“Broad-Based Weighted-Average Anti-Dilution Protection” is the most common type of Anti-Dilution Protection given to a Preferred Stock Investor to protect it from Equity Ownership Dilution in connection with the issuance of additional shares of Capital Stock in future financings. The formula for Broad-Based Weighted-Average Anti-Dilution Protection adjusts the Conversion Ratio at which shares of the applicable series of Preferred Stock will convert into shares of Common Stock (initially at a one-to-one ratio), such that one share of Preferred Stock then will convert into more shares of Common Stock.

The Anti-Dilution Adjustment for Broad-Based Weighted-Average Anti-Dilution Protection is often triggered when there is a Down-Round Financing and new shares of Capital Stock are issued at a price below the price that Investors paid for their shares of Preferred Stock. The calculation of this Anti-Dilution Adjustment is technical and complicated, so it is best to involve the assistance of experienced Startup attorneys or financial advisors.