1009-00001 · Skybridge Fintech Ltd · Closing

officers-certificate-use-of-proceeds.docx DOCUMENT Funds

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OFFICER'S CERTIFICATE OF SKYBRIDGE FINTECH LTD.

USE OF PROCEEDS

Delivered Pursuant to the Note Purchase Agreement dated January 15, 2024 (the "Note Purchase Agreement") by and among Skybridge Fintech Ltd., a Delaware corporation (the "Company"), and the Purchasers listed on Schedule 1 thereto

January 15, 2024

RECITALS

Reference is hereby made to that certain Note Purchase Agreement, dated as of January 15, 2024 (as it may be amended, restated, supplemented, or otherwise modified from time to time, the "Agreement"), by and among Skybridge Fintech Ltd., a corporation organized and existing under the laws of the State of Delaware (the "Company"), on the one hand, and Ridgeline Ventures Fund IV, L.P., a Delaware limited partnership, Beacon Hill Capital Partners, LLC, a Delaware limited liability company, Northstar Innovation Fund II, L.P., a Delaware limited partnership, and Halcyon Growth Equity, L.P., a Delaware limited partnership (each, a "Purchaser" and collectively, the "Purchasers"), on the other hand.

This Officer's Certificate (this "Certificate") is being delivered by the undersigned on behalf of the Company pursuant to Section 5.2(e) of the Agreement, as a condition precedent to the obligations of the Purchasers to consummate the Initial Closing (as defined in the Agreement) thereunder. The delivery of this Certificate is required in order for the Purchasers to confirm the Company's intended application of the proceeds from the issuance of the Notes (as defined below) and to verify the Company's compliance with the representations, warranties, and covenants set forth in the Agreement.

The undersigned, David Lindstrom, is the duly appointed Chief Financial Officer of the Company. The undersigned is duly authorized to execute and deliver this Certificate on behalf of the Company in his capacity as Chief Financial Officer and in accordance with the authorization granted by the Board of Directors of the Company, as more fully described herein.

Capitalized terms used but not otherwise defined in this Certificate shall have the respective meanings ascribed to such terms in the Agreement. All references herein to sections of the Agreement are to sections of the Agreement unless otherwise specified.

Section 1. Certification of Identity and Authority

The undersigned, David Lindstrom, hereby certifies that he is the duly elected, qualified, and acting Chief Financial Officer of Skybridge Fintech Ltd., a corporation duly incorporated and validly existing under the laws of the State of Delaware (Employer Identification Number: 83-2147605; Delaware Secretary of State File Number: 6384291). The Company's principal executive offices are located at 1400 Market Street, Suite 2200, Wilmington, Delaware 19801.

The undersigned has full power and authority to execute and deliver this Certificate on behalf of the Company. Such authority is derived from, and has been duly conferred pursuant to, the Unanimous Written Consent of the Board of Directors of the Company, adopted and effective as of January 10, 2024 (the "Board Consent"), a true and complete copy of which has been separately delivered to counsel for the Purchasers in connection with the closing deliverables required under Section 5.2 of the Agreement. The Board Consent expressly authorized the undersigned, in his capacity as Chief Financial Officer, to execute and deliver all certificates, instruments, and documents required or contemplated in connection with the transactions described in the Agreement, including, without limitation, this Certificate.

The undersigned further certifies that, as of the date hereof, he has not received notice of the revocation, rescission, or amendment of the Board Consent, and that the Board Consent remains in full force and effect.

Section 2. Description of the Financing

Pursuant to the Agreement, the Company is issuing its convertible promissory notes (the "Notes") in the aggregate principal amount of Sixty Million Dollars ($60,000,000). The material terms of the Notes, as set forth in the Agreement and in the form of Note attached thereto as Exhibit A, are summarized below for the convenience of the Purchasers:

(a) Interest Rate. The Notes bear interest at the rate of six percent (6.00%) per annum (600 basis points), calculated as simple interest on the outstanding principal balance, computed on the basis of a 365-day year and actual days elapsed. Interest shall accrue from the date of issuance of each Note and shall be payable at maturity or upon conversion, as applicable.

(b) Maturity Date. The Notes mature on January 15, 2026, which is twenty-four (24) months from the Initial Closing Date (the "Maturity Date"). Unless earlier converted or repaid in accordance with the terms of the Agreement, all outstanding principal and accrued but unpaid interest under each Note shall be due and payable in full on the Maturity Date.

(c) Conversion. The Notes are convertible into shares of the Company's preferred stock upon the occurrence of a Qualified Financing, defined in the Agreement as a Series D equity financing round in which the Company raises at least Eighty Million Dollars ($80,000,000) in new equity capital (exclusive of any amounts converted under the Notes). Upon a Qualified Financing, the outstanding principal and accrued but unpaid interest under each Note shall automatically convert into shares of the preferred stock issued in the Qualified Financing at a conversion price per share equal to the lower of: (i) a twenty percent (20%) discount to the price per share paid by new investors in the Series D round, or (ii) the price per share implied by a pre-money valuation cap of Seven Hundred Fifty Million Dollars ($750,000,000), on a fully diluted basis, as calculated in accordance with the methodology set forth in Section 3.4 of the Agreement.

(d) Subordination. The Notes are subordinated in right of payment to the Company's existing venture debt facility with Kelvantis Lending Corp., pursuant to a Subordination Agreement of even date herewith among the Company, the Purchasers, and Kelvantis Lending Corp. (the "Subordination Agreement"). The aggregate principal amount currently outstanding under the Company's venture debt facility with Kelvantis Lending Corp. is Fifteen Million Dollars ($15,000,000). The terms and conditions of such subordination are set forth in the Subordination Agreement, a copy of which has been provided to each Purchaser.

The foregoing summary is qualified in its entirety by the terms of the Agreement and the form of Note attached thereto, and in the event of any inconsistency between this summary and the Agreement, the terms of the Agreement shall control.

Section 3. Aggregate Proceeds

The undersigned hereby certifies that the aggregate gross proceeds from the issuance and sale of the Notes pursuant to the Agreement are expected to be Sixty Million Dollars ($60,000,000), to be funded in two separate closings as follows:

3.1 Initial Closing

The Initial Closing is scheduled for, and is expected to occur on, January 15, 2024. The aggregate principal amount of Notes to be issued at the Initial Closing is Forty-Five Million Dollars ($45,000,000), comprising the following individual commitments:

3.2 Final Closing

The Final Closing is anticipated to occur on or about January 26, 2024, subject to the satisfaction or waiver of the conditions set forth in Section 5.3 of the Agreement. The aggregate principal amount of Notes to be issued at the Final Closing is Fifteen Million Dollars ($15,000,000), comprising the following individual commitments:

3.3 Escrow Arrangements

All funds from the Purchasers are being deposited into an escrow account established with Granite Trust Company, N.A., a nationally chartered trust company, pursuant to the Escrow Agreement dated as of January 12, 2024 (the "Escrow Agreement") among the Company, the Purchasers, and Granite Trust Company, N.A., as escrow agent. The escrow account is designated as Escrow Account No. 4401-7829-SBF (the "Escrow Account"). Funds deposited in the Escrow Account shall be released to the Company promptly following the satisfaction or waiver of all applicable closing conditions set forth in Article V of the Agreement, as confirmed by the joint written instructions of the Company and the requisite Purchasers, in accordance with the terms of the Escrow Agreement.

3.4 Estimated Net Proceeds

After deducting estimated transaction expenses to be paid or reimbursed by the Company in connection with the closing of the transactions contemplated by the Agreement, the net proceeds to the Company are expected to be approximately Fifty-Nine Million Five Hundred Ninety-Two Thousand Five Hundred Dollars ($59,592,500). The estimated transaction expenses are as follows:

The foregoing estimates are based on information available to the undersigned as of the date hereof. Actual transaction expenses may vary, and the Company reserves the right to supplement or amend this Certificate to the extent that actual transaction expenses differ materially from the estimates set forth above, subject to the caps and limitations set forth in the Agreement.

Section 4. Intended Use of Proceeds

The undersigned hereby certifies that the proceeds of the Notes will be used by the Company for the following purposes, in each case in the ordinary course of the Company's business and consistent with the Company's current operating plan as approved by the Board of Directors. The Company intends to allocate the proceeds among the following categories in a manner consistent with prudent financial management and the Company's strategic priorities, subject to the discretion of the Company's management and Board of Directors:

4.1 General Corporate Purposes and Working Capital

A portion of the proceeds from the Notes will be applied to fund the Company's ongoing general corporate and administrative expenses, including, without limitation: (i) payroll, wages, salaries, bonuses, commissions, and employee benefits (including health insurance, retirement plan contributions, and equity compensation administration costs) for the Company's workforce of approximately three hundred ten (310) full-time employees as of the date hereof; (ii) facilities costs, including office lease payments, utilities, maintenance, and related occupancy expenses for the Company's principal offices in Wilmington, Delaware, as well as its satellite offices in San Francisco, California and Austin, Texas; (iii) insurance premiums (including directors' and officers' liability insurance, errors and omissions insurance, and cyber liability insurance); (iv) software licensing and subscription fees; (v) accounting, audit, tax, and compliance costs; and (vi) other general operating overhead necessary to support the Company's day-to-day business operations.

As of the date hereof, the Company's average monthly cash burn rate (defined as total cash expenditures less total cash receipts from operations) is approximately Four Million Eight Hundred Thousand Dollars ($4,800,000) per month, based on the trailing three-month average as of December 31, 2023. The Company's existing cash on hand as of approximately the date hereof is approximately Eighteen Million Five Hundred Thousand Dollars ($18,500,000). The net proceeds of the Notes, together with the Company's existing cash on hand, will provide the Company with an aggregate cash position of approximately Seventy-Eight Million Five Hundred Thousand Dollars ($78,500,000) (calculated as the sum of existing cash on hand and estimated net proceeds, excluding any anticipated revenue during the period). Based on the Company's current monthly cash burn rate, this aggregate cash position is expected to extend the Company's operational runway from approximately 3.9 months (based on existing cash on hand alone) to approximately 16.4 months, thereby providing the Company with a sufficient operating cushion to sustain its operations through the anticipated closing of the Series D equity financing described in Section 4.4 below.

4.2 Product Development and Engineering

A portion of the proceeds from the Notes will be applied to fund the continued development, enhancement, and scaling of the Company's proprietary cloud-based payments orchestration and embedded lending platform (the "Platform"). Such expenditures are expected to include, without limitation: (i) compensation and related costs for new and existing engineering, product management, data science, and quality assurance personnel; (ii) cloud computing infrastructure costs, including fees payable to the Company's primary cloud services providers; (iii) costs associated with the development and integration of new product features, including the Company's planned embedded credit and buy-now-pay-later functionality; (iv) third-party software tools and development environments; (v) information security enhancements, penetration testing, and compliance certifications (including SOC 2 Type II and PCI-DSS compliance); and (vi) other technology investments reasonably necessary to maintain and advance the Company's competitive position in the payments and embedded finance markets.

The Company's Platform currently processes approximately Four Billion Two Hundred Million Dollars ($4,200,000,000) in annualized gross payment volume ("GPV") and generates approximately Seventy-Eight Million Dollars ($78,000,000) in annualized recurring revenue ("ARR"), in each case as of the end of the third quarter of fiscal year 2023 (September 30, 2023). The Company's net revenue retention rate, calculated on a trailing twelve-month basis as of September 30, 2023, is approximately one hundred twenty-eight percent (128%), reflecting strong customer expansion and low churn among the Company's existing customer cohorts. The Company's product development and engineering investments are expected to drive continued growth in GPV, ARR, and net revenue retention by expanding the functionality of the Platform and deepening integrations with the Company's mid-market e-commerce customer base.

4.3 Sales, Marketing, and Customer Acquisition

A portion of the proceeds from the Notes will be applied to fund sales and marketing initiatives designed to expand the Company's customer base and accelerate revenue growth. These initiatives are expected to include, without limitation: (i) expansion of the Company's direct sales team, including the hiring of additional account executives and sales engineers focused on mid-market e-commerce companies with annual GPV of between $50,000,000 and $1,000,000,000; (ii) targeted digital marketing campaigns, content marketing, and demand generation programs; (iii) participation in industry conferences and trade events; (iv) customer success and account management programs to support onboarding, retention, and expansion of existing customer relationships; and (v) strategic partnership and channel development efforts. The Company believes that investment in sales and marketing is critical to maintaining its current growth trajectory and building a scalable go-to-market engine in advance of the planned Series D equity financing.

4.4 Bridge to Planned Series D Equity Financing

The Notes are intended to serve as bridge financing in advance of the Company's planned Series D preferred equity financing round (the "Series D Financing"). The Company currently anticipates initiating the formal marketing and fundraising process for the Series D Financing in the third quarter of 2024, with a targeted closing in the third or fourth quarter of 2024, subject to market conditions, investor interest, and the Company's operating performance.

The proceeds of the Notes are intended to provide the Company with sufficient operating capital to sustain its business operations and growth trajectory through the anticipated closing of the Series D Financing. By strengthening the Company's balance sheet and extending its cash runway, the proceeds of the Notes are expected to allow the Company to negotiate the Series D Financing from a position of financial stability and to optimize the timing and terms of such financing for the benefit of the Company and its stockholders.

The Company acknowledges that the timing and terms of the Series D Financing are subject to range factors, including prevailing market conditions, the Company's financial and operating performance, and the availability and interest of potential investors. No assurance can be given that the Series D Financing will be consummated on the timeline described above, or at all. Notwithstanding the foregoing, the Company's management and Board of Directors intend to pursue the Series D Financing with diligence and in good faith.

4.5 Negative Covenants — Restricted Uses of Proceeds

The undersigned hereby certifies that no portion of the proceeds of the Notes will be used, directly or indirectly, for any of the following purposes:

(a) To repay, prepay, redeem, repurchase, defease, or otherwise retire any amounts outstanding under the Company's existing venture debt facility with Kelvantis Lending Corp. (pursuant to that certain Loan and Security Agreement, dated August 15, 2022, as amended, by and between the Company and Kelvantis Lending Corp.), except for regularly scheduled payments of principal and interest payable in the ordinary course in accordance with the existing amortization schedule and the terms of such Loan and Security Agreement;

(b) To make any dividend, distribution, or other payment to any stockholder of the Company, whether in respect of the Company's common stock, preferred stock, or any other equity security, or to effect any stock redemption or repurchase;

(c) To fund, finance, or consummate any acquisition of, or investment in, any other person, entity, business, or assets that is not specifically contemplated in the Company's current operating plan as approved by the Board of Directors and disclosed to the Purchasers in connection with the transactions contemplated by the Agreement; or

(d) For any purpose that would violate any applicable federal, state, local, or foreign law, statute, rule, regulation, or ordinance, including, without limitation, any applicable money transmission laws, state licensing requirements for payment processors or lenders, or any sanctions, anti-money laundering, or anti-corruption laws or regulations.

The foregoing restricted use covenants are in addition to, and not in limitation of, any negative covenants, restricted payment provisions, or use-of-proceeds restrictions set forth in the Agreement, the Notes, the Subordination Agreement, or the Loan and Security Agreement with Kelvantis Lending Corp.

Section 5. Current Financial Position

For the information and reference of the Purchasers, the undersigned hereby sets forth below certain key financial and operating metrics of the Company as of the dates indicated. The financial information set forth below has been derived from the Company's internal financial records and, where indicated, from the Company's reviewed financial statements for the fiscal year ended September 30, 2023, as reviewed by Pinnacle Audit Group LLP (engagement partner: Lisa Johannsen).

The Company makes no representation that the financial and operating metrics set forth above will be indicative of the Company's future performance. The information set forth above is provided solely for the purpose of satisfying the closing conditions of the Agreement and should not be relied upon for any other purpose.

Section 6. Representations

The undersigned, in his capacity as Chief Financial Officer of the Company and on behalf of the Company, hereby represents and certifies to each of the Purchasers as follows:

(1) The statements and information set forth in this Certificate are true and correct in all material respects as of the date hereof, and the undersigned has no knowledge of any facts or circumstances that would cause any such statement or information to be materially misleading.

(2) The undersigned is duly authorized to make the certifications and representations contained in this Certificate on behalf of the Company, in his capacity as Chief Financial Officer and as authorized by the Board Consent.

(3) The intended use of proceeds described in Section 4 of this Certificate is consistent with, and does not conflict with, the representations and warranties made by the Company in the Agreement, including, without limitation, the representations set forth in Section 4.15 of the Agreement (Use of Proceeds), and is consistent with the resolutions adopted by the Board of Directors pursuant to the Unanimous Written Consent dated January 10, 2024.

(4) No portion of the proceeds of the Notes will be used for any purpose that would cause the Company to violate any covenant, agreement, obligation, or restriction contained in the Agreement, the Notes, the Subordination Agreement dated as of the date hereof, or the Loan and Security Agreement, dated August 15, 2022, by and between the Company and Kelvantis Lending Corp. (as amended), and the application of proceeds in the manner described herein will not result in a default or an event of default under any of the foregoing agreements.

Section 7. Governing Law

This Certificate shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.

[Signature Page Follows]

IN WITNESS WHEREOF, the undersigned has duly executed this Officer's Certificate as of the date first written above.

SKYBRIDGE FINTECH LTD.

By: ________

Name: David Lindstrom

Title: Chief Financial Officer

Date: January 15, 2024

Purchaser	Principal Amount
Ridgeline Ventures Fund IV, L.P.	$30,000,000
Beacon Hill Capital Partners, LLC	$10,000,000
Halcyon Growth Equity, L.P.	$5,000,000
Total — Initial Closing	$45,000,000
Purchaser	Principal Amount
Beacon Hill Capital Partners, LLC	$5,000,000
Northstar Innovation Fund II, L.P.	$10,000,000
Total — Final Closing	$15,000,000
Expense Item	Estimated Amount
Granite Trust Company, N.A. — escrow agent fee	$7,500
Calderwood & Harkness LLP — Company legal counsel fees (subject to a fee cap of $275,000, plus reasonable out-of-pocket disbursements)	$275,000
Reimbursement of Whitfield, Pratt & Soo LLP — Purchaser legal counsel fees (subject to a reimbursement cap of $125,000 pursuant to Section 9.7 of the Agreement)	$125,000
Total Estimated Transaction Expenses	$407,500
Metric	Value	As of Date
Annualized Recurring Revenue (ARR)	Approximately $78,000,000	September 30, 2023
Annualized Gross Payment Volume (GPV)	Approximately $4,200,000,000	September 30, 2023
Net Revenue Retention (NRR)	Approximately 128%	Trailing twelve months ended September 30, 2023
Cash on Hand	Approximately $18,500,000	Approximately the date hereof
Monthly Cash Burn Rate	Approximately $4,800,000	Trailing three-month average as of December 31, 2023
Outstanding Venture Debt (Kelvantis Lending Corp.)	$15,000,000	As of the date hereof; matures August 15, 2025
Last 409A Fair Market Value per Common Share	$8.42 per share	September 15, 2023 (prepared by Atlas Valuation Services, Inc.)
Fully Diluted Shares Outstanding (pre-bridge)	Approximately 48,500,000 shares	As of the date hereof
Employee Headcount	Approximately 310 full-time employees	As of the date hereof

OFFICER'S CERTIFICATE OF SKYBRIDGE FINTECH LTD.
USE OF PROCEEDS
Delivered Pursuant to the Note Purchase Agreement dated January 15, 2024 (the "Note Purchase Agreement") by and among Skybridge Fintech Ltd., a Delaware corporation (the "Company"), and the Purchasers listed on Schedule 1 thereto
January 15, 2024
RECITALS
Reference is hereby made to that certain Note Purchase Agreement, dated as of January 15, 2024 (as it may be amended, restated, supplemented, or otherwise modified from time to time, the "Agreement"), by and among Skybridge Fintech Ltd., a corporation organized and existing under the laws of the State of Delaware (the "Company"), on the one hand, and Ridgeline Ventures Fund IV, L.P., a Delaware limited partnership, Beacon Hill Capital Partners, LLC, a Delaware limited liability company, Northstar Innovation Fund II, L.P., a Delaware limited partnership, and Halcyon Growth Equity, L.P., a Delaware limited partnership (each, a "Purchaser" and collectively, the "Purchasers"), on the other hand.
This Officer's Certificate (this "Certificate") is being delivered by the undersigned on behalf of the Company pursuant to Section 5.2(e) of the Agreement, as a condition precedent to the obligations of the Purchasers to consummate the Initial Closing (as defined in the Agreement) thereunder. The delivery of this Certificate is required in order for the Purchasers to confirm the Company's intended application of the proceeds from the issuance of the Notes (as defined below) and to verify the Company's compliance with the representations, warranties, and covenants set forth in the Agreement.
The undersigned, David Lindstrom, is the duly appointed Chief Financial Officer of the Company. The undersigned is duly authorized to execute and deliver this Certificate on behalf of the Company in his capacity as Chief Financial Officer and in accordance with the authorization granted by the Board of Directors of the Company, as more fully described herein.
Capitalized terms used but not otherwise defined in this Certificate shall have the respective meanings ascribed to such terms in the Agreement. All references herein to sections of the Agreement are to sections of the Agreement unless otherwise specified.
Section 1. Certification of Identity and Authority
The undersigned, David Lindstrom, hereby certifies that he is the duly elected, qualified, and acting Chief Financial Officer of Skybridge Fintech Ltd., a corporation duly incorporated and validly existing under the laws of the State of Delaware (Employer Identification Number: 83-2147605; Delaware Secretary of State File Number: 6384291). The Company's principal executive offices are located at 1400 Market Street, Suite 2200, Wilmington, Delaware 19801.
The undersigned has full power and authority to execute and deliver this Certificate on behalf of the Company. Such authority is derived from, and has been duly conferred pursuant to, the Unanimous Written Consent of the Board of Directors of the Company, adopted and effective as of January 10, 2024 (the "Board Consent"), a true and complete copy of which has been separately delivered to counsel for the Purchasers in connection with the closing deliverables required under Section 5.2 of the Agreement. The Board Consent expressly authorized the undersigned, in his capacity as Chief Financial Officer, to execute and deliver all certificates, instruments, and documents required or contemplated in connection with the transactions described in the Agreement, including, without limitation, this Certificate.
The undersigned further certifies that, as of the date hereof, he has not received notice of the revocation, rescission, or amendment of the Board Consent, and that the Board Consent remains in full force and effect.
Section 2. Description of the Financing
Pursuant to the Agreement, the Company is issuing its convertible promissory notes (the "Notes") in the aggregate principal amount of Sixty Million Dollars ($60,000,000). The material terms of the Notes, as set forth in the Agreement and in the form of Note attached thereto as Exhibit A, are summarized below for the convenience of the Purchasers:
(a) Interest Rate. The Notes bear interest at the rate of six percent (6.00%) per annum (600 basis points), calculated as simple interest on the outstanding principal balance, computed on the basis of a 365-day year and actual days elapsed. Interest shall accrue from the date of issuance of each Note and shall be payable at maturity or upon conversion, as applicable.
(b) Maturity Date. The Notes mature on January 15, 2026, which is twenty-four (24) months from the Initial Closing Date (the "Maturity Date"). Unless earlier converted or repaid in accordance with the terms of the Agreement, all outstanding principal and accrued but unpaid interest under each Note shall be due and payable in full on the Maturity Date.
(c) Conversion. The Notes are convertible into shares of the Company's preferred stock upon the occurrence of a Qualified Financing, defined in the Agreement as a Series D equity financing round in which the Company raises at least Eighty Million Dollars ($80,000,000) in new equity capital (exclusive of any amounts converted under the Notes). Upon a Qualified Financing, the outstanding principal and accrued but unpaid interest under each Note shall automatically convert into shares of the preferred stock issued in the Qualified Financing at a conversion price per share equal to the lower of: (i) a twenty percent (20%) discount to the price per share paid by new investors in the Series D round, or (ii) the price per share implied by a pre-money valuation cap of Seven Hundred Fifty Million Dollars ($750,000,000), on a fully diluted basis, as calculated in accordance with the methodology set forth in Section 3.4 of the Agreement.
(d) Subordination. The Notes are subordinated in right of payment to the Company's existing venture debt facility with Kelvantis Lending Corp., pursuant to a Subordination Agreement of even date herewith among the Company, the Purchasers, and Kelvantis Lending Corp. (the "Subordination Agreement"). The aggregate principal amount currently outstanding under the Company's venture debt facility with Kelvantis Lending Corp. is Fifteen Million Dollars ($15,000,000). The terms and conditions of such subordination are set forth in the Subordination Agreement, a copy of which has been provided to each Purchaser.
The foregoing summary is qualified in its entirety by the terms of the Agreement and the form of Note attached thereto, and in the event of any inconsistency between this summary and the Agreement, the terms of the Agreement shall control.
Section 3. Aggregate Proceeds
The undersigned hereby certifies that the aggregate gross proceeds from the issuance and sale of the Notes pursuant to the Agreement are expected to be Sixty Million Dollars ($60,000,000), to be funded in two separate closings as follows:
3.1 Initial Closing
The Initial Closing is scheduled for, and is expected to occur on, January 15, 2024. The aggregate principal amount of Notes to be issued at the Initial Closing is Forty-Five Million Dollars ($45,000,000), comprising the following individual commitments:
3.2 Final Closing
The Final Closing is anticipated to occur on or about January 26, 2024, subject to the satisfaction or waiver of the conditions set forth in Section 5.3 of the Agreement. The aggregate principal amount of Notes to be issued at the Final Closing is Fifteen Million Dollars ($15,000,000), comprising the following individual commitments:
3.3 Escrow Arrangements
All funds from the Purchasers are being deposited into an escrow account established with Granite Trust Company, N.A., a nationally chartered trust company, pursuant to the Escrow Agreement dated as of January 12, 2024 (the "Escrow Agreement") among the Company, the Purchasers, and Granite Trust Company, N.A., as escrow agent. The escrow account is designated as Escrow Account No. 4401-7829-SBF (the "Escrow Account"). Funds deposited in the Escrow Account shall be released to the Company promptly following the satisfaction or waiver of all applicable closing conditions set forth in Article V of the Agreement, as confirmed by the joint written instructions of the Company and the requisite Purchasers, in accordance with the terms of the Escrow Agreement.
3.4 Estimated Net Proceeds
After deducting estimated transaction expenses to be paid or reimbursed by the Company in connection with the closing of the transactions contemplated by the Agreement, the net proceeds to the Company are expected to be approximately Fifty-Nine Million Five Hundred Ninety-Two Thousand Five Hundred Dollars ($59,592,500). The estimated transaction expenses are as follows:
The foregoing estimates are based on information available to the undersigned as of the date hereof. Actual transaction expenses may vary, and the Company reserves the right to supplement or amend this Certificate to the extent that actual transaction expenses differ materially from the estimates set forth above, subject to the caps and limitations set forth in the Agreement.
Section 4. Intended Use of Proceeds
The undersigned hereby certifies that the proceeds of the Notes will be used by the Company for the following purposes, in each case in the ordinary course of the Company's business and consistent with the Company's current operating plan as approved by the Board of Directors. The Company intends to allocate the proceeds among the following categories in a manner consistent with prudent financial management and the Company's strategic priorities, subject to the discretion of the Company's management and Board of Directors:
4.1 General Corporate Purposes and Working Capital
A portion of the proceeds from the Notes will be applied to fund the Company's ongoing general corporate and administrative expenses, including, without limitation: (i) payroll, wages, salaries, bonuses, commissions, and employee benefits (including health insurance, retirement plan contributions, and equity compensation administration costs) for the Company's workforce of approximately three hundred ten (310) full-time employees as of the date hereof; (ii) facilities costs, including office lease payments, utilities, maintenance, and related occupancy expenses for the Company's principal offices in Wilmington, Delaware, as well as its satellite offices in San Francisco, California and Austin, Texas; (iii) insurance premiums (including directors' and officers' liability insurance, errors and omissions insurance, and cyber liability insurance); (iv) software licensing and subscription fees; (v) accounting, audit, tax, and compliance costs; and (vi) other general operating overhead necessary to support the Company's day-to-day business operations.
As of the date hereof, the Company's average monthly cash burn rate (defined as total cash expenditures less total cash receipts from operations) is approximately Four Million Eight Hundred Thousand Dollars ($4,800,000) per month, based on the trailing three-month average as of December 31, 2023. The Company's existing cash on hand as of approximately the date hereof is approximately Eighteen Million Five Hundred Thousand Dollars ($18,500,000). The net proceeds of the Notes, together with the Company's existing cash on hand, will provide the Company with an aggregate cash position of approximately Seventy-Eight Million Five Hundred Thousand Dollars ($78,500,000) (calculated as the sum of existing cash on hand and estimated net proceeds, excluding any anticipated revenue during the period). Based on the Company's current monthly cash burn rate, this aggregate cash position is expected to extend the Company's operational runway from approximately 3.9 months (based on existing cash on hand alone) to approximately 16.4 months, thereby providing the Company with a sufficient operating cushion to sustain its operations through the anticipated closing of the Series D equity financing described in Section 4.4 below.
4.2 Product Development and Engineering
A portion of the proceeds from the Notes will be applied to fund the continued development, enhancement, and scaling of the Company's proprietary cloud-based payments orchestration and embedded lending platform (the "Platform"). Such expenditures are expected to include, without limitation: (i) compensation and related costs for new and existing engineering, product management, data science, and quality assurance personnel; (ii) cloud computing infrastructure costs, including fees payable to the Company's primary cloud services providers; (iii) costs associated with the development and integration of new product features, including the Company's planned embedded credit and buy-now-pay-later functionality; (iv) third-party software tools and development environments; (v) information security enhancements, penetration testing, and compliance certifications (including SOC 2 Type II and PCI-DSS compliance); and (vi) other technology investments reasonably necessary to maintain and advance the Company's competitive position in the payments and embedded finance markets.
The Company's Platform currently processes approximately Four Billion Two Hundred Million Dollars ($4,200,000,000) in annualized gross payment volume ("GPV") and generates approximately Seventy-Eight Million Dollars ($78,000,000) in annualized recurring revenue ("ARR"), in each case as of the end of the third quarter of fiscal year 2023 (September 30, 2023). The Company's net revenue retention rate, calculated on a trailing twelve-month basis as of September 30, 2023, is approximately one hundred twenty-eight percent (128%), reflecting strong customer expansion and low churn among the Company's existing customer cohorts. The Company's product development and engineering investments are expected to drive continued growth in GPV, ARR, and net revenue retention by expanding the functionality of the Platform and deepening integrations with the Company's mid-market e-commerce customer base.
4.3 Sales, Marketing, and Customer Acquisition
A portion of the proceeds from the Notes will be applied to fund sales and marketing initiatives designed to expand the Company's customer base and accelerate revenue growth. These initiatives are expected to include, without limitation: (i) expansion of the Company's direct sales team, including the hiring of additional account executives and sales engineers focused on mid-market e-commerce companies with annual GPV of between $50,000,000 and $1,000,000,000; (ii) targeted digital marketing campaigns, content marketing, and demand generation programs; (iii) participation in industry conferences and trade events; (iv) customer success and account management programs to support onboarding, retention, and expansion of existing customer relationships; and (v) strategic partnership and channel development efforts. The Company believes that investment in sales and marketing is critical to maintaining its current growth trajectory and building a scalable go-to-market engine in advance of the planned Series D equity financing.
4.4 Bridge to Planned Series D Equity Financing
The Notes are intended to serve as bridge financing in advance of the Company's planned Series D preferred equity financing round (the "Series D Financing"). The Company currently anticipates initiating the formal marketing and fundraising process for the Series D Financing in the third quarter of 2024, with a targeted closing in the third or fourth quarter of 2024, subject to market conditions, investor interest, and the Company's operating performance.
The proceeds of the Notes are intended to provide the Company with sufficient operating capital to sustain its business operations and growth trajectory through the anticipated closing of the Series D Financing. By strengthening the Company's balance sheet and extending its cash runway, the proceeds of the Notes are expected to allow the Company to negotiate the Series D Financing from a position of financial stability and to optimize the timing and terms of such financing for the benefit of the Company and its stockholders.
The Company acknowledges that the timing and terms of the Series D Financing are subject to range factors, including prevailing market conditions, the Company's financial and operating performance, and the availability and interest of potential investors. No assurance can be given that the Series D Financing will be consummated on the timeline described above, or at all. Notwithstanding the foregoing, the Company's management and Board of Directors intend to pursue the Series D Financing with diligence and in good faith.
4.5 Negative Covenants — Restricted Uses of Proceeds
The undersigned hereby certifies that no portion of the proceeds of the Notes will be used, directly or indirectly, for any of the following purposes:
(a) To repay, prepay, redeem, repurchase, defease, or otherwise retire any amounts outstanding under the Company's existing venture debt facility with Kelvantis Lending Corp. (pursuant to that certain Loan and Security Agreement, dated August 15, 2022, as amended, by and between the Company and Kelvantis Lending Corp.), except for regularly scheduled payments of principal and interest payable in the ordinary course in accordance with the existing amortization schedule and the terms of such Loan and Security Agreement;
(b) To make any dividend, distribution, or other payment to any stockholder of the Company, whether in respect of the Company's common stock, preferred stock, or any other equity security, or to effect any stock redemption or repurchase;
(c) To fund, finance, or consummate any acquisition of, or investment in, any other person, entity, business, or assets that is not specifically contemplated in the Company's current operating plan as approved by the Board of Directors and disclosed to the Purchasers in connection with the transactions contemplated by the Agreement; or
(d) For any purpose that would violate any applicable federal, state, local, or foreign law, statute, rule, regulation, or ordinance, including, without limitation, any applicable money transmission laws, state licensing requirements for payment processors or lenders, or any sanctions, anti-money laundering, or anti-corruption laws or regulations.
The foregoing restricted use covenants are in addition to, and not in limitation of, any negative covenants, restricted payment provisions, or use-of-proceeds restrictions set forth in the Agreement, the Notes, the Subordination Agreement, or the Loan and Security Agreement with Kelvantis Lending Corp.
Section 5. Current Financial Position
For the information and reference of the Purchasers, the undersigned hereby sets forth below certain key financial and operating metrics of the Company as of the dates indicated. The financial information set forth below has been derived from the Company's internal financial records and, where indicated, from the Company's reviewed financial statements for the fiscal year ended September 30, 2023, as reviewed by Pinnacle Audit Group LLP (engagement partner: Lisa Johannsen).
The Company makes no representation that the financial and operating metrics set forth above will be indicative of the Company's future performance. The information set forth above is provided solely for the purpose of satisfying the closing conditions of the Agreement and should not be relied upon for any other purpose.
Section 6. Representations
The undersigned, in his capacity as Chief Financial Officer of the Company and on behalf of the Company, hereby represents and certifies to each of the Purchasers as follows:
(1) The statements and information set forth in this Certificate are true and correct in all material respects as of the date hereof, and the undersigned has no knowledge of any facts or circumstances that would cause any such statement or information to be materially misleading.
(2) The undersigned is duly authorized to make the certifications and representations contained in this Certificate on behalf of the Company, in his capacity as Chief Financial Officer and as authorized by the Board Consent.
(3) The intended use of proceeds described in Section 4 of this Certificate is consistent with, and does not conflict with, the representations and warranties made by the Company in the Agreement, including, without limitation, the representations set forth in Section 4.15 of the Agreement (Use of Proceeds), and is consistent with the resolutions adopted by the Board of Directors pursuant to the Unanimous Written Consent dated January 10, 2024.
(4) No portion of the proceeds of the Notes will be used for any purpose that would cause the Company to violate any covenant, agreement, obligation, or restriction contained in the Agreement, the Notes, the Subordination Agreement dated as of the date hereof, or the Loan and Security Agreement, dated August 15, 2022, by and between the Company and Kelvantis Lending Corp. (as amended), and the application of proceeds in the manner described herein will not result in a default or an event of default under any of the foregoing agreements.
Section 7. Governing Law
This Certificate shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.
[Signature Page Follows]
IN WITNESS WHEREOF, the undersigned has duly executed this Officer's Certificate as of the date first written above.
SKYBRIDGE FINTECH LTD.
By: ________
Name: David Lindstrom
Title: Chief Financial Officer
Date: January 15, 2024
Purchaser | Principal Amount
Ridgeline Ventures Fund IV, L.P. | $30,000,000
Beacon Hill Capital Partners, LLC | $10,000,000
Halcyon Growth Equity, L.P. | $5,000,000
Total — Initial Closing | $45,000,000
Purchaser | Principal Amount
Beacon Hill Capital Partners, LLC | $5,000,000
Northstar Innovation Fund II, L.P. | $10,000,000
Total — Final Closing | $15,000,000
Expense Item | Estimated Amount
Granite Trust Company, N.A. — escrow agent fee | $7,500
Calderwood & Harkness LLP — Company legal counsel fees (subject to a fee cap of $275,000, plus reasonable out-of-pocket disbursements) | $275,000
Reimbursement of Whitfield, Pratt & Soo LLP — Purchaser legal counsel fees (subject to a reimbursement cap of $125,000 pursuant to Section 9.7 of the Agreement) | $125,000
Total Estimated Transaction Expenses | $407,500
Metric | Value | As of Date
Annualized Recurring Revenue (ARR) | Approximately $78,000,000 | September 30, 2023
Annualized Gross Payment Volume (GPV) | Approximately $4,200,000,000 | September 30, 2023
Net Revenue Retention (NRR) | Approximately 128% | Trailing twelve months ended September 30, 2023
Cash on Hand | Approximately $18,500,000 | Approximately the date hereof
Monthly Cash Burn Rate | Approximately $4,800,000 | Trailing three-month average as of December 31, 2023
Outstanding Venture Debt (Kelvantis Lending Corp.) | $15,000,000 | As of the date hereof; matures August 15, 2025
Last 409A Fair Market Value per Common Share | $8.42 per share | September 15, 2023 (prepared by Atlas Valuation Services, Inc.)
Fully Diluted Shares Outstanding (pre-bridge) | Approximately 48,500,000 shares | As of the date hereof
Employee Headcount | Approximately 310 full-time employees | As of the date hereof

OFFICER'S CERTIFICATE OF SKYBRIDGE FINTECH LTD.

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