Contract analysis

I. Introduction and Scope A. Purpose The purpose of this memorandum is to summarize the litigation and claims due diligence findings for Skybridge Fintech Ltd. ("Skybridge" or the "Company"), a Delaware corporation headquartered at 1400 Market Street, Suite 2200, Wilmington, DE 19801, in connection with the proposed $60,000,000 convertible promissory note bridge financing (the "Bridge Financing") led by Ridgeline Ven

1. All pending litigation, arbitration, and administrative proceedings in which the Company is a named party, whether as plaintiff, defendant, counterclaimant, third-party defendant, or intervenor;

2. All threatened claims, including demand letters, pre-litigation correspondence, cease-and-desist letters, and other communications reasonably indicating the potential for future litigation or adversarial proceedings;

3. All litigation, arbitration, and administrative proceedings resolved or settled within the prior three years (i.e., from December 2020 through the date of this memorandum);

4. All regulatory investigations, inquiries, enforcement actions, or similar proceedings, whether formal or informal, pending or resolved, involving the Company or any of its officers or directors in their capacity as such;

5. All material indemnification obligations arising from or in connection with prior disputes, settlements, consent orders, or similar arrangements; and

6. A high-level assessment of insurance coverage relevant to the identified litigation matters and potential claims exposure. C. Sources Reviewed In preparing this memorandum, we reviewed and relied upon the following sources of information: • The Company's responses to C&H's Due Diligence Request List dated November 13, 2023 (the "Initial Request List"), including all documents produced in response to Items 7.1 thro

II. Executive Summary Based on the review conducted in accordance with the scope described in Section I above, we provide the following executive summary of our findings. A. Overall Assessment Skybridge has a relatively modest litigation profile for a fintech company of its scale. As of the date of this memorandum, the Company has approximately 310 full-time equivalent employees, generates approximately $78 million i

III. Pending Litigation A. Meridian Commerce Solutions, Inc. v. Skybridge Fintech Ltd.

2. Parties and Background Meridian is a Delaware corporation and competitor of Skybridge in the payments orchestration and gateway management space. Meridian offers a suite of payment processing solutions, including a payment routing optimization product that competes with Skybridge's Dynamic Routing Engine ("DRE"), a core component of Skybridge's payments orchestration platform. Based on publicly available informati

3. Nature of Claims Meridian alleges that Skybridge's DRE module infringes two of Meridian's U.S. utility patents: • U.S. Patent No. 10,XXX,312 (the "'312 Patent"), titled "System and Method for Dynamic Payment Gateway Selection Based on Transaction Attributes," issued on March 17, 2020; and • U.S. Patent No. 10,XXX,479 (the "'479 Patent"), titled "Apparatus and Method for Real-Time Optimization of Payment Processing

4. Relief Sought Meridian seeks the following relief: (a) A permanent injunction prohibiting Skybridge from making, using, selling, offering for sale, or importing any products or services that infringe the '312 and '479 Patents; (b) Compensatory damages in an amount to be determined at trial, including lost profits and/or reasonable royalties; (c) Enhanced damages (up to treble damages) under 35 U.S.C. § 284 for all

5. Current Status of Proceedings Skybridge filed its Answer and Counterclaims on August 28, 2023. In its Answer, the Company denied all allegations of infringement and asserted the following affirmative defenses: (a) Non-infringement — the Company's DRE does not practice any claim of the '312 or '479 Patents, either literally or under the doctrine of equivalents; (b) Invalidity — the asserted patent claims are invali

6. Company's Position and Merits Assessment Skybridge and its IP counsel at C&H believe the claims are without merit. The Company's position rests on several grounds. First, Skybridge's DRE technology was independently developed by the Company's engineering team, led by Elena Vasquez, CTO and Co-Founder, beginning in 2018, well before Meridian's patents were issued. The Company has represented that it maintains conte

7. Financial Exposure Assessment Given the early stage of the proceedings, a precise quantification of potential damages exposure is difficult. However, based on our review of comparable patent infringement cases in the payments technology space, and taking into account the following factors—(i) the size of the Company's DRE-related revenue as a component of total ARR, (ii) typical reasonable royalty rates applied in

8. Insurance Coverage The Company's directors' and officers' ("D&O") insurance and technology errors and omissions ("E&O") / professional liability insurance policies have been reviewed in connection with this matter. Patent infringement claims may trigger coverage under the Company's technology E&O policy, which includes a "media and intellectual property" coverage component, subject to applicable policy exclusions

9. Risk Rating and Disclosure Recommendation Risk Rating: Low-to-Moderate. Disclosure Recommendation: This matter must be disclosed on the Company Disclosure Schedule. It is a pending litigation matter in which the Company is a named defendant, involves claims that could theoretically result in a damages award or injunctive relief affecting a core component of the Company's product offering, and is the type of matter

2. Parties and Background Takeshi Marlowe Commerce Bank is a former senior software engineer who was employed by Skybridge from approximately March 2020 to June 2023. According to Company records, Mr. Marlowe Commerce Bank was hired as a Senior Software Engineer at an initial annual salary of $115,000, which was subsequently increased to $125,000 effective January 2022. His position was classified as exempt from over

3. Nature of Claims The Complaint alleges two causes of action: (a) Violation of the Fair Labor Standards Act, 29 U.S.C. § 207. Mr. Marlowe Commerce Bank alleges that he was misclassified as an exempt employee and that he regularly worked in excess of 40 hours per week without receiving overtime compensation at one and one-half times his regular rate of pay. He alleges that his actual job duties did not satisfy the r

4. Relief Sought Mr. Marlowe Commerce Bank seeks the following relief: (a) Back wages estimated by the plaintiff at approximately $87,000 (based on his calculation of approximately 18 months of overtime at an average of 8–10 hours per week); (b) Liquidated damages in an equal amount (approximately $87,000) under both the FLSA and Delaware law; (c) Attorneys' fees and costs; and (d) Pre-judgment interest.

5. Current Status of Proceedings The Company filed its Answer on October 20, 2023, denying the material allegations and asserting the affirmative defense that Mr. Marlowe Commerce Bank was properly classified as exempt under the computer professional exemption. An initial case scheduling conference was held on November 15, 2023, at which the Court established a discovery schedule. Discovery is currently ongoing. No m

6. Company's Position Skybridge maintains that Mr. Marlowe Commerce Bank was properly classified as an exempt employee under the computer professional exemption. The Company's position is supported by the following factors: (a) Mr. Marlowe Commerce Bank's annual salary at all relevant times exceeded $110,000 (the threshold for the highly compensated employee exemption) and exceeded the minimum salary threshold for th

7. Financial Exposure Assessment We assess the maximum financial exposure in this matter as follows: • Back wages claimed: approximately $87,000 • Liquidated damages (equal amount): approximately $87,000 • Estimated attorneys' fees and costs: approximately $50,000–$75,000 • Total maximum exposure: approximately $200,000–$250,000 We note that the potential nuisance settlement value of this matter is estimated at appro

8. Insurance Coverage The Company maintains an employment practices liability insurance ("EPLI") policy that is expected to apply to claims of this nature, subject to a self-insured retention (deductible). The EPLI policy covers claims arising from alleged wrongful employment practices, including wage and hour misclassification claims. The specific coverage terms, retention amount, and policy limits are addressed in

9. Risk Rating and Disclosure Recommendation Risk Rating: Low. This matter is financially immaterial to the Company. Even at maximum exposure, the potential liability represents a negligible fraction of the Company's annual revenue and would not constitute a material adverse effect under any reasonable definition of that term. Disclosure Recommendation: We recommend disclosure on the Company Disclosure Schedule notwi

IV. Threatened Claims A. Demand Letter from Brindoval Data Analytics, LLC

2. Background and Nature of Claim Brindoval Data is a Delaware limited liability company that provides data analytics and fraud detection services to companies in the financial technology and e-commerce sectors. Skybridge entered into a Services Agreement with Brindoval Data dated February 1, 2022 (the "Brindoval Agreement"), pursuant to which Brindoval Data agreed to provide fraud detection analytics services to Sky

3. The Demand and Subsequent Correspondence On October 10, 2023, Skybridge received a demand letter from Crestline Growth Partners, Rowe & Farris LLP, counsel to Brindoval Data. The demand letter asserts that Skybridge's purported termination for cause was improper and that the cited SLA failures did not constitute "material breaches" within the meaning of the Brindoval Agreement. Specifically, Brindoval Data's posit

4. Current Status No litigation has been filed as of the date of this memorandum. On November 20, 2023, Brindoval Data's counsel sent a follow-up letter reiterating the demand and reserving Brindoval Data's right to pursue all available legal remedies, including the filing of a breach of contract action. No further communications have been received from Brindoval Data or its counsel since that date. The Company's Gen

5. Financial Exposure Assessment The maximum financial exposure is approximately $340,000, representing the full amount of the claimed early termination fee and associated charges. However, we believe the Company has strong defenses based on its for-cause termination right under the Brindoval Agreement, as described above. In our assessment, the likelihood that Brindoval Data would prevail on its claim in full is low

6. Risk Rating and Disclosure Recommendation Risk Rating: Low. Disclosure Recommendation: We recommend disclosure on the Company Disclosure Schedule as a threatened claim. Although no litigation has been filed, the demand letter and follow-up correspondence are sufficient to establish that this is a "threatened" claim that should be disclosed under the NPA's litigation representation, which typically extends to threa

V. Recently Resolved Matters (Past Three Years) A. Settlement with Pinnacle Payments Corp.

1. Background. Pinnacle Payments Corp. ("Pinnacle") is a payment processing company that previously served as a strategic vendor partner to Skybridge. On or about April 1, 2020, Skybridge and Pinnacle entered into a Joint Development Agreement (the "JDA") pursuant to which the parties agreed to collaborate on the co-development of an integrated payment acceptance solution combining Pinnacle's point-of-sale processing

2. Resolution. The dispute was resolved pursuant to a confidential settlement agreement executed by both parties in March 2022. Under the terms of the settlement: (a) Skybridge paid Pinnacle $275,000 in full and final settlement of all claims, counterclaims, and disputes arising out of or relating to the JDA; (b) The parties exchanged mutual general releases of all claims arising out of or relating to the JDA and the

3. Ongoing Obligations Other than the standard confidentiality provisions in the settlement agreement, there are no ongoing obligations, restrictive covenants, non-compete provisions, non-solicitation provisions, or other continuing restrictions arising from the settlement. The JDA has been fully terminated, and the parties have no further commercial relationship.

4. Disclosure Recommendation We recommend disclosure of this settlement on the Company Disclosure Schedule for completeness. The settlement occurred within the three-year look-back period likely to be covered by the NPA's litigation representation. Although the matter has been fully resolved and the settlement amount ($275,000) is financially immaterial, disclosing the settlement demonstrates the Company's commitment

1. Background. In Q2 2022, the New York Department of Financial Services ("NYDFS") initiated an informal inquiry regarding Skybridge's money transmission activities in the State of New York and the scope of the Company's licensing obligations under the New York Banking Law. At the time of the inquiry, Skybridge was in the process of applying for a New York money transmitter license but had not yet received the licens

2. Resolution. Skybridge cooperated fully with the NYDFS throughout the inquiry process. The Company provided the NYDFS with detailed information regarding its business model, the nature of its payment processing activities, its reliance on licensed payment processor partners for settlement and funds transmission, and the status of its pending license application. The Company's outside regulatory counsel engaged in s

3. Ongoing Obligations As a licensed money transmitter in New York, the Company is subject to ongoing regulatory obligations, including: (a) Periodic reporting requirements (quarterly and annual reports); (b) Maintenance of minimum net worth and surety bond requirements; (c) Examination rights — the NYDFS retains the right to examine the Company's books, records, and operations; (d) Compliance with the NYDFS's cybers

4. Disclosure Recommendation We recommend disclosure of this matter on the Company Disclosure Schedule for transparency. Although the inquiry was informal and was closed without any enforcement action, the NPA's litigation representations may encompass regulatory inquiries, investigations, or proceedings, and a conservative approach to disclosure is warranted. Disclosing this matter—together with the fact that it was

VI. Indemnification Obligations As part of our litigation and claims diligence review, we examined the Company's material indemnification obligations arising from contractual arrangements and corporate governance documents. This section provides a summary of our findings; a more detailed analysis of the Company's contractual indemnification provisions is set forth in the Material Contracts Diligence Summary dated Dec

VII. Insurance Coverage Summary (Cross-Reference) A detailed review of the Company's insurance program is set forth in the Insurance Coverage Review Memorandum dated December 23, 2023. For purposes of this litigation diligence memorandum, we provide the following high-level summary of the key insurance policies relevant to the Company's litigation exposure: The Company does not have any pending insurance claims relat

VIII. Disclosure Schedule Recommendations Based on the findings set forth in this memorandum, we recommend that the following matters be included on the Company Disclosure Schedule to be delivered in connection with the Note Purchase Agreement: We offer the following additional guidance with respect to the preparation of the Disclosure Schedule:

1. Tracking the NPA Representation. The disclosure schedule entries should be drafted to track the specific language of the litigation representation in the final NPA. At a minimum, each entry should include sufficient detail regarding the forum, parties, nature of claims or dispute, relief sought (if applicable), current status, the Company's position, and estimated financial exposure. The level of detail should be

2. Resolved Matters. For the two resolved matters (the Pinnacle settlement and the NYDFS inquiry), the disclosure should make clear that these matters have been fully resolved and that there are no ongoing obligations (other than the confidentiality provisions in the Pinnacle settlement agreement and the ongoing regulatory compliance obligations associated with the New York money transmitter license).

3. Timing of Delivery. The Company Disclosure Schedule is to be delivered on or prior to the Closing Date, which is currently targeted for January 15, 2024. Any new matters that arise between the date of this memorandum and the Closing Date should be promptly evaluated for inclusion on the Disclosure Schedule. We recommend that the Company institute a process for monitoring and reporting any new claims, demands, regu

4. Bring-Down and Closing Condition. The NPA will likely contain a closing condition requiring the Company to deliver a bring-down certificate confirming the accuracy of its representations and warranties (including the litigation representation) as of the Closing Date. The Company should be prepared to confirm that the Disclosure Schedule remains accurate and complete as of the Closing Date, or to update the Disclos

IX. Risk Assessment and Conclusion A. Aggregate Litigation Risk Assessment Based on the comprehensive review described in this memorandum, we assess the Company's aggregate litigation risk as low-to-moderate. The pending and threatened matters are not individually or collectively material to the Company's financial condition, results of operations, or business prospects. The most significant matter from a financial e

X. Limitations and Qualifications This memorandum is subject to the following limitations and qualifications, which should be considered in evaluating the findings and assessments set forth herein:

1. Reliance on Company-Provided Information. This memorandum is based in substantial part on information provided by the Company, including the Company's responses to the Initial Request List and Supplemental Request List, documents produced by the Company, and representations made by the Company's officers and employees during interviews. While we have endeavored to verify key facts through independent sources where

2. Scope of Docket Searches. Docket searches were conducted in the following courts and databases as of December 18, 2023: the United States District Court for the District of Delaware (PACER); the Delaware Superior Court (New Castle County); the Delaware Court of Chancery; and the Delaware Justice of the Peace Courts. Searches were also conducted in select federal and state court databases in jurisdictions where the

3. No Legal Opinion on Merits. This memorandum does not constitute a legal opinion on the merits of any pending or threatened matter. The risk assessments and financial exposure estimates provided herein are based on our professional judgment, taking into account the information available to us as of the date of this memorandum, and are inherently uncertain. Actual outcomes may differ materially from the assessments

4. Point-in-Time Assessment. This memorandum reflects the status of matters as of December 18, 2023. Litigation and regulatory matters are inherently dynamic, and the status, risk profile, and financial exposure of the identified matters may change as events unfold. This memorandum should not be relied upon as a current assessment of the Company's litigation risk after the date hereof without appropriate updating.

5. Purpose and Privilege. This memorandum is prepared solely for the internal use of ECVC and the Lead Investor in connection with the convertible note bridge financing described herein. It is protected by the attorney-client privilege and the work product doctrine. This memorandum is not intended for, and should not be relied upon by, any third party, and no third party is an intended beneficiary of the analysis or