COMPANY DISCLOSURE SCHEDULE

COMPANY DISCLOSURE SCHEDULE
Delivered by
SKYBRIDGE FINTECH LTD.
a Delaware corporation
Dated: January 14, 2024
In connection with that certain Note Purchase Agreement, dated as of January 15, 2024, by and among Skybridge Fintech Ltd. and the Purchasers listed on Schedule 1 thereto
Calderwood & Harkness LLP Matter No. 1009-00001
INTRODUCTORY NOTES AND QUALIFICATIONS
This Company Disclosure Schedule (this "Disclosure Schedule") is delivered by Skybridge Fintech Ltd., a Delaware corporation (the "Company"), dated January 14, 2024, in connection with and pursuant to that certain Note Purchase Agreement (the "Agreement"), dated as of January 15, 2024, by and among the Company and the Purchasers listed on Schedule 1 thereto, namely: (i) Ridgeline Ventures Fund IV, L.P., (ii) Beacon Hill Capital Partners, LLC, (iii) Northstar Innovation Fund II, L.P., and (iv) Halcyon Growth Equity, L.P. (each, a "Purchaser" and collectively, the "Purchasers"). This Disclosure Schedule supplements, qualifies, and provides exceptions to the representations and warranties of the Company set forth in Article II of the Agreement.
The following introductory notes and qualifications apply to this Disclosure Schedule in its entirety and should be read carefully before reviewing any specific schedule or section hereof:
1.  Defined Terms. Capitalized terms used but not otherwise defined in this Disclosure Schedule shall have the meanings ascribed to such terms in the Agreement. All references to "Sections" or "Schedules" are references to Sections of, or Schedules to, the Agreement unless otherwise specified.
2.  No Admission of Materiality. The inclusion of any item, matter, or information in this Disclosure Schedule does not constitute an admission by the Company that such item, matter, or information is material, or that such item, matter, or information is required to be disclosed under the Agreement. Certain items, matters, and information have been included in this Disclosure Schedule solely for informational purposes and out of an abundance of caution. Nothing in this Disclosure Schedule shall be deemed or construed to expand the scope of the Company's representations, warranties, or obligations under the Agreement.
3.  Cross-References and Deemed Disclosures. This Disclosure Schedule is arranged in sections corresponding to the Sections of Article II of the Agreement. Disclosures made with respect to any particular section or subsection of the Agreement shall be deemed to qualify, modify, or provide an exception to any other section or subsection of the Agreement to the extent the relevance of such disclosure to such other section or subsection is reasonably apparent on the face of such disclosure, notwithstanding the absence of a specific cross-reference. The Company has endeavored to provide cross-references where practicable, but the absence of a cross-reference shall not limit the applicability of any disclosure to any section or subsection of the Agreement.
4.  Headings. The headings and section references contained in this Disclosure Schedule are for convenience of reference only and shall not be deemed to limit, modify, or affect the scope or substance of any disclosure made herein.
5.  No Broadening of Representations. The Company's delivery of this Disclosure Schedule shall not be deemed or construed to broaden, expand, or otherwise modify the scope of any representation or warranty contained in the Agreement. Information disclosed in this Disclosure Schedule that is not within the scope of the relevant representation or warranty shall not be deemed to expand the scope of such representation or warranty.
6.  Approximations. Certain dollar amounts, share numbers, percentages, and financial figures contained in this Disclosure Schedule are approximations and are identified as such where indicated by the use of the word "approximately" or similar language. Such approximations are based on the best information available to the Company as of the date hereof and are provided in good faith.
7.  Documents. Any summary or description of a document set forth in this Disclosure Schedule is qualified in its entirety by reference to the full text of such document, copies of which have been made available to the Purchasers and their counsel in the virtual data room established and maintained by the Company in connection with the transactions contemplated by the Agreement (the "Data Room").
8.  Knowledge Qualification. Where any disclosure is qualified by the phrase "to the Company's knowledge" or words of similar import, such phrase shall have the meaning ascribed to the defined term "Knowledge of the Company" in the Agreement.
SCHEDULE 2.1
Organization and Good Standing
The following information is disclosed with respect to the Company's organization and good standing:
1. Full Legal Name and Entity Type.
The Company's full legal name is Skybridge Fintech Ltd. The Company is a corporation (C-corporation) incorporated under the laws of the State of Delaware.
2. Delaware Filing Information.
Delaware Secretary of State File Number: 6384291
Federal Employer Identification Number (EIN): 83-2147605
Date of Incorporation: March 22, 2017
Registered Agent: Pemberton Industries, 251 Little Falls Drive, Wilmington, Delaware 19808
Registered Office: 1400 Market Street, Suite 2200, Wilmington, Delaware 19801
3. Good Standing.
The Company is in good standing under the laws of the State of Delaware. A Certificate of Good Standing was obtained from the Office of the Secretary of State of the State of Delaware on January 11, 2024 (a copy of which has been made available in the Data Room).
4. Principal Place of Business.
The Company's principal executive offices are located at 450 Park Avenue South, 14th Floor, New York, New York 10016.
5. Foreign Qualifications.
The Company is qualified to transact business as a foreign corporation in good standing in each of the jurisdictions listed below. In each such jurisdiction, the Company either holds money transmission licenses, maintains employees, or otherwise conducts activities that require qualification. The Company's regulatory licenses and related filings are described in greater detail in Schedule 2.14.
The Company has confirmed that its franchise tax and annual report filings are current in each jurisdiction listed above.
6. Subsidiaries.
The Company has no subsidiaries. The Company does not own, directly or indirectly, any equity interest in any other corporation, limited liability company, partnership, joint venture, trust, or other entity.
SCHEDULE 2.2
Authorization
No exceptions. The Company has full corporate power and authority to enter into the Agreement and each of the Related Transaction Documents (as defined in the Agreement), to consummate the transactions contemplated thereby, and to issue the convertible promissory notes in the aggregate principal amount of $60,000,000 (the "Notes") to the Purchasers in accordance with the terms and conditions of the Agreement.
The execution, delivery, and performance of the Agreement and the Related Transaction Documents, and the issuance of the Notes, have been duly authorized by all necessary corporate action on the part of the Company, including without limitation:
(a) Board Authorization. The Board of Directors of the Company (the "Board") approved the Agreement, the Related Transaction Documents, the issuance of the Notes, and the transactions contemplated thereby, pursuant to a Unanimous Written Consent of the Board of Directors, dated January 10, 2024 (a copy of which has been made available in the Data Room). All members of the Board entitled to vote on such matter voted in favor of such approval.
(b) Stockholder Authorization. The holders of the requisite number of shares of capital stock of the Company approved the Agreement, the Related Transaction Documents, the issuance of the Notes, and the transactions contemplated thereby, including the amendment and restatement of certain provisions of the Amended and Restated Certificate of Incorporation as required in connection therewith, pursuant to a Written Consent of Stockholders in Lieu of Special Meeting, dated January 12, 2024 (a copy of which has been made available in the Data Room).
(c) Notice to Non-Consenting Stockholders. In accordance with Section 228(e) of the Delaware General Corporation Law, the Company will deliver prompt written notice to all stockholders who did not execute the Written Consent of Stockholders referenced in clause (b) above, informing such stockholders of the actions taken by written consent. Such notice is expected to be delivered on or about January 15, 2024.
No other corporate proceedings or approvals on the part of the Company are necessary to authorize the execution, delivery, and performance of the Agreement and the Related Transaction Documents, or the issuance of the Notes.
SCHEDULE 2.3
Capitalization
(a) Authorized and Outstanding Capital Stock
The Company's Amended and Restated Certificate of Incorporation, as most recently amended and filed with the Office of the Secretary of State of the State of Delaware on July 19, 2021 (the "Charter"), authorizes the following shares of capital stock:
As of the date hereof (prior to giving effect to the issuance of the Notes and the transactions contemplated by the Agreement), the following shares of capital stock of the Company are issued and outstanding:
Common Stock.  A total of 20,000,000 shares of Common Stock are issued and outstanding. The holders of Common Stock as of the date hereof are as follows:
All shares of Common Stock held by Arjun Mehta and Elena Vasquez were originally subject to the Company's standard four-year vesting schedule (with a one-year cliff) and are fully vested as of the date hereof. Shares held by David Lindstrom and Priya Ramanathan remain subject to vesting, with details as set forth in their respective restricted stock purchase agreements, copies of which have been made available in the Data Room.
Preferred Stock — Series A.  A total of 4,500,000 shares of Series A Preferred Stock are issued and outstanding. The Series A Preferred Stock was issued in connection with the Company's Series A Preferred Stock financing, which closed on October 4, 2018, at an original issue price of $1.50 per share (aggregate proceeds of approximately $6,750,000).
Crestpoint Seed Partners, L.P. is a Delaware limited partnership with its principal office at 600 Lexington Avenue, 21st Floor, New York, New York 10022. The deal lead for the Series A investment was Jordan Whitfield, Managing Partner of Crestpoint Seed Partners, L.P.
Preferred Stock — Series B.  A total of 8,000,000 shares of Series B Preferred Stock are issued and outstanding. The Series B Preferred Stock was issued in connection with the Company's Series B Preferred Stock financing, which closed on March 18, 2020, at an original issue price of $5.00 per share (aggregate proceeds of approximately $40,000,000).
Halcyon Growth Equity, L.P. is a Delaware limited partnership. Its general partner is Halcyon Growth Management, LLC, a Delaware limited liability company, with its principal office at 1201 Third Avenue, Suite 5600, Seattle, Washington 98101. The deal lead for the Series B investment was Robert "Rob" Castillo, Managing Director of Halcyon Growth Management, LLC. Halcyon Growth Equity, L.P. is also a Purchaser under the Agreement.
Preferred Stock — Series C.  A total of 10,000,000 shares of Series C Preferred Stock are issued and outstanding. The Series C Preferred Stock was issued in connection with the Company's Series C Preferred Stock financing, which closed on July 19, 2021, at an original issue price of $12.50 per share (aggregate proceeds of approximately $125,000,000). The post-money valuation of the Company at the closing of the Series C financing was approximately $620,000,000.
Ridgeline Ventures Fund III, L.P. is a Delaware limited partnership with its principal office at 3000 Sand Hill Road, Building 2, Suite 250, Menlo Park, California 94025. Ridgeline Ventures Fund III, L.P. is an affiliate of Ridgeline Ventures Fund IV, L.P., a Purchaser under the Agreement. Beacon Hill Capital Partners, LLC is a Delaware limited liability company with its principal office at 200 Clarendon Street, 55th Floor, Boston, Massachusetts 02116. Beacon Hill Capital Partners, LLC is also a Purchaser under the Agreement.
Summary of Outstanding Capital Stock (Pre-Bridge):
(b) Fully Diluted Share Count
As of the date hereof and prior to giving effect to the issuance of the Notes and the transactions contemplated by the Agreement, the total number of shares of Common Stock of the Company outstanding on a fully diluted basis is approximately 48,500,000 shares. This fully diluted share count is calculated as follows:
A detailed capitalization table is attached hereto as Exhibit A.
(c) Stock Option Plan and Outstanding Options
The Company maintains the Skybridge Fintech Ltd. 2017 Equity Incentive Plan, as amended (the "Plan"), which was most recently amended by the Board on September 8, 2023, and approved by the stockholders on September 15, 2023. The material terms of the Plan are summarized as follows:
(i) Total Shares Reserved. A total of 6,000,000 shares of Common Stock are reserved for issuance under the Plan.
(ii) Options Outstanding. As of the date hereof, options to purchase an aggregate of 4,200,000 shares of Common Stock are outstanding under the Plan. The weighted average exercise price of all outstanding options is $6.18 per share. Of the outstanding options, approximately 2,650,000 shares are vested and exercisable as of the date hereof.
(iii) Options Available for Future Grant. As of the date hereof, 1,800,000 shares of Common Stock remain available for future grant under the Plan.
(iv) Most Recent 409A Valuation. The most recent independent fair market value determination of the Company's Common Stock was $8.42 per share, as determined by Atlas Valuation Services, Inc. (the "409A Valuation"), in a report dated September 15, 2023. The 409A Valuation was performed by Atlas Valuation Services, Inc. (contact: Martin Khoury, Managing Director; principal office: 2300 Clarendon Blvd., Suite 400, Arlington, Virginia 22201). All stock option grants made since the date of such 409A Valuation have been granted at exercise prices equal to or greater than $8.42 per share.
A schedule of all outstanding options under the Plan (including grant dates, exercise prices, vesting commencement dates, vesting schedules, and expiration dates) is attached hereto as Exhibit B.
(d) Outstanding Convertible Securities, Warrants, and Rights
Except as set forth below and except for the Notes to be issued pursuant to the Agreement, there are no outstanding convertible securities, warrants, options (other than options granted under the Plan as described in Section (c) above), or other rights to acquire shares of capital stock or other equity interests of the Company:
(i) Kelvantis Warrants. In connection with the Loan and Security Agreement with Kelvantis Lending Corp. described in Schedule 2.4, the Company issued to Kelvantis Lending Corp. a warrant to purchase up to 150,000 shares of Common Stock at an exercise price of $8.42 per share (the "Kelvantis Warrant"). The Kelvantis Warrant was issued on August 15, 2022, and has a term of ten (10) years, expiring on August 15, 2032. The Kelvantis Warrant contains customary cashless exercise provisions and anti-dilution adjustments. A copy of the Kelvantis Warrant has been made available in the Data Room.
Other than the Notes, the options described in Section (c) above, and the Kelvantis Warrant, there are no outstanding convertible securities, warrants, options, calls, commitments, preemptive rights, subscription rights, or other rights or agreements obligating the Company to issue, transfer, sell, or otherwise dispose of any shares of its capital stock or other equity interests, or any securities convertible into or exercisable or exchangeable for any shares of capital stock or other equity interests of the Company.
(e) Voting Agreements and Stockholder Arrangements
The Company is a party to the following agreements relating to the voting, transfer, or other disposition of its capital stock:
(i) Amended and Restated Voting Agreement, dated as of July 19, 2021, by and among the Company, the Founders (Arjun Mehta and Elena Vasquez), and the holders of Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock (the "Voting Agreement"). The Voting Agreement provides, among other things, for the election of members of the Board in accordance with the designation rights set forth therein.
(ii) Amended and Restated Investors' Rights Agreement, dated as of July 19, 2021, by and among the Company and the investors party thereto (the "IRA"). The IRA provides, among other things, for registration rights, information rights, rights of first offer, and certain affirmative and negative covenants of the Company. The IRA will be amended by Amendment No. 1 to the Amended and Restated Investors' Rights Agreement, to be dated as of January 15, 2024 (the "IRA Amendment"), to extend certain rights to the Purchasers under the Agreement.
(iii) Right of First Refusal and Co-Sale Agreement, dated as of July 19, 2021, by and among the Company, the Founders, and the investors party thereto (the "ROFR Agreement"). The ROFR Agreement provides, among other things, for a right of first refusal in favor of the Company and certain investors, and co-sale rights in favor of such investors, with respect to proposed transfers of capital stock by the Founders and other key holders. The ROFR Agreement will be amended by Amendment No. 1 to the Right of First Refusal and Co-Sale Agreement, to be dated as of January 15, 2024 (the "ROFR Amendment"), to extend certain rights to the Purchasers under the Agreement.
Copies of each of the foregoing agreements, together with the proposed forms of the IRA Amendment and the ROFR Amendment, have been made available in the Data Room.
(f) Anti-Dilution Provisions
The Charter provides for weighted-average anti-dilution protections with respect to the Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock. Specifically, in the event the Company issues additional shares of Common Stock or Common Stock equivalents (subject to certain customary carve-outs and exceptions) at a price per share less than the applicable conversion price then in effect for such series of Preferred Stock, the conversion price of such series will be adjusted downward in accordance with a broad-based weighted-average formula, as set forth in Article IV, Section 4 of the Charter.
The Company notes that the Notes contain a most-favored-nation ("MFN") provision as described in Section 5.12 of the Agreement. The interaction between the anti-dilution protections applicable to the Preferred Stock and the MFN provision is addressed in the Agreement, and the parties have agreed that the issuance of the Notes does not, in and of itself, trigger the anti-dilution adjustment provisions of the Charter. See Schedule 2.3(e) for related agreements.
SCHEDULE 2.4
Existing Indebtedness
The following is a description of all outstanding indebtedness of the Company as of the date hereof:
1. Kelvantis Lending Corp. — Loan and Security Agreement
Parties: Skybridge Fintech Ltd. (as Borrower) and Kelvantis Lending Corp. (as Lender)
Agreement: Loan and Security Agreement, dated August 15, 2022 (the "Kelvantis LSA")
Lender Information: Kelvantis Lending Corp. is a Delaware corporation with its principal office at 350 Park Avenue, 18th Floor, New York, New York 10022. The relationship manager for the Kelvantis facility is Theodore "Ted" Marsh, Managing Director.
Type: Venture debt facility (term loan)
Original Principal Amount: $15,000,000
Outstanding Principal Balance (as of December 31, 2023): Approximately $11,250,000
Interest Rate: Prime Rate plus 2.50% per annum, with a Prime Rate floor of 4.00%
Maturity Date: August 15, 2025
Amortization: Interest-only period through August 15, 2023; thereafter, amortizing in equal monthly installments of principal and interest through the maturity date.
Security Interest / Collateral: Pursuant to the Kelvantis LSA, the Company has granted Kelvantis Lending Corp. a first-priority security interest in substantially all of the Company's personal property assets, including but not limited to accounts receivable, deposit accounts, inventory, equipment, intellectual property, and general intangibles, subject to customary exceptions and carve-outs (including, without limitation, an exception for assets securing purchase money obligations not to exceed $500,000 in the aggregate). Kelvantis Lending Corp. has filed a UCC-1 Financing Statement with the Office of the Secretary of State of the State of Delaware (File Number 2022-4871093, filed August 16, 2022).
Financial Covenants: The Kelvantis LSA contains customary affirmative and negative covenants, including, among others: (i) a minimum liquidity covenant requiring the Company to maintain unrestricted cash and cash equivalents of not less than $5,000,000 at all times; (ii) restrictions on additional indebtedness; and (iii) restrictions on liens, mergers, acquisitions, and dispositions of assets, in each case subject to customary exceptions and baskets.
Lender Consent and Waiver: Kelvantis Lending Corp. delivered a Consent and Waiver Letter to the Company, dated January 12, 2024, pursuant to which Kelvantis Lending Corp. (a) consented to the Company's issuance of the Notes pursuant to the Agreement, (b) waived any default or event of default under the Kelvantis LSA that would otherwise arise from the issuance of the Notes, and (c) agreed to execute the Subordination Agreement (described below). A copy of the Consent and Waiver Letter has been made available in the Data Room.
End-of-Term Fee: The Kelvantis LSA provides for an end-of-term fee equal to 3.0% of the original principal amount ($450,000), payable upon the earlier of (x) the maturity date and (y) prepayment or refinancing of the facility.
Warrant: See Schedule 2.3(d)(i) for a description of the Kelvantis Warrant issued in connection with the Kelvantis LSA.
2. Subordination Agreement.
The Notes to be issued pursuant to the Agreement will be subordinated to the obligations of the Company under the Kelvantis LSA pursuant to a Subordination Agreement, to be dated as of January 15, 2024, by and among Kelvantis Lending Corp. (as Senior Lender), the Purchasers (as Subordinated Lenders), and the Company (the "Subordination Agreement"). A copy of the form of Subordination Agreement has been made available in the Data Room.
3. No Other Material Indebtedness.
Other than the Kelvantis LSA described above and the Notes to be issued pursuant to the Agreement, the Company has no outstanding indebtedness for borrowed money, purchase money obligations, capitalized lease obligations, guarantees, letters of credit, or similar obligations that are material to the Company, individually or in the aggregate. The Company maintains standard trade payables and accrued liabilities incurred in the ordinary course of business, which are not considered indebtedness for purposes of this disclosure.
SCHEDULE 2.5
Financial Statements
The following financial statements of the Company have been delivered to the Purchasers and their counsel and made available in the Data Room:
1. Audited Financial Statements — Fiscal Year Ended December 31, 2022.
The Company has delivered its audited financial statements for the fiscal year ended December 31, 2022 (the "2022 Audited Financials"), consisting of the audited balance sheet as of December 31, 2022, and the related audited statements of operations, changes in stockholders' equity (deficit), and cash flows for the fiscal year then ended, together with the notes thereto. The 2022 Audited Financials were prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP"), applied on a consistent basis, and were audited by Pinnacle Audit Group LLP, an independent registered public accounting firm. Pinnacle Audit Group LLP issued an unqualified audit opinion with respect to the 2022 Audited Financials.
Auditor: Pinnacle Audit Group LLP
Engagement Partner: Lisa Johannsen, CPA
Principal Office: 71 South Wacker Drive, Suite 1800, Chicago, Illinois 60606
2. Reviewed Financial Statements — Nine Months Ended September 30, 2023.
The Company has delivered its reviewed (unaudited) financial statements for the nine-month period ended September 30, 2023 (the "Interim Financials"), consisting of the unaudited balance sheet as of September 30, 2023, and the related unaudited statements of operations and cash flows for the nine-month period then ended, together with the notes thereto. The Interim Financials were prepared in accordance with U.S. GAAP (subject to normal year-end adjustments and the absence of complete footnote disclosures) and were reviewed by Pinnacle Audit Group LLP.
3. Key Financial Metrics (as of September 30, 2023).
The following key financial and operating metrics are provided for informational purposes as of and for the period ended September 30, 2023:
The implied cash runway set forth above is calculated by dividing cash on hand ($18,500,000) by the monthly net cash burn rate ($4,800,000 per month), yielding approximately 3.9 months of runway. This calculation assumes a constant burn rate and does not account for revenue growth, changes in operating expenses, or other factors that may affect the Company's actual cash position.
4. No Material Adverse Change.
Except as set forth in Schedule 2.6 and as may be attributable to continued operations in the ordinary course of business consistent with the monthly burn rate disclosed above, there has been no material adverse change in the business, assets, financial condition, or results of operations of the Company since September 30, 2023.
5. Post-Bridge Projected Cash Position.
Following the closing of the convertible note financing contemplated by the Agreement and the receipt of aggregate gross proceeds of $60,000,000, the Company's projected cash position will be approximately $78,500,000 (calculated as $18,500,000 in existing cash on hand plus $60,000,000 in gross proceeds from the Notes, prior to deduction of transaction expenses). Based on the Company's current monthly net cash burn rate of approximately $4,800,000, the projected post-bridge implied cash runway is approximately 16.4 months.
SCHEDULE 2.6
Absence of Changes
There has been no material adverse change in the business, assets, financial condition, or results of operations of the Company since September 30, 2023, except as set forth below:
(a) Continued Operating Losses. The Company has continued to incur operating losses in the ordinary course of business, consistent with its historical operating performance and the monthly net cash burn rate of approximately $4,800,000 disclosed in Schedule 2.5. Such operating losses are attributable to the Company's ongoing investment in product development, sales and marketing, and general and administrative functions in furtherance of its growth strategy.
(b) Ordinary Course Hiring. The Company has continued to hire employees in the ordinary course of business. As of the date hereof, the Company's total headcount is approximately 310 full-time equivalent employees (FTEs), compared to approximately 295 FTEs as of September 30, 2023. All such hiring has been conducted in the ordinary course of business and consistent with the Company's approved operating plan and budget.
(c) Entry into Customer and Vendor Agreements. The Company has entered into new customer agreements and vendor agreements in the ordinary course of business on terms and conditions substantially consistent with its existing agreements and customary business practices. None of such agreements, individually or in the aggregate, would be required to be disclosed as a Material Contract under the Agreement, other than as set forth in Schedule 2.7.
(d) No Other Material Changes. Other than as set forth above, the Company has not (i) declared, paid, or set aside any dividend or other distribution with respect to its capital stock; (ii) issued any shares of capital stock (other than upon exercise of previously outstanding options under the Plan); (iii) incurred any indebtedness for borrowed money outside the ordinary course of business; (iv) sold, transferred, or otherwise disposed of any material assets; (v) made any material change in its accounting methods, principles, or practices; (vi) experienced any material damage, destruction, or casualty loss to its property; or (vii) taken any other action that would be prohibited under Section 4.1 of the Agreement if such action were taken after the date of the Agreement without the prior written consent of the Required Purchasers.
SCHEDULE 2.7
Material Contracts
The following is a list of the material contracts to which the Company is a party or by which the Company or any of its assets is bound, in each case as of the date hereof. Copies of each of the following contracts have been made available in the Data Room. A detailed schedule of material contracts is also attached hereto as Exhibit C.
1. Financing Agreements
(a) Loan and Security Agreement, dated August 15, 2022, by and between Kelvantis Lending Corp. (as Lender) and Skybridge Fintech Ltd. (as Borrower), as described in Schedule 2.4.
(b) Subordination Agreement, to be dated as of January 15, 2024, by and among Kelvantis Lending Corp., the Purchasers, and the Company.
2. Stockholder and Governance Agreements
(a) Amended and Restated Investors' Rights Agreement, dated as of July 19, 2021, by and among the Company and the investors party thereto (to be amended by Amendment No. 1, dated as of January 15, 2024). Parties include Crestpoint Seed Partners, L.P., Halcyon Growth Equity, L.P., Ridgeline Ventures Fund III, L.P., and Beacon Hill Capital Partners, LLC, among others.
(b) Amended and Restated Voting Agreement, dated as of July 19, 2021, by and among the Company, the Founders, and the investors party thereto.
(c) Right of First Refusal and Co-Sale Agreement, dated as of July 19, 2021, by and among the Company, the Founders, and the investors party thereto (to be amended by Amendment No. 1, dated as of January 15, 2024).
3. Key Customer Agreements
The Company's top ten (10) customer relationships by revenue contribution for the twelve-month period ended September 30, 2023, are set forth below. Certain of these agreements contain anti-assignment clauses or change-of-control provisions as noted; however, the Company has determined that the issuance of the Notes pursuant to the Agreement does not constitute a change of control or assignment event under any such agreement.
(a) Master Services Agreement with Meridian National Bank, dated March 1, 2020, as amended (annual contract value: approximately $6,200,000). Contains anti-assignment clause; no change-of-control provision.
(b) Platform License and Services Agreement with Pacific Commerce Group, Inc., dated August 15, 2020, as amended (annual contract value: approximately $5,100,000). Contains change-of-control provision requiring notice.
(c) Enterprise Subscription Agreement with Clearwater Financial Services, LLC, dated January 10, 2021 (annual contract value: approximately $4,800,000). Contains anti-assignment clause.
(d) Master Services Agreement with Atlas Retail Holdings Corp., dated April 22, 2021 (annual contract value: approximately $3,900,000). Standard terms; no change-of-control provision.
(e) Platform License Agreement with Keystone Digital Payments, Inc., dated September 3, 2021 (annual contract value: approximately $3,500,000). Contains anti-assignment clause.
(f) Enterprise Subscription Agreement with Summit Health Systems, Inc., dated November 15, 2021 (annual contract value: approximately $3,200,000). Standard terms.
(g) Master Services Agreement with Harbor Point Insurance Group, dated February 8, 2022 (annual contract value: approximately $2,800,000). Contains change-of-control provision requiring consent.
(h) Platform License and Services Agreement with Marlowe Asset Management Logistics International, LLC, dated June 14, 2022 (annual contract value: approximately $2,500,000). Standard terms.
(i) Enterprise Subscription Agreement with Northwind Consumer Brands, Inc., dated October 1, 2022 (annual contract value: approximately $2,100,000). Standard terms.
(j) Master Services Agreement with Trident Mortgage Corporation, dated March 20, 2023 (annual contract value: approximately $1,900,000). Contains anti-assignment clause.
4. Key Vendor and Technology Agreements
(a) Cloud Hosting Services Agreement with Adriatic Technologies (Meridian Technologies), dated May 1, 2019, as amended (annual spend: approximately $3,600,000). Enterprise discount Program (EDP) commitment through December 31, 2024.
(b) Payment Processor Partnership Agreement with Vireo Solutions, dated July 15, 2019, as amended (integrated payment processing; fees based on transaction volume).
(c) Payment Processor Partnership Agreement with Tidewater & Co., dated February 1, 2021 (integrated payment processing; fees based on transaction volume).
(d) Data Provider Agreement with Cobalt Ridge Software, dated September 10, 2020, as amended (bank account linking and verification services; annual spend: approximately $1,200,000).
(e) Data Provider Agreement with Quillon Solutions, dated November 1, 2021 (credit data services for embedded lending functionality; annual spend: approximately $800,000).
(f) Software License Agreement with Crowne Albany Software, dated March 15, 2022 (data warehousing and analytics; annual spend: approximately $600,000).
(g) Software License Agreement with Larkspur Solutions, dated January 1, 2020, as amended (CRM platform; annual spend: approximately $450,000).
5. Key Partnership and Channel Agreements
(a) Strategic Partnership Agreement with Granite Point Banking Solutions, LLC, dated April 1, 2022 (banking-as-a-service distribution partnership; revenue sharing arrangement).
(b) Channel Partner Agreement with Evergreen Technology Consulting Group, Inc., dated August 15, 2022 (referral and implementation partnership; commission-based compensation).
(c) Reseller Agreement with Pinnacle Software Distribution, LLC, dated January 8, 2023 (non-exclusive reseller arrangement for the Company's platform in the healthcare vertical).
6. Anti-Assignment and Change-of-Control Provisions.
As noted above, certain of the Company's material contracts contain anti-assignment clauses or change-of-control provisions. The Company has reviewed such provisions and has determined that the issuance of the Notes pursuant to the Agreement and the transactions contemplated thereby (including the potential conversion of the Notes into equity securities of the Company) do not constitute a "change of control," "assignment," or similar triggering event under any such contract. Notwithstanding the foregoing, the Company will continue to monitor the applicability of such provisions in connection with future transactions, including the Company's planned Series D equity round.
SCHEDULE 2.8
Intellectual Property
(a) Owned intellectual Property
The Company owns the following categories of intellectual property. A detailed schedule of registered and applied-for intellectual property is attached hereto as Exhibit D.
Patents and Patent Applications:
Trademarks:
Copyrights:
The Company owns all right, title, and interest in and to its proprietary software code, including the source code and object code for the Skybridge payments orchestration platform, the Skybridge embedded lending engine, and the Skybridge merchant dashboard, as well as the platform's user interface and user experience designs (UI/UX). The Company has not registered any of its copyrights with the United States Copyright Office; however, the Company's ownership of such copyrights arises under applicable copyright law as original works of authorship.
Trade Secrets:
The Company maintains as trade secrets its proprietary algorithms, data models, analytics engines, payment routing logic, risk scoring methodologies, and related technical know-how. The Company employs reasonable measures to protect the confidentiality of its trade secrets, including the use of confidentiality and non-disclosure agreements with employees, contractors, and business partners, as well as technical access controls and security protocols.
Domain Names:
The Company owns the following principal domain names: skybridgefintech.com, skybridge.io, skybridgepay.com, and skyflowpayments.com.
(b) Licenses and Third-Party IP
Inbound Licenses:
The Company is a licensee under the following categories of third-party intellectual property licenses:
(i) Commercial software licenses for enterprise tools and infrastructure (including Meridian Technologies, Snowflake, Pinnacle Health IT, and other vendors described in Schedule 2.7).
(ii) Open-source software licenses, as described in Section (e) below.
(iii) Third-party SDK and API licenses from payment processor partners (including Vireo Solutions and Tidewater & Co.).
(iv) Data licensing agreements with Cobalt Ridge Software and Quillon Solutions, as described in Schedule 2.7.
Outbound Licenses:
The Company licenses its proprietary platform to customers pursuant to SaaS (software-as-a-service) subscription agreements. Under such agreements, customers receive a non-exclusive, non-transferable, limited license to access and use the Company's platform during the subscription term. The Company retains all ownership rights in the platform and underlying intellectual property. No customer agreement grants any customer any rights to the Company's source code, except as may be required under a source code escrow arrangement (of which there is currently one, with Meridian National Bank, pursuant to a Source Code Escrow Agreement with Fenmore Data Systems, dated March 1, 2020).
(c) IP Assignments
The Company has obtained intellectual property assignment agreements from the following individuals and categories of contributors:
(i) Founders. Arjun Mehta and Elena Vasquez each executed an intellectual Property Assignment Agreement, dated March 22, 2017, pursuant to which each founder assigned to the Company all right, title, and interest in and to any and all intellectual property conceived, developed, or reduced to practice in connection with the Company's business, including all intellectual property developed prior to the Company's incorporation that relates to the Company's current or planned products and services.
(ii) Employees. All employees of the Company are required to execute the Company's standard Employee Proprietary Information and Inventions Assignment Agreement (the "PIIA") as a condition of employment. As of the date hereof, the Company believes that all current employees have executed the PIIA, subject to the exceptions noted below.
(iii) Contractors. The Company requires all independent contractors and consultants who perform services involving the creation or development of intellectual property to execute the Company's standard Consultant Proprietary Information and Inventions Assignment Agreement (the "Consultant PIIA") or to provide services under a master services agreement containing equivalent intellectual property assignment provisions.
(iv) Identified Gaps. An IP Ownership & Assignment Analysis was conducted by Peter Vassiliev and Wendy Schultz of Calderwood & Harkness LLP, dated December 22, 2023 (a copy of which has been made available in the Data Room). The analysis identified the following gaps in the Company's IP assignment chain:
•  Three (3) former independent contractors who performed software development services between April 2017 and December 2018 did not execute the Consultant PIIA or an equivalent assignment agreement. The Company has assessed the contributions of these individuals and believes that the work product created by such contractors was of limited scope and is not material to the Company's current products or platform. The Company is endeavoring to obtain retroactive assignment agreements from such individuals.
•  Two (2) current employees (both hired in Q1 2023 in non-engineering roles) have not yet executed the PIIA. The Company is in the process of obtaining signed PIIAs from such employees and expects to complete such process prior to the closing of the transactions contemplated by the Agreement.
(d) IP Disputes
As of the date hereof, there are no pending or, to the Company's knowledge, threatened claims, demands, actions, suits, proceedings, or investigations (whether by any third party, governmental authority, or otherwise) against the Company alleging infringement, misappropriation, or other violation of any third party's intellectual property rights. The Company has not received any cease-and-desist letters, demand letters, or similar communications from any third party alleging that the Company's products, services, or technology infringe upon or misappropriate any third party's patents, trademarks, copyrights, trade secrets, or other intellectual property rights.
Cross-reference: See Schedule 2.10 for general litigation disclosures.
(e) Open-Source Software
The Company uses certain open-source software components in its platform and internal tools. A list of material open-source components and their applicable license types is maintained by the Company's engineering team and has been made available in the Data Room.
The Company's engineering team conducts periodic reviews of open-source software usage to ensure compliance with applicable license terms. The Company has implemented policies and technical controls (including software composition analysis tools) to prevent the incorporation of open-source components subject to "copyleft" or "reciprocal" license obligations (such as the GNU General Public License (GPL) v2 or v3, the Affero General Public License (AGPL), or the Server Side Public License (SSPL)) in a manner that would require the Company to disclose, distribute, or license its proprietary source code.
As of the date hereof, the Company is not aware of any open-source component used in its platform or products in a manner that would trigger any copyleft or reciprocal license obligation with respect to the Company's proprietary source code. No exceptions to the foregoing have been identified.
SCHEDULE 2.9
Tax Matters
The following information is disclosed with respect to the Company's tax matters:
1.  Federal Employer Identification Number. The Company's federal employer identification number (EIN) is 83-2147605.
2.  Tax Filing Status. The Company files federal income tax returns as a C-corporation (Form 1120) and files state income tax returns in each state in which it is required to do so based on its nexus and filing obligations. The Company's federal and state income tax returns for the fiscal years ended December 31, 2020, December 31, 2021, and December 31, 2022 have been timely filed (or valid extensions have been obtained and the returns filed within such extended periods).
3.  No Pending or Threatened Audits. As of the date hereof, there are no pending or, to the Company's knowledge, threatened audits, examinations, assessments, deficiency notices, or disputes with respect to any federal, state, local, or foreign taxes owed by or asserted against the Company. The Company has not received any written notice from any taxing authority regarding any proposed audit, examination, or assessment.
4.  Delaware Franchise Tax. The Company's Delaware franchise tax obligations are current. The Company has timely filed its annual franchise tax reports with the Delaware Division of Corporations and has paid all franchise taxes due and payable through the date hereof.
5.  State and Local Taxes. The Company is current on all material state and local tax obligations, including income taxes, franchise taxes, sales and use taxes (where applicable), and payroll and employment taxes, in each jurisdiction in which such taxes are due and payable.
6.  Section 409A Compliance. The Company has complied in all material respects with Section 409A of the Internal Revenue Code of 1986, as amended ("Section 409A"), with respect to all compensatory arrangements subject thereto, including stock options granted under the Plan. All stock options granted by the Company under the Plan have been granted with exercise prices at or above the fair market value of the Company's Common Stock on the date of grant, as determined by independent valuation. The most recent 409A valuation of the Company's Common Stock is $8.42 per share, as determined by Atlas Valuation Services, Inc., in a report dated September 15, 2023 (see Schedule 2.3(c) for additional details).
7.  No Tax Liens. There are no tax liens filed against any of the Company's assets.
8.  Withholding. The Company has complied in all material respects with all applicable withholding and reporting obligations with respect to taxes required to be withheld or collected, including federal and state income tax withholding, FICA, FUTA, and state unemployment taxes.
SCHEDULE 2.10
Litigation
Except as set forth below, there is no pending or, to the Company's knowledge, threatened litigation, arbitration, mediation, administrative proceeding, governmental investigation, or other proceeding against or involving the Company (or any of its officers or directors in their capacities as such) that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company.
1. Tidewater Payment Systems, Inc. v. Skybridge Fintech Ltd.
Forum: United States District Court for the Southern District of New York, Case No. 1:23-cv-08214
Parties: Tidewater Payment Systems, Inc. (Plaintiff) v. Skybridge Fintech Ltd. (Defendant)
Nature of Claims: Breach of contract. Plaintiff alleges that the Company improperly terminated a referral agreement and failed to pay referral fees for certain customer introductions. Plaintiff seeks damages of approximately $1,200,000 in alleged unpaid referral fees, plus interest and attorneys' fees.
Date Filed: September 18, 2023
Current Status: The Company filed its Answer and Counterclaims on November 6, 2023. The Company has counterclaimed for breach of contract, alleging that Plaintiff failed to meet its performance obligations under the referral agreement. Discovery is ongoing. No dispositive motions have been filed.
Estimated Exposure: The Company believes the claims are without merit and intends to vigorously defend against them. Based on the advice of outside counsel, the Company estimates the range of reasonably possible loss, if any, to be between $0 and $400,000. The Company has not established a loss reserve with respect to this matter.
Insurance Coverage: The Company has tendered this claim to its general commercial liability insurer. Coverage determination is pending.
2. Pre-Litigation Demand — Sentinel Compliance Solutions, LLC
Parties: Sentinel Compliance Solutions, LLC (Claimant) and Skybridge Fintech Ltd. (Respondent)
Nature of Claims: Sentinel Compliance Solutions, LLC sent a demand letter to the Company, dated October 30, 2023, alleging that the Company's automated compliance monitoring functionality infringes upon a patent held by Sentinel (U.S. Patent No. 10,847,219). The demand letter requests that the Company enter into a license agreement and pay royalties in an unspecified amount.
Current Status: Pre-litigation; no lawsuit has been filed. The Company's outside patent counsel has reviewed the Sentinel patent and the Company's technology and has provided a preliminary non-infringement opinion. The Company responded to the demand letter on December 5, 2023, denying infringement and declining to enter into a license agreement. No further correspondence has been received as of the date hereof.
Estimated Exposure: The Company believes the infringement allegations are without merit. The Company is unable to estimate the range of loss, if any, at this early stage. No loss reserve has been established.
Insurance Coverage: The Company has notified its Errors & Omissions / Professional Liability insurer and its Cyber Liability insurer of the demand. Coverage determination has not been completed.
3. Regulatory Matters.
Cross-reference: See Schedule 2.14 for disclosures relating to regulatory matters, including any pending or threatened enforcement actions, consent orders, or material regulatory inquiries. As of the date hereof, no such matters are pending or, to the Company's knowledge, threatened.
SCHEDULE 2.11
Employee Matters
(a) Employees.  As of the date hereof, the Company employs approximately 310 full-time equivalent employees (FTEs). The Company's workforce is distributed across the following functional areas:
The Company's principal offices are located in New York, New York, with additional employees working remotely from various locations throughout the United States. The Company does not have any employees located outside of the United States.
Key Employees:
(b) Employee Benefit Plans
The Company maintains the following employee benefit plans:
(i) Equity Incentive Plan. The Skybridge Fintech Ltd. 2017 Equity Incentive Plan, as amended. See Schedule 2.3(c) for details regarding the Plan, including outstanding options and shares reserved for future grant.
(ii) 401(k) Plan. The Company sponsors a 401(k) retirement savings plan for eligible employees through Guideline, Inc. (as plan administrator). The Company makes a discretionary employer matching contribution of up to 4% of each participating employee's eligible compensation, subject to applicable IRS limits.
(iii) Health Insurance. The Company provides comprehensive health insurance benefits to eligible employees, including medical, dental, and vision coverage, through Northpoint Casualty Group (a Ridgeline Group). The Company pays approximately 90% of employee premiums and approximately 75% of dependent premiums.
(iv) Other Benefits. The Company provides additional employee benefits including: life insurance and accidental death and dismemberment (AD&D) coverage; short-term and long-term disability insurance; a flexible spending account (FSA) program; commuter benefits; an employee assistance program (EAP); and paid time off (PTO) and paid family leave.
(v) No Defined Benefit Pension Plan. The Company does not maintain, sponsor, or contribute to any defined benefit pension plan, multiemployer plan, or other employee benefit plan subject to Title IV of the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
(c) Employment Agreements
(i) Executive Employment Agreements. The Company has entered into employment agreements with each of the following key executive officers: Arjun Mehta (CEO), Elena Vasquez (CTO), David Lindstrom (CFO), and Priya Ramanathan (General Counsel). Each such employment agreement provides for base salary, eligibility for annual performance bonuses, equity compensation, standard employee benefits, and termination provisions (including severance upon termination without cause or resignation for good reason, subject to execution of a release of claims). Each executive employment agreement contains customary non-competition (for a period of twelve months following termination in applicable jurisdictions), non-solicitation (for a period of eighteen months following termination), and confidentiality covenants. Copies of all executive employment agreements have been made available in the Data Room.
(ii) At-Will Employment. All non-executive employees of the Company are employed on an at-will basis, subject to the terms of their respective offer letters and the Company's standard policies and procedures. The Company provides offer letters to all new employees, which set forth the material terms of employment, including title, compensation, benefits eligibility, and at-will employment status.
(iii) PIIA. All employees of the Company are required to execute the Company's standard Employee Proprietary Information and Inventions Assignment Agreement (the "PIIA") as a condition of employment. See Schedule 2.8(c) for information regarding identified gaps in the Company's PIIA coverage.
(d) Labor Matters
(i) No Collective Bargaining Agreements. The Company is not a party to, and none of its employees are covered by, any collective bargaining agreement or other agreement with any labor union, works council, or employee representative body. To the Company's knowledge, no labor union organizing efforts are pending or threatened with respect to any of the Company's employees.
(ii) No Unfair Labor Practice Charges. There are no pending or, to the Company's knowledge, threatened unfair labor practice charges or complaints against the Company before the National Labor Relations Board or any comparable state or local agency.
(iii) No Material Employment Claims. There are no pending or, to the Company's knowledge, threatened employment-related claims, demands, actions, suits, charges, complaints, grievances, arbitrations, or proceedings against the Company (including, without limitation, claims relating to wrongful termination, discrimination, harassment, retaliation, wage and hour violations, or misclassification), except as set forth in Schedule 2.10 (Litigation). As of the date hereof, no such claims are pending or known to be threatened.
SCHEDULE 2.12
Insurance
The Company maintains the following insurance policies, which are currently in force and for which all premiums have been paid current. A schedule of all insurance policies is attached hereto as Exhibit E.
Insurance Coverage Review. An Insurance Coverage Review Memorandum was prepared by the Company's insurance broker, Cobalt Ridge Benefit Group, dated December 23, 2023. The memorandum identified the following observations:
(a) The Company's D&O policy limits of $10,000,000 are at the lower end of the range typically maintained by technology companies of comparable size and stage. The Company's insurance broker has recommended that the Company consider increasing D&O limits to $15,000,000 or $20,000,000 in connection with the Company's planned Series D equity round. The Company intends to evaluate such increase at the time of the Series D round.
(b) No material gaps in coverage were identified with respect to the Company's current operations and risk profile.
SCHEDULE 2.13
Environmental Matters
Not applicable. The Company operates as a software and financial technology business and does not engage in manufacturing, industrial processing, mining, chemical production, or other operations that generate material environmental liabilities. The Company does not own, lease, or operate any real property (other than leased office space at its principal executive offices at 450 Park Avenue South, 14th Floor, New York, New York 10016), and, to the Company's knowledge, no hazardous substances, pollutants, or contaminants have been generated, stored, released, or disposed of by the Company at any location. The Company is not subject to, and has not received notice of, any claim, demand, action, or proceeding under any federal, state, or local environmental law, regulation, or ordinance.
SCHEDULE 2.14
Regulatory Matters (Money Transmission and State Licensing)
1. Business Description.
The Company operates a cloud-based payments orchestration and embedded lending platform. The Company's platform enables enterprise customers to integrate, route, and manage payments across multiple acquiring banks, payment processors, and payment networks through a single API interface. The Company also offers an embedded lending product that enables its customers to offer point-of-sale and working capital financing to their end users. In connection with its payments and lending activities, the Company holds or has obtained money transmission licenses or equivalent authorizations in multiple states, as described below.
2. Money Transmission Licenses.
The Company holds active money transmission licenses (or equivalent state licenses or authorizations) in the following states. A detailed schedule of all regulatory licenses and filings is attached hereto as Exhibit F.
3. Pending Applications.
As of the date hereof, the Company has pending money transmission license applications in the following states:
(a) Oregon — Application submitted July 10, 2023; status: under review by the Oregon Division of Financial Regulation.
(b) Indiana — Application submitted September 18, 2023; status: under review by the Indiana Department of Financial Institutions.
(c) Wisconsin — Application submitted November 2, 2023; status: under review by the Wisconsin Department of Financial Institutions.
4. Enforcement Actions and Regulatory Inquiries.
As of the date hereof, there are no pending or, to the Company's knowledge, threatened enforcement actions, consent orders, cease-and-desist orders, or material regulatory inquiries by any federal or state regulatory authority against or involving the Company or any of its officers or directors.
The Company received a routine examination letter from the New York Department of Financial Services (NYDFS) on October 2, 2023, notifying the Company of a scheduled safety and soundness examination in connection with the Company's money transmitter license. The examination is expected to commence in Q1 2024 and is a routine periodic examination, not initiated in response to any specific complaint, violation, or concern.
5. Compliance Programs.
The Company maintains comprehensive compliance programs covering the following areas:
(a) Anti-Money Laundering (AML). The Company maintains a written AML compliance program in accordance with the Bank Secrecy Act (BSA) and applicable FinCEN regulations, including customer identification program (CIP) procedures, transaction monitoring, suspicious activity reporting (SAR) procedures, and currency transaction reporting (CTR) procedures. The Company's AML compliance program is overseen by its designated BSA/AML Compliance Officer (currently: Kara Johannsen, Director of Compliance).
(b) Know Your Customer (KYC). The Company maintains KYC policies and procedures for onboarding and monitoring customers and, where applicable, the end users of its customers' platforms.
(c) Office of Foreign Assets Control (OFAC). The Company screens all transactions and customer relationships against OFAC's Specially Designated Nationals (SDN) list and other applicable sanctions lists.
(d) State Regulatory Compliance. The Company maintains compliance with all conditions and requirements of its money transmission licenses, including surety bond requirements, minimum net worth requirements, permissible investment requirements, and periodic reporting and examination obligations.
Cross-reference: See Schedule 2.10 for general litigation and dispute disclosures, including any regulatory-related matters.
SCHEDULE 2.15
Compliance with Laws
The Company is in material compliance with all applicable federal, state, and local laws, rules, regulations, orders, and ordinances applicable to its business, operations, properties, and assets, including but not limited to:
(a) Securities Laws. The Company is in material compliance with applicable federal securities laws (including the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, to the extent applicable to a privately held company) and applicable state securities or "blue sky" laws, including with respect to the offer and sale of its securities.
(b) Money Transmission and Payments Regulations. The Company is in material compliance with all applicable federal and state laws and regulations governing money transmission, payments, and financial services, incl