MEMORANDUM

MEMORANDUM
PRIVILEGED & CONFIDENTIAL ATTORNEY WORK PRODUCT
TO: Rachel Bernstein, Partner, Calderwood & Harkness LLP Christine Aldridge, Partner, Pinnacle Venture Fund II LP Tomas Medina, Vice President, Pinnacle Venture Fund II LP
FROM: Leila Nazari, Lead Associate, Calderwood & Harkness LLP Robert Jansen, Associate, Calderwood & Harkness LLP
DATE: May 6, 2026
RE: Convertible Note Conversion Analysis — Quillen Technologies, Inc. Series A Preferred Stock Financing
Matter No.: 1002-00002
Billing Code: 78412.001
Right-click to update Table of Contents
I. Executive Summary
The purpose of this memorandum is to analyze the mechanics and economic impact of the automatic conversion of Quillen Technologies, Inc.'s (the "Company" or "Quillen") outstanding convertible promissory notes (collectively, the "Notes") upon the closing of the Company's Series A Preferred Stock financing (the "Series A Financing" or the "Series A"). This memorandum has been prepared at the request of Pinnacle Venture Fund II LP ("Pinnacle"), the lead investor in the Series A Financing, to provide Pinnacle and its deal team with a comprehensive understanding of the conversion dynamics, including the applicable conversion price, the number of shares to be issued upon conversion, the resulting dilutive impact on Pinnacle's investment, and the principal open items that should be addressed prior to closing.
As of the date of this memorandum, the Company has an aggregate of $1,500,000 in principal amount of convertible promissory notes outstanding, all of which were issued on March 15, 2024 to three holders: Harborview Angel Syndicate LLC, Caldwell Family Office LLC, and Dr. Lawrence Hu. The Notes bear simple interest at a rate of 6% per annum and were originally scheduled to mature on March 15, 2026. The maturity date was subsequently extended to June 30, 2026 by unanimous consent of all note holders in connection with the anticipated closing of the Series A Financing.
The Notes will convert automatically upon the closing of the Series A Financing, which constitutes a "Qualified Financing" under the terms of the Notes. The conversion price applicable to the Notes is determined by the lower of two formulas: (i) the discount price, calculated as the Series A price per share ($5.00) multiplied by one minus the 20% discount rate, yielding $4.00 per share; and (ii) the valuation cap price, calculated as the $25,000,000 valuation cap divided by the Company's fully-diluted pre-money capitalization of 12,500,000 shares, yielding $2.00 per share. Because the valuation cap price of $2.00 per share is lower than the discount price, the cap price controls and the Notes will convert at $2.00 per share.
Based on an assumed closing date of June 15, 2026, the estimated total conversion amount — consisting of the aggregate principal of $1,500,000 plus estimated accrued simple interest of $202,500 — is $1,702,500. At the conversion price of $2.00 per share, this total conversion amount will result in the issuance of 851,250 shares of Series A Preferred Stock to the note holders upon conversion. These conversion shares are in addition to the 4,500,000 shares of Series A Preferred Stock to be issued to the new-money investors in the Series A Financing (representing $22,500,000 in aggregate investment at $5.00 per share). The conversion shares will represent approximately 5.2% of the Company's fully diluted post-money capitalization.
This memorandum sets forth the detailed calculations supporting the foregoing summary, analyzes the impact of the Note conversion on the post-Series A capitalization and on Pinnacle's ownership position, identifies key transaction document considerations, and recommends specific open items for resolution prior to closing.
II. Background
A. The Convertible Notes
The Company issued a series of convertible promissory notes on March 15, 2024 to the three holders identified in Section II.B below, raising an aggregate of $1,500,000 in bridge financing to fund the Company's operations through the anticipated closing of a preferred stock financing round. The principal terms of the Notes, as set forth in the form of Convertible Promissory Note dated March 15, 2024 (the "Note Purchase Agreement"), are summarized below:
Aggregate Principal Amount: $1,500,000
Date of Issuance: March 15, 2024
Original Maturity Date: March 15, 2026 (twenty-four (24) months from the date of issuance)
Extended Maturity Date: June 30, 2026. The original maturity date was extended pursuant to a unanimous written consent of all note holders executed on or about February 28, 2026, in anticipation of the Series A Financing. The extension agreement did not modify any other material terms of the Notes.
Interest Rate: 6% per annum, calculated on the basis of simple interest (not compounded). Interest accrues from the date of issuance and is payable only upon conversion, maturity, or prepayment.
Conversion discount: 20% discount to the price per share paid by investors in a Qualified Financing (as defined in the Notes). The discount price is therefore calculated as the Qualified Financing price per share multiplied by 0.80.
Valuation Cap: $25,000,000. The valuation cap establishes a ceiling on the effective pre-money valuation at which the Notes may convert, thereby providing the note holders with price protection in the event that the Company's valuation at the time of a Qualified Financing exceeds the cap. The valuation cap price per share is calculated by dividing $25,000,000 by the Company's fully-diluted pre-money capitalization (the "Cap Denominator"), as further discussed in Section III.B below.
Qualified Financing Trigger: The Notes define a "Qualified Financing" as an equity financing in which the Company sells and issues shares of its preferred stock and receives aggregate gross proceeds of at least $5,000,000 (exclusive of the conversion of the Notes themselves). The Series A Financing, with $22,500,000 in new-money proceeds, comfortably satisfies this threshold.
Automatic Conversion: The Notes provide for automatic conversion of all outstanding principal and accrued but unpaid interest into shares of the preferred stock issued in the Qualified Financing, at the applicable conversion price, upon the initial closing of the Qualified Financing. No action on the part of the note holders is required to effect the conversion, and the note holders may not elect to defer or decline conversion upon the occurrence of a Qualified Financing.
Prepayment: The Notes may not be prepaid by the Company without the prior written consent of the holders of a majority of the aggregate outstanding principal amount of the Notes.
Subordination: The Notes are unsecured obligations of the Company and are not subordinated to any other indebtedness. The Company has represented to Pinnacle that the Notes constitute the Company's only outstanding indebtedness as of the date hereof, other than ordinary-course trade payables.
We have reviewed executed copies of each of the three individual Notes and the Note Purchase Agreement. Our review indicates that all three Notes are materially identical in their terms, including the interest rate, discount percentage, valuation cap, Qualified Financing threshold, and conversion mechanics. We have requested confirmation from the Company's counsel, Fenwick, Torres & Keane LLP, that there are no side letters, amendments, or other agreements that modify any of the foregoing terms for any individual note holder.
B. The Note Holders
The following table identifies each holder of the Notes, together with the principal amount held and a brief description of the holder:
We note that Harborview Angel Syndicate LLC is both a note holder and an existing equity holder in the Company by virtue of its 1,500,000 shares of Series Seed Preferred Stock. The implications of Harborview's combined holdings for purposes of post-Series A governance rights (including potential major investor thresholds under the Investors' Rights Agreement) are discussed in Section VI.D below.
C. Series A Financing Terms (for Conversion Reference)
The following summary of the principal terms of the Series A Financing is drawn from the term sheet executed by Pinnacle Venture Fund II LP and the Company on April 1, 2026 (the "Term Sheet"), and is provided here solely for the purpose of establishing the reference points necessary for the conversion analysis. A comprehensive analysis of the Series A terms is set forth in our separate memorandum dated April 18, 2026.
Total Round Size: $22,500,000 in new-money investment
Pre-Money Valuation: $57,500,000
Post-Money Valuation: $80,000,000 (pre-money valuation of $57,500,000 plus $22,500,000 in new-money investment)
Series A Price Per Share: $5.00 per share (calculated as $57,500,000 pre-money valuation divided by 11,500,000 fully diluted pre-money shares, as adjusted for the expanded option pool; note that this differs from the 12,500,000 figure used in the Note conversion cap denominator, as discussed further in Section III.B)
New-Money Investors and Allocations:
Pinnacle Venture Fund II LP — $14,000,000 / 2,800,000 shares (lead investor)
Blackthorn Growth Fund III LP — $6,000,000 / 1,200,000 shares
Stonebridge Ventures LLC — $2,500,000 / 500,000 shares
Total New-Money Shares: 4,500,000 shares of Series A Preferred Stock
Key Economic Terms of Series A Preferred Stock:
•  1x non-participating liquidation preference
•  8% non-cumulative dividends (when, as, and if declared by the Board)
•  Broad-based weighted-average anti-dilution protection
•  Standard protective provisions, including veto rights over specified corporate actions
•  Full voting rights on an as-converted basis
Target Closing Date: June 15, 2026
Company Counsel: Fenwick, Torres & Keane LLP (Gregory Navarro, Partner; Sophie Marchetti, Associate)
Pinnacle Counsel: Calderwood & Harkness LLP (Rachel Bernstein, Partner; Leila Nazari, Lead Associate; Robert Jansen, Associate)
III. Conversion Price Calculation
The Notes provide that upon a Qualified Financing, the outstanding principal and accrued interest under each Note shall convert into shares of the preferred stock issued in the Qualified Financing at a conversion price per share equal to the lower of (i) the discount price and (ii) the valuation cap price. Because the conversion price is defined as the lower of these two alternatives, the formula operates to provide the note holders with the more favorable (i.e., lower) price. We calculate each component below.
A. Discount Price
The discount price is calculated by applying the contractual 20% discount to the price per share paid by the new-money investors in the Qualified Financing:
Formula: discount Price = Series A Price Per Share × (1 − discount Rate)
Calculation: $5.00 × (1 − 0.20) = $5.00 × 0.80 = $4.00 per share
The discount price of $4.00 per share reflects a straightforward 20% reduction from the $5.00 Series A price. At this price, the note holders would receive 1.25x the number of shares per dollar invested relative to the new-money Series A investors (i.e., $5.00 ÷ $4.00 = 1.25x). However, as set forth below, the valuation cap price yields a lower per-share conversion price and therefore supersedes the discount price in this transaction.
B. Valuation Cap Price
The valuation cap price is calculated by dividing the contractual valuation cap by the Company's fully-diluted pre-money capitalization (the "Cap Denominator"):
Formula: Cap Price = Valuation Cap ÷ Fully-Diluted Pre-Money Capitalization (Cap Denominator)
Determination of the Cap Denominator. The Cap Denominator consists of all shares of the Company's capital stock outstanding or reserved immediately prior to the closing of the Series A Financing, calculated on a fully-diluted basis. Based on our review of the Company's capitalization table as of the date hereof (as provided by company counsel on April 22, 2026) and the terms of the Notes, the Cap Denominator is composed of the following:
(i) Outstanding Common Stock: 8,000,000 shares. This includes all shares of common stock held by the Company's founders, employees, and other common stockholders. The principal common stockholders are:
•  Dr. Amara Osei (Co-Founder and Chief Executive Officer): 3,200,000 shares
•  Julian Voss (Co-Founder and Chief Technology Officer): 2,800,000 shares
•  Priya Chandrasekar (Vice President of Engineering): 400,000 shares
•  Other holders (early employees and advisors): 1,600,000 shares (aggregate)
(ii) Outstanding Series Seed Preferred Stock: 2,500,000 shares. The Company completed its Series Seed Preferred Stock financing in October 2023, issuing 2,500,000 shares of Series Seed Preferred Stock at a price of $1.20 per share, raising aggregate gross proceeds of $3,000,000. The Series Seed holders are:
•  Harborview Angel Syndicate LLC: 1,500,000 shares
•  Ridgepoint Seed Partners LP: 1,000,000 shares
For purposes of the Cap Denominator, the Series Seed Preferred Stock is included on an as-converted-to-common-stock basis. The Series Seed Preferred Stock converts into common stock on a 1:1 basis (subject to customary anti-dilution adjustments, none of which have been triggered to date), and therefore 2,500,000 shares are included in the denominator.
(iii) Equity Incentive Plan Pool: 2,000,000 shares. The Company adopted the 2023 Equity Incentive Plan (the "Plan") in October 2023 in connection with the Series Seed financing. The Plan authorizes the issuance of up to 2,000,000 shares of common stock pursuant to stock options, restricted stock awards, and other equity incentive awards. As of the date hereof:
•  Granted and outstanding options: 1,200,000 shares (covering approximately 15 employees and advisors, with varying vesting schedules and exercise prices)
•  Unissued and available for future grant: 800,000 shares
Per the standard terms of the Notes, the full authorized option pool of 2,000,000 shares (including both granted options and unissued shares reserved under the Plan) is included in the Cap Denominator. This treatment is consistent with customary market practice for convertible note valuations caps and serves to increase the denominator, thereby reducing the cap price and providing a more conservative (i.e., higher) effective valuation for the Company for purposes of note conversion.
Total Fully-Diluted Pre-Money Shares (Cap Denominator):
Exclusion of Convertible Notes from Cap Denominator. We note that the Notes themselves — i.e., the shares issuable upon conversion of the Notes — are excluded from the Cap Denominator. The Notes are the converting instruments (effectively the "numerator" in the conversion equation), and including them in the denominator would create a circularity. The Note terms are clear on this point, and we have confirmed this interpretation with company counsel.
Valuation Cap Price Calculation:
$25,000,000 ÷ 12,500,000 shares = $2.00 per share
C. Applicable Conversion Price
The Note terms provide that conversion shall occur at the lower of the discount price and the valuation cap price, as this lower price is more favorable to the note holders and reflects the economic bargain struck at the time the Notes were issued.
•  discount Price: $4.00 per share
•  Valuation Cap Price: $2.00 per share
The valuation cap price of $2.00 per share controls, as it is lower than the discount price and therefore more favorable to the note holders.
It is worth noting the economic significance of this result. The note holders will effectively convert their Notes into Series A Preferred Stock at a price that represents a 60% discount to the $5.00 per share price paid by the new-money Series A investors — substantially more favorable than the contractual 20% discount. This outcome is a direct consequence of the Company's significant valuation appreciation between the date the Notes were issued (March 2024, when the implied valuation cap was $25,000,000) and the date of the Series A Financing (June 2026, when the pre-money valuation is $57,500,000). The valuation cap was designed precisely to protect early note holders against this scenario, ensuring that their effective conversion price would not exceed the cap regardless of how high the Company's valuation might rise at the time of the Qualified Financing.
At the $2.00 conversion price, note holders receive 2.5x the number of shares per dollar invested compared to new-money Series A investors (i.e., $5.00 ÷ $2.00 = 2.5x). This differential is a significant economic benefit to the note holders and a corresponding source of dilution to all other stockholders, including the new-money Series A investors, as discussed further in Section VI below.
IV. Accrued Interest Calculation
Interest on the Notes accrues at a rate of 6% per annum on a simple interest basis from the date of issuance. Under the terms of the Notes, accrued but unpaid interest converts into equity along with the outstanding principal upon a Qualified Financing. No interest payments have been made on the Notes since issuance.
The accrued interest calculation is as follows:
Interest Rate: 6% per annum (simple interest — not compounded)
Principal Amount: $1,500,000 (aggregate)
Interest Accrual Period: March 15, 2024 (date of issuance) through June 15, 2026 (assumed closing date of the Series A Financing)
Duration of Accrual Period: Approximately 27 months, or 27/12 of a year = 2.25 years. More precisely, the period from March 15, 2024 to June 15, 2026 is 822 days (assuming a 365-day year for 2024 — which was a leap year with 366 days — and a 365-day year for both 2025 and 2026; however, for purposes of this analysis, we have used the monthly approximation of 27/12, which is consistent with the typical convention for convertible note interest calculations).
Calculation:
Accrued Interest = Principal × Interest Rate × Time (in years)
Accrued Interest = $1,500,000 × 0.06 × 2.25
Accrued Interest = $1,500,000 × 0.135
Accrued Interest = $202,500
Closing Date Sensitivity. If the closing of the Series A Financing occurs on a date other than June 15, 2026, the accrued interest amount will change accordingly. Each day of delay or advancement relative to the assumed June 15, 2026 closing date adds or subtracts approximately $246.58 in accrued interest, calculated as follows:
Per Diem Interest = $1,500,000 × 0.06 ÷ 365 = $90,000 ÷ 365 ≈ $246.58 per day
A sensitivity table showing the impact of alternative closing dates on accrued interest and total conversion shares is provided in Appendix B to this memorandum.
Interest Calculation Convention. The foregoing calculation assumes a 365-day year convention. As noted in Section VIII (Open Items) below, we recommend confirming with company counsel whether the Notes specify a 365-day year or a 360-day year for purposes of the simple interest calculation. Under a 360-day year convention, the per diem interest would be slightly higher ($250.00 per day versus $246.58), which would result in a marginally higher total conversion amount and a correspondingly greater number of conversion shares. While this difference is not material to the overall economics of the transaction, precision on this point is advisable for purposes of the final conversion calculations at closing.
V. Total Conversion Amount and Share Issuance
A. Aggregate Conversion Amount
Based on the foregoing calculations, the total amount to be converted from debt to equity upon the closing of the Series A Financing is as follows:
B. Shares Issued Upon Conversion
The total number of shares of Series A Preferred Stock to be issued upon conversion of the Notes is calculated by dividing the total conversion amount by the applicable conversion price per share:
Total Conversion Shares = Total Conversion Amount ÷ Conversion Price Per Share
Total Conversion Shares = $1,702,500 ÷ $2.00
Total Conversion Shares = 851,250 shares of Series A Preferred Stock
These conversion shares will be identical in all respects to the shares of Series A Preferred Stock purchased by the new-money investors in the Series A Financing. The conversion shares will carry the same rights, preferences, and privileges as all other outstanding shares of Series A Preferred Stock, including but not limited to:
•  Liquidation Preference: 1x non-participating liquidation preference, as proposed by Pinnacle in the Term Sheet. The aggregate liquidation preference attributable to the conversion shares will be $1,702,500 (i.e., the total conversion amount, which equals the original issue price of $2.00 per share multiplied by 851,250 shares).
•  Dividends: 8% non-cumulative dividends, payable when, as, and if declared by the Board of Directors.
•  Anti-Dilution Protection: Broad-based weighted-average anti-dilution protection, protecting against future issuances of equity at a price below the applicable conversion price.
•  Voting Rights: Full voting rights on an as-converted-to-common-stock basis, including the right to vote together with the common stock on all matters submitted to a vote of the stockholders.
•  Protective Provisions: The right to participate in the protective provision votes reserved to the holders of Series A Preferred Stock as a class.
It is important to note that while the conversion shares carry a 1x liquidation preference based on their original issue price of $2.00 per share, the aggregate liquidation preference attributable to the conversion shares ($1,702,500) is substantially less than the aggregate liquidation preference attributable to the new-money Series A shares ($22,500,000), because the conversion shares were issued at a lower per-share price reflecting the valuation cap discount. This has implications for liquidation waterfall analysis, which is addressed in our separate Series A term sheet memorandum.
C. Allocation Among Note Holders
The following table sets forth the conversion calculation for each individual note holder, assuming a closing date of June 15, 2026:
The accrued interest for each individual note holder is calculated on a pro rata basis, reflecting each holder's proportionate share of the aggregate principal amount:
•  Harborview Angel Syndicate LLC: $750,000 / $1,500,000 = 50.00% × $202,500 = $101,250
•  Caldwell Family Office LLC: $500,000 / $1,500,000 = 33.33% × $202,500 = $67,500
•  Dr. Lawrence Hu: $250,000 / $1,500,000 = 16.67% × $202,500 = $33,750
This pro rata allocation is appropriate because all three Notes were issued on the same date (March 15, 2024) at the same interest rate (6% per annum), with the same conversion terms. We have requested confirmation from Fenwick, Torres & Keane LLP (through Gregory Navarro and Sophie Marchetti) that the Notes are in fact identical in all material terms and that no variations exist that would require individual adjustments to the conversion calculations. If any variations are identified — for example, if one Note was funded on a different date or bears a different interest rate — the individual calculations set forth above may need to be revised accordingly.
We note that the per-holder share allocations at the assumed June 15, 2026 closing date yield numbers at the half-share level (425,625; 283,750; 141,875), and do not give rise to fractional share issues. However, if the closing date shifts, the resulting changes in accrued interest could produce fractional shares. The treatment of fractional shares is addressed in Section VIII (Open Items) below.
VI. Impact on Series A Economics and Capitalization
A. Post-Series A Pro Forma Capitalization (Fully Diluted)
The following table sets forth the Company's estimated pro forma capitalization immediately following the closing of the Series A Financing, on a fully diluted basis (including all outstanding shares, shares issuable upon conversion of the Notes, and shares reserved under the equity incentive plan):
Several clarifying notes regarding the foregoing capitalization table:
Option Pool Expansion. The Term Sheet contemplates an expansion of the Company's equity incentive plan pool from 2,000,000 authorized shares to 3,000,000 authorized shares — an increase of 1,000,000 new shares — to be effected immediately prior to the closing of the Series A Financing. After giving effect to this expansion, the total unissued option pool will consist of 1,800,000 shares (800,000 shares currently unissued under the existing 2,000,000-share pool, plus 1,000,000 newly authorized shares). The dilution resulting from this pool expansion is borne entirely by the pre-Series A stockholders (i.e., the founders, employees, and seed investors), as the expansion is factored into the pre-money valuation and the resulting Series A price per share.
Outstanding Options. The 1,200,000 shares subject to outstanding option grants are included in the "Common Stock" line for purposes of the percentage calculation, as these options represent rights to acquire common stock that are already outstanding and exercisable (subject to vesting). When combined with the 8,000,000 shares of issued and outstanding common stock, the total common-equivalent shares are 9,200,000.
Fully Diluted Methodology. The fully diluted total of 16,251,250 shares includes all outstanding shares (common, seed preferred, and Series A preferred), all shares issuable upon conversion of the Notes, all shares subject to outstanding option grants, and all shares reserved but unissued under the expanded equity incentive plan. If one were to exclude the 1,800,000 unissued option pool shares and count only outstanding shares and shares subject to outstanding grants, the total would be 14,451,250 shares (or 15,651,250 if outstanding options are included separately from common stock). We have used the broader fully diluted figure of 16,251,250, which is the standard convention for Series A capitalization analysis and is consistent with the methodology used in the Term Sheet.
B. Dilutive Effect of Note Conversion
The 851,250 shares of Series A Preferred Stock to be issued upon conversion of the Notes represent approximately 5.2% of the fully diluted post-money capitalization of 16,251,250 shares. This dilution is a significant consideration for all stakeholders in the Series A Financing and warrants careful analysis.
Distribution of Dilution. The dilution attributable to the conversion shares is borne by all stockholders — common stockholders, seed preferred stockholders, and new-money Series A investors alike — rather than being borne solely by any single class of stockholders or by the new-money investors alone. This is because the conversion shares are issued as part of the Series A Preferred Stock class and are factored into the overall post-money capitalization.
Economic Differential. The effective price paid by the note holders upon conversion ($2.00 per share) is substantially lower than the $5.00 per share price paid by the new-money Series A investors. As a result, the note holders receive 2.5x the number of shares per dollar invested compared to the new-money investors. Stated differently, the note holders' $1,702,500 in total conversion amount yields 851,250 shares at $2.00 per share, whereas if the same $1,702,500 were invested at the Series A price of $5.00 per share, it would yield only 340,500 shares. The additional 510,750 shares (851,250 minus 340,500) represent the economic benefit conferred by the valuation cap — in effect, the note holders' reward for having provided early-stage capital to the Company at a time of greater risk and uncertainty.
Treatment of Conversion Shares in Valuation. The conversion of the Notes does not directly affect the pre-money valuation ($57,500,000) or the post-money valuation ($80,000,000) as set forth in the Term Sheet. In standard Series A mechanics, the shares issuable upon conversion of outstanding convertible notes are typically treated as part of the pre-money capitalization — that is, they are included in the fully diluted share count used to calculate the pre-money valuation and the resulting price per share. Under this treatment, the dilution from the conversion shares has already been "priced into" the $5.00 per share Series A price.
However, we note that the specific treatment of conversion shares in the valuation mechanics should be confirmed during the negotiation of the Stock Purchase Agreement with company counsel. There are alternative approaches — for example, some transactions treat conversion shares as "post-money" issuances that reduce the effective post-money valuation available to new-money investors — and clarity on this point is essential to avoid misunderstandings at closing.
C. Pinnacle Ownership Analysis
The following analysis summarizes Pinnacle's post-Series A ownership position in light of the Note conversion:
Pinnacle's Series A Preferred Stock Holdings: 2,800,000 shares
Pinnacle's Percentage of Fully Diluted Post-Money Capitalization:
2,800,000 shares ÷ 16,251,250 total fully diluted shares ≈ 17.2%
Pinnacle's Economic Ownership as a Percentage of Post-Money Valuation:
$14,000,000 invested ÷ $80,000,000 post-money valuation = 17.5%
The modest difference between Pinnacle's share-based ownership (17.2%) and its economic ownership (17.5%) is attributable to the dilutive effect of the Note conversion shares, which are included in the fully diluted share count but were issued at a lower price per share than the Series A price.
Pinnacle's Share of Total Series A Preferred Stock (New Money + Conversion):
2,800,000 shares ÷ (4,500,000 new-money shares + 851,250 conversion shares) = 2,800,000 ÷ 5,351,250 ≈ 52.3%
This figure is relevant for purposes of determining Pinnacle's voting power within the Series A Preferred Stock class, including its ability to control or influence outcomes under the protective provisions and other class-specific governance rights reserved to the holders of Series A Preferred Stock.
D. Note Holder Post-Conversion Positions (Combined Holdings)
Upon conversion of the Notes, each note holder's aggregate equity position in the Company (including any pre-existing equity holdings) will be as follows:
Harborview Angel Syndicate LLC:
•  Series Seed Preferred Stock: 1,500,000 shares (pre-existing)
•  Series A Preferred Stock (note conversion): 425,625 shares
•  Total shares held: 1,925,625
•  Approximate percentage of fully diluted post-money capitalization: 11.8%
Harborview will be one of the largest individual stockholders in the Company following the Series A Financing, trailing only Dr. Amara Osei (3,200,000 shares common, approximately 19.7%) and Pinnacle (2,800,000 shares Series A Preferred, approximately 17.2%). Harborview's combined holdings across two series of preferred stock may have implications for major investor thresholds under the Investors' Rights Agreement and for protective provision voting, depending on how the definitive agreements define "Major Investor" and whether the threshold is based on shares held or dollars invested.
Caldwell Family Office LLC:
•  Series A Preferred Stock (note conversion): 283,750 shares
•  Total shares held: 283,750
•  Approximate percentage of fully diluted post-money capitalization: 1.7%
Caldwell Family Office's holdings are modest relative to the other Series A holders and may fall below the threshold for "Major Investor" status under the Investors' Rights Agreement. If so, Caldwell may not be entitled to information rights, pro rata participation rights, or other investor protections that are typically reserved for major investors. This point should be addressed in the IRA negotiation.
Dr. Lawrence Hu:
•  Series A Preferred Stock (note conversion): 141,875 shares
•  Total shares held: 141,875
•  Approximate percentage of fully diluted post-money capitalization: 0.9%
Dr. Hu's holdings are the smallest of any preferred stockholder. As with Caldwell Family Office, Dr. Hu's holdings may fall below the major investor threshold, and his rights under the Investors' Rights Agreement should be clarified.
VII. Transaction Document Considerations
The automatic conversion of the Notes upon the closing of the Series A Financing implicates several of the definitive transaction documents. Set forth below is a summary of the key document considerations and recommended approaches for each.
A. Stock Purchase Agreement
The Series A Stock Purchase Agreement (the "SPA") should include a clear mechanism for the automatic conversion of the Notes at closing. There are two common approaches to documenting the conversion:
(i) Parallel Conversion Instrument. Under this approach, the conversion of the Notes is documented in a separate instrument (e.g., a Conversion Agreement or a Notice of Conversion) that is executed and delivered at closing contemporaneously with the SPA. The conversion shares are not technically issued "under" the SPA but are issued pursuant to the terms of the Notes themselves, with the Conversion Agreement serving as the implementing instrument. This approach has the advantage of cleanly separating the new-money investment from the debt-to-equity conversion.
(ii) Inclusion in the SPA. Under this approach, the conversion shares are treated as part of the shares issued under the SPA, with the note holders listed as "Investors" on the Schedule of Investors alongside the new-money investors, but with a notation indicating that their shares are being issued upon conversion of the Notes rather than for new cash consideration. This approach has the advantage of consolidating all share issuances into a single instrument.
We recommend discussing the preferred approach with company counsel. In either case, the following items should be addressed in the SPA or its schedules:
•  The Disclosure Schedules to the SPA should include a complete listing of all outstanding convertible notes, including the identity of each note holder, the principal amount, the interest rate, the accrued interest as of the closing date, the discount percentage, the valuation cap, the original and extended maturity dates, and the automatic conversion provisions.
•  The Company's representations and warranties in the SPA should include a representation that the Notes constitute the only outstanding convertible instruments, warrants, or other rights to acquire equity securities of the Company (other than outstanding options under the 2023 Equity Incentive Plan), and that no other convertible debt or equity commitments exist.
•  The SPA should include a closing condition requiring that the Notes have been duly converted (or will be converted simultaneously with the closing) and that no Notes remain outstanding following the closing.
B. Amended and Restated Certificate of Incorporation
The Amended and Restated Certificate of Incorporation (the "Restated Certificate") to be filed with the Delaware Secretary of State at or immediately prior to closing must authorize a sufficient number of shares of Series A Preferred Stock to cover both the new-money issuance and the conversion issuance. Specifically:
•  New-money shares: 4,500,000
•  Conversion shares: 851,250
•  Total Series A Preferred Stock to be authorized: at least 5,351,250 shares
We recommend authorizing a modest buffer above 5,351,250 shares to account for any adjustments to the conversion share count that may result from changes in the closing date (and therefore the accrued interest amount) or from rounding of fractional shares. A round number such as 5,500,000 authorized shares of Series A Preferred Stock would provide adequate flexibility. This recommendation should be coordinated with company counsel.
C. Note Cancellation
Upon conversion, the original promissory notes should be cancelled and either marked "Converted — [Date]" or physically surrendered to the Company for cancellation. The cancellation of the Notes is a ministerial but important step in ensuring a clean capitalization table following the closing. The following coordination steps should be taken:
•  Harborview Angel Syndicate LLC (note principal: $750,000): Coordinate with Peggy Dunlap (Managing Member) for delivery of the original Note or a lost note affidavit. Given that Harborview is also a seed investor, this coordination may be handled through Harborview's existing relationship with company counsel.
•  Caldwell Family Office LLC (note principal: $500,000): Coordinate with Nathan Caldwell (Principal) for delivery of the original Note or a lost note affidavit.
•  Dr. Lawrence Hu (note principal: $250,000): Coordinate directly with Dr. Hu or through company counsel for delivery of the original Note or a lost note affidavit.
Each note holder should also execute a Conversion Acknowledgment confirming the principal amount, accrued interest, total conversion amount, conversion price, and number of shares received, and acknowledging the cancellation of the Note and the release of all claims thereunder.
D. Investors' Rights Agreement / Voting Agreement / ROFR and Co-Sale Agreement
Upon conversion of the Notes into Series A Preferred Stock, the note holders will become holders of Series A Preferred Stock and will therefore become parties to the ancillary agreements entered into in connection with the Series A Financing, including:
(i) Investors' Rights Agreement (IRA). The note holders should be added as "Investors" (or "Holders") under the IRA. Standard practice is to include converting note holders on the same basis as new-money Series A investors for purposes of the rights and obligations set forth in the IRA. However, the following specific points should be confirmed:
•  Pro Rata Rights: Confirm whether the note holders will be entitled to participate in future financings on a pro rata basis, and whether this right is subject to a minimum holdings threshold (e.g., a "Major Investor" threshold of 250,000 or 500,000 shares of Series A Preferred Stock). If the Major Investor threshold is set at 250,000 shares, Harborview (425,625 shares) and Caldwell (283,750 shares) would qualify, while Dr. Hu (141,875 shares) would not.
•  Information Rights: Confirm whether the note holders will receive financial statements, board observer rights, and other information rights under the IRA.
•  Registration Rights: Confirm whether the conversion shares will be "Registrable Securities" under the IRA, entitling the note holders to participate in any future registration of the Company's securities.
(ii) Voting Agreement. The note holders should become parties to the Voting Agreement, which will set forth the board composition requirements, drag-along obligations, and other voting commitments applicable to the Series A Preferred stockholders. Confirm that the note holders will be bound by the drag-along provisions on the same terms as the new-money investors.
(iii) Right of First Refusal and Co-Sale Agreement (ROFR). The note holders should become parties to the ROFR and Co-Sale Agreement, which will impose transfer restrictions on the Series A Preferred Stock and provide other holders with rights of first refusal and co-sale rights in connection with certain transfers. This is standard for all Series A holders.
VIII. Open Items and Recommendations
Based on our analysis, we have identified the following open items that should be resolved prior to the closing of the Series A Financing. We recommend that these items be raised with company counsel (Gregory Navarro and Sophie Marchetti at Fenwick, Torres & Keane LLP) and, where applicable, with the note holders, as promptly as practicable.
1. Confirm Cap Denominator Calculation with Company Counsel. We recommend requesting written confirmation from Fenwick, Torres & Keane LLP that the fully-diluted pre-money share count of 12,500,000 shares is consistent with the Note terms' definition of "Company Capitalization" (or the equivalent defined term used in the Notes). In particular, we should confirm the treatment of the full equity incentive plan pool (2,000,000 shares, including 800,000 shares that are authorized but unissued and not subject to outstanding awards) in the Cap Denominator. While the inclusion of the full pool is standard market practice, the specific Note terms should be reviewed to ensure consistency. We should also confirm that no additional shares (e.g., shares subject to outstanding warrants or other convertible instruments that we are not aware of) should be included in the denominator.
2. Verify Interest Calculation Convention. We recommend confirming whether the Notes specify a 365-day year or a 360-day year for purposes of the simple interest calculation. Our analysis above assumes a 365-day year convention, which is the more common convention for convertible notes in the venture capital context. If the Notes use a 360-day year convention, the per diem interest would be $250.00 per day (rather than $246.58), and the total accrued interest at a June 15, 2026 closing would be slightly higher. While this difference is not material, accuracy on this point is important for the final conversion calculations.
3. Closing Date Sensitivity. If the closing of the Series A Financing occurs later than the assumed date of June 15, 2026 (but before the extended maturity date of June 30, 2026), the accrued interest will increase and additional conversion shares may result. We recommend preparing a per diem interest schedule and a corresponding share issuance schedule for each potential closing date between June 1 and June 30, 2026. A preliminary version of this schedule is included as Appendix B to this memorandum.
4. Fractional Shares. We recommend confirming the treatment of fractional shares under the Note terms. The typical convention is to round fractional shares down to the nearest whole share, with the Company paying cash for the fractional remainder, or alternatively, to round to the nearest whole share (up or down). In the present case, the per-holder share allocations at the assumed June 15, 2026 closing date yield numbers at the half-share level (425,625; 283,750; 141,875), which do not raise a fractional share issue. However, if the closing date changes — and with it the accrued interest amount — the resulting share calculations may produce fractional shares, and the applicable rounding convention should be established in advance.
5. Authorized Share Count. We recommend ensuring that the Amended and Restated Certificate of Incorporation authorizes at least 5,351,250 shares of Series A Preferred Stock (4,500,000 new-money shares plus 851,250 conversion shares), with a recommended buffer to 5,500,000 shares or such higher number as may be appropriate to accommodate potential adjustments. This point should be coordinated with company counsel in the drafting of the Restated Certificate.
6. Tax Implications of Conversion. The conversion of the Notes into Series A Preferred Stock is generally treated as a tax-free exchange under the principles of IRC § 1036 (pertaining to exchanges of securities of the same corporation), as the conversion represents a debt-to-equity conversion in the same corporate issuer. However, the accrued interest component of the conversion ($202,500 in the aggregate) may be treated as ordinary income to the note holders at the time of conversion, to the extent the accrued interest is deemed to be "paid" through the issuance of equity. We recommend flagging this issue for company counsel, who should in turn advise the note holders and their individual tax advisors of the potential tax treatment. The Company may also have withholding or reporting obligations with respect to the interest component.
7. QSBS Considerations. The Series A Preferred Stock issued upon conversion of the Notes should qualify as "qualified small business stock" (QSBS) under IRC § 1202 on the same basis as the shares issued to the new-money investors, subject to the holder-level eligibility requirements analyzed in our separate QSBS memorandum dated April 14, 2026. Two specific points warrant attention in the context of the note conversion:
•  Cost Basis. The conversion shares' cost basis for QSBS purposes will be the total conversion amount (i.e., the principal plus accrued interest allocated to each share), which equates to $2.00 per share. This cost basis determines the amount of gain eligible for exclusion under IRC § 1202.
•  Holding Period. The holding period for the conversion shares begins at the date of conversion (i.e., the closing date of the Series A Financing), not at the date of original issuance of the Notes. This is a critical distinction, as the five-year holding period requirement under IRC § 1202 must be satisfied from the conversion date. Note holders should be advised that the QSBS holding period clock does not begin until the equity is issued, notwithstanding the earlier issuance of the Notes.
8. Wire / Funds Flow. No cash changes hands in connection with the conversion of the Notes — the conversion is a cashless exchange of the Company's outstanding indebtedness for newly issued equity. The funds flow memorandum prepared in connection with the closing of the Series A Financing should clearly reflect this by indicating that the conversion shares are issued in satisfaction of the Notes and that no wire transfer or other cash payment is required from or to the note holders. This will avoid confusion at closing and ensure that the funds flow reconciles properly with the total shares being issued.
IX. Conclusion
Based on our analysis, the mechanics and economics of the automatic conversion of the Company's outstanding convertible promissory notes upon the closing of the Series A Preferred Stock financing may be summarized as follows:
The outstanding convertible notes — with an aggregate principal of $1,500,000 and estimated accrued interest of $202,500, for a total conversion amount of $1,702,500 — will convert automatically into 851,250 shares of Series A Preferred Stock at a conversion price of $2.00 per share (the valuation cap price) upon the closing of the Series A Financing.
The conversion is economically favorable to the note holders, who receive an effective 60% discount to the $5.00 per share Series A price, resulting in 2.5x the shares per dollar invested compared to the new-money Series A investors. This discount is driven by the valuation cap of $25,000,000, which is substantially below the Company's $57,500,000 pre-money valuation in the Series A.
The conversion shares represent approximately 5.2% of the Company's fully diluted post-money capitalization of 16,251,250 shares. Pinnacle's 2,800,000 shares represent approximately 17.2% of the fully diluted post-money capitalization, and Pinnacle holds approximately 52.3% of the total outstanding Series A Preferred Stock (new money and conversion shares combined).
We recommend coordinating promptly with Fenwick, Torres & Keane LLP to:
(a) confirm the Cap Denominator calculation (12,500,000 shares) is consistent with the Note terms' definition of the relevant capitalization measure;
(b) verify the interest calculation convention (365-day vs. 360-day year);
(c) confirm the fractional share treatment under the Notes; and
(d) ensure that all conversion mechanics — including the authorized share count, Note cancellation procedures, and joinder of note holders to the ancillary transaction documents — are accurately reflected in the definitive transaction documents.
We are available to discuss this analysis at your convenience and to prepare updated calculations as additional information becomes available or if the closing date changes.
Appendix A — Conversion Calculation Detail (Tabular)
The following table provides a step-by-step breakdown of the conversion calculations for each note holder, incorporating all inputs discussed in the body of this memorandum. All calculations assume a closing date of June 15, 2026.
Step 1: Principal and Interest Calculation
Step 2: Conversion Price Determination
Step 3: Share Issuance Calculation
Summary Totals.  
Appendix B — Sensitivity Table: Closing Date Variations
The following table illustrates the impact of alternative closing dates on the total accrued interest and the total number of shares of Series A Preferred Stock to be issued upon conversion of the Notes. The table covers the period from June 1, 2026 through June 30, 2026 (the extended maturity date of the Notes).
Assumptions:
•  Aggregate principal: $1,500,000
•  Interest rate: 6% per annum, simple interest
•  Interest accrual start date: March 15, 2024
•  Day count convention: 365-day year
•  Per diem interest: $1,500,000 × 6% ÷ 365 = $90,000 ÷ 365 ≈ $246.58 per day
•  Conversion price: $2.00 per share (valuation cap price; constant regardless of closing date)
Notes to Appendix B:
(1) The "Total Conversion Shares" column reflects the total shares prior to any rounding for fractional shares. The applicable fractional share treatment under the Note terms should be confirmed, as discussed in Section VIII.4 of this memorandum.
(2) The precise day count from March 15, 2024 to each closing date is calculated inclusive of the closing date. 2024 was a leap year (366 days), which has been taken into account in the day count. The accrued interest figures in this table reflect a more precise calculation using actual days elapsed divided by 365, rather than the monthly approximation (27/12 = 2.25 years) used in the body of this memorandum. Accordingly, the figures in this table may differ slightly from the rounded figures presented in the body of the memorandum. For the June 15, 2026 closing date, the precise day-count calculation yields $202,520.55 in accrued interest (822 days ÷ 365 × 6% × $1,500,000), compared to the $202,500 figure used in the body of the memorandum based on the 27/12 monthly approximation. The difference of $20.55 is de minimis and results in an immaterial difference in the number of conversion shares (851,260 shares under the precise calculation versus 851,250 shares under the monthly approximation). The final conversion calculations at closing should use the precise day-count method.
(3) Each day of delay beyond June 15, 2026 adds approximately $246.58 in accrued interest and approximately 123 additional shares of Series A Preferred Stock (at the $2.00 conversion price).
(4) If the Series A Financing does not close by June 30, 2026 (the extended maturity date), the Notes will become due and payable at maturity, and the automatic conversion provisions will no longer apply absent a further extension of the maturity date by the note holders.
This memorandum has been prepared by Calderwood & Harkness LLP for the sole use of Pinnacle Venture Fund II LP and its authorized representatives in connection with the Series A Preferred Stock Financing of Quillen Technologies, Inc. This memorandum is protected by the attorney-client privilege and the attorney work product doctrine. It is not intended to be, and should not be, relied upon by any third party. The analysis set forth herein is based on information available as of the date hereof and is subject to revision as additional information becomes available or as transaction terms are modified.
Note Holder | Principal Amount | Entity Type / Description
Harborview Angel Syndicate LLC | $750,000 | Massachusetts limited liability company. Also holds 1,500,000 shares of Series Seed Preferred Stock (representing 60% of the outstanding Series Seed Preferred). Managing Member: Margaret "Peggy" Dunlap. Harborview is an organized angel syndicate that has participated in several early-stage financings in the Boston and New York markets.
Caldwell Family Office LLC | $500,000 | Connecticut limited liability company. Principal: Nathan Caldwell. Caldwell Family Office is a single-family office that invests in early-stage technology companies, typically at the seed and bridge stages. This is Caldwell's first investment in Quillen.
Dr. Lawrence Hu | $250,000 | Individual angel investor residing in California. Former Chief Investment Officer of the Camberwell Municipal Pension Fund (Tidewater Workers' Pension Fund). Dr. Hu is an individual accredited investor and has no other equity holdings in the Company.
Total | $1,500,000
Component | Shares
Outstanding Common Stock | 8,000,000
Outstanding Series Seed Preferred Stock (as-converted) | 2,500,000
Equity Incentive Plan Pool (full authorized pool) | 2,000,000
Total Cap Denominator | 12,500,000
Component | Amount
Aggregate Principal | $1,500,000
Estimated Accrued Interest (through June 15, 2026) | $202,500
Total Conversion Amount | $1,702,500
Note Holder | Principal | Accrued Interest (Est.) | Total Conversion Amount | Conversion Price | Shares Issued
Harborview Angel Syndicate LLC | $750,000 | $101,250 | $851,250 | $2.00 | 425,625
Caldwell Family Office LLC | $500,000 | $67,500 | $567,500 | $2.00 | 283,750
Dr. Lawrence Hu | $250,000 | $33,750 | $283,750 | $2.00 | 141,875
Total | $1,500,000 | $202,500 | $1,702,500 | $2.00 | 851,250
Category | Shares | Approx. % (Fully Diluted)
Common Stock (Founders & Employees) | 8,000,000 | 49.2%
Series Seed Preferred Stock | 2,500,000 | 15.4%
Series A Preferred Stock (new money) | 4,500,000 | 27.7%
Series A Preferred Stock (note conversion) | 851,250 | 5.2%
Outstanding Options (granted under 2023 Plan) | 1,200,000 | Included in Common for dilution purposes
Unissued Option Pool (post-expansion) | 1,800,000 | Reserved; included in fully diluted total
Fully Diluted Total | 16,251,250 | 100%
Note Holder | Principal | Interest Rate | Accrual Period (Months) | Accrual Period (Years) | Accrued Interest | Total Conversion Amount
Harborview Angel Syndicate LLC | $750,000 | 6.00% | 27 | 2.25 | $101,250 | $851,250
Caldwell Family Office LLC | $500,000 | 6.00% | 27 | 2.25 | $67,500 | $567,500
Dr. Lawrence Hu | $250,000 | 6.00% | 27 | 2.25 | $33,750 | $283,750
Total | $1,500,000 | $202,500 | $1,702,500
Parameter | Value
Series A Price Per Share | $5.00
Contractual discount Rate | 20%
discount Price (= $5.00 × 0.80) | $4.00
Valuation Cap | $25,000,000
Fully-Diluted Pre-Money Shares (Cap Denominator) | 12,500,000
Cap Price (= $25,000,000 ÷ 12,500,000) | $2.00
Conversion Price (lower of discount Price and Cap Price) | $2.00
Note Holder | Total Conversion Amount | Conversion Price | Shares of Series A Preferred Stock Issued
Harborview Angel Syndicate LLC | $851,250 | $2.00 | 425,625
Caldwell Family Office LLC | $567,500 | $2.00 | 283,750
Dr. Lawrence Hu | $283,750 | $2.00 | 141,875
Total | $1,702,500 | $2.00 | 851,250
Metric | Amount
Aggregate Principal Converting | $1,500,000
Aggregate Accrued Interest Converting | $202,500
Total Conversion Amount | $1,702,500
Applicable Conversion Price Per Share | $2.00
Total Conversion Shares Issued | 851,250
Effective discount to Series A Price | 60%
Share Multiple vs. New-Money Investors | 2.5x
Closing Date | Days from Issuance | Total Accrued Interest | Total Conversion Amount | Total Conversion Shares
June 1, 2026 | 808 | $199,068.49 | $1,699,068.49 | 849,534
June 2, 2026 | 809 | $199,315.07 | $1,699,315.07 | 849,658
June 3, 2026 | 810 | $199,561.64 | $1,699,561.64 | 849,781
June 4, 2026 | 811 | $199,808.22 | $1,699,808.22 | 849,904
June 5, 2026 | 812 | $200,054.79 | $1,700,054.79 | 850,027
June 6, 2026 | 813 | $200,301.37 | $1,700,301.37 | 850,151
June 7, 2026 | 814 | $200,547.95 | $1,700,547.95 | 850,274
June 8, 2026 | 815 | $200,794.52 | $1,700,794.52 | 850,397
June 9, 2026 | 816 | $201,041.10 | $1,701,041.10 | 850,521
June 10, 2026 | 817 | $201,287.67 | $1,701,287.67 | 850,644
June 11, 2026 | 818 | $201,534.25 | $1,701,534.25 | 850,767
June 12, 2026 | 819 | $201,780.82 | $1,701,780.82 | 850,890
June 13, 2026 | 820 | $202,027.40 | $1,702,027.40 | 851,014
June 14, 2026 | 821 | $202,273.97 | $1,702,273.97 | 851,137
June 15, 2026 | 822 | $202,520.55 | $1,702,520.55 | 851,260
June 16, 2026 | 823 | $202,767.12 | $1,702,767.12 | 851,384
June 17, 2026 | 824 | $203,013.70 | $1,703,013.70 | 851,507
June 18, 2026 | 825 | $203,260.27 | $1,703,260.27 | 851,630
June 19, 2026 | 826 | $203,506.85 | $1,703,506.85 | 851,753
June 20, 2026 | 827 | $203,753.42 | $1,703,753.42 | 851,877
June 21, 2026 | 828 | $204,000.00 | $1,704,000.00 | 852,000
June 22, 2026 | 829 | $204,246.58 | $1,704,246.58 | 852,123
June 23, 2026 | 830 | $204,493.15 | $1,704,493.15 | 852,247
June 24, 2026 | 831 | $204,739.73 | $1,704,739.73 | 852,370
June 25, 2026 | 832 | $204,986.30 | $1,704,986.30 | 852,493
June 26, 2026 | 833 | $205,232.88 | $1,705,232.88 | 852,616
June 27, 2026 | 834 | $205,479.45 | $1,705,479.45 | 852,740
June 28, 2026 | 835 | $205,726.03 | $1,705,726.03 | 852,863
June 29, 2026 | 836 | $205,972.60 | $1,705,972.60 | 852,986
June 30, 2026 | 837 | $206,219.18 | $1,706,219.18 | 853,110