<PAGE> 1
===========================================================================
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
------------------------
DEC 22, 1998
Date of report (Date of earliest event reported)
------------------------
Commission File Number: 0-18108
------------------------
FINET HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State or jurisdiction of
incorporation or organization)
3021 CITRUS CIRCLE, SUITE 150
WALNUT CREEK, CA 94598
(Address of principal executive office)
94-3115180
(IRS Employer Identification Number)
Telephone Number: (510) 988-6550
(Registrant's telephone number, including area code)
============================================================================
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Attached hereto as an exhibit is the notice of certain unregistered offerings
as required by Section 135c (a) and (b).
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
FINET HOLDINGS CORPORATION
Date: Dec 22, 1998 /s/ MARK L. KORELL
------------------------------------
MARK L. KORELL
(CEO AND PRINCIPAL EXECUTIVE OFFICER)
Date: Dec 22, 1998 /s/ GEORGE P. WINKEL
------------------------------------
GEORGE P. WINKEL
(PRINCIPAL FINANCIAL OFFICER)
News from Finet
Dan Rawitch, President Brian Bailey
Finet Holdings Corporation Rubenstein Assoc, Inc.
415-263-5430 212-843-9258
[email protected]
FINET REPORTS FY99 SECOND QUARTER RESULTS
Company announces $14.7 million Equity Private Placement
and $9.5 million Convertible Securities Restructuring
Management focuses Company Operations to Capitalize on
Growing E-commerce Business Opportunities
SAN FRANCISCO, CA , December 22, 1998 -- Finet Holdings Corporation
(Nasdaq: FNHC) today announced results of operations for its fiscal 1999
second quarter which ended October 31, 1998. At the same time, the Company
announced that it has signed agreements for a total of $14.7 million in
private placements of common stock and restructuring of both its $7 million of
Convertible Debentures and its $2.5 million of Convertible Preferred Stock.
Additionally, Finet's management team, led by Chairman & CEO Mark Korell, is
reviewing and redirecting the focus of the Company's operating units to more
directly reflect the Company's strategy of concentrating on the growth
opportunities to deliver E-commerce real estate services to the growing U.S.
Internet audience.
Consolidated revenues for the three months ending October 31, 1998
increased 148% to $6.2 million from $2.5 million in the prior year, after
restating for last year's acquisition of Coastal Federal Mortgage Company
("Coastal"), and including the contribution of Mical Mortgage, Inc. ("Mical")
since its purchase by Finet on May 19, 1998. Consolidated revenues for the six
months ending October 31, 1998 increased 113% to $13.4 million from $6.3
million in the same period last year. Expenses for the same three-month
periods of 1998 and 1997 were $11.0 million and $4.3 million, respectively,
and, for the six-month periods, were $20.7 million and $9.2 million,
respectively. Consolidated net loss for the quarter ending October 31, 1998
increased to $4.8 million, or $0.14 per share, from the $1.9 million, or $0.06
per share loss reported in the prior year. Consolidated net loss for the six-
month periods increased to $7.4 million, or $0.23 per share, from the $3.0
million, or $0.10 per share, reported in the prior year.
Revenue increases were due primarily to higher loan volumes and the $1.3
million contribution of Interloan.com, the Company's new Internet mortgage
services unit. Expense increases were due primarily to higher compensation and
occupancy costs associated with the acquisitions, additional professional fees
associated with the acquisitions, increased marketing activity, higher
mortgage credit facility borrowing rates and debenture premium expense
amortization.
The following events are part of the company's plan to strengthen its
capital structure and management team, prioritize and capture E-commerce
business opportunities, eliminate marginal non-E-commerce operations, and
focus on achieving near term profitability.
1. Capital Structure The Company's capital structure is being significantly
improved. The Company recently signed agreements for a total of $14.7 million
in private placements of its common stock. Holders of the Company's $7 million
of convertible debentures and $2.5 million of Preferred Stock also have agreed
to restructure their securities by redeeming the Preferred Stock and $1.5
million of Debentures, with the remaining $5.5 million of Debentures converted
into common stock. These transactions, in the aggregate, will add
approximately $18.0 million to the Company's shareholders' equity. The new
common shares 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.
2. Management Since the end of the prior fiscal quarter, the Company's
management has been strengthened by the addition of Chairman & CEO Mark
Korell, EVP Capital Markets Michael Conway and EVP Finance & Administration
Thomas Porter, all three of whom have extensive public company and/or industry
management experience.
3. E-commerce Business Opportunities In Finet's rapidly evolving product
mix, electronically originated loans have taken the lead over traditional loan
applications. In October and November, more than 55% of wholesale loans were
completed using Fannie Mae's automated underwriting system. A just completed
exclusive alliance with a leading aggregator of mortgage leads on the Internet
will enable consumers to select online loan approvals directly through Finet's
iQualify.com technology or receive personalized advice and assistance through
its Interloan.com service. In another major new alliance, Finet will
exclusively operate the Finance Center site on a major new Internet/print
media real estate portal covering 27 major metro areas that goes live next
month.
4. Operations The Company is reviewing the operations and economics of
Mical, a traditional, non-electronic commerce FHA/VA mortgage banker acquired
in May 1998, to determine how best to maximize shareholder value. The Company
is consulting with lenders, governmental regulatory agencies, loan investors
and outside consultants. On December 15, 1998, the Company's Board of
Directors approved a preliminary restructuring plan. The Company is assessing
the future economic value of the goodwill recorded in the purchase transaction
along with the other assets of Mical and determining the provision necessary
to recognize costs associated with restructuring and integrating operations.
The Company anticipates that these charges will total approximately $7 to $8
million and will be recognized in the third fiscal quarter when the plan is
finalized. Additionally, Mortgage Marketing Concepts, Finet's mortgage lead
telemarketing unit, has been discontinued. These actions are expected to
eliminate redundancies, slash costs and sharpen Finet's focus toward online
prime and special markets mortgage financing activities.
5. Profitability Management has set achieving a monthly operating profit in
the first quarter of Finet's next fiscal year as its primary enterprise-wide
objective. With a more focused revenue and earnings base, the Company
continues to forge strategic relationships and to automate business processes
as it further develops its on-line mortgage loan origination and fulfillment
services.
Finet CEO, Mark L Korell, commented, "Price-conscious, technology-savvy
baby boomers are the largest mortgage applicant group today and the biggest
Internet users. It's a natural fit. As the preference for online shopping
accelerates, it is imperative that we focus Finet's systems, capabilities and
financial resources on where the market is headed, not where it has been.
Accordingly, we are narrowing our focus to those online areas where we have
the most meaningful competitive advantages and opportunities. However painful
these non-recurring special charges will be, we have taken the actions
necessary to best position us to maximize future profits and shareholder
value."
Finet, an e-commerce firm, facilitates home ownership through a variety
of technology-based products and automated services for consumers and real
estate service providers, including Realtors, mortgage brokers, Internet home
listing aggregators, title companies and other settlement services providers.
Finet's Internet products include iQualify, a national award-winning service
providing consumers a mortgage approval decision in minutes; and
Interloan.com, an on-line home financing services site.
Certain statements in this press release, including
statements regarding the anticipated development and expansion
of the Company's business, and the intent, belief or current
expectations of the Company, its directors or its officers, are
"forward-looking" statements (as such term is defined in the
Private Securities Litigation Reform Act of 1995). Because such
statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied
by such forward-looking statements.
FINET HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands except per share amounts)
Three Months Ended October
31,
1998 1997
Revenues $ 6,193 $ 2,523
Expenses 11,024 4,334
Loss before income taxes (4,831) (1,811)
Income taxes - (42)
Net loss $ (4,831) $ (1,853)
Earnings per share $ (.14) $ (.06)
Shares used to calculate earnings 32,983 28,812
per share
Six Months Ended October 31,
1998 1997
Revenues $ 13,361 $ 6,258
Expenses 20,740 9,169
Loss before income taxes (7,379) (2,911)
Income taxes - (46)
Extraordinary gain, net of taxes - 3
Net loss $(7,379) $ (2,953)
Earnings per share $ (.23) $ (.10)
Shares used to calculate earnings 32,728 28,642
per share
FINET HOLDING CORPORATION
CONDENSED BALANCE SHEETS
(unaudited, in thousands)
October 31,
1998
Assets
Cash and short-term investments $ 137
Accounts receivable from sales of mortgage loans
and servicing rights 15,822
Mortgage loan servicing advances and other 3,303
receivables
Mortgages held for sale, net 103,771
Mortgage servicing rights 4,604
Property and Equipment, net 2.323
Goodwill 4,593
Other Assets 3,591
Total assets $ 138,000
Liabilities
Warehouse lines of credit 116,156
Other liabilities 20,617
Deferred income taxes 0
Shareholders' Equity 1,227
Total liabilities and shareholders' equity $ 138,000
# # #
