Laird Superfood, Inc. S-1/A Sep. 22, 2020 6:07 AM



Notes to Unaudited Financial Statements


As of December 31, 2019, the Company was authorized to issue 1,329,680 shares of
preferred stock at a par value of $0.001, including 1,117,426 shares of Series A-1 preferred stock, including 609,078 which were undesignated preferred, and 152,253 shares of Series A-2 preferred stock, of which 162,340 shares of Series A-1 preferred stock and 152,253 shares of Series A-2 preferred stock were

Series A-1 and A-2 Preferred Stock

Effective November 19, 2018, the Company executed a capital transaction of $25,000,000 with a private investor, with $15,000,000 funded at
the closing date and an additional $10,000,000 to be funded one year following the execution. The additional tranche was determined to be embedded in the initial agreement and not subject to bifurcation accounting. The investing entity received
Series A-1 preferred stock, carrying certain standard protective provisions.

In conjunction with
this equity infusion, in November and December 2018, the Company further sold to existing stockholders an additional $7,000,000 of shares of Series A-1 and A-2 preferred
stock, carrying the same standard protective provisions noted above, partially offset by redemptions of common stock of $670,133. One additional redemption of common stock was completed in January 2019 for $1,079,878.

All shares of Series A-1 and A-2 preferred stock issued are
convertible into common stock at any time at the option of the holder, or mandatorily convertible into common stock upon the event of an initial public offering. The Series A-1 and A-2 preferred stock are redeemable upon the occurrence of a deemed liquidation event. The Company determined that this redemption feature requires classification of both Series A-1 and A-2 preferred stock as mezzanine equity in our balance sheet as of June 30, 2020 and December 31, 2019. Shares of preferred stock are entitled to non-cumulative dividends paid on an as-converted basis when, and if, paid to common stock. In the event of liquidation, shares of preferred stock receive a per share amount
equal to the greater of the original purchase price plus accrued dividends in preference of the common stockholders, or the amount that holders of preferred stock would receive on an as-converted basis.
Preferred stock carry pro rata participation rights in subsequent issuances of securities.

Shares of Series A-2 preferred stock were issued at a 20% discount, based on preexisting terms in a line of credit agreement with the investor. As a result, the $673,133 was recorded as a reduction to additional paid-in-capital in 2018 and was considered a deemed dividend increasing the net loss attributable to common stockholders.

On November 18, 2019, the Company negotiated the repurchase of 609,013 shares of Series A-1
preferred stock from a private investor for $7,500,000, or $12.32 per share, and the termination of the private investor’s commitment to fund an additional $10,000,000 in November 2019. At the time of repurchase, the carrying value of the
shares of Series A-1 preferred stock outstanding on the balance sheet was $14,999,901, or a value of $24.63 per share. The favorable rate at which the shares were able to be negotiated resulted in a deemed
contribution of $7,448,879 which was included in net loss available to common stockholders.

Series B-1 and B-2 Preferred Stock

Effective April 13, 2020, the Company completed a private placement to a third-party investor for 383,142 shares of its Series B-1 preferred stock for total proceeds of $10,000,006, or $26.10 per




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