PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT
LEGAL DUE DILIGENCE SUMMARY MEMORANDUM
SKYBRIDGE FINTECH LTD.
FROM: Naomi Petersen and Ryan Kowalski Calderwood & Harkness LLP 125 Broad Street, 40th Floor New York, NY 10004
TO: James Prentice, Responsible Partner, M&A — Calderwood & Harkness LLP Sandra Tung, Billing Partner, M&A — Calderwood & Harkness LLP Leonard Cross, Specialist Partner, Tax — Calderwood & Harkness LLP
CC: Teresa Okafor, General Counsel, Skybridge Fintech Ltd.
DATE: March 28, 2025
RE: Summary of Legal Due Diligence — Skybridge Fintech Ltd. in connection with proposed de-SPAC business combination with Pinnacle Growth Acquisition Corp.
MATTER REFERENCE: Skybridge Fintech Ltd. / Pinnacle Growth Acquisition Corp. De-SPAC Business Combination
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I. EXECUTIVE SUMMARY
This memorandum summarizes the legal due diligence findings of Calderwood & Harkness LLP ("C&H") with respect to Skybridge Fintech Ltd., a Delaware corporation ("Skybridge," "SBF," or the "Company"), conducted in connection with the proposed approximately $450,000,000 de-SPAC business combination (the "Transaction") between Skybridge and Pinnacle Growth Acquisition Corp., a Cayman Islands exempted company ("Pinnacle" or "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., a newly formed Delaware corporation and wholly owned subsidiary of Pinnacle ("Merger Sub"), will merge with and into Skybridge, with Skybridge surviving the merger as a wholly owned subsidiary of the domesticated Pinnacle. At or prior to the closing of the Transaction, Pinnacle will domesticate as a Delaware corporation and be renamed "Skybridge Fintech Holdings, Inc."
Our due diligence review was conducted during the period beginning February 10, 2025, and concluding March 28, 2025 (the "Diligence Period"). This memorandum is current as of March 28, 2025, and reflects only the information available to us as of that date. Any material developments occurring after this date will be addressed in the pre-closing Bring-Down Due Diligence Memorandum to be prepared by Ryan Kowalski in advance of the anticipated closing.
Scope of Review. Our diligence covered the following principal areas: (i) corporate organization and good standing; (ii) capitalization; (iii) material contracts; (iv) intellectual property; (v) litigation and proceedings; (vi) employment and benefits matters; (vii) tax matters; (viii) real property; (ix) environmental matters; (x) insurance; and (xi) regulatory and licensing matters. Our review of intellectual property matters and regulatory and licensing matters is summarized at a high level in this memorandum. Detailed analysis of those workstreams is set forth in the standalone IP Due Diligence Memorandum (prepared by Naomi Petersen, dated March 25, 2025) and the Regulatory and Licensing Memorandum (prepared by Ryan Kowalski, dated March 26, 2025), which are cross-referenced throughout this document.
Sources of Information. Our review was based upon the following sources: (a) the virtual data room ("VDR") maintained by Skybridge and accessible at the secure Crestline Solutions portal designated "Project Overpass" (the "Data Room"); (b) supplemental document requests issued by C&H and responses thereto; (c) management interviews conducted with Priya Chandrasekaran, Founder and Chief Executive Officer; Marcus Ellingham, Chief Financial Officer; Teresa Okafor, General Counsel; and Daniel Hsiao, Chief Technology Officer; and (d) responses and information provided by third-party advisors, including Graystone Thornton LLP (Helen Marchetti, Engagement Partner) (independent auditor), Cedarhurst Advisory Group LLC (Martin Cho, Partner) (tax advisor), and Whitfield Royce & Co. (Gregory Fenton, Managing Director) (financial advisor). Management representations and factual assertions made by Company personnel and their advisors were not independently verified.
Overall Assessment. Based on our review, we have not identified any findings that would, in our judgment, prevent consummation of the Transaction. However, we have flagged several items that, in our assessment, require disclosure in the Company's disclosure schedules to the Business Combination Agreement ("BCA"), remediation prior to closing, or ongoing monitoring by the combined company following closing. These items are consolidated and summarized in Section XII of this memorandum. We note in particular the following categories of findings that merit attention:
• Certain customer and vendor contracts contain change-of-control provisions that may be triggered by the Transaction and require consent or notice;
• The Company's revolving credit facility with Velthorn Commerce Bank, N.A. contains a change-of-control default provision and must be repaid in full at closing from trust proceeds;
• Open-source software license compliance requires further review with respect to a limited number of components, as detailed in the IP Due Diligence Memorandum;
• Money transmitter licensing requirements in certain states may require change-of-control notifications and, in a limited number of jurisdictions, prior regulatory approval, as detailed in the Regulatory and Licensing Memorandum;
• Certain state qualification-to-do-business filings may require updating; and
• Section 382 limitations on the utilization of the Company's net operating loss carryforwards following the Transaction require further analysis by Leonard Cross and the Cedarhurst Advisory Group.
This memorandum is intended solely for the internal use of the addressees and is protected by the attorney-client privilege and the work product doctrine. It should not be disclosed to any third party without the prior written consent of Calderwood & Harkness LLP.
II. CORPORATE ORGANIZATION AND GOOD STANDING
A. Formation and Organizational History
Skybridge Fintech Ltd. was incorporated under the laws of the State of Delaware on June 15, 2018, as evidenced by its Certificate of Incorporation filed with the Delaware Secretary of State on that date. The Company's Employer Identification Number is 83-2471560.
The Company was founded by Priya Chandrasekaran, who continues to serve as Chief Executive Officer. Skybridge's principal executive offices are located at 1200 Market Street, Suite 1400, Wilmington, Delaware 19801. The Company also maintains an engineering office at 450 Folsom Street, 7th Floor, San Francisco, California 94105. As of the date of this memorandum, the Company employs approximately 340 employees across these two offices and various remote locations.
Skybridge's business consists of the development, licensing, and operation of a proprietary cloud-based payment orchestration and embedded-finance software-as-a-service ("SaaS") platform. The platform serves mid-market financial institutions and neobanks, providing routing, reconciliation, compliance monitoring, and embedded lending and payment capabilities through a unified API layer.
Based on our review of the Company's organizational documents and corporate records, the Company has operated continuously since its date of incorporation. We reviewed the Company's historical formation documents, including the original Certificate of Incorporation, all Certificates of Amendment, and any Certificates of Designation filed with the Delaware Secretary of State. The organizational history reflects an orderly corporate formation and capitalization consistent with a venture-backed technology company.
B. Certificate of Incorporation and Bylaws
We reviewed the Company's current Amended and Restated Certificate of Incorporation, as most recently amended by the Certificate of Amendment filed on August 12, 2021, in connection with the Series B financing (described in Section III.B below). The certificate of incorporation contains standard provisions for a Delaware corporation, including provisions relating to authorized share capital, the limitation of director liability under DGCL Section 102(b)(7), and the grant of indemnification rights to directors and officers to the fullest extent permitted by Delaware law. We did not identify any unusual or non-standard provisions in the certificate of incorporation that would impede or complicate the proposed Transaction.
We also reviewed the Company's current Amended and Restated Bylaws, adopted by the Board of Directors on August 12, 2021. The bylaws contain customary provisions regarding the mechanics of stockholder and Board meetings, notice requirements, officer authority, indemnification and advancement of expenses, and related matters. The bylaws provide for a Board of Directors consisting of not fewer than three nor more than nine members. As of the date of this memorandum, the Board consists of seven members: Priya Chandrasekaran (Founder and CEO), two designees of Harborview Partners (Serena Caldwell and Nathan Obrecht), one designee of Atlas Horizon Ventures Fund II, LP (Michelle Tanaka), and three independent directors (Dr. Raymond Kipling, Annette Brossard, and Victor Johansson). The bylaws contain standard provisions regarding the appointment and removal of officers. No supermajority voting requirements or other provisions were identified that would create impediments to the approval of the Transaction by the Board or the Company's stockholders.
The indemnification and advancement provisions in the certificate of incorporation and bylaws are consistent with customary Delaware practice and were reviewed to confirm their adequacy in connection with the D&O tail policy to be bound at closing (see Section X.B).
C. Subsidiaries and Affiliates
Based on our review of the corporate records and representations made by Teresa Okafor during our management interview on March 4, 2025, Skybridge does not have any subsidiaries, whether domestic or foreign. The Company operates as a single-entity corporation. All operations, employees, and assets are held directly by Skybridge Fintech Ltd. There are no joint ventures, partnerships, or other affiliated entities.
We confirmed the absence of subsidiaries through our review of the Company's tax returns, organizational chart, and Data Room contents. An organizational chart reflecting the Company's structure is attached as Appendix B.
D. Qualification to Do Business / Good Standing
We obtained a Certificate of Good Standing for Skybridge from the Delaware Secretary of State, dated March 14, 2025, confirming that the Company is in good standing under the laws of the State of Delaware.
In addition, Skybridge is qualified to do business as a foreign corporation in the following states:
1. California (qualification effective September 10, 2018)
2. New York (qualification effective January 22, 2019)
3. Texas (qualification effective March 15, 2020)
4. Illinois (qualification effective June 8, 2021)
5. Florida (qualification effective November 3, 2021)
6. Georgia (qualification effective February 17, 2022)
7. Massachusetts (qualification effective July 29, 2022)
We requested Certificates of Good Standing (or their equivalent) from each of these states. As of the date of this memorandum, we have received good standing certificates from Delaware, California, New York, Texas, and Florida. Certificates from Illinois, Georgia, and Massachusetts have been requested but not yet received. The status of all good standing certificate requests is tracked in the Good Standing Certificate Status Tracker attached as Appendix E.
Based on our review of the Company's operations, employee locations, and customer base, we identified two states — Colorado and North Carolina — in which the Company may have a level of activity sufficient to require qualification as a foreign corporation but in which the Company has not been qualified. We have flagged this as a risk item in Section XII and recommend that the Company file qualification applications in these jurisdictions prior to or promptly following the closing of the Transaction.
E. Corporate Records
We reviewed the minutes of meetings of the Board of Directors and stockholders of Skybridge for the period from the Company's incorporation on June 15, 2018, through March 2025. We also reviewed all written consents in lieu of meetings executed during this period.
Based on our review, the following material corporate actions were duly authorized by the Board and/or stockholders, as applicable:
• Adoption of the Company's initial bylaws and election of initial directors and officers (June 2018);
• Authorization and issuance of shares of common stock to the founder and early employees (June–August 2018);
• Authorization and closing of the Series A Preferred Stock financing (November 2019);
• Adoption of the 2019 Equity Incentive Plan and authorization of the initial option pool (November 2019);
• Authorization and closing of the Series B Preferred Stock financing (August 2021);
• Amendment and restatement of the Certificate of Incorporation and Bylaws in connection with the Series B financing (August 2021);
• Expansion of the authorized option pool under the 2019 Equity Incentive Plan (August 2021);
• Approval of the Credit Agreement with Velthorn Commerce Bank, N.A. (March 2023);
• Appointment and removal of officers and directors throughout the period; and
• Authorization of the engagement of Whitfield Royce & Co. as financial advisor and Calderwood & Harkness LLP as legal counsel in connection with the proposed Transaction (January 2025).
We did not identify any material corporate actions that lacked proper authorization. However, we noted that the minutes of the Board meeting held on April 9, 2022, were unsigned, although the minutes reflected actions that were subsequently ratified in the July 12, 2022, Board minutes. We recommend that the Company obtain executed copies of the April 2022 minutes or adopt a formal ratification resolution prior to closing, and we have included this item in the risk summary in Section XII.
III. CAPITALIZATION
A. Authorized and Outstanding Capital Stock
Pursuant to the Company's current Amended and Restated Certificate of Incorporation, the authorized share capital of Skybridge consists of:
• Common Stock: 100,000,000 shares of Common Stock, par value $0.001 per share; and
• Preferred Stock: 50,000,000 shares of Preferred Stock, par value $0.001 per share, of which:
• 15,000,000 shares are designated as Series A Preferred Stock; and
• 20,000,000 shares are designated as Series B Preferred Stock.
As of March 28, 2025, the following shares are issued and outstanding:
The pre-transaction fully diluted capitalization of Skybridge, assuming the exercise of all outstanding stock options and the conversion of all outstanding shares of Preferred Stock into Common Stock on a one-for-one basis (subject to any applicable conversion ratio adjustments), is set forth in the capitalization table attached as Appendix C. On a fully diluted basis, the ownership of Skybridge is approximately as follows:
We reviewed the Company's stock ledger and cap table and confirmed that the outstanding share information is consistent with the corporate records, Board and stockholder minutes, and the representations of Marcus Ellingham, CFO.
B. Equity Financing History
Skybridge has conducted the following equity financing rounds:
Series A Preferred Stock Financing. In November 2019, Skybridge closed a Series A Preferred Stock financing led by Atlas Horizon Ventures Fund II, LP ("Atlas Horizon"). The Company issued an aggregate of 12,800,000 shares of Series A Preferred Stock at a price of $2.00 per share, raising aggregate gross proceeds of $25,600,000. The Series A Preferred Stock carries a 1x non-participating liquidation preference (aggregate liquidation preference: $25,600,000), standard broad-based weighted average anti-dilution protection, a one-for-one conversion ratio into Common Stock (subject to adjustment for stock splits, dividends, and anti-dilution adjustments), and optional and mandatory conversion provisions (mandatory conversion upon a Qualified IPO, as defined in the certificate of incorporation, or upon the vote of holders of a majority of the Series A Preferred Stock). The Transaction is expected to constitute a Qualified IPO or Deemed Liquidation Event under the certificate of incorporation, triggering mandatory conversion of the Series A Preferred Stock.
Series B Preferred Stock Financing. In August 2021, Skybridge closed a Series B Preferred Stock financing led by Harborview Partners ("Veltrano Capital"). The Company issued an aggregate of 18,200,000 shares of Series B Preferred Stock at a price of $5.00 per share, raising aggregate gross proceeds of $91,000,000. The Series B Preferred Stock carries a 1x non-participating liquidation preference (aggregate liquidation preference: $91,000,000), standard broad-based weighted average anti-dilution protection, and a one-for-one conversion ratio into Common Stock (subject to adjustment). The Series B Preferred Stock is senior to the Series A Preferred Stock and the Common Stock in liquidation. As with the Series A Preferred Stock, the Transaction is expected to trigger mandatory conversion of the Series B Preferred Stock.
Bridge Financings, Convertible Notes, and SAFEs. Based on our review and representations of the Company's management, Skybridge has not issued any convertible promissory notes, Simple Agreements for Future Equity (SAFEs), or other bridge financing instruments. All equity financing has been conducted through priced equity rounds as described above.
C. Stock Option Plans and Equity Awards
Skybridge maintains one equity incentive plan: the Skybridge Fintech Ltd. 2019 Equity Incentive Plan (the "2019 Plan"), which was adopted by the Board and approved by the stockholders in November 2019 in connection with the Series A financing.
The 2019 Plan was amended in August 2021 to increase the authorized share reserve. As of March 28, 2025, the status of the 2019 Plan is as follows:
Options outstanding under the 2019 Plan have exercise prices ranging from $1.50 per share (for early grants) to $6.25 per share (for recent grants). All options vest over a four-year period, with a one-year cliff and monthly vesting thereafter, subject to continued service. The standard form of stock option agreement under the 2019 Plan provides for acceleration of vesting upon a "double trigger" basis — i.e., accelerated vesting occurs only upon a qualifying termination of the option holder's employment within twelve (12) months following a change of control. However, we noted that the individual stock option agreements for three senior executives (Priya Chandrasekaran, Marcus Ellingham, and Daniel Hsiao) contain "single trigger" acceleration provisions that would result in full vesting of their unvested options upon the closing of the Transaction. The implications of single-trigger acceleration for these executives are discussed further in Section VII.B and are flagged as a disclosure item in Section XII.
Treatment in the Merger. Under the terms of the draft BCA, each outstanding and unexercised option under the 2019 Plan will be assumed by the combined company and converted into an option to acquire shares of common stock of Skybridge Fintech Holdings, Inc., with appropriate adjustments to the number of shares subject to the option and the exercise price to preserve the economic value of the award. The 2019 Plan will be assumed by the combined company, and shares available for future grant will be carried forward.
Section 409A Compliance. We reviewed the Company's 409A valuation reports, which were prepared by an independent valuation firm (Fairhaven Valuation Services LLC) at the time of each round of option grants. Based on our review, the exercise prices for all options granted under the 2019 Plan were set at or above the fair market value of the Company's Common Stock as of the applicable grant date, as determined by the contemporaneous 409A valuation report. We did not identify any instances of discounted options or other Section 409A compliance concerns. However, we note that we have not independently verified the assumptions underlying the 409A valuations.
D. Stockholder Agreements and Governance Arrangements
In connection with the Series A and Series B financings, the Company and its stockholders entered into the following agreements, each of which was reviewed by C&H:
Investors' Rights Agreement. The Amended and Restated Investors' Rights Agreement, dated August 12, 2021, among Skybridge, Veltrano Capital, Atlas Horizon, and certain other stockholders (the "IRA"), provides for, among other things: (i) registration rights (including demand registration rights for holders of Registrable Securities (as defined therein), S-3 registration rights, and customary piggyback registration rights); (ii) information rights (annual and quarterly financial statements, inspection rights); and (iii) preemptive rights on future issuances of equity securities (subject to customary carve-outs for option plan grants, strategic acquisitions, and equipment financings). Pursuant to Section 6.3 of the IRA, the agreement terminates upon the closing of a Qualified Public Offering (as defined therein). Based on our review, the Transaction is expected to constitute a Qualified Public Offering under the IRA, and accordingly, the IRA would terminate by its terms upon closing. We confirmed this interpretation with Teresa Okafor during our March 4, 2025, management interview.
Right of First Refusal and Co-Sale Agreement. The Amended and Restated Right of First Refusal and Co-Sale Agreement, dated August 12, 2021 (the "ROFR Agreement"), grants to the Company and, secondarily, to the holders of Preferred Stock, a right of first refusal on any proposed transfer of shares by the founder and key holders, and grants co-sale (tag-along) rights to holders of Preferred Stock on such transfers. The ROFR Agreement also terminates upon a Qualified Public Offering.
Voting Agreement. The Amended and Restated Voting Agreement, dated August 12, 2021 (the "Voting Agreement"), sets forth the Board composition requirements, including the designation rights of Veltrano Capital (two Board seats), Atlas Horizon (one Board seat), the founder (one Board seat), and mutual agreement of the investors and the founder on three independent directors. The Voting Agreement further provides for a drag-along right: if holders of a majority of the outstanding shares of Preferred Stock (voting together as a single class on an as-converted basis) approve a sale of the Company, all other stockholders are obligated to vote in favor of and not impede such sale. The Voting Agreement also terminates upon a Qualified Public Offering. We confirmed that the drag-along right is being exercised by the requisite holders in connection with the Transaction, and that the written consent of the stockholders approving the Transaction has been or will be obtained in accordance with DGCL Section 228.
Tag-Along and Drag-Along Rights. As noted above, the ROFR Agreement provides tag-along rights, and the Voting Agreement provides drag-along rights. Based on our review, these provisions are standard for venture-backed companies and do not present any impediment to the Transaction. The drag-along provision will facilitate the required stockholder approval.
Termination. We confirmed that each of the IRA, the ROFR Agreement, and the Voting Agreement contains a termination provision that is triggered upon the closing of a Qualified Public Offering or a Deemed Liquidation Event (as defined in the certificate of incorporation). The Transaction is expected to satisfy both of these conditions. Accordingly, all existing stockholder agreements are expected to terminate automatically by their terms at closing.
E. Warrants, Convertible Instruments, and Other Rights
Based on our review and representations of the Company's management, Skybridge has not issued any outstanding warrants, convertible notes, SAFEs, or other instruments convertible into or exchangeable for equity securities of the Company, other than the stock options described in Section III.C above. We confirmed that no warrants were issued to placement agents, finders, or other parties in connection with the Series A or Series B financings or any other transaction.
We confirmed with the Company's management and reviewed the Company's stock ledger and corporate records to verify that all rights to acquire equity securities of the Company are reflected in the fully diluted capitalization table set forth in Appendix C.
F. Capitalization Considerations for the Transaction
Under the terms of the proposed Transaction, the merger consideration payable to the holders of Skybridge equity securities is structured as follows:
Per-Share Merger Consideration. Each share of Skybridge common stock (including shares of common stock issuable upon conversion of the Series A Preferred Stock and Series B Preferred Stock) will be converted into the right to receive shares of common stock of the combined company (Skybridge Fintech Holdings, Inc.) at an implied value of $10.00 per share. The total number of shares to be issued to Skybridge stockholders is 45,000,000 shares, representing an aggregate equity value of $450,000,000.
Earnout Consideration. In addition to the upfront merger consideration, the Company's stockholders will be entitled to receive up to 5,000,000 additional earnout shares, subject to the achievement of the following stock price milestones:
Tranche 1: 2,500,000 earnout shares will be issued if the volume-weighted average price ("VWAP") of the common stock of the combined company equals or exceeds $12.50 for any 20 trading days out of 30 consecutive trading days within the 24-month period following the closing; and
Tranche 2: 2,500,000 earnout shares will be issued if the VWAP of the common stock of the combined company equals or exceeds $15.00 for any 20 trading days out of 30 consecutive trading days within the 36-month period following the closing.
Change-of-Control and Acceleration Provisions. As noted in Section III.C, the stock option agreements for three senior executives contain single-trigger acceleration provisions. The aggregate number of unvested options that will accelerate upon closing for these three individuals is approximately 1,200,000 shares, with a weighted average exercise price of $4.85 per share. The economic value of this acceleration should be considered in the context of the overall transaction economics and disclosed in the proxy statement/prospectus filed in connection with the Transaction.
IV. MATERIAL CONTRACTS
A. Overview. We conducted a review of all contracts identified by the Company's management as material to Skybridge's business, as well as any additional contracts identified by C&H as meeting quantitative or qualitative materiality thresholds. For purposes of this review, we considered a contract to be material if it (i) involved annual payments or commitments in excess of $500,000, (ii) contained change-of-control, assignment restriction, or termination provisions that could be triggered by or affect the Transaction, (iii) involved a top-ten customer or vendor relationship, (iv) imposed exclusivity, non-compete, or most-favored-nation obligations, or (v) was otherwise identified by management as significant to the Company's operations, financial condition, or prospects. A separate Material Contracts Summary spreadsheet has been prepared and is cross-referenced in Appendix D.
B. Customer Agreements
Skybridge's revenue is principally derived from SaaS subscription agreements with financial institutions and neobanks. We reviewed the Company's top twenty customer contracts by revenue contribution, which in the aggregate account for approximately 82% of the Company's annual recurring revenue as of the twelve months ended December 31, 2024.
The Company's standard customer agreement is structured as a multi-year SaaS subscription agreement with annual payment terms. Standard contract durations range from one to three years, with automatic renewal for successive one-year periods unless either party provides written notice of non-renewal at least ninety (90) days prior to the expiration of the then-current term. Termination-for-cause provisions allow either party to terminate upon a material breach that remains uncured for thirty (30) days following written notice. Customer agreements generally do not include termination-for-convenience rights in favor of the customer.
Change-of-Control Provisions. We identified change-of-control clauses in four (4) customer agreements that could potentially be triggered by the Transaction. Specifically:
(i) The Master Subscription Agreement with Meridian National Bancorp, dated January 15, 2022 (the Company's second-largest customer by revenue), contains a change-of-control clause granting Meridian the right to terminate the agreement upon sixty (60) days' written notice following a change of control of Skybridge. This agreement accounts for approximately 8.5% of the Company's annual recurring revenue.
(ii) The SaaS Subscription Agreement with Cascade Digital Bank, dated April 3, 2023, contains a similar change-of-control termination right, with thirty (30) days' notice. This agreement accounts for approximately 4.2% of the Company's annual recurring revenue.
(iii) The Enterprise License Agreement with Ironbridge Financial Services, Inc., dated September 9, 2021, requires prior written consent of Ironbridge for any assignment of the agreement arising from a change of control. This agreement accounts for approximately 3.8% of the Company's annual recurring revenue.
(iv) The Platform Services Agreement with Novus Payments LLC, dated June 22, 2023, requires Skybridge to provide written notice to Novus of any change of control within fifteen (15) business days of the effective date thereof. While notice, rather than consent, is required, the agreement grants Novus an option to renegotiate pricing terms within sixty (60) days following receipt of such notice. This agreement accounts for approximately 2.9% of the Company's annual recurring revenue.
Assignment Restrictions. In addition to the change-of-control provisions described above, we identified eight (8) customer agreements that contain general anti-assignment provisions prohibiting assignment without the prior written consent of the counterparty. In each case, the anti-assignment provision applies to assignments "by operation of law," which may be triggered by the forward triangular merger structure of the Transaction. However, because Skybridge will be the surviving entity in the merger, and the merger will not result in a direct assignment of the customer agreements, there is a reasonable argument under Delaware law that the anti-assignment provisions are not triggered. We recommend, however, that the Company seek consents from the counterparties to these agreements as a precautionary measure, particularly with respect to the four agreements identified above that contain specific change-of-control provisions.
Consent Solicitation Status. As of the date of this memorandum, the Company has initiated consent solicitation efforts with respect to the four agreements containing specific change-of-control provisions. The Company reports that it has received verbal indications of consent from Cascade Digital Bank and Novus Payments LLC, and that discussions are ongoing with Meridian National Bancorp and Ironbridge Financial Services, Inc. We recommend that all consents be obtained in writing prior to closing, and we have included these matters in the consent tracking table in Section IV.I.
C. Vendor and Supplier Agreements
Skybridge relies on a number of third-party technology vendors, cloud infrastructure providers, and payment network partners for the operation of its platform. We reviewed the Company's key vendor and supplier agreements, focusing on contracts with the Company's five largest vendors by annual spend and any agreements that impose material obligations, restrictions, or risks.
Cloud Infrastructure. The Company's platform is hosted on Ridgeway Industries ("Meridian Technologies") pursuant to an Enterprise Customer Agreement with Adriatic Technologies, dated March 1, 2020, as amended. The agreement is non-exclusive and provides for usage-based pricing. The agreement does not contain a change-of-control provision and is terminable by either party upon thirty (30) days' notice. We do not anticipate any issues arising from the Transaction with respect to this agreement.
Payment Network Agreements. Skybridge maintains agreements with Hollowell Enterprises and Greaves Industries governing its registration as a payment facilitator / technology service provider. These agreements are subject to the respective card network rules and regulations and are discussed further in Section XI.C. We identified certain change-of-control notification requirements under the card network rules, as detailed in the Regulatory and Licensing Memorandum.
Other Vendor Agreements. We reviewed vendor agreements with the Company's key data providers, compliance software vendors, customer support platform providers, and cybersecurity service providers. No material change-of-control provisions, termination-for-convenience rights, or assignment restrictions were identified in these agreements, with the exception of the Company's agreement with Sentinel Compliance Systems, Inc. (compliance monitoring software), which requires thirty (30) days' prior written notice of any change of control. We have included this notification requirement in the consent and notice summary table in Section IV.I.
D. Partnership and Channel Agreements
Skybridge has entered into strategic partnership agreements with certain financial institutions, neobanks, and payment processors that serve as distribution channels for the Company's platform. We reviewed the following key partnership and channel agreements:
(i) Strategic Alliance Agreement with Commonwealth Partners Group, LP (dated February 28, 2022): This agreement provides for a revenue-sharing arrangement pursuant to which Commonwealth receives a referral fee equal to 12% of net subscription revenue generated from customers referred by Commonwealth. The agreement has a three-year initial term with automatic one-year renewal periods and contains an exclusivity provision prohibiting Skybridge from entering into similar referral arrangements with any entity that competes directly with Commonwealth in the institutional wealth management sector. The exclusivity provision does not contain a change-of-control exception and will survive the Transaction. We recommend disclosure of this exclusivity provision in the BCA schedules.
(ii) Co-Marketing and Distribution Agreement with Eastpoint Digital, Inc. (dated October 14, 2023): This agreement provides for joint marketing and co-selling of Skybridge's platform to Eastpoint's customer base. The agreement does not contain change-of-control or assignment restrictions. No action is required in connection with the Transaction.
(iii) Technology Integration Agreement with Northstar Processing Corp. (dated July 7, 2022): This agreement provides for the integration of Skybridge's payment orchestration capabilities with Northstar's payment processing infrastructure. The agreement contains a non-compete clause prohibiting Skybridge from directly offering its own payment processing services (as opposed to orchestration services) to Northstar's existing customers during the term of the agreement and for twelve (12) months following termination. The agreement includes a mutual change-of-control termination right. We recommend that the Company notify Northstar of the Transaction and assess whether Northstar intends to exercise its termination right.
E. Debt and Financing Agreements
Skybridge is party to one credit agreement:
Credit Agreement with Velthorn Commerce Bank, N.A. Skybridge entered into a Credit Agreement dated March 22, 2023, with Velthorn Commerce Bank, N.A. ("Velthorn"), as administrative agent and lender, providing for a revolving credit facility in the aggregate principal amount of $25,000,000 (the "Credit Facility"). The Credit Facility bears interest at a floating rate equal to the Secured Overnight Financing Rate ("SOFR") plus 3.25% per annum. The Credit Facility matures on March 22, 2026.
As of the date of this memorandum, the outstanding balance under the Credit Facility is $18,500,000. The Credit Facility is secured by a first-priority lien on substantially all of the assets of Skybridge, as evidenced by a UCC-1 financing statement filed with the Delaware Secretary of State.
The Credit Agreement contains a change-of-control default provision, pursuant to which a "Change of Control" (as defined in the Credit Agreement) constitutes an Event of Default. The proposed Transaction would constitute a Change of Control under the Credit Agreement. Accordingly, the Credit Facility must be repaid in full at or prior to the closing of the Transaction. We understand from Marcus Ellingham that the Company intends to repay the Credit Facility in full from the proceeds of the trust account maintained by Pinnacle. Upon repayment, the Company will obtain a UCC-3 termination statement and lien release letter from Velthorn.
We reviewed the UCC financing statement filings on record with the Delaware Secretary of State and confirmed that the only UCC-1 financing statement filed against Skybridge is the filing in favor of Velthorn. No judgment liens, tax liens, or other encumbrances were identified in the UCC search results.
No other indebtedness of the Company was identified.
F. Lease Agreements
The Company's real property leases (Wilmington headquarters and San Francisco engineering office) are reviewed in detail in Section IX below. We note here that both leases were identified by management as material contracts and are included in the Material Contracts Summary spreadsheet (Appendix D).
G. Insurance Agreements
The Company's insurance coverage is reviewed in detail in Section X below.
H. Other Material Contracts
In addition to the agreements described above, we reviewed the following categories of contracts:
Settlement Agreements. Based on our review and representations of the Company's management, Skybridge is not a party to any settlement agreements that impose ongoing obligations (financial or otherwise) on the Company.
Government Contracts. Skybridge does not have any contracts with any federal, state, or local governmental entity.
Joint Ventures. Skybridge is not a party to any joint venture or similar collaborative arrangement.
Non-Disclosure Agreements. We reviewed the Company's form non-disclosure agreement and confirmed that the Company has entered into mutual NDAs with various counterparties in the ordinary course of business, including potential customers, partners, and vendors. We also reviewed the NDA executed between Skybridge and Pinnacle in connection with the Transaction, which contains customary terms and a carve-out permitting disclosure in the proxy statement/prospectus.
I. Consent and Notice Requirements Summary
The following table summarizes all contracts that require consent, notice, or that contain change-of-control provisions triggered by the Transaction:
We recommend that the Company continue its consent solicitation efforts and provide all required notices in a timely manner prior to closing. The status of these efforts should be confirmed in the Bring-Down Due Diligence Memorandum.
V. INTELLECTUAL PROPERTY
A. Overview. Skybridge's principal intellectual property asset is its proprietary cloud-based payment orchestration and embedded-finance SaaS platform (the "Skybridge Platform"). The Platform enables mid-market financial institutions and neobanks to route payment transactions, manage compliance workflows, embed lending and payment capabilities, and access real-time analytics through a unified API layer. The Company's intellectual property is critical to its business and represents a significant component of its enterprise value.
A detailed analysis of the Company's intellectual property portfolio, ownership, encumbrances, freedom-to-operate considerations, and risk items is set forth in the standalone IP Due Diligence Memorandum prepared by Naomi Petersen, dated March 25, 2025. This Section V provides a high-level summary of the key findings and cross-references the IP Due Diligence Memorandum for additional detail.
B. Patents. Skybridge holds a small patent portfolio consisting of three (3) issued United States utility patents and two (2) pending United States patent applications, all of which relate to aspects of the Company's payment orchestration technology, including real-time routing optimization algorithms and embedded-finance API integration methodologies. The Company's patents were issued between 2021 and 2024.
We confirmed that all issued patents and pending applications are registered in the name of Skybridge Fintech Ltd. and that maintenance fees are current. We did not identify any liens or encumbrances on the Company's patents, other than the blanket security interest granted to Velthorn under the Credit Agreement, which will be released at closing.
Freedom-to-operate analysis with respect to the Company's core technology is addressed in the IP Due Diligence Memorandum. No material freedom-to-operate concerns were identified, although we note that the payment technology and fintech sectors are characterized by a dense patent landscape, and continued monitoring of third-party patent activity is advisable.
C. Trademarks. The Company holds the following key trademark registrations with the United States Patent and Trademark Office:
• "SKYBRIDGE" (word mark) — U.S. Reg. No. 5,923,417, registered May 12, 2020, for International Class 42 (SaaS services);
• "SKYBRIDGE" (stylized logo) — U.S. Reg. No. 6,124,889, registered September 8, 2021, for International Classes 36 and 42;
• "PAYBRIDGE" (word mark, for the Company's payment orchestration product) — U.S. Reg. No. 6,387,542, registered January 17, 2023, for International Class 42.
All trademark registrations are active and in good standing. No opposition or cancellation proceedings are pending with respect to any of the Company's trademark registrations.
D. Software and Proprietary Technology
The Skybridge Platform is developed and maintained by the Company's in-house engineering team, which is based primarily in the San Francisco engineering office. We confirmed through our review of the Company's form employee invention assignment agreements and contractor agreements that all intellectual property created by employees and contractors in connection with their work for the Company is assigned to Skybridge. All current employees in engineering, product development, and data science roles have executed the Company's standard Confidentiality, Invention Assignment, and Non-Solicitation Agreement. We identified three former contractors who performed development work for the Company during 2018–2019 and for whom executed invention assignment agreements were not located in the Data Room. The Company's General Counsel has represented that she is working to locate these agreements and, if necessary, obtain retroactive assignments. This item is flagged in Section XII.
Skybridge licenses certain third-party software components on an inbound basis, including commercial database software, analytics tools, and API management libraries. We reviewed the key inbound software licenses and did not identify any provisions that would restrict the Company's ability to use such software following the Transaction, subject to the continued payment of applicable license fees.
E. Open-Source Software Compliance
The Skybridge Platform incorporates a significant number of open-source software components, as is common for cloud-based SaaS platforms. The Company maintains an internal open-source inventory and has implemented a review process for the introduction of new open-source components.
We reviewed the Company's open-source inventory and compliance practices. The majority of the open-source components used by the Company are licensed under permissive licenses (MIT, Apache 2.0, BSD), which impose minimal obligations and do not require the disclosure or licensing of the Company's proprietary source code.
However, we identified a limited number of components that are subject to "copyleft" licenses (specifically, the GNU General Public License, version 2 (GPLv2) and the GNU Lesser General Public License, version 2.1 (LGPLv2.1)). Our analysis of these components is set forth in detail in the IP Due Diligence Memorandum. In summary, we believe that the Company's use of the GPLv2-licensed components in question does not trigger the copyleft obligation to disclose proprietary source code, based on the manner in which these components are integrated (dynamic linking rather than static linking, and use as standalone utilities rather than as libraries linked into the Company's proprietary codebase). However, we have recommended that the Company's engineering team confirm the technical architecture of these integrations and that this matter be monitored on an ongoing basis. We have included this item as a medium-severity risk item in Section XII.
F. Trade Secrets and Confidentiality
The Company maintains reasonable policies and procedures for the protection of its trade secrets and proprietary information. These include: (i) the requirement that all employees and contractors execute confidentiality and invention assignment agreements; (ii) role-based access controls and multi-factor authentication for access to the Company's source code repositories and internal systems; (iii) encryption of data at rest and in transit; and (iv) exit interview procedures that include reminders of ongoing confidentiality obligations.
We reviewed the Company's standard Confidentiality, Invention Assignment, and Non-Solicitation Agreement and confirmed that it contains customary provisions regarding the assignment of inventions, the protection of confidential information, and post-employment non-solicitation covenants (with a one-year restriction period). The agreement does not contain a post-employment non-compete covenant, which is consistent with California law prohibiting non-compete agreements (noting that the majority of the Company's engineering team is based in California).
G. IP-Related Risk Items
The following IP-related risk items have been identified and are addressed in greater detail in the IP Due Diligence Memorandum and summarized in Section XII of this memorandum:
(i) Three former contractors for whom executed invention assignment agreements were not located (medium severity);
(ii) Open-source compliance with respect to certain GPLv2-licensed components requires technical confirmation (medium severity); and
(iii) Ongoing monitoring of third-party patent activity in the payment technology and fintech sectors is advisable (low severity; general industry risk).
VI. LITIGATION AND PROCEEDINGS
A. Pending Litigation
Based on our review of the Company's records, management representations, and searches of public court dockets in Delaware, California (state and federal), and the federal PACER system, no lawsuits, arbitrations, or administrative proceedings are currently pending against or by Skybridge.
B. Threatened Litigation
We reviewed the Company's correspondence files and conducted interviews with Teresa Okafor regarding any demand letters, cease-and-desist notices, or threatened claims. We identified one matter:
Wavecrest Technologies, Inc. Cease-and-Desist Letter. On September 14, 2024, the Company received a cease-and-desist letter from Wavecrest Technologies, Inc. ("Wavecrest"), a competitor in the payment orchestration space, alleging that certain features of the Skybridge Platform infringe U.S. Patent No. 10,892,XXX, owned by Wavecrest and relating to real-time payment routing optimization. Teresa Okafor responded on October 2, 2024, denying the allegations and requesting identification of the specific claims of the Wavecrest patent that are allegedly infringed and a claim chart mapping the accused functionality to the patent claims. As of the date of this memorandum, Wavecrest has not responded to the Company's October 2024 letter, has not filed suit, and has not made any further communications. The Company's outside patent counsel (Hartwell & Payne LLP) conducted a preliminary non-infringement analysis and concluded that the Company's payment routing technology does not practice the claims of the Wavecrest patent. This analysis is summarized in the IP Due Diligence Memorandum. While we assess the likelihood of a successful infringement claim by Wavecrest as low based on the available information, we recommend that this matter be disclosed in the BCA disclosure schedules and monitored on an ongoing basis.
C. Government Investigations and Regulatory Proceedings
Based on our review and management representations, Skybridge is not the subject of any pending or threatened government investigations, enforcement actions, subpoenas, civil investigative demands, or regulatory proceedings. No Suspicious Activity Reports (SARs) have been filed by the Company, and no inquiries from the Financial Crimes Enforcement Network (FinCEN), the Consumer Financial Protection Bureau (CFPB), or any state banking or financial services regulator are pending.
D. Judgments, Orders, and Decrees
Based on our review and management representations, there are no outstanding judgments, consent decrees, injunctions, or settlement agreements that impose any ongoing obligations on the Company.
E. Assessment. Overall litigation risk is assessed as low. The Wavecrest cease-and-desist matter, while not rising to the level of pending litigation, should be disclosed in the BCA disclosure schedules and monitored post-closing. No other litigation-related matters were identified that would require disclosure or that would be material to the Transaction.
VII. EMPLOYMENT AND BENEFITS MATTERS
A. Employee Overview
As of the date of this memorandum, Skybridge employs approximately 340 full-time employees. The geographic distribution of the Company's workforce is approximately as follows:
The Company does not have any employees located outside of the United States.
B. Employment Agreements
We reviewed the individual employment agreements of the Company's four named executive officers:
Priya Chandrasekaran, Founder and Chief Executive Officer. Ms. Chandrasekaran's Employment Agreement, dated June 15, 2018 (as amended August 12, 2021), provides for: (i) an annual base salary of $450,000; (ii) eligibility for an annual cash bonus of up to 100% of base salary, based on achievement of Board-approved performance targets; (iii) single-trigger acceleration of all unvested equity awards upon a change of control (as defined in the agreement); (iv) in the event of a termination without cause or for good reason within twelve (12) months following a change of control (a "double-trigger" severance trigger), severance equal to eighteen (18) months of base salary plus the target annual bonus, continued health insurance coverage for eighteen (18) months, and full acceleration of any then-unvested equity awards (to the extent not already accelerated under the single-trigger provision); (v) a perpetual confidentiality obligation; (vi) a twelve (12)-month post-employment non-solicitation covenant; and (vii) an assignment of inventions provision.
Marcus Ellingham, Chief Financial Officer. Mr. Ellingham's Employment Agreement, dated March 1, 2020 (as amended August 12, 2021), provides for: (i) an annual base salary of $375,000; (ii) eligibility for an annual cash bonus of up to 75% of base salary; (iii) single-trigger acceleration of all unvested equity awards upon a change of control; (iv) double-trigger severance equal to twelve (12) months of base salary plus the target annual bonus, continued health insurance coverage for twelve (12) months, and full acceleration of any then-unvested equity awards; (v) standard confidentiality, non-solicitation, and invention assignment provisions.
Teresa Okafor, General Counsel. Ms. Okafor's Employment Agreement, dated September 15, 2019, provides for: (i) an annual base salary of $350,000; (ii) eligibility for an annual cash bonus of up to 60% of base salary; (iii) double-trigger acceleration of unvested equity awards (no single-trigger acceleration); (iv) double-trigger severance equal to twelve (12) months of base salary, continued health insurance coverage for twelve (12) months, and full acceleration of unvested equity awards; (v) standard confidentiality, non-solicitation, and invention assignment provisions.
Daniel Hsiao, Chief Technology Officer. Mr. Hsiao's Employment Agreement, dated January 6, 2019 (as amended August 12, 2021), provides for: (i) an annual base salary of $400,000; (ii) eligibility for an annual cash bonus of up to 75% of base salary; (iii) single-trigger acceleration of all unvested equity awards upon a change of control; (iv) double-trigger severance equal to twelve (12) months of base salary plus the target annual bonus, continued health insurance coverage for twelve (12) months, and full acceleration of any then-unvested equity awards; (v) standard confidentiality, non-solicitation, and invention assignment provisions.
We note that the single-trigger acceleration provisions in the employment agreements of Ms. Chandrasekaran, Mr. Ellingham, and Mr. Hsiao will result in the immediate vesting of all unvested equity awards held by these individuals upon the closing of the Transaction. The aggregate estimated value of accelerated equity (based on the $10.00 per share merger consideration and the applicable exercise prices) is approximately $7,380,000. This acceleration should be disclosed in the proxy statement/prospectus.
Other than the four named executive officers, the Company's employees are "at-will" employees and do not have individual employment agreements. All employees are required to execute the Company's standard Confidentiality, Invention Assignment, and Non-Solicitation Agreement and the Company's standard Employee Handbook Acknowledgment upon hire.
C. Employee Benefit Plans
Skybridge offers the following employee benefit plans:
• Health Insurance: Group medical, dental, and vision coverage through Bramwell Life Insurance (PPO and HMO options). The Company pays 90% of the premium for employee-only coverage and 70% of the premium for dependent coverage.
• Life Insurance and Disability: Company-paid group term life insurance and short-term and long-term disability insurance through Quillon Holdings.
• 401(k) Plan: Skybridge maintains a 401(k) defined contribution retirement plan (the "401(k) Plan") administered by Brightwater Capital Management. The Company provides an employer match of 50% of employee contributions up to 6% of eligible compensation (maximum employer match of 3% of eligible compensation). The 401(k) Plan is intended to be qualified under Internal Revenue Code Section 401(a), and the Company has received a favorable determination letter from the IRS.
We reviewed the 401(k) Plan documents, summary plan description, and the most recent Form 5500 annual report. Based on our review, the 401(k) Plan appears to be operated in compliance with ERISA and the Internal Revenue Code. No prohibited transactions, late contributions, or compliance deficiencies were identified. The Company does not maintain any defined benefit pension plan, post-retirement health or welfare benefits, or nonqualified deferred compensation plans.
D. Equity Compensation
The treatment of the Company's equity compensation arrangements in the Transaction is discussed in Section III.C and Section III.F above. As noted, the 2019 Plan and all outstanding equity awards will be assumed by the combined company, with appropriate adjustments to preserve economic value. The single-trigger acceleration provisions applicable to three named executive officers are discussed in Section VII.B above.
E. Independent Contractors