RocketFuel transfer erases $1M executive debt; no valuation

RocketFuel Blockchain transferred substantially all assets used in its payments business to RPay, a company led by Peter M. Jensen, in a transaction that closed on Aug. 13 and was disclosed in an Aug. 21 SEC filing.

Under the terms disclosed, RPay assumed about $800,000 in deferred compensation owed to Jensen and $200,000 owed to Bennett J. Yankowitz, a former RocketFuel director who remains on the company’s advisory board. RocketFuel was released from those obligations at closing. The transferred assets included intellectual property, contracts, merchant relationships and other items used primarily in the payments unit, together with cash and accounts receivable attributable to that business.

RocketFuel received a warrant to purchase 160,000 RPay common shares, but the warrant is subject to a $1 million repurchase right exercisable by RPay at any time. Because of that repurchase right, RocketFuel did not receive the underlying shares or $1 million in cash at closing. The filing notes that Yankowitz’s assumed obligation is payable at $0.25 for each $1 paid to Jensen, at the discretion of RPay’s board.

The filing identifies Jensen as RPay’s sole director and CEO and notes he also serves as a RocketFuel director and executive officer. The filing states, “Jensen’s interests differed from those of stockholders generally.” RocketFuel’s board approved the transaction using a fairness memorandum that addressed the disclosed conflicts instead of obtaining an independent valuation or seeking stockholder ratification. The board concluded a stockholder vote was not required under Nevada Revised Statutes Section 78.565.

RocketFuel characterized the RPay sale as a significant disposition under the SEC’s asset and income tests, but the Aug. 21 filing did not include the unaudited pro forma financial statements that the SEC requires in that circumstance. The company said it would provide the pro forma figures in an amended Form 8-K/A; as of Aug. 22 no such amendment had been posted to the SEC record.

Earlier in March, RocketFuel disclosed a non-binding term sheet that proposed a different structure involving two buyers: RPay and a separate proposed buyer for the loyalty and rewards business called RPoints. That preliminary package outlined roughly $1.5 million in deferred-compensation assumptions, a payments-revenue earn-out and warrants representing 20% fully diluted stakes in both companies. The Aug. 21 filing covers only the RPay transaction, and no RPoints filing appeared in RocketFuel’s SEC submissions as of Aug. 22, preventing a direct comparison between the earlier terms and the finalized RPay-only arrangement.

RocketFuel’s filings do not show any cash consideration paid at closing. The company has not yet filed the pro forma disclosures required to show the transaction’s effect on its balance sheet and results of operations. The transaction documents record the board’s use of an internal fairness memorandum to approve the related-party deal that relieved the issuer of roughly $1 million in liabilities.