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, 1996



                                 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)


                                 (201) 523-4600
                           (Issuer's telephone number,
                              including area code)





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

<TABLE>
<CAPTION>

<S>                                                           <C>    
         Title of each Class                                  Name of each exchange on which registered


Common Stock, par value $.00133 per share                              NASDAQ SmallCap & Boston Stock Exchange
-----------------------------------------                              ---------------------------------------

Redeemable Common Stock Purchase Warrants                     NASDAQ SmallCap & Boston Stock Exchange

</TABLE>


<PAGE>

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. [ ]

         The issuer's revenues for the fiscal year ended December 31, 1996 were
$14,427,108.

         The aggregate market value of the voting stock hold by non-affiliates
computed by reference to the closing price of the stock on February 28, 1997 was
$11,193,750.

         The number of shares of the issuer's Common Stock, par value $.00133
per share, outstanding as of March 20, 1997 was 4,385,000. The actual number of
the issuer's Redeemable Common Stock Purchase Warrants outstanding as of March
20, 1997 was 2,530,000.


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

<PAGE>
                                                 TABLE OF CONTENTS
<TABLE>
<CAPTION>


                  ROOM PLUS, INC.                                                       PAGE #


<S>                                                                                       <C>    
PART I..........................................................................
         Item 1   Description of Business.......................................           1
         Item 2   Description of Property.......................................           6
         Item 3   Legal Proceedings.............................................           7
         Item 4   Submission of Matters to a Vote of Security Holders...........           7


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.................           8
         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....................................................          29
         Item 12  Certain Relationships and Related Transactions................          31
         Item 13  Exhibits, Lists and Reports on Form 8-K.......................          32
                                                                                   

SIGNATURES......................................................................          35

</TABLE>



<PAGE>


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 open additional retail showrooms, to automate the manufacturing
process to increase productivity and reduce costs and to compete with its direct
and indirect competitors.

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 (201)
523-4600.

         The Company is a fully-integrated manufacturer and retailer of
high-pressure, 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 metropolitan
area and Pennsylvania. 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 $327 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 various 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 year, the company has
implemented numerous changes to its manufacturing facility and processes in
order to significantly reduce the direct costs of manufacturing and to produce
more contemporary styles of high quality, mica-laminated furniture.

                                        1
<PAGE>
         The Company's existing manufacturing facility currently operates on a
single shift and has sufficient capacity to more than double its manufacturing
volume without substantially increasing indirect costs of manufacture. The
Company is in the process of using a substantial portion of the proceeds from
its Initial Public Offering ("IPO") consummated on November 6, 1996 to establish
12 to 14 additional retail showrooms, primarily in the Boston to Washington,
D.C. corridor, to increase demand for its products, and to continue to upgrade
and automate its manufacturing process and to further reduce direct
manufacturing costs.

         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.

(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 shift, 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 more than double its
manufacturing volume 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. The Company has utilized and will continue to
utilize a portion of the net proceeds of the IPO to lease and/or purchase
machine tools to further automate the manufacture of the Company's products in
order to decrease the costs associated with such manufacturing. Management
believes that additional shifts of workers, together with the continued
automation of the manufacturing process, will permit the Company to meet its
manufacturing requirements over the foreseeable future without the necessity of
expanding its manufacturing facility beyond its current size. The Company is
also exploring the possibility of using any excess manufacturing capacity to
provide independent retailers with a private label of the Company's products.

         In March 1995, the Company established the Target Team program as a
method of engaging the participation of all Company employees in Company-wide
improvements. The Target Team solicits individual employee and group ideas as to
how to reduce costs and make the Company more profitable. Groups are created to
establish and meet aggressive targets in all phases of the manufacturing
process, such as the time it takes to build a piece of furniture and the amount
of raw materials utilized. The Target Team consists of senior management of the
Company and management consultants who review employee suggestions and provide
recommendations that have resulted in the significant reduction of manufacturing
costs. For example, the Target Team recommended acquisition of several pieces of
computer controlled machine tools which would streamline production while
significantly reducing manufacturing costs. In addition, in January 1997, the
Company established Team Plus, an employee management work group whose mission
is to improve quality control through teamwork, pride and unity. One
recommendation of Team Plus that was implemented was to change from a
conventional open container for waste removal to a highly efficient compactor
system. This change is expected to result in an annualized savings of $50,000.

(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

                                        2
<PAGE>
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 recently
began producing a thinner, low-pressure laminated furniture line that sells at
lower prices, and management believes that there is sufficient demand for this
product line. In addition, the Company recently introduced a new contemporary
modular furniture design 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 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 5% 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.

                                        3
<PAGE>
         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 10-12 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. 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 fiscal year ended December 31, 1996, the Company's advertising
budget was approximately $1,100,000 or 8% of revenues. The Company achieves
savings in advertising costs through its use of an affiliated entity to purchase
advertising at discounts and its strategy of making long-term advance purchases
and purchasing in time blocks in bulk to achieve discounted rates. The Company
also advertises to a lesser extent in newspapers and on radio.

         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.

         The three principals of the Company established Retail Media Plus, Inc.
("Retail Media Plus") in June 1995. Retail Media Plus places 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. See "Certain
Relationships and Related Transactions".

         In May 1996, an agreement was reached with King Features to utilize the
Dennis the Menace character as part of the corporate logo. The Company believes
that this recognizable character will assist in market recognition as the
Company begins its expansion in 1997 outside its traditional market areas.

(g)      Expansion Strategy.

         The Company's expansion strategy is primarily focused on opening
additional retail showrooms in the existing markets of New York and New Jersey
and in new markets such as Pennsylvania, Washington, DC and Virginia. In
February and March 1997, management opened three sites in the metropolitan New
York area and two sites in the Pennsylvania market. The Company intends to use
approximately 50% of the proceeds from the IPO to open twelve to fourteen new
retail showrooms in the next 24 months. To support the growth of new store
openings, the Company will be supplementing its management information system in
1997 with point of sale equipment to permit on line order processing, and
provide on demand sales and marketing information.

(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

                                        4
<PAGE>
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 uses 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 annual U.S. sales of over $47.7 billion in 1995 and estimated annual
U.S. sales of $49 billion in 1996.

         The Company is the largest retailer of mica-laminated home furniture in
the New York metropolitan area and Pennsylvania, 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. The Company believes that it will face similar
competitive conditions (a few small retailers specializing in mica-laminated
furniture and many retailers, both large and small, of home furniture that is
not mica-laminated) in the market areas in which it plans to open additional
retail showrooms.

(k)       Employees.

          In January 1996, all Company employees became employees of Corporate
Management Group Recruiting, Inc. ("CMGR") and their services were then leased
back to the Company pursuant to an employee leasing agreement (the "Employee
Leasing Agreement") between the Company and CMGR. All references to employees
herein refer to employees whose services are leased by the Company from CMGR
pursuant to the Employee Leasing Agreement.

         Pursuant to the Employee Leasing Agreement, CMGR is responsible for
payment of all federal, state and local employment taxes and providing workers'
compensation and disability coverage and other mandated employee benefits

                                        5
<PAGE>
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) CMGR on ninety (90) days
prior notice.

         The Company provides 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 seven years, and the sales manager has been with the Company for
over 13 years.

         As of December 31, 1996, the Company had approximately 161 employees,
of whom four were executive officers, 73 were engaged in sales, 66 were engaged
in manufacturing and 18 were administrative staff. Approximately 50 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 1994. 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:
<TABLE>
<CAPTION>

                                                     Month and Year                   Square Feet
         Location                                        Opened                     (Approximately)
         --------                                    --------------                 ---------------

<S>                                                  <C>                             <C>  
Manhattan (3rd Ave.), NY                             June 1981                       3,500
Manhattan (Lexington Ave.), NY                       November 1995                   2,700
Manhattan (Broadway between
  18th & 19th Sts.), NY                              September 1996                  5,000
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 1997                      4,000
Brooklyn, NY                                         December 1996                   2,720
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                     3,350
Union, NJ                                            October 1995                    3,900
Cherry Hill, NJ                                      March 1997                      5,000
Langhorne, PA                                        February 1997                   3,200
</TABLE>

         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.

         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.

                                        6
<PAGE>
         From June 1991 to September 1995, the Company closed seven retail
showrooms to reduce costs and consolidate selling efforts. The showrooms that
were closed were located in Manhasset and Cedarhurst, New York, Totowa,
Eatontown, Toms River, and Manalapan, New Jersey and Westport, Connecticut.

         In addition to its retail showrooms, the Company currently leases a
78,000 square foot plan 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 $23,000, subject to annual adjustment as more fully set forth in
such leases. The leases expire on May 31, 1999, and the Company has the option
to renew the leases for an additional 15 year period on the same terms and
conditions as the original leases, including annual adjustments in rent. The
owner of the Paterson facility is M&S Realty Company, which is owned by Theodore
Shapiro, the Company's Executive Vice President and Director of Manufacturing.
See "Certain Relationships and Related Transactions".

Item 3.    Legal Proceedings.

         The Company is not a party to any 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.

         None during the fourth quarter of the year ended December 31, 1996.

PART II

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

(a)      Market Information.

          Since the consummation of the Company's IPO on November 6, 1996, the
Company's Common Stock and Redeemable Common Stock Purchase Warrants have been
traded on the National Association of Securities Dealers Automated Quotation
System (NASDAQ) SmallCap Market under the Symbols "PLUS" and "PLUSW"
respectively, and on the Boston Stock Exchange under the symbols "RPI" and
"RPIW", 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 the fourth quarter of 1996 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
Year ended December 31, 1996                         Stock                      Purchase Warrant
----------------------------                         ---------------            ----------------

<S>                                                  <C>                       <C>
Fourth Quarter                                       High 8 7/8                 High    4
                                                     Low 4 5/8                  Low     1 1/4


</TABLE>






                                        7
<PAGE>
(b)    Holders.

         As of February 11, 1997, the Company had approximately 746 beneficial
owners of its Common Stock and 6 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 year 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.

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 high-pressure, 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.

          On November 1, 1996, the Securities and Exchange Commission declared
effective the Company's Registration Statement relating to the issuance of
1,100,000 shares of its Common Stock (including 100,000 shares of Common Stock
registered for the account of certain selling securityholders) and 2,200,000
Redeemable Common Stock Purchase Warrants at a price of $5.00 per share and
$0.10 per warrant. On November 6, 1996, the underwriter also exercised its over
allotment option for an additional 165,000 shares of the Company's Common Stock
and 330,000 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.

                                        8
<PAGE>
(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

                                                              1996                      1995
                                                              ----                      ----

<S>                                                           <C>                       <C> 
Revenues                                                      100%                      100%
Cost of goods sold                                            40.3%                     52.3%
Gross profit                                                  59.7%                     47.7%
Selling, general & administrative
    expenses                                                  59.6%                     60.3%
Earnings (loss) from operations                                  0%                    (12.7%)
Other income (deductions)                                        0%                     (1.2%)
Net earnings (loss)                                              0%                      (13%)
</TABLE>

Fiscal 1996 Compared with Fiscal 1995.

Revenues.

         Revenues for the fiscal year ended December 31, 1996 were $14,427,108,
as compared to $13,149,018 for the fiscal year ended December 31, 1995, or an
increase of $1,278,090 or 9.7%. This increase is primarily the result of four
new showroom openings during October/November 1995 and 1996, which increased
revenues by approximately $1,391,382, increased revenues of $399,687 for
existing showroom sales, and was partially offset by the closing of one showroom
in 1996. Management believes that due to the short period of time they were
open, revenues realized in fiscal year 1996 by such showrooms are not indicative
of future results. Management believes that the four new showrooms will realize
aggregate revenues of approximately $2.5 million in 1997. In addition to these
showrooms, the Company has opened three additional showrooms in the first
quarter of 1997, and will open a fourth showroom in April 1997. Management
believes that these additional showrooms will realize aggregate revenues of
approximately $1.6 million in 1997.

Cost of Sales.

         Cost of sales for the fiscal year ended December 31, 1996 were
$5,811,602 or 40.3% of revenues as compared to $6,881,282 or 52.3% of revenues
for the same period in 1995. This decrease is due to changes in the
manufacturing processes and sale of inventory recommended by the Target Team,
including a reduction of direct labor, and manufacturing overhead of $264,197
and $120,422, respectively, as compared to the same period for 1995. In
addition, inventory was reduced from $1,739,995 in January 1995 to $1,229,561 in
December 1995. The inventory was sold at our Paramus, New Jersey Showroom, which
was used as a Clearance Center for several months in 1995. At December 31, 1996
inventory increased by $220,846 to $1,450,407, primarily due to the addition of
four showrooms in late 1995 and 1996.

         As a result of the foregoing, the Company realized an increase in gross
profit in 1996 as compared to 1995, with a gross profit of $8,615,506 or 59.7%
of revenues in the fiscal year ended December 31, 1996, as compared to
$6,267,736 or 47.7% of revenues achieved during the same period in 1995.

Selling, General and Administrative Expenses.

         Selling, general and administrative expenses amounted to $8,605,096 or
59.6% of revenues in fiscal year 1996 as compared to $7,932,515 or 60.3% of
revenues in fiscal year 1995. The increase of $672,581 is primarily due to
expenses associated with the opening of four new showrooms in late 1995 and
1996. Such expenses included payroll, rent and related showroom overhead
expenses of $588,231 and an increase in advertising of $300,000 over the 1995
levels.
 
                                      9
<PAGE>
These additional expenses were partially offset by a reduction in employee
benefits and related Workers' Compensation insurance premiums achieved when the
Company entered into an employee leasing agreement with CMGR, Inc., in January
of 1996.

Operating Income.

         Operating income for the fiscal year ended December 31, 1996 was
$10,410 as compared to an operating loss of $1,664,779 or 12.7% of revenues
during the fiscal year ended December 31, 1995. Although there can be no
assurance as to the Company's future profitability, Management believes that
1996 represented a positive turning point in the Company's operations and
believes that fiscal year 1997 will show further improvement. The Company plans
to open showrooms in new geographic areas, including Alexandria, Virginia, and
Rockford, Maryland and while the expenses associated with opening the new
showrooms may adversely affect operating income in the near term, Management
believes this expansion strategy will enhance operating income as the showrooms
gain recognition in new markets. See "Liquidity and Capital Resources."

Other Income and Expenses.

         Other income and expenses for the fiscal year ended December 31, 1996
was ($32,672) as compared to ($159,572) in fiscal year ended December 31, 1995.
The primary reasons, for the $126,900 net decrease in other expenses were a
reduction in interest expenses and proceeds from an insurance claim for water
damage.

         In September 1995, the Company's S corporation status was changed to a
C corporation under the applicable sections of the Internal Revenue Code of
1986, as amended, as a result of the private placement of 750,000 shares of the
Company's Common Stock. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources." This
change caused a revised tax treatment so that federal income taxes thereafter
became the direct responsibility or benefit of the Company and not of the
stockholders. This change gave rise to pro forma tax benefit of $426,388 in the
fiscal year ended December 31, 1995, as a result of the operating loss incurred
by the Company during that period.

Income Before Income Taxes.

         The preceding factors combined to show an increase in net income
totaling $1,802,089 in the fiscal year ended December 31, 1996 as compared to
the fiscal year ended December 31, 1995. There was a net loss of $22,262 in 1996
as compared to a net loss of $1,824,351 or 13.9% of revenues in 1995.

Liquidity and Capital Resources.

         The Company had a working capital surplus of $2,774,488 at December 31,
1996 which represented an increase in working capital of $4,021,078 or 323% from
the working capital deficit of $1,246,590 at December 31, 1995. The decrease in
the deficit was mainly due to the IPO which supplied approximately $4,200,000 of
working capital. The IPO also increased the Company's cash and cash equivalents
position from ($61,436) on December 31, 1995 to $3,178,088 on December 31, 1996.

         The Company's operating activities used cash of $989,274 and $1,385,761
for the fiscal years ended December 31, 1996 and 1995, respectively. The
principal use of the cash in 1996 was to finance operating expenses and
inventory associated with the opening of four new retail showrooms in late 1995
and 1996 and a $480,631 reduction in accounts payable, which represented
payments of accrued liabilities to various landlords and vendors. Payment of
outstanding accounts payable also permitted the Company to negotiate lower
prices for several raw materials. In fiscal year 1995, cash was primarily used
to finance an approximate 15% decrease in accounts payable, to finance expenses
associated with the June 1995 bridge loan and 1995 private placement and to
finance an increase in cost of goods sold relating to the manufacture of a new
line of rounded-edge furniture.

                                       10
<PAGE>
         The Company's investing activities provided (used) cash of ($975,506)
and $195,094 for the fiscal years ended December 31, 1996 and 1995 respectively.
The principal use of cash in 1996 was the purchase of property and inventory for
the four new showrooms and the purchase of equipment to improve manufacturing
efficiency. The principal sources of the cash provided in 1995 were loans from
officers in the amount of $254,465.

         The Company's financing activities provided cash of $5,204,304 and
$1,116,716 for the fiscal years ended December 31, 1996 and 1995 respectively.
The cash provided by the Company's financing activities for the fiscal year 1996
primarily resulted from the proceeds of the sale of common stock of $6,478,000
which was partially offset by $1,716,583 of charges connected with the IPO. The
cash provided by the Company's financing activities for the fiscal year ended
1995 was the result of the 1995 Private Placement as defined below.

         In June 1995, the Company obtained a bridge loan in the amount of
$300,000 from several investors. The loan was non-interest bearing and was fully
repaid in September 1995 with the proceeds of the 1995 Private Placement
discussed below. In connection with the bridge loan, the Company issued to the
investors warrants to purchase an aggregate of 75,000 shares of Common Stock at
a purchase price of $0.00133 per share. Such warrants were exercised in June
1996.

         In September 1995, the Company issued 750,000 shares of Common Stock in
a private placement at a price of $1.33 per share and received net proceeds of
approximately $831,000 (the "1995 Private Placement"). The proceeds from this
private placement were utilized for deposits on leased machinery for the
Company's manufacturing facility, the development of additional retail showrooms
and working capital.

         In connection with the 1995 Private Placement, the Company granted to
the placement agent a warrant to purchase 75,000 shares of Common Stock at a
purchase price of $.00133, which warrant was exercised in September, 1995, and
the warrants to purchase 750,000 shares of Common Stock at a purchase price of
$1.20 per share.

         In March 1996, the Company obtained a bank line of credit in the amount
of $350,000, which bears interest at the rate of prime rate plus 2% per annum.
In June 1996, the Company also obtained a bank loan in the amount of $50,000,
which bore interest at prime rate plus 2% per annum. The Company repaid all
outstanding balances on the bank loan and the line of credit with a portion of
the net proceeds from the IPO.

         In June 1996, a bridge loan in the amount of $150,000 was obtained from
four investors. The loan bore interest at the rate of 13% per annum and is due
on June 18, 1997. In connection with this bridge loan, the Company issued an
aggregate of 20,000 shares of Common Stock to the investors.

         In July 1996, a private placement of 500,000 shares of Common Stock at
a purchase price of $.80 per share was completed by the Company (the "1996
Private Placement"). The Company received net proceeds of $332,500 from the 1996
Private Placement and such proceeds were utilized for expenses relating to the
IPO, repayment of a portion of the Company's bank borrowings and working
capital.

                                       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 #
-----------------------------                                             ------

         Independent Auditors' Report                                     F-2

         Balance Sheet as of December 31, 1996                            F-3

         Statements of Operations for the Years Ended
            December 31, 1996 and 1995                                    F-4

         Statements of Stockholders' Equity (Deficit) for the
            Years Ended December 31, 1996 and 1995                        F-5

         Statements of Cash Flows for the Years Ended
            December 31, 1996 and 1995                                    F-6

         Notes to Financial Statements                                    F-7

                                       F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

To The Board of Directors
   and Shareholders of Room Plus, Inc.
Paterson, New Jersey

We have audited the accompanying balance sheet of Room Plus, Inc. as of December
31, 1996, and the related statements of operations, stockholders' equity
(deficit) and cash flows for each of the two years in the period ended December
31, 1996. 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 as of December 31, 1995,
were audited by Ehrenkrantz and Company, who merged with Ehrenkrantz Sterling &
Co., L.L.C., as of January 1, 1997, and whose report dated March 12, 1996
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, 1996, and the results of its operations and cash flows for each of the two
years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles.





/s/ EHRENKRANTZ STERLING & CO., L.L.C.
EHRENKRANTZ STERLING & CO., L.L.C.



Roseland, New Jersey
March 19, 1997


                                       F-2


<PAGE>

                                                  ROOM PLUS, INC.
                                                   BALANCE SHEET

                                                 December 31, 1996
                                                 -----------------
<TABLE>
<CAPTION>

                                    ASSETS
<S>                                                                             <C>         
CURRENT ASSETS
   Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 3,178,088
   Accounts receivable  . . . . . . . . . . . . . . . . . . . . . . . . . . . .       38,888
   Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   1,450,407
   Notes receivable, officers  . . . . . . . . . . . . . . . . . . . . . . . . .      48,600
   Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      375,538
   Deferred income taxes   . . . . . . . . . . . . . . . . . . . . . . . . . . .      67,329
                                                                                ------------
   TOTAL CURRENT ASSETS  . . . . . . . . . . . . . . . . . . . . . . . . . . . .   5,158,850
                                                                                ------------
                                                                                  
PROPERTY AND EQUIPMENT, at cost  . . . . . . . . . . . . . . . . . . . . . . . .   2,820,083
   Less: Accumulated depreciation   . . . . . . . . . . . . . . . . . . . . . .    1,752,099
                                                                                ------------
                                                                                   1,067,984
                                                                                ------------
                                                                                  
OTHER ASSETS                                                                      
   Security deposits   . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     159,549
   Deferred charges   . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      237,476
   Deferred income taxes  . . . . . . . . . . . . . . . . . . . . . . . . . . .      106,048
   Notes receivable, officers . . . . . . . . . . . . . . . . . . . . . . . . .      177,092
   Miscellaneous assets   . . . . . . . . . . . . . . . . . . . . . . . . . . .        3,304
                                                                                ------------
                                                                                     683,469
                                                                                ------------
                                                                                 $ 6,910,303
                                                                                ============
</TABLE>                                                                       
<TABLE>                                                                        
<CAPTION>                                                                      
                                                                               
                                                                               
                                       LIABILITIES AND STOCKHOLDERS' EQUITY    
<S>                                                                              <C>                     
CURRENT LIABILITIES                                                              
   Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . $   190,869
   Notes payable, bridge loans. . . . . . . . . . . . . . . . . . . . . . . . .       75,000
   Due to related companies  . . . . . . . . . . . . . . . . . . . . . . . . . .     135,514
   Accounts payable. . . . . . . . . . . . . . . . . . .  . . . . . . . . . . .    1,220,726
   Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      164,077
   Payroll and sales taxes payable   . . . . . . . . . . . . . . . . . . . . . .     122,772
   Customer deposits and other advances   . . . . . . . . . . . . . . . . . . .      475,404
                                                                                ------------
   TOTAL CURRENT LIABILITIES  . . . . . . . . . . . . . . . . . . . . . . . . .    2,384,362
                                                                                ------------
                                                                                 
LONG -TERM DEBT, less current portion  . . . . . . . . . . . . . . . . . . . . .     118,866
                                                                                ------------
                                                                                 
COMMITMENTS AND CONTINGENCY                                                               --

STOCKHOLDERS' EQUITY (DEFICIT)
   Capital stock
      Authorized, 10,000,000 shares at $.00133 par value, 4,385,000
      shares issued and outstanding . . . . . . . . . . . . . . . . . . . . . .        5,832
   Additional paid-in capital  . . . . . . . . . . . . . . . . . . . . . . . . .   6,512,645
   Deficit  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   (2,111,402)
                                                                                ------------
                                                                                   4,407,075
                                                                                ------------
                                                                                $  6,910,303
                                                                                ============
</TABLE>

See notes to financial statements.
                                                        F-3
<PAGE>
                                                  ROOM PLUS, INC.
                                             STATEMENTS OF OPERATIONS
                                                      
<TABLE>
<CAPTION>
                                                                                                   Years Ended December 31
                                                                                                1996                       1995
                                                                                            ------------               ------------

<S>                                                                                         <C>                        <C>         
REVENUES .....................................................................              $ 14,427,108               $ 13,149,018

COST OF GOODS SOLD ...........................................................                 5,811,602                  6,881,282
                                                                                            ------------               ------------

GROSS PROFIT .................................................................                 8,615,506                  6,267,736
                                                                                            ------------               ------------

EXPENSES
   Selling ...................................................................                 7,062,219                  5,713,534
   General and administrative ................................................                 1,542,877                  2,218,981
                                                                                            ------------               ------------
                                                                                               8,605,096                  7,932,515
                                                                                            ------------               ------------

EARNINGS (LOSS) FROM OPERATIONS ..............................................                    10,410                 (1,664,779)
                                                                                            ------------               ------------

OTHER INCOME (DEDUCTIONS)
   Interest Expense ..........................................................                   (65,135)                  (182,605)
   Miscellaneous Income ......................................................                    32,463                     23,033
                                                                                            ------------               ------------
                                                                                                 (32,672)                  (159,572)
                                                                                            ------------               ------------

LOSS BEFORE INCOME
   TAXES (BENEFITS) ..........................................................                   (22,262)                (1,824,351)
INCOME TAXES (BENEFITS) ......................................................                   (19,177)                  (118,103)
                                                                                            ------------               ------------

NET LOSS .....................................................................              $     (3,085)              $ (1,706,248)
                                                                                            ============               ============

PRO FORMA NET LOSS DATA
   (UNAUDITED)
   Loss before provision for income tax benefits .............................              $       --                 $ (1,824,351)
   Pro forma income tax (benefits) ...........................................                      --                     (426,388)
                                                                                            ------------               ------------

     Pro forma net loss ......................................................              $       --                 $ (1,397,963)
                                                                                            ============               ============

PRO FORMA NET LOSS PER
   COMMON SHARES OUTSTANDING .................................................              $       --                 $      (0.42)
                                                                                            ============               ============

PRO FORMA COMMON SHARES ......................................................                 3,896,875                  3,363,850
                                                                                            ============               ============
   OUTSTANDING
</TABLE>




See notes to financial statements.





                                                        F-4


<PAGE>

                                 ROOM PLUS, INC.

             STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

                 FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>

                                                        Issued and                    Issued and
                                       Authorized       Outstanding                  Outstanding                       Additional
                                         Common           Common                        Common                           Paid-in
                                         Shares           Shares         Amount        Warrants         Amount           Capital    
                                      -------------   ---------------  -----------  --------------   -------------   ---------------

<S>                                    <C>            <C>              <C>          <C>              <C>             <C>
BALANCE - December 31, 1994              10,000,000         1,500,000  $     1,992              --   $          --   $       230,082

     Stock Split                                                                                --              --            58,000

     Issuance of common stock                                 750,000        1,000              --              --         1,022,647

     Issuance of common stock                                  75,000          100              --              --                --

     Net Loss                                                      --           --              --              --                --
                                      -------------   ---------------  -----------  --------------   -------------   ---------------
BALANCE - December 31, 1995              10,000,000         2,325,000        3,092              --              --         1,310,729

     Issuance of common stock                                 300,000          399              --              --           240,000

     Issuance of common stock                                  20,000           27              --              --            16,000

     Issuance of common stock                                  75,000          100              --              --                --

     Issuance of common stock                                 500,000          665              --              --           331,499

     Initial Public Offering                                1,165,000        1,549       2,530,000         253,000         4,361,417

     Net Loss                                                      --           --              --              --                --
                                      -------------   ---------------  -----------  --------------   -------------   ---------------

BALANCE - December 31, 1996              10,000,000         4,385,000  $     5,832       2,530,000   $     253,000   $     6,259,645
                                      =============   ===============  ===========  ==============   =============   ===============
</TABLE>

See notes to financial statements.                      F-5
[RESTUBBED TABLE]

                                         Deficit           Total    
BALANCE - December 31, 1994          ----------------  -------------
                                                                    
     Stock Split                     $      (402,069)  $   (169,995)
                                                                    
     Issuance of common stock                      --         58,000
                                                                    
     Issuance of common stock                      --      1,023,647
                                                                    
     Net Loss                                      --            100
                                                                    
BALANCE - December 31, 1995               (1,706,248)    (1,706,248)
                                     ----------------  -------------
     Issuance of common stock             (2,108,317)      (794,496)
                                                                    
     Issuance of common stock                      --        240,399
                                                                    
     Issuance of common stock                      --         16,027
                                                                    
     Issuance of common stock                      --            100
                                                                    
     Initial Public Offering                       --        332,164
                                                                    
     Net Loss                                      --      4,615,966
                                                                    
BALANCE - December 31, 1996                   (3,085)        (3,085)
                                     ----------------  -------------
                                                                    
                                     $    (2,111,402)  $   4,407,075
                                     ================  =============
<PAGE>
                                 ROOM PLUS, INC.
                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>


                                                                           Years Ended December 31
                                                                          1996                 1995
                                                                       -------------        ------------

CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                   <C>                  <C>         
Net loss ............................................................ $    (3,085)         $(1,706,248)
Adjustments to reconcile net loss to net
cash used in operating activities
Depreciation ........................................................      134,901             136,849
Loss on sale of equipment ...........................................           --               1,335
Reserve for bad debts ...............................................      (77,412)             77,412
Deferred income taxes ...............................................      (18,877)           (121,300)
(Increase) decrease in operating assets
    Accounts receivable .............................................      203,687            (191,438)
    Inventories .....................................................     (220,846)             510,394
    Prepaid expenses ................................................     (230,694)             (17,331)
    Deferred charges ................................................      (237,476)                --
Increase (decrease) in operating liabilities
    Accounts payable, accrued expenses and
    other liabilities ...............................................      (480,631)          (153,984)
    Payroll and sales taxes payable .................................      (64,159)             78,074
    Cash surrender value, officers' life insurance ..................        5,318                 476
                                                                         -----------         -----------

    Net cash used in operating
     activities .....................................................    (989,274)          (1,385,761)
                                                                         -----------          -----------

CASH  FLOWS FROM INVESTING ACTIVITIES
 Purchases of property and equipment ................................    (816,210)             (59,124)
 Net loans (to) from officers .......................................    (106,747)             254,465
 Increase in security deposits and other assets .....................    (52,549)                 (247)
                                                                         -----------          -----------

   Net cash provided by (used in) investing  activities .............    (975,506)             195,094
                                                                         -----------          -----------

CASH FLOWS FROM FINANCING ACTIVITIES
 Net proceeds of short-term debt ....................................      75,000                   --
 Proceeds (repayment) of long-term debt .............................     (75,352)              34,969
 Proceeds from issuance of common stock .............................   6,478,000            1,081,747
 Charges in connection with initial public offering .................  (1,273,344)                  --
                                                                        -----------          -----------
   Net cash provided by financing activities ........................   5,204,304            1,116,716
                                                                        -----------          -----------

NET INCREASE (DECREASE) IN CASH .....................................   3,239,524              (73,951)

CASH (OVERDRAFT),
    beginning of year ...............................................    (61,436)               12,515
                                                                        -----------          -----------
CASH (OVERDRAFT),
    end of year ..................................................... $ 3,178,088          $   (61,436)
                                                                       ===========          ===========
</TABLE>

See notes to financial statements.


                                       F-6
<PAGE>

                                 ROOM PLUS, INC.

                          NOTES TO FINANCIAL STATEMENTS

Note 1:  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


ORGANIZATION

         The Company was established in 1982 under the name RPF Holding Corp. In
March 1995, Bunk Trunk Manufacturing Company, Inc. ("Bunk Trunk") was merged
into the Company. Three months later, the surviving entity, which was named TAM
Industries, Inc., changed its name to Room Plus, Inc.

         The Company is located in Paterson, New Jersey, and manufactures high
quality mica furniture. Substantially all sales are made through its 13 retail
showrooms located in New York and New Jersey, 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.

INVENTORIES

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

DEPRECIATION AND AMORTIZATION

         Depreciation and amortization are computed on the straight-line and
various accelerated methods over the estimated useful lives of the related
assets, which ranges between five and thirteen years.

GUARANTY AND WARRANTY POLICIES

         The Company maintains a limited lifetime defective product warranty for
products that are manufactured by the Company to ultimate retail customers.
Product warranty expense is not significant in relation to the product sale and
is expensed when incurred. The effect of this accounting treatment is not
material to the financial position or the results of operations for any period
presented.

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.

                                       F-7
<PAGE>
                                 ROOM PLUS, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (Continued)

Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (Continued)

ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
   ASSETS TO BE DISPOSED OF

         In March 1995, Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and the Long-Lived Assets to
be Disposed of" (SFAS 121), was issued. This statement, which was adopted in
1996, establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles and goodwill related to those assets to be held
and used and for long-lived assets and certain identifiable intangibles to be
disposed of. The Company believes that the adoption of SFAS 121 has not had a
material impact on the financial statements.

ADVERTISING

The Company expenses the production costs of advertising the first time the
advertising takes place.

Advertising expense was $1,295,839 and $996,602 in 1996 and 1995, respectively.

PRO FORMA NET LOSS PER COMMON SHARE

         Pro forma net loss per common share has been computed by dividing pro
forma net loss by the pro forma number of common shares outstanding. As required
by the Securities and Exchange Commission rules, all warrants, options and
shares issued within one year of the public offering at less than the public
offering price are assumed to be outstanding for each year presented for
purposes of the per share calculation. Such incremental shares were determined
utilizing the treasury stock method as if they were outstanding for all periods
presented.

Note 2:  INVENTORIES

         Inventories consist of the following as of December 31, 1996:

                  Showrooms                                     $1,151,107
                  Raw materials                                    290,498
                  Work-in-process                                    8,802
                                                             -------------
                                                                $1,450,407
                                                             =============
Note 3:  PROPERTY AND EQUIPMENT

         Property and equipment consist of the following as of December 31,
1996:

            Automobiles.......................................$     20,304
            Office furniture, fixtures and equipment..........     426,149
            Factory machinery and equipment...................   1,009,612
            Leasehold improvements............................   1,364,018
                                                                ----------
                                                                $2,820,083
                                                                ==========



                                      F-8
<PAGE>
                                 ROOM PLUS, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (Continued)

Note 4:  LINE OF CREDIT AND BANK LOAN

         The Company has a line of credit of $350,000 from BSB Bank and Trust
Company bearing interest at prime plus 2% per annum and expiring in April 1997.
Substantially all of the Company's assets collateralize the loan, along with
personal guarantees by three executive officers of the Company. There was no
outstanding balance at December 31, 1996.


Note 5:  LONG-TERM DEBT

<TABLE>
<CAPTION>
         Long-term debt consists of the following:


         <S>                                                                            <C>    
         Five obligations under capital leases are payable in monthly

             installments of $3,691 maturing in 2000 and bear interest at rates
             between 4.5% and 23.18%. The obligations are collaterized by
             machinery and equipment and guaranteed by certain executive officers 
            (see Note 6) .............................................................  $   86,558
         Unsecured obligation payable to a landlord which matures
            in November, 1997.........................................................      91,667
         Non-interest bearing note due a spouse of an executive
            officer due in August, 1997...............................................       9,909
         Note due a finance company relating to Directors and
            Officers insurance requires monthly payments of $5,289
            including interest at 7.85% and matures in January 1999...................     121,601
                                                                                          --------
                                                                                           309,735
         Less: Current portion, including obligations under capital
            leases of $33,391 in 1996.................................................     190,869
                                                                                         ---------
                                                                                          $118,866
                                                                                          ========
         Annual payments of long-term debt are as follows:


                         Years ending
                          December 31                                                      Amount
                          -----------                                                      ------

                           1997                                                           $190,869
                           1998                                                             95,577
                           1999                                                             18,129
                           2000                                                              5,160
                                                                                        ----------
                                                                                          $309,735
                                                                                        ==========
</TABLE>

Note 6:  OBLIGATIONS UNDER CAPITAL LEASES

         The Company leases certain machinery and equipment under capital leases
with a capitalized cost of $160,776 less accumulated depreciation of $103,636.


                                       F-9
<PAGE>
                                 ROOM PLUS, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (Continued)

Note 6: OBLIGATIONS UNDER CAPITAL LEASES -- (Continued)

         The following is a schedule of future minimum payments required under
the leases together with their present value as of December 31, 1996:

        Years Ending
        December 31                                             Amount
        -----------                                             ------

     1997 ..............................................      $  44,304
     1998 ..............................................         41,154
     1999 ..............................................         14,840
     2000 ..............................................          5,832
                                                            -----------
                                                                106,130
Less: Amount representing interest......................         19,572
                                                             ----------
                                                              $  86,558
                                                             ==========
Note 7: RELATED PARTY TRANSACTIONS

         The aggregate balance due from certain executive officers was $225,692
at December 31, 1996, which is represented by promissory notes bearing interest
at 8% per annum, and maturing in January 1998.

         During 1995, the Company agreed to pay $150,000 to the owner of a
commercial property in which the Company had previously leased retail showroom
space in settlement of claims in respect of unpaid rent and related items. In
connection with such settlement, certain executive officers, who had been
members of the partnership that owned such commercial property, transferred
their interests in such partnership to the remaining partner in exchange for a
release of certain claims against them.

          During the years ended December 31, 1996 and 1995, the Company
incurred advertising costs of approximately $1,069,000 and $66,000,
respectively, with a related company.

         Employment contracts between the Company and three executive officers
through 1998 each provide for minimum annual salaries of $125,000, 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.

         The Company had a Consulting Agreement with a Director pursuant to
which he made recommendations aimed at reducing the Company's operating costs
which resulted in payments of approximately $91,000.

         See Notes 4, 5, 9, 12, 13 and 14 for other related party transactions.

Note 8:  INCOME AND DEFERRED TAXES

         The Company was an "S" Corporation for Federal and New York state
income tax purposes through September 30, 1995. The stockholders accounted for
their share of the Company's earnings, losses, deductions and credits on their
income tax returns. Accordingly, these statements do not include any provision
for Federal and New York state income taxes prior to September 30, 1995. The
Company was subject to New Jersey income taxes for the year ended December 31,
1995.

         The accompanying 1995 statements of operations include unaudited pro
forma adjustments for income tax expense which would have been recorded prior to
September 30, 1995 had the Company been subject to Federal and New York income
taxes based on the tax laws in effect during those periods.

                                      F-10
<PAGE>
                                 ROOM PLUS, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (Continued)

Note 8: INCOME AND DEFERRED TAXES -- (Continued)

         A deferred tax asset results from timing differences in the recognition
of depreciation for tax and financial reporting purposes and the recognition of
net operating loss carryforwards for financial statement purposes in 1996 of
approximately $198,000 for Federal income taxes. In addition, net operating loss
carryforwards of $198,000 and $1,988,000 for the States of New York and New
Jersey, respectively, expire between 2003 and 2011. The Company has provided a
valuation reserve of approximately $39,000 and $155,000 in 1996 and 1995,
respectively, against the future benefits of the net operating loss
carryforwards.

         The Federal and State income taxes (benefits) is comprised of the
following:

<TABLE>
<CAPTION>

                                                            Years Ended December 31
                                                         1996                       1995
                                                     -----------                  --------
<S>                                                  <C>                      <C>    
Current income taxes (benefits)
         Federal                                         $     --                 $      --
         State                                               (711)                    3,197
                                                     -------------              -----------
                                                             (711)                    3,197
                                                     -------------              -----------

Deferred income taxes (benefits)
         Federal                                          (27,896)                  (79,400)
         State                                              9,430                   (41,900)
                                                     -------------              ------------
                                                          (18,466)                 (121,300)
                                                     -------------              ------------
                                                         $(19,177)                $(118,103)
                                                     =============              ============
</TABLE>

Note 9:  COMMITMENTS AND CONTINGENCY

LEASING ACTIVITIES

         Leases for retail showrooms in New York and New Jersey expire at
various dates through October 2006. The leases require the Company to pay
various operating expenditures including real estate taxes, while certain leases
contain provisions for rent escalations.

         The Company leases its manufacturing facility from M & S Realty
Company, a related party, under a lease which expires May 31, 1999 at an annual
rental of approximately $281,000. The lease requires the Company to pay certain
operating expenses of the facility, including real estate taxes and insurance.
In addition, the lease contains provisions for rent escalations and an optional
renewal term of fifteen years.

         In 1996, the Company entered into two capital leases totaling $680,000
for equipment that will be operational in 1997. They will require monthly
rentals of approximately $7,800 including interest and mature through the year
2001.

         Rent expense for retail showrooms and the manufacturing facility
totaled $1,600,919 and $1,409,500 in 1996 and 1995, respectively.

         The Company has automotive and other equipment leases expiring through
December 2001 with future minimum lease payments of approximately $160,000. Rent
expense for these leases totaled approximately $49,000 and $47,000 in 1996 and
1995, respectively.

                                      F-11
<PAGE>
                                 ROOM PLUS, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (Continued)

Note 9: COMMITMENTS AND CONTINGENCY -- (Continued)

LEASING ACTIVITIES  -- (Continued)

         Approximate future minimum rentals under all operating lease
arrangements, including four new showroom leases which opened in 1997, are due
as follows:

 Years Ending
 December 31                                      Amount
 -----------                                      ------
     1997                                        $2,074,100
     1998                                         2,001,300
     1999                                         1,396,900
     2000                                           999,600
     2001                                           887,000
     Thereafter                                   1,786,000
                                                 ----------
                                                 $9,144,900
                                                 ==========
LITIGATION

         The Company is subject to legal proceedings and claims which arise in
the ordinary course of its 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.


Note 10: PENSION PLANS

         The Company funds a union sponsored defined contribution pension plan
which covers its union employees. Contributions totaled $13,523 in 1996 and
$16,311 in 1995.

         The Company has a deferred compensation plan under section 401 (k) of
the Internal Revenue Code. Under the plan, additional contributions may be
funded at the employer's discretion. All eligible non-union employees may elect
to defer a portion of their salary. No contributions were made by the Company in
1996 and 1995.


Note 11:   OUTSTANDING WARRANTS

         At December 31, 1996 and 1995, the Company had outstanding warrants to
purchase 4,441,250 and 1,581,250 shares of its common stock, respectively, at
prices ranging from $1.20 to $8.25 per share. The warrants became exercisable in
1995 and expire at various dates through 2001. At December 31, 1996 and 1995,
4,441,250 and 1,581,250 shares of common stock, respectively, were reserved for
that purpose.


                                      F-12
<PAGE>
                                 ROOM PLUS, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (Continued)

Note 12:  CAPITAL TRANSACTIONS

         1.   In June 1996, the Company entered into a three year consulting
              agreement with a Director which included a $25,000 cash payment
              and 250,000 shares of common stock issued at $.80 per share. In
              addition, the Company issued 50,000 shares of common stock at $.80
              per share to an unrelated individual under a one year consulting
              agreement.

         2.   In June 1996, the Company received four bridge loans totaling
              $150,000 ($75,000 of which is due at December 31, 1996) from
              unrelated parties and a Director in the form of promissory notes
              which bear interest at 13% and mature in June 1997. In addition,
              the Company issued 20,000 shares of common stock to the holders of
              the notes. The effective price of $.80/share for such common stock
              represents a cost of financing and is being amortized over the
              term of the promissory notes as interest expense. The proceeds of
              the bridge loans were used to finance costs of opening a new
              retail showroom.

         3.   On July 1, 1996, the Board of Directors and the shareholders
              approved a 4 for 3 reverse stock split of the Company's common
              stock with an increase in par value to $.00133.

         4.   In July 1996, the Company completed an additional private
              placement of 500,000 shares of common stock which raised
              approximately $332,000 in capital, net of expenses. The proceeds
              were utilized for the payment of fees incurred in connection with
              the public offering and to provide for working capital.

         5.   On November 1, 1996, the Company sold to the public in an initial
              public offering 1,000,000 shares of the Company's common stock at
              a price of $5.00 per share as well as 2,200,000 redeemable common
              stock purchase warrants (the "warrants") at a price of $.10 per
              warrant. In addition, 165,000 shares of the Company's common stock
              and 330,000 of the Company's warrants were issued upon the
              exercise of an over-allotment option granted to the underwriters
              of the initial public offering. Net proceeds to the Company after
              underwriting expenses and additional expenses were approximately
              $4,616,000.

              In June 1995, the following occurred:

         1.   The stockholders of the Company approved amendments to its
              Certificate of Incorporation increasing the number of authorized
              shares to 10,000,000 with a designated par value of $.001.

         2.   The Company effected a 33,333 for 1 stock split whereby 1,999,940
              additional shares of common stock were issued and additional
              paid-in capital was increased by approximately $58,000.

         3.   As payment for consulting and advisory services to the Company,
              three executive officers contributed an aggregate 50,000 shares of
              common stock to a Director as additional compensation. In
              connection with the transaction, professional fees related to
              these services charged to expenses totaled $50,000 with a
              corresponding credit to additional paid-in capital. In addition,
              the Company granted an option to this Director of 25,000 common
              shares at $3 per share.

              In September 1995, the Company, through a private placement, sold
              750,000 shares of common stock to unrelated investors at $1.33 per
              share and received net proceeds of approximately $831,000. The
              proceeds were utilized for deposits on leased machinery in the
              factory, development of additional retail showrooms and to provide
              working capital. In connection with the private placement, the
              following other events occurred:

         1.   Three executive officers of the Company received warrants to
              purchase 750,000 shares of common stock exercisable at $3 per
              share any time until November 2001.


                                      F-13
<PAGE>
                                 ROOM PLUS, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (Continued)

Note 12: CAPITAL TRANSACTIONS (Continued)

         2.   Warrants were granted to several lenders in connection with prior
              bridge loan financing to purchase 75,000 shares of common stock at
              $.00133 per share and were exercised in June 1996. Interest
              expense of $99,900 relating to the issuance of the warrants was
              charged to expenses with a corresponding credit to additional
              paid-in capital.

         3.   A warrant was granted to the placement agents to purchase 75,000
              shares at $.00133 per share which was exercised at the closing of
              the private placement. Compensation expense of $99,900 relating to
              these services was charged to expenses with a corresponding credit
              to additional paid-in capital.

         4.   Warrants to purchase 750,000 additional common shares exercisable
              at $1.20 per share were issued to the placement agents exercisable
              any time until November 2001.

         5.   An unrelated individual who provided financial consulting,
              received warrants to purchase 56,250 shares of common stock at
              $2.00 per share.

         All references in the accompanying financial statements to the number
of common shares for December 31, 1995 have been restated to reflect the stock
splits.

Note 13: SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>

                                                                                           Years Ended
                                                                                          December 31
                                                                                  ----------------------------
                                                                                    1996                1995
                                                                                  --------            --------
<S>                                                                               <C>                 <C> 
Cash paid during the year for
Interest ...............................................................          $ 55,385             $79,065
Income taxes (benefits) ................................................              (711)              3,198

     NON CASH FINANCING ACTIVITY

Three executive officers contributed 50,000 common shares at $1 per
share to a Director as additional compensa-
tion ...................................................................              --                50,000

Issuance of 300,000 common shares
at $.80 per share to a Director and a
consultant .............................................................           240,000                --

Issuance of 20,000 common shares to
unrelated parties and a Director at
$.80 per share for fees in connection
with receiving four bridge loans .......................................            16,000                --

Issuance of 75,000 common shares at
 $1.33 per share to placement agents as
 compensation ..........................................................              --                99,900

Issuance of 75,000 common shares at
$1.33 per share to several lenders in
connection with bridge loan financing ..................................              --                99,900
</TABLE>

                                      F-14


<PAGE>
                                 ROOM PLUS, INC.

                  NOTES TO FINANCIAL STATEMENTS -- (Continued)

Note 14: MERGER

         The merger of Bunk Trunk into the Company in March 1995 has been
accounted for as a pooling of interests and, accordingly, the Company's
financial statements have been restated to include the accounts and operations
of Bunk Trunk for all periods prior to the merger.

         Results of operations for the periods prior to the merger with Bunk
Trunk for the year ended December 31, 1995 are as follows:

    NET SALES
        Room Plus, Inc. ..............................$12,978,052
        Bunk Trunk....................................    170,966
                                                      -----------
                                                      $13,149,018
                                                      ===========
    NET LOSS                                                      
        Room Plus, Inc. ..............................$(1,511,557)
        Bunk Trunk....................................   (194,691)
                                                      ------------
                                                      $(1,706,248)
                                                      ============
                                                       
Note 15: CONCENTRATION OF CREDIT RISK

         The Company maintains cash balances at a financial institutions located
in New Jersey. Accounts at these institutions are secured by the Federal Deposit
Insurance Corporation up to $100,000.

NOTE 16: RECLASSIFICATIONS

         Certain reclassifications have been reflected on the 1995 financial
statements to conform to 1996 classifications.


                                      F-15
<PAGE>
Note 8.  Changes In and Disagreements with Accountants on Accounting and 
         Financial Disclosure

         None

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:
<TABLE>
<CAPTION>

              Name                          Age               Position with Company
              ----                          ---               ---------------------

<S>                                         <C>               <C>                                                 
Marc Zucker                                 48                Chairman of the Board and Chief Executive Officer
Allan Socher                                46                President, Director of Marketing and Director
Theodore Shapiro                            62                Executive Vice President, Director of Manufacturing
                                                              and Director
Edmund J. McCormick, Jr.                    54                Director
Alan Hirschfeld                             45                Director
Alan Granetz                                52                Director
Frank Terzo                                 37                Director
William Halpern                             42                Chief Financial Officer
</TABLE>
                                                           
         Marc Zucker has 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 the President, 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 VicePresident 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.

         Theodore Shapiro has been the Executive Vice President, Director of
Manufacturing and a Director of the Company since March 1995. He was one of the
original founders of Bunk Trunk in 1982 and was its President from inception
until the merger with RPF Holding in March 1995. Mr. Shapiro had worked in the
retail furniture business for over 12 years before founding his own retail
furniture chain, Mr. Sandman Furniture, in 1960.

         Edmund J. McCormick, Jr. has been a Director of the Company since March
1995. He has been the Chairman of McCormick & Company, an international
management consulting firm, since 1985.

         Alan Hirschfeld has been a Director of the Company since December 1996.
Since 1987 he has been the Executive Vice President, Chief Financial Officer and
a Director of IVC Industries, Inc., a public traded company that manufactures
and distributes vitamins and nutritional supplements. Prior to that, Mr.
Hirschfeld was a partner in Grossman, Brown, Weinberg & Lawson, certified public
accountants.

         Alan Granetz has been a Director of the Company since December 1996.
Since 1968 he has been the Vice President of Granetz Group, a holding company
for real estate ventures and retail and commercial furniture sales. From 1988 to
the present, Mr. Granetz has also been the Executive Director of the
Metropolitan Furnishings Association of New Jersey.

         Frank Terzo has been a Director of the Company since December 1996. He
was founder of the New York retail clothing chain, Nicholas Flynn Men's Club,
from 1983 until 1988. From 1987 to May 1996 Mr. Terzo was a registered
representative with a number of different NASD member firms. He is currently
President of Small Cap. Consulting International, Inc., a consulting and
investment advisory company which also invests in small capital

                                       27
<PAGE>
market companies. Mr. Terzo was elected a member of the Board pursuant to the
right of the underwriter of the Company's IPO to designate one member of the
Board until November 1999, subject to the Company's good faith approval.

         William Halpern, CPA, has been the Chief Financial Officer of the
Company since March 1995. Prior to that, Mr. Halpern was Chief Financial Officer
of Bunk Trunk and RPF Holding from December 1989 until their merger in March
1995. Prior to that, he served for over 12 years in diversified financial
positions with several corporations, including Xerox Corporation, Colt
Industries and Household International. He holds a BA degree in accounting from
Brooklyn College.

         Mr. Zucker and Mr. Socher are brothers-in-law and Mr. Shapiro is the
uncle of their spouses.

         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 Frank Terzo
and Alan Granetz, Directors of the Company each filed one late Form 3 for the
fiscal year ended December 31, 1996.

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 fiscal year ended December 31, 1996.

Summary Compensation Table

                                              Annual Compensation
<TABLE>
<CAPTION>

Name of Individual
and Principal Position                                     Year           Salary           Bonus
----------------------                                     ----           ------         --------
<S>                                                        <C>          <C>              <C>     
Marc Zucker
         Chairman, Chief Executive
         Officer .................................         1996         $125,000         $42,500
Allan Socher
         President and Director of
         Marketing ...............................         1996         $125,000         $43,159
Theodore Shapiro
         Executive Vice President and
         Director of Manufacturing ...............         1996         $125,000         $42,800
</TABLE>


                                       28
<PAGE>
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, 1996, with each of Marc Zucker, Allan Socher and
Theodore Shapiro (the "Principals"). Pursuant to each employment agreement,
Messrs. Zucker, Socher and Shapiro will act as Chairman and Chief Executive
Officer, President and Director of Marketing, and Executive Vice President and
Director of Manufacturing, respectively, and each will be entitled to receive,
among other things, (a) a salary of $125,000 per annum, (b) such further sum by
way of bonus or otherwise as determined by the Compensation Committee of the
Board, or if no such committee is established by the Board, the entire Board, in
each year of the employment agreement, and (c) pension contributions as set
forth in any future plan adopted by the Company.

         In addition, pursuant to their employment agreements, Allan Socher is
entitled to a performance bonus of .75% of revenues and Marc Zucker and Theodore
Shapiro are each entitled to a performance bonus of 1.5% of gross profit.

         Each employment agreement shall continue unless terminated by the
Company for cause, as described in such employment agreement, or terminated by
not less than three (3) years written notice if given by the Company or not less
than three (3) months written notice if given by the respective Principal.

         In the event any person shall become beneficially entitled to 50% plus
one share or more of the issued and outstanding Common Stock of the Company
pursuant to an offer, the terms of which are not recommended by the Board, each
of the Principals shall be permitted to terminate his employment agreement
within one week of the completion of the change in control or such later date as
may be agreed upon by such Principal and the Company. In the event of such
termination, the Principal shall be entitled to payment from the Company of an
amount calculated in accordance with the provisions of his employment agreement.

         For a period of one year following the termination of each employment
agreement, such Principal shall not solicit or endeavor to entice away any
employee, director or agent of the Company or any entity affiliated with the
Company. In addition, such Principal may not, 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 any similar name for the
purpose of a business competing with the Company or any entity affiliated with
the Company.


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 7, 1997. 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.

                                       29
<PAGE>
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                                        701,668(1)                     16%
91 Michigan Avenue                                                      
Paterson, NJ 07503                                                      
                                                                        
Allan Socher                                       701,666(2)                     16%
91 Michigan Avenue                                                      
Paterson, NJ 07503                                                      
                                                                        
Theodore Shapiro                                   701,666(3)                     16%
91 Michigan Avenue                                                      
Paterson, NJ 07503                                                      
                                                                        
Edmund J. McCormick, Jr                             70,000(4)                    1.6%
91 Michigan Avenue                                                      
Paterson, NJ 07503                                                      
                                                                        
Frank Terzo                                        490,000(5)                   11.4%
26 Tunnel Street                                                        
Floral Park, NY 11011                                                   
                                                                        
Alan Hirschfeld                                      2,000                         0%
500 Hallsmill Road                                                      
Freehold, NJ 07728                                                      
                                                                        
Alan Granetz                                             0                         0%
205 West Main Street                                                    
Somerville, NJ 08876                                                    
                                                                        
Swan Alley (Nominees) Limited(6)                   775,000(7)                   17.7%
40 Queen Street                                                         
London ECR IDD England                                                  
                                                                        
Kirlin Holding Corp.                               234,687(8)                    5.4%
6901 Jericho Turnpike                                                   
Syosset, NY 11791                                                       
                                                                        
All Directors and Officers as a Group            2,667,000(9)                   60.8%
         (7 Persons)                                              

--------------
(1)      Includes currently exercisable warrants to purchase 250,000 shares of Common Stock.
(2)      Includes currently exercisable warrants to purchase 250,000 shares of Common Stock.
(3)      Includes currently exercisable warrants to purchase 250,000 shares of Common Stock.
(4)      Includes currently exercisable options to purchase 25,000 shares of Common Stock.
(5)      Includes currently exercisable warrants of Small Cap. Consulting International, Inc. to purchase 240,000
shares of Common Stock.  Frank Terzo is the President, sole director and sole stockholder of Small Cap. Consulting
International, Inc.
(6) Swan Alley (Nominees) Limited is an entity formed to acquire and hold
securities for customers of Astaire & Partners  Limited ("Astaire"), a member of
the London Stock Exchange. Based upon information provided to the Company by
Astaire, none of the customers of Astaire is the beneficial owner of more than
5% of the Company's outstanding Common Stock.
</TABLE>

                                       30
<PAGE>
(7) Includes currently exercisable warrants to purchase 500,000 shares of Common
Stock. 

(8) Includes (i) 219,375 shares of Common Stock owned by Kirlin Holding
Corp. and its wholly owned subsidiary, Kirlin Securities, Inc. (collectively,
"Kirlin"), (ii) 5,312 shares of Common Stock owned by David Lindner, the Chief
Executive Officer of Kirlin, and (iii) currently exercisable warrants to
purchase 10,000 shares of Common Stock. 

(9) Includes an aggregate of 1,015,000
shares of Common Stock issuable upon exercise of outstanding options and
warrants.

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 director
and the Executive Vice President and Director of Manufacturing of the Company.
The leases for the facility expire May 31, 1999 (subject to extension at the
option of the Company) and provide for an annual rental of approximately
$281,000.

         In fiscal year 1994, the Company advanced $158,488 on open account to
the three principals of the Company, Marc Zucker, Allan Socher and Theodore
Shapiro. Such advances were non-interest bearing and increased the total net
amount receivable to the Company from the three principals to $373,410. At
December 31, 1995, the three principals' aggregate indebtedness to the Company
had been reduced to $118,945 as a result of net payments to the Company by the
principals aggregating $254,465 during fiscal year 1995. At December 31, 1996,
the three principals' aggregate indebtedness to the Company increased by
$106,747 to $225,692. Such increase consisted of additional advanced to the
principals in the amount of $90,711 and accrued interest in the amount of
$16,036. In January 1997, the principals repaid $39,600 to the Company, bringing
an aggregate balance of $186,092. Such balance bears interest at the rate of 8%
per annum and matures in January 1998.

         During 1995, the Company agreed to pay $150,000 to the owner of a
commercial property in which the Company had previously leased retail showroom
space in settlement of claims in respect of unpaid rent and related items. In
connection with such settlements, Messrs. Zucker and Socher, who had been
members of the partnership that owned such commercial property, transferred
their interests in such partnership to the remaining partner in exchange for a
release of certain claims against them.

         Retail Media Plus was incorporated by the three principals of the
Company in June 1995. Retail Media Plus places all of the Company's advertising
and passes through any cost savings to the Company. For fiscal year 1995 and
1996, the Company reimbursed Retail Media Plus $65,695 and approximately
$1,069,246 respectively, for advertising costs.

         In 1995, as partial payment for consulting and advisory services to the
Company, the three principals of the Company contributed an aggregate of 50,000
shares of Common Stock to Edmund J. McCormick, a director of the Company, which
shares were valued at $1.00 per share for purposes of the Company's financial
statements. In addition, the Company paid Mr. McCormick $15,400 for such
services. In June 1995 the Company issued options (the "McCormick Options") to
McCormick & Company in connection with an agreement for payment of consultant
and advisory services. Edmund J. McCormick is the sole stockholder of McCormick
& Company. The McCormick Options consist of the right to purchase up to 25,000
shares of Common Stock at any time at a purchase price of $3.00 per share.

         In June 1996, Edmund J. McCormick lent the Company $25,000 in
connection with the Company's $150,000 bridge loan. Such loan bears interest at
the rate of 13% per annum and is due on June 18, 1997. Mr. McCormick also
received 3,334 shares of Common Stock in connection with his participation in
the bridge financing. Mr. McCormick is also a party to a consulting agreement
with the Company pursuant to which he makes recommendations aimed at reducing
the Company's operating costs. Pursuant to such consulting agreement, Mr.
McCormick was entitled to receive 10% of any cost savings realized by the
Company in its manufacturing process during the period of September 1, 1995 to
November 1, 1996. The amount of such cost savings totaled $909,370, and,
accordingly, Mr. McCormick was paid $90,937 as required by the consulting
agreement.

                                       31
<PAGE>
         In June 1995, Mark Rubin, a stockholder of the Company, became a
consultant to the Company. As compensation for these services under his
consulting agreement, as amended, Mr. Rubin receives $3,000 per month, of which
$1,000 per month has not yet been paid, and in June 1995, he received the Rubin
Warrant to purchase 56,250 shares of Common Stock at $2.00 per share. In
connection with an extension of the consulting agreement until June 1997,
subject to the Company's right to terminate such agreement after December 1996,
Mr. Rubin received 50,000 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.

         Kirlin acted a placement agent in the 1995 Private Placement and
received a placement agent commission of $100,000 plus the Kirlin Warrant, which
Kirlin sold to Swan Alley (Nominees) Limited and Small Cap. Consulting
International, Inc.

         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.

         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.
--------------

     1    Form of Underwriting Agreement among the Company, the holders of the
          Directors Shares and The Thornwater Company, L.P. (1)
  
     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 the 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)

     5    Opinion of Wilentz, Goldman & Spitzer, P.A. (1)

     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 an 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)

                                       32
<PAGE>

    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. (*)

     11   Calculation of Net Income (Loss) per Common Share (*)

     23.1 Consent of Ehrenkrantz Sterling and Co., LLC (1)

     23.2 Consent of Wilentz, Goldman & Spitzer, P.A. (Included in Exhibit 5)
          (1)

     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).
      
(*)  Exhibit filed with this Form 10-KSB.
     

         (b)  Reports on Form 8-K

         The Company did not file any report on Form 8-K during the last quarter
of fiscal year ended December 31, 1996.

                                       33