RIGHT START INC /CA
8-K, 1999-01-26
CATALOG & MAIL-ORDER HOUSES
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<PAGE>
 
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

                                    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):  December 28, 1998


                             The Right Start, Inc.
          ____________________________________________________________
               (Exact name of registrant as specified in charter)

   California                       0-19536                       95-3971414
____________________        ________________________           ________________
(State of other             (Commission file number)           (IRS employer
jurisdiction of                                                identification
incorporation)                                                 number)


  5388 Sterling Center Drive, Unit C
     Westlake Village, California                                      91361
________________________________________                           ____________
(Address of principal executive offices)                            (Zip code)
 

                                 (818) 707-7100
                         ______________________________
              (Registrant's telephone number, including area code)

                                 Not applicable
          ____________________________________________________________
         (Former name or former address, if changed since last report)
<PAGE>
 
Item 5.  Other Events
         ------------

         On December 28, 1998, The Right Start, Inc. (the "Company") completed
its recapitalization transaction (the "Recapitalization Transaction") as set
forth in the Company's Letter Agreement dated April 6, 1998, as amended by
letter agreements dated April 13, 1998 and July 7, 1998 (collectively, the
"Letter Agreement"), whereby the Company exchanged (a) the Company's Convertible
Debentures dated October 11, 1996 in an aggregate principal amount of $3,000,000
and the Company's 11.5% Senior Subordinated Notes due May 6, 2000 in the
aggregate principal amount of $3,000,000 (together with warrants to purchase an
aggregate of 475,000 shares of the Company's common stock issued therewith) for
an aggregate of 30,000 shares of the Company's Series A Mandatorily Redeemable
Preferred Stock and 30,000 shares of the Company's Series B Convertible
Preferred Stock and (b) the Company's non-interest bearing Senior Subordinated
Notes due May 6, 2000 in the aggregate principal amount of $3,850,000 (together
with detachable warrants to purchase 3,850,000 shares of the Company's common
stock issued therewith) for 38,500 shares of the Company's Series C Convertible
Preferred Stock.

         Prior to the completion of the Recapitalization Transaction, pursuant
to the amendment to the Letter Agreement dated July 7, 1998, the Company
received consent from all parties to the Letter Agreement to amend the original
terms of the Series B Convertible Preferred Stock and the Series C Convertible
Preferred Stock to remove the mandatory redemption features of such securities.
The impact of this amendment on the balance sheet of the Company is to allow the
Company to include the Series B Convertible Preferred Stock and the Series C
Convertible Preferred Stock in shareholders' equity, as illustrated in Exhibit
99.1 to this Form 8-K, a balance sheet of the Company as of December 31, 1998.
Such exhibit is incorporated herein by reference.

Item 7.  Financial Statements, Pro Forma Financial Information and Exhibits
         ------------------------------------------------------------------

         (c)  Exhibits

              99.1  Balance sheet of the Company as of December 31, 1998.

                                      -2-
<PAGE>
 
          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 thereunto duly authorized.


                                      THE RIGHT START, INC.


Date:  January 26, 1999                         /s/ Jerry R. Welch
                                      ------------------------------------------
                                      Jerry R. Welch
                                      Chief Executive Officer and
                                      Chairman of the Board

                                      -3-
<PAGE>
 
                                 EXHIBIT INDEX


99.1  Balance sheet of the Company as of December 31, 1998.



                                      -4-

<PAGE>
                                                                    EXHIBIT 99.1
 
                             THE RIGHT START, INC.
                                 BALANCE SHEET
                                  (unaudited)

                                                                    January 2,
                                                                       1999
                                                                   ------------
ASSETS
Current assets:
    Cash                                                           $    484,000
    Accounts and other receivables                                      302,000
    Merchandise inventories                                           5,835,000
    Prepaid catalog expenses                                            328,000
    Other current assets                                                990,000
                                                                   ------------
         Total current assets                                         7,939,000
                                                                   ------------
Noncurrent assets:
    Property, plant and equipment, net                             $  7,815,000
    Other non-current assets                                             70,000
    Deferred income tax benefit                                       1,400,000
                                                                   ------------
                                                                      9,285,000
                                                                   ------------
                                                                   $ 17,224,000
                                                                   ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
    Accounts payable and accrued expenses                          $  2,546,000
    Accrued salaries and bonuses                                        418,000
    Advance payments on orders                                           23,000
                                                                   ------------
         Total current liabilities                                    2,987,000
                                                                   ------------
Note payable long term                                                2,750,000
Deferred rent                                                         1,455,000
Mandatorily redeemable preferred stock Series A                       1,769,000
Shareholders' equity:
    Convertible preferred stock Series B                              2,813,000
    Convertible preferred stock Series C                              3,850,000
    Common stock (25,000,000 shares authorized                       22,337,000
         at no par value; 5,051,820 issued and outstanding)
    Paid in capital                                                   3,674,000
    Accumulated deficit                                             (24,411,000)
                                                                   ------------
         Total shareholders' equity                                   8,263,000
                                                                   ------------
                                                                   $ 17,224,000
                                                                   ============


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