Netcapital Proposes Acquisition of RezyFi Subsidiary Assets for $5M

Netcapital announced that it has entered into a non-binding letter of intent, or LOI, with RezyFi regarding the proposed acquisition by a newly formed wholly-owned South Dakota subsidiary of Netcapital of substantially all of the assets and assumed liabilities of Resmac, a wholly owned subsidiary of RezyFi. Resmac is a residential mortgage bank and holds active HUD Title II non-supervised direct endorsement mortgagee approval, operates in eleven states, and maintains warehouse financing relationships. The transaction would be structured as an asset purchase by SD Holdco, a newly formed wholly owned subsidiary of Netcapital. SD Holdco would acquire substantially all of the assets and assumed liabilities of Resmac, subject to required consents and approvals. Total acquisition value is $5M, payable solely through the issuance of 2.5M shares of SD Holdco Series A convertible preferred stock with a stated value of $2.00 per share. The SD Holdco preferred stock would not be convertible into, or exchangeable for, securities of Netcapital. Acquired assets are expected to include state mortgage lending licenses, HUD Title II non-supervised direct endorsement mortgagee approval, related FHA certifications and approvals, mortgage servicing rights, mortgage loans, technology systems, loan origination platforms, trade names, domain names, trademarks, customer and borrower relationships, and other operating contracts and arrangements. RezyFi may be eligible to receive up to 1M additional shares of SD Holdco preferred stock if the Resmac business unit achieves cumulative GAAP revenue of at least $10M within 24 months after closing. RezyFi may also be eligible to receive up to 500,000 additional shares of SD Holdco preferred stock if SD Holdco completes an SEC-declared effective Form S-1 registration statement for a public offering resulting in gross proceeds of at least $10M. Following closing, Netcapital and SD Holdco would use commercially reasonable efforts to file a Form S-1 registration statement with the SEC to register equity securities of SD Holdco for public distribution. Netcapital would contemplate distributing its interest in SD Holdco to Netcapital shareholders of record as a dividend spinout. The contemplated spinout would create a separate public financial services company in which both Netcapital shareholders and RezyFi would hold equity interests.