CONFIDENTIAL — FOR DISCUSSION PURPOSES ONLY

CONFIDENTIAL — FOR DISCUSSION PURPOSES ONLY
NON-BINDING TERM SHEET
SAFE FINANCING
October 4, 2023
This term sheet summarizes the principal terms with respect to a proposed investment in Lumos Analytics Inc., a Delaware corporation (the "Company"), by Atlas Fintech Syndicate, L.P., a Delaware limited partnership (the "Investor"). This term sheet is non-binding and is intended solely for discussion purposes, except for the provisions relating to Confidentiality (Section 13), Exclusivity (Section 14), and Governing Law (Section 12), which are binding on the parties upon execution of this term sheet. No legally binding obligation shall be created, implied, or inferred from this term sheet until definitive documentation has been negotiated, executed, and delivered by the parties, except with respect to the binding provisions identified above.
1. Parties
1.1 Issuer / Company
Business Description. The Company is a seed-stage software-as-a-service ("SaaS") and financial technology ("fintech") analytics company. The Company is the developer of the "Lumos Prism" platform, an AI-driven financial analytics solution providing real-time regulatory compliance dashboards and predictive risk scoring to mid-market financial institutions. The Lumos Prism platform leverages proprietary machine learning models and natural language processing capabilities to automate the monitoring of regulatory obligations and generate forward-looking risk assessments across multiple compliance domains.
1.2 Investor.  
2. Investment Terms
2.1 Type of Security
The security to be issued to the Investor shall be a Post-Money SAFE (Simple Agreement for Future Equity) (the "SAFE"). The form of the SAFE shall be based on the Calderon Partners LLC standard Post-Money SAFE form, as modified by the Company to reflect the specific terms set forth in this term sheet and such other modifications as may be mutually agreed upon by the Company and the Investor in connection with the negotiation of definitive documentation. For the avoidance of doubt, the SAFE is not a debt instrument and shall not bear interest or have a maturity date.
2.2 Purchase Amount
The Investor shall invest a total of One Million Dollars ($1,000,000) (the "Purchase Amount") in exchange for the SAFE, payable in cash by wire transfer of immediately available funds to an account designated by the Company, at such time and in such manner as shall be specified in the definitive SAFE documentation. The full Purchase Amount shall be funded in a single closing.
2.3 Total Round Size
The Company is conducting a broader SAFE financing round (the "SAFE Round") with an aggregate target round size of Six Million Eight Hundred Thousand Dollars ($6,800,000) in SAFEs issued on substantially similar terms. The lead investor in the SAFE Round is Vantage Peak Ventures Fund II, L.P., which has committed Three Million Five Hundred Thousand Dollars ($3,500,000) pursuant to a SAFE executed on September 12, 2023. Additional co-investors are participating in the SAFE Round on the same or substantially similar terms as described herein. The Company reserves the right to accept additional SAFE investments from other investors as part of this SAFE Round, subject to the Most Favored Nation provision set forth in Section 4 below.
2.4 Post-Money Valuation Cap
The Post-Money Valuation Cap applicable to the SAFE shall be Twenty-Eight Million Dollars ($28,000,000) (the "Valuation Cap"). For purposes of calculating the conversion price upon an Equity Financing (as defined below), the price per share shall be determined by dividing the Valuation Cap by the Company Capitalization (as such term will be defined in the SAFE in accordance with the Calderon Partners LLC Post-Money SAFE standard definition, which includes all issued and outstanding capital stock, all outstanding stock options and other convertible securities, all shares reserved under equity incentive plans (whether granted or available for future grant), and all shares issuable upon conversion of outstanding SAFEs and convertible notes, calculated on an as-converted, fully diluted basis).
2.5 discount Rate
The SAFE shall not include a discount rate. No discount to the price per share of the equity securities issued in a qualifying Equity Financing shall apply upon conversion of the SAFE. Conversion shall occur solely by reference to the Valuation Cap.
2.6 Pro Forma Ownership at Conversion
Based on the Valuation Cap of $28,000,000 and assuming (i) the full SAFE Round is completed at the aggregate target amount of $6,800,000, (ii) conversion occurs at the Valuation Cap, and (iii) the Company Capitalization is calculated on a fully diluted, as-converted basis at the time of conversion, the Investor's pro forma ownership upon conversion is estimated to be approximately 3.57% ($1,000,000 ÷ $28,000,000). This estimate is provided for illustrative purposes only and is subject to change based on changes in the Company Capitalization, the actual amount of SAFEs and other convertible securities outstanding at the time of conversion, and the terms of the qualifying Equity Financing.
3. Conversion Events
3.1 Equity Financing
The SAFE shall automatically convert into shares of the Company's preferred stock (the "SAFE Preferred Stock") issued in connection with a bona fide equity financing (an "Equity Financing") in which the Company issues and sells shares of its preferred stock with aggregate gross proceeds to the Company of at least One Million Dollars ($1,000,000), excluding any amounts received upon conversion of SAFEs, convertible promissory notes, or other convertible instruments. Upon such Equity Financing, the SAFE shall convert into shares of SAFE Preferred Stock at a price per share equal to the quotient obtained by dividing (x) the Post-Money Valuation Cap by (y) the Company Capitalization (as defined in the SAFE). The SAFE Preferred Stock shall have the same rights, preferences, privileges, and restrictions as the preferred stock issued in the Equity Financing, except that the price per share and the resulting number of shares of SAFE Preferred Stock shall be determined by reference to the Valuation Cap as described above. In the event that the price per share of the preferred stock sold in the Equity Financing is lower than the price per share derived from the Valuation Cap, the SAFE shall convert at the lower per share price (i.e., the Valuation Cap operates as a ceiling on the conversion price, not a floor).
3.2 Liquidity Event
In the event of a Change of Control (as such term will be defined in the SAFE, generally including any merger, acquisition, sale of all or substantially all of the Company's assets, or other transaction in which the holders of the Company's outstanding voting securities immediately prior to such transaction hold less than a majority of the outstanding voting securities of the surviving entity immediately following such transaction) or a Direct Listing (as such term will be defined in the SAFE, generally including the listing of the Company's Common Stock on a national securities exchange without a concurrent underwritten offering), the Investor shall have the right, at the Investor's sole election, to either:
(a) receive a cash payment equal to the Purchase Amount; or
(b) convert the SAFE into shares of the Company's Common Stock at a price per share calculated by dividing the Post-Money Valuation Cap by the Company Capitalization as of immediately prior to the Liquidity Event.
The Investor shall notify the Company of its election in writing within the time period specified in the definitive SAFE documentation following receipt of notice of the Liquidity Event from the Company.
3.3 Dissolution Event
In the event of a voluntary or involuntary dissolution, winding up, or liquidation of the Company (a "Dissolution Event"), the Investor shall be entitled to receive a cash payment equal to the Purchase Amount, which payment shall be made prior to any distributions to holders of the Company's Common Stock. The Investor's right to receive payment in a Dissolution Event shall be senior to the rights of holders of Common Stock but may be junior or pari passu with the rights of holders of the Company's preferred stock, as set forth in the Company's certificate of incorporation as then in effect. In the event the Company's assets are insufficient to pay the full Purchase Amount to the Investor and all holders of SAFEs and other instruments entitled to preferential treatment in a Dissolution Event, payments shall be made on a pro rata basis based on the respective Purchase Amounts of each such holder.
4. Most Favored Nation (MFN) Provision
The SAFE shall contain a Most Favored Nation ("MFN") clause in favor of each holder of a SAFE issued in this SAFE Round. If, at any time prior to the conversion or termination of the Investor's SAFE, the Company issues any subsequent SAFE or similar convertible instrument (a "Subsequent SAFE") to any investor with terms that are more favorable to the investor thereunder than the terms of the Investor's SAFE — including, without limitation, a lower post-money valuation cap, a discount rate not included in the Investor's SAFE, or any other material economic term that provides more favorable economics or rights — then the Investor shall have the right, upon written notice to the Company, to amend the terms of its SAFE to incorporate and match such more favorable terms. The MFN right shall be exercisable by the Investor within a reasonable period following receipt of written notice from the Company of the issuance of such Subsequent SAFE and a summary of the material terms thereof. The Company shall provide such notice to all SAFE holders entitled to MFN rights within five (5) business days of the issuance of any Subsequent SAFE.
5. Pro Rata Rights
The Company will offer a pro rata rights side letter (the "Pro Rata Rights Side Letter") to the lead investor in the SAFE Round, Vantage Peak Ventures Fund II, L.P., granting such lead investor the right to participate, on a pro rata basis (determined by reference to the lead investor's ownership percentage on an as-converted, fully diluted basis), in the next equity financing of the Company following conversion of the SAFEs issued in this SAFE Round.
Atlas Fintech Syndicate, L.P. is not entitled to a separate pro rata rights side letter under the terms of this term sheet. The potential inclusion of pro rata participation rights for the Investor may be discussed and negotiated in connection with the negotiation and execution of the definitive SAFE documentation, but no commitment or obligation to grant such rights is implied or created by this term sheet.
6. Information Rights
Following the execution of the SAFE, the Company shall provide the Investor with the following information:
(a) Quarterly Financial Statements. Unaudited quarterly financial statements of the Company, including a balance sheet, income statement, and statement of cash flows, within forty-five (45) days following the end of each fiscal quarter;
(b) Annual Financial Statements. Unaudited annual financial statements of the Company, including a balance sheet, income statement, and statement of cash flows, within ninety (90) days following the end of each fiscal year; and
(c) Other Information. Such other information regarding the Company's financial condition, results of operations, and business activities as may be reasonably requested by the Investor from time to time.
All information provided to the Investor pursuant to this Section 6 shall be subject to the confidentiality obligations set forth in Section 13 below and such additional confidentiality and non-disclosure obligations as may be set forth in the definitive SAFE documentation or a separate confidentiality agreement between the parties. The Company's obligation to provide information rights under this section shall continue until the earlier of (i) the conversion or termination of the SAFE, or (ii) such time as the Investor receives equivalent or superior information rights pursuant to the terms of the Company's charter documents or an investors' rights agreement entered into in connection with a subsequent Equity Financing.
7. Representations and Warranties
The definitive SAFE documentation will contain customary representations and warranties by the Company, including, without limitation, representations and warranties relating to:
(a) due organization, valid existence, and good standing under the laws of the State of Delaware;
(b) corporate authority and power to execute, deliver, and perform the SAFE;
(c) due authorization, execution, and delivery of the SAFE, and the enforceability thereof;
(d) absence of conflicts with the Company's certificate of incorporation, bylaws, or other organizational documents, or any material agreement, instrument, or applicable law;
(e) accuracy and completeness of the Company's capitalization as disclosed to the Investor;
(f) ownership of, or valid licenses to, all material intellectual property necessary to conduct the Company's business as presently conducted and as presently proposed to be conducted;
(g) absence of any material pending or threatened litigation, arbitration, or governmental investigation against the Company or any of its officers, directors, or key employees in their capacities as such; and
(h) compliance with all applicable laws, rules, and regulations material to the conduct of the Company's business.
The Investor shall not be required to make any representations or warranties other than (i) the Investor's authority and legal capacity to enter into the SAFE, and (ii) customary investment representations, including representations as to the Investor's status as an "accredited investor" within the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended, and the Investor's investment intent with respect to the securities acquired under the SAFE.
8. Capitalization Summary (Pre-Round)
The following table sets forth a summary of the Company's capitalization as of the date of this term sheet, prior to giving effect to the SAFE Round described herein. This capitalization summary is provided for informational purposes only and is subject to verification through customary due diligence and review of the Company's stock records, certificate of incorporation, and equity plan documentation.
Authorized Capital Stock:
Issued and Outstanding Common Stock:
2022 Equity Incentive Plan:
Outstanding Convertible Securities (Pre-Seed SAFEs):
The Company has previously issued SAFEs in connection with a pre-seed financing in August 2022, with an aggregate principal amount of $1,200,000 and a post-money valuation cap of $8,000,000. The holders of the pre-seed SAFEs are as follows:
The pre-seed SAFEs remain outstanding and unconverted as of the date of this term sheet. The pre-seed SAFEs will be included in the calculation of the Company Capitalization for purposes of determining the conversion price of the SAFE issued hereunder upon an Equity Financing, in accordance with the standard Calderon Partners LLC Post-Money SAFE methodology.
9. Use of Proceeds
The Company intends to use the proceeds from the SAFE Round for general corporate purposes, including but not limited to continued development and enhancement of the Lumos Prism platform, expansion of the Company's engineering and product teams through additional hiring, sales and marketing activities, and general working capital needs. The Company shall have sole discretion over the specific allocation and deployment of the proceeds, subject to compliance with applicable law.
10. Company Counsel
The Company is represented in connection with this financing by:
Calderwood & Harkness LLP 555 California Street, 30th Floor San Francisco, CA 94104
Attention: Patricia Dunmore, Partner
All definitive SAFE documentation will be prepared by Company counsel, with the Investor and its counsel (if any) afforded a reasonable opportunity to review and comment on such documentation prior to execution.
11. Investor Counsel
Atlas Fintech Syndicate, L.P. shall designate its own legal counsel, if any, in connection with the review and negotiation of the definitive SAFE documentation. The Company shall not be responsible for the legal fees and expenses of the Investor's counsel incurred in connection with this financing, unless otherwise agreed in writing by the parties.
12. Governing Law (Binding Provision)
The definitive SAFE to be entered into between the Company and the Investor shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to principles of conflicts of law that would cause the application of the laws of any other jurisdiction. This Section 12 is a binding provision of this term sheet and shall survive regardless of whether definitive documentation is executed. Any disputes arising out of or relating to this term sheet or the binding provisions hereof shall be subject to the exclusive jurisdiction of the state and federal courts located in the State of Delaware, and each party hereby irrevocably consents to the personal jurisdiction of such courts.
13. Confidentiality (Binding Provision)
This Section 13 is a binding obligation of the parties upon execution of this term sheet. Each party agrees to keep the terms of this term sheet, the existence and substance of any negotiations related hereto, and any non-public information disclosed by one party to the other in connection with the proposed investment strictly confidential, and shall not disclose such information to any third party, except:
(a) as required by applicable law, regulation, or legal process (provided that the disclosing party shall, to the extent legally permissible, provide the other party with prompt written notice of such requirement prior to disclosure so that the other party may seek a protective order or other appropriate remedy);
(b) to such party's directors, officers, employees, members, partners, advisors, accountants, and legal counsel who have a bona fide need to know such information in connection with the evaluation and consummation of the proposed investment and who are bound by confidentiality obligations no less restrictive than those set forth in this Section 13; and
(c) to any other co-investors or prospective co-investors in the SAFE Round, solely to the extent necessary to facilitate the completion of the SAFE Round, and subject to appropriate confidentiality protections.
The obligations set forth in this Section 13 shall survive the termination or expiration of this term sheet for a period of eighteen (18) months from the date hereof.
14. Exclusivity
There is no exclusivity provision in this term sheet. The Company expressly reserves the right to negotiate with, solicit interest from, and close SAFEs or other investment instruments with additional investors on the same, substantially similar, or different terms, in the Company's sole discretion, subject to the Most Favored Nation provision set forth in Section 4 above. The Investor acknowledges that the Company is concurrently engaging with multiple potential investors in connection with the SAFE Round and that the Company is under no obligation to limit its fundraising activities in any way.
15. Non-Binding Nature
Except for the binding provisions set forth in Section 12 (Governing Law), Section 13 (Confidentiality), and Section 14 (Exclusivity), this term sheet is non-binding and does not create any obligation on the part of any party to consummate the proposed investment, negotiate or execute definitive documents, or take any other action in furtherance of the transactions contemplated hereby. No contract or agreement with respect to the proposed investment shall be deemed to exist unless and until definitive documentation has been negotiated, executed, and delivered by the Company and the Investor.
This term sheet does not constitute an offer to sell or a solicitation of an offer to buy any securities and is not intended to be, and shall not be construed as, a commitment or agreement to invest. Either party may terminate discussions relating to the proposed investment at any time, for any reason or no reason, without liability or obligation to the other party (except with respect to the binding provisions hereof).
16. Expiration
This term sheet shall automatically expire and be of no further force or effect if not accepted and countersigned by the Investor by 5:00 p.m. Pacific Time on October 11, 2023 (one week from the date of this term sheet), unless such deadline is extended in writing by the Company in its sole discretion. Upon expiration, all provisions of this term sheet, including the binding provisions, shall terminate, except that the confidentiality obligations set forth in Section 13 shall survive for the period specified therein.
Signature blocks
IN WITNESS WHEREOF, the undersigned have executed this Non-Binding Term Sheet as of the date first set forth above, intending to be bound only by the provisions expressly identified herein as binding.
COMPANY:
LUMOS ANALYTICS INC.
By: ________
Name: Priya Narasimhan
Title: Co-Founder, CEO & President
Date: October 4, 2023
INVESTOR:
Accepted and Agreed:
ATLAS FINTECH SYNDICATE, L.P.
By: Atlas Fintech GP LLC, its General Partner
By: ________
Name: Marcus Greenfield
Title: General Partner
Date: October 4, 2023
CONFIDENTIAL — FOR DISCUSSION PURPOSES ONLY This term sheet is non-binding except with respect to the provisions expressly identified herein as binding.
Legal Name: | Lumos Analytics Inc., a Delaware corporation
Principal Office: | 340 Folsom Street, Suite 1100, San Francisco, CA 94105
Date of Incorporation: | January 14, 2022 (State of Delaware)
Employer Identification Number (EIN): | 87-3491026
Delaware Secretary of State File No.: | 7394821
Chief Executive Officer: | Priya Narasimhan, Co-Founder, CEO & President
Legal Name: | Atlas Fintech Syndicate, L.P., a Delaware limited partnership
General Partner: | Atlas Fintech GP LLC, a Delaware limited liability company
Principal Office: | 800 Boylston Street, Suite 1400, Boston, MA 02199
Deal Contact: | Marcus Greenfield, General Partner
Class | Authorized Shares
Common Stock | 10,000,000
Holder | Shares | Approximate % (Undiluted)
Priya Narasimhan (Co-Founder, CEO & President) | 4,200,000 | 48.8%
Elliot Marsh (Co-Founder) | 3,800,000 | 44.2%
Danielle Okoye | 600,000 | 7.0%
Total Issued and Outstanding | 8,600,000 | 100.0%
Shares
Total Shares Reserved under Plan | 1,200,000
Shares Subject to Outstanding Grants (Options/RSUs) | 480,000
Shares Available for Future Grant | 720,000
Holder | Purchase Amount | Valuation Cap
Ridgeline Angel Fund, L.P. | $500,000 | $8,000,000
Individual angel investors (aggregate) | $700,000 | $8,000,000
Total Pre-Seed SAFEs | $1,200,000