U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB/A
Amendment Number 1
[X] Quarterly Report Under Section 13 or 15(d) of The Securities
Exchange Act of 1934 For The Quarterly Period Ended September
30, 1998.
[ ] 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 11, 1998 was 4,385,000.
The number of the Issuer's Common Stock Purchase Warrants outstanding
as of November 11, 1998 was 2,530,000.
Transitional small business disclosure format:
Yes No X
--- ---
1
<PAGE>
ROOM PLUS, INC.
FORM 10-QSB/A
This Form 10-QSB/A amends the following item of the Company's Quarterly Report
on Form 10-QSB previously filed with the Securities and Exchange Commission on
November 16, 1998.
INDEX
Part I FINANCIAL INFORMATION PAGE
- ------ --------------------- ----
Item 1. Financial Statements
Balance Sheets as of September 30, 1998 and December 31, 1997 3
Statements of Operations for the three and nine
months ended September 30, 1998 and 1997 4
Statements of Cash Flows for the nine months ended
September 30, 1998 and 1997 5
Notes to Financial Statements 6
Item 2. Management's Discussions and Analysis of
Financial Condition and Results of Operations 7
Part II OTHER INFORMATION
- ------- -----------------
Number Exhibit Description
- ------ -------------------
11 Calculation of Earnings (Loss) Per Share 10
27 Financial Data Schedule 11
Signatures 12
- 2 -
<PAGE>
ROOM PLUS, INC.
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30 December 31
1998 1997
------------ -----------
(Restated)
----------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents...................................... $ 789,019 $ 185,843
Accounts receivable............................................ 68,483 67,685
Inventories.................................................... 2,203,947 1,904,326
Notes receivable, officers..................................... 12,000 12,400
Prepaid expenses............................................... 370,915 492,555
Deferred income taxes.......................................... 267,000 134,500
----------- -----------
Total Current Assets........................................ 3,711,364 2,797,309
----------- -----------
Property and Equipment, net...................................... 1,535,750 1,804,303
----------- -----------
Other Assets
Security deposits and deferred charges......................... 157,983 249,474
Deferred income taxes.......................................... 951,000 1,038,500
Notes receivable, officers..................................... 175,414 177,965
----------- -----------
1,284,397 1,465,939
----------- -----------
$6,531,511 $6,067,551
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt.............................. $ 163,483 $ 212,791
Notes payable.................................................. -- 400,070
Due to related companies....................................... 326,701 258,770
Accounts payable and accrued expenses.......................... 1,339,863 1,604,047
Sales taxes payable............................................ 226,488 108,475
Customer deposits and other advances........................... 453,742 528,517
----------- -----------
Total Current Liabilities................................... 2,510,227 3,112,670
----------- -----------
Long-Term Debt, less current portion............................. 1,013,110 447,857
----------- -----------
Stockholders' Equity
Common stock; authorized, 10,000,000 shares; $.00133 par value;
4,385,000 shares issued and outstanding...................... 5,832 5,832
Additional paid-in capital..................................... 7,525,250 6,512,645
Deficit........................................................ (4,522,958) (4,011,453)
----------- -----------
3,008,124 2,507,024
----------- -----------
$6,531,511 $6,067,551
=========== ===========
</TABLE>
- 3 -
<PAGE>
ROOM PLUS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30 September 30
----------------------------------------------------------
1998 1997 1998 1997
----------------------------------------------------------
(Restated) (Restated)
--------- ---------
<S> <C> <C> <C> <C>
Revenues............................ $14,228,450 $12,145,971 $5,224,239 $4,862,979
Cost of goods sold.................. 5,954,324 5,029,014 1,990,576 2,009,492
----------- ----------- ---------- ----------
Gross profit........................ 8,274,126 7,116,957 3,233,663 2,853,487
----------- ----------- ---------- ----------
Expenses
Selling......................... 7,072,458 7,017,136 2,503,410 2,538,190
General and administrative...... 1,535,325 2,253,829 519,527 804,481
----------- ----------- ---------- ----------
8,607,783 9,270,965 3,022,937 3,342,671
----------- ----------- ---------- ----------
Earnings (loss) from operations...... (333,657) (2,154,008) 210,726 (489,184)
----------- ----------- ---------- ----------
Other income (expenses)
Interest income................. 17,317 51,372 11,755 11,678
Interest expense................ (306,040) (77,067) (93,263) (26,273)
Miscellaneous income............ 65,875 16,809 16,033 20,000
----------- ----------- ---------- ----------
(222,848) (8,886) (65,475) 5,405
----------- ----------- ---------- ----------
Earnings (loss) before income
tax benefits..................... (556,505) (2,162,894) 145,251 (483,779)
Income tax provision (benefits)..... (45,000) (931,405) 60,000 (184,439)
----------- ----------- ---------- ----------
Net earnings (loss)............. $ (511,505) $(1,231,489) $ 85,251 $(299,340)
=========== =========== ========== ==========
Weighted average common
shares outstanding.............. 4,385,000 4,385,000 4,385,000 4,385,000
=========== =========== ========== ==========
Net earnings (loss) per share....... $ (.15) $ (.28) $ .02 $ (.07)
=========== =========== ========== ==========
</TABLE>
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<PAGE>
ROOM PLUS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
--------------------------
1998 1997
--------------------------
(Restated)
----------
<S> <C> <C>
Cash Flows from Operating Activities
Net loss................................................ $ (511,505) $(1,231,489)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation............................................ 199,262 184,074
Amortization of discount................................ 38,336 --
Deferred income taxes .................................. (45,000) (934,223)
(Increase) decrease in operating assets
Accounts receivable................................... (798) (55,989)
Inventories........................................... (299,621) (417,716)
Prepaid expenses...................................... 121,640 (196,536)
Deferred charges...................................... 80,124 112,290
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses................. (271,028) 97,621
Payroll and sales taxes payable....................... 118,013 36,488
---------- -----------
Net cash used in operating activities................. (570,577) (2,405,480)
---------- -----------
Cash Flows from Investing Activities
Purchases of property and equipment..................... (68,242) (921,540)
Disposal of leasehold improvements...................... 137,533 --
Net loans from certain shareholders..................... 2,951 31,086
Increase in investments................................. -- (100,000)
Decrease (increase) in security deposits and other assets 11,367 (5,634)
---------- -----------
Net cash provided by (used in) investing activities... 83,609 (996,088)
---------- -----------
Cash Flows from Financing Activities
Net repayment of short-term debt........................ (400,070) (25,000)
Net proceeds of long-term debt.......................... 477,609 398,111
Proceeds from detachable warrants....................... 1,012,605 --
---------- -----------
Net cash provided by financing activities............. 1,090,144 373,111
---------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents....... 603,176 (3,028,457)
Cash and Cash Equivalents, beginning of period............. 185,843 3,178,088
---------- -----------
Cash and Cash Equivalents, end of period................... $ 789,019 $ 149,631
========== ===========
</TABLE>
- 5 -
<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 Annual Report on Form 10-KSB for
the year ended December 31, 1997 of Room Plus, Inc. (the "Company"),
as amended, as filed with the Securities and Exchange Commission.
In the opinion of management of the Company, the accompanying
unaudited financial statements contain all adjustments (which include
only normal recurring adjustments) necessary in order to make the
balance sheets, statements of operations and deficit and statements
of cash flow not misleading.
The results of operations for the nine-month period ended September
30, 1998, are not necessarily indicative of the operating results to
be expected for the full year.
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
1998 1997
------------ -----------
Finished goods $1,629,192 $1,451,814
Work in process 90,100 25,258
Raw materials 484,655 427,254
---------- ----------
$2,203,947 $1,904,326
========== ==========
Note 3: Restatement
During the course of the Company's 1998 audit, certain year-end
adjustments were recorded by the Company that related to 1998 interim
quarters. For the nine and three months ended September 30, 1998,
such adjustments amounted to $189,830, or $.04 per share, and
$38,336, or $.01 per share, respectively.
- 6 -
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1998 and 1997
Revenues for the nine months ended September 30, 1998 totaled $14,228,450
as compared to $12,145,971 for the nine months ended September 30, 1997,
an increase of $2,082,479, or 17.1%. Existing store revenue increased
$1,590,158, or 13.6%, as compared to September 30, 1997, while four new
showrooms realized $642,321 in revenues during the same period and
revenues were reduced $150,000 as a result of a store closing on June 30,
1998.
Cost of goods sold totaled $5,954,324 for the first nine months of 1998
as compared to $5,029,014 for the first nine months of 1997. This
increase of $925,310, or 18.4%, was primarily the result of the increase
in revenues. Cost of goods sold increased as a percentage of revenues
from 41.4% to 41.8%.
Selling, general and administrative expenses totaled $8,607,783 for the
first nine months of 1998 as compared to $9,270,965 for the first nine
months of 1997. The decrease of $663,182, or 7.2%, was primarily the
result of reduced advertising expenses, professional fees and certain
store operating costs.
Loss from operations for the period ended September 30, 1998 was 333,657,
or 2.3% of revenues, as compared to a loss from operations of $2,154,008,
or 17.7% of revenues, during the period ended September 30, 1997.
Other expenses for the period ended September 30, 1998 were $222,848 as
compared to $8,886 for September 30, 1997. The increase in other expenses
of $213,962 is primarily due to an increase in net interest expense which
was partially offset by a recovery of certain store closing costs. These
changes result from the Company's utilization of its cash reserves and
increased use of its borrowing facility, the noncash interest associated
with the issuance of detachable warrants and the sale of leasehold
improvements at one of its locations.
For the first nine months of 1998, the Company recorded a net deferred
income tax benefit of $45,000 compared to net deferred income tax
benefits of $931,405 in 1997.
Due to the combination of the preceding factors and a restatement of the
prior two quarters of 1998, the Company realized a net loss of $511,505,
or 3.6% of revenues, during the nine months ended September 30, 1998 as
compared to a net loss of $1,231,489, or 10.1% of revenues, during the
nine months ended September 30, 1997.
Three Months Ended September 30, 1998 and 1997
Revenues for the three months ended September 30, 1998, totaled
$5,224,239 as compared to $4,862,979 for the three months ended September
30 1997, an increase of $361,260, or 7.4%. There were no new showrooms
opened during the three-month period ended September 30, 1998.
Cost of goods sold for the three months ended September 30, 1998, were
$1,990,576, or 38.1% of revenues, as compared to $2,009,492, or 41.3% of
revenues, for the same period in 1997. The decrease in cost of goods sold
as a percentage of revenues is primarily due to the increase in volume
and production efficiencies.
Selling, general and administrative expenses amounted to $3,022,937, or
57.9% of revenues, for the three months ended September 30, 1998,
compared to $3,342,671, or 68.7% of revenues, for the three months ended
September 30, 1997. The decrease of $319,734, or 9.6%, was primarily the
result of reduced advertising expenses, professional fees and certain
store operating costs.
Earnings from operations for the period ended September 30, 1998 was
$210,726, or 4.0% of revenues, as compared to a loss from operations of
$(489,184), or (10.1%) of revenues, during the period ended September 30,
1997.
- 7 -
<PAGE>
Item 2. (Continued)
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Other expenses for the three months ended September 30, 1998 were $65,475
as compared to income of $5,405 in the three months ended September 30,
1997. The primary reasons for the $70,879 net increase in other expenses
was an increase in interest costs associated with the Company's
borrowings and the noncash interest associated with the issuance of
detachable warrants.
In the three months ending September 30, 1998, the Company recorded a net
deferred income tax provision of $60,000 compared to net deferred income
tax benefits of $184,439 in 1997.
As a result of the preceding factors, the Company realized net earnings
of $85,251, or 1.6% of revenues, during the three months ended September
30, 1998 as compared to a net loss of $(299,340), or (6.2%) of revenues,
during the three months ended September 30, 1997.
Liquidity and Capital Resources
The Company had working capital of $1,201,087 at September 30, 1998,
which represented a net change of $1,516,448 from the working capital
deficit of $315,361 at December 31, 1997.
The Company's operating activities used cash of $570,577 and $2,405,480
for the nine months ended September 30, 1998 and 1997, respectively. For
the nine months ended September 30, 1998, cash was used primarily to
finance inventory and reduce trade payables. For the nine months ended
September 30, 1997, cash was used to primarily finance inventory and the
initial costs for six new retail showrooms.
The Company's investing activities provided (used) cash of $83,609 and
$(996,088), for the nine months ended September 30, 1998 and 1997,
respectively. The cash provided by the Company's investing activities for
the nine months ended September 30, 1998, results primarily from funds
received in connection with the closing of one of the Company's retail
showrooms. The cash used by the Company's investing activities for the
nine months ended September 30, 1997, was primarily the result of the
acquisition of computerized machinery and equipment, which improved
operating efficiency and lowered costs of manufacturing, and leasehold
improvements for four new showrooms.
The Company's financing activities provided cash of $1,090,144 and
$373,111, for the nine months ended September 30, 1998 and 1997,
respectively. The cash provided by the financing activities for the nine
months ended September 30, 1998 was the result of a $1,500,000 two-year
term loan from the Company's new Chairman of the Board of Directors, net
of the repayment of the Company's bank line of credit and certain
equipment financing arrangements. 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 Company's current cash position coupled with significant improvements
in operations should, in management's opinion, provide sufficient capital
to enable the Company to fund its operations for at least the next twelve
months. 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.
Year 2000 Issues
The Company continues to evaluate and adjust all known date-sensitive
systems and equipment for Year 2000 ("Y2K") compliance. The assessment
phase of the Company's Y2K project includes both information technology
as well as non- information technology equipment. The Company is using
both internal and external resources to identify and test the systems for
Y2K compliance, and to reprogram or replace them when necessary. It is
presently anticipated that such efforts will be completed by late-1999.
The Company does not separately track the internal costs incurred for the
Y2K project, and such costs are principally the related payroll costs for
its information systems group. These costs are expensed as incurred. All
such costs are being funded through operating cash flows. The only third
parties with whom the Company has material relationships are the various
suppliers of raw materials or purchased products. The Company
- 8 -
<PAGE>
Item 2. (Continued)
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
has begun to survey those significant suppliers (several of which are
public companies and have disclosed their Year 2000 status) to determine
the extent to which the Company's, systems and operations are vulnerable
to any failure by those third-party suppliers to remediate their own Y2K
problems. Management has not been informed of or discovered any facts
that would suggest that those third-party suppliers will not be Y2K
compliant. There can be no guarantee, however, that those suppliers will
successfully attain Y2K compliance and that such failure to so comply
would not have an adverse effect on the Company. Moreover, should any one
supplier suffer a serious Y2K problem, the Company would be able to
obtain appropriate replacement products from alternative suppliers as the
Company is not solely dependent upon any one supplier for any of its
primary raw materials or purchased products. Further, the Company will
evaluate the extent to which contingency plans may be needed based upon
communications with third-party suppliers and assessment of other outside
risks, such contingency plans shall be finalized during 1999. Management
believes, however, that ongoing communication with and assessment of the
third-party suppliers will minimize any of the above discussed risks.
"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..
- 9 -
<PAGE>
Exhibit No. 11
ROOM PLUS, INC.
Computation of Earnings (Loss) per Common Share
(See Note 1 of Notes to Financial Statements)
<TABLE>
<CAPTION>
Nine Months Ended September 30
------------------------------
1998 1997
----------- -----------
(Restated)
----------
<S> <C> <C>
Basic and Diluted
Net (loss) applicable to common stock $(511,505) $(1,231,489)
========= ===========
Shares
Weighted average number of common shares outstanding 4,385,000 4,385,000
Basic and diluted earnings (loss) per common share $ (.12) $ (0.28)
========= ===========
</TABLE>
Assumed exercise of options and warrants which could have been purchased with
the proceeds from the exercise of such options and warrants would have an
anti-dilutive effect on earnings per share.
- 10 -
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this amendment to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: May 11, 1999 ROOM PLUS, INC.
By: /s/ Jay H. Goldberg
--------------------
Name: Jay H. Goldberg
Title: Chief Financial Officer
(Principal Accounting and Financial Officer)
- 11 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 789,019
<SECURITIES> 0
<RECEIVABLES> 68,483
<ALLOWANCES> 0
<INVENTORY> 2,203,947
<CURRENT-ASSETS> 3,711,364
<PP&E> 3,630,900
<DEPRECIATION> 2,095,150
<TOTAL-ASSETS> 6,531,511
<CURRENT-LIABILITIES> 2,510,277
<BONDS> 0
0
0
<COMMON> 5,832
<OTHER-SE> 7,525,250
<TOTAL-LIABILITY-AND-EQUITY> 6,531,511
<SALES> 14,228,450
<TOTAL-REVENUES> 14,228,450
<CGS> 5,954,324
<TOTAL-COSTS> 8,607,783
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 306,040
<INCOME-PRETAX> (556,505)
<INCOME-TAX> (45,000)
<INCOME-CONTINUING> (511,505)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (511,505)
<EPS-PRIMARY> (0.15)
<EPS-DILUTED> (0.15)
</TABLE>
