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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 30, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------------------
FINET.COM, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 6162 94-3115180
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code No.) Identification No.)
organization)
2527 CAMINO RAMON, SUITE 200, SAN RAMON, CALIFORNIA 94583
TELEPHONE: (925) 242-6550
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
STEPHEN J. SOGIN, INTERIM CHIEF EXECUTIVE OFFICER
2527 CAMINO RAMON, SUITE 200, SAN RAMON, CALIFORNIA 94583
TELEPHONE: (925) 242-6550
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
------------------------------------
COPIES TO:
ROGER S. MERTZ STEPHEN C. FERRUOLO
ALLEN, MATKINS, LECK, GAMBLE & HELLER EHRMAN WHITE & MCAULIFFE
MALLORY LLP 525 UNIVERSITY AVENUE
333 BUSH STREET, SEVENTEENTH FLOOR PALO ALTO, CALIFORNIA 94301
SAN FRANCISCO, CALIFORNIA 94104-2806 TELEPHONE: (650) 324-7000
TELEPHONE: (415) 837-1515 FACSIMILE: (650) 324-0638
FACSIMILE: (415) 837-1516
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE 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 of 1933, check the following
box and list the Securities Act registration 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 of 1933, 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(d)
under the Securities Act of 1933, 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: / /
------------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE REGISTRATION FEE
--------------------- ------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value 600,000 $1.20 $721,875 $190.58
</TABLE>
(1) Estimated solely for the purpose of computing the amount of registration
fee pursuant to Rule 457(c) under the Securities Act of 1933.
------------------------------------
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.
<PAGE>
The information in this preliminary 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 becomes effective. This
preliminary 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.
SUBJECT TO COMPLETION, DATED DECEMBER 30, 1999
PROSPECTUS
FiNET.COM, INC.
600,000 SHARES
COMMON STOCK
The selling stockholder identified in this prospectus is offering 600,000
shares of common stock. FiNet.com will not receive any of the proceeds from the
sale of shares by the selling stockholder.
FiNet.com's common stock is traded on the Nasdaq SmallCap Market under the
symbol "FNCM." On December 28, 1999, the last reported sale price for the
common stock on the Nasdaq SmallCap Market was $1.03 per share.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 3.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
-----------------------------
The date of this Prospectus is ____________, 1999.
<PAGE>
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. The selling security holder is offering to sell,
and seeking offers to buy, shares of FiNet.com's common stock only in
jurisdictions where offers and sales are permitted. The information contained
in this prospectus is accurate only as of the date of this prospectus,
regardless of the time of delivery of this prospectus or of any sale of the
shares.
In this prospectus, the "company," the "Registrant," "FiNet.com," "we,"
"us," and "our" refer to FiNet.com, Inc.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to "incorporate" into this prospectus information we file
with the SEC in other documents. This means that we can disclose important
information to you by referring to other documents that contain that
information. The information may include documents filed after the date of this
prospectus which update and supersede the information you read in this
prospectus. We incorporate by reference the documents listed below, except to
the extent information in those documents is different from the information
contained in this prospectus, and all future documents filed with the SEC under
Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until
we terminate the offering of these shares.
SEC Filing (File No. 0-18108) Period/Filing Date
----------------------------- -------------------
Annual Report on Form 10-K Year ended April 30, 1999
Quarterly Reports on Form 10-Q Quarter ended July 31, 1999
Quarter ended October 31, 1999
Current Reports on Form 8-K June 24, 1999
June 28, 1999
August 20, 1999
November 9, 1999
You may request a copy of these documents, at no cost, by writing to:
FiNet.com, Inc.
2527 Camino Ramon, Suite 200
San Ramon, California 94583
Attention: Investor Relations
Telephone: (925) 242-6550
----------------------
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SUBSEQUENT EVENTS
Effective November 9, 1999, FiNet.com has changed its fiscal year end from
April 30 to December 31.
On November 15, 1999, FiNet.com moved its corporate headquarters from 3021
Citrus Circle, Suite 150, Walnut Creek, California to 2527 Camino Ramon, Suite
200, San Ramon, California.
On December 15, 1999, FiNet.com announced that Mark Korell, its Chairman,
President and Chief Executive Officer would retire from all positions he holds
with FiNet.com, effective January 15, 2000. His retirement triggered an event
of default under the Company's warehouse lending agreement with Residential
Funding Corporation. The Company has received a waiver of this default from the
lender. Following Mr. Korell's retirement, Stephen J. Sogin, a current member
of FiNet.com's board of directors, will serve as Interim Chief Executive
Officer.
In November 1999, Kevin Gillespie, our Executive Vice President - Sales
and Marketing, announced his resignation, effective as of December 20, 1999.
In November 1999, the Company announced that Kellie Johnson Abreu had been
hired to replace Mr. Gillespie as Vice President--Marketing and Sales. In
December 1999, Ms. Abreu informed the Company that she was resigning,
believing that she had been constructively terminated. The Company is
currently negotiating a severance arrangement with Ms. Abreu.
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE MAKING A
DECISION TO BUY OUR COMMON STOCK. THE RISKS DESCRIBED BELOW ARE NOT THE ONLY
ONES WE FACE. ADDITIONAL RISKS NOT PRESENTLY KNOWN TO US OR THAT WE CURRENTLY
CONSIDER IMMATERIAL MAY ALSO MATERIALLY IMPAIR OUR BUSINESS OPERATIONS.
IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL
CONDITION OR RESULTS OF OPERATIONS COULD BE MATERIALLY ADVERSELY AFFECTED. IN
SUCH CASE, THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE, AND YOU MAY LOSE
ALL OR PART OF YOUR INVESTMENT. YOU SHOULD ALSO REFER TO THE OTHER INFORMATION
SET FORTH IN THIS PROSPECTUS, INCLUDING OUR CONSOLIDATED FINANCIAL STATEMENTS.
IF WE CONTINUE TO EXPERIENCE LOSSES IN THE FUTURE, OUR BUSINESS, FINANCIAL
CONDITION AND GROWTH PROSPECTS COULD BE MATERIALLY ADVERSELY AFFECTED.
We have had net losses in each fiscal year since fiscal 1997, and we expect
that we will continue to incur losses for the foreseeable future on both an
annual and quarterly basis. We expect to continue to incur losses because of
our plans to invest over the near term in information systems, sales and
marketing, recruiting and training, customer support and administrative
infrastructure. Because of these expected losses, we may not be able to
implement our business plans, and our business, results of operations, financial
condition and growth prospects could be materially adversely affected.
As of October 31, 1999, we had an accumulated deficit of approximately
$62.5 million. Prior to December 31, 1995, our year-end financial statements
contained a qualification from our independent accountants regarding the
uncertainty of our ability to continue as a going concern. We believe that it
is likely that we will experience losses and accumulate deficits for the
foreseeable future.
WE MAY INCUR ADDITIONAL LOSSES FROM THE DISCONTINUED BUSINESSES OF COASTAL
FEDERAL MORTGAGE AND MICAL MORTGAGE.
In April 1998, we acquired Coastal Federal Mortgage, and in May 1998, we
acquired Mical Mortgage Inc., both which have incurred losses since we
acquired them. In April 1999, we discontinued the business units of Coastal
Federal Mortgage and Mical Mortgage, and we substantially liquidated their
assets. We reported a net loss associated with their acquisition and
operation of $16.9 million in fiscal 1999 and for the six months ended
October 31, 1999 we reported net losses of $2.2 million. We may incur
additional losses in connection with these discontinued business units.
IF OUR NEW MANAGEMENT IS NOT ABLE TO IMPROVE AND EXPAND OUR OPERATIONS, OUR
BUSINESS COULD SUFFER.
In 1999, we replaced most of our management team.
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Mark Korell, our Chairman, President and Chief Executive Officer, has
announced his retirement effective January 15, 2000. Kevin Gillespie, our
Executive Vice President-Sales and Marketing, resigned effective December 20,
1999 and the Company has had difficulty permanently filling his position. If
FiNet.com's new President and Chief Executive Officer and Vice
President--Marketing and Sales, when appointed, and the current members of
the management team are not able to improve and expand our operations, our
financial condition, profitability and growth prospects could be materially
adversely affected.
THE LOSS OF ANY OF OUR EXECUTIVE OFFICERS OR KEY PERSONNEL WOULD LIKELY HAVE AN
ADVERSE EFFECT ON OUR BUSINESS.
Mr. Korell has recently announced his retirement as Chairman, President
and Chief Executive Officer and we are seeking to replace another key member of
our management team. We believe that our future success will depend to a
significant extent on the continued services of our remaining senior
management and other key personnel. The loss of the services of key employees
could have a material adverse effect on our business, results of operations
and financial condition. We do not maintain "key person" life insurance for
any of our personnel.
FiNet.com is seeking to find a replacement for Mr. Korell. However, we
have not been successful in recruiting a permanent replacement for Mr. Korell
to date. Delay in recruiting candidates to fill the Chief Executive Officer,
and Vice President--Marketing and Sales positions, or any other key position
which may become vacant, could have a material adverse effect on our
business, results of operations and financial condition.
IF WE ARE UNABLE TO RETAIN AND ATTRACT QUALIFIED PERSONNEL, OUR BUSINESS COULD
SUFFER.
Our ability to grow and our future success depends on our ability to
identify, attract, hire, train, retain and motivate other highly skilled
technical, managerial, sales and marketing, customer service and professional
personnel. Competition for such employees is intense, especially in the
e-commerce sector, and there is a risk that we will not be able to
successfully attract, assimilate or retain sufficiently qualified personnel.
If we fail to retain and attract the necessary technical, managerial, sales
and marketing, customer service personnel and experienced professionals, our
business, results of operations and financial condition could be materially
adversely effected.
IF CONSUMERS AND MORTGAGE BROKER BUSINESSES DO NOT EMBRACE ON-LINE MORTGAGE
FINANCING AND SALES, OUR BUSINESS WILL BE MATERIALLY ADVERSELY AFFECTED.
Our success depends upon the acceptance of on-line mortgage financing by
consumers, mortgage brokers and other real estate service providers. If these
groups do not embrace our model for mortgage finance, our business, results of
operations and financial condition will be materially adversely affected. The
market for electronic mortgage financing, particularly over the Internet, is at
an early stage of development and is evolving rapidly. Rapid growth in the use
of and interest in the Internet is a recent development and we cannot be sure
that Internet usage will continue to grow or that a sufficiently broad base of
consumers and businesses will adopt, and continue to use, the Internet as a
medium by which to communicate and obtain services traditionally provided in
person-to-person and paper transactions. Our business prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in the new and rapidly evolving market for Internet
products and services.
We believe that acceptance of our products and services will depend on the
following factors, among others:
- the growth of the Internet as a medium for commerce generally, and as
a market for financial products and services in particular;
- development of the necessary Internet network infrastructure to
support new technologies and handle the demands placed upon the
Internet;
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- government regulation of the Internet;
- our ability to successfully and efficiently develop on-line products
and services that are attractive to a sufficiently large number of
consumers and mortgage brokers; and
- a change in the perception among many consumers and real estate
service providers that obtaining a mortgage on-line is less dependable
than obtaining a mortgage through a more traditional method.
There is a risk that on-line mortgage financing will not gain market
acceptance and that consumers will not significantly increase their use of the
Internet for obtaining loans. If the market for on-line mortgage financing
fails to develop, or develops more slowly than expected, our business, results
of operations and financial condition would be materially adversely affected.
In addition, if there are insufficient communications services to support the
Internet, it could result in slower response times which would adversely affect
usage of the Internet. Even if the Internet gains acceptance, we may be unable,
for technical or other reasons, to develop and introduce new products and
services or enhancements of existing products and services in a timely manner,
and such products and services and enhancements may not gain widespread market
acceptance. Any of these factors could have a material adverse effect on our
business, results of operations and financial condition.
In addition, because the market for on-line mortgage lending is at an early
stage of development, the volume of loans that we originate or sell in any given
period is difficult to predict. If the volume of loans that we originate or
sell falls below our expectations or the expectations of financial analysts, our
business, results of operation and financial condition could be materially
adversely affected.
IF THERE IS A RECESSION, NATURAL DISASTER OR OTHER DISRUPTION IN THE
CALIFORNIA ECONOMY, OUR BUSINESS COULD BE MATERIALLY ADVERSELY AFFECTED.
Approximately 86% of the loans we originated and/or funded in the first six
months of fiscal 2000 were for properties located in California. No other state
represented more than 3% of our closed loans during such period. Because a high
concentration of our business is in California, we are particularly vulnerable
to recessions and conditions affecting the economy of California. Although we
seek to originate more loans in other states, we are likely to continue to be
dependent on originating loans for properties located in California for the
foreseeable future. There have been times in the past, most recently in 1991
and 1992, when the California economy suffered a recession more severe than the
rest of the country. If such a recession were to occur again, our business,
results of operations and financial condition would be materially adversely
affected.
In addition, California historically has been vulnerable to natural
disasters, such as earthquakes and mudslides, which are not typically covered by
standard hazard insurance policies that homeowners typically maintain.
Uninsured disasters may reduce a borrower's ability to repay the mortgage loans
we close and sell. A sustained period of increased delinquencies or defaults
resulting from natural disasters could adversely affect the pricing of our
future loan sales and our overall ability to sell loans. The occurrence of any
such natural disasters in California could have a material adverse effect on our
business, results of operations and financial condition.
IF THERE IS A FURTHER DECREASE IN THE DEMAND FOR MORTGAGES, OUR BUSINESS
COULD SUFFER.
Demand for mortgages is typically adversely affected by periods of economic
slowdown or recession, which can be accompanied by rising interest rates and
declining demand for consumer credit, home sales, real estate values and ability
of borrowers to make loan payments. These factors tend to decrease demand for
mortgage loans of the types we originate and could increase the rates of
delinquencies and foreclosures on loans we hold. These changes would likely
have a material adverse effect on our business, results of operations and
financial condition.
Over the last seven years we have generally operated in an environment
of relatively low interest rates, relatively high demand for consumer credit
and increasing home sales and real estate values. However, the mortgage
market has contracted during 1999 with the increase in mortgage rates. We
cannot be sure that we will be
5
<PAGE>
able to grow our business in an atmosphere of higher interest rates, lower
consumer credit demand and real estate value and fewer home sales.
IF INTEREST RATES CONTINUE TO RISE, OUR RESULTS OF OPERATIONS COULD BE
MATERIALLY ADVERSELY AFFECTED.
Our residential mortgage business depends upon overall levels of sale and
refinancing of residential real estate as well as on mortgage loan interest
rates. Any fluctuation in interest rates or an adverse change in residential
real estate or general economic conditions, both of which are outside our
control, could have a material adverse effect on our business, results of
operations and financial condition. The residential real estate industry is
highly cyclical. Shifts in the economy and residential real estate values
generally affect the number of home sales and new housing starts. The demand
for mortgage loan financing increases as the number of home sales increases.
Declining interest rates generally increase mortgage loan financing activity
because homeowners refinance existing mortgage loans to obtain more favorable
interest rates. Rising interest rates, in contrast, discourage refinancing
activities and generally reduce the number of home sales that occur.
The effect of interest rate changes tends to be greater on the market
for refinancing loans than it is on the market for purchase loans, since
refinancing a mortgage loan is voluntary and motivated primarily by a
homeowner's desire to lower financing costs, whereas new home purchasers are
motivated by a need or desire for a new home. Accordingly, the annual volume
of new mortgage refinance loans is quite volatile. Approximately 46% of the
loans we originated and/or funded in fiscal 1999 were loans to refinance
mortgage debt, compared to 69% in the first six months of fiscal 2000. We
cannot predict future interest rate trends, their impact on our business, or
our ability to manage this business mix.
The value of the loans we make is based, in part, on market interest rates,
and our business, results of operations and financial condition may be
materially adversely affected if interest rates change rapidly or unexpectedly.
If interest rates rise after we fix a price for a loan but before we sell the
loan into the secondary market, the value of that loan will decrease. If we
delay in selling our loans into the secondary market, our interest rate exposure
increases and we could incur a loss on the sale. While we use various hedging
strategies to provide some protection against interest rate risks, no hedging
strategy can protect us completely. The nature and timing of hedging
transactions influences the effectiveness of hedging strategies and poorly
designed strategies or improperly executed transactions may increase rather than
decrease risk. In addition, hedging strategies involve transaction and other
costs. There is a risk that our hedging strategy and the hedges that we make
will not adequately offset the risks of interest rate volatility and that our
hedges will result in losses.
IF WE ARE UNABLE TO DIFFERENTIATE OURSELVES FROM COMPETITION IN OUR INDUSTRY,
OUR BUSINESS PROSPECTS COULD BE HARMED.
The e-commerce market is new, rapidly evolving and intensely competitive.
We expect competition to intensify in the future. Barriers to entry are
minimal, so our competitors can launch new Internet sites at relatively low
cost. In addition, the residential mortgage loan business is highly
competitive. We currently compete with a variety of other companies offering
mortgage services, including:
- various on-line mortgage brokers, including E-LOAN Inc., iOwn.com,
Mortgage.com, Quicken Mortgage and Keystroke Financial;
- mortgage companies that offer products through on-line search engines,
such as Yahoo! and Microsoft Corporation's Home Advisor website;
- mortgage banking companies, commercial banks, savings associations,
credit unions and other financial institutions which still originate
the vast majority of mortgage loans; and
- mortgage brokers.
Many of our mortgage banking and mortgage brokerage competitors have longer
operating histories or significantly greater financial, technical, marketing and
other resources than we do. Some of our on-line
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competitors are spending substantial funds on mass marketing and branding
their mortgage services. In addition, some of our competitors offer a wider
range of services and financial products to customers and have the ability to
respond more quickly to new or changing opportunities. As a result, many
have greater name recognition and more extensive customer bases and can offer
more attractive terms to customers and adopt more aggressive loan pricing
policies. We can not be sure that we will be able to compete successfully
against current and future competitors. If we are unable to do so it will
have a material adverse effect on our business, results of operations and
financial condition.
IF OUR QUARTERLY REVENUES AND OPERATING RESULTS FLUCTUATE SIGNIFICANTLY, THE
PRICE OF OUR COMMON STOCK IS LIKELY TO BE VOLATILE.
Our quarterly revenues and operating results are likely to continue to vary
substantially from quarter to quarter. Fluctuation in our quarterly results may
cause the price of our common stock to be volatile. We believe that the
following factors, among others, could affect our quarterly results:
- fluctuations in mortgage loan interest rates;
- seasonal or other economic factors affecting demand for mortgage
credit;
- the volume of our mortgage loan originations;
- the size and timing of our loan sales;
- our ability to offer competitive mortgage rates;
- changes in our pricing policies or our competitors' pricing policies
for mortgage origination and processing fees;
- the proportion of our mortgage originations which are used to purchase
homes or refinance existing debt;
- the introduction of new products and services by us or our
competitors;
- the level of consumer interest and confidence in the Internet as a
means of accessing financial products and services;
- the timing of releases of enhancements to our products and services;
- our ability to upgrade and develop our information systems and
operational infrastructure to accommodate growth;
- the timing and rate at which we increase our expenses to support
projected growth;
- the cost of compliance with federal and state government laws and
regulations, including any changes in our historic business practices
that could result from legal interpretations;
- any termination or restructuring of any strategic alliances or
agreements with key service providers such as the Federal National
Mortgage Association, commonly known as Fannie Mae, or the Federal
Home Loan Mortgage Corporation, commonly known as Freddie Mac;
- our announcement of new marketing initiatives or strategic alliances
with other Internet-based companies, or termination of any such
initiative or alliance;
- the volume of business resulting from collaborative marketing efforts
with our strategic partners;
- technical difficulties or service interruptions affecting our Internet
websites or operational data processing systems;
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- changes in our operating expenses and investment in our
infrastructure;
- general economic conditions in the United States and economic
conditions which particularly affect e-commerce industries; and
- additions or departures of key executives and operating personnel.
These factors make a substantial decline in our stock price possible at any
time. For example, our common stock traded between $0.75 and $18.25 per share
between December 20, 1998 and December 20, 1999.
In addition, the trading prices of Internet and e-commerce stocks have
recently experienced extreme price and volume fluctuations. These fluctuations
often appear to be unrelated or disproportionate to the operating performance of
Internet and e-commerce companies. The valuations of many Internet and
e-commerce stocks are extraordinarily high based on conventional valuation
standards such as price-to-earnings and price-to-sales ratios. These trading
prices and valuations may not be sustained. Any negative change in the public's
perception of the prospects of Internet or e-commerce companies could depress
our stock price regardless of our results. In the past, securities class action
litigation often has been brought against companies following declines in the
market price of their securities. If litigation of this type were brought
against us, it could be very costly and could divert management's attention and
resources from our business.
We anticipate that as the on-line mortgage origination industry matures,
our business will also be increasingly susceptible to the same seasonal and
cyclical factors that affect the mortgage industry as a whole. Accordingly, we
believe period-to-period comparisons of our operating results are not meaningful
and our results for any period should not be relied upon as an indication of
future performance. Our operating results may fail to meet our expectations or
those of analysts who follow us. Any such failure could cause our stock price
to decline substantially.
We are aware that from time to time chat groups may develop on the Internet
and that participants in those groups may post statements about us. These
statements may influence the market price of our common stock. We do not
monitor statements about us that appear on the Internet, except for authorized
statements made by us. We undertake no obligation of any kind whatsoever to
monitor, correct, comment on or respond to statements on the Internet or
elsewhere by others, and it is our policy not to monitor, correct, comment on or
respond to such statements.
IF WE ARE UNABLE TO MANAGE GROWTH IN OUR BUSINESS, OUR RESULTS OF OPERATIONS MAY
NOT IMPROVE.
We anticipate that we will need to expand our employee base, facilities and
infrastructure in order to be able to compete successfully and take advantage of
market opportunities. We expect this expansion to place significant strain on
our management, operational and financial resources. Our current personnel,
systems, procedures and controls are not adequate to support anticipated growth
of our operations. To manage this expected growth, we will need to improve our
mortgage processing, operational and financial systems, information processing
capacity, procedures and controls. We may be unable to hire, train, retain or
manage necessary personnel, or to identify and take advantage of existing and
potential strategic relationships and market opportunities. If we are unable to
manage expansion of our business effectively, our business, results of
operations and financial condition may not improve and could deteriorate.
PROBLEMS AND RISKS RELATED TO POTENTIAL ACQUISITIONS AND ALLIANCES MAY HARM OUR
BUSINESS.
To implement our growth strategy we may acquire or enter into alliances
with companies with complementary services, technologies and businesses. In
connection with any such acquisition, we may fail to successfully integrate the
operations of the acquired company. For example, as described more completely
above under "We may incur additional losses from the discontinued operations of
Coastal Federal Mortgage and Mical Mortgage," we incurred significant losses
following our acquisitions of Mical Mortgage and Coastal Federal Mortgage, and
have discontinued their operations. Any future alliances we pursue may not be
successful. Also,
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acquisitions or alliances could divert our management's attention from other
business matters, or we could lose key employees of acquired companies or
alliance businesses.
THE DISCONTINUATION OF FEDERAL PROGRAMS THAT PURCHASE LOANS OR ANY CHANGE IN OUR
ELIGIBILITY TO PARTICIPATE SUCH PROGRAMS WOULD HAVE A MATERIAL ADVERSE EFFECT ON
OUR BUSINESS.
We fund our mortgage loan operations in part by selling the mortgage loans
that we fund to entities such as Fannie Mae, Freddie Mac and the Government
National Mortgage Association, commonly known as Ginnie Mae, which pool those
mortgage loans into mortgage-backed securities. Our ability to sell mortgage
loans depends upon the continuation of programs administered by these entities,
as well as our continued eligibility to participate in these programs. If these
programs, or our eligibility to participate in them, were terminated or
significantly curtailed, our business, results of operations and financial
condition would be materially adversely affected. In addition, the mortgage
products offered under these federal programs may change from time to time. The
profitability of specific mortgage products may vary depending on a number of
factors, including our administrative costs of originating these products.
We also depend upon private mortgage investors, such as GMAC/RFC, GE
Capital Mortgage and IndyMac, to purchase mortgage loans that we originate which
do not qualify for inclusion in the federal programs described above. If
private investors reduce their purchases of these mortgage loans, the market and
price for such mortgage loans will be adversely affected, which would have a
material adverse effect on our business, results of operations and financial
condition.
We depend on automated underwriting and other services offered by
government sponsored and other mortgage investors, including Fannie Mae's DU,
Freddie Mac's Loan Prospector, GMAC/RFC's AssetWise and GE Capital Mortgage's
Good Decisions. These services help ensure that our mortgage services can be
offered efficiently and timely. We currently have an agreement with Fannie
Mae that allows us to use their automated underwriting services and enables
us to sell qualified first mortgages to Fannie Mae. During the first six
months of fiscal 2000, approximately 44% of loans funded by our subsidiary,
Monument Mortgage, were submitted and underwritten using Fannie Mae's DU. We
expect to continue to process a significant portion of our conforming loans
using the Fannie Mae system. However, our agreements with Fannie Mae and
other mortgage investors can be terminated by either party immediately upon
the delivery of a written termination notice. There is a risk that we will
not remain in good standing with Fannie Mae and other mortgage investors or
that Fannie Mae and other mortgage investors will terminate our relationship.
The termination of our agreement with Fannie Mae would materially adversely
impact our ability to originate loans.
IF OUR NEW MARKETING RELATIONSHIPS ARE UNSUCCESSFUL, OUR LOAN ORIGINATIONS COULD
SUFFER.
We have entered into a majority of our marketing relationships within
the past year, with such companies as OnMoney.com, Owners.com, Ask.com,
CoxInteractive, GetSmart.com, Homehunter and Homeseekers. Our agreements
with marketing partners are typically short term, lasting as little as 90
days, and, in some cases, can be unilaterally terminated by either party. If
any of these agreements were terminated or lapsed without extension, we could
lose a source of loan applications. We cannot predict whether any or all of
these agreements will be terminated or will be renewed or extended past their
current expiration dates.
IF WE HAVE TO REPURCHASE LOANS ORIGINATED FOR OR SOLD TO LENDERS, OUR OPERATING
RESULTS COULD BE MATERIALLY ADVERSELY AFFECTED.
Under agreements with some of our lenders, they may require us to
repurchase loans that we originate for them, or they purchase from us, in the
event of material misrepresentations by us or inaccuracies in the borrowers'
loan documents. In the first six months of fiscal 2000, we were required
to repurchase approximately $0, $6,500,000 and $465,000 principal amount of
loans originated or sold through Coastal Federal Mortgage, Mical Mortgage and
Monument Mortgage, respectively. It is possible that future demands will be
made to purchase loans originated and sold through these subsidiaries. There
is a risk that we will not have sufficient funds to repurchase
9
<PAGE>
loans upon demand or that such repurchases will have a material adverse
effect on our business, results of operations and financial condition.
As a result of repurchases, we occasionally are required to hold foreclosed
residential real estate in inventory until it can be resold. If interest rates
rise and the economy declines, the rate of mortgage loan foreclosures may rise.
Depending on the circumstances of the transaction, we may or may not be able to
sell the property for more than the outstanding loan balance. As of October 31,
1999, we held approximately $342,000 aggregate principal amount of loans in
foreclosure. Future foreclosures could have a material adverse effect on our
business, results of operations and financial condition.
IF WE LOSE ACCESS TO CREDIT FACILITIES TO FINANCE OUR MORTGAGE LENDING
ACTIVITIES, OUR GROWTH PROSPECTS COULD BE SEVERELY LIMITED.
We act as a lender for many of the loans we originate. Because we are not
a bank, we are dependent upon specialized mortgage credit facilities from other
lenders to finance our mortgage lending activities. In August 1999, we entered
into a $75 million committed warehouse borrowing agreement with GMAC/RFC to
replace an existing $35 million agreement with GMAC/RFC. In the agreement,
which expires on May 31, 2000, we make numerous representations, warranties and
operating and financial covenants. A material breach by FiNet.com of any of
these representations, warranties or covenants could result in the termination
of the agreement and an obligation to repay the entire amount outstanding under
the agreement. For instance, Mr. Korell's retirement will constitute a
technical default under the agreement, which will permit GMAC/RFC to refuse to
continue to make the credit facility available to FiNet.com. In the past, we
have had to obtain waivers from GMAC/RFC's for defaults under the agreement. We
cannot assure you that we will secure a waiver from GMAC/RFC for the default
which will occur due to Mr. Korell's retirement, or that financing will continue
to be available on favorable terms or at all. To the extent that we are unable
to access adequate capital to fund loans, we may have to curtail or cease our
loan funding activities entirely. This would have a material adverse effect on
our business, results of operations and financial condition.
IF THERE ARE INTERRUPTIONS OR DELAYS IN OBTAINING APPRAISAL, CREDIT REPORTING,
TITLE SEARCHING AND OTHER UNDERWRITING SERVICES FROM THIRD PARTIES, WE MAY
EXPERIENCE CUSTOMER DISSATISFACTION AND DIFFICULTIES CLOSING LOANS.
We rely on other companies to perform certain aspects of the loan
underwriting process, including appraisals, credit reporting and title searches.
If the provision of these ancillary services were interrupted or delayed, it
could cause delays in the processing and closing of loans for our customers.
The value of the service we offer and the ultimate success of our business are
dependent on our ability to secure the timely provision of these ancillary
services by the third parties with whom we have business relationships. If we
are unsuccessful in securing the timely delivery of these ancillary services we
will likely experience increased customer dissatisfaction and our business,
results of operations and financial condition could be materially adversely
affected.
IF WE FAIL TO COMPLY WITH EXTENSIVE FEDERAL AND STATE LAWS REGULATING OUR
INDUSTRY, WE COULD BE SUBJECT TO PENALTIES, DISQUALIFICATIONS, LAWSUITS OR
ENFORCEMENT ACTIONS THAT COULD HAVE A MATERIAL ADVERSE AFFECT OUR BUSINESS.
Our operations are subject to extensive regulation by federal and state
authorities. For example, the United States Department of Housing and Urban
Development, or HUD, regulates certain aspects of the mortgage lending business,
as do the Federal Reserve Board and the Federal Trade Commission. The Real
Estate Settlement Procedures Act of 1974, or RESPA, the Truth in Lending Act and
federal statutes, require that certain disclosures, such as good faith estimates
of settlement charges, a Truth-in-Lending Statement and a HUD-1 settlement
statement be provided to borrowers and that certain information, such as the HUD
Settlement Costs booklet, also be provided to borrowers. The Federal Fair
Housing Act and the Equal Credit Opportunity Act prohibit discrimination and
various state statutes prohibit unfair and deceptive trade practices, and impose
disclosure and other requirements in connection with the mortgage loan
origination process. If we fail to comply with such regulations, possible
10
<PAGE>
consequences could include loss of approved status, demands for indemnification,
class action lawsuits, and administrative enforcement actions.
In addition, RESPA contains certain prohibitions regarding the giving or
taking of a fee, kickback, or anything of value for the referral of business to
any specific person or organization. However, the payment of reasonable
compensation for the provision of goods, services and facilities is generally
not prohibited.
In September 1998, HUD cited Mical Mortgage for various alleged violations
of HUD/FHA regulations. Thereafter, HUD withdrew Mical Mortgage's HUD/FHA
Title I & II approvals and imposed a civil money penalty against Mical Mortgage
in the amount of $500,000.
In California, regulation and licensing of mortgage brokers and lenders
falls under the California Department of Real Estate or the California
Department of Corporations. Other than banking industry employees and other
persons who are exempt from California Department of Real Estate and California
Department of Corporations licensing requirements, individuals engaged directly
in the origination of loans or the dissemination of certain information are
required to be licensed by the California Department of Real Estate or the
California Department of Corporations. We and some of our subsidiaries are also
required to be licensed in other states in which we have offices or operate.
Although we have the licenses required in California and several other states
and believe that we will be able to obtain licenses required in other states
from time to time, we cannot be sure that we will successfully comply with the
many government regulations and licensing requirements to which we are subject.
If we fail to comply adequately, it could have a material adverse effect on our
business, results of operations and financial condition.
IF WE ARE UNABLE TO RESPOND TO RAPID TECHNOLOGICAL CHANGE IN E-COMMERCE AND
IMPROVE OUR PRODUCTS AND SERVICES, OUR BUSINESS COULD BE MATERIALLY ADVERSELY
AFFECTED.
The Internet and e-commerce are characterized by rapid technological
change, changes in user and customer requirements and preferences, frequent new
product and service introductions embodying new technologies and the emergence
of new industry standards and practices that could render existing technology
and systems obsolete. To remain competitive, we must continue to enhance and
improve the responsiveness, functionality and features of our on-line services.
We have little proprietary computer software, information databases or
applications. We cannot be sure that others will not develop and offer superior
products and services, or, if so offered, that they will not gain a greater
acceptance among potential customers. Our success will depend, in part, on our
ability to both license and internally develop leading technologies useful in
our business, enhance our existing services, develop new services and technology
that address the increasingly sophisticated and varied needs of our customers,
and respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis.
The development of websites and other proprietary technology entails
significant technical and business risks. There can be no assurance that we
will successfully use new technologies effectively or adapt our websites,
technology and transaction-processing systems to customer requirements or
emerging industry standards. If we are unable, for technical, legal, financial
or other reasons, to adapt in a timely manner to changing market conditions,
customer requirements or emerging industry standards, our business, results of
operations and financial condition could be materially adversely affected.
IF OUR COMPUTER SYSTEMS FAIL, OUR BUSINESS WOULD BE MATERIALLY ADVERSELY
AFFECTED.
A key element of our strategy is to generate a high volume of traffic on,
and use of, our websites. Accordingly, the satisfactory performance,
reliability and availability of our websites, transaction-processing systems and
network infrastructure are critical to our reputation and ability to attract and
retain customers and maintain adequate customer service levels. Our revenues
depend in part on the number of potential customers who visit our websites. Any
system interruption that results in the unavailability of our websites would
reduce the volume and attractiveness of our product and service offerings. Our
communications hardware and some of our other computer hardware operations are
located at our facilities in San Ramon, California. The hardware for our
internal loan and product database, as well as our loan processing operations,
is maintained in our San Ramon
11
<PAGE>
facility. Fires, floods, earthquakes, power losses, telecommunications
failures, breaches and similar events could damage these systems. Computer
viruses, electronic breaches or other similar disruptive problems could also
adversely affect our websites. Our business, results of operations and
financial condition could be adversely affected if our systems were affected
by any of these occurrences. Our insurance policies may not adequately
compensate us for losses that may occur in the event of a failure of our
computer systems or other interruptions in our business.
Our websites must accommodate a high volume of traffic and deliver
frequently updated information, the accuracy and timeliness of which is critical
to our business. In the past, we have experienced periodic system
interruptions, which we believe will continue to occur from time to time. Any
substantial increase in the volume of traffic on our websites will require us to
expand and upgrade further our technology, transaction-processing systems and
network infrastructure. We cannot be sure that we will be able to accurately
project the rate or timing of increases, if any, in the use of our websites or
expand and upgrade our systems and infrastructure to accommodate such increases
in a timely manner. In addition, our users depend on Internet service providers,
on-line service providers and other website operators for access to our
websites. Many of them have experienced significant outages in the past, and
could experience outage delays and other difficulties due to system failures
unrelated to our systems. Moreover, the Internet infrastructure may not be able
to support continued growth in its use. Any of these problems would materially
adversely affect our business, results of operations and financial condition.
IF OUR ELECTRONIC SECURITY DEVICES ARE BREACHED, OUR BUSINESS WOULD BE
MATERIALLY ADVERSELY AFFECTED.
The secure transmission of confidential information through e-commerce is
critical to our underwriting process. We rely on certain encryption and
authentication technology licensed from third parties to provide secure
transmission of confidential information, such as consumers' financial
statements. There can be no assurance that advances in computer capabilities,
new discoveries in the field of cryptography, or other events or developments
will not result in a compromise or breach of the algorithms we use to protect
customer transaction data. If any such compromise were to occur, it could have
a material adverse effect on our business, results of operations and financial
condition.
We may be required to spend significant capital and other resources to
protect against such security breaches or to alleviate problems caused by such
breaches. Concerns over the security of transactions conducted on the Internet
and the privacy of users may also inhibit the growth of the Internet generally,
and e-commerce in particular. To the extent that our activities involve the
storage and transmission of proprietary information, such as consumers'
financial statements and profile information, security breaches could damage our
reputation and expose us to a risk of loss or litigation and possible liability.
There can be no assurance that our security measures will prevent security
breaches or that a failure to prevent such security breaches will not have a
material adverse effect on our business, financial condition and results of
operations.
IF WE ARE UNABLE TO SUCCESSFULLY ADDRESS YEAR 2000 ISSUES, OUR BUSINESS COULD BE
MATERIALLY ADVERSELY AFFECTED.
Many currently installed computer systems and software programs only accept
two digits to identify the year in any date. Any system or program which can
not accept four digits to identify the year in any date may not distinguish
dates falling on or after January 1, 2000 from dates falling before January 1,
2000. As a result, many computer systems and software programs may need to
upgraded or replaced to ensure they comply with Year 2000 requirements.
The actual cost we incur to become Year 2000 compliant is subject to
certain risks and uncertainties including, among others, our ability to timely
identify all affected business-critical systems, and the readiness of service
providers, vendors and suppliers, and our financial institutions and significant
customers. If we are unsuccessful in correcting our business-critical systems
and processes affected by the Year 2000 issue, our, business, results of
operations and financial condition could be materially affected. In addition,
if our service providers, vendors and suppliers or our financial institutions
and significant customers are adversely affected by the Year 2000 issue, our
operations could face substantial interruptions and our business, results of
operations and financial condition could be materially and adversely affected.
These third party risks include possible interruptions
12
<PAGE>
in our ability to fund loans utilizing our warehouse facilities, our ability
to sell loans to Fannie Mae and other investors, originate mortgages over the
Internet and our hedging systems' ability to link to financial data.
WE DO NOT INTEND TO PAY DIVIDENDS.
We have not paid any dividends on our common stock since fiscal 1997 and we
do not anticipate paying dividends on our common stock in the foreseeable
future. You should take this into account when deciding whether to buy our
stock.
FORWARD LOOKING STATEMENTS
We have made forward-looking statements in this prospectus that are subject
to risks and uncertainties. Forward-looking statements include information
concerning our possible or assumed future results of operations. Also, when we
use such words as "believe," "expect," "anticipate," "plan," "could," "intend"
or similar expressions, we are making forward-looking statements. You should
note that an investment in our securities involves certain risks and
uncertainties that could affect our future financial results. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth in "Risk
Factors" and elsewhere in this prospectus.
We believe it is important to communicate our expectations to our
investors. However, there may be events in the future that we are not able to
predict accurately or over which we have no control. The risk factors listed
above, as well as any cautionary language in this prospectus, provide examples
of risks, uncertainties and events that may cause our actual results to differ
materially from the expectations we describe in our forward-looking statements.
Before you invest in our common stock, you should be aware that the occurrence
of the events described in these risk factors and elsewhere in this prospectus
could materially and adversely affect our business, results of operations and
financial condition.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares by the
selling stockholder.
13
<PAGE>
SELLING STOCKHOLDER
The following table sets forth the name of the selling stockholder, the
number of shares of common stock owned beneficially by the selling stockholder
as of December 22, 1999 and the number of shares that may be offered pursuant
to this prospectus. There are currently no agreements, arrangements or
understandings with respect to the sale of any of the shares. The shares are
being registered to permit public secondary trading of the shares, and the
selling stockholder may offer the shares for resale from time to time. The
selling stockholder entered into a marketing agreement with FiNet.com in April
1999. Under our agreement with the selling stockholder, we are the exclusive
operator of the Homeseekers Finance Center.
<TABLE>
<CAPTION>
COMMON STOCK COMMON STOCK
BENEFICIALLY OWNED BENEFICIALLY OWNED
PRIOR TO OFFERING(1) AFTER OFFERING (1)
--------------------- COMMON STOCK ------------------
HOLDER NUMBER PERCENT TO BE SOLD NUMBER PERCENT
------ ------- ------- ------------ ------ -------
<S> <C> <C> <C> <C> <C>
Homeseekers.com, Inc. 600,000 * 600,000 0 -
</TABLE>
- ------------------------
* Less than one percent.
(1) Applicable percentage of ownership is based on 93,440,814 shares of Common
Stock outstanding as of December 22, 1999.
PLAN OF DISTRIBUTION
The selling stockholder may offer its shares at various times in one or
more of the following transactions:
- on the Nasdaq SmallCap Market (or any other exchange on which the
shares may be listed);
- in the over-the-counter market;
- in negotiated transactions other than on such exchanges;
- by pledge to secure debts and other obligations;
- in connection with the writing of non-traded and exchange-traded
call options, in hedge transactions, in covering previously established
short positions and in settlement of other transactions in standardized or
over-the-counter options; or
- in a combination of any of the above transactions.
The selling stockholder may sell its shares at market prices prevailing
at the time of sale, at prices related to such prevailing market prices, at
negotiated prices or at fixed prices. The selling stockholder may use
broker-dealers to sell its shares. The broker-dealers will either receive
discounts or commissions from the selling stockholder, or they will receive
commissions from purchasers of shares.
Under certain circumstances the selling stockholder and any
broker-dealers that participate in the distribution may be deemed to be
"underwriters" within the meaning of the Securities Act. Any commissions
received by such broker-dealers and any profits realized on the resale of
shares by them may be considered underwriting discounts and commissions under
the Securities Act. The selling stockholder may agree to indemnify such
broker-dealers against certain liabilities, including liabilities under the
Securities Act. In addition, FiNet.com has agreed to indemnify the selling
stockholder with respect to the shares offered hereby against certain
liabilities, including certain liabilities under the Securities Act.
Under the rules and regulations of the Exchange Act, any person engaged in
the distribution or the resale of shares may not simultaneously engage in market
making activities with respect to FiNet.com's common stock for a period of two
business days prior to the commencement of such distribution. The selling
stockholder will also be
14
<PAGE>
subject to applicable provisions of the Exchange Act and regulations under
the Exchange Act which may limit the timing of purchases and sales of shares
of FiNet.com's common stock by the selling stockholder.
The selling stockholder will pay all commissions, transfer taxes, and other
expenses associated with the sale of securities by them. The shares offered
hereby are being registered pursuant to contractual obligations of FiNet.com,
and FiNet.com has paid the expenses of the preparation of this prospectus. We
have not made any underwriting arrangements with respect to the sale of shares
offered hereby.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed on for us by
Heller Ehrman White & McAuliffe, Palo Alto, California, counsel to the company
in connection with the offering.
EXPERTS
The consolidated financial statements of FiNet.com which appear in its
Annual Report (Form 10-K) for the fiscal year ended April 30, 1999 have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
therein and incorporated herein by reference. Such financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
FiNet.com's consolidated financial statements, except with respect to
Coastal Federal Mortgage, for the fiscal years ended April 30, 1998 and 1997
were audited by Reuben E. Price & Co., independent certified accountants, as set
forth in their report therein and incorporated herein by reference. Such
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
The financial statements of Coastal Federal Mortgage, for the fiscal years
ended April 30, 1998 and 1997, which are not presented separately herein, were
audited by Richard A. Eisner & Company, LLP, independent auditors, as set forth
in their report thereon and incorporated herein by reference. Such financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly, and current reports, proxy statements, and other
documents with the Securities and Exchange Commission. You may read and copy
any document we file at the SEC's public reference room at Judiciary Plaza
Building, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. You should
call 1-800-SEC-0330 for more information on the public reference room. The SEC
maintains an Internet site at http://www.sec.gov where certain information
regarding issuers (including FiNet.com) may be found.
This prospectus is part of a registration statement that we filed with the
SEC (Registration No. 333-______). The registration statement contains more
information than this prospectus regarding FiNet.com and its common stock,
including certain exhibits and schedules. You can get a copy of the
registration statement from the SEC at the address listed above or from its
Internet site.
15
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the registrant in connection
with the sale of the common stock being registered. All amounts are estimated
except the SEC registration fee.
SEC Registration Fee . . . . . . . . $ 191
Accounting Fees and Expenses . . . . $ 20,000
Legal Fees and Expenses . . . . . . . $ 10,000
Printing and Engraving . . . . . . . $ 2,000
Miscellaneous . . . . . . . . . . . . $ 809
Total . . . . . . . . . . . $ 33,000
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to the General Corporation Law of Delaware (the "DGCL"), the
registrant's Certificate of Incorporation excludes personal liability on the
part of its directors to the registrant for monetary damages based upon any
violation of their fiduciary duties as directors, except as to liability for any
breach of the duty of loyalty, acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, acts in violation
of Section 174 of the General Corporation Law of Delaware, or any transaction
from which a director receives an improper personal benefit. This exclusion of
liability does not limit any right which a director may have to be indemnified.
The registrant's Certificate of Incorporation and its Bylaws require
indemnification of directors and officers of the registrant to the fullest
extent permitted by the DGCL for claims against them in their official
capacities, including stockholders' derivative actions.
Insofar as indemnification for liabilities arising under the Securities Act
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 SEC, such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
ITEM 16. EXHIBITS.
Exhibit Description
- --------- -----------
4.1 Agreement for the Withdrawal of a Member and Amending the Operating
Agreement among the registrant, the selling stockholder and Monument
Mortgage, Inc. dated October 28, 1999
5.1 Opinion of Heller Ehrman White & McAuliffe
23.1 Consent of Ernst & Young LLP
23.2 Consent of Reuben E. Price & Co.
23.3 Consent of Richard A. Eisner & Company, LLP
II-1
<PAGE>
23.4 Consent of Heller Ehrman White & McAuliffe (included in Exhibit 5.1
hereto)
24.1 Power of Attorney (see page II-4)
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, as amended;
(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 SEC pursuant to Rule 424(b) if, in the aggregate, the changes in
the volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of the Registration Fee"
table in the effective Registration Statement; and
(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.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, as amended, 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. 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 provisions described in Item 14 above, 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 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 of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
C. The undersigned registrant hereby undertakes that:
(1) 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.
II-2
<PAGE>
(2) For purposes of determining any liability under the Securities
Act, 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>
SIGNATURE
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 on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Ramon, California on December 28, 1999.
FiNET.COM, INC.
By: /s/ Stephen J. Sogin
----------------------------------
Stephen J. Sogin
Interim Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Stephen J. Sogin and Gary A. Palmer his true and lawful attorneys-in-fact and
agents, each acting alone, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective
amendments) to the Registration Statement, and to sign any registration
statement for the same offering covered by this Registration Statement that
is to be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933, as amended, and all post-effective amendments thereto, and to
file the same, with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully 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, each acting alone, 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 on Form S-3 has been signed by the following persons in
the capacities and on the dates indicated.
Signature Office Date
--------- ------ ----
/s/ Stephen J. Sogin
- ------------------------- Interim Chief Executive December 28, 1999
Stephen J. Sogin Officer and Director
(Principal Executive Officer)
/s/ L. Daniel Rawitch
- ------------------------- Vice Chairman December 28, 1999
L. Daniel Rawitch
/s/ Gary A. Palmer
- ------------------------- Executive Vice President - December 28, 1999
Gary A. Palmer Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ Antonio P. Falcao
- ------------------------- Director December 28, 1999
Antonio P. Falcao
/s/ Richard E. Wilkes
- ------------------------- Director December 28, 1999
Richard E. Wilkes
II-4
<PAGE>
Signature Office Date
--------- ------ ----
- ------------------------- Director December __, 1999
Mark L. Korell
/s/ S. Lewis Meyer
- ------------------------- Director December 28, 1999
S. Lewis Meyer
II-5
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
- ------- -----------
4.1 Agreement for the Withdrawal of a Member and Amending the Operating
Agreement among the registrant, the selling stockholder and Monument
Mortgage, Inc. dated October 28, 1999
5.1 Opinion of Heller Ehrman White & McAuliffe
23.1 Consent of Ernst & Young LLP
23.2 Consent of Reuben E. Price & Co.
23.3 Consent of Richard A. Eisner & Company, LLP
23.4 Consent of Heller Ehrman White & McAuliffe (included in Exhibit 5.1
hereto)
24.1 Power of Attorney (see page II-4)
II-6
<PAGE>
Exhibit 4.1
HOMESEEKERS/iQUALIFY, LLC
Agreement for the Withdrawal of a Member
and
Amending the Operating Agreement
This Agreement is made as of the 28th day of October, 1999 by and
between Homeseekers/iQualify, a Nevada limited liability LLC (the "LLC"), with
offices located at 953 Dorsey Drive, Incline Village, Nevada, consisting of
HomeSeekers.com Incorporated, a Nevada corporation ("Homeseekers"), Finet.com,
Inc., a Delaware corporation ("Finet") and Monument Mortgage, Inc., a California
corporation ("Monument") (collectively the "Members").
RECITAL
A. Homeseekers and Finet entered that HomeSeekers/iQualify, LLC
Operating Agreement, dated January 16, 1998 (the "Operating
Agreement") as the two original members of
HomeSeekers/iQualify, LLC, HomeSeekers and Finet each owned an
equal fifty (50%) percent interest in the LLC.
B. Homeseekers, Finet and Monument entered into that Agreement
Admitting New Member and Amending the Operating Agreement,
dated October 27, 1999 (the "Amendment to Operating
Agreement").
C. Homeseekers desires to sell its interest in the LLC and all of
its assets to Finet, and to withdraw as a member of the LLC.
D. Finet desires to acquire Homeseekers' interest in the LLC,
consent with Monument to the withdrawal of Homeseekers as a
member of the LLC and amend the Operating Agreement, upon the
following terms and conditions.
1. TRANSFER OF INTEREST
(a) The assets of the LLC are composed solely of three hundred
thousand (300,000) shares of NDS Software common stock (the
"Assets") and are represented by NDS Share Certificates
Numbers 4640, 4641 and 4642, each in the amount of one hundred
thousand shares (the "NDS Shares"), copies of which are
collectively attached hereto as Exhibit A to this Agreement.
(b) Homeseekers agrees to sell and transfer to Finet its 50%
interest in the LLC and in all of its Assets, in consideration
of Finet transferring to Homeseekers six hundred thousand
(600,000) shares of FiNet.com, Inc. common stock (the "Finet
Shares"), within fifteen days after the date of this
Agreement.
<PAGE>
(c) Finet and Monument consent to the withdrawal of Homeseekers as
a member of the LLC and Homeseekers' transfer of its 50%
interest in the LLC and in all of its Assets to Finet.
2. INTERESTS OF PARTNERS/MEMBERS
Upon completion of the transactions described herein, the interests of
all the members will be as follows:
Homeseekers 0%
Finet 90%
Monument 10%
3. OPERATING AGREEMENT
A copy of the Operating Agreement dated January 16, 1998 is attached to
this Agreement as Exhibit B and incorporated in it by this reference,
and such agreement will continue in full force and effect except as
modified by this Agreement.
4. OPERATION OF BUSINESS
(a) Finet and Monument shall, and shall cause their affiliates and
the LLC to, as soon as practicable following the date hereof,
cease to use any trade names, trademarks, service marks,
logos, designs or similar rights to and interests in the name
"Homeseekers" or any abbreviation of variation thereof in the
operations of their respective businesses or the LLC or on any
stationary, business form, packaging, sign or other property,
real or personal ("Name Change Process").
(b) Finet and Monument shall (i) promptly amend the Operating
Agreement and (ii) prepare, execute and file within 14 days
after date hereof appropriate documents with the Secretary of
State of Nevada and any other appropriate authorities where
the LLC is qualified to do business to change the name of the
LLC so that it does not include the name "Homeseekers" or any
name confusingly similar thereto.
(c) The provisions of sections 4.(a) and (b) above shall not
prohibit the sale of the NDS Shares by the LLC prior to the
completion of the proposed Name Change Process.
(d) The business of the LLC will be operated without interruption,
in the manner provided by the attached Operating Agreement,
except as modified by this Agreement.
2
<PAGE>
5. OBLIGATIONS AS TO SHARES
(a) Finet agrees to exercise its reasonable best efforts to
include the Finet Shares in a Registration Statement or
Amendment to a current Registration Statement to be filed
prior to December 31, 1999.
(b) Attached collectively hereto as Exhibit C is a form of Opinion
Letter ("Opinion Letter") and Form 144, as completed by Finet,
which has been reviewed by both Homeseekers and its transfer
agent ("Transfer Agent"), each of which have found the form of
Exhibit C to be satisfactory so as to comply with the
requirements of the restrictive legend attached to the NDS
Shares and to allow the sale and transfer of the NDS Shares by
the LLC.
(c) Upon the execution of this Agreement, Homeseekers will direct
its Transfer Agent to authorize the transfer of the NDS Shares
under Rule 144 of the Securities Act of 1933 after such
Transfer Agent has been provided with a legal opinion of the
counsel to Finet, in the form of the Opinion Letter attached
hereto, together with such other supporting documentation from
Finet that such transfer agent may reasonably request.
(d) Finet and Homeseekers shall each execute and deliver such
other documents or certificates required under this Agreement
or as may be reasonably requested by the other party to carry
out the provisions and purpose of this Agreement,
6. CONSTRUCTION AND INTERPRETATION
This Agreement shall be construed and interpreted in accordance with
the substantive laws of the State of Nevada.
7. DESCRIPTIVE HEADINGS
The descriptive headings of the several articles and sections contained
in this Agreement are included for convenience only and shall not
control or affect the meaning or construction of any of the provisions
hereof.
8. MULTIPLE COUNTERPARTS
This Agreement may be executed in a number of identical counterparts,
each of which, for all purposes, is to be deemed as original, and all
of which constitute, collectively, one agreement, but in making proof
of this Agreement, it shall not be necessary to produce or account for
more than one such counterpart.
3
<PAGE>
9. EFFECTIVE DATE
For all purposes hereof, this Agreement shall be deemed effective as of
the date first written above.
HOMESEEKERS.COM, INC. FINET.COM, INC.
/s/ Gregory L. Costley /s/ Gary Palmer
- -------------------------------- ------------------------------------
Signature Signature
Gregory L. Costley Gary Palmer
- -------------------------------- ------------------------------------
Printed Name Printed Name
CEO CFO
- -------------------------------- ------------------------------------
Title Title
MONUMENT MORTGAGE, INC.
/s/ Gary Palmer
- --------------------------------
Signature
Gary Palmer
- --------------------------------
Printed Name
CFO & Secretary
- --------------------------------
Title
4
<PAGE>
Exhibit 5.1
December 29, 1999
25716-0001
FiNet.com, Inc.
2527 Camino Ramon, Suite 200
San Ramon, CA 94583
REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have acted as counsel to FiNet.com, Inc., a Delaware corporation (the
"Company"), in connection with the Registration Statement on Form S-3 (the
"Registration Statement") which the Company proposes to file with the Securities
and Exchange Commission on December 29, 1999 for the purpose of registering
under the Securities Act of 1933, as amended, 600,000 shares of its Common
Stock, par value $0.01 (the "Shares").
We have assumed the authenticity of all records, documents and instruments
submitted to us as originals, the genuineness of all signatures, the legal
capacity of natural persons and the conformity to the originals of all records,
documents and instruments submitted to us as copies.
In rendering our opinion, we have examined the following records, documents
and instruments:
(a) The Certificate of Incorporation of the Company, certified by the Delaware
Secretary of State as of June 1, 1999, and plain copies of the Certificate
of Incorporation dated as of December 22, 1999 and certified to us by an
officer of the Company as being complete and in full force as of the date
of this opinion;
(b) The Bylaws of the Company certified to us by an officer of the Company as
being complete and in full force and effect as of the date of this opinion;
(c) A Certificate of an officer of the Company (i) attaching records certified
to us as constituting all records of proceedings and actions of the Board
of Directors, including any committee thereof, and stockholders of the
Company relating to the Shares, and the Registration Statement, and (ii)
certifying as to certain factual matters;
(d) The Registration Statement;
<PAGE>
FiNet.com, Inc.
December 29, 1999 Page 2
(e) A letter from Continental Stock Transfer & Trust Company, the Company's
transfer agent, dated December 23, 1999, as to the number of shares of the
Company's Common Stock that were outstanding on December 23, 1999.
This opinion is limited to the federal law of the United States of America
and the General Corporation Law of the State of Delaware, and we disclaim any
opinion as to the laws of any other jurisdiction. We further disclaim any
opinion as to any other statute, rule, regulation, ordinance, order or other
promulgation of any other jurisdiction or any regional or local governmental
body or as to any related judicial or administrative opinion.
Based upon the foregoing and our examination of such questions of law as we
have deemed necessary or appropriate for the purpose of this opinion, and
assuming that (i) the Registration Statement becomes and remains effective
during the period when the Shares are offered and sold, (ii) the full
consideration stated in the purchase agreement pursuant to which the Shares were
purchased was paid for each Share and that such consideration in respect of each
Share includes payment of cash or other lawful consideration at least equal to
the par value thereof, (iii) appropriate certificates evidencing the Shares were
executed and delivered by the Company, and (iv) all applicable securities laws
are complied with, it is our opinion that the Shares were legally issued, and
are fully paid and nonassessable.
This opinion is rendered to you in connection with the Registration
Statement and is solely for your benefit. This opinion may not be relied upon
by you for any other purpose, or relied upon by any other person, firm,
corporation or other entity for any purpose, without our prior written consent.
We disclaim any obligation to advise you of any change of law that occurs, or
any facts of which we may become aware, after the date of this opinion.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Heller Ehrman White & McAuliffe
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3 No. 33-XXXXX) and related Prospectus of
FiNet.com, Inc. and subsidiaries for the registration of 600,000 shares of
its common stock and to the incorporation by reference therein of our report
dated June 11, 1999 (except Note 20, as to which the date is June 28, 1999),
with respect to the consolidated financial statements of FiNet.com, Inc. and
subsidiaries included in its Form 10-K for the year ended April 30, 1999,
filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
San Francisco, California
December 28, 1999
<PAGE>
Exhibit 23.2
[LETTERHEAD]
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in this Registration Statement
of FiNet.com, Inc. on Form S-3 of our reports dated August 12, 1998 appearing
in the Annual Report on Form 10-K of FiNet.com, Inc. for the year ended
April 30, 1999 and to the reference to us under the heading "Experts" in the
Prospectus, which is part of this registration Statement.
/s/Reuben E. Price & Co.
San Francisco, CA
December 27, 1999
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement
on Form S-3, relating to the registration of 600,000 shares of common stock
of FINET.com, Inc., of our report dated July 9, 1998 (with respect to Note C
July 31, 1998) with respect to our audit of the financial statements (not
included in the registration statement) of Coastal Federal Mortgage Company,
a wholly owned subsidiary of FiNET.Com, as of and for each of the years in
the two year period ended April 30, 1998.
/s/ Richard A. Eisner and Company, LLP
Florham Park, New Jersey
December 22, 1999
