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EFC and Toxic Term Sheets Cap and Payout Tables Assumptions Series A Invesment $ 5,000,000 Table 1 Cap Table Pre-Investment Ownership Shareholder Shares Percentage Founder 800,000 80% Management 200,000 20% Total 1,000,000 100% Table 2 Cap Table Post-Common Investment Ownership Shareholder Shares Percentage VC1 333,333 25% Founder 800,000 60% Management 200,000 15% Total 1,333,333 100% Table 3 Payout Table - All Common Stock
$10 million acquisition proceeds Ownership Total Shareholder Shares Percentage Payout VC1 333,333 25% $ 2,500,000 Founder 800,000 60% $ 6,000,000 Management 200,000 15% $ 1,500,000 Total 1,333,333 100% $ 10,000,000 Table 4 Payout Table - Redeemable Preferred Stock $10 million acquisition proceeds Ownership Shareholder Security Shares Percentage VC1 Preferred 333,333 100% Total Preferreed Founder Common 800,000 60% Management Common 200,000 15% Total 1,333,333 75% Table 5 Payout Table - Convertible Preferred Stock $10 million and $40 million acquisition proceeds $10 million acquisition proceeds Ownership Shareholder Security Shares Percentage VC1 Preferred 333,333 25% Founder Common 800,000 60%
Management Common 200,000 15% Total 1,333,333 100% $40 million acquisition proceeds $ 40,000,000 Ownership Shareholder Security Shares Percentage VC1 Preferred 333,333 25% Founder Common 800,000 60% Management Common 200,000 15% Total 1,333,333 100% Table 6 Payout Table - Participating Convertible Preferred $10 million and $40 million acquisition proceeds $10 million acquistion proceeds $ 10,000,000 Ownership Shareholder Security Shares Percentage VC1 Preferred 333,333 25% Founder Common 800,000 60% Management Common 200,000 15% Total 1,333,333 100% $40 million acquisition proceeds $ 40,000,000 Ownership Shareholder Security Shares Percentage VC1 Preferred 333,333 25% Founder Common 800,000 60%
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Management Common 200,000 15% Total 1,333,333 100%
Net Payout $ (2,500,000) $ 5,000,000 $ 1,500,000 $ 4,000,000 Total Net Payout Payout $ 5,000,000 $ - $ 5,000,000 $ - $ 4,000,000 $ 3,000,000 $ 1,000,000 $ 1,000,000 $ 10,000,000 $ 4,000,000 Total Net Payout Payout $ 5,000,000 $ - $ 4,000,000 $ 3,000,000
$ 1,000,000 $ 1,000,000 $ 10,000,000 $ 4,000,000 Total Net Payout Payout $ 10,000,000 $ 5,000,000 $ 24,000,000 $ 23,000,000 $ 6,000,000 $ 6,000,000 $ 10,000,000 $ 34,000,000 d Stock Total Net Payout Payout Investment $ 6,250,000 $ 1,250,000 $ 5,000,000 $ 3,000,000 $ 2,000,000 $ 750,000 $ 750,000 $ 10,000,000 $ 4,000,000 Total Net Payout Payout $ 13,750,000 $ 8,750,000 $ 5,000,000 $ 21,000,000 $ 20,000,000
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$ 5,250,000 $ 5,250,000 $ 40,000,000 $ 34,000,000
Assumptions: Series B Pre-money $ 30,000,000 Investment $ 20,000,000 Post-money $ 50,000,000 Series B percentage 40.0% Option pool 10.0% Table 7 Cap Table - Post-Series B Investment Option Pool Shares - Pre-Series B Pre-Investment Capitalization Table Series A Capitalization Table Series B Capitalization Table Common Fully Diluted Amount Pref. A Pref. A Fully Diluted Amount Pref. B Pref. B Fully Diluted Series B Shareholder Shares Ownership Percentage Invested Shares Percentage Ownership Percentage Invested Shares Percentage Ownership Percentage Percentage VC2 $ 20,000,000 1,066,667 100% 1,066,667 40.00% 40.00% VC1 $ 5,000,000 333,333 100% 333,333 25% $ - - 0% 333,333 12.50% Founder 800,000 800,000 80% 800,000 60% 800,000 30.00% Management 200,000 200,000 20% 200,000 15% 200,000 7.50% Series A Option Pool - 0.00% Series B Option Pool 266,667 10.00% Total 1,000,000 1,000,000 100% $ 5,000,000 333,333 100% 1,333,333 100% $ 20,000,000 1,066,667 100% 2,666,667 100% Preferred Share Price $ 15.00 $ 18.75 Table 8 Cap Table - Post-Series B Investment Option Pool Shares - Post-Series B Pre-Investment Capitalization Table Series A Capitalization Table Series B Capitalization Table Post-Closing Option Pool Common Fully Diluted Amount Pref. A Pref. A Fully Diluted Amount Pref. B Pref. B Fully Diluted Series B Option Fully Diluted Series B Shareholder Shares Ownership Percentage Invested Shares Percentage Ownership Percentage Invested Shares Percentage Ownership Percentage Percentage Pool Ownership Percentage Percentage VC2 $ 20,000,000 888,889 100% 888,889 40.00% 40.00% 888,889 36.00% 36.00% VC1 $ 5,000,000 333,333 100% 333,333 25% $ - - 0% 333,333 15.00% 333,333 13.50% Founder 800,000 800,000 80% 800,000 60% 800,000 36.00% 800,000 32.40% Management 200,000 200,000 20% 200,000 15% 200,000 9.00% 200,000 8.10% Series A Option Pool - 0.00% - 0.00% Series B Option Pool - 0.00% 222,222 246,914 10.00% Total 1,000,000 1,000,000 100% $ 5,000,000 333,333 100% 1,333,333 100% $ 20,000,000 888,889 100% 2,222,222 100% 222,222 2,469,136 100% Preferred Share Price $ 15.00 $ 22.50 $ 20.25
Table 9 Cap Table - Post-Series B Investment Ownership Assuming All Options are Exercise and if All Options Expire Unexercised Panel A - Post Series B with Options Panel B - Post Series B with Options Unexercised Fully Diluted Series B Fully Diluted Series B Shareholder Ownership Percentage Percentage Ownership Percentage Percentage VC2 1,066,667 40.00% 40.00% 1,066,667 44.44% 44.44% VC1 333,333 12.50% 333,333 13.89% Founder 800,000 30.00% 800,000 33.33% Management 200,000 7.50% 200,000 8.33% Series A Option Pool - 0.00% - 0.00% Series B Option Pool 266,667 10.00% - 0.00% Total 2,666,667 100% 2,400,000 100% Table 10 Founder Share Repurchase Post Series B Founder Leaves within One Month of Funding Common fair market price of $18.75, cost basis of $0.01 Founder Leaves Founder Removed Founder Removed Voluntarily With Cause Without Cause Repurchase Repurchase Repurchase Founder 1 Ownership Percentage Price Value Price Value Price Value Vested 100,000 25.00% $ 18.75 $ 1,875,000 $ 0.01 $ 1,000 $ 18.75 $ 1,875,000 Unvested 300,000 75.00% $ 0.01 $ 3,000 $ 0.01 $ 3,000 $ 18.75 $ 5,625,000 Total 400,000 100% $ 1,878,000 $ 4,000 $ 7,500,000
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Table 11 Payout Table $100 million acquisition proceeds (i) Convertible Preferred 100000000 Pre-Investment Capitalization Table Series A Capitalization Table Series B Capitalization Table Dividends Potential Common Fully Diluted Amount Pref. A Fully Diluted Amount Pref. B Fully Diluted Pref. A Pref. B Fully Diluted Preference Total Shareholder Shares Ownership Percentage Invested Shares Ownership Percentage Invested Shares Ownership Percentage Shares Shares Ownership Percentage Payment Distribution VC2 $ 20,000,000 1,066,667 1,066,667 40.00% 128,000 1,194,667 41.56% $ 22,400,000 $ 41,558,442 VC1 $ 5,000,000 333,333 333,333 25% $ - - 333,333 12.50% 80,000 - 413,333 14.38% $ 6,200,000 $ 14,378,479 Founder 800,000 800,000 80% 800,000 60% 800,000 30.00% 800,000 27.83% $ 27,829,314 Management 200,000 200,000 20% 200,000 15% 200,000 7.50% 200,000 6.96% $ 6,957,328 Series A Option Pool - 0.00% - 0.00% $ - Series B Option Pool 266,667 10.00% 266,667 9.28% $ 9,276,438 Total 1,000,000 1,000,000 100% $ 5,000,000 333,333 1,333,333 100% $ 20,000,000 1,066,667 2,666,667 100% 80,000 128,000 2,874,667 100% $ 28,600,000 $ 100,000,000 Preferred Share Price $ 15.00 $ 18.75 $ 36.53 (i) Participating Convertible Preferred $ 100,000,000 Pre-Investment Capitalization Table Series A Capitalization Table Series B Capitalization Table Dividends Common Fully Diluted Amount Pref. A Fully Diluted Amount Pref. B Fully Diluted Pref. A Pref. B Fully Diluted Preference Total Shareholder Shares Ownership Percentage Invested Shares Ownership Percentage Invested Shares Ownership Percentage Shares Shares Ownership Percentage Payment Distribution VC2 $ 20,000,000 1,066,667 1,066,667 40.00% 128,000 1,194,667 41.56% $ 22,400,000 $ 52,072,727 VC1 $ 5,000,000 333,333 333,333 25% $ - - 333,333 12.50% 80,000 - 413,333 14.38% $ 6,200,000 $ 16,466,234 Founder 800,000 800,000 80% 800,000 60% 800,000 30.00% 800,000 27.83% $ 19,870,130 Management 200,000 200,000 20% 200,000 15% 200,000 7.50% 200,000 6.96% $ 4,967,532 Series A Option Pool - 0.00% - 0.00% $ - Series B Option Pool 266,667 10.00% 266,667 9.28% $ 6,623,377 Total 1,000,000 1,000,000 100% $ 5,000,000 333,333 1,333,333 100% $ 20,000,000 1,066,667 2,666,667 100% 80,000 128,000 2,874,667 100% $ 28,600,000 $ 100,000,000 Preferred Share Price $ 15.00 $ 18.75 $ 36.53 Table 12 Antidulution and ratchets $10 million Series B round, Post Money Valuation of $25 million Before Ratchet No Ratchet Full Ratchet After Weighted Avg. Ratchet Shareholder Ownership Percentage Ownership Percentage Ownership Percentage Ownership Percentage VC2 888,889 40.00% 1,142,857 40.00% 1,014,493 40.00% VC1 333,333 25.00% 333,333 15.00% 714,286 25.00% 521,739 20.57% Founder 800,000 60.00% 800,000 36.00% 800,000 28.00% 800,000 31.54% Management 200,000 15% 200,000 9.00% 200,000 7.00% 200,000 7.89% Total 1,333,333 100.00% 2,222,222 100.00% 2,857,143 100.00% 2,536,232 100.00% Share Price $ 15.00 $ 11.25 $ 8.75 $ 9.86
Table 13 Antidulution and ratchets $27 million sale Participating Convertible Preferred Convertible Preferred $ 27,000,000 Before Dividends After Dividends Ownership Ownership Sale Consideration Sale Consideration Years to sales Shareholder Ownership Percentage Dividends Total Shares Percentage Preferences Payouts Percentage Payouts Percentage Series A VC2 1,142,857 40.00% 274,286 1,417,143 43.59% $ 12,400,000 $ 15,799,649 58.52% $ 11,768,014 43.59% 6 $ 5,905,097 VC1 714,286 25.00% 120,000 834,286 25.66% $ 6,800,000 $ 8,801,406 32.60% $ 6,927,944 25.66% Series B Founder 800,000 28.00% - 800,000 24.60% - $ 1,919,156 7.11% $ 6,643,234 24.60% 4 -$ 5,905,097 Management 200,000 7.00% - 200,000 6.15% - $ 479,789 1.78% $ 1,660,808 6.15% Total 2,857,143 100.00% 120,000 3,251,429 100.00% $ 19,200,000 $ 27,000,000 100.00% $ 27,000,000 100.00% Don’t include in table Share Price $ 8.75
Check -10.0% -10.0% -10.0% -10.0%
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Check $ 43,636,364 $ 15,097,403 $ 29,220,779 $ 7,305,195 $ - $ 9,740,260 $ 105,000,000 Check Differences $ 43,636,364 $10,514,286 $ 12,602,041 21.5% $ 15,097,403 $ 2,087,755 $ 29,220,779 -$ 7,959,184 $ 7,305,195 -$ 1,989,796 $ - $ - $ 9,740,260 -$ 2,653,061 $ 105,000,000 $ -
Assumptions: Series B Pre-money $ 15,000,000 Investment $ 10,000,000 Post-money $ 25,000,000 Series B percentage 40.0% Option pool 0.0% Table 7 Cap Table - Post-Series B Investment No Ratchet Option Pool Shares - Pre-Series B Pre-Investment Capitalization Table Series A Capitalization Table Series B Capitalization Table Common Fully Diluted Amount Pref. A Pref. A Fully Diluted Amount Pref. B Pref. B Fully Diluted Series B Shareholder Shares Ownership Percentage Invested Shares Percentage Ownership Percentage Invested Shares Percentage Ownership Percentage Percentage VC2 $ 10,000,000 888,889 100% 888,889 40.00% 40.00% VC1 $ 5,000,000 333,333 100% 333,333 25% $ - - 0% 333,333 15.00% Founder 800,000 800,000 80% 800,000 60% 800,000 36.00% Management 200,000 200,000 20% 200,000 15% 200,000 9.00% Series A Option Pool - 0.00% Series B Option Pool - 0.00% Total 1,000,000 1,000,000 100% $ 5,000,000 333,333 100% 1,333,333 100% $ 10,000,000 888,889 100% 2,222,222 100.00% Preferred Share Price $ 15.00 $ 11.25 $ 15.00 $ 11.25 Table 7 Cap Table - Post-Series B Investment Full Ratchet Option Pool Shares - Pre-Series B Pre-Investment Capitalization Table Series A Capitalization Table Series B Capitalization Table Common Fully Diluted Amount Pref. A Pref. A Fully Diluted Amount Pref. B Pref. B Fully Diluted Series B Shareholder Shares Ownership Percentage Invested Shares Percentage Ownership Percentage Invested Shares Percentage Ownership Percentage Percentage VC2 $ 10,000,000 1,142,857 75% 1,142,857 40.00% VC1 $ 5,000,000 333,333 100% 333,333 25% $ - 380,952 25% 714,286 25.00% Founder 800,000 800,000 80% 800,000 60% 800,000 28.00% Management 200,000 200,000 20% 200,000 15% 200,000 7.00% Series A Option Pool - 0.00% Series B Option Pool - 0.00% Total 1,000,000 1,000,000 100% $ 5,000,000 333,333 100% 1,333,333 100% $ 10,000,000 1,523,810 100% 2,857,143 100.00% Preferred Share Price $ 15.00 $ 8.75
Table 7 Cap Table - Post-Series B Investment Wtd Avg Ratchet Option Pool Shares - Pre-Series B Pre-Investment Capitalization Table Series A Capitalization Table Series B Capitalization Table Common Fully Diluted Amount Pref. A Pref. A Fully Diluted Amount Pref. B Pref. B Fully Diluted Series B Shareholder Shares Ownership Percentage Invested Shares Percentage Ownership Percentage Invested Shares Percentage Ownership Percentage Percentage VC2 $ 10,000,000 1,014,493 84% 1,014,493 40.00% VC1 $ 5,000,000 333,333 100% 333,333 25% $ - 188,406 16% 521,739 20.57% Founder 800,000 800,000 80% 800,000 60% 800,000 31.54% Management 200,000 200,000 20% 200,000 15% 200,000 7.89% Series A Option Pool - 0.00% Series B Option Pool - 0.00% Total 1,000,000 1,000,000 100% $ 5,000,000 333,333 100% 1,333,333 100% $ 10,000,000 1,202,899 100% 2,536,232 100.00% Preferred Share Price $ 15.00 $ 11.25 $ 11.25 $ 9.86 Weighted Average Price Calculation Fully Diluted Pre Money 1,333,333 Shares Issued if at Old Price 666,667 A 2,000,000 Fully Diluted Pre Money 1,333,333 Actual Shares Issued 1,014,493 B 2,347,826 A / B 0.852 Old Price $ 11.25 New Price $ 9.58
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Expected Pre / Post Fully Diluted CHECK 40.00% 40.00% 0.0000% Expected Fully Diluted CHECK $ 10,000,000 40.00% 0.0000% $ 6,250,000 25.00% 0.0000% $ 7,000,000 $ 1,750,000 $ - $ -
Expected Fully Diluted CHECK 40.00% 0.0000%
Table 7 Cap Table - Post-Series B Investment Option Pool Shares - Pre-Series B Pre-Investment Capitalization Table Series A Capitalization Table Series B Capitalization Table Common Fully Diluted Amount Pref. A Pref. A Fully Diluted Amount Pref. B Pref. B Fully Diluted Series B Shareholder Shares Ownership Percentage Invested Shares Percentage Ownership Percentage Invested Shares Percentage Ownership Percentage Percentage VC2 $ 15,000,000 800,000 75% 800,000 30.00% 40.00% VC1 $ 5,000,000 333,333 100% 333,333 25% $ 5,000,000 266,667 25% 600,000 22.50% Founder 800,000 800,000 80% 800,000 60% 800,000 30.00% Management 200,000 200,000 20% 200,000 15% 200,000 7.50% Series A Option Pool - 0.00% Series B Option Pool 266,667 10.00% Total 1,000,000 1,000,000 100% $ 5,000,000 333,333 100% 1,333,333 100% $ 20,000,000 1,066,667 100% 2,666,667 100% Preferred Share Price $ 15.00 $ 18.75
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