U.S. Securities and Exchange Commission

                             Washington, D.C. 20549

                                   Form 10-KSB



                     ANNUAL REPORT UNDER SECTION 13 or 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended                         Commission file number 1-14478
December 31, 1998


                                 ROOM PLUS, INC.
                                 ---------------
                 (Name of small business issuer in its charter)


                  New York                             11-2622051
                  --------                             ----------
       (State or other jurisdiction                 (I.R.S. Employer
     of incorporation or organization)             Identification No.)


                 91 Michigan Avenue, Paterson, New Jersey 07503
                 ----------------------------------------------
               (Address of principal executive offices) (Zip Code)


                                 (973) 523-4600
                                 --------------
                           (Issuer's telephone number,
                              including area code)

         Securities registered under Section 12 (b) of the Exchange Act:

                                                       Name of each exchange
        Title of each Class                             on which registered
        -------------------                             -------------------
Common Stock, par value $.00133 per share                 NASDAQ SmallCap

Redeemable Common Stock Purchase Warrants                 NASDAQ SmallCap


        Securities registered under Section 12 (g) of the Exchange Act:

                    Common Stock, par value $.00133 per share
                    -----------------------------------------
                                (Title of Class)

                    Redeemable Common Stock Purchase Warrants
                    -----------------------------------------
                                (Title of Class)

Check whether issuer (1) filed all reports required to be filed by Section 13 or
15 (d) of the Exchange Act 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         
                                 ---          ---


Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this form 10-KSB. [ X ]



<PAGE>



     The issuer's revenues for the fiscal year ended December 31, 1998 were
                                  $19,223,455

 The aggregate market value of the voting stock held by non-affiliates computed
by reference to the closing price of the stock on March 22, 1999 was $2,064,000

   The Company has not issued any stock which does not possess voting rights.



The number of shares of the issuer's Common Stock, par value $.00133 per share,
    outstanding as of April 2, 1999 was 4,385,000. The actual number of the
 issuer's Redeemable Common Stock Purchase Warrants outstanding as of April 2,
                              1999 was 2,530,000.


Transitional Small Business Disclosure Format (check one):
               Yes        No  X
                   ---       ---



<PAGE>



                                 ROOM PLUS, INC.
                                 ---------------

                                TABLE OF CONTENTS


                                                                         PAGE #
PART I
   Item 1  Description of Business                                          1
   Item 2  Description of Property                                          5
   Item 3  Legal Proceedings                                                6
   Item 4  Submission of Matters to a Vote of Security Holders              6


PART II
   Item 5  Market for Common Equity and Related Stockholder Matters         7
   Item 6  Management's Discussion and Analysis of
           Financial Condition and Results of Operations                    9
   Item 7  Financial Statements                                            12
   Item 8  Changes In and Disagreements With Accountants
           on Accounting and Financial Disclosure                          27


PART III
   Item 9  Directors, Executive Officers, Promoters and Control Persons;
           Compliance with Section 16 (a) of the Exchange Act              27
   Item 10 Executive Compensation                                          28
   Item 11 Security Ownership of Certain Beneficial Owners and
           Management                                                      31
   Item 12 Certain Relationships and Related Transactions                  32
   Item 13 Exhibits, Lists and Reports on Form 8-K                         32




SIGNATURES                                                                 36



                           Forward-Looking Statements
                           --------------------------

This Report on Form 10-KSB may contain statements that are forward-looking in
nature and such statements should not be considered as guarantees of future
performance because they involve many uncertainties and risks. Actual results
may vary materially from projected results based upon a number of factors,
including, but not limited to, the Company's ability to successfully expand its
retail distribution, to further automate the manufacturing process to increase
productivity, reduce costs and to compete with its direct and indirect
competitors.




<PAGE>



Item 1. Description of Business
-------------------------------

(a) General
    -------

    The Company is a New York corporation that was organized in 1982 under the
    name RPF Holding Corp. ("RPF Holding") and was engaged in the retail sale of
    mica-laminated furniture. From 1979 to 1982, the founders of the Company had
    engaged in the same business under other corporate names. In March 1995,
    Bunk Trunk Manufacturing Company, Inc. ("Bunk Trunk"), which was the
    principal manufacturer of the furniture sold by RPF Holding, was merged into
    RPF Holding. The surviving entity in such merger, which was named TAM
    Industries, Inc., changed its name to Room Plus, Inc. in June 1995. The
    Company's principal offices are located at 91 Michigan Avenue, Paterson, New
    Jersey 07503, and its telephone number at that address is (973) 523-4600.

    The Company is a fully-integrated manufacturer and retailer of
    mica-laminated furniture for residential uses, primarily bedroom furniture
    for 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.

    The Company distributes its products through its own distribution network of
    16 retail showrooms located in the greater New York City and Philadelphia
    metropolitan areas. Management believes that stores located in strip malls
    and densely populated areas offer the highest visibility of the Company's
    products and ease of access for the Company's targeted customers. The
    Company's retail showrooms range from approximately 2,000 to 5,000 square
    feet and yield average annual sales of $308 per square foot.

    The Company uses standard component pieces to manufacture furniture for
    children's and adult's bedrooms and home offices. The approximately 300
    standard components can be finished in numerous colors and textures and
    combined in various configurations to produce a finished product which is
    personalized to the customer's taste, space and budget. The use of standard
    components also permits the Company's furniture to be reconfigured as the
    customer's needs or tastes change. For example, a loft bed can be converted
    into separate beds, a desk, a dresser and a bookcase, and a baby's changing
    table can be converted into a child's play table and a dresser.

    Unlike many of its direct competitors, the Company uses high quality raw
    materials in the manufacture of its products, including high-pressure,
    mica-laminate that is more resistant to impact and engineered wood that has
    been laminated on both sides to provide greater stability and protection
    against warping. The quality of materials and manufacturing processes used
    by the Company enable it to offer a limited lifetime warranty against
    structural defects.

    Because the Company's finished products are manufactured from standard
    components and personalized to the customer's needs, the Company does not
    maintain a large inventory of finished products (other than showroom display
    models). Finished products are manufactured to meet a specified desired
    delivery date, which is generally fixed at the time of the order and is
    generally within two to six weeks thereafter.

    The Company's manufacturing operations are conducted in a 78,000 square foot
    facility located in Paterson, New Jersey. In the past three years, the
    Company has implemented numerous changes to its manufacturing facility and
    processes in order to produce more contemporary styles of high quality,
    mica-laminated furniture.

    The Company's existing manufacturing facility currently operates on one and
    one-half shifts and has sufficient capacity to increase its manufacturing
    volume by approximately 20% without substantially increasing indirect costs
    of manufacturing. During 1997, the Company established five additional
    retail showrooms, three in the Philadelphia metropolitan area and two in New
    York City. During 1998, the Company closed one of its New York City
    locations. The Company continues to upgrade and automate its manufacturing
    process.

    The residential furniture industry is cyclical, fluctuating with the general
    economy. While the Company believes that furniture sales are influenced by a
    number of macroeconomic factors including existing home sales, housing
    starts, consumer confidence, interest rates and demographic trends, the
    Company believes that it is less affected by industry economic trends
    because of its focus on furniture for children. The Company believes that
    regardless of economic trends, parents will place a high priority on
    furnishing their children's rooms with affordable, high-quality furniture.


                                      - 1 -

<PAGE>



(b) Manufacturing Process
    ---------------------

    The Company manufactures its products in a 78,000 square foot plant located
    in Paterson, New Jersey. The plant currently operates on one and one-half
    shifts, five days per week, utilizing a "Just In Time" manufacturing process
    that allows the Company to reduce expenses associated with the maintenance
    of inventory. The plant has sufficient capacity to enable the Company to
    increase its manufacturing volume by approximately 20% without substantially
    increasing indirect manufacturing costs. Many of the current production
    processes used by the Company in the manufacture of its products are highly
    labor intensive as is traditional in the furniture manufacturing industry.

(c) Raw Materials and Suppliers
    ---------------------------

    The raw materials used by the Company in manufacturing its products include
    laminate, lumber, plywood, fiber-board, engineered wood, hardware,
    adhesives, finishing materials and mirrored glass. Management believes that
    such raw materials are readily available.

    The Company has no long-term supply contracts for its raw materials and
    generally purchases its raw materials from a small number of suppliers.
    Although the Company has strategic reasons such as price, quality and
    delivery for using a limited number of suppliers, the Company believes that
    sufficient other sources of raw materials are available should its current
    supply sources be disrupted. Raw materials prices fluctuate over time
    depending on factors such as supply and demand and increases in prices may
    have a short-term negative impact on the Company's financial condition.

(d) Products
    --------

    The Company manufactures and sells multi-functional high quality
    mica-laminated furniture designed both to make small spaces larger and to be
    convertible into other uses. The furniture offered by the Company is
    primarily made of engineered wood covered on the interior with low-pressure
    mica-laminate and on the exterior with high-pressure mica-laminate. The
    Company has begun producing a thinner, low-pressure laminated furniture line
    that sells at lower prices, and management believes that there is strong
    demand for this product line. The Company manufactures contemporary modular
    furniture that has rounded (post-formed) edges on tops and drawers. The
    benefits of rounded edges to the consumer include enhanced visual appeal and
    elimination of hard edges, which is an important safety consideration since
    the Company principally targets the children's furniture market. The Company
    also produces traditional square edge products.

    The Company manufactures approximately 300 standard components that can be
    combined in various configurations to meet a customer's space limitations or
    storage needs, and such components can be finished in hundreds of colors and
    textures. In addition, the Company offers numerous options and features to
    personalize its products for each customer. For example, telephone jacks can
    be added to bedroom headboards, dividers can be included in drawers and
    night tables can be manufactured with a tray that slides away when not in
    use. Such features allow customers to have the look and utility of
    customized furniture at a lower cost.

    The Company maintains an open stock policy, which enables customers to add
    additional matching pieces over time to previously purchased furniture
    products and to change the look of their furniture by replacing door and
    drawer fronts and other accent pieces. The Company believes that such
    flexibility enhances the value of the furniture to the customer and
    encourages repeat business.

    A substantial majority of the Company's sales relate to bedroom furniture
    for children and young adults. The Company offers a wide range of beds for
    children with matching desks and dressers, including multi-functional bunk
    and storage modules. One of the most popular models for children is the loft
    bed that utilizes space more efficiently than conventional bedroom
    furniture. It is able to sleep one or two people and has a built-in desk and
    storage drawers. Since a child's room is often the smallest room in the
    house, the Company's children's furniture line is designed to save space
    through modular designs and filling space vertically, leading to the
    Company's motto "A LOT OF LIVING in a Little Space". See "Advertising and
    Promotion".

    In addition, a portion of the Company's sales relate to adult bedroom
    furniture and home office furniture. The Company offers, among other items,
    night tables, headboards, armoires, bookcases, computer stations and desks.
    Approximately 4%

                                      - 2 -

<PAGE>



    of the Company's sales are comprised of accessory furnishings such as lamps,
    bed coverings, bookends, picture frames and other small items that give the
    Company the ability to complete the design of the room in the showroom.

(e) Gallery/Specialty Format
    ------------------------

    Two formats widely used by retailers of furniture to market their products
    are the gallery format and the specialty format. The gallery format displays
    products in complete room settings, including furnishings, wall decor,
    accents and accessories and typically feature the products of one
    manufacturer, such as Ethan Allen, La-Z-Boy, Thomasville and Drexel
    Heritage. The specialty format specializes in a category of merchandise such
    as bedding, sofas or lighting and is utilized by retailers such as Pier 1
    Imports, Sleepy's and The Bombay Company.

    The Company utilizes a combination gallery/specialty format as its
    high-pressure, mica-laminated furniture is displayed in settings designed to
    allow the consumers to envision the look of a complete room in their homes.
    Each retail showroom features approximately 18-20 settings. This
    presentation format encourages consumers to purchase an entire room of
    furniture and accessories from the Company, instead of individual pieces
    from different manufacturers and results in an average sale per customer of
    approximately $2,000. The Company believes that distributing its products
    through dedicated Company owned stores strengthens brand awareness, provides
    well-informed and focused sales personnel and encourages the purchase of
    multiple items per visit.

(f) Advertising and Promotion
    -------------------------

    The Company marketing effort is supported by extensive advertising and
    promotion featuring the Company's slogan "Just 'Round the Corner" and "A LOT
    OF LIVING in a Little Space" motto. The Company has taken all necessary
    steps to register its slogan and motto. Management believes that advertising
    on broadcast and cable television has made the Company a household name in
    the area of children's furniture in the New York metropolitan area.

    For the year ended December 31, 1998, the Company's advertising expenditures
    were approximately $1,550,000 or 8.1% of revenues. This represents a
    decrease from the prior year of approximately 13%. In 1998, the Company did
    not incur the "start up" advertising costs associated with the Company's
    1997 entry into metropolitan Philadelphia through the opening of three
    showrooms. The Company also advertises to a lesser extent in newspapers and
    on radio. Currently, the Company has begun to increase the level of print
    advertising.

    The Company's primary target market is women in the 24 to 50 age bracket,
    since the Company believes they most strongly influence the buying decision
    for children's furniture. Much of the Company's advertising is also shown
    during programming for children because children may influence their
    parents' decision on what type of furniture to have in their rooms.

    Throughout all of 1997 and through November 1998, Retail Media Plus, Inc.
    ("Retail Media Plus"), which is owned by three affiliated persons, placed
    all of the Company's advertising and bills the Company only for the actual
    cost of such advertising, without any additional expenses or mark-ups.
    Beginning in December 1998, the Company began placing its own advertising.
    See "Certain Relationships and Related Transactions".

    Pursuant to an agreement with King Features, the Company utilized the Dennis
    the Menace character as part of its corporate logo. The Company did not
    renew the agreement which expired on February 28, 1999.

(g) Expansion Strategy
    ------------------

    The Company's expansion strategy is primarily focused on opening additional
    retail showrooms in the existing markets of New York, New Jersey and greater
    Philadelphia, PA. In 1998, the Company did not open any new showrooms and
    closed one of its three showrooms in New York City. The Company does not
    plan to open any new showrooms in 1999. The Company is supplementing its
    management information system in 1999 with point of sale equipment to permit
    on line order processing, and provide on demand sales and marketing
    information. The Company is also exploring creating an E-Commerce site on
    the Internet.



                                      - 3 -

<PAGE>



(h) Customer Satisfaction
    ---------------------

    The Company is committed to providing high-quality customer service in all
    phases of its business, including offering instant store credit, a
    decorating service and professional delivery. The Company offers no
    interest, deferred payment plans to qualified purchasers, which the Company
    believes gives customers the flexibility to structure their purchases of the
    Company's furniture according to their budget.

    The Company is generally able to offer delivery and in-home set-up of its
    products within two to six weeks from the date of the order. Delivery is
    provided by an independent professional furniture delivery company whose
    delivery personnel are trained by the Company in the set-up of its products.
    The Company also offers free in-home decorating service with a minimum
    purchase of $1,000. A trained salesperson will travel to a customer's home
    with pictures of the Company's products, floor plans and charts of available
    colors and finishes, assist the customer in the selection of products and
    take measurements to ensure that the furniture selected will fit properly in
    the intended location. In addition to its sales personnel, skilled customer
    satisfaction representatives are available to answer customer questions
    during business hours. The Company believes that its commitment to customer
    service has contributed to the number of repeat purchases by the Company's
    customers.

(i) Government Regulation
    ---------------------

    The Company's manufacturing operations are subject to a wide range of
    federal, state and local laws and regulations relating to the protection of
    the environment, workers' health and safety and the emission, discharge,
    storage, treatment and disposal of hazardous materials. These laws include
    the Clean Air Act of 1970, as amended, the Resource Conservation and
    Recovery Act, the Federal Water Pollution Control Act and the Comprehensive
    Environmental, Response, Compensation and Liability Act. Certain of the
    Company's operations use glues and coating materials that contain chemicals
    that are considered hazardous under various environmental laws. Accordingly,
    management closely monitors the Company's environmental performance at its
    manufacturing facility. The Company is also a voluntary participant in the
    Occupational Safety and Health Administration ("OSHA") Consultation Program
    in which OSHA periodically inspects the Company's facilities and makes
    recommendations on how to eliminate unsafe conditions in the manufacturing
    process before a complaint is filed. The cost to the Company to comply with
    government regulation of its manufacturing process and the effect of such
    compliance on the Company's operations are not material.

    The Company's retail operations are not subject to material federal, state
    and local laws and regulations other than consumer protection laws.
    Management believes that the Company is in substantial compliance with all
    laws and regulations affecting its business.

(j) Competition
    -----------

    The home furniture industry is a highly competitive and fragmented market
    with estimated annual U.S. sales of $54.8 billion in 1997 and estimated
    annual U.S. sales of $57.9 billion in 1998.

    The Company is the largest retailer of mica-laminated home furniture in the
    metropolitan New York and Philadelphia areas, where its 16 retail showrooms
    are located. Several small retailers such as Atlantic Furniture and Kids'
    Room, and large retailers, such as IKEA, also sell mica-laminated furniture
    similar to that sold by the Company in the same geographic region, but
    generally through only one or two retail outlets. The Company also competes
    with many companies, including much larger and diverse furniture companies,
    such as Huffmann Koos, Levitz, Thomasville and Drexel Heritage, that sell
    primarily wood furniture that is not mica-laminated.

(k) Employees
    ---------

    All Company personnel are employees of Employee Solutions, Inc. ("ESI") and
    their services are leased to the Company pursuant to an employee leasing
    agreement (the "Employee Leasing Agreement") between the Company and ESI.
    All references to employees herein refer to personnel whose services are
    leased by the Company from ESI under the Employee Leasing Agreement.


                                      - 4 -

<PAGE>



    Pursuant to the Employee Leasing Agreement, ESI is responsible for payment
    of all federal, state and local employment taxes and providing workers'
    compensation and disability coverage and other mandated employee benefits
    for the employees. The Company retains the right to make all decisions
    concerning the hiring and termination of employees. The Employee Leasing
    Agreement provides that it shall continue in full force and effect unless
    terminated by (i) either party for cause, as described in such agreement,
    (ii) the Company on thirty (30) days prior notice, or (iii) ESI on ninety
    (90) days prior notice.

    The Company provides an intensive two-week, 100-hour training program to all
    sales personnel. Topics include merchandising, room layout, product
    knowledge and salesmanship and are taught by a full-time professional
    trainer. The Company believes that a well-trained sales force helps increase
    sales, encourages repeat customers and minimizes employee turnover. The
    Company attempts to select its retail managers from the pool of sales
    personnel employed by the Company. The average store manager has been with
    the Company for approximately eight years.

    As of December 31, 1998, the Company had approximately 198 employees, of
    whom five were executive officers, 77 were engaged in sales, 94 were engaged
    in manufacturing and 22 were administrative staff. Approximately 65 of the
    Company's manufacturing employees are covered by a collective bargaining
    agreement with a local division of the International Union of Electronic,
    Electrical, Salaried, Machine and Furniture Workers, AFL-CIO (the "Union").
    The Company entered into a three-year collective bargaining agreement with
    the Union in September 1997. The Company has never experienced a material
    work stoppage and believes that its relationship with its employees is
    generally satisfactory.

Item 2.  Description of Property
-------  -----------------------

    The Company distributes substantially all of its products through a network
    of Company-owned retail showrooms dedicated solely to the display of the
    Company's products. All of such showrooms are located in premises leased by
    the Company. As of the date of this 10-KSB, the Company operates 16 retail
    showrooms in New York, New Jersey and Pennsylvania, which showrooms are set
    forth below:

                                      Month and Year                Square Feet
    Location                             Opened                    (Approximate)
    --------                             ------                    -------------
    Manhattan (3rd Ave.), NY          June 1981                        3,500
    Manhattan (Lexington Ave.), NY    November 1995                    2,700
    Scarsdale, NY                     January 1982                     3,500
    Farmingdale, NY                   February 1995                    3,700
    Carle Place, NY                   August 1987                      4,400
    Forest Hills, NY                  October 1987                     2,000
    Staten Island, NY                 March 1998                       4,000
    Brooklyn, NY                      January 1998                     2,700
    Paramus, NJ (Rt. 4)               March 1983                       5,000
    Paramus, NJ (Rt. 17)              February 1988                    5,000
    East Hanover, NJ                  August 1983                      4,000
    East Brunswick, NJ                August 1985                      4,800
    Union, NJ                         October 1995                     3,900
    Cherry Hill, NJ                   March 1998                       5,000
    Langhorne, PA                     February 1998                    3,200
    King of Prussia, PA               June 1998                        4,000

    The leases for the Company's retail showrooms have terms ranging from five
    to 13 years and some leases contain optional renewal provisions for
    additional five-year periods. Certain leases require the Company to pay real
    estate taxes and insurance.

    The Company's retail showrooms are open seven days a week, generally from
    10 a.m. to 9 p.m. Monday through Saturday and 12 p.m. to 5 p.m. on Sundays.
    The two retail showrooms located in Paramus, New Jersey are closed on
    Sundays.


                                      - 5 -

<PAGE>



    In addition to its retail showrooms, the Company currently leases a 78,000
    square foot plant in Paterson, New Jersey, which houses its administrative
    offices, executive staff, sales and marketing staff and its manufacturing
    and shipping facilities. The Company leases the facility at a monthly rent
    of approximately $25,000, subject to annual adjustment as more fully set
    forth in such lease. The lease expired on May 31, 1998, and the Company now
    occupies the facility on a month-to-month basis (which requires a twelve
    month notice to vacate) on the same terms and conditions as the original
    lease, including annual adjustments in rent. The owner of the Paterson
    facility is M&S Realty Company, which is owned by the Company's former
    Executive Vice President and Director of Manufacturing. See "Certain
    Relationships and Related Transactions". In September 1998, the Company
    entered into a one-year lease for approximately 15,000 square feet of
    additional warehouse space from an unrelated third party at an annual rental
    of $52,000.

Item 3. Legal Proceedings

    On February 19, 1999, a complaint was filed by a landlord in the US District
    Court, Eastern District for Pennsylvania, against the Company which alleges
    that the Company is in default of a lease and that the landlord is entitled
    to immediate payment of all rents due under the remaining term of the lease
    plus certain expenses. In connection therewith, a judgement was entered
    against the Company in the approximate amount of $1,200,000. Management has
    tentatively negotiated a settlement with the landlord requiring prepayment
    of rent in the approximate amount of $35,000.

    The Company is not a party to any other material pending legal proceedings,
    nor, to the Company's knowledge is any material legal proceeding threatened.

Item 4. Submission of Matters to a Vote of Security Holders

    (a) The 1998 Annual Meeting of Shareholders was held on October 30, 1998.
        The number of common shareholders present at the Annual Meeting in 
        person or by proxy and voting and withholding authority to vote in the
        election of Directors was 3,696,054 or 84.3% of the common shares of
        Room Plus, Inc. outstanding on September 1, 1998, the record date for
        the Annual Meeting.

    (b) The following nominees, having received the FOR votes set opposite their
        respective names, constituting a majority of the votes cast at the
        Annual Meeting for the election of Directors, were elected Directors of
        Room Plus, Inc. to terms expiring in 1999:

                 Directors                For            Withheld
                 ---------                ---            --------
                 David Belford         3,572,269          123,785
                 Marc Zucker           3,572,269          123,785
                 Allan Socher          3,572,269          123,785
                 Theodore Shapiro      3,572,269          123,785
                 Alan Hirschfeld       3,572,269          123,785
                 Alan Granetz          3,572,269          123,785
                 Frank Terzo           3,572,269          123,785

    (c) Shareholders ratified the appointment of Ehrenkrantz Sterling & Co.,
        LLC, as independent public accountants, to audit the financial
        statements for the current year ending December 31, 1998. The vote was
        3,667,319 shares FOR and 19,100 shares AGAINST such ratification, with
        9,635 shares abstaining. See Item 8.


                                      - 6 -

<PAGE>

PART II

Item 5.  Market For Common Equity and Related Stockholder Matters
-------  --------------------------------------------------------

(a) Market Information
    The Company's common stock and redeemable common stock purchase warrants are
    traded on the National Association of Securities Dealers Automated Quotation
    System (NASDAQ) SmallCap Market under the Symbols "PLUS" and "PLUSW"
    respectively. Set forth below are the range of reported high and low sales
    price information for the Company's common stock and redeemable common stock
    purchase warrants for 1998 and 1997 as reported by NASDAQ. All
    over-the-counter market price quotations reflect inter-dealer prices,
    without retail mark-up, mark-down or commission, and may not represent
    actual transactions.

<TABLE>
<CAPTION>
                                                                    Price Per
                                            Price Per Share        Redeemable
                                              of Common           Common Stock
                                                 Stock          Purchase Warrant
                                                 -----          ----------------
    Year ended December 31, 1998
    ----------------------------
<S>                                 <C>          <C>                 <C>
    First Quarter                   High         4 1/8                3/4
                                    Low          1 1/2                9/32

    Second Quarter                  High         3 1/2               13/32
                                    Low          1 1/2                1/4

    Third Quarter                   High         2 13/16              7/32
                                    Low          1 1/8                5/32

    Fourth Quarter                  High         1 11/16              3/32
                                    Low            17/32              1/32


    Year ended December 31, 1997
    ----------------------------
    First Quarter                   High         5 1/2              2 7/8
                                    Low          2 7/8                21/32

    Second Quarter                  High         6 1/4              1 3/4
                                    Low          3                    7/8

    Third Quarter                   High         6 3/4              1 1/2
                                    Low          5 1/8                3/4

    Fourth Quarter                  High         8 1/4              2 1/2
                                    Low          2                    7/16
</TABLE>

(b)  Holders
     As of April 2, 1999, the Company had approximately 1,070 beneficial owners
     of its common stock and 370 record holders of its redeemable common stock
     purchase warrants.

(c)  Dividends
     The Company has not paid any dividends on its Common Stock in the last two
     fiscal years and does not anticipate paying dividends to its shareholders
     in the foreseeable future. The Company currently intends to reinvest
     earnings, if any, in the development and expansion of its business. The
     declaration and payment of dividends in the future will be at the election
     of the Board of Directors and will depend upon the Company's earnings,
     current and anticipated capital requirements, results of operations,
     financial position of the Company, plans for expansion, future prospects,
     general economic conditions, and restrictions under then existing credit
     and other debt instruments and arrangements, and other factors deemed
     pertinent by the Board.

                                      - 7 -

<PAGE>

(d)  Recent Sales of Unregistered Securities
     Effective January 31, 1997, the Company issued warrants to acquire 25,000
     shares of common stock to each of three then serving executive officers,
     Marc Zucker, Allan Socher and Theodore Shapiro, at an exercise price of
     $3.0625. Such warrants vested immediately and expire five years from the
     date of grant. Such warrants were issued in lieu of cash bonus awards for
     services rendered in 1996.

     On July 31, 1998, the Company issued an option to David Belford, in
     connection with his loan of $1,500,000 to the Company, to purchase
     2,000,000 shares of the Company's common stock at $2.00. As part of the
     loan agreement, Mr. Belford was elected Chairman of the Company's Board of
     Directors. Such warrants vested immediately and expire five years from the
     date of grant. On February 5, 1999, the warrants were canceled and
     replacement warrants were issued therefor. The exercise price of the
     replacement warrants is $0.75. Such exercise price was based upon the
     closing market price for the underlying securities on February 4, 1999,
     which was $0.50. The closing market price for the underlying securities on
     the date of grant was $1.438.

     In September and October 1998, the Company issued options to two
     employees, Stephen Giordano and Ronald A. Kaplan, to purchase an aggregate
     of 400,000 shares of the Company's common stock at $2.00. Such options vest
     over a three-year period and expire five years from the date of grant. On
     February 5, 1999, the options were canceled and replacement options were
     issued therefor. The exercise price of the replacement options is $0.75.
     Such exercise price was based upon the closing market price for the
     underlying securities on February 4, 1999, which was $0.50. The closing
     market price for the underlying securities on the date of grant was $1.438.

     All of the securities described above were issued in reliance on the
     exemption from registration provided by Section 4(2) of the Securities Act
     of 1933 and the rules promulgated thereunder and no public offering was
     involved.


                                      - 8 -

<PAGE>



Item 6.  Management's Discussion and Analysis of Financial Condition and Results
-------  -----------------------------------------------------------------------
         of Operations
         -------------

     The following discussion and analysis should be read in conjunction with
     the Company's Financial Statements (and the related notes thereto) included
     elsewhere in this Form 10-KSB.

     Description of Business
     -----------------------

   (a)  General
        -------

   The Company is a New York corporation that was organized in 1982 under the
   name RPF Holding Corp. ("RPF Holding") and was engaged in the retail sale of
   mica-laminated furniture. From 1979 to 1982, the founders of the Company had
   engaged in the same business under other corporate names. In March 1995, Bunk
   Trunk Manufacturing Company, Inc. ("Bunk Trunk"), which was the principal
   manufacturer of the furniture sold by RPF Holding, was merged into RPF
   Holding. The surviving entity in such merger, which was named TAM Industries,
   Inc., changed its name to Room Plus, Inc. in June 1995. The Company is a
   fully-integrated manufacturer and retailer of mica-laminated furniture for
   residential uses, primarily bedroom furniture for 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.

   In November 1996, the Company completed its initial public offering ("IPO")
   of 1,165,000 shares of its Common Stock and 2,530,000 Redeemable Common Stock
   Purchase Warrants. Net proceeds to the Company after underwriting
   commissions, related underwriting expenses, and additional expenses incurred
   in connection with the offering were approximately $4,600,000.

   (b)  Results of Operations--Ratios
        -----------------------------

   The following tables set forth, for the periods indicated, certain items from
   the Company's Statements of Operations, presented as a percentage of
   revenues. The operating results for any period are not necessarily indicative
   of results that can be expected for any future period.

<TABLE>
<CAPTION>
                                                        Years ended December 31
                                                        -----------------------
                                                         1998             1997  
                                                        -------         --------
<S>                                                      <C>             <C>   
     Revenues                                            100.0%          100.0%
     Cost of goods sold                                   44.0%           44.0%
     Gross profit                                         56.0%           56.0%
     Selling, general & administrative expenses           62.4%           71.9%
     Loss from operations                                 (6.4)%         (15.9)%
     Other income (deductions)                            (1.9)%          (1.3)%
     Net loss                                            (14.4)%         (11.3)%
</TABLE>


     1998 Compared with 1997

     Revenues
     Revenues for the year ended December 31, 1998 were $19,223,455, as compared
     to $16,851,321 for the year ended December 31, 1997, an increase of
     $2,372,134 or 14.1%. This increase is, in part, the result of four new
     showrooms opened in 1997, having a full year of operations in 1998 and
     increased volume from existing showrooms. Same store revenues increased
     $1,991,000, or 12%, while the new showrooms added $381,000.

     Cost of goods sold
     Cost of goods sold for the year ended December 31, 1998 was $8,457,924 or
     44.0% of revenues as compared to $7,418,128 or 44.0% of revenues for the
     same period in 1997. Cost of goods sold increased $1,039,796, or 14.0% in
     1998 compared to 1997. This increase in cost of goods sold was primarily
     the result of increased sales volume.

     Selling, general and administrative expenses
     Selling, general and administrative expenses amounted to $11,996,492, or
     62.4% of revenues in 1998 as compared to $12,110,370 or 71.9% of revenues
     in 1997. The decrease of $113,878, or 0.9% is primarily due to reduced
     advertising costs and professional fees.


                                      - 9 -

<PAGE>

     Other income and expenses
     Other income and expenses was a net expense of $370,831 as compared to a
     net expense of $219,679 in 1997. Net interest expense increased
     approximately $362,000 in 1998 as a result of increased borowings and
     higher interest rates and the noncash interest associated with the issuance
     of detachable warrants in 1998. Other expenses, primarily acquisition costs
     and a provision for store closing costs, decreased approximately $150,000
     in 1998.

     Loss before income taxes
     The preceding factors combined to produce a loss before income taxes of
     $1,601,792 as compared to a loss before income taxes of $2,896,856 in 1997.
     Management's plans to improve this position in 1999 are included in Note 2
     in the financial statements included in Item 7.

     Income taxes
     In years prior to 1998, the Company recorded net deferred tax assets of
     $1,173,000. During 1998, the Company reassessed the net realizable value of
     these assets and has fully reserved them, resulting in a tax provision of
     $1,173,000 in 1998.

     1997 Compared with 1996

     Revenues
     Revenues for the year ended December 31, 1997 were $16,851,321, as compared
     to $14,427,108 for the year ended December 31, 1996, an increase of
     $2,424,213 or 16.8%. This increase is primarily the result of five new
     showrooms in 1997. The new showrooms contributed revenues of $3,078,696
     while revenues of existing showrooms decreased $654,483. Management
     believes that the opening of two showrooms in 1997 in the same geographic
     area of existing showrooms contributed to the decrease in existing showroom
     revenues, primarily as a result of the dilution of experienced sales
     personnel. The remaining three new showrooms were opened in a new
     geographic area for the Company and have required greater investments in
     personnel and advertising than anticipated to generate revenues.

     Cost of goods sold
     Cost of goods sold for the year ended December 31, 1997 was $7,418,128 or
     44.0% of revenues as compared to $5,814,485 or 40.3% of revenues for the
     same period in 1996. The increase in cost of goods sold was primarily the
     result of increased production cost (labor) in anticipation of increased
     volume from new showrooms. As these new showrooms have taken longer than
     anticipated to generate the expected revenues, costs as a percentage of
     revenues has increased. Inventory has increased approximately $450,000
     primarily due to the addition of the five aforementioned new showrooms. As
     a result of the foregoing, gross profit decreased in 1997 to 56.0% of
     revenues from 59.7%

     Selling, general and administrative expenses
     Selling, general and administrative expenses amounted to $12,110,370 or
     71.9% of revenues in 1997 as compared to $8,613,398 or 59.7% of revenues in
     1996. The increase of $3,496,972 is primarily due to expenses associated
     with the opening of one new showroom in late-1996 and five new showrooms in
     1997. Such expenses included payroll, rent and related showroom overhead
     costs of $1,950,000 and an increase in advertising of $400,000.

     Other income and expenses
     Other income and expenses was a net expense of $219,679 in 1997 as compared
     to a net expense of $21,487 in 1996. The increase is the result of costs
     accrued in anticipation of closing one showroom, increased interest expense
     caused by the Company's use of its line of credit and the costs associated
     with a proposed acquisition which was terminated in 1997.


     Liquidity and Capital Resources

     Recurring losses from operations have had an adverse effect on the
     Company's short-term liquidity. The ability of management to successfully
     secure financing through vendor support or other alternatives is critical
     to the Company's ability to continue as a going concern. The Company
     incurred losses before income taxes of approximately $1,600,000 and
     $2,900,000 the years ended December 31, 1998 and 1997. The Company had a
     working capital deficit of $53,589 at December 31, 1998, which represented
     an improvement of $261,772 from the working capital deficit of $315,361 at
     December 31, 1997. The decrease in working capital deficit is primarily the
     result of the Company's reduction of its current liabilities. Management's
     plans to mitigate these conditions include the addition of certain new
     senior management executives, a new incentive sales compensation plan and
     additional engineering expertise to redesign products to minimize

                                     - 10 -

<PAGE>



     production costs and to reevaluate plant layout to maximize efficiency and
     profitability. In addition, advertising expenditures will be redistributed
     to increase customer traffic and more effectively reach target markets.

     Management believes, that if financing can be obtained to address the
     Company's severe short-term liquidity issues for which there is no
     guarantee, these and other related efforts will enable the Company to
     generate income in 1999 and thereafter. However, there can be no assurances
     that the Company's plan will succeed. The financial statements do not
     include any adjustments relating to the recoverability and classification
     of asset carrying amounts or the amount and classification of liabilities
     that might result should the Company be unable to continue as a going
     concern.

     The Company's operating activities used cash of $1,198,733 and $2,717,036
     for the years ended December 31, 1998 and 1997, respectively. The principal
     use of the cash in 1998 was to fund operations. The principal use of the
     cash in 1997 was to finance operating expenses and inventory associated
     with the opening of one showroom in late-1996 and five new retail showrooms
     in 1997, a $453,919 increase in inventory, a provision for closing one
     showroom and a $100,000 deposit in connection with a proposed acquisition.
     In February 1998, the Company terminated its letter of intent to acquire
     The Baby's Room, Inc. and Baby's Room USA, Inc. Upon such termination, the
     Company's deposit of $100,000 was returned.

     The Company's investing activities provided (used) cash of $110,857 and
     $(508,835) for the years ended December 31, 1998 and 1997, respectively.
     The primary source of cash in 1998 was the sale of property. The principal
     use of cash in 1998 was the purchase of manufacturing equipment. The
     principal use of cash in 1997 was the money expended on leasehold
     improvements as well as the purchase of fixtures and inventory for new
     showrooms and the purchase of equipment to improve manufacturing
     efficiency. In management's opinion, all such assets are adequately
     insured.

     The Company's financing activities provided cash of $1,029,920 and $233,626
     for the years ended December 31, 1998 and 1997, respectively. On June 11,
     1998, the Company obtained extensions of two loans from individuals
     originally due on that date. The loans were extended to August 1, 1998 and
     subsequently to August 4, 1998. On August 4, 1998, those loans were repaid
     in full. On July 31, 1998, the Company obtained a $1.5 million loan from
     David A. Belford, an individual investor. The loan, which matures July 31,
     2000, bears interest at 12% per annum, payable quarterly, and is secured by
     substantially all of the Company's assets. In addition, the investor was
     granted warrants to purchase 2,000,000 shares of the Company's common stock
     at an exercise price of $2.00 per share (subsequently repriced on February
     5, 1999, at $.75 per share). On August 4, 1998, the Company repaid its full
     outstanding balance on its bank line of credit of approximately $700,000.
     Utilization of the Company's line of credit was the primary source of cash
     in 1997. In August 1997, the Company increased its line of credit facility
     from $350,000 to $500,000. Such line bore interest at the prime rate plus
     2% per annum and expired in August 1998.

     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 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.


                                     - 11 -

<PAGE>



Item 7.  Financial Statements
-------  --------------------

     The following financial statements are furnished as part of this Annual
Report on Form 10-KSB:

     Index to Financial Statements                                    Page No.
     -----------------------------                                    --------

         Report of Independent Public Accountants                       13

         Balance Sheets as of December 31, 1998 and 1997                14

         Statements of Operations
           Years Ended December 31, 1998 and 1997                       15

         Statements of Stockholders' Equity
           Years Ended December 31, 1998 and 1997                       16

         Statements of Cash Flows
           Years Ended December 31, 1998 and 1997                       17

         Notes to Financial Statements                                  18





                                     - 12 -

<PAGE>






                    Report of Independent Public Accountants

To the Board of Directors and
   Stockholders of Room Plus, Inc.:

We have audited the accompanying balance sheet of ROOM PLUS, INC. (a New York
corporation) as of December 31, 1998, and the related statements of operations,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Room Plus, Inc. as of December 31, 1997,
were audited by other auditors whose report dated March 30, 1998, except for
Note 19, as to which the date was August 4, 1998, expressed an unqualified
opinion on those statements.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Room Plus, Inc. as of December
31, 1998, and the results of its operations and cash flows the year then ended
in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations
and has a deficit in working capital that raises substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 2. The financial statements do not include
any adjustments relating to the recoverability and classification of asset
carrying amounts or the amount and classification of liabilities that might
result should the Company be unable to continue as a going concern.



                                                         /s/ ARTHUR ANDERSEN LLP
                                                         -----------------------

Columbus, Ohio,
April 9, 1999.




                                     - 13 -

<PAGE>



                                 ROOM PLUS, INC.
                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                        December 31         
                                                               -----------------------------
                                                                    1998           1997     
                                                               -------------- --------------
<S>                                                               <C>            <C>        
                                     ASSETS
Current Assets
  Cash and cash equivalents...................................... $   127,887    $   185,843
  Accounts receivable............................................     151,533         67,685
  Inventories, net...............................................   1,940,428      1,904,326
  Notes receivable, officers.....................................      12,000         12,400
  Prepaid expenses and other current assets......................     274,387        492,555
  Deferred income taxes..........................................          --        134,500
                                                                  -----------    -----------
    Total Current Assets.........................................   2,506,235      2,797,309
                                                                  -----------    -----------

Property and Equipment, at cost..................................   3,814,273      3,745,196
  Less accumulated depreciation
    and amortization.............................................  (2,165,260)    (1,940,893)
                                                                  -----------    -----------
                                                                    1,649,013      1,804,303
                                                                  -----------    -----------
Other Assets
  Security deposits..............................................     158,350        165,183
  Deferred charges...............................................          --         84,291
  Deferred income taxes..........................................          --      1,038,500
  Notes receivable, officers.....................................     175,880        177,965
                                                                  -----------    -----------
                                                                      334,230      1,465,939
                                                                  -----------    -----------
                                                                   $4,489,478     $6,067,551
                                                                  -----------    -----------

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
  Current portion of long-term obligations.......................  $  176,945     $  212,791
  Notes payable..................................................          --        400,070
  Due to related company.........................................          --        258,770
  Accounts payable and accrued expenses..........................   1,982,183      1,604,047
  Sales taxes payable............................................     188,267        108,475
  Customer deposits and other advances...........................     212,429        528,517
                                                                  -----------    -----------
    Total Current Liabilities....................................   2,559,824      3,112,670

Long-term Obligations, less current portion......................   1,184,817        447,857
                                                                  -----------   ------------
                                                                    3,749,641      3,560,527
                                                                  -----------   ------------

Commitments and Contingencies                                      

Stockholders' Equity
  Capital stock
    Authorized, 10,000,000 shares at $.00133 par value, 4,385,000
    shares issued and outstanding................................       5,832          5,832
  Additional paid-in capital.....................................   7,525,250      6,512,645
  Retained deficit...............................................  (6,786,245)    (4,011,453)
                                                                  -----------    -----------
                                                                      744,837      2,507,024
                                                                  -----------    -----------
                                                                   $4,489,478     $6,067,551
                                                                  ===========    ===========
</TABLE>

The accompanying notes are an integral part of these statements.


                                     - 14 -
<PAGE>



                                ROOM PLUS, INC.
                            STATEMENTS OF OPERATIONS




<TABLE>
<CAPTION>
                                                                  Years Ended December 31  
                                                                    1998          1997      
                                                               ---------------------------
<S>                                                              <C>           <C>        
Revenues......................................................   $19,223,455   $16,851,321

Cost of goods sold............................................     8,457,924     7,418,128
                                                                 -----------   -----------

  Gross Profit................................................    10,765,531     9,433,193
                                                                 -----------   -----------

Expenses
  Selling.....................................................     9,789,125     9,979,319
  General and administrative..................................     2,207,367     2,131,051
                                                                 -----------   -----------
                                                                  11,996,492    12,110,370
                                                                 -----------   -----------

Loss from operations..........................................    (1,230,961)   (2,677,177)
                                                                 -----------   -----------

Other Income (expenses)
  Interest expense............................................      (438,850)     (106,205)
  Proposed acquisition costs..................................            --      (104,003)
  Provision for store closing.................................            --      (100,000)
  Interest and other income...................................         68,019       90,529
                                                                 -----------   -----------
                                                                    (370,831)     (219,679)
                                                                 -----------   -----------

Loss before income tax provision (benefit)....................    (1,601,792)   (2,896,856)

Income tax provision (benefit)................................     1,173,000      (996,805)
                                                                 -----------   -----------

  Net Loss....................................................   $(2,774,792)  $(1,900,051)
                                                                 ===========   ===========

Weighted average common shares outstanding....................     4,385,000     4,385,000
                                                                 -----------   -----------

Basic and diluted net loss per share..........................   $     (0.63)  $     (0.43)
                                                                 ===========   ===========
</TABLE>







The accompanying notes are an integral part of these statements.


                                     - 15 -

<PAGE>



                                            ROOM PLUS, INC.
                                  STATEMENTS OF STOCKHOLDERS' EQUITY
                                YEARS ENDED DECEMBER 31, 1998 AND 1997




<TABLE>
<CAPTION>
                                          Issued and             Issued and
                             Authorized   Outstanding            Outstanding            Additional
                               Common       Common                 Common                 Paid-in     Retained
                               Shares       Shares      Amount     Warrants   Amount      Capital      Deficit      Total    
                               ------       ------      ------     --------   ------      -------      -------      -----    
<S>                          <C>           <C>          <C>       <C>         <C>       <C>          <C>          <C>       
Balance, December 31, 1996   10,000,000    4,385,000    $5,832    2,530,000   $253,000  $6,259,645   $(2,111,402) $4,407,075
  Net loss                           --           --        --           --         --          --    (1,900,051) (1,900,051)
                             ----------    ---------    ------    ---------   --------  ----------   -----------  ----------
Balance, December 31, 1997   10,000,000    4,385,000     5,832    2,530,000    253,000   6,259,645    (4,011,453)  2,507,024
  Issuance of detachable
      warrants                       --           --        --           --         --   1,012,605            --   1,012,605
  Net loss                           --           --        --           --         --          --    (2,774,792) (2,774,792)
                             ----------    ---------    ------    ---------   --------  ----------   -----------  ----------
Balance, December 31, 1998   10,000,000    4,385,000    $5,832    2,530,000   $253,000  $7,272,250   $(6,786,245) $  744,837
                             ==========    =========    ======    =========   ========  ==========   ===========  ==========
</TABLE>




The accompanying notes are an integral part of these statements.


                                     - 16 -

<PAGE>



                                 ROOM PLUS, INC.
                            STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                  Years Ended December 31  
                                                                  -----------------------  
                                                                     1998          1997      
                                                                     ----          ----      
<S>                                                             <C>            <C>         
Cash Flows from Operating Activities
Net loss.....................................................   $ (2,774,792)  $(1,900,051)
Adjustments to reconcile net loss to net cash used in
  operating activities:
  Depreciation and amortization...............................       269,371       250,200
  Amortization of discount....................................       103,736            --
  Deferred income taxes.......................................     1,173,000      (999,623)
  Gain on sale of property....................................       (42,460)           --
  Provision for store closing.................................            --       100,000
(Increase) decrease in operating assets:
    Accounts receivable.......................................       (83,848)      (28,797)
  Inventories.................................................       (36,102)     (453,919)
  Prepaid expenses............................................       218,168      (117,017)
  Security deposits ..........................................         6,833        (5,634)
  Deferred charges............................................        84,291       156,489
Increase (decrease) in operating liabilities:
  Accounts payable and accrued expenses.......................       378,136       119,244
  Customer deposits and other advances........................      (316,088)       53,113
  Due to related party........................................      (258,770)      123,256
  Sales taxes payable.........................................         79,792      (14,297)
                                                                ------------   ----------- 
    Net cash used in operating activities.....................    (1,198,733)   (2,717,036)
                                                                ------------   ----------- 

Cash  Flows from Investing Activities
Purchases of property and equipment, net......................       (78,796)     (544,162)
Proceeds from sale of property................................       187,168            --
Repayments of notes receivable from executive officers........         2,485        35,327
                                                                ------------   ----------- 
    Net cash provided by (used in) investing activities.......       110,857      (508,835)
                                                                ------------   ----------- 

Cash Flows from Financing Activities
Net proceeds (repayment) of notes payable.....................      (400,070)      325,070
Proceeds from long-term obligations...........................       638,889            --
Repayment of long-term obligations............................      (221,504)      (91,444)
Proceeds from detachable warrants.............................     1,012,605            --
                                                                ------------   ----------- 
    Net cash provided by financing activities.................     1,029,920       233,626
                                                                ------------   ----------- 

  Net Decrease in Cash and Cash Equivalents...................       (57,956)   (2,992,245)

Cash and Cash Equivalents, beginning of year..................       185,843     3,178,088
                                                                ------------   ----------- 

Cash and Cash Equivalents, end of year........................  $    127,887   $   185,843
                                                                ============   ===========
</TABLE>

The accompanying notes are an integral part of these statements.


                                     - 17 -
<PAGE>



                                 ROOM PLUS, INC.
                          NOTES TO FINANCIAL STATEMENTS



Note 1:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         Organization
         Room Plus, Inc. (the "Company") is located in Paterson, New Jersey, and
         manufactures high quality mica-laminated furniture. The Company
         distributes substantially all of its products through a network of 16
         company-owned retail showrooms dedicated primarily to the display of
         the Company's products. The retail showrooms are located in New York,
         New Jersey and Pennsylvania under the trade name of Room Plus
         Furniture.

         Estimates
         The preparation of financial statements in conformity with generally
         accepted accounting principles requires management to make estimates
         and assumptions that affect the reported amounts of assets and
         liabilities and disclosure of contingent assets and liabilities at the
         date of the financial statements and the reported amounts of revenues
         and expenses during the reporting period. Actual results could differ
         from those estimates.

         Cash and Cash Equivalents
         The Company considers all highly liquid investments purchased with an
         initial maturity of three months or less to be cash equivalents.

         Inventories
         Inventories are stated at the lower of cost determined by the first-in,
         first-out method or market.

         Depreciation and Amortization
         Depreciation is computed by the straight-line and various accelerated
         methods over the estimated useful lives of the related assets, which
         range between five and ten years. Amortization of leasehold
         improvements is computed by the straight-line method over the estimated
         useful lives of the related assets or the lease term, if shorter.

         Guaranty and Warranty Policies
         The Company maintains a limited lifetime defective product warranty for
         certain products that are manufactured by the Company. The Company 
         accrues estimated warranty costs as products are sold.


         Fair Value of Financial Instruments
         The fair value of the Company's assets and liabilities, which
         constitute financial instruments as defined in Statement of Financial
         Accounting Standards No. 107, approximate their recorded value.

         Advertising
         The Company expenses the production costs of advertising the first time
         the advertising takes place. Advertising expense was $1,549,608 and
         $1,780,380 in 1998 and 1997, respectively.

         Earnings per Common Share
         In the fourth quarter of 1997, the Company adopted Statement of
         Financial Accounting Standards No. 128, "Earnings per Share" (SFAS
         128), which supersedes Accounting Principles Board Opinion No. 15.
         Under SFAS 128 earnings per common share is computed by dividing net
         income (loss) available to common shareholders by the weighted-average
         number of common shares outstanding during the period. Diluted earnings
         per share do not reflect the potential dilution that could occur if
         securities or other contracts to issue common shares were exercised or
         converted into common shares or resulted in the issuance of common
         shares as the impact of such would be antidilutive given the net
         losses incurred. 

         New Accounting Pronouncements
         Effective January 1, 1998, the Company adopted SFAS No. 130 "Reporting
         on Comprehensive Income". SFAS No. 130 requires comprehensive income to
         be reported in a financial statement that is displayed with the same
         prominence as other financial statements. There were no changes to, or
         additional disclosures required in the Company's financial statements
         as a result of adopting this new standard.


                                     - 18 -

<PAGE>


                                 ROOM PLUS, INC
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)



Note 1:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
         Effective January 1, 1998, the Company adopted SFAS No. 131
         "Disclosures About Segments of an Enterprise and Related Information".
         SFAS No. 131 requires disclosure of the Company's financial and
         detailed information about its operating segments in a manner
         consistent with internal reporting used by the Company to allocate
         resources and assess financial performance. There were no changes to,
         or additional disclosures required in the Company's financial
         statements as a result of adopting this new standard.

Note 2:  MANAGEMENT'S PLAN (Unaudited)
         Recurring losses from operations have had an adverse effect on the
         Company's short-term liquidity. The ability of management to
         successfully secure financing through vendor support or other
         alternatives is critical to the Company's ability to continue as a
         going concern. The Company incurred losses before income taxes of
         approximately $1,600,000 and $2,900,000 the years ended December 31,
         1998 and 1997. Further, at December 31, 1998 and 1997, the Company had
         a working capital deficit of approximately $54,000 and $315,000,
         respectively. Management's plans to mitigate these conditions include
         the addition of certain new senior management executives, a new
         incentive sales compensation plan and additional engineering expertise
         to redesign products to minimize production costs and to reevaluate
         plant layout to maximize efficiency and profitability. In addition,
         advertising expenditures will be redistributed to increase customer
         traffic and more effectively reach target markets.

         Management believes, that if financing can be obtained to address the
         Company's severe short-term liquidity issues for which there is no
         guarantee, these and other related efforts will enable the Company
         to generate income in 1999 and thereafter. However, there can be no
         assurances that the Company's plan will succeed. The financial
         statements do not include any adjustments relating to the
         recoverability and classification of asset carrying amounts or the
         amount and classification of liabilities that might result should the
         Company be unable to continue as a going concern.

Note 3:  RECLASSIFICATIONS
         Certain reclassifications have been made to the 1997 financial
         statements to conform with the 1998 presentation.

Note 4:  INVENTORIES
         Inventories consist of the following:

<TABLE>
<CAPTION>
                                                                     December 31
                                                              ------------------------
                                                                 1998          1997     
                                                              ------------------------
<S>                                                           <C>           <C>       
         Showrooms and warehouse..........................    $1,656,078    $1,451,814
         Raw materials....................................       415,418       427,254
         Work-in-process..................................        10,932        25,258
         Allowance for slow-moving inventory..............      (142,000)           --
                                                              ----------    ----------
                                                              $1,940,428    $1,904,326
                                                              ==========    ==========
</TABLE>


Note 5:  PROPERTY AND EQUIPMENT
         Property and equipment consist of the following, at cost:

<TABLE>
<CAPTION>
                                                                     December 31
                                                              ------------------------
                                                                 1998          1997     
                                                              ------------------------
<S>                                                           <C>           <C>       
         Automobiles......................................    $  115,501    $  109,723
         Office furniture, fixtures and equipment.........       500,839       460,283
         Factory machinery and equipment..................     1,622,642     1,448,194
         Leasehold improvements...........................     1,575,291     1,726,996
                                                              ----------    ----------
                                                              $3,814,273    $3,745,196
                                                              ==========    ==========
</TABLE>

         Expenditures for major betterments are capitalized and repairs and
         maintenance are expensed. When assets are retired or sold, the cost and
         related accumulated depreciation are removed from the accounts and the
         gain or loss is reflected in operations. The Company has determined
         that no impairment exists related to the net book value of these 
         assets.


                                     - 19 -

<PAGE>


                                 ROOM PLUS, INC
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)



Note 6:  LINE OF CREDIT AND BANK LOAN
         The Company had a line of credit of $700,000 from a bank bearing
         interest at prime plus 2% per annum (10 1/2% at December 31, 1997)
         which expired in August 1998. On August 4, 1998, the Company repaid its
         full outstanding balance on this bank line of credit.


Note 7:  LONG-TERM OBLIGATIONS
         Long-term obligations consists of the following:

<TABLE>
<CAPTION>
                                                                                                      December 31            
                                                                                              -------------------------
                                                                                                  1998          1997     
                                                                                                  ----          ----     
<S>                                                                                           <C>             <C>     
         $1,500,000 note payable to a director/shareholder at a 12% stated interest 
         rate, for which proceeds of $861,111 were for detachable warrants granted 
         in conjunction with issuance of the note. This amount will be amortized 
         using the effective interest method over the life of the loan, at an 
         effective interest rate of 63%. The loan matures on July 31, 2000, and is
         collateralized by substantially all of the Company's assets............                $742,625           --

         Obligations under capital leases are payable in monthly installments of
         $12,904 maturing in 2003 and bear interest at rates between 4.5% and
         23.18%. The obligations are collateralized by machinery and equipment
         and guaranteed by certain executive officers...........................                 587,548       542,532

         Notes payable in monthly installments of $1,543 maturing in 2001
         and bearing interest at rates between 8.74% and 9.15%, collateralized
         by transportation equipment with a net book value of $33,645...........                  26,340        41,756

         Unsecured obligation payable to a landlord which matured
         in January 1998........................................................                      --        10,660

         Note due a finance company relating to Directors and
         Officers insurance requiring monthly payments of $5,289
         including interest at 7.85% and maturing in January 1999...............                   5,249        65,700
                                                                                              ----------      --------
                                                                                               1,361,762       660,648
         Less current portion, including obligations under capital
         leases of $154,859 and $126,264 in 1998 and 1997.......................                 176,945       212,791
                                                                                              ----------      --------
                                                                                              $1,184,817      $447,857
                                                                                              ==========      ========
</TABLE>

         Annual payments of long-term obligations are as follows:

<TABLE>
<CAPTION>
             Years ending
             December 31                                               Amount
             -----------                                               ------
<S>                                                                  <C>       
                1999..............................................   $  176,945
                2000..............................................      910,305
                2001..............................................      168,543
                2002..............................................       74,731
                2003..............................................       31,245
                                                                     ----------
                                                                     $1,361,762
                                                                     ==========
</TABLE>






                                     - 20 -

<PAGE>


                                 ROOM PLUS, INC
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)



Note 8:  OBLIGATIONS UNDER CAPITAL LEASES
         The Company leases certain machinery and equipment under capital leases
         with a capitalized cost of $888,837 less accumulated amortization of
         $129,708 at December 31, 1998 and $689,275 and $98,525, at December 31,
         1997, respectively.

         The following is a schedule of future minimum payments required under
         the leases together with their present value as of December 31, 1998:

<TABLE>
<CAPTION>
             Due During
             Year Ending
             December 31                                              Amount
             -----------                                              ------
<S>                                                                 <C>     
                1999.............................................   $220,486
                2000.............................................    207,157
                2001.............................................    189,602
                2002.............................................     82,719
                2003.............................................     36,891
                                                                    --------
                                                                     736,855
         Less amount representing interest.......................    149,307
                                                                    --------
                                                                    $587,548
                                                                    ========
</TABLE>


Note 9:  RELATED PARTY TRANSACTIONS
         The aggregate balance due from certain executive officers and a former
         executive officer was $187,880 and $190,365 at December 31, 1998 and
         1997, respectively, which is represented by promissory notes bearing
         interest at 6% per annum with no stated maturity.

         During the years ended December 31, 1998 and 1997, the Company incurred
         advertising costs of approximately $1,219,000 and $1,780,000,
         respectively, with a related company.

         See Notes  7, 11 and 20 for other related party transactions.

Note 10: INCOME AND DEFERRED TAXES
         A deferred tax asset results from timing differences in the recognition
         of depreciation and certain other expenses for tax and financial
         reporting purposes and the recognition of net operating loss
         carryforward benefits for financial statement purposes. As of December
         31, 1998, the Company has net operating loss carryforwards of
         approximately $4,430,000 for Federal income tax purposes. These net
         operating loss carryforwards expire in 2010 to 2013. In addition, the
         Company has net operating loss carryforwards of approximately
         $3,544,000, $2,339,000 and $250,000 for the States of New York, New
         Jersey and Pennsylvania, respectively, which expire between 2002 and
         2013. The Company has provided a valuation allowance of approximately
         $2,055,000 and $460,000 in 1998 and 1997, respectively, against the
         future benefits of the deferred tax assets due to uncertainty of future
         realization.

         The deferred tax assets consist of the following:
<TABLE>
<CAPTION>
                                                      December 31
                                               ------------------------
                                                  1998          1997   
                                               ----------    ----------
<S>                                            <C>           <C>       
             Federal                           $1,675,000    $1,093,000
             State                                380,000       540,000
                                               ----------    ----------
                                                2,055,000     1,633,000
             Valuation allowance               (2,055,000)     (460,000)
                                               ----------    ----------
               Total deferred tax assets       $       --    $1,173,000
                                               ==========    ==========
</TABLE>



                                     - 21 -
<PAGE>


                                 ROOM PLUS, INC
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)



Note 10: INCOME AND DEFERRED TAXES (Continued)
         The provision (benefit) for Federal and State income taxes is comprised
         of the following:


<TABLE>
<CAPTION>
                                                   Years Ended December 31
                                                   -----------------------
                                                     1998           1997  
                                                     ----           ----  
<S>                                               <C>           <C>        
         Current income taxes
             Federal                              $       --    $       --
             State                                        --         2,818
                                                  ----------    ---------- 
                                                          --         2,818
                                                  ----------    ---------- 
         Deferred income taxes (benefits)
             Increase in deferred tax assets        (422,000)     (735,293)
             Increase in valuation allowance       1,595,000      (264,330)
                                                  ----------    ---------- 
                                                   1,173,000      (999,623)
                                                  ----------    ---------- 
             Total provision (benefit)            $1,173,000    $ (996,805)
                                                  ==========    ==========
</TABLE>


Note 11: COMMITMENTS AND CONTINGENCIES
         Leasing Activities
         Leases for retail showrooms in New York, Pennsylvania and New Jersey
         expire at various dates through May 2009. The leases require the
         Company to pay various operating expenditures including real estate
         taxes, while certain leases contain provisions for rent escalations.

         The Company leased its corporate office and manufacturing facility from
         M & S Realty Company, a related party, under a lease which expired May
         31, 1998, at an annual rental of approximately $292,000. Upon the
         expiration of the lease, the Company began occupying the facility on a
         month-to-month basis under the same terms of the original lease,
         including rent escalations, but is required to give the landlord twelve
         months notice of its intent to terminate the lease. The lease requires
         the Company to pay certain operating expenses of the facility,
         including real estate taxes and insurance.

         In September 1998, the Company entered into a one year lease for
         additional warehouse space at a monthly rental of $4,333.

         Rent expense for retail showrooms, warehousing and the manufacturing
         facility totaled $2,396,897 and $2,489,086 in 1998 and 1997,
         respectively.

         The Company has automotive and other equipment leases expiring through
         November 2003 with future minimum lease payments of approximately
         $98,000. Rent expense for these leases totaled approximately $37,000
         and $40,000 in 1998 and 1997, respectively.

         Approximate future minimum rentals under all operating lease
         arrangements are due as follows:

                       Years Ending
                        December 31                   Amount   
                        -----------                -----------
                           1999                     $2,099,200
                           2000                      1,557,900
                           2001                      1,452,800
                           2002                      1,156,700
                           2003                        942,700
                        Thereafter                   1,575,900
                                                    ----------
                                                    $8,785,200
                                                    ==========





                                     - 22 -

<PAGE>


                                 ROOM PLUS, INC
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)



Note 11: COMMITMENTS AND CONTINGENCIES (Continued)
         Litigation
         On February 19, 1999, a complaint was filed by a landlord in the U.S.
         District Court, Eastern District for Pennsylvania, against the Company
         which alleges that the Company is in default of a lease and that the
         landlord is entitled to immediate payment of all rents due under the
         remaining term of the lease plus certain expenses. In connection
         therewith, a judgement was entered against the Company in the
         approximate amount of $1,200,000. Management has tentatively negotiated
         a settlement with the landlord requiring prepayment of rent in the
         approximate amount of $35,000.

         The Company is subject to routine litigation that is incidental to the
         business. In the opinion of management, the amount of ultimate
         liability with respect to these actions will not materially affect the
         financial position or the results of operations of the Company.

         Employment Contracts
         Employment contracts between the Company and four executive officers
         through 1999 provide for an aggregate minimum annual salary of
         $618,000, adjusted for incentives based on the Company's attainment of
         specified levels of revenues or gross profit. In addition, the
         executive officers receive an allowance for certain expenses.

Note 12: PENSION PLANS
         The Company funds a union sponsored defined contribution pension plan
         which covers its leased union personnel. Contributions totaled $17,895
         in 1998 and $17,792 in 1997.

Note 13: ACQUISITION TRANSACTIONS
         In 1997, the Company signed a letter of intent to acquire and/or merge
         with two unrelated companies in the furniture industry located in
         Chicago, Illinois. In February 1998, the proposed transactions were
         terminated and escrow funds were returned to the Company.

Note 14: STOCK OPTIONS / WARRANTS

<TABLE>
<CAPTION>
                                           Options Outstanding                     Options Exercisable
                                -----------------------------------------  ----------------------------------
                                            Weighted  Weighted  Weighted    Number of     Weighted   Weighted
                                Number of   Average   Average   Average     Warrants/     Average    Average
                                Warrants/   Exercise  Market    Remaining    Options      Exercise   Market
                                 Options      Price   Price       Life     Exercisable      Price     Price
                                 -------      -----   -----       ----     -----------      -----     -----
<S>                             <C>           <C>      <C>         <C>       <C>            <C>       <C>  
         Outstanding as of
           December 31, 1996    4,441,250     $4.48    $4.48       5.0       4,441,250      $4.48     $4.48
          Warrants/Options
           Granted in 1997        135,000      4.16     4.16       4.0         135,000       4.16      4.16
          Outstanding as of
           December 31, 1997    4,576,250      4.47     4.47       4.0       4,576,250       4.47      4.47
          Warrants/Options
           Granted in 1998      2,960,000      2.02     2.19       5.0       2,587,778       2.03      2.22
          Outstanding as of
           December 31, 1998    7,536,250      3.51     3.58       3.6       7,164,028       3.59      3.66
</TABLE>



                                     - 23 -

<PAGE>


                                 ROOM PLUS, INC
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)




Note 14:  STOCK OPTIONS / WARRANTS (Continued)

<TABLE>
<CAPTION>
                                                   Options Outstanding                    Options Exercisable
                                        ----------------------------------------       -------------------------
                                                         Weighted     Weighted                          Weighted
                                        Number of        Average       Average         Number of        Average
                                        Warrants/        Exercise    Contractual       Warrants/        Exercise
          Range of Exercise Prices       Options          Price         Life            Options          Price
          ------------------------       -------          -----         ----            -------          -----
<S>                                     <C>                <C>          <C>            <C>                <C> 
                   $1.20                  750,000         $1.20         6.00             750,000         $1.20
               $2.00 - $3.06            3,871,250          2.24         5.34           3,499,028          2.27
               $5.50 - $8.25            2,915,000          5.79         5.00           2,915,000          5.79
</TABLE>


          No warrants were exercised, canceled or expired during 1998 or 1997.
          All warrants/options are immediately vested, with the exception of
          certain options granted to employees in 1998, which vest over a
          three-year period. At December 31, 1998 and 1997, 5,615,000 and
          4,576,250 shares of common stock, respectively, were reserved for the
          purpose of granting warrants/options. The Company's Board of Directors
          has offered a proposal to be voted on by shareholders on April 30,
          1999, to increase the authorized common stock of the Company from
          10,000,000 shares to 20,000,000 shares.

          In April 1998, the Company issued detachable warrants to two
          individuals in connection with their loans totaling $200,000 to the
          Company, to purchase 500,000 shares of the Company's common stock at
          $2.125. Proceeds from the loans related to the detachable warrants
          granted in conjunction with the loans in the amount of $132,774 were
          credited to additional paid-in capital and amortized into interest
          expense using the effective interest method over the life of the loan.

          In June 1998, the Company issued options to an individual in
          connection with his personal guarantee of the Company's bank line of
          credit, to purchase 60,000 shares of the Company's common stock at
          $2.125. The value of the options in the amount of $18,720 was recorded
          as interest expense and additional paid-in capital in the accompanying
          financial statements.

          In July 1998, the Company issued detachable warrants to an
          individual in connection with his loan of $1,500,000 to the Company,
          to purchase 2,000,000 shares of the Company's common stock at $2.00,
          subsequently reissued on February 5, 1999 at $.075. Proceeds from
          the loan related to the detachable warrants granted in conjunction
          with the loan in the amount of $861,111 were credited to additional
          paid-in capital and are being amortized into interest expense using
          the effective interest method over the life of the loan. As part of
          the loan agreement, the individual was elected Chairman of the
          Company's Board of Directors.

          In September and October 1998, the Company issued options to two
          employees to purchase an aggregate of 400,000 shares of the Company's
          common stock at $2.00, subsequently reissued on February 5, 1999 at
          $.075.

Note 15:  STOCK-BASED COMPENSATION
          The Company follows the requirements of APB No. 25 to account for
          stock options granted to employees, and, accordingly, no compensation
          cost is recognized in the statement of operations for these options.
          SFAS No. 123, "Accounting for Stock- based Compensation," requires
          certain disclosures about stock-based employee compensation
          arrangements. The fair value of each option granted is estimated on
          the date of grant using the Black-Sholes option pricing model, with
          assumptions of a risk-free interest rate of 5.5%, expected lives of
          four years and expected volatility of 36.7% for both 1998 and 1997.
          Had compensation cost for the Company's employee stock options been
          determined based on fair values at the grant date using this model,
          the Company's net losses for 1998 and 1997 would have increased to
          $2,795,348 and $2,001,351, respectively. Loss per share amounts would
          have increased to $0.64 and $0.46 per share for 1998 and 1997,
          respectively. The weighted average fair values of options granted to
          employees in 1998 and 1997 were $0.74 and $1.53, respectively.




                                     - 24 -

<PAGE>

                                 ROOM PLUS, INC
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)

Note 16:  SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                                           December 31          
                                                               ---------------------------------
                                                                       1998         1997    
                                                                   -----------   -----------
<S>                                                                 <C>           <C>     
          Cash paid during the year for interest..............      $164,295      $106,205
          Cash paid during the year for income taxes..........            --         2,818
</TABLE>

          Non Cash Investing Activity
          During 1998 and 1997, the Company financed the acquisition of certain
          equipment through capital leases. The cost of such equipment and the
          related debt incurred was $179,993 and $389,765, respectively. In
          addition, the Company purchased transportation equipment in 1997 at a
          cost of $52,592 and incurred a like amount of debt.

Note 17:  CONCENTRATION OF CREDIT RISK
          The Company maintains cash balances at a financial institutions
          located in New Jersey and New York. Accounts at these institutions are
          secured by the Federal Deposit Insurance Corporation up to $100,000.

Note 18:  PREPAID EXPENSES AND OTHER CURRENT ASSETS

<TABLE>
<CAPTION>
                                                                           December 31          
                                                               ---------------------------------
                                                                       1998         1997    
                                                                   -----------   -----------
<S>                                                                 <C>           <C>     
          Proposed acquisition deposit........................       $      --      $ 100,000
          Prepaid advertising.................................         111,225        161,115
          Prepaid insurance...................................          56,034         80,168
          Prepaid consulting fees.............................          99,651        140,884
          Other...............................................           7,477         10,388
                                                                     ---------      ---------
                                                                     $ 274,387      $ 492,555
                                                                     =========      =========
</TABLE>

Note 19:  ACCOUNTS PAYABLE AND ACCRUED EXPENSES

<TABLE>
<CAPTION>
                                                                           December 31          
                                                               ---------------------------------
                                                                       1998         1997    
                                                                   -----------   -----------
<S>                                                                 <C>           <C>     
          Trade payables......................................      $1,457,923     $1,063,349
          Accrued leased personnel expenses...................         257,037        108,334
          Accrued professional fees...........................          52,932        178,148
          Deferred rent.......................................         136,532        127,956
          Accrued store closing costs.........................              --        100,000
          Accrued interest....................................          30,000         10,675
          Other...............................................          47,759         15,585
                                                                     ---------      ---------
                                                                    $1,982,183     $1,604,047
                                                                    ==========     ==========
</TABLE>

Note 20:  SUBSEQUENT EVENTS
          1. On February 5, 1999, the Company's Board of Directors approved two
             proposals, both subject to a shareholder vote scheduled for April
             30, 1999, as follows:
              i)  to amend the Company's certificate of incorporation to
                  increase the authorized shares of common stock from 10,000,000
                  to 20,000,000, and
              ii) to institute an employee stock option plan.

          2. On February 5, 1999, the Company's Board of Directors approved the
             repricing of certain warrants and options issued to certain
             employees and directors from an exercise price of $2.00 per share
             to $0.75 per share.

                                     - 25 -

<PAGE>

                                 ROOM PLUS, INC
                          NOTES TO FINANCIAL STATEMENTS
                                   (Continued)


Note 20:  SUBSEQUENT EVENTS (Continued)
          3. On July 31, 1998, the Company entered into a Conditional Agreement
             and Plan of Merger with Nationwide Warehouse & Storage, Inc.
             ("Nationwide") whereby the companies could merge subject to the
             approval of Nationwide's Board of Directors and shareholders and
             the Company's shareholders. On March 2, 1999, following a change in
             ownership of Nationwide, Nationwide's Board of Directors and
             shareholders voted to terminate the agreement.


                                     - 26 -

<PAGE>
Item 8.   Changes In and Disagreements with Accountants on Accounting and
-------   ---------------------------------------------------------------
          Financial Disclosure
          --------------------

          On January 19, 1999, the Company retained Arthur Andersen LLP, as its
          new independent public 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. During the Company's two most recent
          fiscal years and through January 19, 1999, there were no disagreements
          or events between the Company and Ehrenkrantz of the types described
          in Item 304(a)(iv) of Regulation S-B, other than the above.

Part III.

Item 9.   Directors, Executive Officers, Promoters and Control Persons;
-------   -------------------------------------------------------------
          Compliance with Section 16(a) of the Exchange Act                  
          -------------------------------------------------                  

           The directors, executive officers and significant employees of the
Company are as follows (1):

<TABLE>
<CAPTION>
             Name             Age        Position with Company
             ----             ---        ---------------------
<S>                            <C>       <C>                                  
           David A. Belford    39        Chairman of the Board of Directors
           Ronald A. Kaplan    55        Chief Executive Officer, President and Director
           Marc Zucker         50        President, Merchandising and Director
           Allan Socher        48        President, Advertising and Director
           Stephen Giordano    39        Executive Vice President and Chief Operating Officer
           Jay  Goldberg       53        Secretary, Treasurer and Chief Financial Officer
</TABLE>
           ------------------
           (1) Such list excludes Alan Granetz, Alan Hirschfeld and Theodore
           Shapiro who served as directors of the Company for only a portion of
           1998 having resigned effective November 23, 1998, November 30, 1998
           and December 16, 1998, respectively and Frank Terzo who resigned
           March 31, 1999.

           David A. Belford has been Chairman of the Board of Directors since
           October 31, 1998. Mr. Belford had been the chief executive officer
           of Nationwide Warehouse & Storage, Inc. ("Nationwide") for more than
           five years. On March 2, 1999, Mr. Belford sold his interest in
           Nationwide.

           Ronald A. Kaplan has been Chief Executive Officer, President and a
           Director since November 1, 1998. Previously, Mr. Kaplan was a
           business consultant for two years and prior to that was President
           and Chief Operating Officer of Levitz Furniture, Inc. from June 1995
           to September 1996.

           Marc Zucker has been President, Merchandising since October 31, 1998.
           Previously, he had been the Chairman of the Board and Chief Executive
           Officer of the Company since March 1995. He was co-founder of RPF
           Holding and was its President from 1982 until its merger with Bunk
           Trunk in March 1995. In addition, he was Vice President and General
           Manager of Bunk Trunk from its inception in 1984 until the merger
           with RPF Holding. Prior to that, Mr. Zucker worked in other areas of
           the retail furniture business for 10 years.

           Allan Socher has been President, Advertising since October 31, 1998.
           Previously, he had been Director of Marketing and a Director of the
           Company since March 1995. Mr. Socher is also the Company's
           spokesperson in its extensive television commercials. He was a
           Vice-President, Secretary and co-founder of RPF Holding from 1982
           until its merger with Bunk Trunk in March 1995 and was a
           Vice-President and Secretary of Bunk Trunk from its inception in 1984
           until the merger with RPF Holding. Prior to that, Mr. Socher worked
           in other areas of the retail furniture business for 10 years.

           Stephen Giordano has been Executive Vice President and Chief
           Operating Officer since September 21, 1998. Previously, Mr. Giordano
           was Divisional President of Roberds South and Market President of
           Roberds Georgia. Roberds is a furniture retailer with operations
           primarily in the Midwestern and Southeastern sections of the US.
           Prior to joining Roberds, he was the General Manager of both the
           Southeast and Mid-Atlantic divisions of Levitz Furniture, Inc.

           Jay Goldberg, CPA, has been the Chief Financial Officer of the
           Company since September 1997 and Secretary/Treasurer since March
           1998. Mr. Goldberg was a director in Ehrenkrantz Sterling & Co., LLC,
           certified public accountants and

                                     - 27 -

<PAGE>



           a partner in Sterling, Nappen, Chavkin & Co., LLC, its predecessor
           firm, from February 1989 to September 1997. Prior to that, he was a
           partner of Touche Ross & Co., a predecessor to Deloitte & Touche LLP,
           from 1982 to 1989. He holds a B.S. degree in accounting from Seton
           Hall University.

           Mr. Zucker and Mr. Socher are brothers-in-law.

           Directors are elected to serve until the next meeting of stockholders
           and until their successors are elected and qualified. Meetings of
           stockholders of the Company are expected to be held on an annual
           basis. However, if at any time a meeting is not held for the election
           of directors, the then current directors will continue to serve until
           their successors are elected and qualified. Officers serve at the
           discretion of the Board.

           Section 16(a) Beneficial Ownership Reporting Compliance
           -------------------------------------------------------
           The Securities Exchange Act of 1934 requires that the Company's
           executive officers, Directors, and any persons owning more than 10%
           of a class of the Company's stock to file certain reports of
           ownership and changes in ownership with the Securities and Exchange
           Commission (the "SEC"). Copies of these reports must also be
           furnished to the Company.

           Based solely on a review of copies of all reports filed with the SEC
           and representations of certain officers, directors and shareholders
           holding more than 10% of the Company's Common Stock, the Company
           believes that the directors and officers are not delinquent in their
           16(a) reporting obligations.

Item 10.   Executive Compensation
--------   ----------------------

           The following table sets forth the cash compensation paid by the
           Company to, as well as any other compensation paid to or earned by,
           the Chairman and Chief Executive Officer of the Company and those
           executive officers compensated at or greater than $100,000 for
           services rendered to the Company in all capacities during the years
           ended December 31, 1998.


                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                                                          Long Term
                                                     Annual Compensation             Compensation Awards
                                                     -------------------             -------------------
                                                                                    Securities Underlying
                                                                                       Warrants/Options
           Name of Individual                                                          ----------------
           and Principal Position                      Year     Salary     Bonus
           ----------------------                      ----     ------     -----
<S>                                                    <C>    <C>        <C>               <C>    
           Ronald A. Kaplan, Chief Executive Officer   1998   $  9,231       none          300,000
                                                       1997       none       none             none
                                                       1996       none       none             none

           Marc Zucker, President - Merchandising      1998   $162,000       none             none
             Chairman, Chief Executive Officer         1997    125,000   $119,250           25,000
                                                       1996    125,000     42,500             none

           Allan Socher, President - Advertising       1998   $162,000       none             none
             President and Director of Marketing       1997    125,000   $119,250           25,000
                                                       1996    125,000     43,159             none

           Jay Goldberg, Secretary, Treasurer and      1998   $100,000       none             none
             Chief Financial Officer                   1997     25,000       none            5,000
                                                       1996       none       none             none
</TABLE>



                                     - 28 -

<PAGE>
           Warrants
           The following table sets forth certain information concerning
           individual issues of warrants made during the years ended December
           31, 1998 and 1997 to the Company's executive officers.
<TABLE>
<CAPTION>
                                                        Individual Grants as % of Total
                                Number of Securities     Warrants Issued to Personnel     Exercise or Base      Expiration
           Name                 Underlying Warrants             in Fiscal Year             Price per Share         Date
           ----                 -------------------             --------------             ---------------         ----
<S>                                  <C>                           <C>                         <C>               <C>     
           1998
           ----
           David A. Belford          2,000,000                     83.3%                       $0.75 (1)          7/31/03
           Stephen Giordano            100,000                      4.2%                       $0.75 (2)          9/20/03
           Ronald A. Kaplan            300,000                     12.5%                       $0.75 (3)         10/31/03

           1997
           ----
           Marc Zucker                  25,000                     29.4%                       $3.0625            1/31/02
           Allan Socher                 25,000                     29.4%                       $3.0625            1/31/02
           Jay Goldberg                  5,000                      5.9%                       $6.0000            9/30/02
</TABLE>
            (1)   As originally granted on July 31, 1998, the exercise price of
                  the warrant was $2.00. On February 5, 1999, the warrant was
                  canceled and a replacement warrant was issued therefor. The
                  exercise price of the replacement warrant is $0.75. Such
                  exercise price was based upon the closing market price for the
                  underlying securities on February 4, 1999, which was $0.50.
                  The closing market price for the underlying securities on the
                  date of grant was $1.438.

            (2)   As originally granted on October 1, 1998, the exercise price
                  of the option was $2.00. On February 5, 1999, the option was
                  canceled and a replacement option was issued therefor. The
                  exercise price of the replacement option is $0.75. Such
                  exercise price was based upon the closing market price for the
                  underlying securities on February 4, 1999, which was $0.50.
                  The closing market price for the underlying securities on the
                  date of grant was $1.438.

            (3)   As originally granted on September 21, 1998, the exercise
                  price of the option was $2.00. On February 5, 1999, the option
                  was canceled and a replacement option was issued therefor. The
                  exercise price of the replacement option is $0.75. Such
                  exercise price was based upon the closing market price for the
                  underlying securities on February 4, 1999, which was $0.50.
                  The closing market price for the underlying securities on the
                  date of grant was $1.438.

             Compensation of Directors
             Outside Directors of the Company are currently entitled to receive
             $500 for attendance at each Board meeting.

             Employment Agreements
             The Company has entered into employment agreements effective June
             30, 1995, as amended on August 1, 1997, with each of Marc Zucker
             and Allan Socher. pursuant to a Loan Agreement dated July 31, 1998,
             by and between the Company and David A. Belford, the employment
             agreements of Messrs. Zucker and Socher have been modified.
             Pursuant to such modifications, Messrs Zucker and Socher will each
             be entitled to an annual salary of $162,000 plus either a cost of
             living increase or an increase of five percent (5%) annually,
             whichever is greater. Increases will take effect each year of the
             contracts as long as a minimum of $850,000 earnings before
             interest, taxes, depreciation and amortization ("EBITDA") is
             attained. In addition, Messrs Zucker and Socher will be entitled to
             receive certain incentive compensation and stock options based on
             the Company's performance if EBITDA exceeds $850,000. The
             employment agreements, as modified, shall remain in effect until
             December 31, 2000, at which time such agreements will be
             automatically extended for one calendar year unless either party
             notifies the other to the contrary by not less than six (6) months
             notice.

             In the event of a change of control of the Company, the successor
             entity shall make payment to each of Messrs. Zucker and Socher for
             all amounts due and owing under their respective employment
             agreements through the expiration date thereof.

             For a period of one year following the termination of each
             employment agreement, neither Zucker nor Socher shall solicit or
             endeavor to entice away any employee, director or agent of the
             Company or any entity affiliated with the Company. In addition,
             neither Zucker nor Socher may, at any time after the termination of
             the employment agreement, use the names or slogans "Room Plus",
             "Just >Round the Corner" or "A LOT OF LIVING in a Little Space" or

                                     - 29 -
<PAGE>


             any similar name for the purpose of a business competing with the
             Company or any entity affiliated with the Company or successor
             thereof.

             The Company has entered into employment agreements with each of
             Ronald Kaplan and Stephen Giordano, effective November 1, 1998 and
             September 21, 1998, respectively. Pursuant to each employment
             agreement, Messrs. Kaplan and Giordano will act as Chief Executive
             Officer and Chief Operating Officer, respectively, and each will be
             entitled to receive, among other things, (a) a salary of $160,000
             per annum plus either a cost of living increase or an increase of
             five percent (5%) annually, whichever is greater, and (b) such
             further sum by way of bonus or otherwise as determined by the
             Compensation Committee of the Board. The employment agreements
             shall remain in effect for a period of one (1) year from the
             effective date thereof, at which time such agreements will be
             automatically extended for an additional two (2) years unless
             either party notifies the other to the contrary by not less than
             sixty (60) days written notice.

             In addition, pursuant to their employment agreements, Messrs.
             Kaplan and Giordano are entitled to receive options to purchase up
             to 300,000 and 100,000 shares of the Company's Common Stock,
             respectively. Such options are subject to a three (3) year vesting
             schedule, unless otherwise accelerated upon the occurrence of
             specified events. See "Stock Options."

             In the event any person (excluding (i) the Company or any
             subsidiary thereof; (ii) any affiliate of the Company; (iii) any
             employee benefit plan sponsored or maintained by the Company or any
             subsidiary thereof; or (iv) David Belford or any entity with which
             he is affiliated (a "Belford Entity")) shall become the beneficial
             owner of securities of the Company representing 30% or more of the
             combined voting power of the Company's then outstanding securities;
             or upon the occurrence of a transaction requiring stockholder
             approval for the acquisition of the Company by any such person
             through the purchase of assets or by merger or otherwise, each of
             Messrs. Kaplan and Giordano shall be permitted to terminate his
             employment agreement within thirty (30) days of receiving notice of
             such change in control from the Company in accordance with the
             terms of the respective employment agreement and to receive payment
             from the Company of an amount calculated in accordance with the
             provisions of such employment agreement.






                                     - 30 -

<PAGE>



Item 11.     Security Ownership of Certain Beneficial Owners and Management
--------     --------------------------------------------------------------

             The following table sets forth certain information regarding the
             beneficial ownership of the Company's Common Stock by each person
             or group that is known by the Company to be the beneficial owner of
             more than 5% of its outstanding Common Stock, each Director of the
             Company, each person named in the Summary Compensation Table, and
             all Directors and executive officers of the Company as a group as
             of March 22, 1999. Unless otherwise indicated, the Company believes
             that the persons named in the table below, based on information
             furnished by such owners, have sole voting and investment power
             with respect to the Common Stock beneficially owned by them,
             subject to community property laws, where applicable.

Principal Stockholders

<TABLE>
<CAPTION>
                                             Number of Shares of
                                                Common Stock            Percent Ownership of
Name and Address of Beneficial Owner         Beneficially Owned       Common Stock Outstanding
------------------------------------         ------------------       ------------------------
<S>                                              <C>                            <C>  
Marc Zucker                                      692,501(1)                     14.9%
91 Michigan Avenue
Paterson, NJ 07503

Allan Socher                                     692,500(1)                     14.9%
91 Michigan Avenue                                                             
Paterson, NJ 07503                                                             
                                                                               
Theodore Shapiro                                 768,266(2)                     16.4%
91 Michigan Avenue                                                             
Paterson, NJ 07503                                                             
                                                                               
Frank Terzo                                      273,000(3)                      6.1%
88 Village Road                                                                
Manhasset, NY 11030                                                            
                                                                               
David A. Belford                               2,031,900(4)                     31.8%
361 N. Parkview Avenue                                                         
Columbus, OH 43209                                                             
                                                                               
Ronald A. Kaplan                                  78,800(5)                      1.8%
91 Michigan Avenue                                                             
Paterson, NJ 07503                                                             
                                                                               
Jay H. Goldberg                                    5,200(6)                      0.1%
91 Michigan Avenue                                                             
Paterson, NJ 07503                                                             
                                                                               
All Directors and Officers as a Group          3,793,500(7)                     53.3%
    (7 Persons)                                                         
</TABLE>

--------------
(1)   Includes currently exercisable warrants to purchase 270,000 shares of
      Common Stock.
(2)   Includes currently exercisable warrants to purchase 310,000 shares of
      Common Stock.
(3)   Includes currently exercisable warrants to purchase 115,000 shares of
      Common Stock.
(4)   Includes currently exercisable warrants to purchase 2,000,000 shares of
      Common Stock.
(5)   Includes currently exercisable options to purchase 42,000 shares of Common
      Stock and options to purchase 16,800 shares of Common Stock within 60
      days.
(6)   Includes currently exercisable warrants to purchase 5,000 shares of Common
      Stock.
(7)   Includes an aggregate of 2,738,400 shares of Common Stock issuable upon
      exercise of outstanding options and warrants.


                                     - 31 -

<PAGE>
Item 12. Certain Relationships and Related Transactions
-------- ----------------------------------------------

         The Company leases its manufacturing facility, located in Paterson, New
         Jersey, from M&S Realty Company, which is owned by Theodore Shapiro, a
         former director and executive officer of the Company. The lease for the
         facility expired May 31, 1998. Upon the expiration of the lease, the
         Company began occupying the facility on a month-to-month basis under
         the same terms of the original lease, including rent escalations, but
         is required to give the landlord twelve months notice of its intent to
         terminate the lease.

         In 1997, the Company advanced $14,373 to two executive officers and one
         former executive officer consisting of additional advances of $296 and
         accrued interest of $14,077. The individuals made repayments of $49,700
         in 1997, resulting in a balance of $190,365 at December 31, 1997.
         During 1998, the individuals made repayments of $13,567 and interest of
         $11,082 was accrued resulting in a balance of $187,880 at December 31,
         1998. Such balance bears interest at the rate of 6% per annum and has
         no scheduled maturity date.

         Retail Media Plus (which is owned by two executive officers, Marc
         Zucker and Allan Socher, and a former executive officer, Theodore
         Shapiro, of the Company) placed all of the Company's advertising and
         passed through any cost savings to the Company through November 1998.
         For 1998 and 1997, the Company reimbursed Retail Media Plus
         approximately $1,219,000 and $1,780,000, respectively, for advertising
         costs. Commencing in December 1998, the Company began placing its own
         advertising.

         In July 1996, Frank Terzo became a consultant to the Company. Under his
         consulting agreement, which is for a term of three years, Mr. Terzo
         received a cash payment of $25,000 and 250,000 shares of Common Stock,
         which shares were valued at $.80 per share (the price of the stock sold
         in the 1996 Private Placement) for financial accounting purposes. Mr.
         Terzo became a director of the Company in December 1996 and resigned as
         a director of the Company on March 31, 1999.

         All future transactions and/or loans between the Company and officers
         and directors will be on terms no less favorable than could be obtained
         from independent, third parties and will be approved by a majority of
         the directors of the Company disinterested in such transactions and/or
         loans.

Item 13. Exhibits, List and Reports on Form 8-K
-------- --------------------------------------

     (a) Exhibits to Form 10-KSB
         -----------------------
         Additional exhibits filed herewith are as follows:

EXHIBIT INDEX

Exhibit
  No.  
-------
3.1   Certification of Incorporation of the Company, as amended (1)
3.2   Restated and Amended By-laws of the Company (1)
4.1   Form of Representative Warrant Agreement between the Company and The
      Thornwater Company, L.P., with form of Warrant attached (1)
4.2   Form of Warrant Agreement between the Company and American Stock Transfer
      & Trust Company, with form of Warrant attached (1)
4.3   Form of Warrant issued by Company to Allan J. Socher, Theodore Shapiro,
      Marc I. Zucker and Kirlin Securities Corp.(1)
4.4   Form of Warrant issued by the Company to Mark Rubin (1)
4.5   Letter dated April 24, 1998 confirming terms and conditions to lend the
      Company $200,000 (5)
4.6   Promissory Note in the amount of $100,000 due June 11, 1998, between the
      Company and Finbar O'Neill (5)
4.7   Stock Purchase Option dated April 24, 1998 for 250,000 shares of common
      stock issued to Finbar O'Neill (5)
4.8   Promissory Note in the amount of $100,000 due June 11, 1998, between the
      Company and Mark Rubin (5)
4.9   Stock Purchase Option dated April 24, 1998 for 250,000 shares of common
      stock issued to Mark Rubin (5)
4.10  Stock Purchase Option dated June 23, 1998 for 60,000 shares of common
      stock issued to Mark Rubin (5)
4.11  Letter Agreement dated July 7, 1998 between the Company and Mark Rubin
      extending the due date of the Promissory Note due June 11, 1998, to August
      1, 1998 (5)
4.12  Letter Agreement dated July 7, 1998 between the Company and Finbar O'Neill
      extending the due date of the Promissory Note due June 11, 1998, to August
      1, 1998 (5)
4.13  Stock Subscription Warrant issued by the Company to David A. Belford (6)
4.14  Stock Subscription Warrant issued by the Company to David A. Belford,
      dated February 5, 1999 (8)

                                     - 32 -
<PAGE>


 4.15 Stock Option Agreement by and between the Company and Ronald A. Kaplan,
      dated February 5, 1999 (8)
 4.16 Stock Option Agreement by and between the Company and Stephen Giordano,
      dated February 5, 1999 (8)
10.1  Employment Agreement dated June 16, 1995 between the Company and Allan J.
      Socher (1)
10.2  Employment Agreement dated June 16, 1995 between the Company and Theodore
      Shapiro (1)
10.3  Employment Agreement dated June 16, 1995 between the Company and Marc I.
      Zucker (1)
10.4  Lease dated June 1, 1984 between M&S Realty Company and Bunk Trunk
      Manufacturing Company, Inc., as amended on December 1, 1988 and January 2,
      1996 (1)
10.5  Lease dated June 6, 1996 between Milford Management Corp., as agent, and
      the Company (1)
10.6  Lease dated November 1, 1991 between Dilstan Realty Corporation and Room
      Plus Furniture of Westchester, Inc.(1)
10.7  Indenture of Lease dated October 1, 1988 between Daper Realty, Inc. and
      RPF Holding Corporation (1)
10.8  Lease dated June 1, 1983 between Hannon's and the Company, as modified by
      and Extension of Lease dated July 31, 1993(1)
10.9  Agreement of Lease dated August 9, 1985 between Patrician Equities Corp.
      and Room Plus Furniture of East Brunswick, as modified by a Lease
      Extension Agreement dated August 25, 1995 (1)
10.10 Lease dated August 26, 1987 between Country Glen Associates and Room Plus
      Furniture, Inc. (1)
10.11 Agreement of Lease between Austin Mall Associates and Room Plus Furniture
      of Forest Hills, Inc. (1)
10.12 Sublease Agreement dated February 5, 1988 between NYNEX Business
      Information Systems Company and RPF Holding Corporation, as modified by a
      letter agreement dated March 25, 1993 (1)
10.13 Shopping Center Agreement of Lease dated October 1, 1995 between Alexander
      Carpet Company and the Company(1)
10.14 Lease dated November 21, 1995 between 205/215 Lexington Limited
      Partnership and the Company (1)
10.15 Assignment of Lease dated June 26, 1996 between Reliable Broadway, Inc.
      and the Company (1)
10.16 Lease dated January 11, 1996 between Comalgri Holding Corp. and the
      Company (1)
10.17 Form of Financial Advisory and Investment Banking Agreement between the
      Company and The Thornwater Company, L.P.(1)
10.18 Lease dated September 20, 1996, between Heartland Shopping Center LLC and
      Room Plus, Inc. (2)
10.19 Sublease and Assumption Agreement dated October 11, 1996 between Bedding
      Discount Center, Inc. and Room Plus, Inc.(2)
10.20 Lease dated December 19, 1996 between Ackrik Associates, and Room Plus,
      Inc. (3)
10.21 Lease dated December 2, 1996 between Pitrock Realty Corp. and Room Plus,
      Inc. (4)
10.22 Lease dated March 20, 1997 between CMW Investments, Ltd. and Room Plus,
      Inc. (4)
10.23 Lease modification agreement dated July 22, 1997 between Austin Mall
      Associates and Room Plus, Inc. (4)
10.24 Extension of lease dated January 26, 1998 between Hannon's and Room Plus,
      Inc. (4)
10.25 Loan Agreement dated July 31, 1998, by and between the Company and David
      A. Belford (6)
10.26 Security Agreement dated as of July 31, 1998, by and between the Company
      and David A. Belford (6)
10.27 Stockholder Agreement dated as of July 31, 1998, by and between Nationwide
      Warehouse & Storage, Inc., the Company, Room Plus Sub, Inc. and Marc
      Zucker (6)
10.28 Stockholder Agreement dated as of July 31, 1998, by and between Nationwide
      Warehouse & Storage, Inc., the Company, Room Plus Sub, Inc. and Allan
      Socher (6)
10.29 Stockholder Agreement dated as of July 31, 1998, by and between Nationwide
      Warehouse & Storage, Inc., the Company, Room Plus Sub, Inc. and Theodore
      Shapiro (6)
10.30 Stockholder Agreement dated as of July 31, 1998, by and between Nationwide
      Warehouse & Storage, Inc., the Company, Room Plus Sub, Inc. and Frank
      Terzo (6)
10.31 Employment Agreement dated September 21, 1998 between the Company and
      Stephen Giordano (*) 10.32 Employment Agreement dated November 1, 1998
      between the Company and Ronald A. Kaplan (*)
11    Calculation of Net Income (Loss) per Common Share (*)
23.1  Consent of Arthur Andersen LLP (*)
27    Financial Data Schedule (*)

----------------
(1)   Incorporated by reference to the exhibit of the same number filed as part
      of the Registration Statement on Form SB-2 (File No. 333-10483).
(2)   Incorporated by reference to the exhibit of the same number filed as part
      of the Quarterly Report on Form 10-QSB for the period ended September 30,
      1996 (File No. 1-14478).
(3)   Incorporated by reference to the exhibit of the same number filed as part
      of the Annual Report on Form 10-KSB for the period ended December 31, 1996
      (File No. 1-14478).
(4)   Incorporated by reference to the exhibit of the same number filed as part
      of the Annual Report on Form 10-KSB for the period ended December 31, 1997
      (File No. 1-14478).
(5)   Incorporated by reference to the exhibit of the same number filed as part
      of the Quarterly Report on Form 10-QSB for the period ended March 31, 1998
      (File No. 1-14478).
(6)   Incorporated by reference to the exhibit of the same number filed as part
      of the Current Report on Form 8-K as of July 31, 1998 (File No. 1-14478).

                                     - 33 -

<PAGE>



(7)   Incorporated by reference to the exhibit of the same number filed as part
      of the Registration Statement on Form S-3 as filed with the Commission on
      as of July 30, 1998 (File No. 1-14478).
(8)   Incorporated by reference to the exhibit of the same number filed as part
      of the Current Report on Form 8-K as of February 18, 1999 (File No.
      1-14478).
(*)   Exhibit filed with this Form 10-KSB.

     (b)   Reports on Form 8-K
           -------------------
           The Company did not file any reports on Form 8-K during the quarter
ended December 31, 1998.

                                     - 34 -