SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) January 19, 1999
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Room Plus, Inc.
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(Exact Name of Registrant as Specified in Charter)
New York 1-14478 11-2622051
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
91 Michigan Avenue, Paterson, New Jersey 07503
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (973) 523-4600
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Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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Item 1. Changes in Control of Registrant.
Not applicable.
Item 2. Acquisition or Disposition of Assets.
Not applicable.
Item 3. Bankruptcy or Receivership.
Not applicable.
Item 4. Changes in Registrant's Certifying Accountants.
On January 19, 1999, Room Plus, Inc. (the "Company") retained Arthur
Andersen LLP ("Andersen"), as its new independent accountants, to audit the
Company's financial statements for the year ended December 31, 1998, dismissing
Ehrenkrantz Sterling & Co., LLC ("Ehrenkrantz"), which had served in such
capacity prior thereto.
Following the Company's filing of its Form 10-QSB for the nine months
ended September 30, 1998, and amended Forms 10-QSB for the three months ended
March 31,1998 and six months ended June 30,1998, respectively, management of the
Company, at the urging of the Chairman of the Board, commenced a review of the
Company's internal accounting systems, methods and controls and its financial
reporting to shareholders. As part of such review, management considered whether
it might be appropriate to retain a major national accounting firm to serve as
the Company's certified public accountants. Management determined that the
accounting services being rendered by Ehrenkrantz could be provided by Andersen
at costs equivalent to, or less than, those charged by Ehrenkrantz and also
concluded that Andersen, which represents numerous public companies, would, in
management's judgment, be able to provide greater expertise in auditing the
Company's financial statements, assisting the Company with respect to its
interim financial reporting obligations and advising the Company with respect to
internal accounting systems and controls. Accordingly, the Company's Board of
Directors unanimously determined that it was in the Company's best interest to
terminate the services of Ehrenkrantz and to retain Andersen as the Company's
independent public accountants. As a result of the resignation of certain
members of the Company's Board of Directors, the Audit Committee of the Board of
Directors was not fully constituted on January 19, 1999, and the action to
terminate Ehrenkrantz and to retain Andersen was adopted by the entire Board of
Directors on such date by unanimous consent.
Except for the qualification in its report on the Company's financial
statements for the year ended December 31, 1997 that there was "substantial
doubt about the Company's ability to continue as a going concern," the reports
of Ehrenkrantz on the Company's financial statements for the years ended
December 31, 1996 and December 31, 1997 did not contain any adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles. With respect to its report on the
Company's 1997 financial statements, such report was later amended to remove the
going concern opinion.
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During the Company's two most recent fiscal years and subsequent
interim periods through the date of this report, there were no disagreements
between the Company and Ehrenkrantz of the type described in Item 304(a)(iv)(A)
of Regulation S-B.
Except as set forth below, during the conduct of the audits of the two
most recent fiscal years of the Company, and all subsequent interim periods
preceding the dismissal of Ehrenkrantz and the engagement of Andersen,
Ehrenkrantz has not advised the Company that (i) the internal controls necessary
for the Company to develop reliable financial statements do not exist; (ii)
information has come to the attention of Ehrenkrantz that has led it to no
longer be able to rely on management's representations, or unwilling to be
associated with the financial statements prepared by management; or (iii) the
scope of its audit should be expanded significantly, or information has come to
the attention of Ehrenkrantz during such time period that Ehrenkrantz has
concluded will, or if further investigated may, materially impact the fairness
or reliability of either a previously issued audit report or the underlying
financial statements, or the financial statements issued or to be issued
covering the fiscal periods subsequent to the date of the most recent financial
statements covered by an audit report.
During the course of its informal reviews of the Company's preliminary
unaudited financial statements for each of the three months and six months ended
March 31, 1998 and June 30, 1998, respectively, Ehrenkrantz raised a question
concerning the accuracy of the closing inventory for each such period as
reported therein. In each instance, the Company's Chief Financial Officer
provided Ehrenkrantz with a reasoned explanation for the reported amount, and
the Company thereafter finalized such unaudited financial statements and filed
them with the Securities and Exchange Commission ("Commission") as part of its
Form 10-QSB for each such period in the belief that the inventory as reported
therein was materially accurate. During the course of its informal review of the
Company's preliminary unaudited financial statements for the nine months ended
September 30, 1998, Ehrenkrantz again raised a question concerning the accuracy
of the reported closing inventory for that period. Following such inquiry, the
Company conducted certain physical inventories and concluded that the inventory
amount set forth in such preliminary unaudited financial statements, as well as
the reported inventory amount contained in the Company's unaudited financial
statements for the three and six month periods ended March 31, 1998 and June 30,
1998 as filed with the Commission, were overstated. Accordingly, based on such
further procedures and analysis, the Company revised its unaudited financial
statements for the nine months ended September 30, 1998 to reflect the
recalculated inventory amount and included such revised unaudited financial
statements in its Form 10-QSB for such period. Subsequently, the Company filed
amended Forms 10-QSB for each of the prior two fiscal quarters that contained
restated unaudited financial statements reflecting recalculated inventory
amounts.
The matters described in the preceding paragraphs have been discussed
among Ehrenkrantz and members of the Company's management and Board of
Directors. The Company has authorized Ehrenkrantz to respond fully to any
inquiries of Andersen concerning the subject matter disclosed herein.
During the two most recent fiscal years and subsequent interim periods
through the date hereof, the Company had not previously consulted with Andersen
regarding application of accounting principles to a specific completed or
contemplated transaction, or the type of audit opinion that might be rendered on
the Company's financial statements and no written or oral advice was provided by
Andersen that was an important factor considered by the Company in reaching a
decision as to any accounting, auditing or
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financial reporting issue. Andersen was not consulted with respect to any matter
that was the subject of a disagreement or event identified herein.
As required by Items 304(a)(2)(ii)(D) and 304 (a)(3) of Regulation S-B,
the Company has provided Andersen and Ehrenkrantz with copies of the disclosures
made in this Current Report on Form 8-K and has requested each firm to submit a
letter addressed to the Commission setting forth its agreement or disagreement
with the disclosures contained herein relating to such firm. The letter from
Andersen required by Item 304(a)(2)(ii)(D) of Regulation S-B is filed herewith
as Exhibit 16.1. The letter from Ehrenkrantz required by Item 304(a)(3) will be
filed as Exhibit 16.2 to this Current Report on Form 8-K by amendment promptly
following its receipt.
Item 5. Other Events.
Not applicable.
Item 6. Resignations of Registrant's Directors.
Not applicable.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
Exhibit Number Description
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16.1 Letter from Andersen to the Securities and
Exchange Commission, dated January 25, 1999
16.2 Letter from Ehrenkrantz to the Securities and
Exchange Commission (to be filed by amendment)
Item 8. Change in Fiscal Year.
Not applicable.
Item 9. Sales of Equity Securities Pursuant to Regulation S.
Not applicable.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ROOM PLUS, INC.
By: /s/ Jay H. Goldberg
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Name: Jay H. Goldberg
Title: Chief Financial Officer
Date: January 26, 1999
EXHIBIT 16.1
Letter from Andersen to the Securities and Exchange Commission, dated January
25, 1999
January 25, 1999
Office of the Chief Accountant
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Room Plus, Inc.
Dear Sir/Madam:
We have read Item 4 included in the Form 8-K dated January 19, 1999 of
Room Plus, Inc. to be filed with the Securities and Exchange Commission and are
in agreement with the statements contained therein.
Very truly yours,
/s/ Arthur Andersen LLP
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ARTHUR ANDERSEN LLP
Certified Public Accountants
