Fully Diluted

The term Fully Diluted means that when determining the price per share, the total capitalization of the Company includes all outstanding stock plus stock of the Company that may be acquired in the future pursuant to outstanding securities that are convertible or exercisable for shares of stock (e.g., warrants, granted option shares, and available shares in the employee option pool).

Stockholders, especially Investors, like to see their ownership expressed in turns terms of a Company’s Common Stock outstanding on a Fully Diluted basis. The Fully Diluted share count allows Investors to conservatively determine the potential value and risk of their investment, assuming those shares were actually issued. In many cases it is not possible to express the number of shares into which securities convert (e.g. SAFEs), because the triggering event necessary to calculate the exact number of shares has not yet occurred, so these securities are often not included in the “Fully Diluted” calculation.

A Company’s Common Stock outstanding on a Fully Diluted basis is the sum of the number of shares of the Company’s Common Stock that is: (a) outstanding, (b) issuable pursuant to outstanding Convertible Securities for which exact share amounts are determinable (like Preferred Stock), (c) issuable pursuant to exercisable securities (like options and warrants) and (d) otherwise reserved for issuance pursuant to the Company’s Option plan(s).