U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
PERIOD ENDED SEPTEMBER 30, 1997.
[ ]TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE TRANSITION PERIOD FROM ________ TO ________
Commission File Number 1-14478
ROOM PLUS, INC.
(Exact name of small business issuer as specified in its charter)
NEW YORK 11-2622051
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
91 Michigan Avenue
Paterson, NJ 07503
(Address of principal executive offices)
(973) 523-4600
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes _X_ No ___
The number of shares outstanding of the Issuer's Common Stock $.00133 par value,
as of November 10, 1997 was 4,385,000.
The number of the Issuer's Common Stock Purchase Warrants outstanding as of
November 10, 1997 was 2,530,000.
Transitional small business disclosure format:
Yes ___ No _X_
<PAGE>
ROOM PLUS, INC.
FORM 10-QSB
INDEX
Part I FINANCIAL INFORMATION PAGE
- ------ --------------------- ----
Item 1. Financial Statements
Balance Sheet as of September 30, 1997 1
Statements of Operations for the three and nine
months ended September 30, 1997 and 1996 2
Statement of Changes in Shareholders' Equity
for the nine months ended September 30, 1997 3
Statements of Cash Flows for the three and nine
months ended September 30, 1997 and 1996 4
Notes to Financial Statements 5
Item 2. Management's Discussions and Analysis of
Financial Condition and Results of Operations 6
Part II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
(a) Exhibit Index
Number Exhibit Description
11 Calculation of Earnings (Loss) Per Common Share 10
Signatures 11
<PAGE>
ROOM PLUS, INC.
BALANCE SHEET
(Unaudited)
September 30, 1997
ASSETS
Current Assets
Cash........................................................... $ 149,631
Investments in short-term certificate of deposits.............. 100,000
Inventory...................................................... 1,868,123
Accounts receivable............................................ 94,877
Notes receivable, officers..................................... 12,000
Deferred income taxes.......................................... 215,000
Prepaid expenses............................................... 572,074
----------
Total Current Assets......................................... 3,011,705
----------
Property and Equipment, at cost................................... 3,741,623
Less: Accumulated depreciation................................. 1,936,173
----------
1,805,450
----------
Other Assets
Security deposits.............................................. 165,183
Deferred charges............................................... 128,490
Notes receivable, officers..................................... 182,606
Deferred income taxes.......................................... 769,800
----------
1,246,079
----------
$6,063,234
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt.............................. $ 209,651
Notes payable - bank........................................... 50,000
Due to related companies....................................... 328,093
Accounts payable and accrued expenses.......................... 875,026
Payroll and sales taxes payable................................ 159,260
Customer deposits and other advances........................... 606,710
----------
Total Current Liabilities.................................... 2,228,740
----------
Long -Term Debt, less current portion............................. 498,195
----------
Stockholders' Equity
Capital stock
Authorized, 10,000,000 shares at $.00133 par value;
4,385,000 shares issued and outstanding.................... 5,832
Additional paid-in capital..................................... 6,512,645
Deficit........................................................ (3,182,178)
----------
3,336,299
----------
$6,063,234
==========
-1-
<PAGE>
ROOM PLUS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
--------------------------- ---------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues .......................... $12,145,971 $10,545,010 $ 4,862,979 $ 3,873,928
Cost of goods sold ................ 4,941,867 4,242,185 1,922,345 1,607,680
----------- ----------- ----------- -----------
Gross profit ...................... 7,204,104 6,302,825 2,940,634 2,266,248
----------- ----------- ----------- -----------
Expenses
Selling ...................... 6,881,465 4,682,835 2,402,519 1,697,409
General and administrative ... 2,193,134 1,443,072 743,786 409,939
----------- ----------- ----------- -----------
9,074,599 6,125,907 3,146,305 2,107,348
----------- ----------- ----------- -----------
Earnings (loss) from operations ... (1,870,495) 176,918 (205,671) 158,900
----------- ----------- ----------- -----------
Other income (deductions)
Interest income .............. 51,372 10,052 11,678 19,284
Interest expense ............. (77,067) (45,318) (26,273) (21,892)
Miscellaneous income (expense) 16,809 16,016 20,000 --
----------- ----------- ----------- -----------
(8,886) (19,250) 5,405 (2,608)
----------- ----------- ----------- -----------
Earnings (loss) before income
taxes (benefits) ............... (1,879,381) 157,668 (200,266) 156,292
Income taxes (benefits) ........... (808,605) 19, 572 (61,639) 19,272
----------- ----------- ----------- -----------
Net earnings (loss) .......... $(1,070,776) $ 138,096 $ (138,627) $ 137,020
=========== =========== =========== ===========
Weighted average common
shares outstanding ........... 4,385,000 3,559,028 4.385.000 3,559,028
=========== =========== =========== ===========
Net earnings (loss) per share ..... $ (.24) $ .04 $ (.03) $ .04
=========== =========== =========== ===========
</TABLE>
-2-
<PAGE>
ROOM PLUS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Issued and Issued and
Authorized Outstanding Outstanding Additional
Common Common Common Paid-in
Shares Shares Amount Warrants Amount Capital Deficit Total
---------- --------- ------ --------- -------- ---------- ----------- -----------
BALANCE -
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January 1, 1997 10,000,000 4,385,000 $5,832 2,530,000 $253,000 $6,259,645 $(2,111,402) $ 4,407,075
Net loss for the
nine months ended
September 30, 1997 -- -- -- -- -- -- (1,070,776) (1,070,776)
---------- --------- ------ --------- -------- ---------- ----------- -----------
BALANCE -
September 30, 1997 10,000,000 4,385,000 $5,832 2,530,000 $253,000 $6,259,645 $(3,182,178) $ 3,336,299
========== ========= ====== ========= ======== ========== =========== ===========
</TABLE>
-3-
<PAGE>
ROOM PLUS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
--------------------------- -------------------------
1997 1996 1997 1996
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities
Net earning (loss) ........................................... $(1,070,776) $ 138,096 $(138,627) $ 137,020
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities
Depreciation ................................................. 184,074 77,634 76,561 25,097
Reserve for bad debts ........................................ -- -- -- (77,412)
Deferred income taxes ........................................ (811,423) 19,200 (62,900) 18,900
(Increase) decrease in operating assets
Accounts receivable ........................................ (55,989) 66,307 (18,024) 92,126
Inventories ................................................ (417,716) (178,093) (83,233) (140,726)
Prepaid expenses ........................................... (196,536) (217,978) (88,132) (32,320)
Deferred charges ........................................... 112,290 (37,212) 34,381 (49,412)
Increase (decrease) in operating liabilities
Accounts payable, accrued expenses and
other liabilities ......................................... (185,892) 270,969 (120,813) 305,266
Payroll and sales taxes payable ............................ 36.488 (20,202) 20,693 48,478
Cash surrender value, officers' life insurance ............. -- 5,318 -- --
----------- --------- --------- ---------
Net cash provided by (used in)
operating activities ..................................... (2,405,480) 124,039 (380,094) 327,017
----------- --------- --------- ---------
Cash Flows from Investing Activities
Purchases of property and equipment ......................... (921,540) (268,565) (68,128) (161,907)
Net loans (to) from certain shareholders .................... 31,086 (48,940) (7,334) (3,291)
Increase in investments ..................................... (100,000) -- -- --
Increase in security deposits and other assets .............. (5,634) (46,521) -- (6,886)
----------- --------- --------- ---------
Net cash used in investing activities ...................... (996,088) (364,026) (75,462) (172,084)
----------- --------- --------- ---------
Cash Flows from Financing Activities
Net proceeds (repayment) of short-term debt .................. (25,000) 395,000 50,000 (150,000)
Net proceeds (repayment) of long-term debt ................... 398,111 (153,448) (43,603) (87,606)
Proceeds from issuance of common stock ....................... -- 332,690 -- 332,690
Charges in connection with initial
public offering ............................................ -- (153,209) -- (153,209)
----------- --------- --------- ---------
Net cash provided by (used in)
financing activities ..................................... 373,111 421,033 6,397 (58,125)
----------- --------- --------- ---------
Net Increase (Decrease) in Cash .................................. (3,028,457) 181,046 (449,159) 96,808
Cash (overdraft), beginning of period ............................ 3,178,088 (61,436) 598,790 22,802
----------- --------- --------- ---------
Cash, end of period .............................................. $ 149,631 $ 119,610 $ 149,631 $ 119,610
=========== ========= ========= =========
</TABLE>
-4-
<PAGE>
ROOM PLUS, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1: BASIS OF PRESENTATION
---------------------
The accompanying unaudited financial statements, which are for
interim periods, do not include all disclosures provided in the
annual financial statements. These unaudited financial statements
should be read in conjunction with the financial statements and
footnotes thereto contained in the Room Plus, Inc. (the "Company")
Annual Report on Form 10-KSB for the year ended December 31, 1996,
as filed with the Securities and Exchange Commission.
In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows of the Company for
the interim periods presented.
The results of operations for the nine-month period ended September
30, 1997, are not necessarily indicative of the operating results
for the full year. Certain amounts have been reclassified to
conform with the current period presentation. These
reclassifications had no effect on net earnings or loss.
Note 2: INVENTORIES
-----------
Inventories are stated at the lower of cost determined by the
first-in, first-out method or market and consist of the following:
September 30 December 31
------------ -----------
1997 1996
------------ -----------
Showrooms $1,474,458 $1,151,107
Work in process 30,602 8,802
Raw materials 363,063 290,498
---------- ----------
$1,868,123 $1,450,407
========== ==========
-5-
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1997 and 1996
Revenues for the nine months ended September 30, 1997 totaled
$12,145,971 as compared to $10,545,010 for the nine months ended
September 30, 1996 an increase of $1,600,961 or 15.2%. Existing store
revenue decreased $759,365 as compared to September 30, 1996, while six
new showrooms realized $2,360,326 in revenues during the same period.
Cost of goods sold totaled $4,941,867 or 40.7% of revenues for the first
nine months of 1997 as compared to $4,242,185 or 40.2% of revenues for
the first nine months of 1996. This increase of $699,682 or 16.5% was
primarily the result of the increase sales in volume.
As a result of the foregoing, the Company realized an increase in gross
profit in 1997 as compared to 1996, with a gross profit of $7,204,104 or
59.3% of revenues in the first nine months of 1997 as compared to
$6,302,825 or 59.8% of revenues achieved during the same period in 1996.
Selling, general and administrative expenses totaled $9,074,599 for the
first nine months of 1997 as compared to $6,125,907 for the first nine
months of 1996. The increase of $2,948,692 or 48.1% was primarily the
result of increased professional fees and expenses associated with the
opening of six new showrooms, including, but not limited to, an increase
in occupancy costs, salaries, commissions and advertising expense.
Operating loss for the period ended September 30, 1997 was $1,870,495 or
15.4% of revenues as compared to operating income of $176,918 during the
period ended September 30, 1996.
Other income (deductions) for the period ended September 30, 1997 was
($8,886) as compared to ($19,250) for September 30, 1996. The decrease
in other income (deductions) of $10,364 is primarily due to an increase
of interest income of approximately $40,000 which was offset by an
increase in interest expense of approximately $30,000 from the leasing
of new machinery and equipment.
For the first nine months of 1997, the Company also has recorded net
deferred income tax benefits of $808,605, which will be used to offset
future income tax liabilities.
Due to the combination of the preceding factors, the Company realized a
net loss of $1,070,776 or 8.8% of revenues during the nine months ended
September 30, 1997 as compared to net income of $138,096 or 1.3% during
the nine months ended September 30, 1996.
Three Months Ended September 30, 1997 and 1996
Revenues for the three months ended September 30, 1997, totaled
$4,862,979 as compared to $3,873,928 for the three months ended
September 30 1996, an increase of $989,051 or 25.5%. This increase is
primarily due to the opening of six additional retail showrooms.
Cost of goods sold for the three months ended September 30, 1997, were
$1,922,345 or 39.5% of revenues as compared to $1,607,680 or 41.5% of
revenues for the same period in 1996. This increase of $314,665 or 19.6%
is primarily due to costs associated with the increase in revenues. Cost
of goods sold decreased as a percentage of revenues due to the continued
efficiencies gained through the introduction of new machinery and
equipment.
As a result of the foregoing, the Company realized a gross profit in the
three months ended September 30, 1997 of $2,940,634 or 60.5% of revenue
as compared to 1996, with a gross profit of $2,266,248 or 58.5% of
revenues.
Selling, general and administrative expenses amounted to $3,146,305 or
64.7% of revenues for the three months ended September 30, 1997,
compared to $2,107,348 or 54.4% of revenues for the three months ended
September 30, 1996.
-6-
<PAGE>
Item 2. (Continued)
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The increase of $1,038,957 or 49.3% was primarily the result of expenses
associated with the opening of six new showrooms, including, but not
limited to, an increase in occupancy costs, salaries, commissions and
advertising expense.
Due to the increase in expenses, the Company realized an operating loss
for the three months ended September 30, 1997, of $205,671 or 4.2% of
revenues as compared to operating earnings of $158,900 or 4.1% or
revenues during the three months ended September 30, 1996.
Other income (deductions) for the three months ended September 30, 1997
were $5,405 as compared to ($2,608) in the three months ended September
30, 1996. The primary reasons for the $8,013 net increase in other
income were a $20,000 gain on the sale of equipment offset by a net
increase in interest expense of approximately $12,000, which was the
result of capital leases on new machinery and equipment.
In the three months ending September 30, 1997, the Company also recorded
income tax benefits of $61,639, which will be used to offset future
income tax liabilities.
The preceding factors combined to show a net loss of $138,627 in the
three months ended September 30 1997, as compared to net earnings of
$137,020 for the three months ended September 30 1996.
Liquidity and Capital Resources
The Company had working capital of $782,965 at September 30 1997, which
represented a net change of $1,989,045 or 165% from the working capital
deficit of $1,206,080 at September 30, 1996. The increase in working
capital was mainly due to the realization of the net proceeds from the
Company's initial public offering ("IPO") in November 1996.
The Company's operating activities provided (used) cash of $(2,405,480)
and $124,039 for the nine months ended September 30, 1997 and 1996,
respectively, and $(380,094) and $327,017 for the three months ended
September 30, 1997 and 1996, respectively. For the nine months ended
September 30, 1997, cash was used to primarily finance inventory and
selling expenses for six new retail showrooms. In the nine months ended
September 30, 1996, cash was provided primarily from earnings and an
increase in accounts payable and accrued expenses.
In the three months ended September 30, 1997, cash was used to continue
the support of the six new showrooms and to take advantage of purchase
discounts by paying vendors within 10 rather than 30 days. For the three
months ended September 30, 1996 cash was provided by earnings and an
increase in accounts payable, which were partly offset by increased
inventory levels.
The Company's investing activities used cash of $996,088, $364,026,
$75,462, and $172,084 for the nine months ended September 30, 1997 and
1996 and the three months ended September 30, 1997 and 1996,
respectively. The cash used by the Company's investing activities for
the nine months ended September 30, 1997, is primarily the result of the
purchase of computerized machinery and equipment, which will improve
operating efficiency and lower costs of manufacturing as well as provide
improvements to new showrooms. The cash used for the nine months ended
September 30, 1996 was the result of purchases of equipment. The cash
used by investing activity for the three months ended September 30, 1997
was the result of purchases of property and equipment. The cash used by
investing activity for the three months ended September 30, 1996 was the
result of purchases of equipment as well as improvements to three new
retail showrooms.
-7-
<PAGE>
Item 2. (Continued)
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company's financing activities provided (used) cash of $373,111,
$421,033, $6,397 and $(58,125) for the nine months ended September 30,
1997 and 1996, and the three months ended September 30, 1997 and 1996,
respectively. The cash provided by financing activities for the nine
months ended September 30, 1997, was the result of capital leases which
the company used toward the purchase of machinery and equipment. The
cash provided by the Company's financing activities for the nine months
ended September 30, 1996, was the result of borrowings from the
Company's line of credit and the net proceeds from the sale of common
stock. The cash used for the three months ended September 30, 1996, was
the result of expenses associated with the IPO and a partial repayment
of the Company's line of credit.
The Company expects that cash flow from operations together with the
remaining net proceeds from its IPO will be sufficient to fund the
Company's business operations for at least the next six months. If such
sources should prove insufficient, the Company would either curtail its
expansion plans or seek to raise funds through bank borrowings or sales
of its securities. However, there is no assurance that such borrowings
or securities sales could be achieved on terms acceptable to the
Company, if at all. The Company may also utilize its available bank line
of credit to fund short-term fluctuations in its cash flow.
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.
"Safe Harbor" Statement
Forward looking statements made herein are based on current expectations
of the Company that involve a number of risks and uncertainties and such
forward looking statements should not be considered guarantees of future
performance. These statements are made under the "Safe Harbor
Provisions" of the Private Securities Litigation Reform Act of 1995. The
factors that could cause actual results to differ materially from the
forward looking statements include the impact of competitive products
and pricing, product demand and market acceptance risks, the presence of
competitors with greater financial resources than the Company and an
inability to arrange additional debt or equity financing.
-8-
<PAGE>
Part II.
OTHER INFORMATION
Item 1. - Legal Proceedings
Not applicable
Item 2. - Changes in Securities
Not applicable
Item 3. - Defaults upon Senior Securities
Not applicable
Item 4. - Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. - Other Information
Not applicable
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibits description
11 Calculation of net earnings per common share
(b) Reports on Form 8-K:
None
-9-
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: November 13, 1997 ROOM PLUS, INC.
By: /s/ Jay H. Goldberg
-------------------
Name: Jay H. Goldberg
Title: Chief Financial Officer
-10-
EXHIBIT NO. 11
--------------
ROOM PLUS, INC.
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
(See Note 1 of Notes to Financial Statements)
Nine Months Ended September 30
1997 1996
----------- ----------
PRIMARY
Net earnings (loss) applicable to common stock $(1,070,776) $ 138,096
=========== ==========
Shares
Weighted average number of common
shares outstanding 4,385,000 2,645,278
Primary Earnings (Loss) per Common Share $ (0.24) $ .05
=========== ==========
ASSUMING FULL DILUTION
Net earnings (loss) applicable to common stock $(1,070,776) $ 138,096
=========== ==========
Shares
Weighted average number of common shares
outstanding 4,385,000 2,645,278
Assuming exercise of options and warrants which
could have been purchased with the proceeds
from the exercise of such options and warrants 1,234,519 913,750
----------- ----------
Weighted average number of shares outstanding
as adjusted 5,619,519 3,559,028
=========== ==========
Earnings (Loss) per Common Share Assuming
Full Dilution $ (0.19) $ .04
=========== ==========
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001009773
<NAME> ROOM PLUS, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 149,631
<SECURITIES> 0
<RECEIVABLES> 94,877
<ALLOWANCES> 0
<INVENTORY> 1,868,123
<CURRENT-ASSETS> 3,011,705
<PP&E> 3,741,623
<DEPRECIATION> 1,936,173
<TOTAL-ASSETS> 6,063,234
<CURRENT-LIABILITIES> 2,228,740
<BONDS> 0
0
0
<COMMON> 5,832
<OTHER-SE> 6,512,645
<TOTAL-LIABILITY-AND-EQUITY> 6,063,234
<SALES> 12,145,971
<TOTAL-REVENUES> 12,145,971
<CGS> 4,941,867
<TOTAL-COSTS> 9,074,599
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (77,067)
<INCOME-PRETAX> (1,879,381)
<INCOME-TAX> (808,605)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,070,776)
<EPS-PRIMARY> (.24)
<EPS-DILUTED> (.19)
</TABLE>
