U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB/A
Amendment Number 2
[X] Quarterly Report Under Section 13 or 15(d) of
The Securities Exchange Act of 1934 For The
Quarterly Period Ended March 31, 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
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The number of shares outstanding of the Issuer's Common Stock $.00133 par
value, as of May 11, 1998 was 4,385,000.
The number of the Issuer's Common Stock Purchase Warrants outstanding as of May
11, 1998 was 2,530,000.
Transitional small business disclosure format:
Yes No X
-- --
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ROOM PLUS, INC.
Form 10-QSB/A
This Form 10-QSB/A amends the following items of the Company's Quarterly Report
on Form 10-QSB/A previously filed with the Securities and Exchange Commission on
December 14, 1998.
INDEX
Part I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Notes to Financial Statements 6
Item 2. Management's Discussions and Analysis of
Financial Condition and Results of Operations 7
Signatures 11
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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 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 three-month period ended March
31, 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:
March 31 December 31
-----------------------------------------
1998 1997 1997
------------ ------------ ----------
Finished goods $1,551,559 $1,362,025 $1,451,814
Work in process 38,802 95,041 25,258
Raw materials 471,378 316,362 427,254
------------ ------------ ------------
$2,061,739 $1,773,428 $1,904,326
========== ========== ==========
Note 3: SUBSEQUENT EVENT
In April 1998, the Company obtained bridge loans totaling $200,000
from certain unaffiliated individuals. The loans are due in June
1998. In consideration for these loans, the Company issued the
lenders options to acquire an aggregate 500,000 shares of the
Company's common stock at $2.125 per share.
Note 4: RESTATEMENT
During the course of the preparation of the interim financial
statements for the quarter ended September 30, 1998, the Company
determined that the method used to value its inventories at interim
dates was in error. The effect of the correction of this error on
the previously issued financial statements was to reduce the net
income by $260,857, or $.06 per share, from $32,151 to a loss of
$(228,706). This error was discovered by the Company's taking
certain physical inventory counts as of September 30, 1998 and
comparing the valuation of those inventories with the values
computed using the methodology employed as of March 31, 1998 (and
as of June 30, 1998). Management did not previously detect these
errors since the results of operations, based on such methodology,
were consistent with projected results.
Management has since implemented a new data processing system that
will more accurately account for inventory quantities and costs.
The Company will employ cycle counts of its finished goods
inventories and is conducting monthly physical counts of its raw
material inventories to ensure a proper accounting. This new system
will also provide the Company with more reliable data as to the
sales product mix, which has a significant impact on gross profits.
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Item 2.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
The Company is a fully-integrated manufacturer and retailer of mica-laminated
furniture for residential uses, primarily bedroom furniture targeted at 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.
Three Months Ended March 31, 1998 and 1997
Revenues for the three months ended March 31, 1998 totaled $4,559,934 as
compared to 3,426,026 for the three months ended March 31, 1997, an increase of
$1,133,908, or 33.1%. The increase is attributable to existing store revenues
increasing $470,556, or 13.7%, as compared to March 31, 1997, while revenues of
new stores were $663,352 during the same period. The increase in existing store
revenues is the result of the maturation and stabilization of the Company's
sales personnel.
Cost of goods sold totaled $2,007,331 for the first three months of 1998 as
compared to $1,455,207 for the first three months of 1997, an increase of
$552,124, or 37.9%, which was primarily the result of the costs associated with
the increase in production. The cost of goods sold did increase as a percentage
of revenues from 42.5% to 44.0% principally due to a change in the product mix.
During the course of the preparation of the interim financial statements for the
quarter ended September 30, 1998, the Company determined that the method used to
value its inventories at interim dates was in error. This was discovered by the
Company's taking certain physical inventory counts as of September 30, 1998 and
comparing the valuation of those inventories with the values computed using the
methodology employed as of March 31, 1998 (and as of June 30, 1998). Management
did not previously detect these errors since the results of operations were in
accordance with projected results.
Management has since implemented a new data processing system that will more
accurately account for inventory quantities and costs. The Company will employ
cycle counts of its finished goods inventories and is conducting monthly
physical counts of its raw material inventories to ensure a proper accounting.
This new system will also provide the Company with more reliable data as to the
sales product mix, which has a significant impact on gross profits..
Selling, general and administrative expenses totaled $2,798,620, or 61.4% of
revenues, for the first three months of 1998 as compared to $2,894,733, or 84.5%
of revenues, for the first three months of 1997. The net decrease of $96,113, or
3.3%, was primarily the result of significant decreases in professional fees and
advertising expense partially offset by increases in commissions and delivery
costs.
Operating loss for the period ended March 31, 1998 was $246,017, or 5.4% of
revenues, as compared to an operating loss of $923,914, or 27.0% of revenues,
during the period ended March 31, 1997, an improvement of $677,897.
Other expenses for the period ended March 31, 1998 were $27,689 as compared to
income of $7,164 for the three months ended March 31, 1997. The decrease in
other income of $34,853 is primarily due to a decrease in interest income of
approximately $29,000 and an increase in interest expense of $8,000. These
changes result from the Company's utilization of its cash reserves and increased
use of its borrowing facility.
For the first three months of 1998, the Company recorded net deferred income tax
benefit of $45,000, as compared to a net deferred income tax benefit of $434,241
in the three months ended March 31, 1997.
Due to the combination of the preceding factors, the Company realized a net loss
of $228,706, or 5.0% of revenues, during the three months ended March 31, 1998
as compared to a net loss of $482,509, or 14.1% of revenues, during the three
months ended March 31, 1997.
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Liquidity and Capital Resources
The Company had a working capital deficit of $560,013 at March 31, 1998, which
represented an increase in the working capital deficit of $244,652 from $315,361
at December 31, 1997. The increase in the working capital deficit was primarily
the result of increased debt.
The Company's operating activities used cash of $133,372 and $1,016,068 for the
three months ended March 31, 1998 and 1997, respectively. For the three months
ended March 31, 1998, cash was used primarily to fund inventory. In the three
months ended March 31, 1997, cash was used to primarily finance inventory and
selling expenses for six new retail showrooms.
The Company's investing activities used cash of $18,966 and $457,330 for the
three months ended March 31, 1998 and 1997, respectively. The cash used by the
Company's investing activities for the three months ended March 31, 1998 was not
material. The cash used for the three months ended March 31, 1997 was primarily
the result of the purchase of computerized manufacturing machinery and
equipment.
The Company's financing activities provided (used) cash of $39,135 and
$(141,339) for the three months ended March 31, 1998 and 1997, respectively. The
cash provided by financing activities for the three months ended March 31, 1998,
was the result of further utilization of the Company's short-term line of credit
offset by the repayment of long-term debt. The cash used for the three months
ended March 31, 1997, was the result of the repayment of debt.
The Company had substantially depleted its cash reserves at March 31, 1998. The
Company obtained a $200,000 bridge loan in April 1998, which is due in June
1998. The Company has received several financing proposals and is currently
considering such proposals and other possible financing alternatives. While
there can be no assurances as to the ultimate availability or terms of such
additional financing, the Company believes that sufficient financing will be
available 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.
"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.
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Management's Discussion and Analysis of Financial
Condition and Results of Operations
(Continued)
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: February 18, 1999 ROOM PLUS, INC.
By: /s/ Jay H. Goldberg
---------------------------
Name: Jay H. Goldberg
Title: Chief Financial Officer
(Principal Accounting and Financial
Officer)
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