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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 3, 2000
REGISTRATION NO. 333-_______
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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KRAUSE'S FURNITURE, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 5710 77-0310773
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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200 NORTH BERRY STREET
BREA, CALIFORNIA 92821-3903
(714) 990-3100
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
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PHILIP M. HAWLEY
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
KRAUSE'S FURNITURE, INC.
200 NORTH BERRY STREET
BREA, CALIFORNIA 92821-3903
(714) 990-3100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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COPIES OF ALL COMMUNICATIONS TO BE SENT TO:
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JUDITH OLSON LASKER, ESQ. RENA L. O'MALLEY, ESQ.
KRAUSE'S FURNITURE, INC. CHARLES S. KAUFMAN, ESQ.
200 NORTH BERRY STREET MORRISON & FOERSTER LLP
BREA, CALIFORNIA 92821-3903 555 WEST FIFTH STREET
(714) 990-3100 LOS ANGELES, CALIFORNIA 90013-1024
(213) 892-5200
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]_______________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]__________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=====================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
OFFERING PRICE AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED(1) REGISTERED SHARE PRICE FEE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, par value $0.001 per share, 4,272,726 shares $2.0625 $9,079,542.75(2) $2,326
issuable upon conversion of the Series A
Convertible Preferred Stock
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</TABLE>
(1) This registration statement covers offers, sales and other distributions
of the securities listed in this table from time to time at prices to be
determined.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) based on the average of the high and low prices
of the registrant's Common Stock, as quoted on the American Stock
Exchange on May 1, 2000.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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SUBJECT TO COMPLETION DATED May 3, 2000
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS
4,272,726 SHARES
[LOGO]
KRAUSE'S FURNITURE, INC.
UP TO 4,272,726 SHARES OF COMMON STOCK
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This prospectus is being used in connection with offerings from time to
time by some of our stockholders. The selling stockholders collectively own the
following stock being registered here:
- 4,272,726 shares of common stock issuable upon conversion of the
convertible preferred stock.
Our common stock is quoted on the American Stock Exchange under the
symbol "KFI." The last reported sale price of the common stock on the American
Stock Exchange on May 1, 2000 was $2.0625 per share.
You should read this prospectus and any prospectus supplements carefully
before you decide to invest.
INVESTING IN THE COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 3.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
All of the Stock sold under this prospectus will be sold for the account
of stockholders. We will receive no proceeds from the sale.
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The selling stockholders from time to time may offer and sell the shares
they hold through agents or broker-dealers, or directly to one or more
purchasers, at market prices prevailing at the time of sale or at prices
otherwise negotiated. The selling stockholders reserve the sole right to accept
or reject, in whole or in part, any proposed purchase of the shares to be made
directly or through agents.
The selling stockholders and any agents or broker-dealers that participate
with the selling stockholders in the distribution of shares may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended. Any
commissions paid or any discounts or concessions allowed to any such persons,
and any profit on the resale of the shares, may be deemed to be underwriting
commissions or discounts under the Securities Act. Also, there are certain
indemnification arrangements between us and the selling stockholders.
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The date of this prospectus is May 3, 2000.
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PROSPECTUS SUMMARY
OUR COMPANY
We are a leading vertically integrated manufacturer, retailer and wholesaler
of made-to-order upholstered furniture and accessories. At December 26, 1999, we
operated 91 total furniture showrooms, 79 showrooms under the Krause's brand
name and 12 showrooms under the Castro Convertibles brand name. These showrooms
are located in 12 states, with 54 in California and in the New York City
metropolitan area, including New York, New Jersey and Connecticut. Customers can
choose from more than 60 styles and 40 sizes of sofas, incliners, recliners,
sectionals, sofabeds and chairs, which they can customize with 800 fabrics and
50 leathers. We believe that we have developed a reputation for delivering high
quality, custom-crafted furniture at prices comparable to those of mass-produced
sold-as-shown furniture. In recent periods, we have undergone significant
changes, raising substantial new capital, hiring a new management team with
extensive expertise in retailing, and changing our business strategy from a
factory-direct orientation to a retail-oriented, fashion conscious approach.
We were incorporated in Delaware in 1992. Our executive offices are located
at 200 North Berry Street, Brea, California 92821-3903. Our telephone number is
714-990-3100 and our facsimile number is 714-990-3561.
EXPLANATORY NOTE
On January 4, 2000, we changed the ending date of our fiscal year. The
fiscal year previously ended on the Sunday closest to January 31. It now ends on
the Sunday closest to December 25. As a result, the most recent annual financial
results of the company described in this prospectus are reported for the 47-week
period ended December 26, 1999, which is the transition period to the new fiscal
year-end. The previous fiscal year ended on January 31, 1999.
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FORWARD-LOOKING STATEMENTS
Some of the statements under "Summary," "Risk Factors," and elsewhere in
this prospectus constitute forward-looking statements within the meaning of the
Private Securities Reform Act of 1995. These statements involve known and
unknown risks, uncertainties and other factors that may cause our actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance, or
achievements expressed or implied by such forward-looking statements. These
statements include those related to our plans for sales through e-commerce and
business-to-business channel; those related to management's strategy for opening
new stores, remodeling existing stores and improving our marketing approach; and
those related to our management's expectation that we will achieve
profitability. In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "should," "could," "expects," "plans,"
"intends," "anticipates," "believes," "estimates," "predicts," "potential" or
"continue" or the negative of such terms and other comparable terminology.
We urge readers to consider the factors described under the heading Risk
Factors. Those risks and the other economic, competitive and other factors noted
elsewhere in this prospectus and in our recent filings with the Securities and
Exchange Commission, including our Form 10-K, constitute cautionary statements
that identify risks and uncertainties that could cause actual results to differ
materially from those contained in the forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor anyone else
assumes responsibility for the accuracy and completeness of such statements. We
are under no duty to update any of the forward-looking statements after the date
of this prospectus.
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RISK FACTORS
In addition to the other information we provide in this prospectus, you
should carefully consider the following risks before deciding whether to invest
in our common stock and risks outlined in documents incorporated by reference.
These are not the only risks we face. Some risks are not yet known to us and
there are others we do not currently believe are material but could later turn
out to be so. All of these could hurt our business. The trading price of our
common stock could decline because of general market conditions or because any
or all of these risks come to pass and you could lose all or part of your
investment. In evaluating the risks of investing in us, you should also evaluate
the other information set forth in this prospectus, including our financial
statements.
WE HAVE ACCUMULATED DEFICITS AND A HISTORY OF LOSSES FROM OPERATIONS.
We have reported losses from operations in each of the past five years and
had an accumulated deficit of $56.4 million at December 26, 1999. If losses from
operations continue, they could adversely affect the market price for the common
stock and our ability to maintain existing financing and obtain new financing.
We may not be able to achieve profitability in the future.
WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE AND OUR ABILITY TO OBTAIN
ADDITIONAL CAPITAL IS CURRENTLY RESTRICTED.
We believe that borrowings under our Revolving Credit Facility, the proceeds
from our recently completed $19 million Series A Convertible Preferred Stock
private placement and internally generated funds will be sufficient to fund our
requirements for working capital, capital expenditures, and e-commerce strategy
development and deployment through the end of fiscal 2000. We may need to raise
additional funds to finance our expansion program and e-commerce strategy
through either debt or equity financing, and we cannot ensure that our financial
performance will generate sufficient funds. Beginning in fiscal 2001, we will
require funds to begin making required principal payments on our subordinated
debt.
Our existing secured revolving credit facility provides for borrowings of up
to $15 million. This credit facility is subject to maturity in March 2002 and
imposes borrowing base limitations. The limitations imposed by this credit
facility include requiring us to maintain financial covenants for adjusted net
worth and working capital and restricts us from incurring future additional
indebtedness from third parties. Consequently, if we need any significant
additional infusion of capital, we may have to issue additional equity. Such
additional capital, if raised, would likely dilute the interest of our
stockholders. Substantially all of our assets are pledged as collateral for
repayment of existing indebtedness. Our collateral pledge may make it more
difficult for us to obtain additional financing on advantageous terms, if at
all.
OUR HIGH LEVEL OF DEBT AND DEBT SERVICE REQUIREMENTS MAY HAVE AN ADVERSE EFFECT
ON OUR FUTURE OPERATIONS.
At December 26, 1999, we had $ 23.3 million of long-term debt and had a
negative tangible net worth (stockholders' equity less intangible assets) of
$8.8 million. For the forty-seven week transition period ended December 26,
1999, earnings before interest, taxes, depreciation and amortization were
negative $4.1 million. A high percentage of our operating expenses are
relatively fixed, including approximately $1.7 million per month in lease
payments.
Our high level of debt and debt service requirements will have several
important effects on our future operations, including the following:
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- we will need to devote significant cash to service debt, which
will reduce funds available for operations and future business
opportunities and increase our vulnerability to adverse economic
and industry conditions and competition;
- our leveraged position will increase our vulnerability to
competitive pressures;
- the financial covenants and other restrictions contained in
certain agreements relating to our indebtedness will require us
to meet certain financial performance tests which increase over
time and will restrict our ability to borrow additional funds,
to dispose of assets, to issue additional equity or to pay cash
dividends on or repurchase common stock; and
- funds available for working capital, capital expenditures,
acquisitions and general corporate purposes will be limited.
Any default under the documents governing our indebtedness could have a
significant adverse effect on the market value of the common stock.
WE CANNOT ASSURE SUCCESSFUL IMPLEMENTATION OF BUSINESS STRATEGIES.
Our near-term business strategies include:
- revamping marketing and sales promotion with the goal of better
defining our market niche and differentiating us from our
competitors;
- developing new products, which will accomplish a freshening of
inventories and see the introduction of a number of new styles,
designed to increase customer appeal;
- enhancing and leveraging the strength of our brand names;
- opening approximately 16 to 20 showrooms per year for the
foreseeable future; and
- developing and implementing a successful e-commerce strategy.
Our inability to achieve any of these goals could have a material adverse
effect on our business, financial condition, and results of operations as well
as the market value of our common stock.
Certain internal and external factors directly affect our business,
including the availability of suitable showroom locations in existing and new
markets; the availability of financing for expansion; the rapid rate of change
in the world wide web and the number of new web sites offering furniture for
sale; and general economic conditions, including employment levels, business
conditions, interest rates and tax rates in our market areas. While we believe
that current economic conditions favor growth in the markets we serve, various
factors, including those listed above, could reduce sales or increase operating
expenses. These various factors may adversely affect our business in the future
or may prevent us from successfully implementing our business strategies.
WE MAY NOT SUCCEED IN EXPANDING OUR BUSINESS ONTO THE INTERNET AND INTO
BUSINESS-TO-BUSINESS SALES CHANNELS.
We lack experience in electronic commerce and business-to-business sales. As
a result we may encounter unexpected difficulties and expenses in expanding our
business into those areas. In addition, consumers may not shift a significant
amount of their home furnishings purchases from conventional
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retail locations to the internet. If a market for home furnishings does not
develop on the internet we will not achieve the expected benefits of our
e-commerce initiative.
WE DEPEND UPON OUR CHIEF EXECUTIVE OFFICER AND OTHER KEY PERSONNEL AND COULD BE
ADVERSELY AFFECTED BY THE LOSS OF THEIR SERVICES.
Our future performance will depend to a large extent upon the efforts of
Philip M. Hawley and other members of our executive management team. The loss of
the services of Mr. Hawley or other key members of the team could have an
adverse effect on us. We have an Employment Agreement with Mr. Hawley, pursuant
to which we have agreed to employ Mr. Hawley for a term ending on January 28,
2001.
OUR QUARTERLY RESULTS ARE SUBJECT TO POTENTIAL FLUCTUATIONS.
Because we sell most of our products on a made-to-order basis with a
two-to-four week delivery cycle, we typically operate with about 30 days of
backlog. As a result, quarterly sales and operating results generally depend on
the volume and timing of orders and our ability to fulfill orders within a
quarter, which are difficult to forecast. We may be unable to adjust spending in
a timely manner to compensate for any unexpected revenue shortfall. Accordingly,
any significant shortfall of demand for our products in relation to our
expectations would have an immediate adverse impact on our business, operating
results and financial condition. In addition, we plan to increase certain cash
expenditures in connection with the development and implementation of our
e-commerce strategy. If these expenditures precede or are not subsequently
followed by increased revenues, our business, operating results and financial
condition will suffer material harm. In addition, a variety of factors that we
cannot control affect our operating results, including consumer tastes, housing
activity, interest rates, credit availability and general economic conditions in
our selected market. It is likely that in some future quarter our operating
results will be below the expectations of public market analysts and investors.
If that happens, the price of our common stock would likely fall.
WE DEPEND ON SUPPLIERS OF RAW MATERIALS AND CERTAIN MANUFACTURED PRODUCTS.
We obtain our raw materials and some manufactured products from various
outside sources. Generally we have had no difficulty obtaining them. However, we
depend on the continued supply from relatively few suppliers of certain
products, components and raw materials, including fabrics, leather, foam, and
sleeper and motion mechanisms. Specifically, our 10 largest suppliers accounted
for approximately 60.0% of our aggregate purchases of raw materials in the
47-week transition period ended December 26, 1999. During the 47-week transition
period ended December 26, 1999, approximately 32.8% of these aggregate purchases
of raw materials consist of fabric, with one supplier accounting for
approximately 30.8% of the fabric purchases made by us during the period.
Approximately 18.2% of these purchases consisted of leather, with one supplier
accounting for approximately 31.4% of the leather purchases made by us during
the period. Approximately 14.0% of these purchases consisted of wood and pre-cut
wood components, with one supplier accounting for approximately 88.5% of our
wood and pre-cut wood purchases during this period. We have no supply contract
with these large suppliers, but instead make each purchase under a separate
purchase order. Both leather and pre-cut wood components are commodities we
believe we can readily obtain from alternative sources, and from time to time we
have purchased them from alternative sources. If we could not develop
alternative sources of supply of leather, pre-cut wood components or certain
other raw materials and products when needed, or could not obtain sufficient
single-source products, components and raw materials when needed, the resulting
loss of production capability would harm our financial performance. Many
different sources supply fabric. However fabric is subject to changing fashion
and not all styles are available from every mill.
In addition, prices of commodity raw materials fluctuate. Because raw
materials make up a substantial part of our cost of goods sold, price
fluctuations could materially harm our business.
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Although we have historically absorbed gradual increases in raw material prices,
we may not be able to continue to do so in the future. In addition, sharp
increases in material prices are more difficult to pass through to the customer
in a short period of time and may especially hurt our short-term financial
performance.
SOME OF OUR COMPETITORS HAVE GREATER RESOURCES.
The home furnishings industry is highly competitive and fragmented, and
includes competition from traditional furniture retailers, department stores and
discount and warehouse outlets as well as from internet retailers, most of whom
do not have the expenses we have that result from maintaining retail stores.
Companies that compete directly with us have greater financial and other
resources than we do. We compete on a national level with Ethan Allen Inc.,
Levitz Furniture, Leather Center, Inc., Expressions and traditional department
stores, among others. We also compete on a regional basis. In New York, New
Jersey and Chicago, our primary competitor is Jennifer Convertibles, Inc., and
in the Western United States our primary regional competitors include Homestead
House, Inc., The Leather Factory and Norwalk Furniture Corporation (the latter
of which also competes in the Midwest market). In Houston, Texas, our primary
regional competitor is Star Furniture Company. Expressions, Norwalk Furniture
Corporation and Ethan Allen Inc., like us, manufacture their own upholstered
products and offer custom-crafted furniture similar to that we produce. Levitz
Furniture primarily addresses the low to middle end "as shown" market, whereas
traditional department stores typically focus on the middle to upper end "as
shown" market.
THE CYCLICAL NATURE OF THE FURNITURE INDUSTRY CAN ADVERSELY AFFECT OUR EARNINGS.
The home furnishings industry has historically followed a cyclical pattern,
fluctuating significantly with general economic cycles. After economic
downturns, the home furnishings industry tends to recover more slowly than the
general economy. We believe that the industry is significantly influenced by
economic conditions generally and particularly by consumer behavior and
confidence, the level of personal discretionary spending, housing activity,
interest rates and credit availability. A prolonged economic downturn would
materially harm our business.
WE ARE DEPENDENT ON REGIONAL ECONOMIES.
Our markets are concentrated in California and the New York City
metropolitan area. Fifty-one percent of our sales originated in California and
15% in the New York City metropolitan area in the forty-seven week transition
period ended December 26, 1999. Consequently, an economic downturn in either of
those regions would likely have a disproportionately negative impact on our
financial condition. We believe the economic indicator most relevant to our
operations is consumer confidence. In January 1999, the consumer confidence
index, as reported by the Conference Board for the Middle Atlantic Region, which
includes New York, was 119.1, the index for the Pacific Region, which includes
California, was 137.1, and the average index for the United States as a whole
was 136.7.
WE RELY ON OUR SOLE MANUFACTURING FACILITY AND OUR COMPUTER SYSTEM, WHICH ARE
LOCATED IN AN AREA PRONE TO EARTHQUAKES.
Our sole manufacturing plant, as well as the central processing facility for
the computer system that contains our business records and links the showrooms
to our headquarters, is located in Southern California, an area prone to
earthquakes. An earthquake or other natural disaster or work stoppage or other
event affecting the normal operations of the business could seriously impair our
capacity to continue our manufacturing and retail operations. While we have
taken steps to implement a disaster recovery system to lessen the impact of such
a disaster or other work stoppage, we cannot guarantee that we will successfully
put such a system into operation.
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In addition, we are several months into the process of replacing our
computer system with a new Oracle(TM) enterprise resource planning system to
improve order configuration, manufacturing scheduling, distribution processes
and financial reporting. If we do not replace our current computer system, or
fail to promptly implement and integrate the new Oracle(TM) enterprise resource
planning system, our business would suffer material harm.
WE ARE CONTROLLED BY PRINCIPAL STOCKHOLDERS, WHICH MAY DELAY OR PREVENT A CHANGE
IN CONTROL.
Our current management, directors and other principal stockholders own
securities that entitle them to vote, in the aggregate, approximately 71% of the
voting power of our issued and outstanding common stock. Furthermore, we have
entered into an Amended and Restated Stockholders Agreement with some of our
stockholders. This agreement provides, in part, that those stockholders will
vote their shares in any election of directors in a manner that assures the
election of directors designated by each of them. The Amended and Restated
Stockholders Agreement also prohibits us from taking certain actions, such as
entering into a merger, liquidation, dissolution, or entering into joint
ventures, issuing new equity securities, or issuing new debt securities in
excess of $200,000 without the approval of the members of the Board of Directors
designated by TH Lee.Putnam Internet Partners, L.P., TH Lee Putnam Internet
Parallel Partners, L.P. and General Electric Capital Corporation. It is unlikely
that any other principal stockholder or group of public stockholders acting in
concert would be able to influence corporate policy, particularly where the
policy could have a detrimental effect on TH Lee.Putnam Internet Partners,
L.P., TH Lee Putnam Internet Parallel Partners, L.P. or General Electric Capital
Corporation. This concentration of voting power may delay, defer or prevent a
change in control.
WE MAY BE LIMITED IN OUR USE OF OPERATING LOSS CARRYFORWARDS BECAUSE OF A CHANGE
IN CONTROL.
As of December 26, 1999, we had approximately $45 million of federal income
tax net operating loss carryforwards including approximately $11 million that is
currently limited by Section 382 and other provisions of the Internal Revenue
Code. Also, Section 382 would further limit our use of our operating loss
carryforwards if the cumulative ownership change during any three-year period
exceeds 50%. As a result of transactions occurring through December 26, 1999, we
experienced a cumulative ownership change of approximately 42%, as defined in
Section 382. However, after giving effect to the issuance of Series A
Convertible Preferred Stock on January 18, 2000, the cumulative ownership change
increased to approximately 45.9% at that date. These changes may delay, defer or
prevent our use of some of the net operating loss carryforwards.
THE PRICE OF OUR COMMON STOCK MAY FLUCTUATE DUE TO VARIOUS MARKET FACTORS.
Our common stock began trading on the American Stock Exchange on March 31,
1998. Prior to that date our common stock traded on the Nasdaq SmallCap Market.
We cannot ensure an active market for our common stock, which is generally
thinly traded. The market price of our Common stock may fluctuate significantly
because of factors such as:
- quarterly variations in operating results;
- changes in revenue growth rates for our company as a whole or for
specific geographic areas or products;
- earnings estimates or changes in estimates by market analysts;
- speculation in the press or analyst community; and
- general market conditions or market conditions specific to
particular industries.
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Further, the stock market as a whole has periods of extreme volatility that,
in many cases, are unrelated to the operating performance of, or announcements
concerning, the issuers of the affected securities. General market declines or
volatility in the future could reduce the price of the common stock. We cannot
assure you that the common stock will maintain its current market price.
Short-term trading strategies of investors can have a significant effect on the
price of specific securities.
WE MAY FACE DIFFICULTY MAINTAINING OUR LISTING ON THE AMERICAN STOCK EXCHANGE.
We have traded on the American Stock Exchange or "AMEX" since March 31,
1998. During fiscal 1999, the AMEX has notified us that because of our losses in
the last five fiscal years we fall below the continued listing standards of the
AMEX, and our continued listing is being reviewed. (We had a five-year history
of losses at the time of our original listing.) The AMEX has the discretion to
continue listing us or to delist us. Based on the January 2000 financing, which
strengthened our general financial position, and on the improvement in our
financial results since we were first admitted to listing on the AMEX, we have
requested that the AMEX continue to list our shares for trading. If our common
stock were to be removed from listing on the AMEX, it is possible that any
alternative listing may result in a reduction in the trading price of our common
stock, and our stockholders may find it harder to sell their shares.
PROVISIONS OF DELAWARE LAW AND OF OUR CHARTER MAY MAKE A CHANGE OF CONTROL MORE
DIFFICULT.
Certain provisions of our Certificate of Incorporation and of Delaware law
could discourage potential acquisition proposals and could delay or prevent a
change in control. These provisions could diminish the opportunities for
stockholders to participate in tender offers, including tender offers at a price
above the then prevailing market value of our Common Stock. These provisions may
also inhibit fluctuations in the market price of our Common Stock that could
result from takeover attempts. Our Certificate of Incorporation authorizes the
Board of Directors to issue up to 666,667 shares of Preferred Stock without
further stockholder approval. Issuance of preferred stock could have the effect
of delaying, deterring or preventing a change in control. The issuance of
additional series of preferred stock could also adversely affect the voting
power of the holders of Common Stock, including the loss of voting control to
others. The Board of Directors also has the authority to fix and determine the
relative rights and preferences of preferred shares, as well as the authority to
issue such shares, without further stockholder approval. As a result, the Board
of Directors could authorize the issuance of a series of Preferred Stock which
would grant to holders preferred rights to our assets upon liquidation, the
right to receive dividends before dividends would be declared to holders of
Common Stock, and the right to the redemption of such shares, together with a
premium, prior to the redemption of the Common Stock, or such other preferred
provisions as the Board of Directors may in their sole discretion deem
appropriate. Holders of Common Stock have no redemption rights or other
preferences.
In January 2000, we designated 450,000 of our authorized shares of preferred
stock as Series A Convertible Preferred Stock. 380,000 shares of the Series A
Convertible Preferred Stock were sold to raise capital for the Company and not
to discourage any takeover effort. However, the Series A Convertible Preferred
Stock has features that in some circumstances could discourage a takeover. In
particular, Series A Convertible Preferred Stock will be redeemable at our
original issue price on any change in control, which would include a merger or
sale of the corporation, and we may not merge with or be acquired by another
company without the approval of holders of 66 2/3% of the Series A Convertible
Preferred Stock.
As a result of the above transaction, our Board of Directors could issue up
to 286,667 shares of Preferred Stock without further stockholder approval.
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FAILING TO MEET THE STANDARDS SPECIFIED BY GOVERNMENTAL REGULATION COULD HAVE AN
ADVERSE EFFECT ON US.
Our operations must meet federal, state and local regulatory standards in
the areas of safety, health and environmental pollution and waste control. If we
fail to comply with these regulations, we could face liability ranging from
monetary fines and charges to injunctive actions, any of which would harm our
business. Future changes in these regulations could also have a material adverse
effect on us.
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<PAGE> 12
USE OF PROCEEDS
We will not receive any proceeds from the sale of shares of our common stock
by the selling stockholders but have agreed to bear all expenses of registration
of the selling stockholders' shares under federal and state securities laws. See
"Plan of Distribution."
SELLING STOCKHOLDERS
The following table sets forth certain information, received through
February 17, 2000, with respect to the number of shares of common stock
beneficially owned and/or to be owned after conversion of the convertible
preferred stock prior to this offering, and the number of shares of common stock
to be registered, by the selling stockholders named below. The information is
based on information provided by or on behalf of the selling stockholders and,
with regard to the beneficial holdings of the selling stockholders, is accurate
only to the extent beneficial holdings information was disclosed to us by or on
behalf of the selling stockholders. The selling stockholders and holders listed
in any supplement to this prospectus, and any transferors, pledgees, donees or
successors to these persons, may from time to time offer and sell, pursuant to
this prospectus and any subsequent prospectus supplement, any and all of these
shares. Any supplement to this prospectus may contain certain additional or
varied information about the selling stockholders or additional holders, and any
of their transferors, pledgees, donees or successors, and the aggregate
principal amount of the shares beneficially owned by each person that they are
offering. This information will be obtained from the selling stockholders.
The selling stockholders will be offering shares of common stock received on
the conversion of the Series A Convertible Preferred Stock they purchased on
January 19, 2000. The selling stockholders may offer all, some or none of the
common stock listed below. Because the selling stockholders may offer all, some
or none of the common stock, no estimate can be given as to the amount or
percentage of the common stock that will be held by the selling stockholders
upon termination of any of the sales. In addition, the selling stockholders
identified below may have sold, transferred or otherwise disposed of all or a
portion of their convertible preferred stock or common stock since the date on
which they provided the information regarding their common stock to us in
transactions exempt from the registration requirements of the Securities Act of
1933, as amended.
The shares offered by this prospectus may be offered from time to time by
the selling stockholders named below:
<TABLE>
<CAPTION>
NO. OF SHARES OF
COMMON STOCK
REGISTERED IN THIS
SELLING STOCKHOLDER OFFERING
------------------- ------------------
<S> <C>
Ascend Partners, L.P........................ 295,455
Bank Insinger De Beaufort................... 170,455
Larry Black................................. 45,455
Branagh Revocable Trust..................... 13,636
Matthew William Clarke...................... 90,909
Sanford J. Colen............................ 40,909
Aaron J. Colen, UTMA, CA.................... 11,364
Elyse L. Colen, UTMA, CA.................... 11,364
Sarah Keller Cox............................ 22,727
John Davies................................. 56,818
Diamond A. Partners, L.P.................... 119,318
J. Steven Emerson........................... 284,091
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
NO. OF SHARES OF
COMMON STOCK
REGISTERED IN THIS
SELLING STOCKHOLDER OFFERING
------------------- ------------------
<S> <C>
Emily Fairbairn - IRA....................... 204,545
Malcolm Fairbairn - IRA..................... 68,182
William T. and Kathleen P. Gibson........... 22,727
Jonathan & Nancy Glaser Family Trust ....... 90,909
Edward M. Hawley............................ 9,091
George P. Hawley............................ 9,091
Allison Booth Hawley Trust I................ 113,636
Caitlin Hale Hawley Trust I................. 113,636
Hawley Family Trust......................... 113,636
Maureen Erin Hawley Trust I................. 113,636
Shannon Follen Hawley Trust I............... 113,636
Dr. Philip Hawley, Jr....................... 56,818
Victor F. Hawley............................ 9,091
Richard Hicks............................... 272,727
Ian Jack.................................... 90,909
Kathryn Jergens Trust....................... 11,364
Diane Johnson............................... 9,091
Richard M. Keller........................... 22,727
Stephen M. Keller........................... 22,727
Stephen F. Keller Professional
Corporation Defined Benefit Plan........ 68,182
Sidney Kimmel............................... 5,682
Konopisos Family Trust Dated 12/15/80....... 56,818
Peter Lamm.................................. 90,909
Robert London............................... 272,727
Jeffrey S. Morgan........................... 9,091
Jeffrey S. Morgan BSSC Master Defined
Contribution Pension Plan............... 19,318
The Muhl Family Trust....................... 28,409
Pacific Security Group, Inc................. 22,727
Pilot Holdings, L.P......................... 227,273
Pointe Investments Capital, Ltd............. 90,909
Pollat, Evans & Co., Inc.................... 7,955
Kevin and Erin Przybocki.................... 9,091
Charles B. Runnels, Jr...................... 28,409
Charles B. Runnels, III..................... 28,409
G. Tyler Runnels............................ 254,545
Lord Robin Russell.......................... 11,364
Timothy Michael Wallace..................... 113,636
Wave Enterprises, Inc....................... 11,364
Ira Weingarten.............................. 28,409
David Weinstein............................. 18,182
J.D. Yates.................................. 11,364
Zaxis Partners, L.P......................... 227,273
TOTAL.............. 4,272,726
</TABLE>
11
<PAGE> 14
PLAN OF DISTRIBUTION
This prospectus relates to the offer and sale from time to time by the
selling stockholders of up to 4,272,726 shares of our common stock.
The selling stockholders will act independently of Krause's Furniture, Inc.
in deciding to sell their shares. We will not receive any proceeds when the
selling stockholders sell their shares.
Shares of our common stock held by the selling stockholders and covered by
this prospectus and, if applicable, any prospectus supplement, may be offered
and sold from time to time by the selling stockholders in one or more
transactions. These transactions may involve block transactions. The selling
stockholders, including their transferees, pledgees or donees or their
successors, may sell the shares being offered here as follows:
- on any of the United States securities exchanges or quotation
services where the common stock is listed or quoted at the time of
sale, including the American Stock Exchange where our common stock
is listed;
- in transactions otherwise than on the exchanges or services
described above;
- in the over-the-counter market;
- in negotiated transactions or otherwise, including an underwritten
offering;
- in connection with short sales of our shares;
- by pledge or by grant of a security interest in the shares to secure
debts and other obligations;
- through the writing of options, whether the options are listed on an
options exchange or otherwise;
- in connection with the writing of non-traded and exchange-traded
call options or put options, in hedge transactions and in settlement
of other transactions in standardized or over-the-counter options;
- through the distribution of the shares by any selling stockholder to
its partners, members or stockholders; or
- in a combination of any of the above transactions.
In connection with the sale of the common stock or otherwise, the selling
stockholders may enter into hedging transactions with broker-dealers or other
financial institutions. These broker-dealers or other financial institutions may
in turn engage in short sales of the common stock and deliver these securities
to close out these short positions. They also may loan or pledge the common
stock to broker-dealers that in turn may sell these securities.
The selling stockholders may sell their shares at market prices prevailing
at the time of sale, at prices related to the prevailing market prices, at
negotiated prices or at fixed prices. Each of the selling stockholders reserves
the right to accept and, together with their agents from time to time, to
reject, in whole or in part, any proposed purchase of the common stock to be
made directly or through agents. The selling stockholders are subject to the
provisions of the Exchange Act of 1934, as amended, and the rules
12
<PAGE> 15
under it relating to stock manipulation, particularly Regulation M. They are not
to engage in any transaction in violation of these provisions.
The selling stockholders may sell their shares directly to purchasers or may
use underwriters, broker-dealers or agents to sell their shares. Underwriters,
broker-dealers or agents who sell the shares may receive compensation in the
form of discounts, concessions, or commissions from the selling stockholders or
they may receive compensation from purchasers of the shares for whom they acted
as agents or to whom they sold the shares as principal, or both. The
compensation as to a particular underwriter, broker- dealer or agent will not
exceed 8% of the selling price of the shares sold by the particular underwriter,
broker-dealer or agent. The selling stockholders and any underwriters,
broker-dealers or agents that participate in the sale of their common stock may
be deemed to be "underwriters" within the meaning of the Securities Act of 1933,
as amended. Any discounts, commissions, concessions or profits received by these
underwriters, broker-dealers or agents on any resale of the shares may be
underwriting discounts and commissions under the Securities Act of 1933, as
amended. Selling stockholders who are "underwriters" within the meaning of the
Securities Act of 1933, as amended, will be subject to the prospectus delivery
requirements of the Securities Act.
Those selling stockholders identified as broker-dealers are statutory
underwriters within the meaning of the Securities Act when those broker-dealers
sell shares of our common stock and the stock was not acquired initially by such
broker-dealers as compensation for underwriting activities.
We will pay all fees and expenses incurred in connection with preparing and
filing this prospectus and any prospectus supplement and the registration
statement and any amendments to those documents. The selling stockholders will
pay any brokerage commissions and similar selling expenses, if any, attributable
in connection with the sale of the shares of common stock, including stock
transfer taxes due or payable in connection with the sale of the shares.
We have agreed to keep the registration statement, of which this prospectus
and any subsequent prospectus supplements constitute a part, effective until all
of the securities covered by this registration statement may be freely sold by
the selling stockholders without registration pursuant to Rule 144(k) of the
Securities Act. We cannot assure that the selling stockholders will sell all or
any of the shares of common stock offered here.
Under the securities laws of certain states, the securities may be sold in
such states only through registered or licensed brokers or dealers.
Selling stockholders may also resell all or a portion of their securities in
open market transactions in reliance upon Rule 144 under the Securities Act of
1933, as amended. However, to do so, they must meet the criteria and conform to
the requirements of that Rule. In addition, any securities covered by this
prospectus which qualify for sale pursuant to Rule 144A of the Securities Act,
as amended, may be sold under Rule 144A rather than pursuant to this prospectus.
A selling stockholder may not sell any common stock by means other than as
described in this prospectus.
We have entered into a registration rights agreement for the benefit of the
selling stockholders to register their common stock under applicable federal and
state securities laws under various circumstances and at various times. Under
that agreement, we have agreed to indemnify the selling stockholders, and the
selling stockholders have agreed to indemnify us, and each of us has agreed to
indemnify other persons named or described in the registration rights agreement,
in each case against various liabilities, including some liabilities arising
under the Securities Act of 1933, as amended, in connection with the offer and
sale of the common stock by the selling stockholders. These indemnification
obligations of ours and the selling stockholders generally include obligations
to
13
<PAGE> 16
indemnify any underwriter that participates in the offering or sale of the
common stock by the selling stockholders and any person who controls each
underwriter.
DESCRIPTION OF CAPITAL STOCK
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is EquiServe, L.P.
14
<PAGE> 17
LEGAL MATTERS
The validity of the common stock offered under this prospectus will be
passed upon by Morrison & Foerster LLP, Los Angeles, California.
EXPERTS
The audited financial statements and schedules incorporated by reference in
this registration statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in giving said reports.
15
<PAGE> 18
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We have filed with the Securities and Exchange Commission, or the SEC, a
registration statement on Form S-3 under the Securities Act of 1933. This
prospectus and any subsequent prospectus supplements do not contain all of the
information in the registration statement. We have omitted from this prospectus
some parts of the registration statement, as permitted by the rules and
regulations of the SEC. This prospectus provides you with only a general
description of the offered securities. Each time offered securities are to be
sold, we will provide, if and so far as required, a prospectus supplement that
will contain specific information about the terms of that offering. The
prospectus supplement may also add, update or change any information contained
in this prospectus. You should read both this prospectus and any prospectus
supplement together with the additional information described under this
heading.
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may inspect and copy the registration statement,
including exhibits, and any reports, statements or other information that we
file at the SEC's public reference rooms at 450 Fifth Street, N.W., Washington,
D.C. 20549. You can call the SEC at 1-800-SEC-0330 for further information about
the public reference rooms. In addition, the SEC maintains an Internet site
(http://www.sec.gov) that contains reports, proxy and information statements,
and other information regarding issuers that file electronically with the SEC.
The SEC allows us to "incorporate by reference" information into this
prospectus and any subsequent prospectus supplement, which means that we can
disclose important information to you by referring you to another document filed
separately with the SEC. This prospectus incorporates by reference documents
which are not presented in this prospectus or delivered to you with it. The
information incorporated by reference is an important part of this prospectus
and any subsequent prospectus supplement. Information that we file subsequently
with the SEC will automatically update this prospectus and any outstanding
prospectus supplements. We incorporate by reference the documents listed below
and amendments to them. These documents and their amendments were previously
filed with the SEC. These documents contain important information about us and
our finances.
(i) Our annual report on Form 10-K for our 47-week transition period
ended December 26, 1999. This report contains the audited
consolidated financial statements for us and our subsidiaries as
of December 26, 1999 and January 31, 1999 and for the 47-week
transition period ended December 26, 1999 and the year ended
January 31, 1999 and February 1, 1998; and
(ii) Our current report on Form 8-K dated January 19, 2000; and
(iii) Our current report on Form 8-K dated February 4, 2000.
We are also incorporating by reference in this prospectus and any subsequent
prospectus supplement all reports and other documents that we file pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act of 1934, as amended,
after the date of this prospectus and prior to the termination of this offering
of common stock. These reports and documents will be incorporated by reference
in and considered to be a part of this prospectus and any subsequent prospectus
supplement as of the date of filing the reports and documents.
Upon request, we will provide without charge to each person to whom a copy
of this prospectus is delivered, including any beneficial owner, a copy of the
information that has been or may be incorporated by reference in this
prospectus, other than exhibits to the relevant documents. We will send exhibits
to these documents to you for a reasonable fee. Direct any request for copies to
Judith Olson Lasker, Esq., at our corporate headquarters, located at 200 North
Berry Street, Brea, California 92821-3903 (telephone number (714) 990-3100).
16
<PAGE> 19
Any statement contained in a document which is incorporated by reference in
this prospectus or in any subsequent prospectus supplement will be modified or
superseded for purposes of this prospectus or any subsequent prospectus
supplement to the extent that a statement contained in this prospectus or
incorporated in this prospectus or in any prospectus supplement or in any
document that we file after the date of this prospectus that also is
incorporated by reference in this prospectus or in any subsequent prospectus
supplement modifies or supersedes the prior statement. Any modified or
superseded statement shall not be deemed, except as so modified or superseded,
to constitute a part of this prospectus or any subsequent prospectus supplement.
Subject to the foregoing, all information appearing in this prospectus is
qualified in its entirety by the information appearing in the documents
incorporated by reference in this prospectus.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR ANY APPLICABLE PROSPECTUS SUPPLEMENT. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH ANY OTHER INFORMATION. THE SECURITIES
OFFERED IN THIS PROSPECTUS MAY ONLY BE OFFERED IN STATES WHERE THE OFFER IS
PERMITTED, AND WE AND THE SELLING STOCKHOLDERS ARE NOT MAKING AN OFFER OF THESE
SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME
THAT THE INFORMATION IN THIS PROSPECTUS OR ANY APPLICABLE PROSPECTUS SUPPLEMENT
IS ACCURATE AS OF ANY DATE OTHER THAN THE DATES ON THE FRONT OF THOSE DOCUMENTS.
17
<PAGE> 20
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY.............................................................1
FORWARD-LOOKING STATEMENTS.....................................................2
RISK FACTORS...................................................................3
USE OF PROCEEDS...............................................................10
SELLING STOCKHOLDERS..........................................................10
PLAN OF DISTRIBUTION..........................................................12
DESCRIPTION OF CAPITAL STOCK..................................................14
LEGAL MATTERS.................................................................15
EXPERTS.......................................................................15
WHERE YOU CAN FIND MORE INFORMATION ABOUT US..................................16
</TABLE>
18
<PAGE> 21
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized list of the estimated expenses to be incurred
in connection with the Offering of the securities being offered hereunder other
than underwriting discounts and commissions.
<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
----------
<S> <C>
Registration fee................................................... $ 2,326
Printing and Engraving expenses.................................... 32,917
Legal fees and expenses............................................ 183,493
Blue Sky qualification fees and expenses........................... --
Accounting fees and expenses....................................... 16,000
Transfer Agent and registrar fees.................................. 2,674
Miscellaneous...................................................... 62,590
--------
Total......................................................... $300,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") contains
detailed provisions on indemnification of directors and officers against
expenses, judgments, fines and amounts paid in settlement, actually and
reasonably incurred in connection with legal proceedings. Section 102(a)(7) of
the DGCL permits a provision in the certificate of incorporation of each
corporation organized thereunder, such as the Company, eliminating or limiting,
with certain exceptions, the personal liability of a director of the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director. The Certificate of Incorporation of the Company eliminates the
liability of each of its directors to its stockholders or the Company for
monetary damages for breach of fiduciary duty to the full extent provided by the
DGCL, as such law exists or may hereafter be amended.
Indemnification applies to any threatened, pending or completed action, suit
or proceeding, whether, civil, criminal, administrative or investigative.
Indemnification may include all expenses (including attorneys' fees, judgments,
fines, ERISA excise taxes and amounts paid in settlement) reasonably incurred by
the indemnified person.
II-1
<PAGE> 22
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
(a) Exhibits and Financial Statement Schedules
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
*5.1 Opinion of Morrison & Foerster LLP
23.1 Consent of Arthur Andersen, LLP, Independent Public Accountants
*23.2 Consent of Morrison & Foerster LLP (included in the opinion filed
herewith as Exhibit 5.1)
24.1 Power of attorney (included on the signature page at II-6)
</TABLE>
* To be filed by amendment.
(b) Financial Statement Schedules
No schedules are included because the information required to be set forth
therein is not applicable or is shown in the financial statements or notes
thereto.
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Securities and Exchange Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Securities and Exchange Commission by the registrant pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 that are incorporated by reference
in the registration statement.
II-2
<PAGE> 23
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
(e) The undersigned registrant hereby undertakes that for purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
of 1933 shall be deemed to be part of this registration statement as of the time
it was declared effective.
(f) The undersigned registrant hereby undertakes that for the purpose of
determining any liability under the Securities Act of 1933, each post-effective
amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-3
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Brea, County of Orange, State of California, as of
May 3, 2000.
KRAUSE'S FURNITURE, INC.
By: /s/ Robert A. Burton
-------------------------------------
Robert A. Burton
Executive Vice President and Chief
Financial Officer
POWER OF ATTORNEY
signed hereby constitutes and appoints Robert A. Burton and Judith O.
Lasker, and each of them, as his true and lawful attorneys-in-fact and agents,
jointly and severally, with full power of substitution and resubstitution, for
and in his stead, in any and all capacities, to sign on his behalf this
Registration Statement on form S-3 in connection with the offering of common
stock by Krause's Furniture, Inc. and to execute any amendments thereto
(including post-effective amendments) or certificates that may be required in
connection with this Registration Statement, and to file the same, with all
exhibits thereto, and all other documents in connection therewith, with the
Securities and Exchange Commission and granting unto said attorneys-in-fact and
agents, and each of them, jointly and severally, the full power and authority to
do and perform each and every act and thing necessary or advisable to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, jointly
or severally, or their or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated below.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Phillip M. Hawley Chairman of the Board and Chief May 2, 2000
- ----------------------------------- Executive Officer
Phillip M. Hawley (Principal Executive Officer)
/s/ Thomas M. DeLitto Director and Vice Chairman of May 2, 2000
- ----------------------------------- the Board
Thomas M. DeLitto
</TABLE>
II-4
<PAGE> 25
<TABLE>
<S> <C> <C>
Executive Vice President and May 2, 2000
/s/ Robert A. Burton Chief Financial Officer
- ----------------------------------- (Principal Financial Officer
Robert A. Burton and Principal Accounting
Officer)
/s/ Kamal G. Abdelnour
- ----------------------------------- Director May 2, 2000
Kamal G. Abdelnour
- ----------------------------------- Director May 2, 2000
Jeffrey H. Coats
- ----------------------------------- Director May 2, 2000
Peter H. Dailey
/s/ John A. Gavin
- ----------------------------------- Director May 2, 2000
John A. Gavin
- ----------------------------------- Director May 2, 2000
George Hashbarger
</TABLE>
II-5
<PAGE> 26
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
<S> <C>
*5.1 Opinion of Morrison & Foerster LLP
23.1 Consent of Arthur Andersen, LLP, Independent Public
Accountants
*23.2 Consent of Morrison & Foerster LLP (included in the
opinion filed herewith as Exhibit 5.1)
24.1 Power of attorney (included on the signature page
at II-6)
</TABLE>
* To be filed by amendment.
II-6
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated April 3, 2000
included in Krause's Furniture, Inc.'s Form 10-K for the 47 week transition
period ended December 26, 1999 and to all references to our Firm included in
this registration statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Orange County, California
April 28, 2000
