1009-00001 · Skybridge Fintech Ltd · Analysis & Strategy

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MEMORANDUM

PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT

From: Leonard Ashford, Of Counsel, and Nina Reyes, Senior Associate Calderwood & Harkness LLP 600 Lexington Avenue New York, NY 10022

To: Arjun Mehta, CEO & Co-Founder David Lindstrom, CFO Priya Ramanathan, General Counsel Skybridge Fintech Ltd. 1400 Market Street, Suite 2200 Wilmington, DE 19801

Date: November 17, 2023

Re: Securities Law Analysis — Availability of Section 4(a)(2) and Rule 506(b) of Regulation D Exemptions for the Proposed $60,000,000 Convertible Note Bridge Financing

Matter No.: 1009-00001

I. Executive Summary

Calderwood & Harkness LLP has been engaged by Skybridge Fintech Ltd. ("Skybridge" or the "Company") to analyze the federal and state securities law exemptions available for the Company's proposed issuance of convertible promissory notes (the "Notes") in the aggregate principal amount of Sixty Million Dollars ($60,000,000) to a syndicate of four institutional investors (collectively, the "Purchasers"). This memorandum sets forth our analysis of the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), and the availability of applicable exemptions therefrom, together with related state securities law ("blue sky") considerations.

Based on the analysis detailed herein, it is our conclusion that the proposed offering (the "Offering") qualifies for exemption from the registration requirements of Section 5 of the Securities Act under Section 4(a)(2) of the Securities Act, which exempts "transactions by an issuer not involving any public offering," and Rule 506(b) of Regulation D promulgated thereunder by the Securities and Exchange Commission (the "SEC"), which provides a non-exclusive safe harbor for private placements to accredited investors.

In reaching this conclusion, we have considered and determined the following:

• The convertible promissory notes, and the shares of equity securities issuable upon conversion thereof (the "Conversion Shares"), constitute "securities" within the meaning of Section 2(a)(1) of the Securities Act. Accordingly, the offer and sale of such instruments must either be registered under Section 5 of the Securities Act or qualify for an applicable exemption from registration.

• No general solicitation or general advertising, as those terms are understood under Rule 502(c) of Regulation D and applicable SEC guidance, has been or will be employed in connection with the Offering. The Company identified and approached each Purchaser through pre-existing substantive relationships or through direct introductions within established venture capital networks.

• All four Purchasers qualify as "accredited investors" within the meaning of Rule 501(a) of Regulation D, each being an institutional investment fund with total assets substantially in excess of $5,000,000 and not having been formed for the specific purpose of acquiring the securities being offered.

• A notice on Form D must be filed with the SEC via the EDGAR system no later than fifteen (15) calendar days following the first sale of securities in the Offering, which will be the date of the Initial Closing (as defined below).

• State blue sky notice filings will be required in certain jurisdictions, including Delaware, Massachusetts, Illinois, California, and Washington, as discussed in further detail in Section VII of this memorandum.

Based on the foregoing, we recommend that the Company proceed with the Offering in reliance on Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D, subject to strict compliance with the procedural and filing requirements detailed herein. The specific action items necessary to ensure compliance are set forth in Section XIII below, and we recommend that the Company and its officers review those items carefully in advance of the anticipated closing.

II. Background and Transaction Overview

A. The Company

Skybridge Fintech Ltd. ("Skybridge" or the "Company") is a Delaware corporation (C-corporation) originally incorporated under the laws of the State of Delaware on March 14, 2017. The Company's Employer Identification Number is 83-2147605, and its Delaware Division of Corporations file number is 6384291. The Company's principal executive offices are located at 1400 Market Street, Suite 2200, Wilmington, Delaware 19801.

Skybridge operates a cloud-based payments orchestration and embedded lending platform designed to serve mid-market e-commerce companies. The Company's platform enables merchants to integrate multiple payment service providers, optimize transaction routing, and offer embedded lending products to their end customers through a single API-driven infrastructure layer. As of the third quarter of 2023, the Company reported annualized gross payment volume ("GPV") of approximately $4.2 billion, annual recurring revenue ("ARR") of approximately $78 million, and a net revenue retention rate of approximately 128%, reflecting robust expansion revenue from existing customers. The Company currently employs approximately 310 full-time equivalents ("FTEs") across its engineering, product, operations, sales, and administrative functions.

The Company has completed multiple rounds of equity financing since its founding. The Company raised its Series A round from Crestpoint Seed Partners, L.P. Its Series B round was led by Halcyon Growth Equity, L.P. Most recently, the Company closed its Series C financing round in July 2021, led by Ridgeline Ventures Fund III, L.P. and joined by Beacon Hill Capital Partners, LLC, at a post-money valuation of approximately $620 million. On a fully diluted basis (accounting for all outstanding shares of common stock and preferred stock, together with shares reserved for issuance under outstanding options, warrants, and other convertible securities), the Company has approximately 48,500,000 shares outstanding as of the date of this memorandum.

In addition to its equity capitalization, the Company has outstanding indebtedness in the form of a $15 million venture debt facility with Kelvantis Lending Corp., pursuant to a Loan and Security Agreement dated August 15, 2022, which matures on August 15, 2025. This facility is secured by substantially all of the Company's assets. As discussed below, the Notes to be issued in the Offering will be subordinate to the Company's obligations under the Kelvantis facility.

The Company is not a reporting company under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and is not required to file periodic reports with the SEC. The Company's securities are not listed or quoted on any national securities exchange or interdealer quotation system.

B. The Proposed Offering

The Company proposes to issue convertible promissory notes (the "Notes") in the aggregate principal amount of $60,000,000 to the four Purchasers identified in Section II.C below. The material terms of the Notes, as set forth in the current term sheet dated October 28, 2023, and as expected to be reflected in the Note Purchase Agreement (the "NPA") and the form of Convertible Promissory Note, are summarized as follows:

Instrument. Convertible promissory notes, to be issued pursuant to a Note Purchase Agreement among the Company and the Purchasers.

Aggregate Principal Amount. $60,000,000.

Interest Rate. 6.00% per annum (600 basis points), computed as simple interest on the basis of a 365-day year, accruing from the applicable Closing Date and payable at maturity or upon conversion.

Maturity. Twenty-four (24) months from the date of the Initial Closing (as defined below). Based on the currently anticipated Initial Closing date, the expected maturity date of the Notes would be approximately January 15, 2026.

Conversion Trigger — Qualified Financing. The Notes will automatically convert into equity securities upon the closing of a "Qualified Financing," defined as a round of equity financing (anticipated to be the Company's Series D Preferred Stock financing) in which the Company raises at least $80,000,000 in new equity capital from investors.

Conversion discount. The Notes will convert at a 20% discount to the price per share paid by investors in the Qualified Financing. That is, the Note holders will receive shares at a price equal to 80% of the Series D price per share.

Valuation Cap. The Notes are subject to a valuation cap of $750,000,000 on a pre-money basis.

Conversion Price. The conversion price applicable to the Notes upon a Qualified Financing will be the lower of: (a) 80% of the price per share of the Qualified Financing (reflecting the 20% conversion discount), or (b) the price per share implied by the $750,000,000 valuation cap on a fully diluted basis, which, based on the current fully diluted share count of approximately 48,500,000 shares, yields an implied conversion price of approximately $15.46 per share. The conversion price ensures that Note holders receive the benefit of the more favorable conversion mechanism.

Change of Control. In the event of a Change of Control (to be defined in the NPA to include mergers, asset sales, and similar fundamental transactions) occurring prior to the conversion or repayment of the Notes, each Note holder will be entitled to receive, at such holder's election, the greater of: (i) 2.0x the outstanding principal amount of such holder's Note plus all accrued and unpaid interest thereon, or (ii) the amount that would have been payable to such holder had the Note been converted immediately prior to the Change of Control at the Valuation Cap price.

Most Favored Nation Provision. The Notes will include a "most favored nation" provision pursuant to which, if the Company issues any subsequent convertible notes or simple agreements for future equity ("SAFEs") on terms more favorable to the holders thereof than the terms of the Notes, the Note holders will have the right to amend their Notes to incorporate such more favorable terms.

Subordination. The Notes will be subordinated to the Company's existing obligations under the Kelvantis Lending Corp. venture debt facility. The terms of subordination will be set forth in the NPA and, if required, in a separate intercreditor or subordination agreement with Kelvantis.

Governing Documents. The Notes will be issued pursuant to a Note Purchase Agreement, to be negotiated among the Company, the Purchasers, and their respective counsel. The form of Convertible Promissory Note will be attached as an exhibit to the NPA.

C. The Purchasers

The Company proposes to sell the Notes to a syndicate of four institutional investors. The following table sets forth certain information regarding each Purchaser, including its organizational form, principal office, key personnel, commitment amount, and relationship to the Company:

Total Commitment: $60,000,000 across four Purchasers.

We note that investor counsel for the syndicate is Whitfield, Pratt & Soo LLP, with Graham Whitfield serving as lead partner and Danielle Kwon as the primary associate on the matter. Whitfield, Pratt & Soo LLP is located at One Federal Street, 26th Floor, Boston, MA 02110. Whitfield, Pratt & Soo LLP represents Ridgeline Ventures Fund IV, L.P. as lead investor on behalf of the syndicate. We understand that each of the other Purchasers has consented to joint representation by Whitfield, Pratt & Soo LLP for purposes of the NPA negotiation, while reserving the right to engage independent counsel.

D. Closing Structure

The Offering is expected to close in two tranches:

Initial Closing. The initial closing (the "Initial Closing") is expected to involve the sale of Notes in the aggregate principal amount of $45,000,000 to three of the four Purchasers, allocated as follows: Ridgeline Ventures Fund IV, L.P. ($30,000,000), Beacon Hill Capital Partners, LLC ($10,000,000), and Halcyon Growth Equity, L.P. ($5,000,000). The Initial Closing is currently anticipated to occur in late November or early December 2023, subject to the satisfaction of customary closing conditions set forth in the NPA.

Final Closing. The final closing (the "Final Closing") is expected to involve the sale of Notes in the aggregate principal amount of $15,000,000 to the remaining Purchasers, allocated as follows: Beacon Hill Capital Partners, LLC ($5,000,000, representing the balance of its $15,000,000 commitment), and Northstar Innovation Fund II, L.P. ($10,000,000). The Final Closing is anticipated to occur within thirty (30) to sixty (60) days following the Initial Closing, subject to the completion of Northstar's due diligence process and satisfaction of its internal investment committee approval requirements.

All funds will be deposited in escrow at Granite Trust Company, N.A. (Escrow Account No. 4401-7829-SBF) pending satisfaction of applicable closing conditions, and will be released to the Company upon the occurrence of the relevant closing. The escrow arrangements will be governed by a separate Escrow Agreement among the Company, the Purchasers, and Granite Trust Company, N.A. as escrow agent.

The Company anticipates commencing its Series D Preferred Stock financing (the "Planned Series D") in Q3 or Q4 of 2024. If the Planned Series D constitutes a "Qualified Financing" as defined in the NPA (i.e., raises at least $80,000,000 in new equity capital), the Notes will automatically convert into shares of Series D Preferred Stock at the applicable conversion price. The timing and terms of the Planned Series D will be the subject of separate analysis at the appropriate time.

III. The Securities at Issue

The threshold question in any securities law analysis is whether the instruments at issue constitute "securities" within the meaning of the applicable statutory definition. We address this question with respect to both the Notes themselves and the equity securities issuable upon their conversion.

A. The Convertible Notes Are "Securities"

Section 2(a)(1) of the Securities Act defines the term "security" broadly to include, among other things, "any note, stock, treasury stock, security future, security-based swap, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, ... [or] investment contract." The statutory definition expressly includes "any note," which would, on its face, encompass the convertible promissory notes to be issued in the Offering.

However, the Supreme Court has held that not every note is a "security" within the meaning of the federal securities laws. In Reves v. Rowan Whitfield CPAs LLP, 494 U.S. 56 (1990), the Court adopted the "family resemblance" test to determine whether a particular note should be treated as a security. Under this test, a note is presumed to be a security, and the issuer bears the burden of demonstrating that the note "bears a strong resemblance" to one of the categories of notes that the Court has identified as falling outside the definition — a "family" of non-security notes that includes notes delivered in consumer financing, notes secured by a lien on a small business or its assets, short-term notes secured by an assignment of accounts receivable, notes evidencing "character" loans to bank customers, short-term notes secured by an assignment of accounts receivable, and notes that simply formalize an open-account debt incurred in the ordinary course of business.

In determining whether a note bears a "family resemblance" to one of these categories, the Court in Reves identified four factors to be considered:

1. The motivations of the buyer and seller. If the seller's purpose is to raise money for the general use of a business enterprise or to finance substantial investments, and the buyer is interested primarily in the profit the note is expected to generate, the note is more likely to be a security. Conversely, if the note is exchanged to facilitate the purchase and sale of a minor asset or consumer good, to correct for the seller's cash-flow difficulties, or to advance some other commercial or consumer purpose, it is less likely to be a security.

2. The plan of distribution. If the note is offered and sold to a broad segment of the public, it is more likely a security. If the note is sold only to a limited class of persons, the analysis may cut either way, depending on the nature of those persons and the purpose of the transaction.

3. The reasonable expectations of the investing public. Whether the public would reasonably expect the note to be treated as a security is relevant to the analysis.

4. The existence of an alternative regulatory regime. If some factor, such as the existence of another regulatory scheme, significantly reduces the risk of the instrument, that factor suggests the note is not a security.

Applying the Reves factors to the convertible promissory notes at issue:

Motivations. The Company's motivation in issuing the Notes is to raise $60,000,000 in capital to fund the Company's ongoing operations and growth initiatives — a quintessential investment purpose. The Purchasers' motivation in acquiring the Notes is to obtain a return on their investment, both through the accrual of interest at 6.00% per annum and, more significantly, through the conversion feature that provides the Purchasers with the opportunity to acquire equity securities at a discount to the Qualified Financing price. This is a classic investment motivation.

Plan of Distribution. The Notes are being offered and sold to a closed group of four institutional investors, none of which intends to redistribute the Notes to the public. While this factor does not definitively resolve the inquiry, it does not negate the investment character of the transaction.

Reasonable Expectations. The Purchasers, as sophisticated institutional investors, would reasonably expect the Notes to be treated as securities subject to the protections of the federal securities laws. The convertible feature and investment-return orientation of the Notes reinforce this expectation.

Alternative Regulatory Regime. There is no alternative regulatory regime that governs the Notes or that would significantly reduce the risk to Note holders. The Notes are not subject to regulation under the banking laws, consumer credit statutes, or any other regulatory framework that might serve as a substitute for the protections of the securities laws.

Conclusion. The convertible promissory notes to be issued in the Offering are "securities" within the meaning of Section 2(a)(1) of the Securities Act. The Notes do not bear a family resemblance to any of the categories of non-security notes identified in Reves. Accordingly, the offer and sale of the Notes must either be registered under Section 5 of the Securities Act or qualify for an applicable exemption from registration.

B. The Underlying Conversion Shares Are "Securities"

Upon conversion of the Notes — whether automatically upon a Qualified Financing or at the election of the holders at maturity — the Notes will convert into shares of equity securities. In the case of a Qualified Financing, the Notes will convert into shares of Series D Preferred Stock (or such other class or series of equity securities as may be issued in the Qualified Financing). In the case of an optional conversion at maturity, the Notes will convert into shares priced at the Valuation Cap-implied price of approximately $15.46 per share.

The equity securities issuable upon conversion of the Notes are unquestionably "securities" within the meaning of Section 2(a)(1) of the Securities Act, which expressly includes "stock" and any "certificate of interest or participation in any profit-sharing agreement" within the definition. There is no colorable argument that shares of preferred stock or common stock issued by a Delaware corporation to investors would fall outside the statutory definition.

Importantly, the exemption analysis set forth in this memorandum must cover not only the initial issuance of the Notes but also the subsequent issuance of the Conversion Shares upon conversion. As discussed in Section X below, we believe that the issuance of the Conversion Shares will be covered by the same Section 4(a)(2)/Rule 506(b) exemption that applies to the initial sale of the Notes, provided that the conversion is structured in accordance with the recommendations set forth herein. The integration analysis applicable to the conversion is addressed in Sections V.F and X of this memorandum.

IV. Section 4(a)(2) of the Securities Act — Statutory Private Placement Exemption

A. Overview of Section 4(a)(2)

Section 4(a)(2) of the Securities Act (formerly Section 4(2), redesignated by the JOBS Act of 2012) provides an exemption from the registration requirements of Section 5 for "transactions by an issuer not involving any public offering." The statutory text is notable for its brevity; it does not prescribe specific conditions or requirements, but instead articulates a broad standard that has been developed through decades of judicial interpretation and SEC guidance.

The seminal case interpreting Section 4(a)(2) is SEC v. Ralston Purina Co., 346 U.S. 119 (1953), in which the Supreme Court held that the applicability of the private placement exemption turns on whether the particular class of persons to whom the securities are offered is in need of the protections afforded by the registration process. The Court emphasized that the exemption is designed to permit transactions "where there is no practical need for [the registration requirement's] application" because the offerees are able to "fend for themselves." Id. at 125.

Drawing on Ralston Purina and its progeny, courts and the SEC have identified several factors relevant to determining whether an offering constitutes a "private placement" eligible for the Section 4(a)(2) exemption:

(i) Number of Offerees and Their Relationship to the Issuer. An offering to a small number of persons who have a pre-existing relationship with the issuer is more likely to qualify as a private placement than an offering to a large or indeterminate number of persons.

(ii) Number of Units Offered. While the size of the offering alone is not dispositive, an offering of a limited number of units to a discrete group of investors is consistent with a private placement.

(iii) Size of the Offering. As with the number of units, the dollar amount of the offering is relevant but not determinative.

(iv) Manner of the Offering. The offering must not involve general solicitation or general advertising. If the issuer or its agents use mass mailings, public advertisements, or other methods of reaching the general public, the exemption is likely unavailable.

(v) Sophistication and Access to Information. The offerees must be sufficiently sophisticated to evaluate the merits and risks of the investment, and must have access to the type of information that would be included in a registration statement. This may be demonstrated by the offerees' business experience, financial acumen, or access to the issuer's books and records.

The burden of establishing the availability of the Section 4(a)(2) exemption rests with the party claiming it — in this case, the Company. See SEC v. Ralston Purina Co., 346 U.S. at 126.

B. Application to the Skybridge Offering

Applying the factors set forth above to the proposed Offering, we conclude that the transaction qualifies as a private placement exempt from registration under Section 4(a)(2).

Number and Nature of Offerees. The Offering is limited to four institutional investors, all of which are sophisticated venture capital or growth equity funds with assets under management ranging from $900 million (Northstar Innovation Fund II, L.P.) to $3.2 billion (Beacon Hill Capital Partners, LLC). Three of the four Purchasers — Ridgeline Ventures (through its predecessor Fund III), Beacon Hill Capital Partners, and Halcyon Growth Equity — are existing investors in the Company, having participated in prior equity financing rounds. Northstar Innovation Fund II, L.P. is the only new investor, and it was identified through Ridgeline's established venture capital network rather than through any form of public solicitation. The extremely limited number of offerees and the institutional nature of each Purchaser strongly support the characterization of this Offering as a private placement. The Company has not made offers to any person or entity other than the four Purchasers identified herein.

Sophistication and Access to Information. Each Purchaser is a professionally managed institutional investment fund with dedicated deal teams, including named deal leads (Samuel Okonkwo at Ridgeline, Joanna Falkner at Beacon Hill, Wei-Lin Chang at Northstar, and Robert Castillo at Halcyon), experienced investment professionals, and legal counsel (Whitfield, Pratt & Soo LLP, representing the syndicate). Each Purchaser has extensive experience in evaluating and negotiating venture capital and growth equity transactions, including convertible note financings. Each Purchaser has had, or will have prior to the applicable Closing, access to comprehensive due diligence materials regarding the Company, including the Company's audited financial statements prepared by Pinnacle Audit Group LLP, the Company's independent Section 409A valuation report prepared by Atlas Valuation Services, Inc. dated September 15, 2023, capitalization tables, material contracts, intellectual property summaries, and the opportunity to conduct management interviews and ask questions of the Company's officers and directors. The three existing investors have the additional benefit of their historical familiarity with the Company's business, financial condition, and management team, as well as their ongoing information rights under existing investor agreements. The sophistication and access-to-information requirements of Section 4(a)(2) are clearly satisfied.

Manner of Offering. No general solicitation or general advertising has been employed in connection with the Offering. The Company has not published any advertisements, press releases, or public announcements regarding the Offering. The Company has not posted any offering materials on its website, social media channels, or any other publicly accessible platform. No seminars, meetings, or presentations open to the general public have been held. The Company identified and approached each Purchaser directly, through pre-existing business relationships or, in the case of Northstar, through a private introduction facilitated by Ridgeline's venture capital network. The term sheet was negotiated bilaterally between the Company and Ridgeline Ventures as lead investor, and thereafter circulated to the remaining syndicate members on a confidential basis. No placement agent, broker-dealer, finder, or other intermediary has been engaged to solicit investors for the Offering.

Number of Units and Size. The Offering involves a single class of convertible promissory notes sold to four Purchasers in an aggregate amount of $60,000,000. While the dollar amount is substantial, the limited number of Purchasers and the single-class structure of the Offering are consistent with a private transaction.

Investment Intent. Each Purchaser will represent in the NPA that it is acquiring the Notes for its own account, for investment purposes only, and not with a view to, or for offer or sale in connection with, any distribution thereof within the meaning of Section 2(a)(11) of the Securities Act. The Notes and any Conversion Shares will bear appropriate restrictive legends referencing the restrictions on transfer applicable to unregistered securities.

Conclusion. Based on the foregoing analysis, the proposed Offering satisfies the requirements of Section 4(a)(2) of the Securities Act as a transaction by the issuer not involving any public offering. The Offering is limited to a small number of sophisticated institutional investors, the majority of which have pre-existing substantive relationships with the Company; no general solicitation or advertising has been employed; each Purchaser has had or will have access to comprehensive information regarding the Company; and each Purchaser will represent its investment intent in the transaction documents. We are satisfied that the offerees in this transaction are able to "fend for themselves" within the meaning of Ralston Purina and do not require the protections of the registration process.

V. Rule 506(b) of Regulation D — Safe Harbor Analysis

A. Overview of Regulation D

Regulation D, comprising Rules 500 through 508, was adopted by the SEC to provide a series of non-exclusive safe harbors under Section 4(a)(2) of the Securities Act. Compliance with the conditions of a particular Regulation D exemption provides an issuer with a greater degree of certainty that its offering will be deemed exempt from registration, without foreclosing the issuer's ability to rely directly on the statutory exemption of Section 4(a)(2).

Rule 506(b) of Regulation D is the safe harbor most commonly used for private placements by venture-backed companies. Under Rule 506(b), an issuer may sell securities to an unlimited number of "accredited investors" (as defined in Rule 501(a)) and up to thirty-five (35) non-accredited investors who are "sophisticated" (i.e., who have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the prospective investment), provided that the issuer does not engage in any form of general solicitation or general advertising in connection with the offering. If any non-accredited investors participate, the issuer must provide specified disclosure documents to such investors under Rule 502(b); however, if the offering is limited to accredited investors, the enhanced disclosure requirements of Rule 502(b) do not apply.

Importantly, compliance with Rule 506(b) confers a significant additional benefit: securities sold under Rule 506 are "covered securities" under Section 18(b)(4)(D) of the Securities Act, as added by the National Securities Markets Improvement Act of 1996 ("NSMIA"). As "covered securities," they are exempt from state-level substantive merit review and registration requirements, although states retain the authority to require notice filings, collect fees, and bring enforcement actions for fraud. This federal preemption substantially simplifies the blue sky compliance process for issuers conducting nationwide offerings.

We recommend that the Company structure the Offering to comply with the conditions of Rule 506(b) in order to avail itself of this safe harbor and the associated federal preemption of state registration requirements. The following subsections analyze each of the material conditions of Rule 506(b) as applied to the Offering.

B. Accredited Investor Analysis — Rule 501(a)

Rule 501(a) of Regulation D sets forth the definition of "accredited investor" for purposes of Regulation D. Several categories of accredited investors are defined, including natural persons meeting specified income or net worth thresholds, banks, insurance companies, registered investment companies, employee benefit plans, and certain other entities. The categories most relevant to the Purchasers in the Offering are:

Rule 501(a)(3) — Any organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, partnership, or limited liability company, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000.

Rule 501(a)(8) — Any entity in which all of the equity owners are accredited investors. This provision provides an alternative basis for qualification and may apply to entities that qualify under another category (such as Rule 501(a)(3)) as well as to entities whose equity owners are themselves accredited investors.

Rule 501(a)(13) — "Knowledgeable employees" of a private fund, as defined in Rule 3c-5(a)(4) under the Investment Company Act of 1940. While this category may be applicable to certain individuals within the general partner entities of the Purchasers, it is not the primary basis for the Purchasers' qualification as accredited investors.

Application to Each Purchaser:

Ridgeline Ventures Fund IV, L.P. Ridgeline Ventures Fund IV, L.P. is a Delaware limited partnership with approximately $1.8 billion in assets under management. It was formed as a growth-stage venture capital fund and was not formed for the specific purpose of acquiring the Notes in this Offering. Its total assets substantially exceed $5,000,000. Accordingly, Ridgeline qualifies as an accredited investor under Rule 501(a)(3). In the alternative, Ridgeline may qualify under Rule 501(a)(8) if all of its equity owners (limited partners and the general partner, Ridgeline Ventures Management IV, LLC) are themselves accredited investors, which is typical for institutional venture capital funds of this size.

Beacon Hill Capital Partners, LLC. Beacon Hill Capital Partners, LLC is a Delaware limited liability company with approximately $3.2 billion in assets under management. It operates as a late-stage crossover fund and was not formed for the specific purpose of acquiring the Notes. Its total assets substantially exceed $5,000,000. Beacon Hill qualifies as an accredited investor under Rule 501(a)(3).

Northstar Innovation Fund II, L.P. Northstar Innovation Fund II, L.P. is a Delaware limited partnership with approximately $900 million in assets under management. It was formed as an early-to-growth-stage technology fund and was not formed for the specific purpose of acquiring the Notes. Its total assets substantially exceed $5,000,000. Northstar qualifies as an accredited investor under Rule 501(a)(3).

Halcyon Growth Equity, L.P. Halcyon Growth Equity, L.P. is a Delaware limited partnership with approximately $2.1 billion in assets under management. It serves as a growth equity fund and was not formed for the specific purpose of acquiring the Notes. Its total assets substantially exceed $5,000,000. Halcyon qualifies as an accredited investor under Rule 501(a)(3).

Recommendation. Although the accredited investor status of each Purchaser appears clear based on the information available, we recommend that the Company obtain completed accredited investor questionnaires or certifications from each Purchaser as part of the closing deliverables under the NPA. Such questionnaires should be drafted to elicit the specific factual basis for each Purchaser's qualification as an accredited investor and should be executed by an authorized representative of each Purchaser. This documentation will provide additional evidentiary support for the Company's reliance on Rule 506(b) in the event of any future inquiry by the SEC or other regulatory authority.

Because no non-accredited investors are participating in the Offering, the enhanced information delivery requirements of Rule 502(b) — which require the issuer to furnish specified financial statements and other disclosure documents to non-accredited investors — do not apply. This simplifies the disclosure obligations of the Company, although we note that the Company remains subject to the anti-fraud provisions of the federal securities laws and must ensure that all information provided to the Purchasers is complete, accurate, and not misleading, as discussed in Section XII below.

C. Prohibition on General Solicitation — Rule 502(c)

Rule 502(c) of Regulation D provides that, in connection with any offering made in reliance on Rule 506(b), "neither the issuer nor any person acting on its behalf shall offer or sell the securities by any form of general solicitation or general advertising," including, but not limited to:

(i) any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio;

(ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising; and

(iii) any website, social media posting, or other electronic communication accessible to the general public.

The determination of whether a particular communication constitutes "general solicitation" or "general advertising" is a facts-and-circumstances inquiry. The SEC and its staff have consistently emphasized that the relevant inquiry focuses on whether there is a pre-existing, substantive relationship between the issuer (or its agents) and the offeree. A "pre-existing" relationship is one that was established before the commencement of the offering, and a "substantive" relationship is one through which the issuer (or its agent) has sufficient information about the offeree to evaluate the offeree's financial circumstances, sophistication, and suitability as an investor.

Application to the Offering. Based on the information provided by the Company and its officers, the Company has not published any advertisements, press releases, social media posts, or other public communications regarding the Offering. The Company has not engaged in any media outreach or public relations activities in connection with the Offering. No offering materials have been posted on the Company's website or on any third-party platform. No seminars, meetings, or presentations open to the general public have been held. No placement agent, broker-dealer, or finder has been engaged to solicit investors or identify prospective purchasers.

The Company identified the four Purchasers through pre-existing substantive relationships. Three of the four Purchasers — Ridgeline Ventures (through its predecessor Fund III), Beacon Hill Capital Partners, and Halcyon Growth Equity — are existing stockholders of the Company, having participated in the Company's prior equity financing rounds. The Company and its management team have ongoing relationships with these investors, including regular communication regarding the Company's business, financial condition, and strategic plans, as well as the exercise of information rights and governance rights under existing investor agreements. Northstar Innovation Fund II, L.P., the sole new investor, was introduced to the Company through Ridgeline's venture capital network — specifically, through a private introduction by Catherine Drummond, Managing Partner of Ridgeline Ventures, who has a long-standing professional relationship with Wei-Lin Chang, Managing Partner of Northstar. This introduction occurred within the context of an established, private venture capital network and did not involve any form of public communication or solicitation.

The term sheet for the Offering was negotiated bilaterally between the Company and Ridgeline Ventures as lead investor. The negotiated term sheet was then circulated to the remaining syndicate members (Beacon Hill, Northstar, and Halcyon) on a confidential basis, with appropriate confidentiality undertakings. At no point was the term sheet or any other offering material made available to the public or to any person other than the four Purchasers and their respective counsel and advisors.

Conclusion. The no-general-solicitation requirement of Rule 502(c) is satisfied. The Company has not engaged in, and will not engage in, any form of general solicitation or general advertising in connection with the Offering.

D. Manner of Offering and Conditions of Rule 502(d) — Resale Limitations

Rule 502(d) of Regulation D provides that securities sold under Rule 506(b) are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act. As restricted securities, the Notes (and any Conversion Shares issued upon conversion thereof) may not be resold by the Purchasers unless such resale is registered under the Securities Act or qualifies for an applicable exemption from registration.

Rule 502(d) further requires the issuer to "exercise reasonable care" to assure that the purchasers of the securities are not "underwriters" within the meaning of Section 2(a)(11) of the Securities Act — that is, that the purchasers are acquiring the securities for investment and not with a view to distribution. The rule specifies that "reasonable care" may be demonstrated by the issuer through the following measures:

(i) Reasonable inquiry as to whether the purchaser is acquiring the securities for the purchaser's own account or for the account of others, and whether the purchaser is acquiring with a view to distribution;

(ii) Written disclosure to each purchaser prior to sale that the securities have not been registered under the Securities Act and therefore cannot be resold unless they are registered or an exemption from registration is available;

(iii) Placement of a restrictive legend on the certificate or other document evidencing the securities, stating that the securities have not been registered and are subject to restrictions on transfer; and

(iv) Issuance of stop-transfer instructions to the Company's transfer agent (to the extent applicable, i.e., upon conversion of the Notes into equity securities held in book-entry form by the Company's transfer agent).

Application to the Offering. The NPA will include customary investment representations from each Purchaser, including representations that: (a) such Purchaser is acquiring the Notes for its own account, for investment purposes only, and not with a view to, or for offer or sale in connection with, any distribution thereof; (b) such Purchaser understands that the Notes and any Conversion Shares have not been registered under the Securities Act and are "restricted securities" subject to restrictions on transfer; (c) such Purchaser has been advised that the Notes and Conversion Shares may not be resold absent registration or an applicable exemption; and (d) such Purchaser has the financial ability to bear the economic risk of its investment for an indefinite period.

The form of Convertible Promissory Note will include a customary restrictive legend substantially in the following form:

"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES LAWS. THIS NOTE MAY NOT BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS."

A substantially similar legend will be placed on the stock certificates (or book-entry notations) representing any Conversion Shares issued upon conversion of the Notes. Stop-transfer instructions will be issued to the Company's transfer agent at the time of any such conversion.

E. Number of Purchasers — Rule 501(e)

Under Rule 506(b), there is no limit on the number of accredited investor purchasers. The thirty-five (35) purchaser limit applies only to non-accredited investors. Because all four Purchasers in the Offering are accredited investors, no counting issues arise under Rule 501(e), which provides the counting rules for determining the number of non-accredited purchasers in a Regulation D offering. We note Rule 501(e) for completeness: it provides that the number of purchasers is calculated excluding accredited investors and certain related parties, and that entities may be counted as a single purchaser in certain circumstances. These provisions are not implicated in the present Offering because no non-accredited investors are participating.

F. Integration Analysis — Rule 502(a) and Rule 152

General Doctrine. Integration is the SEC doctrine under which multiple offerings by the same issuer may be "integrated" — that is, treated as a single offering for purposes of determining whether the combined offering complies with the conditions of an applicable exemption from registration. If multiple transactions are integrated and the combined offering fails to meet the conditions of the exemption relied upon (for example, because one component involved general solicitation), the exemption may be lost for the entire combined offering, with the result that all sales in the integrated offering are made in violation of Section 5 of the Securities Act.

The integration doctrine is of particular concern in the context of the Offering for two reasons: (a) the Company has engaged in prior equity financings (most recently, the Series C closing in July 2021), and (b) the Company anticipates conducting a Planned Series D equity financing in Q3–Q4 2024. If the Offering were integrated with either the Series C or the Planned Series D, the combined offering might not satisfy the conditions of the exemption if, for example, the Planned Series D were conducted in a manner inconsistent with Rule 506(b) (e.g., if the Planned Series D were conducted under Rule 506(c) with general solicitation).

Safe Harbor — Rule 502(a). Rule 502(a) provides a traditional six-month safe harbor for integration analysis. Under this provision, offers and sales that are made more than six months before the start of a Regulation D offering, or more than six months after its completion, generally will not be integrated with such offering, provided that during those six-month periods the issuer does not make any offers or sales of securities of the same or a similar class as those offered or sold in the Regulation D offering (other than those made pursuant to employee compensation plans exempt under Rule 701 under the Securities Act or pursuant to an employee benefit plan as defined in Rule 405 under the Securities Act).

The Company's most recent prior equity financing — the Series C round — closed in July 2021, more than two years prior to the anticipated Initial Closing of the Offering. There is no risk of integration between the Series C and the Offering under the six-month safe harbor of Rule 502(a).

The Planned Series D is anticipated to commence in Q3 or Q4 of 2024. Assuming the Final Closing of the Offering occurs in early 2024, the commencement of the Planned Series D would be more than six months after the Final Closing. Accordingly, there is no integration concern between the Offering and the Planned Series D under the traditional six-month safe harbor.

Rule 152 (Amended 2020). In November 2020, the SEC adopted amendments to Rule 152 under the Securities Act, which provides a comprehensive framework for the integration analysis. Amended Rule 152 establishes a general principle of integration and four non-exclusive safe harbors:

Rule 152(b)(1): Any offering made more than 30 calendar days before the commencement of a subsequent offering, or more than 30 calendar days after the termination or completion of a subsequent offering, will not be integrated with such subsequent offering, provided that the earlier offering was made in compliance with the conditions of its applicable exemption (or registration requirements). This safe harbor is applicable here: the Series C closed more than two years before the Offering, and the Planned Series D is expected to commence well more than 30 days (and, indeed, more than six months) after the completion of the Offering.

Rule 152(b)(2): Offers and sales made in compliance with Rule 506(b) will not be integrated with another exempt offering made under Rule 506(b) or any other exemption, provided that each offering independently satisfies the conditions of its respective exemption. This safe harbor provides additional comfort that the Offering will not be integrated with the Planned Series D, regardless of the exemption relied upon for the Planned Series D, so long as each offering independently complies with its own exemption.

Conversion of Notes. A separate integration question arises with respect to the issuance of Conversion Shares upon conversion of the Notes. We conclude that the issuance of Conversion Shares should not be treated as a separate "offering" for integration purposes, but rather as part of the same integrated transaction as the original issuance of the Notes. This conclusion is supported by the following considerations: (a) the conversion is contemplated in the original transaction documents (the NPA and the form of Note); (b) the conversion occurs automatically (in the case of a Qualified Financing) or at the election of the holder (at maturity), in each case pursuant to the terms of the Notes as originally issued; (c) no additional consideration is paid by the holders in connection with the conversion (the conversion price is established at the time of the original Note issuance); and (d) no new offerees are involved in the conversion — the Conversion Shares are issued only to the original Note holders. The conversion is, in substance, a transformation of the form of the security (from a debt instrument to equity), not a new offer and sale.

Conclusion. No integration concerns exist with respect to the Company's prior offerings or the Planned Series D. The conversion of the Notes into Conversion Shares should be treated as part of the same transaction as the original Note issuance and should be covered by the same Section 4(a)(2)/Rule 506(b) exemption.

G. Bad Actor Disqualification — Rule 506(d)

Rule 506(d) of Regulation D, adopted by the SEC in July 2013, disqualifies an issuer from relying on the Rule 506 exemption if any "covered person" associated with the offering is subject to a specified "disqualifying event." The rule was adopted pursuant to Section 926 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Covered Persons. Rule 506(d)(1) defines "covered persons" to include:

(i) the issuer and any predecessor of the issuer or affiliated issuer;

(ii) any director, executive officer, or other officer participating in the offering of the issuer;

(iii) any general partner or managing member of the issuer;

(iv) any beneficial owner of 20% or more of the issuer's outstanding voting equity securities, calculated on the basis of voting power;

(v) any promoter connected with the issuer in any capacity at the time of the offering;

(vi) any investment manager of an issuer that is a pooled investment fund and any director, executive officer, or other officer participating in the offering of any such investment manager or general partner or managing member of such investment manager;

(vii) any person that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with such sale of securities (a "compensated solicitor"); and

(viii) any general partner or managing member of any such compensated solicitor.

Disqualifying Events. The disqualifying events specified in Rule 506(d)(1) include, among others: (a) certain criminal convictions in connection with the purchase or sale of securities, making false filings with the SEC, or conduct of underwriters, brokers, dealers, or investment advisers; (b) certain court injunctions and restraining orders in connection with the purchase or sale of securities; (c) certain final orders of state securities regulators, banking regulators, credit union regulators, insurance regulators, or federal banking agencies; (d) certain SEC disciplinary orders, cease-and-desist orders, or stop orders; (e) SEC orders suspending or revoking the registration of a broker, dealer, or investment adviser; (f) suspension or expulsion from membership in, or bar from association with a member of, a self-regulatory organization; and (g) certain U.S. Postal Service false representation orders.

Application to the Offering. Calderwood & Harkness LLP should confirm — and we recommend that the Company take affirmative steps to confirm — that no covered person associated with the Offering is subject to any disqualifying event. Specifically:

• Company Officers and Directors. None of Skybridge's directors or executive officers — including Arjun Mehta (CEO & Co-Founder), Elena Vasquez (COO), David Lindstrom (CFO), Priya Ramanathan (General Counsel), and Marcus Tillman (CTO) — should be subject to any disqualifying event. We recommend that the Company obtain written certifications from each such individual confirming the absence of disqualifying events.

• 20% Beneficial Equity Holders. Any beneficial owner of 20% or more of the Company's outstanding voting equity securities is a covered person. The Company should identify all such holders and obtain certifications from each.

• Compensated Solicitors. No placement agent, broker-dealer, finder, or other compensated solicitor has been engaged in connection with the Offering. Accordingly, this category of covered persons is not implicated.

• Purchaser-Side Covered Persons. While purchasers are not themselves "covered persons" under Rule 506(d)(1), the SEC staff has clarified that certain relationships between purchasers and the issuer (e.g., if a purchaser is a 20% beneficial equity holder of the issuer) may bring the purchaser within the scope of the covered persons definition. We recommend that the NPA include representations from each Purchaser regarding the bad actor status of its general partner, managing members, and other relevant persons.

Recommendation. We recommend that the Company include bad actor representations and questionnaires in the NPA and obtain completed questionnaires from each covered person (including Company officers and directors, 20% equity holders, and the relevant persons associated with each Purchaser) prior to the Initial Closing. The questionnaires should be substantially in the form customarily used in Rule 506(b) offerings and should be reviewed by Calderwood & Harkness LLP prior to closing.

Disclosure Obligation — Rule 506(e). Rule 506(e) provides that disqualifying events that occurred before September 23, 2013 (the effective date of Rule 506(d)) do not trigger disqualification but must be disclosed to investors a reasonable time prior to sale. We are not aware of any pre-September 23, 2013 disqualifying events affecting any covered person, but this should be confirmed through the questionnaire process.

H. Summary of Rule 506(b) Compliance

The following table summarizes each material requirement of Rule 506(b) and the Company's compliance status:

VI. Form D Filing Requirements — Rule 503

A. Initial Filing

Rule 503 of Regulation D requires the issuer to file a notice on Form D with the SEC no later than fifteen (15) calendar days after the first sale of securities in the offering. The "first sale" for purposes of this requirement will be the date of the Initial Closing — that is, the date on which the Company executes the NPA and the Notes are issued to the Initial Closing Purchasers in exchange for the release of funds from the Granite Trust Company escrow.

Form D is a brief notice filing that provides the SEC with basic information about the issuer and the offering. The information to be included in the Form D filing for the Offering includes, but is not limited to, the following:

• Issuer name: Skybridge Fintech Ltd.

• Issuer EIN: 83-2147605

• Jurisdiction of incorporation/organization: Delaware

• Principal place of business: 1400 Market Street, Suite 2200, Wilmington, DE 19801

• Type of securities offered: Convertible Promissory Notes

• Aggregate offering amount: $60,000,000

• Total amount sold as of the Initial Closing: $45,000,000

• Exemption relied upon: Rule 506(b) of Regulation D

• Names of the issuer's executive officers and directors

• Number of non-accredited investors: Zero (0)

• Whether the offering has been completed or is ongoing

The Form D must be filed electronically through the SEC's EDGAR filing system. Prior to filing, the Company (or its authorized representative) will need to ensure that Skybridge has an active EDGAR Central Index Key ("CIK") and the appropriate EDGAR access codes. If the Company has not previously filed with the SEC, we will assist with the EDGAR registration process.

We note that the failure to file Form D on a timely basis does not, by itself, result in the loss of the Regulation D exemption. Rule 507 provides that the Rule 506 exemption is unavailable to an issuer only if the issuer has been enjoined by a court for failure to comply with Rule 503. Nevertheless, the timely filing of Form D is an important compliance obligation, and failure to file may have adverse consequences under state blue sky laws (which often condition their preemption on the filing of Form D) and may raise questions about the issuer's compliance posture in any future SEC inquiry. Accordingly, we strongly recommend timely filing.

B. Amendment for Final Closing

If the Final Closing involves the joinder of additional purchasers (specifically, Northstar Innovation Fund II, L.P.) or the sale of Notes in an amount beyond that sold at the Initial Closing, an amended Form D must be filed with the SEC to reflect the updated information. The amended Form D should include, at a minimum:

• Updated total amount sold: $60,000,000 (reflecting the aggregate of the Initial Closing and Final Closing amounts)

• Any additional purchaser information (to the extent required on the form)

• Confirmation that the offering has been completed (if the Final Closing represents the final sale in the Offering)

The amendment must be filed within fifteen (15) calendar days after the Final Closing. We will prepare the amended Form D and coordinate its filing with the Company's designated EDGAR agent.

C. Annual Amendment

If the Offering extends beyond one year from the date of the initial Form D filing without being completed, Rule 503 requires the filing of an annual amendment to Form D on or before the first anniversary of the initial filing. Given the anticipated timeline of the Offering — with the Initial Closing expected in late November or early December 2023 and the Final Closing expected within thirty to sixty days thereafter — we do not anticipate that an annual amendment will be required. However, if unexpected delays cause the Offering to remain open for more than twelve months, we will advise the Company of this requirement.

VII. State Securities ("Blue Sky") Considerations

A. Federal Preemption Under NSMIA — Section 18 of the Securities Act

As noted above, securities offered or sold in a transaction exempt under Rule 506 of Regulation D are "covered securities" under Section 18(b)(4)(D) of the Securities Act, as added by the National Securities Markets Improvement Act of 1996 ("NSMIA"). The designation of securities as "covered securities" has important practical consequences: under Section 18(a) of the Securities Act, no state may require the registration or qualification of a covered security, or require the filing of any offering document with respect to a covered security, as a condition to the offer or sale of such security in the state.

The federal preemption afforded by NSMIA significantly reduces the regulatory burden on issuers conducting offerings under Rule 506 by eliminating the need to comply with the substantive registration and merit review requirements of individual states. However, NSMIA does not entirely eliminate state regulatory authority over Rule 506 offerings. Specifically, under Section 18(c)(2) of the Securities Act, states retain the authority to:

(i) require the filing of any document filed with the SEC pursuant to the Securities Act (including Form D), together with any annual or periodic reports, and a consent to service of process, and to collect a fee for such filings;

(ii) issue a stop order suspending the offer or sale of securities within the state if the state securities administrator determines that the offering would constitute fraud; and

(iii) bring enforcement actions with respect to fraud or deceit, or unlawful conduct by a broker-dealer, in connection with securities or securities transactions.

Accordingly, while the Company is not required to register the Notes under the blue sky laws of any state, the Company must comply with applicable st

MEMORANDUM
PRIVILEGED & CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION ATTORNEY WORK PRODUCT
From: Leonard Ashford, Of Counsel, and Nina Reyes, Senior Associate Calderwood & Harkness LLP 600 Lexington Avenue New York, NY 10022
To: Arjun Mehta, CEO & Co-Founder David Lindstrom, CFO Priya Ramanathan, General Counsel Skybridge Fintech Ltd. 1400 Market Street, Suite 2200 Wilmington, DE 19801
Date: November 17, 2023
Re: Securities Law Analysis — Availability of Section 4(a)(2) and Rule 506(b) of Regulation D Exemptions for the Proposed $60,000,000 Convertible Note Bridge Financing
Matter No.: 1009-00001
I. Executive Summary
Calderwood & Harkness LLP has been engaged by Skybridge Fintech Ltd. ("Skybridge" or the "Company") to analyze the federal and state securities law exemptions available for the Company's proposed issuance of convertible promissory notes (the "Notes") in the aggregate principal amount of Sixty Million Dollars ($60,000,000) to a syndicate of four institutional investors (collectively, the "Purchasers"). This memorandum sets forth our analysis of the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), and the availability of applicable exemptions therefrom, together with related state securities law ("blue sky") considerations.
Based on the analysis detailed herein, it is our conclusion that the proposed offering (the "Offering") qualifies for exemption from the registration requirements of Section 5 of the Securities Act under Section 4(a)(2) of the Securities Act, which exempts "transactions by an issuer not involving any public offering," and Rule 506(b) of Regulation D promulgated thereunder by the Securities and Exchange Commission (the "SEC"), which provides a non-exclusive safe harbor for private placements to accredited investors.
In reaching this conclusion, we have considered and determined the following:
•  The convertible promissory notes, and the shares of equity securities issuable upon conversion thereof (the "Conversion Shares"), constitute "securities" within the meaning of Section 2(a)(1) of the Securities Act. Accordingly, the offer and sale of such instruments must either be registered under Section 5 of the Securities Act or qualify for an applicable exemption from registration.
•  No general solicitation or general advertising, as those terms are understood under Rule 502(c) of Regulation D and applicable SEC guidance, has been or will be employed in connection with the Offering. The Company identified and approached each Purchaser through pre-existing substantive relationships or through direct introductions within established venture capital networks.
•  All four Purchasers qualify as "accredited investors" within the meaning of Rule 501(a) of Regulation D, each being an institutional investment fund with total assets substantially in excess of $5,000,000 and not having been formed for the specific purpose of acquiring the securities being offered.
•  A notice on Form D must be filed with the SEC via the EDGAR system no later than fifteen (15) calendar days following the first sale of securities in the Offering, which will be the date of the Initial Closing (as defined below).
•  State blue sky notice filings will be required in certain jurisdictions, including Delaware, Massachusetts, Illinois, California, and Washington, as discussed in further detail in Section VII of this memorandum.
Based on the foregoing, we recommend that the Company proceed with the Offering in reliance on Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D, subject to strict compliance with the procedural and filing requirements detailed herein. The specific action items necessary to ensure compliance are set forth in Section XIII below, and we recommend that the Company and its officers review those items carefully in advance of the anticipated closing.
II. Background and Transaction Overview
A. The Company
Skybridge Fintech Ltd. ("Skybridge" or the "Company") is a Delaware corporation (C-corporation) originally incorporated under the laws of the State of Delaware on March 14, 2017. The Company's Employer Identification Number is 83-2147605, and its Delaware Division of Corporations file number is 6384291. The Company's principal executive offices are located at 1400 Market Street, Suite 2200, Wilmington, Delaware 19801.
Skybridge operates a cloud-based payments orchestration and embedded lending platform designed to serve mid-market e-commerce companies. The Company's platform enables merchants to integrate multiple payment service providers, optimize transaction routing, and offer embedded lending products to their end customers through a single API-driven infrastructure layer. As of the third quarter of 2023, the Company reported annualized gross payment volume ("GPV") of approximately $4.2 billion, annual recurring revenue ("ARR") of approximately $78 million, and a net revenue retention rate of approximately 128%, reflecting robust expansion revenue from existing customers. The Company currently employs approximately 310 full-time equivalents ("FTEs") across its engineering, product, operations, sales, and administrative functions.
The Company has completed multiple rounds of equity financing since its founding. The Company raised its Series A round from Crestpoint Seed Partners, L.P. Its Series B round was led by Halcyon Growth Equity, L.P. Most recently, the Company closed its Series C financing round in July 2021, led by Ridgeline Ventures Fund III, L.P. and joined by Beacon Hill Capital Partners, LLC, at a post-money valuation of approximately $620 million. On a fully diluted basis (accounting for all outstanding shares of common stock and preferred stock, together with shares reserved for issuance under outstanding options, warrants, and other convertible securities), the Company has approximately 48,500,000 shares outstanding as of the date of this memorandum.
In addition to its equity capitalization, the Company has outstanding indebtedness in the form of a $15 million venture debt facility with Kelvantis Lending Corp., pursuant to a Loan and Security Agreement dated August 15, 2022, which matures on August 15, 2025. This facility is secured by substantially all of the Company's assets. As discussed below, the Notes to be issued in the Offering will be subordinate to the Company's obligations under the Kelvantis facility.
The Company is not a reporting company under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and is not required to file periodic reports with the SEC. The Company's securities are not listed or quoted on any national securities exchange or interdealer quotation system.
B. The Proposed Offering
The Company proposes to issue convertible promissory notes (the "Notes") in the aggregate principal amount of $60,000,000 to the four Purchasers identified in Section II.C below. The material terms of the Notes, as set forth in the current term sheet dated October 28, 2023, and as expected to be reflected in the Note Purchase Agreement (the "NPA") and the form of Convertible Promissory Note, are summarized as follows:
Instrument. Convertible promissory notes, to be issued pursuant to a Note Purchase Agreement among the Company and the Purchasers.
Aggregate Principal Amount. $60,000,000.
Interest Rate. 6.00% per annum (600 basis points), computed as simple interest on the basis of a 365-day year, accruing from the applicable Closing Date and payable at maturity or upon conversion.
Maturity. Twenty-four (24) months from the date of the Initial Closing (as defined below). Based on the currently anticipated Initial Closing date, the expected maturity date of the Notes would be approximately January 15, 2026.
Conversion Trigger — Qualified Financing. The Notes will automatically convert into equity securities upon the closing of a "Qualified Financing," defined as a round of equity financing (anticipated to be the Company's Series D Preferred Stock financing) in which the Company raises at least $80,000,000 in new equity capital from investors.
Conversion discount. The Notes will convert at a 20% discount to the price per share paid by investors in the Qualified Financing. That is, the Note holders will receive shares at a price equal to 80% of the Series D price per share.
Valuation Cap. The Notes are subject to a valuation cap of $750,000,000 on a pre-money basis.
Conversion Price. The conversion price applicable to the Notes upon a Qualified Financing will be the lower of: (a) 80% of the price per share of the Qualified Financing (reflecting the 20% conversion discount), or (b) the price per share implied by the $750,000,000 valuation cap on a fully diluted basis, which, based on the current fully diluted share count of approximately 48,500,000 shares, yields an implied conversion price of approximately $15.46 per share. The conversion price ensures that Note holders receive the benefit of the more favorable conversion mechanism.
Change of Control. In the event of a Change of Control (to be defined in the NPA to include mergers, asset sales, and similar fundamental transactions) occurring prior to the conversion or repayment of the Notes, each Note holder will be entitled to receive, at such holder's election, the greater of: (i) 2.0x the outstanding principal amount of such holder's Note plus all accrued and unpaid interest thereon, or (ii) the amount that would have been payable to such holder had the Note been converted immediately prior to the Change of Control at the Valuation Cap price.
Most Favored Nation Provision. The Notes will include a "most favored nation" provision pursuant to which, if the Company issues any subsequent convertible notes or simple agreements for future equity ("SAFEs") on terms more favorable to the holders thereof than the terms of the Notes, the Note holders will have the right to amend their Notes to incorporate such more favorable terms.
Subordination. The Notes will be subordinated to the Company's existing obligations under the Kelvantis Lending Corp. venture debt facility. The terms of subordination will be set forth in the NPA and, if required, in a separate intercreditor or subordination agreement with Kelvantis.
Governing Documents. The Notes will be issued pursuant to a Note Purchase Agreement, to be negotiated among the Company, the Purchasers, and their respective counsel. The form of Convertible Promissory Note will be attached as an exhibit to the NPA.
C. The Purchasers
The Company proposes to sell the Notes to a syndicate of four institutional investors. The following table sets forth certain information regarding each Purchaser, including its organizational form, principal office, key personnel, commitment amount, and relationship to the Company:
Total Commitment: $60,000,000 across four Purchasers.
We note that investor counsel for the syndicate is Whitfield, Pratt & Soo LLP, with Graham Whitfield serving as lead partner and Danielle Kwon as the primary associate on the matter. Whitfield, Pratt & Soo LLP is located at One Federal Street, 26th Floor, Boston, MA 02110. Whitfield, Pratt & Soo LLP represents Ridgeline Ventures Fund IV, L.P. as lead investor on behalf of the syndicate. We understand that each of the other Purchasers has consented to joint representation by Whitfield, Pratt & Soo LLP for purposes of the NPA negotiation, while reserving the right to engage independent counsel.
D. Closing Structure
The Offering is expected to close in two tranches:
Initial Closing. The initial closing (the "Initial Closing") is expected to involve the sale of Notes in the aggregate principal amount of $45,000,000 to three of the four Purchasers, allocated as follows: Ridgeline Ventures Fund IV, L.P. ($30,000,000), Beacon Hill Capital Partners, LLC ($10,000,000), and Halcyon Growth Equity, L.P. ($5,000,000). The Initial Closing is currently anticipated to occur in late November or early December 2023, subject to the satisfaction of customary closing conditions set forth in the NPA.
Final Closing. The final closing (the "Final Closing") is expected to involve the sale of Notes in the aggregate principal amount of $15,000,000 to the remaining Purchasers, allocated as follows: Beacon Hill Capital Partners, LLC ($5,000,000, representing the balance of its $15,000,000 commitment), and Northstar Innovation Fund II, L.P. ($10,000,000). The Final Closing is anticipated to occur within thirty (30) to sixty (60) days following the Initial Closing, subject to the completion of Northstar's due diligence process and satisfaction of its internal investment committee approval requirements.
All funds will be deposited in escrow at Granite Trust Company, N.A. (Escrow Account No. 4401-7829-SBF) pending satisfaction of applicable closing conditions, and will be released to the Company upon the occurrence of the relevant closing. The escrow arrangements will be governed by a separate Escrow Agreement among the Company, the Purchasers, and Granite Trust Company, N.A. as escrow agent.
The Company anticipates commencing its Series D Preferred Stock financing (the "Planned Series D") in Q3 or Q4 of 2024. If the Planned Series D constitutes a "Qualified Financing" as defined in the NPA (i.e., raises at least $80,000,000 in new equity capital), the Notes will automatically convert into shares of Series D Preferred Stock at the applicable conversion price. The timing and terms of the Planned Series D will be the subject of separate analysis at the appropriate time.
III. The Securities at Issue
The threshold question in any securities law analysis is whether the instruments at issue constitute "securities" within the meaning of the applicable statutory definition. We address this question with respect to both the Notes themselves and the equity securities issuable upon their conversion.
A. The Convertible Notes Are "Securities"
Section 2(a)(1) of the Securities Act defines the term "security" broadly to include, among other things, "any note, stock, treasury stock, security future, security-based swap, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, ... [or] investment contract." The statutory definition expressly includes "any note," which would, on its face, encompass the convertible promissory notes to be issued in the Offering.
However, the Supreme Court has held that not every note is a "security" within the meaning of the federal securities laws. In Reves v. Rowan Whitfield CPAs LLP, 494 U.S. 56 (1990), the Court adopted the "family resemblance" test to determine whether a particular note should be treated as a security. Under this test, a note is presumed to be a security, and the issuer bears the burden of demonstrating that the note "bears a strong resemblance" to one of the categories of notes that the Court has identified as falling outside the definition — a "family" of non-security notes that includes notes delivered in consumer financing, notes secured by a lien on a small business or its assets, short-term notes secured by an assignment of accounts receivable, notes evidencing "character" loans to bank customers, short-term notes secured by an assignment of accounts receivable, and notes that simply formalize an open-account debt incurred in the ordinary course of business.
In determining whether a note bears a "family resemblance" to one of these categories, the Court in Reves identified four factors to be considered:
1.  The motivations of the buyer and seller. If the seller's purpose is to raise money for the general use of a business enterprise or to finance substantial investments, and the buyer is interested primarily in the profit the note is expected to generate, the note is more likely to be a security. Conversely, if the note is exchanged to facilitate the purchase and sale of a minor asset or consumer good, to correct for the seller's cash-flow difficulties, or to advance some other commercial or consumer purpose, it is less likely to be a security.
2.  The plan of distribution. If the note is offered and sold to a broad segment of the public, it is more likely a security. If the note is sold only to a limited class of persons, the analysis may cut either way, depending on the nature of those persons and the purpose of the transaction.
3.  The reasonable expectations of the investing public. Whether the public would reasonably expect the note to be treated as a security is relevant to the analysis.
4.  The existence of an alternative regulatory regime. If some factor, such as the existence of another regulatory scheme, significantly reduces the risk of the instrument, that factor suggests the note is not a security.
Applying the Reves factors to the convertible promissory notes at issue:
Motivations. The Company's motivation in issuing the Notes is to raise $60,000,000 in capital to fund the Company's ongoing operations and growth initiatives — a quintessential investment purpose. The Purchasers' motivation in acquiring the Notes is to obtain a return on their investment, both through the accrual of interest at 6.00% per annum and, more significantly, through the conversion feature that provides the Purchasers with the opportunity to acquire equity securities at a discount to the Qualified Financing price. This is a classic investment motivation.
Plan of Distribution. The Notes are being offered and sold to a closed group of four institutional investors, none of which intends to redistribute the Notes to the public. While this factor does not definitively resolve the inquiry, it does not negate the investment character of the transaction.
Reasonable Expectations. The Purchasers, as sophisticated institutional investors, would reasonably expect the Notes to be treated as securities subject to the protections of the federal securities laws. The convertible feature and investment-return orientation of the Notes reinforce this expectation.
Alternative Regulatory Regime. There is no alternative regulatory regime that governs the Notes or that would significantly reduce the risk to Note holders. The Notes are not subject to regulation under the banking laws, consumer credit statutes, or any other regulatory framework that might serve as a substitute for the protections of the securities laws.
Conclusion. The convertible promissory notes to be issued in the Offering are "securities" within the meaning of Section 2(a)(1) of the Securities Act. The Notes do not bear a family resemblance to any of the categories of non-security notes identified in Reves. Accordingly, the offer and sale of the Notes must either be registered under Section 5 of the Securities Act or qualify for an applicable exemption from registration.
B. The Underlying Conversion Shares Are "Securities"
Upon conversion of the Notes — whether automatically upon a Qualified Financing or at the election of the holders at maturity — the Notes will convert into shares of equity securities. In the case of a Qualified Financing, the Notes will convert into shares of Series D Preferred Stock (or such other class or series of equity securities as may be issued in the Qualified Financing). In the case of an optional conversion at maturity, the Notes will convert into shares priced at the Valuation Cap-implied price of approximately $15.46 per share.
The equity securities issuable upon conversion of the Notes are unquestionably "securities" within the meaning of Section 2(a)(1) of the Securities Act, which expressly includes "stock" and any "certificate of interest or participation in any profit-sharing agreement" within the definition. There is no colorable argument that shares of preferred stock or common stock issued by a Delaware corporation to investors would fall outside the statutory definition.
Importantly, the exemption analysis set forth in this memorandum must cover not only the initial issuance of the Notes but also the subsequent issuance of the Conversion Shares upon conversion. As discussed in Section X below, we believe that the issuance of the Conversion Shares will be covered by the same Section 4(a)(2)/Rule 506(b) exemption that applies to the initial sale of the Notes, provided that the conversion is structured in accordance with the recommendations set forth herein. The integration analysis applicable to the conversion is addressed in Sections V.F and X of this memorandum.
IV. Section 4(a)(2) of the Securities Act — Statutory Private Placement Exemption
A. Overview of Section 4(a)(2)
Section 4(a)(2) of the Securities Act (formerly Section 4(2), redesignated by the JOBS Act of 2012) provides an exemption from the registration requirements of Section 5 for "transactions by an issuer not involving any public offering." The statutory text is notable for its brevity; it does not prescribe specific conditions or requirements, but instead articulates a broad standard that has been developed through decades of judicial interpretation and SEC guidance.
The seminal case interpreting Section 4(a)(2) is SEC v. Ralston Purina Co., 346 U.S. 119 (1953), in which the Supreme Court held that the applicability of the private placement exemption turns on whether the particular class of persons to whom the securities are offered is in need of the protections afforded by the registration process. The Court emphasized that the exemption is designed to permit transactions "where there is no practical need for [the registration requirement's] application" because the offerees are able to "fend for themselves." Id. at 125.
Drawing on Ralston Purina and its progeny, courts and the SEC have identified several factors relevant to determining whether an offering constitutes a "private placement" eligible for the Section 4(a)(2) exemption:
(i) Number of Offerees and Their Relationship to the Issuer. An offering to a small number of persons who have a pre-existing relationship with the issuer is more likely to qualify as a private placement than an offering to a large or indeterminate number of persons.
(ii) Number of Units Offered. While the size of the offering alone is not dispositive, an offering of a limited number of units to a discrete group of investors is consistent with a private placement.
(iii) Size of the Offering. As with the number of units, the dollar amount of the offering is relevant but not determinative.
(iv) Manner of the Offering. The offering must not involve general solicitation or general advertising. If the issuer or its agents use mass mailings, public advertisements, or other methods of reaching the general public, the exemption is likely unavailable.
(v) Sophistication and Access to Information. The offerees must be sufficiently sophisticated to evaluate the merits and risks of the investment, and must have access to the type of information that would be included in a registration statement. This may be demonstrated by the offerees' business experience, financial acumen, or access to the issuer's books and records.
The burden of establishing the availability of the Section 4(a)(2) exemption rests with the party claiming it — in this case, the Company. See SEC v. Ralston Purina Co., 346 U.S. at 126.
B. Application to the Skybridge Offering
Applying the factors set forth above to the proposed Offering, we conclude that the transaction qualifies as a private placement exempt from registration under Section 4(a)(2).
Number and Nature of Offerees. The Offering is limited to four institutional investors, all of which are sophisticated venture capital or growth equity funds with assets under management ranging from $900 million (Northstar Innovation Fund II, L.P.) to $3.2 billion (Beacon Hill Capital Partners, LLC). Three of the four Purchasers — Ridgeline Ventures (through its predecessor Fund III), Beacon Hill Capital Partners, and Halcyon Growth Equity — are existing investors in the Company, having participated in prior equity financing rounds. Northstar Innovation Fund II, L.P. is the only new investor, and it was identified through Ridgeline's established venture capital network rather than through any form of public solicitation. The extremely limited number of offerees and the institutional nature of each Purchaser strongly support the characterization of this Offering as a private placement. The Company has not made offers to any person or entity other than the four Purchasers identified herein.
Sophistication and Access to Information. Each Purchaser is a professionally managed institutional investment fund with dedicated deal teams, including named deal leads (Samuel Okonkwo at Ridgeline, Joanna Falkner at Beacon Hill, Wei-Lin Chang at Northstar, and Robert Castillo at Halcyon), experienced investment professionals, and legal counsel (Whitfield, Pratt & Soo LLP, representing the syndicate). Each Purchaser has extensive experience in evaluating and negotiating venture capital and growth equity transactions, including convertible note financings. Each Purchaser has had, or will have prior to the applicable Closing, access to comprehensive due diligence materials regarding the Company, including the Company's audited financial statements prepared by Pinnacle Audit Group LLP, the Company's independent Section 409A valuation report prepared by Atlas Valuation Services, Inc. dated September 15, 2023, capitalization tables, material contracts, intellectual property summaries, and the opportunity to conduct management interviews and ask questions of the Company's officers and directors. The three existing investors have the additional benefit of their historical familiarity with the Company's business, financial condition, and management team, as well as their ongoing information rights under existing investor agreements. The sophistication and access-to-information requirements of Section 4(a)(2) are clearly satisfied.
Manner of Offering. No general solicitation or general advertising has been employed in connection with the Offering. The Company has not published any advertisements, press releases, or public announcements regarding the Offering. The Company has not posted any offering materials on its website, social media channels, or any other publicly accessible platform. No seminars, meetings, or presentations open to the general public have been held. The Company identified and approached each Purchaser directly, through pre-existing business relationships or, in the case of Northstar, through a private introduction facilitated by Ridgeline's venture capital network. The term sheet was negotiated bilaterally between the Company and Ridgeline Ventures as lead investor, and thereafter circulated to the remaining syndicate members on a confidential basis. No placement agent, broker-dealer, finder, or other intermediary has been engaged to solicit investors for the Offering.
Number of Units and Size. The Offering involves a single class of convertible promissory notes sold to four Purchasers in an aggregate amount of $60,000,000. While the dollar amount is substantial, the limited number of Purchasers and the single-class structure of the Offering are consistent with a private transaction.
Investment Intent. Each Purchaser will represent in the NPA that it is acquiring the Notes for its own account, for investment purposes only, and not with a view to, or for offer or sale in connection with, any distribution thereof within the meaning of Section 2(a)(11) of the Securities Act. The Notes and any Conversion Shares will bear appropriate restrictive legends referencing the restrictions on transfer applicable to unregistered securities.
Conclusion. Based on the foregoing analysis, the proposed Offering satisfies the requirements of Section 4(a)(2) of the Securities Act as a transaction by the issuer not involving any public offering. The Offering is limited to a small number of sophisticated institutional investors, the majority of which have pre-existing substantive relationships with the Company; no general solicitation or advertising has been employed; each Purchaser has had or will have access to comprehensive information regarding the Company; and each Purchaser will represent its investment intent in the transaction documents. We are satisfied that the offerees in this transaction are able to "fend for themselves" within the meaning of Ralston Purina and do not require the protections of the registration process.
V. Rule 506(b) of Regulation D — Safe Harbor Analysis
A. Overview of Regulation D
Regulation D, comprising Rules 500 through 508, was adopted by the SEC to provide a series of non-exclusive safe harbors under Section 4(a)(2) of the Securities Act. Compliance with the conditions of a particular Regulation D exemption provides an issuer with a greater degree of certainty that its offering will be deemed exempt from registration, without foreclosing the issuer's ability to rely directly on the statutory exemption of Section 4(a)(2).
Rule 506(b) of Regulation D is the safe harbor most commonly used for private placements by venture-backed companies. Under Rule 506(b), an issuer may sell securities to an unlimited number of "accredited investors" (as defined in Rule 501(a)) and up to thirty-five (35) non-accredited investors who are "sophisticated" (i.e., who have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the prospective investment), provided that the issuer does not engage in any form of general solicitation or general advertising in connection with the offering. If any non-accredited investors participate, the issuer must provide specified disclosure documents to such investors under Rule 502(b); however, if the offering is limited to accredited investors, the enhanced disclosure requirements of Rule 502(b) do not apply.
Importantly, compliance with Rule 506(b) confers a significant additional benefit: securities sold under Rule 506 are "covered securities" under Section 18(b)(4)(D) of the Securities Act, as added by the National Securities Markets Improvement Act of 1996 ("NSMIA"). As "covered securities," they are exempt from state-level substantive merit review and registration requirements, although states retain the authority to require notice filings, collect fees, and bring enforcement actions for fraud. This federal preemption substantially simplifies the blue sky compliance process for issuers conducting nationwide offerings.
We recommend that the Company structure the Offering to comply with the conditions of Rule 506(b) in order to avail itself of this safe harbor and the associated federal preemption of state registration requirements. The following subsections analyze each of the material conditions of Rule 506(b) as applied to the Offering.
B. Accredited Investor Analysis — Rule 501(a)
Rule 501(a) of Regulation D sets forth the definition of "accredited investor" for purposes of Regulation D. Several categories of accredited investors are defined, including natural persons meeting specified income or net worth thresholds, banks, insurance companies, registered investment companies, employee benefit plans, and certain other entities. The categories most relevant to the Purchasers in the Offering are:
Rule 501(a)(3) — Any organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, partnership, or limited liability company, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000.
Rule 501(a)(8) — Any entity in which all of the equity owners are accredited investors. This provision provides an alternative basis for qualification and may apply to entities that qualify under another category (such as Rule 501(a)(3)) as well as to entities whose equity owners are themselves accredited investors.
Rule 501(a)(13) — "Knowledgeable employees" of a private fund, as defined in Rule 3c-5(a)(4) under the Investment Company Act of 1940. While this category may be applicable to certain individuals within the general partner entities of the Purchasers, it is not the primary basis for the Purchasers' qualification as accredited investors.
Application to Each Purchaser:
Ridgeline Ventures Fund IV, L.P. Ridgeline Ventures Fund IV, L.P. is a Delaware limited partnership with approximately $1.8 billion in assets under management. It was formed as a growth-stage venture capital fund and was not formed for the specific purpose of acquiring the Notes in this Offering. Its total assets substantially exceed $5,000,000. Accordingly, Ridgeline qualifies as an accredited investor under Rule 501(a)(3). In the alternative, Ridgeline may qualify under Rule 501(a)(8) if all of its equity owners (limited partners and the general partner, Ridgeline Ventures Management IV, LLC) are themselves accredited investors, which is typical for institutional venture capital funds of this size.
Beacon Hill Capital Partners, LLC. Beacon Hill Capital Partners, LLC is a Delaware limited liability company with approximately $3.2 billion in assets under management. It operates as a late-stage crossover fund and was not formed for the specific purpose of acquiring the Notes. Its total assets substantially exceed $5,000,000. Beacon Hill qualifies as an accredited investor under Rule 501(a)(3).
Northstar Innovation Fund II, L.P. Northstar Innovation Fund II, L.P. is a Delaware limited partnership with approximately $900 million in assets under management. It was formed as an early-to-growth-stage technology fund and was not formed for the specific purpose of acquiring the Notes. Its total assets substantially exceed $5,000,000. Northstar qualifies as an accredited investor under Rule 501(a)(3).
Halcyon Growth Equity, L.P. Halcyon Growth Equity, L.P. is a Delaware limited partnership with approximately $2.1 billion in assets under management. It serves as a growth equity fund and was not formed for the specific purpose of acquiring the Notes. Its total assets substantially exceed $5,000,000. Halcyon qualifies as an accredited investor under Rule 501(a)(3).
Recommendation. Although the accredited investor status of each Purchaser appears clear based on the information available, we recommend that the Company obtain completed accredited investor questionnaires or certifications from each Purchaser as part of the closing deliverables under the NPA. Such questionnaires should be drafted to elicit the specific factual basis for each Purchaser's qualification as an accredited investor and should be executed by an authorized representative of each Purchaser. This documentation will provide additional evidentiary support for the Company's reliance on Rule 506(b) in the event of any future inquiry by the SEC or other regulatory authority.
Because no non-accredited investors are participating in the Offering, the enhanced information delivery requirements of Rule 502(b) — which require the issuer to furnish specified financial statements and other disclosure documents to non-accredited investors — do not apply. This simplifies the disclosure obligations of the Company, although we note that the Company remains subject to the anti-fraud provisions of the federal securities laws and must ensure that all information provided to the Purchasers is complete, accurate, and not misleading, as discussed in Section XII below.
C. Prohibition on General Solicitation — Rule 502(c)
Rule 502(c) of Regulation D provides that, in connection with any offering made in reliance on Rule 506(b), "neither the issuer nor any person acting on its behalf shall offer or sell the securities by any form of general solicitation or general advertising," including, but not limited to:
(i) any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio;
(ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising; and
(iii) any website, social media posting, or other electronic communication accessible to the general public.
The determination of whether a particular communication constitutes "general solicitation" or "general advertising" is a facts-and-circumstances inquiry. The SEC and its staff have consistently emphasized that the relevant inquiry focuses on whether there is a pre-existing, substantive relationship between the issuer (or its agents) and the offeree. A "pre-existing" relationship is one that was established before the commencement of the offering, and a "substantive" relationship is one through which the issuer (or its agent) has sufficient information about the offeree to evaluate the offeree's financial circumstances, sophistication, and suitability as an investor.
Application to the Offering. Based on the information provided by the Company and its officers, the Company has not published any advertisements, press releases, social media posts, or other public communications regarding the Offering. The Company has not engaged in any media outreach or public relations activities in connection with the Offering. No offering materials have been posted on the Company's website or on any third-party platform. No seminars, meetings, or presentations open to the general public have been held. No placement agent, broker-dealer, or finder has been engaged to solicit investors or identify prospective purchasers.
The Company identified the four Purchasers through pre-existing substantive relationships. Three of the four Purchasers — Ridgeline Ventures (through its predecessor Fund III), Beacon Hill Capital Partners, and Halcyon Growth Equity — are existing stockholders of the Company, having participated in the Company's prior equity financing rounds. The Company and its management team have ongoing relationships with these investors, including regular communication regarding the Company's business, financial condition, and strategic plans, as well as the exercise of information rights and governance rights under existing investor agreements. Northstar Innovation Fund II, L.P., the sole new investor, was introduced to the Company through Ridgeline's venture capital network — specifically, through a private introduction by Catherine Drummond, Managing Partner of Ridgeline Ventures, who has a long-standing professional relationship with Wei-Lin Chang, Managing Partner of Northstar. This introduction occurred within the context of an established, private venture capital network and did not involve any form of public communication or solicitation.
The term sheet for the Offering was negotiated bilaterally between the Company and Ridgeline Ventures as lead investor. The negotiated term sheet was then circulated to the remaining syndicate members (Beacon Hill, Northstar, and Halcyon) on a confidential basis, with appropriate confidentiality undertakings. At no point was the term sheet or any other offering material made available to the public or to any person other than the four Purchasers and their respective counsel and advisors.
Conclusion. The no-general-solicitation requirement of Rule 502(c) is satisfied. The Company has not engaged in, and will not engage in, any form of general solicitation or general advertising in connection with the Offering.
D. Manner of Offering and Conditions of Rule 502(d) — Resale Limitations
Rule 502(d) of Regulation D provides that securities sold under Rule 506(b) are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act. As restricted securities, the Notes (and any Conversion Shares issued upon conversion thereof) may not be resold by the Purchasers unless such resale is registered under the Securities Act or qualifies for an applicable exemption from registration.
Rule 502(d) further requires the issuer to "exercise reasonable care" to assure that the purchasers of the securities are not "underwriters" within the meaning of Section 2(a)(11) of the Securities Act — that is, that the purchasers are acquiring the securities for investment and not with a view to distribution. The rule specifies that "reasonable care" may be demonstrated by the issuer through the following measures:
(i) Reasonable inquiry as to whether the purchaser is acquiring the securities for the purchaser's own account or for the account of others, and whether the purchaser is acquiring with a view to distribution;
(ii) Written disclosure to each purchaser prior to sale that the securities have not been registered under the Securities Act and therefore cannot be resold unless they are registered or an exemption from registration is available;
(iii) Placement of a restrictive legend on the certificate or other document evidencing the securities, stating that the securities have not been registered and are subject to restrictions on transfer; and
(iv) Issuance of stop-transfer instructions to the Company's transfer agent (to the extent applicable, i.e., upon conversion of the Notes into equity securities held in book-entry form by the Company's transfer agent).
Application to the Offering. The NPA will include customary investment representations from each Purchaser, including representations that: (a) such Purchaser is acquiring the Notes for its own account, for investment purposes only, and not with a view to, or for offer or sale in connection with, any distribution thereof; (b) such Purchaser understands that the Notes and any Conversion Shares have not been registered under the Securities Act and are "restricted securities" subject to restrictions on transfer; (c) such Purchaser has been advised that the Notes and Conversion Shares may not be resold absent registration or an applicable exemption; and (d) such Purchaser has the financial ability to bear the economic risk of its investment for an indefinite period.
The form of Convertible Promissory Note will include a customary restrictive legend substantially in the following form:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES LAWS. THIS NOTE MAY NOT BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS."
A substantially similar legend will be placed on the stock certificates (or book-entry notations) representing any Conversion Shares issued upon conversion of the Notes. Stop-transfer instructions will be issued to the Company's transfer agent at the time of any such conversion.
E. Number of Purchasers — Rule 501(e)
Under Rule 506(b), there is no limit on the number of accredited investor purchasers. The thirty-five (35) purchaser limit applies only to non-accredited investors. Because all four Purchasers in the Offering are accredited investors, no counting issues arise under Rule 501(e), which provides the counting rules for determining the number of non-accredited purchasers in a Regulation D offering. We note Rule 501(e) for completeness: it provides that the number of purchasers is calculated excluding accredited investors and certain related parties, and that entities may be counted as a single purchaser in certain circumstances. These provisions are not implicated in the present Offering because no non-accredited investors are participating.
F. Integration Analysis — Rule 502(a) and Rule 152
General Doctrine. Integration is the SEC doctrine under which multiple offerings by the same issuer may be "integrated" — that is, treated as a single offering for purposes of determining whether the combined offering complies with the conditions of an applicable exemption from registration. If multiple transactions are integrated and the combined offering fails to meet the conditions of the exemption relied upon (for example, because one component involved general solicitation), the exemption may be lost for the entire combined offering, with the result that all sales in the integrated offering are made in violation of Section 5 of the Securities Act.
The integration doctrine is of particular concern in the context of the Offering for two reasons: (a) the Company has engaged in prior equity financings (most recently, the Series C closing in July 2021), and (b) the Company anticipates conducting a Planned Series D equity financing in Q3–Q4 2024. If the Offering were integrated with either the Series C or the Planned Series D, the combined offering might not satisfy the conditions of the exemption if, for example, the Planned Series D were conducted in a manner inconsistent with Rule 506(b) (e.g., if the Planned Series D were conducted under Rule 506(c) with general solicitation).
Safe Harbor — Rule 502(a). Rule 502(a) provides a traditional six-month safe harbor for integration analysis. Under this provision, offers and sales that are made more than six months before the start of a Regulation D offering, or more than six months after its completion, generally will not be integrated with such offering, provided that during those six-month periods the issuer does not make any offers or sales of securities of the same or a similar class as those offered or sold in the Regulation D offering (other than those made pursuant to employee compensation plans exempt under Rule 701 under the Securities Act or pursuant to an employee benefit plan as defined in Rule 405 under the Securities Act).
The Company's most recent prior equity financing — the Series C round — closed in July 2021, more than two years prior to the anticipated Initial Closing of the Offering. There is no risk of integration between the Series C and the Offering under the six-month safe harbor of Rule 502(a).
The Planned Series D is anticipated to commence in Q3 or Q4 of 2024. Assuming the Final Closing of the Offering occurs in early 2024, the commencement of the Planned Series D would be more than six months after the Final Closing. Accordingly, there is no integration concern between the Offering and the Planned Series D under the traditional six-month safe harbor.
Rule 152 (Amended 2020). In November 2020, the SEC adopted amendments to Rule 152 under the Securities Act, which provides a comprehensive framework for the integration analysis. Amended Rule 152 establishes a general principle of integration and four non-exclusive safe harbors:
Rule 152(b)(1): Any offering made more than 30 calendar days before the commencement of a subsequent offering, or more than 30 calendar days after the termination or completion of a subsequent offering, will not be integrated with such subsequent offering, provided that the earlier offering was made in compliance with the conditions of its applicable exemption (or registration requirements). This safe harbor is applicable here: the Series C closed more than two years before the Offering, and the Planned Series D is expected to commence well more than 30 days (and, indeed, more than six months) after the completion of the Offering.
Rule 152(b)(2): Offers and sales made in compliance with Rule 506(b) will not be integrated with another exempt offering made under Rule 506(b) or any other exemption, provided that each offering independently satisfies the conditions of its respective exemption. This safe harbor provides additional comfort that the Offering will not be integrated with the Planned Series D, regardless of the exemption relied upon for the Planned Series D, so long as each offering independently complies with its own exemption.
Conversion of Notes. A separate integration question arises with respect to the issuance of Conversion Shares upon conversion of the Notes. We conclude that the issuance of Conversion Shares should not be treated as a separate "offering" for integration purposes, but rather as part of the same integrated transaction as the original issuance of the Notes. This conclusion is supported by the following considerations: (a) the conversion is contemplated in the original transaction documents (the NPA and the form of Note); (b) the conversion occurs automatically (in the case of a Qualified Financing) or at the election of the holder (at maturity), in each case pursuant to the terms of the Notes as originally issued; (c) no additional consideration is paid by the holders in connection with the conversion (the conversion price is established at the time of the original Note issuance); and (d) no new offerees are involved in the conversion — the Conversion Shares are issued only to the original Note holders. The conversion is, in substance, a transformation of the form of the security (from a debt instrument to equity), not a new offer and sale.
Conclusion. No integration concerns exist with respect to the Company's prior offerings or the Planned Series D. The conversion of the Notes into Conversion Shares should be treated as part of the same transaction as the original Note issuance and should be covered by the same Section 4(a)(2)/Rule 506(b) exemption.
G. Bad Actor Disqualification — Rule 506(d)
Rule 506(d) of Regulation D, adopted by the SEC in July 2013, disqualifies an issuer from relying on the Rule 506 exemption if any "covered person" associated with the offering is subject to a specified "disqualifying event." The rule was adopted pursuant to Section 926 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
Covered Persons. Rule 506(d)(1) defines "covered persons" to include:
(i) the issuer and any predecessor of the issuer or affiliated issuer;
(ii) any director, executive officer, or other officer participating in the offering of the issuer;
(iii) any general partner or managing member of the issuer;
(iv) any beneficial owner of 20% or more of the issuer's outstanding voting equity securities, calculated on the basis of voting power;
(v) any promoter connected with the issuer in any capacity at the time of the offering;
(vi) any investment manager of an issuer that is a pooled investment fund and any director, executive officer, or other officer participating in the offering of any such investment manager or general partner or managing member of such investment manager;
(vii) any person that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with such sale of securities (a "compensated solicitor"); and
(viii) any general partner or managing member of any such compensated solicitor.
Disqualifying Events. The disqualifying events specified in Rule 506(d)(1) include, among others: (a) certain criminal convictions in connection with the purchase or sale of securities, making false filings with the SEC, or conduct of underwriters, brokers, dealers, or investment advisers; (b) certain court injunctions and restraining orders in connection with the purchase or sale of securities; (c) certain final orders of state securities regulators, banking regulators, credit union regulators, insurance regulators, or federal banking agencies; (d) certain SEC disciplinary orders, cease-and-desist orders, or stop orders; (e) SEC orders suspending or revoking the registration of a broker, dealer, or investment adviser; (f) suspension or expulsion from membership in, or bar from association with a member of, a self-regulatory organization; and (g) certain U.S. Postal Service false representation orders.
Application to the Offering. Calderwood & Harkness LLP should confirm — and we recommend that the Company take affirmative steps to confirm — that no covered person associated with the Offering is subject to any disqualifying event. Specifically:
•  Company Officers and Directors. None of Skybridge's directors or executive officers — including Arjun Mehta (CEO & Co-Founder), Elena Vasquez (COO), David Lindstrom (CFO), Priya Ramanathan (General Counsel), and Marcus Tillman (CTO) — should be subject to any disqualifying event. We recommend that the Company obtain written certifications from each such individual confirming the absence of disqualifying events.
•  20% Beneficial Equity Holders. Any beneficial owner of 20% or more of the Company's outstanding voting equity securities is a covered person. The Company should identify all such holders and obtain certifications from each.
•  Compensated Solicitors. No placement agent, broker-dealer, finder, or other compensated solicitor has been engaged in connection with the Offering. Accordingly, this category of covered persons is not implicated.
•  Purchaser-Side Covered Persons. While purchasers are not themselves "covered persons" under Rule 506(d)(1), the SEC staff has clarified that certain relationships between purchasers and the issuer (e.g., if a purchaser is a 20% beneficial equity holder of the issuer) may bring the purchaser within the scope of the covered persons definition. We recommend that the NPA include representations from each Purchaser regarding the bad actor status of its general partner, managing members, and other relevant persons.
Recommendation. We recommend that the Company include bad actor representations and questionnaires in the NPA and obtain completed questionnaires from each covered person (including Company officers and directors, 20% equity holders, and the relevant persons associated with each Purchaser) prior to the Initial Closing. The questionnaires should be substantially in the form customarily used in Rule 506(b) offerings and should be reviewed by Calderwood & Harkness LLP prior to closing.
Disclosure Obligation — Rule 506(e). Rule 506(e) provides that disqualifying events that occurred before September 23, 2013 (the effective date of Rule 506(d)) do not trigger disqualification but must be disclosed to investors a reasonable time prior to sale. We are not aware of any pre-September 23, 2013 disqualifying events affecting any covered person, but this should be confirmed through the questionnaire process.
H. Summary of Rule 506(b) Compliance
The following table summarizes each material requirement of Rule 506(b) and the Company's compliance status:
VI. Form D Filing Requirements — Rule 503
A. Initial Filing
Rule 503 of Regulation D requires the issuer to file a notice on Form D with the SEC no later than fifteen (15) calendar days after the first sale of securities in the offering. The "first sale" for purposes of this requirement will be the date of the Initial Closing — that is, the date on which the Company executes the NPA and the Notes are issued to the Initial Closing Purchasers in exchange for the release of funds from the Granite Trust Company escrow.
Form D is a brief notice filing that provides the SEC with basic information about the issuer and the offering. The information to be included in the Form D filing for the Offering includes, but is not limited to, the following:
•  Issuer name: Skybridge Fintech Ltd.
•  Issuer EIN: 83-2147605
•  Jurisdiction of incorporation/organization: Delaware
•  Principal place of business: 1400 Market Street, Suite 2200, Wilmington, DE 19801
•  Type of securities offered: Convertible Promissory Notes
•  Aggregate offering amount: $60,000,000
•  Total amount sold as of the Initial Closing: $45,000,000
•  Exemption relied upon: Rule 506(b) of Regulation D
•  Names of the issuer's executive officers and directors
•  Number of non-accredited investors: Zero (0)
•  Whether the offering has been completed or is ongoing
The Form D must be filed electronically through the SEC's EDGAR filing system. Prior to filing, the Company (or its authorized representative) will need to ensure that Skybridge has an active EDGAR Central Index Key ("CIK") and the appropriate EDGAR access codes. If the Company has not previously filed with the SEC, we will assist with the EDGAR registration process.
We note that the failure to file Form D on a timely basis does not, by itself, result in the loss of the Regulation D exemption. Rule 507 provides that the Rule 506 exemption is unavailable to an issuer only if the issuer has been enjoined by a court for failure to comply with Rule 503. Nevertheless, the timely filing of Form D is an important compliance obligation, and failure to file may have adverse consequences under state blue sky laws (which often condition their preemption on the filing of Form D) and may raise questions about the issuer's compliance posture in any future SEC inquiry. Accordingly, we strongly recommend timely filing.
B. Amendment for Final Closing
If the Final Closing involves the joinder of additional purchasers (specifically, Northstar Innovation Fund II, L.P.) or the sale of Notes in an amount beyond that sold at the Initial Closing, an amended Form D must be filed with the SEC to reflect the updated information. The amended Form D should include, at a minimum:
•  Updated total amount sold: $60,000,000 (reflecting the aggregate of the Initial Closing and Final Closing amounts)
•  Any additional purchaser information (to the extent required on the form)
•  Confirmation that the offering has been completed (if the Final Closing represents the final sale in the Offering)
The amendment must be filed within fifteen (15) calendar days after the Final Closing. We will prepare the amended Form D and coordinate its filing with the Company's designated EDGAR agent.
C. Annual Amendment
If the Offering extends beyond one year from the date of the initial Form D filing without being completed, Rule 503 requires the filing of an annual amendment to Form D on or before the first anniversary of the initial filing. Given the anticipated timeline of the Offering — with the Initial Closing expected in late November or early December 2023 and the Final Closing expected within thirty to sixty days thereafter — we do not anticipate that an annual amendment will be required. However, if unexpected delays cause the Offering to remain open for more than twelve months, we will advise the Company of this requirement.
VII. State Securities ("Blue Sky") Considerations
A. Federal Preemption Under NSMIA — Section 18 of the Securities Act
As noted above, securities offered or sold in a transaction exempt under Rule 506 of Regulation D are "covered securities" under Section 18(b)(4)(D) of the Securities Act, as added by the National Securities Markets Improvement Act of 1996 ("NSMIA"). The designation of securities as "covered securities" has important practical consequences: under Section 18(a) of the Securities Act, no state may require the registration or qualification of a covered security, or require the filing of any offering document with respect to a covered security, as a condition to the offer or sale of such security in the state.
The federal preemption afforded by NSMIA significantly reduces the regulatory burden on issuers conducting offerings under Rule 506 by eliminating the need to comply with the substantive registration and merit review requirements of individual states. However, NSMIA does not entirely eliminate state regulatory authority over Rule 506 offerings. Specifically, under Section 18(c)(2) of the Securities Act, states retain the authority to:
(i) require the filing of any document filed with the SEC pursuant to the Securities Act (including Form D), together with any annual or periodic reports, and a consent to service of process, and to collect a fee for such filings;
(ii) issue a stop order suspending the offer or sale of securities within the state if the state securities administrator determines that the offering would constitute fraud; and
(iii) bring enforcement actions with respect to fraud or deceit, or unlawful conduct by a broker-dealer, in connection with securities or securities transactions.
Accordingly, while the Company is not required to register the Notes under the blue sky laws of any state, the Company must comply with applicable st

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