PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE ATTORNEY WORK PRODUCT
BRING-DOWN DUE DILIGENCE MEMORANDUM
PRE-CLOSING UPDATE
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I. Introduction and Purpose
This memorandum constitutes a bring-down and update of the Legal Due Diligence Summary Memorandum prepared by Naomi Petersen and Ryan Kowalski and dated March 28, 2025 (the "Initial DD Memo") in connection with the proposed business combination (the "Transaction") between Skybridge Fintech Ltd. ("Skybridge" or the "Company"), a Delaware corporation headquartered at 1200 Market Street, Suite 1400, Wilmington, Delaware 19801, and Pinnacle Growth Acquisition Corp. ("Pinnacle" or "PGAC"), a Cayman Islands exempted company listed on the Nasdaq Stock Market LLC ("Nasdaq") under the ticker symbol "PGAC."
The Transaction is structured as a forward triangular merger under the Delaware General Corporation Law (the "DGCL"), pursuant to which Pinnacle Merger Sub Inc. ("Merger Sub"), a newly formed Delaware corporation and wholly owned subsidiary of Pinnacle, will merge with and into Skybridge, with Skybridge surviving as a wholly owned subsidiary of the domesticated Pinnacle. In connection with the closing, Pinnacle will domesticate from the Cayman Islands to the State of Delaware and will be renamed "Skybridge Fintech Holdings, Inc." The surviving entity will continue the operations of Skybridge as an indirect wholly owned subsidiary of the combined public company.
The Business Combination Agreement (the "BCA") was executed on April 14, 2025, among Pinnacle, Merger Sub, and Skybridge. The BCA reflects an implied enterprise value and equity value of approximately $450,000,000 for Skybridge. The material terms and conditions of the BCA, including representations and warranties, interim operating covenants, closing conditions, and indemnification provisions, were analyzed in detail in the Initial DD Memo and are referenced herein only to the extent relevant to the bring-down analysis.
The purpose of this memorandum is to:
1. Confirm or update the diligence findings set forth in the Initial DD Memo for the period from March 28, 2025 through the date hereof, May 28, 2025 (the "Update Period");
2. Identify any new material developments, risks, or issues arising during the Update Period that may affect the Transaction, including with respect to the truth and accuracy of the Company's representations and warranties under the BCA;
3. Assess compliance with the interim operating covenants set forth in Article V of the BCA during the Update Period; and
4. Support the delivery at closing of the Officer's Certificate required under the BCA, which will certify the continued truth and accuracy of the Company's representations and warranties as of the closing date and the absence of a Company Material Adverse Effect (as defined in the BCA).
The review period covered by this memorandum encompasses developments from March 28, 2025 through approximately May 28, 2025. We note that an additional and final bring-down review will be required immediately prior to the projected closing date of on or about July 21, 2025, in order to confirm that no intervening material developments have occurred. The scope of this bring-down memorandum tracks the same categories addressed in the Initial DD Memo, specifically: corporate organization and good standing, capitalization, material contracts, litigation and proceedings, employment and employee benefits, tax matters, real property, environmental, insurance, regulatory and licensing, and intellectual property.
II. Methodology
In preparing this bring-down memorandum, we employed the following methodology:
Data Room Review. We reviewed all updated data room materials uploaded by Skybridge management to the Pemberton Technologies virtual data room (Project Skyway) since March 28, 2025. This included new documents, updated versions of previously reviewed documents, and management-prepared summaries and certifications. A complete list of documents reviewed during the Update Period is set forth in Appendix A to this memorandum.
Management Interviews. We conducted bring-down interviews with the following members of Skybridge management during the weeks of May 12 and May 19, 2025:
• Teresa Okafor, General Counsel — May 13, 2025
• Marcus Ellingham, Chief Financial Officer — May 14, 2025
• Daniel Hsiao, Chief Technology Officer — May 20, 2025
The dates and participants for each interview are summarized in Appendix B to this memorandum. During these interviews, we inquired specifically as to whether any developments had occurred since the date of the Initial DD Memo that would affect the accuracy of any representation or warranty in the BCA, whether any new material contracts had been entered into or terminated, whether any new litigation or regulatory matters had arisen, and whether management was aware of any event that could constitute a Company Material Adverse Effect.
Public Records Searches. We reviewed publicly available court docket searches (conducted via PACER for federal courts and through applicable state court electronic filing systems), UCC filing searches, and judgment and lien searches, each run as of May 23, 2025, in the jurisdictions of Delaware, California, and New York — the jurisdictions in which Skybridge maintains operations or is subject to jurisdiction.
Capitalization Review. We reviewed the updated capitalization table provided by Skybridge management, dated as of May 15, 2025, and compared it to the capitalization table reviewed in connection with the Initial DD Memo and the disclosure schedules delivered under the BCA.
Material Contracts Review. We reviewed the updated list of material contracts, amendments, and new agreements executed during the Update Period, as provided by Teresa Okafor and her team.
SEC Filings. We reviewed all SEC filings made by Pinnacle during the Update Period, including the Registration Statement on Form S-4 (SEC File No. 333-294817; CIK: 0001948372), initially filed with the Securities and Exchange Commission (the "SEC") on April 28, 2025, and the Current Report on Form 8-K filed by Pinnacle on April 14, 2025 announcing the execution of the BCA.
Cross-Referencing. We cross-referenced all findings described herein against the BCA representations and warranties set forth in Article III (Representations and Warranties of the Company) and the applicable disclosure schedules delivered by Skybridge in connection with the execution of the BCA, in order to assess whether any update, supplement, or amendment to such disclosure schedules may be necessary.
III. Corporate Organization and Good Standing
III.A. Entity Status
Skybridge Fintech Ltd. remains a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware. The Company's federal employer identification number is 83-2471560. The Company was originally incorporated on June 15, 2018, and has continuously maintained its corporate existence since that date.
We confirmed that no amendments to Skybridge's Amended and Restated Certificate of Incorporation or its Amended and Restated Bylaws have been filed, adopted, or approved during the Update Period. The organizational documents of the Company remain in the same form as reviewed and described in the Initial DD Memo.
Skybridge continues to maintain foreign qualifications in good standing in each state identified in the Initial DD Memo, including California, New York, Texas, Florida, and Illinois, among others. No new state qualifications have been obtained, and no withdrawals from any state of foreign qualification have occurred, during the Update Period. Good standing certificates for the State of Delaware and for all states in which the Company is qualified to do business as a foreign corporation will be ordered in connection with the closing of the Transaction, consistent with the Good Standing Certificate Request List circulated separately to the transaction working group.
III.B. Subsidiaries. No new subsidiaries have been formed, acquired, or organized by Skybridge during the Update Period. As noted in the Initial DD Memo, Skybridge does not have any direct or indirect subsidiaries, and this status remains unchanged. The Company continues to conduct all of its operations directly and not through any subsidiary, affiliate, or joint venture entity.
III.C. Board Composition and Officers
There have been no changes to the composition of the Skybridge board of directors or to the officer roster during the Update Period. The officers of the Company continue to be as follows:
No resignations, removals, appointments, or elections of directors or officers have occurred, and no such changes are currently contemplated prior to the closing of the Transaction, other than the post-closing board reconstitution and officer appointments contemplated by the BCA and the Registration Statement on Form S-4.
IV. Capitalization
IV.A. Updated Capitalization Table
We reviewed the updated capitalization table prepared by Skybridge management and dated as of May 15, 2025. We confirm that the pre-Transaction fully diluted ownership of the Company remains materially consistent with the capitalization information set forth in the Initial DD Memo and in the BCA disclosure schedules (Schedule 3.3 — Capitalization). The fully diluted ownership breakdown is as follows:
As of the date of signing of the BCA, Skybridge had a total of approximately 340 employees. We confirmed with Marcus Ellingham during the bring-down interview that the employee headcount has not materially changed during the Update Period and remains at approximately 340 employees as of the date hereof.
IV.B. Stock Option and Equity Award Activity
We confirmed that Skybridge has not granted any new stock options, restricted stock units, stock appreciation rights, phantom equity awards, or any other equity or equity-linked awards during the Update Period. This is consistent with the interim operating covenant restrictions set forth in Section 5.1(b)(iii) of the BCA, which prohibit the Company from granting or issuing any equity awards without the prior written consent of Pinnacle (other than as expressly permitted therein).
No exercises of outstanding stock options under the Company's existing 2019 Equity Incentive Plan have occurred during the Update Period. Furthermore, no modifications, amendments, or accelerations of any outstanding equity awards have been effected.
No changes to the terms, provisions, or share reserve of the Company's existing 2019 Equity Incentive Plan have been made during the Update Period.
IV.C. No New Issuances or Transfers
No issuances of additional shares of common stock, preferred stock, warrants, convertible notes, convertible instruments, or other equity securities of any kind have occurred during the Update Period. The authorized and outstanding capitalization of Skybridge remains as described in the Initial DD Memo and in the BCA disclosure schedules.
We further confirmed that no transfers of shares by key stockholders have occurred during the Update Period that would require consent or notice under the Company Stockholder Support Agreement, which was executed on April 14, 2025, by Harborview Partners, Atlas Horizon Ventures Fund II, LP, and Priya Chandrasekaran (collectively, the "Supporting Stockholders"). Each Supporting Stockholder has, pursuant to the Company Stockholder Support Agreement, agreed to certain transfer restrictions with respect to their shares of Company common stock during the period from execution through the earlier of the closing or termination of the BCA.
V. Material Contracts
V.A. Overview. We reviewed the material contracts summary spreadsheet maintained by Skybridge's legal department, as updated through the Update Period, and compared it to the schedule of material contracts prepared in connection with the Initial DD Memo and the BCA disclosure schedules (Schedule 3.13 — Material Contracts). Our review confirms the following:
No material contracts have been terminated during the Update Period. No material contracts have been materially amended during the Update Period. No material breaches of any material contract by Skybridge or, to the Company's knowledge, by any counterparty thereto, have been identified during the Update Period. The existing material contracts of the Company remain in full force and effect in accordance with their respective terms.
V.B. New Contracts
During the Update Period, Skybridge entered into two new customer agreements. Both agreements were entered into in the ordinary course of business, are consistent with the Company's standard form customer terms, and are below the materiality thresholds established in the BCA's interim operating covenants (Section 5.1(b)(viii)), which require Pinnacle's prior written consent for any contract involving annual consideration in excess of $500,000 or aggregate consideration in excess of $1,000,000.
No new vendor agreements, partnership agreements, or technology license agreements exceeding the BCA-defined thresholds requiring Pinnacle's prior written consent were entered into during the Update Period.
Teresa Okafor confirmed during the bring-down interview conducted on May 13, 2025, that no contracts containing change-of-control provisions have been newly identified beyond those previously disclosed in the Initial DD Memo and in the BCA disclosure schedules. Management's review of the contract portfolio remains consistent with the analysis set forth in the Initial DD Memo.
V.C. Change-of-Control Provisions — Status of Consents and Notices
As identified in the Initial DD Memo and the Material Contracts Summary, certain key customer agreements and vendor agreements contain change-of-control notification or consent provisions that are triggered by the Transaction. These contracts are listed in Schedule 3.4(b) to the BCA.
Skybridge has commenced the process of sending change-of-control notices to the applicable counterparties, as permitted or required under the respective contract terms. As of the date hereof, the Company has sent notices to all counterparties identified as requiring notification. No counterparty has indicated an intention to terminate, adversely modify, renegotiate, or exercise any other remedy under any such agreement in connection with the Transaction or the change of control resulting therefrom.
With respect to those contracts that require the affirmative consent of the counterparty (as distinguished from mere notice), all such consents have either been obtained or are expected to be obtained prior to the closing date. No material issues have been identified in the consent solicitation process, and no counterparty has raised objections or conditions to the granting of consent.
V.D. Velthorn Commerce Bank, N.A. Credit Facility
The Company's $25,000,000 revolving credit facility under the Credit Agreement dated March 22, 2023, by and among Skybridge, as borrower, and Velthorn Commerce Bank, N.A. (100 Federal Street, Boston, Massachusetts 02110), as administrative agent and lender (the "Velthorn Credit Agreement"), remains outstanding. As of the BCA execution date of April 14, 2025, the outstanding balance under the facility was approximately $18,500,000.
We confirmed that the Velthorn Credit Agreement facility is to be repaid in full at closing from trust account proceeds, in accordance with the terms of the BCA and the form payoff letter currently under negotiation with Velthorn Commerce Bank, N.A. Upon repayment, all UCC filings and other security interests held by Velthorn Commerce Bank, N.A. will be released and terminated.
No additional draws on, or repayments under, the revolving credit facility have occurred during the Update Period that have materially changed the outstanding balance from the approximately $18,500,000 level reported at signing. Ordinary course interest payments have been made as required.
No defaults or events of default under the Velthorn Credit Agreement have occurred during the Update Period, and no notice of default has been received from Velthorn Commerce Bank, N.A. The Company remains in compliance with all financial covenants, affirmative covenants, and negative covenants under the Velthorn Credit Agreement.
The change-of-control provision contained in Section 7.01(h) of the Velthorn Credit Agreement will be satisfied by the payoff in full and termination of the facility at closing. A separate consent or waiver with respect to the change-of-control provision is not required, provided that full repayment occurs contemporaneously with or prior to the consummation of the Transaction.
VI. Litigation and Proceedings
VI.A. Pending Litigation
Updated docket searches were conducted on May 23, 2025, across federal court systems (via PACER) and state court systems in Delaware, California, and New York — the jurisdictions in which Skybridge operates or is subject to jurisdiction. These searches were conducted under the Company's full legal name and common variations thereof.
No new lawsuits, arbitrations, mediations, or administrative proceedings have been filed against Skybridge or any of its officers or directors (in their capacity as such) during the Update Period. No new lawsuits, arbitrations, mediations, or administrative proceedings have been commenced by Skybridge during the Update Period.
The matters identified in the Initial DD Memo as pending litigation (which were characterized therein as immaterial and routine in nature) remain in substantially the same procedural posture. No material changes in the status, scheduling, or substantive development of those matters have occurred. None of the pending matters is expected to result in a material liability or to constitute a Company Material Adverse Effect under the BCA.
VI.B. Threatened Litigation
Teresa Okafor confirmed during the bring-down interview conducted on May 13, 2025, that Skybridge has not received any new demand letters, cease-and-desist letters, pre-litigation notices, or written threats of litigation during the Update Period. No informal or verbal threats of litigation known to management have been communicated. The Company is not aware of any facts or circumstances that would reasonably be expected to give rise to any material litigation in the near term.
VI.C. Governmental Investigations
No new governmental investigations, inquiries, examinations, or enforcement actions have been commenced or, to the Company's knowledge, threatened against Skybridge or any of its officers or directors during the Update Period. No subpoenas, civil investigative demands, requests for information, or similar process have been received from any federal, state, or local governmental authority.
VI.D. Judgment and Lien Searches
Updated UCC filing searches, judgment searches, and lien searches were conducted as of May 23, 2025, in the State of Delaware (including the Delaware Secretary of State's office and the New Castle County Recorder of Deeds) and in the State of California (including the California Secretary of State's office and the San Francisco County Recorder's office).
The UCC search results reflect the existing UCC-1 financing statements filed by Velthorn Commerce Bank, N.A. against Skybridge in connection with the revolving credit facility, which are consistent with the security interests described in the Velthorn Credit Agreement and identified in the Initial DD Memo. No new UCC financing statements have been filed against Skybridge during the Update Period.
No judgments against Skybridge were identified in any jurisdiction searched. No federal tax liens, state tax liens, or other liens of any kind (other than the Velthorn Commerce Bank, N.A. UCC filings noted above) were identified against Skybridge in any jurisdiction searched.
VII. Employment and Employee Benefits
VII.A. Headcount. Skybridge's employee headcount remains at approximately 340 employees as of the date hereof. No material layoffs, reductions in force, furloughs, or other workforce restructuring events have occurred during the Update Period. No significant hiring events (defined for purposes of this memorandum as the addition of more than ten employees in a single department or function) have occurred during the Update Period. Ordinary course hiring and attrition have occurred at levels consistent with historical patterns.
VII.B. Key Employee Matters
No departures of executive officers, senior vice presidents, or other key employees (as identified in the Initial DD Memo and the BCA disclosure schedules) have occurred during the Update Period. No resignation letters, termination notices, or similar communications have been received from any such individuals.
No new employment agreements, change-in-control agreements, severance agreements, retention agreements, or other material compensation arrangements have been entered into by the Company with any employee during the Update Period, other than standard offer letters for ordinary course new hires at compensation levels within the parameters permitted by the BCA interim operating covenants.
The BCA interim operating covenants (Section 5.1(b)(vi)) restrict the Company from, among other things, increasing the salary or other compensation of any employee or consultant (other than ordinary course annual increases consistent with past practice for non-executive employees), paying any bonus outside of the ordinary course, or entering into or amending any employment or severance agreement with any director, officer, or employee whose annual base compensation exceeds $200,000, in each case without the prior written consent of Pinnacle. Based on our review and the bring-down interviews, the Company has complied with these restrictions during the Update Period.
VII.C. Employee Benefits
No material changes to Skybridge's employee benefit plans (including the Company's 401(k) plan, health and welfare plans, and other benefit programs described in the Initial DD Memo) have been implemented during the Update Period. The Company's benefit plans continue to be administered in accordance with their terms and applicable law.
The 2025 Equity Incentive Plan of Skybridge Fintech Holdings, Inc. (the combined company post-closing) is being prepared in form and is expected to be presented for approval by Pinnacle's shareholders at the extraordinary general meeting currently projected for July 18, 2025. The plan will be included as an annex to the definitive proxy statement/prospectus forming part of the Form S-4.
VII.D. Labor Relations
No union organizing activity, unfair labor practice charges, labor disputes, work stoppages, picketing, or National Labor Relations Board ("NLRB") proceedings have occurred during the Update Period. The Company's workforce remains non-unionized, and no collective bargaining agreements are in effect or under negotiation.
No charges have been filed with the Equal Employment Opportunity Commission ("EEOC") or any state or local fair employment practices agency against the Company during the Update Period. No complaints have been filed with the Occupational Safety and Health Administration ("OSHA") during the Update Period. No wage and hour claims, whistleblower complaints, or similar regulatory matters have been filed or threatened against the Company during the Update Period.
VIII. Tax Matters
VIII.A. Federal and State Tax Compliance
Marcus Ellingham confirmed during the bring-down interview conducted on May 14, 2025, that Skybridge remains current on all federal and state income tax filings and payments. All required estimated tax payments have been timely remitted. The Company has timely filed all payroll tax returns and remitted all related withholding amounts, and all sales and use tax returns and related payments are current.
No new audits, examinations, or assessments by the Internal Revenue Service (the "IRS") or any state or local taxing authority have been commenced or threatened against the Company during the Update Period. No notices of proposed adjustment, statutory notices of deficiency, 30-day letters, or similar correspondence have been received from any taxing authority.
No new tax liens have been filed against the Company during the Update Period, as confirmed by the lien search results described in Section VI.D above. No notices of federal tax lien or state tax lien have been received by the Company.
VIII.B. Transaction Tax Structure
The tax structure of the Transaction is described in the Tax Structure Memorandum prepared by Leonard Cross of Calderwood & Harkness LLP's Tax Department, in consultation with Cedarhurst Advisory Group LLC (55 Railroad Avenue, Suite 200, Greenwich, Connecticut 06830; Martin Cho, Partner, engagement lead). As described in that memorandum, the merger of Merger Sub with and into Skybridge is intended to qualify as a tax-free reorganization under Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code"), and the domestication of Pinnacle from the Cayman Islands to the State of Delaware is intended to qualify as a tax-free reorganization under Sections 367(b) and 368(a)(1)(F) of the Code.
No developments have occurred during the Update Period that would adversely affect or call into question the expected tax-free treatment of the Transaction. There have been no changes in applicable tax law, IRS guidance, or Treasury regulations that would affect the analysis set forth in the Tax Structure Memorandum.
A draft tax opinion, which is expected to be included as an exhibit to the Registration Statement on Form S-4, is currently under preparation by Leonard Cross. The draft is progressing without issues, and no concerns have been identified that would prevent delivery of the tax opinion in customary form as a condition to the effectiveness of the Registration Statement.
VIII.C. FIRPTA. Pursuant to the FIRPTA/Withholding Analysis Memorandum prepared by Leonard Cross, Skybridge is not and has not been a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Code at any time during the applicable testing period. This status has not changed during the Update Period. The Company's assets continue to consist primarily of intangible assets (Intellectual property, software, and customer relationships) and working capital; the Company does not hold any United States real property interests as defined under Section 897 of the Code.
A FIRPTA certificate in the form prescribed by Treasury Regulation Section 1.1445-2(c)(3) has been prepared and is in form for delivery by the Company at the closing of the Transaction.
IX. Intellectual Property
IX.A. Overview. No material changes to Skybridge's intellectual property portfolio have occurred during the Update Period. The Company's IP assets, as described in detail in the Initial DD Memo and in the separate IP Due Diligence Memorandum prepared by the Calderwood & Harkness IP group, remain substantially unchanged.
Daniel Hsiao (CTO) confirmed during the bring-down interview conducted on May 20, 2025, the following:
• No new patent applications have been filed by the Company during the Update Period, and no patents have been issued to the Company during the Update Period.
• No new trademark applications or registrations have been filed, and no existing trademark applications or registrations have been abandoned, cancelled, or challenged, during the Update Period.
• No new copyright registrations have been filed during the Update Period.
• No material IP disputes, infringement claims (whether asserted by or against the Company), misappropriation claims, or challenges to the validity or ownership of any Company IP have arisen during the Update Period.
IX.B. Software and Open-Source Compliance
No material changes to Skybridge's proprietary cloud-based payment orchestration and embedded-finance software-as-a-service ("SaaS") platform architecture have been made during the Update Period that would affect the IP diligence findings set forth in the Initial DD Memo or the IP Due Diligence Memorandum. The Company's core platform continues to be developed and maintained by in-house engineering staff.
Daniel Hsiao confirmed that no new open-source software components have been introduced into the Company's codebase during the Update Period that would trigger copyleft licensing obligations (including under the GNU General Public License, the GNU Affero General Public License, or similar strongly copyleft licenses) or other material licensing issues beyond those previously identified in the Initial DD Memo and the IP Due Diligence Memorandum. The Company continues to maintain its open-source compliance tracking system, and all open-source usage during the Update Period has been reviewed and approved in accordance with the Company's internal open-source policy.
IX.C. Employee IP Assignment Agreements
Teresa Okafor confirmed that all new hires joining the Company during the Update Period have executed the Company's standard form employee proprietary information, inventions assignment, and confidentiality agreement (the "PIIA"), consistent with the Company's established policies and practices. No exceptions to the standard PIIA execution requirement have been identified. The Company's IP assignment agreement coverage remains complete for all current employees and independent contractors engaged in development or engineering work.
X. Regulatory and Licensing
X.A. Money Transmission and Payment Processor Registrations
No changes to Skybridge's state money transmitter licensing status have occurred during the Update Period. The Company continues to hold active money transmitter licenses in all states identified in the Initial DD Memo and in the Regulatory and Licensing Memorandum. All license renewal filings have been timely submitted, and all required surety bonds and other financial assurance requirements remain in place.
No new regulatory applications have been filed or are pending with any state financial regulatory authority. No adverse regulatory actions, examination findings, matters requiring attention ("MRAs"), consent orders, cease-and-desist orders, or similar enforcement actions have been commenced, threatened, or received during the Update Period.
X.B. BSA/AML Compliance
No Bank Secrecy Act ("BSA") or anti-money laundering ("AML") compliance issues have been identified during the Update Period. The Company's BSA/AML compliance program, including its customer identification program, transaction monitoring systems, and suspicious activity reporting procedures, continues to operate in accordance with applicable federal and state requirements.
No suspicious activity reports ("SARs") or currency transaction reports ("CTRs") requiring escalation to the Company's senior management or board of directors have been filed during the Update Period. No inquiries from FinCEN or any other law enforcement or regulatory agency relating to BSA/AML matters have been received.
X.C. Data Privacy
No data breaches, security incidents (including unauthorized access, data exfiltration, or ransomware events), or material privacy complaints have occurred during the Update Period. The Company's information security program continues to operate in accordance with its established policies and applicable regulatory requirements, including the California Consumer Privacy Act ("CCPA"), the California Privacy Rights Act ("CPRA"), and applicable provisions of the Gramm-Leach-Bliley Act ("GLBA") and related state financial privacy laws.
No new data privacy laws or regulations applicable to the Company's operations have taken effect during the Update Period that would require material changes to the Company's data privacy or information security compliance programs.
X.D. Change-of-Control Impact on Licenses
As discussed in detail in the Regulatory and Licensing Memorandum prepared in connection with the Initial DD Memo, certain state money transmitter licenses held by Skybridge require change-of-control notifications, applications, or approvals in connection with the Transaction. The specific states, filing requirements, and anticipated timelines are set forth in the Change-of-Control Regulatory Tracker maintained by the working group.
Skybridge has commenced the notification and approval process with all relevant state regulators. Applications for change-of-control approval have been filed where required, and notifications have been sent where applicable. As of the date hereof, no state regulator has raised any issues, objections, or conditions in connection with the change-of-control filings. Several states have acknowledged receipt of the filings and indicated that review is underway.
The status of regulatory change-of-control filings will continue to be tracked through closing. Any delays or issues arising in the regulatory approval process will be promptly communicated to the working group. We note that the BCA Outside Date provisions (discussed in Section XV.F below) provide for an extension mechanism if regulatory or SEC-related conditions remain outstanding.
XI. Real Property
No changes to Skybridge's leased real property have occurred during the Update Period. The Company continues to lease the following properties:
No new lease agreements have been entered into during the Update Period. No existing leases have been terminated, materially amended, renewed, or extended during the Update Period. No defaults or events of default under any existing lease have occurred, and no notices of default have been received from any landlord. Rent payments under both leases remain current.
The change-of-control and assignment provisions in each lease were analyzed in the Initial DD Memo. As noted therein, the Wilmington headquarters lease does not contain a change-of-control consent requirement, and the San Francisco lease requires landlord notification (but not consent) upon a change of control. The required notification under the San Francisco lease has been sent as part of the change-of-control notice process described in Section V.C above.
XII. Environmental
No environmental matters have been identified during the Update Period. Skybridge is a SaaS and software company with no manufacturing, production, warehousing, or industrial operations. The Company does not own any real property. The Company's environmental risk profile remains low, as noted in the Initial DD Memo. No environmental claims, complaints, violations, or regulatory inquiries have been received or threatened during the Update Period.
XIII. Insurance
XIII.A. Existing Coverage
Skybridge's existing insurance policies remain in full force and effect with no lapses, cancellations, material modifications, or non-renewals during the Update Period. The Company's insurance portfolio includes the following lines of coverage:
• Commercial General Liability
• Professional Liability / Errors & Omissions ("E&O")
• Cyber Liability / Network Security & Privacy
• Commercial Property
• Workers' Compensation and Employers' Liability
All required premium payments have been timely made. No new insurance claims have been filed by or against Skybridge during the Update Period. No notices of potential claims have been submitted to any insurer. No insurer has issued any reservation of rights letters, coverage denials, or cancellation notices with respect to any Skybridge policy during the Update Period.
XIII.B. Transaction-Related Insurance
Representations and Warranties Insurance. A representations and warranties ("R&W") insurance policy has been bound with Clarendon Mutual Underwriters, Ltd. (Hamilton, Bermuda) under Policy No. CLM-2025-SPAC-04471. The key terms of the R&W policy are as follows:
The policy limit of $45,000,000 matches the BCA indemnification cap of 10% of the $450,000,000 deal value. The retention of $4,500,000 matches the BCA indemnification basket/deductible of 1% of deal value. The R&W insurance binder has been executed, and the final policy will be issued at or promptly following closing. A copy of the binder has been placed in the data room.
Directors & Officers Tail Insurance. A directors and officers ("D&O") tail insurance policy has been quoted by Marlowe Asset Management Specialty Insurance Co. under Policy No. VSI-DO-2025-88320. The D&O tail policy will provide coverage for pre-closing acts of the Company's directors and officers for a period of six years following the closing, as required under Section 5.6 of the BCA. The policy is expected to be bound at or immediately prior to closing. Final premium and coverage terms are under negotiation and are expected to be finalized prior to the closing date.
XIV. Compliance with BCA Interim Operating Covenants
During the Update Period, Skybridge has been subject to the interim operating covenants set forth in Article V of the BCA. These covenants require the Company to conduct its business in the ordinary course, consistent with past practice, and prohibit the Company from taking certain specified actions without the prior written consent of Pinnacle.
Based on our review of all materials provided during the Update Period and the bring-down interviews conducted with Teresa Okafor (General Counsel) on May 13, 2025, and Marcus Ellingham (CFO) on May 14, 2025, no violations of or exceptions to the interim operating covenants have been identified. Specifically, we confirmed the following with respect to each of the principal negative covenants:
• Organizational Documents. No amendments to the Company's certificate of incorporation, bylaws, or other organizational documents have been adopted, filed, or proposed.
• Equity Issuances and Capitalization Changes. No new issuances of equity securities, option grants, equity award grants, or other changes to the Company's capitalization have occurred.
• Acquisitions and Dispositions. No material acquisitions of businesses, assets, or securities, and no material dispositions of assets, have been effected or agreed to.
• Indebtedness. No new material indebtedness has been incurred, assumed, or guaranteed. The outstanding balance under the Velthorn Commerce Bank, N.A. revolving credit facility remains at approximately $18,500,000 and has not materially changed.
• Capital Expenditures. No material capital expenditures have been made outside of the ordinary course of business and consistent with the Company's approved annual budget.
• Accounting Methods. No changes to accounting methods, principles, policies, or practices have been made, and no changes to the Company's fiscal year have been effected.
• Litigation Settlements. No settlements of material litigation or other proceedings have been agreed to or consummated.
• Employee Compensation and Benefits. No material changes to employee compensation (including salary increases, bonuses, and incentive compensation) or employee benefit plans have been made outside of the ordinary course and consistent with past practice. No new employment agreements with compensation above the BCA thresholds have been entered into without Pinnacle's consent.
• Dividends and Distributions. No dividends or other distributions on the Company's equity securities have been declared, set aside, or paid.
XV. Status of Transaction and Closing Conditions
XV.A. SEC Filing Status
The Registration Statement on Form S-4 (SEC File No. 333-294817; CIK: 0001948372) was initially filed with the SEC on April 28, 2025. The Form S-4 registers the shares of common stock of the combined company to be issued in connection with the Transaction, and contains the proxy statement/prospectus to be distributed to Pinnacle shareholders in connection with the extraordinary general meeting to approve the Transaction.
First-round comments from the staff of the SEC's Division of Corporation Finance were received on May 19, 2025. The comment letter contained comments relating to, among other things, the disclosure regarding unaudited pro forma financial information, the description of the PIPE subscription agreements, and certain risk factor disclosures. Calderwood & Harkness LLP and Ashland Burke & Thayer LLP (counsel to Pinnacle) are preparing a response letter and Amendment No. 1 to the Form S-4, which is projected to be filed with the SEC on or about June 2, 2025.
Based on the current timeline and assuming no further rounds of SEC comments (or a prompt resolution of any such comments), effectiveness of the Form S-4 is projected for approximately June 16, 2025, with the definitive proxy statement/prospectus expected to be mailed to Pinnacle shareholders on or about June 18, 2025.
XV.B. Nasdaq Listing
The listing application for the shares of common stock of the combined company on Nasdaq under the proposed ticker symbol "SBFT" was submitted to the Nasdaq Listing Qualifications Department on May 5, 2025. The application is currently under review. No deficiency notices, additional information requests, or other issues have been flagged by Nasdaq to date. We anticipate that Nasdaq will issue a conditional listing approval letter in advance of the projected closing date.
XV.C. Shareholder Approvals
The extraordinary general meeting of Pinnacle shareholders (the "EGM") is projected to be held on or about July 18, 2025, at which Pinnacle shareholders will be asked to approve the following proposals:
1. The Business Combination Proposal (approval of the BCA and the transactions contemplated thereby);
2. The Domestication Proposal (approval of the domestication of Pinnacle from the Cayman Islands to the State of Delaware);
3. The Charter Proposal (approval and adoption of the proposed certificate of incorporation of the combined company);
4. The Incentive Plan Proposal (approval of the 2025 Equity Incentive Plan of Skybridge Fintech Holdings, Inc.);
5. The Director Election Proposal (election of directors to the board of directors of the combined company); and
6. The Adjournment Proposal (adjournment of the EGM, if necessary, to solicit additional proxies).
Approval of the Business Combination Proposal requires an ordinary resolution under Cayman Islands law (simple majority of the votes cast by shareholders present in person or by proxy at the EGM and entitled to vote thereon).
Advantage Proxy Advisors, Inc. (17 Ashbury Asset Advisors, Suite 4000, New York, New York 10004) has been engaged by Pinnacle as proxy solicitor to assist with the proxy solicitation process. Engagement terms are in place and the solicitation campaign is expected to commence promptly following the mailing of the definitive proxy statement/prospectus.
On the Company side, the Company Stockholder Support Agreement executed on April 14, 2025 provides that each of Harborview Partners, Atlas Horizon Ventures Fund II, LP, and Priya Chandrasekaran has committed to deliver an irrevocable written consent in favor of the merger and the other transactions contemplated by the BCA, in accordance with Section 228 of the DGCL. The Supporting Stockholders collectively hold sufficient voting power to approve the merger without a meeting of the Company's stockholders.
XV.D. PIPE and Backstop
All four PIPE Subscription Agreements were executed concurrently with the BCA on April 14, 2025. The PIPE investors and their respective commitment amounts are as follows:
Each PIPE Subscription Agreement provides for the purchase of newly issued shares of common stock of the combined company at $10.00 per share, with the closing of the PIPE to occur concurrently with the closing of the Transaction. The PIPE Subscription Agreements contain customary conditions to closing, including the concurrent consummation of the Transaction and the effectiveness of the Form S-4.
In addition, the Non-Redemption/Backstop Agreement with Velthryn Strategic Investments, LP was executed concurrently with the BCA on April 14, 2025. Under the Backstop Agreement, Velthryn Strategic Investments, LP has committed to purchase from existing Pinnacle public shareholders up to 5,000,000 shares of Pinnacle Class A ordinary shares at a price of $10.25 per share (for a maximum commitment of $51,250,000), in order to reduce the number of public shares redeemed in connection with the Transaction. As consideration for providing the backstop commitment, Velthryn Strategic Investments, LP is entitled to receive incentive shares equal to 10% of the backstop shares actually purchased.
XV.E. Minimum Cash Condition
The BCA provides that it shall be a condition to the obligation of Skybridge to consummate the Transaction that the amount of "Available Cash" (as defined in the BCA) at closing shall be no less than $200,000,000 (the "Minimum Cash Condition"). Available Cash is defined to include the aggregate amount of cash held in the trust account (after giving effect to redemptions), the aggregate PIPE proceeds, and the aggregate backstop proceeds, less estimated transaction expenses payable at closing.
We have analyzed the Minimum Cash Condition under two scenarios:
No-Redemption Scenario:
Under this scenario, the Minimum Cash Condition is satisfied by a substantial margin.
Maximum Redemption Scenario (with Backstop):
Under a maximum redemption scenario (in which all public shareholders other than the backstop purchaser elect to redeem), after giving effect to the Velthryn backstop commitment and the PIPE proceeds, and after deducting estimated transaction expenses, Available Cash is projected to be approximately $215,600,000, which would still satisfy the Minimum Cash Condition.
Based on the foregoing analysis, there are no current concerns regarding the satisfaction of the Minimum Cash Condition.
XV.F. Other Closing Conditions
The following is a summary of the status of other material closing conditions and closing deliverables:
Sponsor Support Agreement and Lock-Up Agreement. The Sponsor Support Agreement (by and between Pinnacle, its sponsor, and certain insiders) and the Lock-Up Agreement (by and among the Company's stockholders) were each executed at the time of signing of the BCA on April 14, 2025, and remain in full force and effect.
Officer's Certificate (Skybridge). The Officer's Certificate to be delivered by Skybridge at closing, certifying the continued truth and accuracy of the Company's representations and warranties as of the closing date and the absence of a Company Material Adverse Effect, is in form. The certificate is expected to be executed at closing by Priya Chandrasekaran (CEO) and Marcus Ellingham (CFO).
Secretary's Certificate (Skybridge). The Secretary's Certificate to be delivered by Skybridge at closing is in form and will attach certified copies of the Company's organizational documents, board resolutions approving the Transaction, and an incumbency certificate for the Company's officers.
FIRPTA Certificate. The FIRPTA certificate is in form, as described in Section VIII.C above, and will be delivered at closing.
Good Standing Certificates. Good standing certificates for the Company from the State of Delaware and from all states in which the Company is qualified to do business as a foreign corporation will be ordered in advance of closing, consistent with the Good Standing Certificate Request List.
Velthorn Commerce Bank, N.A. Payoff. The payoff letter for the Velthorn Commerce Bank, N.A. revolving credit facility (approximately $18,500,000 outstanding) is in form and under final negotiation. Wire instructions are to be confirmed prior to closing. Upon receipt of the payoff amount at closing, Velthorn Commerce Bank, N.A. will release all liens and security interests and authorize the filing of UCC-3 termination statements.
No Legal Impediments. No injunctions, temporary restraining orders, governmental orders, or other legal impediments prohibiting or restraining the consummation of the Transaction have been issued, entered, or threatened. No litigation challenging the Transaction has been filed or threatened.
Outside Date. The BCA provides for an outside termination date of October 14, 2025 (the "Outside Date"), subject to automatic extension to January 14, 2026, if the sole outstanding closing condition as of the Outside Date relates to regulatory or SEC-related matters. Based on the current transaction timeline, closing is projected to occur on or about July 21, 2025, well in advance of the Outside Date.
XVI. Summary of Findings and Conclusion
Based on the review conducted during the Update Period (March 28, 2025 through May 28, 2025), including the review of updated data room materials, bring-down management interviews, public records searches, SEC filing reviews, and the other diligence procedures described in Section II of this memorandum, we report the following:
1. No Material Adverse Developments. No material adverse developments have been identified that would constitute or reasonably be expected to give rise to a "Company Material Adverse Effect" as defined in Section 1.1 of the BCA.