> 6,671,082 6,325,885
<CGS> 2,919,695 3,780,917
<TOTAL-COSTS> 2,919,695 3,780,917
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 23,426 40,260
<INCOME-PRETAX> 1,375 (1,420,660)
<INCOME-TAX> 300 (28,261)
<INCOME-CONTINUING> 1,075 (1,392,399)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,075 (1,392,399)
<EPS-PRIMARY> 0 (.35)
<EPS-DILUTED> 0 (.35)
</TABLE>
