Cash back first, then shared upside.

One simple 1× non-participating preference for cash actually invested — new money senior, the founder's own capital junior, nobody double-dips, and all the upside is shared by ownership.

This document explains the liquidation waterfall — who is paid what if the Company is sold. It is illustrative, uses rounded percentages, and is not legal, tax or financial advice. The Company's Charter, the Disclosure Memorandum and the executed SAFE govern.

1 · The structure in plain English

The Company keeps its preference structure deliberately simple. There is one kind of preference — a 1× non-participating liquidation preference — and it exists only for cash that was actually invested. No multiples, no stacking, no participation. Two classes carry it, and everything else is common.

Class A Preferred — new money (this round). The ~$5.0M raised now (on SAFEs that convert into Class A at the next priced round) sits senior: it is repaid first on an exit. As-converted, it is 6.85% at the cap (735,294 shares).
Class B Preferred — legacy cash. The capital already put in: Massey Developments $3.2M (the founder's own invested capital, pegged to cost) and Kitty Stoneburner / Healing Frequencies ~$1.6M. Class B is junior to Class A, and the two Class B holders rank equally with each other (pari passu). Total Class B preference: $4.8M.
Founder Common — Harry Massey. The enterprise upside sits in common stock held personally — the same economics as every other common share (one vote per share; no economic preference). His control comes from his majority ownership (83.21% post-SAFE at the cap) plus a board director-designation right, not a super-voting multiple.
Common — goodwill holders and employees. The legacy goodwill grants, ordinary common.

“Non-participating” is the whole point. Each preferred holder receives the greater of (a) its cash preference or (b) its as-converted ownership share — never both. On a small exit the preference protects the cash that went in. On a large exit every holder simply converts to common and takes their ownership percentage; the preferences become immaterial. Nobody takes a preference and a share of the upside on the same dollars.

2 · Who owns what (as-converted)

The waterfall runs off these ownership percentages, shown fully diluted after the SAFE converts. The SAFE carries a $73M post-money cap plus a 15% discount (lower of), so the exact percentage is set at the Series A; these tables show conversion at the $73M cap — the floor (~$5.0M = 6.85%; 735,294 new shares on the 10M base). The 15% discount only ever gives the round more (it governs below a ≈$86M Series A — e.g. ~8.1% at a $73M round). The 14% phantom-equity pool is cash-settled and sits off the share table — see the overhang note below.

As-converted ownership · post-SAFE · illustrative
Stakeholder	Class	Cash preference	As-converted %
New investors (this round)	Class A Preferred senior	$5.0M	6.85%
Massey Developments	Class B Preferred junior	$3.2M	4.08%
Kitty Stoneburner / Healing Frequencies	Class B Preferred junior	$1.6M	2.03%
Harry Massey (founder)	Founder Common majority · board control	—	83.21%
Legacy goodwill & employees	Common	—	3.83%
Total		$9.8M	100.00%

The founder's economics sit in common held personally (capital-gains / QSBS-friendly), not in a large preference. Massey Developments' claim is pegged to its $3.2M of actual cost, with its shares priced at the same $73M as this round's cap; the enterprise upside is common, shared with everyone. The founder therefore stands economically behind the new investors on his own invested capital.

3 · The exit waterfall — three scenarios

At each exit value, Class A takes the greater of its $5.0M or its as-converted share; then Class B (Massey $3.2M + Kitty $1.6M) takes the greater of its preference or its as-converted share; whatever remains is split by common ownership. Here is how that resolves at $30M, $150M and $1B.

Scenario A · $30M sale — a small exit
Stakeholder	Takes	Proceeds	% of exit
New investors — Class A	$5.0M preference	$5.00M	16.7%
Massey Developments — Class B	$3.2M preference	$3.20M	10.7%
Kitty / Healing Frequencies — Class B	$1.6M preference	$1.60M	5.3%
Harry Massey — Founder Common	as-converted (of residual)	$19.31M	64.4%
Legacy goodwill & employees — Common	as-converted (of residual)	$0.89M	3.0%
Total		$30.0M	100.0%

At $30M, all three cash preferences bind (each is larger than that holder's as-converted share). $9.8M of invested cash comes off the top and is protected. The founder's common absorbs the shortfall — he takes ~64% of the proceeds rather than his ~83% ownership. New money is made whole first; the founder's own capital ranks behind it.

Scenario B · $150M sale — the preferences have already stopped mattering
Stakeholder	Takes	Proceeds	% of exit
New investors — Class A	as-converted (converts)	$10.27M	6.8%
Massey Developments — Class B	as-converted (converts)	$6.13M	4.1%
Kitty / Healing Frequencies — Class B	as-converted (converts)	$3.05M	2.0%
Harry Massey — Founder Common	as-converted	$124.81M	83.2%
Legacy goodwill & employees — Common	as-converted	$5.74M	3.8%
Total		$150.0M	100.0%

By $150M, every holder's ownership share is worth more than its preference, so everyone converts to common. The waterfall collapses into a clean pro-rata split by ownership. The preferences never pay out — they were downside insurance the Company grew past.

Scenario C · $1B sale — a big exit
Stakeholder	Takes	Proceeds	% of exit
New investors — Class A	as-converted	$68.5M	6.8%
Massey Developments — Class B	as-converted	$40.8M	4.1%
Kitty / Healing Frequencies — Class B	as-converted	$20.3M	2.0%
Harry Massey — Founder Common	as-converted	$832.1M	83.2%
Legacy goodwill & employees — Common	as-converted	$38.3M	3.8%
Total		$1,000M	100.0%

At $1B the combined $9.8M of preferences is a rounding error — everyone is common and simply takes their ownership percentage. This is the case everyone is working toward, and in it the preference structure is invisible.

Where the preferences switch off. A preference only matters below the point where a holder's ownership share is worth more than the cash they put in. Class A converts above roughly a $73M exit (its cap-conversion stake is worth its $5M right at the cap); both Class B holders above roughly $78–79M. Above those points everyone is better off as common. Above those points, the relevant holder is better off as common — so on any healthy exit, the preferences quietly disappear and everyone shares the upside by ownership.

4 · The phantom-equity overhang

Incentives run entirely through a 14% phantom-equity pool — contractual, cash-settled value rights, not shares and not options. Because they are cash-settled, they are paid out of the proceeds on an exit, before the splits above, and are dilution-equivalent to every shareholder. Today 11.5% of Company value is committed in named awards — Hemal Patel 1.0% (vested), Susan Kichuk 5.0% (Board Advisor), Steve McCardell 1.5% and Tony Watson 4.0% — with 2.5% as unallocated headroom up to the 14% cap. In practical terms, each proceeds figure in the tables above should be read as reduced by ~11.5% today (up to ~14% if the pool is fully allocated) to fund those rights — a real cost, disclosed here and in the Disclosure Memorandum rather than buried. The mechanics of the waterfall are unchanged; the pool simply sits ahead of the common split as a cash obligation.

5 · The takeaway

Cash back first, then shared upside. If things go modestly, the money that was actually invested — new investors first, then legacy cash — is returned before the founder sees a dollar of his own capital back, and long before any upside is split. If things go well, everyone converts to common and shares the gain strictly by ownership, with the preferences invisible. There is one preference, it is 1×, it is non-participating, and it protects only real invested cash. No multiples, no stacking, no participation, no double-dip — and the founder stands behind the new money on his own capital.

Confidential. For accredited investors only. Securities offered under Rule 506(c) of Regulation D; accredited status is verified before any subscription is accepted. Percentages and proceeds are illustrative and rounded; the internal split of the founder block between Massey Developments (Class B) and Harry Massey (Founder Common) is subject to definitive documents with counsel and does not change the waterfall mechanics. Ownership percentages derive from the post-SAFE capitalization at the $73M cap ($73M-cap + 15%-discount SAFE; ~$5.0M raised = 6.85% floor; no option pool); a Series A below ~$86M triggers the discount and gives the round more — the actual percentages are set at the Series A. Class A is delivered via SAFE conversion at the next priced round. Company name to be conformed to the name on the Company’s filed Nevada charter. The Charter, the Disclosure Memorandum and the executed SAFE govern.