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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
NOVEMBER 30, 1998
(Date of earliest event reported)
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Commission File Number: 0-18108
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FINET HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State or jurisdiction of
incorporation or organization)
3021 CITRUS CIRCLE
WALNUT CREEK, CA 94598
(Address of principal executive office)
94-3115180
(IRS Employer Identification Number)
Telephone Number: (925) 988-6550
(Registrant's telephone number, including area code)
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<PAGE> 1
ITEM 5. OTHER
NASDAQ has reviewed the Company's compliance with NASDAQ's required net
tangible assets, market capitalization and net income criteria for
continued listing on the Nasdaq Small Cap Market as specified by
Marketplace Rule 4310 (c)(2). As a result of their review, NASDAQ has
requested that the Company file a public document with the Securities and
Exchange Commission containing pro forma information using a historical
base no older than November 30, 1998 and evidencing at least $2 million in
net tangible assets. The Company is filing this pro forma information to
reflect the effect on its balance sheet of several significant transactions
that have occurred or will occur subsequent to the date of the Company's
most recent financial statements reported on Form 10-QSB/A filed for the
quarter ended October 31,1998.
Subsequent to the quarter ended October 31, 1998, the Company completed a
private placement of common stock and received net cash proceeds of $14.3
million ($2.0 million in November 1998 and $12.3 million in December 1998).
The Company will use a portion of these proceeds to redeem its $2.5 million
Series A Convertible Preferred Stock and to redeem a portion ($1.5 million)
of its 3% Convertible Subordinated debentures. The balance of the
Company's 3% Convertible Subordinated debentures of $5.5 million will be
converted into common stock. The new common shares issued or to be issued
pursuant to these transactions have not been registered under the
Securities Act of 1933, as amended, and may not be offered or sold in the
United States absent registration or pursuant to an exemption from the
registration requirements. The Company is obligated to register these
shares.
In addition to this private placement and these debt and equity
transactions, as disclosed in the Company's quarterly report on Form 10-
QSB/A for the quarter ended October 31, 1998, the Company is reviewing the
operations of its Mical Mortgage, Inc. ("Mical") unit to determine how best
to maximize shareholder value. The Company is consulting with lenders,
governmental regulatory agencies and loan investors, and has retained
outside consultants to assist in this review. In connection with this
review, the Company is assessing the future economic value of the goodwill
recorded in the purchase transaction along with the other assets of Mical.
On December 15, 1998, the Company's Board of Directors approved a
preliminary plan to restructure the operations of Mical. The Company
anticipates that the net charges to be incurred in implementing the plan
will be approximately $7 to $8 million, comprised of $4.6 million
impairment of goodwill, $2.5 million in additional loan loss reserves, and
$0.8 million in restructuring charges consisting primarily of severance and
non-cancelable lease costs. These charges are subject to review by the
Company's outside accounting firm for compliance with Securities and
Exchange Commission guidelines. Substantially all of these charges will be
recognized in the third and fourth quarters when the plan is implemented
The effects of the equity contribution, the debt and equity transactions
and the Mical charges are reflected in the Company's pro-forma consolidated
balance sheet as of November 30, 1998 filed herewith.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Not applicable.
(b) PRO FORMA FINANCIAL INFORMATION
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. This Current Report on Form
8-K may contain forward-looking statements which reflect the Company's
current views with respect to future events and financial performance.
These forward-looking statements are subject to certain risks and
uncertainties, including those identified below, which could cause actual
results to differ materially from historical results or those anticipated.
The words "believe," "expect," "anticipate," "intend," "estimate," "should"
and other expressions which indicate future events and trends identify
forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of their
dates. The Company undertakes no obligation to publicly update or revise
any forward-looking statements, whether as a result of new information,
future events or otherwise. The following factors could cause actual
results to differ materially from historical results or those anticipated:
(1) the level of demand for homeownership services, including mortgage
credit, which is affected by such external factors as the level of
<PAGE> 2
interest rates, the strength of the various segments of the economy and
demographics of the Company's markets; (2) the direction of interest rates;
(3) the relationship between mortgage interest rates and the cost of funds;
(4) federal and state regulation of the Company's operations; (5) the rate
of acceptance and growth of demand for on-line homeownership transactions
compared to traditional manual business processes; and (6) competition
within the residential real estate services industry.
The following unaudited pro forma condensed financial statements give
effect, for informational purposes only, to the transactions described
above that have occurred or will occur subsequent to October 31, 1998.
While management expects that these transactions will occur as described,
the amounts reflect management's preliminary estimates based on information
available at the filing date, and there can be no assurance that these
transactions will occur as outlined above.
This pro forma condensed consolidated balance sheet should be read in
conjunction with the historical consolidated financial statements and the
related notes thereto of the Company as reported on Registrant's annual
report on Form 10-KSB for the year ended April 30, 1998 and the quarterly
reports on Form 10-QSB/A for the quarters ended July 31, 1998 and October
31, 1998.
<PAGE> 3
FINET HOLDINGS CORPORATION AND SUBSIDIARIES
CONSOLIDATED PRO FORMA BALANCE SHEET
(Unaudited, dollars in thousands, except share amounts)
November 30,1998
-------- ------- --------
-- -- -
Historic Adjustm Pro
al ents forma
ASSETS
C $351 $8,300 (1) $8,651
a
s
h
4,808
M - 4,808
o
r
t
g
a
g
e
l
o
a
n
s
e
r
v
i
c
i
n
g
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s
a
n
d
o
t
h
e
r
r
e
c
e
i
v
a
b
l
e
s
91,758
M (2,500) (2) 89,258
o
r
t
g
a
g
e
s
h
e
l
d
f
o
r
s
a
l
e
,
n
e
t
o
f
a
l
l
o
w
a
n
c
e
s
M 4,108 - 4,108
o
r
t
g
a
g
e
s
e
r
v
i
c
i
n
g
r
i
g
h
t
s
2,267
F - 2,267
u
r
n
i
t
u
r
e
,
f
i
x
t
u
r
e
s
,
&
e
q
u
i
p
m
e
n
t
,
n
e
t
o
f
a
c
c
u
m
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l
a
t
e
d
d
e
p
r
e
c
i
a
t
i
o
n
4,594
G (4,594) (2) (0)
o
o
d
w
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l
l
,
n
e
t
o
f
a
c
c
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m
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l
a
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d
a
m
o
r
t
i
z
a
t
i
o
n
O 1,326 - 1,326
t
h
e
r
T 109,212 1,206 110,418
o
t
a
l
a
s
s
e
t
s
LIABI
LITIE
S AND
STOCK
HOLDE
RS'
EQUIT
Y
L
i
a
b
i
l
i
t
i
e
s
:
90,236
War - 90,236
eho
use
lin
es
of
cre
dit
898
Not - 898
es
and
cap
ita
liz
ed
lea
ses
7,000
3% (7,000) (3) -
Con
ver
tib
le
sub
ord
ina
ted
deb
ent
ure
s
10,872
Acc 808 (2) 11,680
oun
ts
pay
abl
e,
acc
rue
d
exp
ens
es
and
oth
er
lia
bil
iti
es
T 109,006 (6,192) 102,814
o
t
a
l
l
i
a
b
i
l
i
t
i
e
s
C - - -
o
m
m
i
t
m
e
n
t
s
a
n
d
c
o
n
t
i
n
g
e
n
c
i
e
s
S
t
o
c
k
h
o
l
d
e
r
s
'
e
q
u
i
t
y
:
Pre - - -
fer
red
sto
ck,
$.0
1
par
val
ue
(10
0,0
00
sha
res
aut
hor
ize
d)
335
Com 314 (4) 649
mon
sto
ck,
$.0
1
par
val
ue
(15
0,0
00,
000
sha
res
aut
hor
ize
d)
Pai 21,134 15,406 (4) 36,540
d-
in
cap
ita
l
(467)
Pre 467 (5) -
fer
red
sto
ck
dis
cou
nt
Acc (20,796) (8,789) (6) (29,585)
umu
lat
ed
def
ici
t
T 206 7,398 7,604
o
t
a
l
s
t
o
c
k
h
o
l
d
e
r
s
'
e
q
u
i
t
y
T $109,212 $1,206 $110,418
o
t
a
l
l
i
a
b
i
l
i
t
i
e
s
a
n
d
s
t
o
c
k
h
o
l
d
e
r
s
'
e
q
u
i
t
y
Preferred Stock
Shares issued and 250 (250) 0
outstanding
Common Stock
Shares issued and 35,985,3 32,390, 68,375,8
outstanding 86 400 85
<PAGE 4>
NOTES TO UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
PERIODS
The unaudited pro forma condensed balance sheet is based on the Company's
unaudited historical balance sheet at November 30, 1998. The Company's
November 30, 1998 historical balance sheet has been prepared on the same
basis as the audited financial statements of the Company, and in the
opinion of management, contains all adjustments necessary for the fair
presentation of financial position at such date.
NOTES TO PRO FORMA ADJUSTMENTS (in thousands)
(1) Net effects of the following: cash proceeds, after expenses, from the
private placement of common shares of $12,300, the redemption of the Series
A Preferred Stock of $2,500, and the redemption of a portion of the 3%
Convertible Subordinated Debentures of $1,500.
(2) Mical charges: $4,594 impairment of goodwill, $2,500 in additional
loan loss reserves, and $808 in restructuring charges, consisting primarily
of severance and non-cancelable lease costs relating to the restructuring
of the operations of Mical.
(3) Redemption of $1,500 of the Company's 3% Convertible Subordinated
Debentures and conversion of the remainder of $5,500 into common shares.
(4) Increase in equity resulting from the private placement of Common
Stock, the conversion of the Debentures into common shares and the Series A
Preferred Stock redemption.
(5) Amortization of the preferred stock discount in connection with the
redemption of the preferred shares.
(6) Charges associated with the Debenture conversion of $223, the Series A
Preferred Stock redemption including $467 to amortize the Preferred Stock
discount and $197 to write off issuance costs, and charges of $7,902 to
restructure the Mical unit.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS AMENDMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
FINET HOLDINGS CORPORATION
Date: January 19, 1999 /s/ MARK L. KORELL
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MARK L. KORELL
(CEO AND PRINCIPAL EXECUTIVE OFFICER)
Date: January 19, 1999 /s/ GARY A. PALMER
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GARY A. PALMER
(PRINCIPAL FINANCIAL OFFICER)
