The company previously reported that sales during the third fiscal quarter, ended Oct. 27, dropped after the Sept. 11 terrorist attacks approximately 25% to 30% below the run rate prior to Sept. 11.

The ongoing sales decline is putting increased pressure on the company's cash position. As a result, the company is currently in discussions with its bank group, led by Fleet Retail Finance, to address liquidity issues and various financial scenarios.

In addition, House2Home continues to explore strategic and financial alternatives through the investment banking firm of Barrington Associates.

The company did not make the semi-annual payment of interest, due Nov. 1 on its 5.25% Convertible Subordinated Notes. If such default continues for 30 days, an Event of Default will occur under the Indenture governing the Notes.

As of Oct. 29, the company had stopped accepting all new orders for special-order custom merchandise throughout the chain.