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MEMORANDUM

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION

This memorandum constitutes a privileged and confidential attorney-client communication prepared by Calderwood & Harkness LLP for the exclusive use of Genome Dx Therapeutics Inc. This communication is protected by the attorney-client privilege and the work product doctrine. Any unauthorized disclosure, distribution, or copying of this memorandum, or its contents, is strictly prohibited.

I. Executive Summary

This memorandum analyzes the impact of the Genome Dx Therapeutics Inc. ("GDT") board of directors' May 22, 2024 resolution to defer the commercial launch of OncoPrecise GXP-47 indefinitely on GDT's compliance with the milestone covenant set forth in Section 7.14 of the Revolving Facility Credit Agreement (the "Credit Agreement") between GDT and Pacific Coast National Bank ("PCNB"), dated September 22, 2023. The board's decision, prompted by inconclusive interim results from the CLARITY-LUNG pivotal trial, effectively suspends the regulatory and reimbursement pathway that was the predicate for satisfying the milestone covenant within its stated timeline.

Our principal conclusion is that the deferral creates a material risk that GDT will be unable to satisfy the milestone covenant by the December 31, 2024 testing date. The central interpretive question is whether the existing Local Coverage Determination ("LCD") for OncoPrecise GXP-12 — specifically, LCD L38472, effective August 15, 2021, issued by Cascade Fiscal Intermediaries, LLC — constitutes an "obtain[ed]" Medicare coverage determination within the meaning of the covenant. As we analyze in detail below, while a colorable textual argument can be made that the GXP-12 LCD satisfies the covenant's requirements, the balance of interpretive considerations — including the future-tense construction of the operative language, the purposive context of the covenant, and the likely position of the lender — strongly suggests that PCNB would not accept the existing GXP-12 LCD as fulfilling Section 7.14.

As of May 2024, GDT has an outstanding draw of $9,200,000 against the $15,000,000 total revolving facility. The covenant includes a 90-day cure period, meaning that a breach as of the December 31, 2024 testing date would not ripen into an event of default until March 31, 2025, absent a cure during that period. Nevertheless, even accounting for the cure period, the timeline for obtaining a new Medicare coverage determination for OncoPrecise GXP-47 — or any other GDT product — is not feasible before March 31, 2025, given the revised CLARITY-LUNG trial data readout projections and standard LCD processing timelines.

Accordingly, we recommend that GDT take the following actions:

• Proactively engage PCNB — through Thomas Becerra, Relationship Manager — to discuss a potential covenant waiver or amendment before year-end, rather than allowing the covenant testing date to pass without advance notice or engagement.

• Coordinate with GDT's regular outside counsel, Whitford & Sable LLP (Harrison Whitford), to review the full Credit Agreement for related provisions (including notice obligations, cross-default clauses, and material adverse change provisions) and to lead any covenant waiver or amendment negotiations with PCNB.

• Preserve the GXP-12 LCD satisfaction argument as a negotiating position to support waiver discussions, while recognizing its limitations as a standalone compliance argument.

• Brief the GDT board of directors on the covenant risk at the earliest available board meeting, and ensure that GDT's financial advisor (Verdant Life Sciences Capital) and auditor (Summit Ridge Accounting Group, LLP) are made aware of the potential implications for financial planning and FY2024 disclosures.

The balance of this memorandum sets forth the factual background, detailed legal analysis, timeline considerations, and strategic recommendations supporting these conclusions.

II. Background

A. The Revolving Facility

On September 22, 2023, GDT entered into a Revolving Facility Credit Agreement with PCNB (Credit Agreement Reference: PCNB-GDT-RF-2023-0922). The key terms of the facility are as follows:

Borrower: Genome Dx Therapeutics Inc. (EIN: 83-2947156), a Delaware corporation with its principal office located at 4720 Torrey Pines Road, Suite 300, San Diego, CA 92130.

Lender: Pacific Coast National Bank, a nationally chartered banking institution with its principal office located at 633 West 5th Street, 18th Floor, Los Angeles, CA 90071.

Total Facility Amount: $15,000,000.

Maturity Date: September 22, 2026 (three-year term from execution).

Interest Rate: Secured Overnight Financing Rate ("SOFR") plus 3.75% (floating), adjusted and payable quarterly in accordance with the Credit Agreement's interest provisions.

Security: The facility is secured by a first-priority security interest in GDT's intellectual property, including fourteen (14) issued U.S. patents and seven (7) pending patent applications related to the OncoPrecise diagnostic platform, as well as GDT's accounts receivable. The security interest is documented in a separate Security Agreement executed contemporaneously with the Credit Agreement.

Current Outstanding Draw: As of the date of this memorandum, GDT has drawn $9,200,000 against the $15,000,000 facility, leaving $5,800,000 in available but undrawn capacity. GDT is current on all interest payments due under the Credit Agreement.

Relationship Manager at PCNB: Thomas Becerra, Vice President, Healthcare & Life Sciences Lending Group.

The facility was structured as a revolving credit facility to provide GDT with working capital flexibility during the commercialization phase of its OncoPrecise product platform. At the time of execution, GDT's primary commercial product was OncoPrecise GXP-12, and its principal pipeline product was OncoPrecise GXP-47, which was entering pivotal clinical trials with a projected commercial launch in 2024.

B. The Milestone Covenant — Section 7.14

Section 7.14 of the Credit Agreement contains a milestone covenant that establishes a performance-based condition tied to GDT's Medicare reimbursement trajectory. The operative language of Section 7.14 provides, in relevant part:

"Borrower shall, on or before December 31, 2024, obtain a final Medicare coverage determination (whether by LCD, NCD, or equivalent published coverage policy) for at least one proprietary laboratory-developed test developed by Borrower."

The critical elements of this covenant are as follows:

Obligation: GDT is required to "obtain" a "final Medicare coverage determination." The covenant specifies that the determination may take the form of a Local Coverage Determination (LCD), National Coverage Determination (NCD), or an "equivalent published coverage policy." The use of the disjunctive "whether by LCD, NCD, or equivalent published coverage policy" provides flexibility as to the form of the coverage determination but does not relax the requirement that the determination be "final" and constitute a "Medicare coverage determination."

Qualifying Product: The coverage determination must be for "at least one proprietary laboratory-developed test developed by Borrower." This language requires that the test be both (i) proprietary to GDT and (ii) a laboratory-developed test ("LDT") developed by GDT. The covenant does not identify any specific product by name.

Testing Date: December 31, 2024. The covenant is measured as of this date, meaning GDT must have "obtain[ed]" the qualifying coverage determination on or before this date.

Cure Period: The Credit Agreement provides a 90-day cure period following the covenant testing date. Accordingly, a failure to satisfy Section 7.14 as of December 31, 2024 would not ripen into an event of default until March 31, 2025, provided that GDT does not cure the breach during that 90-day window.

Consequences of Breach (After Cure Period): If GDT fails to satisfy the milestone covenant and the cure period expires without a cure, the failure constitutes an event of default under the Credit Agreement. Upon an event of default, PCNB is entitled to: (a) declare the entire outstanding principal balance, together with all accrued and unpaid interest, immediately due and payable; (b) terminate the revolving credit facility and any further commitment to extend credit; and (c) exercise all remedies available under the Credit Agreement and the related Security Agreement, including foreclosure on and disposition of the collateral (GDT's intellectual property and accounts receivable).

C. OncoPrecise GXP-47 Launch Deferral

On May 22, 2024, GDT's board of directors adopted a resolution to defer the commercial launch of OncoPrecise GXP-47 indefinitely. OncoPrecise GXP-47 is a 47-gene expression panel designed for non-small cell lung cancer ("NSCLC") treatment response prediction, and was GDT's principal pipeline product at the time the Credit Agreement was executed. The board's resolution followed a series of developments that called into question the test's near-term clinical and commercial viability:

CLARITY-LUNG Trial Interim Results. On March 29, 2024, interim results were released from the CLARITY-LUNG pivotal validation trial (ClinicalTrials.gov Identifier: NCT05891247). The interim analysis revealed that OncoPrecise GXP-47's performance fell below pre-specified performance benchmarks: the positive predictive value ("PPV") was measured at 0.68 against a pre-specified target of ≥ 0.75, and the negative predictive value ("NPV") was measured at 0.71 against a pre-specified target of ≥ 0.80. While these results were characterized as "inconclusive" rather than definitively negative, they represented a material shortfall from the performance thresholds that would have been necessary to support a Medicare coverage determination application.

DSMB Recommendation. On April 5, 2024, the Data Safety Monitoring Board ("DSMB") for the CLARITY-LUNG trial, chaired by Dr. Evelyn Matsuda of the Carrington Cancer Institute, met to review the interim data. The DSMB recommended continuing enrollment in the trial but formally characterized the interim results as "inconclusive and below pre-specified performance benchmarks." The DSMB did not recommend termination of the trial, but its assessment confirmed that the data as then available would not support a coverage determination submission.

Pinnacle Health Ventures Recommendation. On May 17, 2024, Pinnacle Health Ventures ("PHV"), GDT's lead institutional investor, formally recommended deferral of the OncoPrecise GXP-47 commercial launch. The recommendation was communicated by Elena Marchetti, Partner at PHV and a member of GDT's board of directors. PHV's recommendation was based on its assessment that the clinical data profile was insufficient to support a credible Medicare coverage strategy, and that proceeding with a premature launch could damage GDT's reputation with payers and jeopardize long-term reimbursement prospects.

Board Resolution. Following the PHV recommendation, GDT's board of directors adopted the May 22, 2024 resolution deferring the commercial launch indefinitely. The revised final data readout for the CLARITY-LUNG trial is now projected for Q2 2025, and any decision to resume commercial launch activities will be contingent upon satisfactory final trial results.

Impact on Calderwood & Harkness Engagement. As a direct result of the board's deferral decision, Calderwood & Harkness LLP's engagement to pursue Medicare coverage and coding for OncoPrecise GXP-47 has been wound down, with matter closure effective June 3, 2024. At the time of wind-down, the following activities had been in progress but were not completed:

• The draft Proprietary Laboratory Analyses ("PLA") code application for OncoPrecise GXP-47 had been prepared but was never submitted to the American Medical Association ("AMA"). The next available submission deadline for the AMA CPT Editorial Panel is June 28, 2024; that deadline will pass without a submission.

• No LCD application for OncoPrecise GXP-47 was filed with Cascade Fiscal Intermediaries, LLC ("CFI"), the Medicare Administrative Contractor for GDT's jurisdiction.

• No MolDx technical assessment submission was made to Ridgeline Administrative Services, the MolDx program administrator. The technical assessment dossier was in early-stage preparation.

• The overall coverage strategy timeline had targeted an LCD filing in August 2024 at the earliest, with LCD issuance projected for Q2–Q3 2025 under normal processing timelines.

The deferral of the GXP-47 launch effectively eliminates any realistic pathway to obtaining a new Medicare coverage determination for OncoPrecise GXP-47 within the timeframe established by Section 7.14 of the Credit Agreement.

D. OncoPrecise GXP-12 — Existing Medicare Coverage

GDT's existing commercial product, OncoPrecise GXP-12, is a 12-gene expression panel used in early-stage breast cancer prognosis and treatment decision-making. OncoPrecise GXP-12 is GDT's only commercially available product and its sole source of revenue.

OncoPrecise GXP-12 is reimbursed under an existing Local Coverage Determination: LCD L38472, which was issued by Cascade Fiscal Intermediaries, LLC ("CFI") and became effective on August 15, 2021. The LCD establishes Medicare coverage criteria for OncoPrecise GXP-12 when used in accordance with specified clinical indications and patient populations. The LCD remains in full force and effect as of the date of this memorandum; it has not been retired, revised, or subjected to a reconsideration process by CFI.

For GDT's fiscal year ended December 31, 2023, OncoPrecise GXP-12 generated approximately $6,200,000 in revenue. This was GDT's only source of revenue for FY2023. GDT continues to bill and receive Medicare reimbursement for OncoPrecise GXP-12 claims submitted under LCD L38472.

Critically, the GXP-12 LCD was obtained more than two years prior to the execution of the PCNB Credit Agreement on September 22, 2023. At the time the Credit Agreement was negotiated and executed, PCNB would have been aware of the existing GXP-12 LCD and the associated revenue stream, as these facts would have been reflected in GDT's financial statements, business plan materials, and loan underwriting documentation provided to PCNB during the credit approval process. This chronological fact is central to the interpretive analysis of Section 7.14, as discussed in Part III below.

III. Legal Analysis of the Milestone Covenant

A. Threshold Question: Does the Existing GXP-12 LCD Satisfy Section 7.14?

The core interpretive question presented by the GXP-47 launch deferral is whether Section 7.14's requirement that GDT "obtain a final Medicare coverage determination... for at least one proprietary laboratory-developed test developed by Borrower" can be satisfied by reference to the pre-existing LCD for OncoPrecise GXP-12 (LCD L38472), or whether the covenant requires GDT to procure a new coverage determination during the term of the Credit Agreement.

This question is one of contract interpretation. Under California law, which governs the Credit Agreement pursuant to its choice-of-law provision, a contract must be interpreted to give effect to the mutual intention of the parties at the time of contracting, insofar as that intention can be ascertained and is lawful. See Cal. Civ. Code § 1636. When the language of a contract is clear and explicit, it governs. See Cal. Civ. Code § 1638. However, where contract language is ambiguous — that is, reasonably susceptible of more than one interpretation — extrinsic evidence may be considered to determine the parties' intent. See Cal. Civ. Code § 1647; Pacific Gas & Elec. Co. v. G.W. Thomas Drayage & Rigging Co., 69 Cal. 2d 33, 37 (1968). Furthermore, "[t]he whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other." Cal. Civ. Code § 1641.

In the credit agreement context, courts and commentators have recognized that milestone covenants in loan agreements to life sciences and technology borrowers serve a distinctive function: they are designed to incentivize the borrower's achievement of specific developmental, regulatory, or commercial milestones that serve as proxies for the borrower's ability to generate the revenue necessary to service its debt obligations. See generally Practical Law Finance, Milestone Covenants in Life Sciences Lending (2023). The interpretation of such covenants is thus informed by both their text and their commercial purpose within the overall credit arrangement.

We analyze the competing arguments below.

B. Arguments That the GXP-12 LCD May Satisfy the Covenant

Several arguments support the interpretation that LCD L38472 for OncoPrecise GXP-12 satisfies the milestone covenant in Section 7.14:

1. Plain-Language Reading — "At Least One" Test. The covenant requires GDT to "obtain a final Medicare coverage determination... for at least one proprietary laboratory-developed test developed by Borrower." OncoPrecise GXP-12 is, indisputably, a proprietary laboratory-developed test developed by GDT. LCD L38472 is a "final Medicare coverage determination" in the form of an LCD — one of the specific coverage-determination formats enumerated in Section 7.14. On its face, GDT possesses a Medicare coverage determination for a qualifying test. The covenant does not specify any particular test by name, nor does it require coverage for a specific number of tests beyond the minimum of one. On a purely facial reading, the condition is satisfied.

2. No Express Requirement for a "New" Determination. Section 7.14 does not explicitly state that GDT must obtain a "new" or "additional" Medicare coverage determination. It does not reference OncoPrecise GXP-47 by name or by any identifying characteristic that would distinguish it from OncoPrecise GXP-12. The covenant language is product-agnostic. If PCNB intended to require a new or additional coverage determination — or a determination specifically for a pipeline product — it could have drafted the covenant to say so explicitly. The absence of such limiting language could be read to indicate that the covenant was drafted as a status-based condition (i.e., requiring that GDT have at least one qualifying LCD in effect) rather than an action-based obligation (i.e., requiring GDT to achieve a new LCD during the covenant period).

3. Continuing Validity of LCD L38472. LCD L38472 remains in full force and effect. It has not been retired, revised, or rescinded by CFI. GDT continues to submit Medicare claims and receive reimbursement under the LCD. The coverage determination is operative and has ongoing commercial effect. If the purpose of the covenant was to ensure that GDT had a viable Medicare reimbursement pathway for at least one product — thereby providing assurance of revenue generation capacity — that purpose is served by the continued existence and operability of the GXP-12 LCD.

4. Industry Context and Commercial Reasonableness. Medicare coverage determinations — whether LCDs or NCDs — are not obtained instantaneously. They are the product of lengthy, resource-intensive regulatory processes involving clinical evidence compilation, MolDx technical assessment review, public notice-and-comment periods, and administrative deliberation. A construction of the covenant that treats a pre-existing, actively utilized LCD as satisfying the requirement is commercially reasonable, as it recognizes the practical reality that Medicare coverage determinations represent durable regulatory assets with ongoing economic value. PCNB, as a lender with experience in healthcare and life sciences lending, would have understood this dynamic.

Taken together, these arguments present a textually grounded case that GDT already satisfies the covenant by virtue of its existing GXP-12 LCD. We note, however, that the strength of this position is materially qualified by the counter-arguments discussed below.

C. Arguments That the GXP-12 LCD Does Not Satisfy the Covenant

The following arguments support the interpretation that Section 7.14 requires GDT to obtain a new Medicare coverage determination — and that the pre-existing GXP-12 LCD does not satisfy the covenant:

1. Verb Tense — "Shall... Obtain." The use of the future-tense construction "shall... obtain" in conjunction with a specific deadline ("on or before December 31, 2024") strongly implies a forward-looking obligation. The operative verb "obtain" denotes an affirmative action to be taken in the future — the procurement of something not yet in hand. As of the Credit Agreement's execution date of September 22, 2023, GDT had already obtained LCD L38472 more than two years earlier (effective August 15, 2021). A determination already in GDT's possession at the time the Credit Agreement was executed is arguably not something GDT "shall... obtain" within the meaning of the covenant. The temporal framing of the covenant language — "on or before December 31, 2024" — reinforces the forward-looking nature of the obligation: it sets a deadline by which a future event must occur. A deadline for an event that has already occurred is a nullity. Absent a reading that requires a new or additional coverage determination, the covenant would serve no operative function. Under California law, "[a]n interpretation which gives effect [to a contract provision] is preferred to one which makes [it] nugatory." Cal. Civ. Code § 1643; see also Mastick v. TD Ameritrade, Inc., 209 Cal. App. 4th 1258, 1264 (2012) (applying the surplusage canon).

2. Purposive Interpretation. The milestone covenant was almost certainly negotiated as a performance milestone tied to GDT's product pipeline and commercialization trajectory. At the time the Credit Agreement was negotiated in mid-to-late 2023, GDT's business plan and investor materials would have highlighted OncoPrecise GXP-47 as the company's principal growth catalyst — the next-generation product expected to substantially expand GDT's market opportunity and revenue base. PCNB would have been fully aware of the existing GXP-12 LCD and the approximately $6.2 million in annual revenue it was generating. A covenant requiring GDT to achieve something it had already achieved would have been commercially purposeless. The more natural reading is that the covenant was intended to incentivize and monitor GDT's progress toward a new commercial milestone — specifically, achieving Medicare coverage for a new product — as a condition of PCNB's continued extension of credit. PCNB was underwriting not merely GDT's existing business, but its growth trajectory, and the covenant was a mechanism to ensure that trajectory was being realized.

3. "On or Before December 31, 2024" as Deadline, Not Status Check. The temporal framing of Section 7.14 is consistent with a deadline for accomplishing a milestone, not a periodic status check on an existing condition. If the parties had intended the covenant to be satisfied by the continued existence of a pre-existing LCD, the provision would more naturally have been drafted as a representation and warranty (e.g., "Borrower represents that it has obtained a final Medicare coverage determination...") or as a maintenance covenant (e.g., "Borrower shall at all times maintain a final Medicare coverage determination..."). Instead, the covenant is structured as a forward-looking affirmative covenant with a specific performance deadline — a structure that is characteristic of milestone covenants requiring the achievement of new, discrete accomplishments within defined timeframes.

4. Negotiating History and Commercial Context. While we have not reviewed the full negotiating history or term sheet for the Credit Agreement (this review should be conducted by Whitford & Sable LLP), we expect that the drafting history may contain evidence confirming that the covenant was specifically intended to require a new coverage determination. The term sheet, credit committee memoranda, or correspondence between the parties' counsel during the negotiation phase may reference OncoPrecise GXP-47 or "pipeline product" coverage as the underlying objective of the milestone covenant. If such evidence exists, it would strongly corroborate the interpretation that the pre-existing GXP-12 LCD was not intended to satisfy Section 7.14.

We recommend that Whitford & Sable LLP undertake a thorough review of the Credit Agreement negotiating file, including the term sheet, credit memoranda, and drafting correspondence, to identify any extrinsic evidence bearing on the parties' intent with respect to Section 7.14. Any such evidence could be material to the covenant analysis and to GDT's negotiating position with PCNB.

5. Lender's Likely Position. From a practical standpoint, PCNB's lending group would almost certainly take the position that the milestone covenant was a material inducement to extending the facility — designed to ensure that GDT's clinical-stage pipeline product would achieve a commercial reimbursement milestone within a defined period. Allowing GDT to point to a pre-existing, already-known LCD would, in PCNB's view, defeat the covenant's purpose and deprive the lender of the bargained-for protection. Thomas Becerra and PCNB's credit committee are unlikely to accept the GXP-12 LCD argument at face value, and pressing the argument aggressively could be perceived as a bad-faith attempt to circumvent a known obligation — potentially damaging the lender-borrower relationship at a time when GDT may need PCNB's cooperation for a waiver or amendment.

D. Assessment of Relative Strength of Arguments

We acknowledge that both sides of the interpretive question have textual support. The plain-language argument based on the "at least one proprietary laboratory-developed test" formulation — and the absence of an express requirement for a "new" or "additional" determination — provides GDT with a colorable textual basis for asserting covenant satisfaction. This argument is not frivolous and has sufficient grounding in the covenant's text to serve as a legitimate negotiating position.

However, the textual argument based on "shall... obtain" (future tense), coupled with the purposive and commercial-context arguments, strongly favors the interpretation that Section 7.14 requires a new coverage determination. A court or arbitrator presented with this dispute would, in our assessment, likely look beyond the isolated phrase "at least one" and consider the surrounding circumstances: the covenant's temporal structure, its placement as an affirmative covenant rather than a representation or maintenance covenant, the parties' awareness of the pre-existing GXP-12 LCD at the time of contracting, and the evident commercial purpose of incentivizing pipeline commercialization. Under the California interpretive framework, which permits consideration of extrinsic evidence to ascertain the parties' mutual intent, these contextual factors would carry substantial weight.

Our conclusion is that the balance of arguments suggests a material risk that PCNB would reject the GXP-12 LCD as satisfying Section 7.14. While the argument should be preserved and deployed as a negotiating position — particularly in the context of proactive engagement with PCNB regarding a covenant waiver or amendment — GDT should not rely on the GXP-12 LCD argument as the primary basis for asserting covenant compliance.

IV. Timeline and Cure Period Analysis

A. Covenant Testing Date

The covenant testing date under Section 7.14 is December 31, 2024. As of the date of this memorandum (May 28, 2024), approximately seven months remain before the testing date.

We have assessed whether it would be feasible for GDT to satisfy the milestone covenant by obtaining a new Medicare coverage determination for OncoPrecise GXP-47 (or any other product) within the remaining timeframe. Our assessment, based on our experience with the MolDx program and the LCD issuance process, is that this is not feasible for the following reasons:

PLA Code Application Timeline. A Proprietary Laboratory Analyses (PLA) code is a prerequisite for Medicare claims submission and is a practical prerequisite for initiating the LCD process. PLA code applications must be submitted to the AMA CPT Editorial Panel by specific quarterly deadlines. The next available submission deadline is June 28, 2024. Even if GDT were to resume the GXP-47 coverage strategy immediately and submit the draft PLA code application by that deadline, the application would not be reviewed until the September 2024 AMA CPT Editorial Panel meeting, with PLA code publication and effective date typically following by approximately three to four months. A PLA code would not be available until late 2024 at the earliest.

LCD Filing and Processing Timeline. Assuming a PLA code were obtained, an LCD application to CFI (or, through the MolDx program, a technical assessment submission to Ridgeline Administrative Services) would need to be filed. The LCD application was targeted for August 2024 at the earliest under the original coverage strategy. LCD issuance timelines under the MolDx program typically run six to twelve months from the date of a complete filing through the full administrative process, which includes a technical assessment review by the MolDx contractor, a proposed LCD publication and public notice-and-comment period, and final LCD issuance. Even under the most optimistic assumptions, an LCD for GXP-47 would not be issued before mid-to-late 2025.

CLARITY-LUNG Trial Data. Most fundamentally, the clinical evidence necessary to support a Medicare coverage determination for OncoPrecise GXP-47 does not currently exist. The interim results from the CLARITY-LUNG trial were inconclusive and below pre-specified performance benchmarks. The revised final data readout is projected for Q2 2025 — well beyond both the December 31, 2024 covenant testing date and the March 31, 2025 cure period expiration date. Without satisfactory final trial data, no credible LCD application could be filed, and CFI and Ridgeline Administrative Services would not favorably review a technical assessment submission based on the current data package.

Conclusion: There is no realistic pathway to obtaining a new Medicare coverage determination for OncoPrecise GXP-47 by December 31, 2024. Even if the launch deferral were reversed immediately and all coverage strategy activities were resumed on an expedited basis, the clinical, regulatory, and administrative timelines make it impossible to achieve an LCD within the covenant period.

B. 90-Day Cure Period

If GDT fails to satisfy the milestone covenant as of December 31, 2024, the Credit Agreement provides a 90-day cure period during which GDT may remedy the breach. The cure period would expire on March 31, 2025.

While the cure period provides an additional three months beyond the testing date, this extension does not materially change the feasibility analysis. As discussed above, the CLARITY-LUNG final data readout is projected for Q2 2025 — at the earliest, April or May 2025 — and even assuming the final data are favorable, the LCD filing and processing timeline would extend well beyond the March 31, 2025 cure period expiration.

The cure period does, however, serve an important practical function: it provides a window for negotiating a covenant waiver or amendment with PCNB. If GDT initiates discussions with PCNB before the December 31, 2024 testing date and is unable to reach agreement on a waiver or amendment before year-end, the 90-day cure period provides additional time to continue those negotiations before the breach ripens into an event of default. We recommend leveraging the cure period as part of a proactive engagement strategy, as discussed in Part V below.

C. Consequences of Default

Upon expiration of the cure period without satisfaction of the milestone covenant (or without a waiver or amendment from PCNB), PCNB would have the right to declare an event of default under the Credit Agreement. The consequences of an event of default would be severe and multifaceted:

Acceleration of Outstanding Balance. PCNB would be entitled to declare the entire outstanding principal balance of $9,200,000, together with all accrued and unpaid interest, fees, and other obligations, immediately due and payable. GDT would be required to repay the full accelerated amount within the timeframe specified in the Credit Agreement (typically immediately upon demand or within a short specified period).

Termination of the Revolving Facility. PCNB would have the right to terminate its commitment to extend further credit under the revolving facility. This would eliminate GDT's access to the remaining $5,800,000 in undrawn capacity, depriving the company of a critical source of working capital liquidity.

Exercise of Remedies Against Collateral. PCNB would be entitled to exercise all remedies available under the Security Agreement, including foreclosure on and disposition of GDT's intellectual property (14 issued U.S. patents and 7 pending applications related to the OncoPrecise platform) and accounts receivable. The prospect of a secured creditor foreclosing on GDT's core IP assets would represent an existential threat to the company's business and would likely trigger significant disruption to GDT's operations, investor relations, and strategic positioning.

Cross-Default Risk. GDT may have cross-default provisions in other agreements — including equipment financing agreements, lease agreements, or other commercial arrangements — that could be triggered by an event of default under the PCNB Credit Agreement. We recommend that Whitford & Sable LLP conduct a comprehensive review of GDT's material agreements to identify any cross-default provisions that could be implicated.

Financial Impact. Acceleration of $9,200,000 in the context of GDT's approximately $34 million annual burn rate and $6,200,000 in FY2023 revenue would be highly significant. GDT's cash position and runway would be materially impaired, and the company's ability to fund ongoing operations — including the CLARITY-LUNG trial and the OncoPrecise GXP-12 commercial business — could be jeopardized.

Insurance Coverage Considerations. GDT maintains a directors' and officers' liability insurance policy with Hawthorne Mutual Insurance Company (Policy No. HMI-DL-2023-04891, $10,000,000 aggregate limit) and a professional liability insurance policy with Hawthorne Mutual Insurance Company (Policy No. HMI-PL-2023-07234, $5,000,000 aggregate limit). We note that these policies are unlikely to provide coverage for a covenant default itself, as insurance policies typically exclude coverage for contractual obligations. However, if a covenant default were to give rise to related claims — such as shareholder derivative actions, investor claims, or director liability claims arising from the board's decision to defer the GXP-47 launch or the alleged failure to manage the covenant compliance risk — the D&O policy could potentially be implicated. We recommend that GDT's insurance broker review the relevant policies in light of this analysis.

V. Strategic Options and Recommendations

Based on the foregoing analysis, we have identified four strategic options for GDT's consideration. We discuss each option and its associated risks, benefits, and practical considerations below, followed by our recommended course of action.

A. Option 1: Proactive Engagement with PCNB for Covenant Waiver or Amendment

We recommend that GDT proactively approach PCNB to discuss the milestone covenant situation before the December 31, 2024 testing date. The objective of this engagement would be to negotiate either: (a) a waiver of the milestone covenant for the current testing period; or (b) an amendment to Section 7.14 extending the milestone deadline to a date that accommodates the revised CLARITY-LUNG trial timeline (e.g., December 31, 2025, or alternatively, a date falling six months following the CLARITY-LUNG final data readout).

Rationale. Proactive engagement with the lender is generally the most constructive approach to managing a foreseeable covenant compliance issue. Lenders typically respond more favorably to borrowers who identify potential issues early, communicate transparently, and propose reasonable solutions, as compared to borrowers who allow covenant breaches to occur without advance notice. By engaging PCNB before the testing date, GDT can demonstrate good faith and preserve the lender relationship, while also creating a constructive framework for negotiating reasonable modifications to the covenant.

GDT's Negotiating Leverage. While the milestone covenant situation is a material concern, GDT is not without negotiating leverage in discussions with PCNB:

• GDT is current on all interest payments and is not in default under any other provision of the Credit Agreement.

• The revolving facility is not fully drawn: $9,200,000 of $15,000,000 has been drawn, leaving meaningful headroom under the facility.

• GDT's intellectual property collateral portfolio — comprising 14 issued U.S. patents and 7 pending patent applications related to the OncoPrecise platform — provides PCNB with meaningful security for its exposure. The OncoPrecise platform has demonstrated clinical and commercial validity through the GXP-12 product, and the IP portfolio has significant value in the molecular diagnostics market.

• GDT has an existing revenue-generating product (OncoPrecise GXP-12) with active Medicare coverage under LCD L38472, generating approximately $6,200,000 in annual revenue. This revenue stream provides a baseline of debt service capacity and demonstrates GDT's commercialization capability.

• GDT's equity investors — including Pinnacle Health Ventures and others — have invested approximately $187,000,000 in the company across multiple financing rounds. This level of institutional backing signals strong investor confidence in GDT's long-term prospects and reduces the risk that GDT will become unable to operate as a going concern.

• The CLARITY-LUNG trial is continuing, and the DSMB has recommended continued enrollment. The trial results are characterized as "inconclusive" rather than negative, and there remains a reasonable possibility of favorable final results. The deferral of the GXP-47 launch is a timing delay, not a product failure.

Potential Consideration for Waiver. PCNB will likely require some form of consideration in exchange for granting a covenant waiver or amendment. Common forms of consideration in these situations include:

• An amendment fee (typically 0.25%–0.50% of the outstanding balance or the facility amount);

• An increase in the interest rate spread (e.g., an additional 25–50 basis points on the SOFR margin);

• Enhanced reporting requirements (e.g., quarterly updates on the CLARITY-LUNG trial status and OncoPrecise GXP-47 commercialization timeline);

• A reduced availability under the revolving facility (e.g., a temporary cap on draws or a reduction in the total commitment amount); and/or

• Additional collateral or guarantees.

The specific terms of any waiver or amendment would be the subject of negotiation between GDT and PCNB and should be handled by Whitford & Sable LLP as GDT's corporate and credit agreement counsel.

Timing. We recommend initiating discussions with PCNB no later than mid-July 2024. This timeline provides approximately five months of negotiating runway before the December 31, 2024 testing date, which is sufficient to allow for a thorough and deliberate negotiation process. Initiating discussions earlier (e.g., immediately following the June 3, 2024 wind-down of the Calderwood & Harkness coverage engagement) would be preferable, as it would provide even greater flexibility and would underscore GDT's proactive and transparent approach.

B. Option 2: Assert GXP-12 LCD Satisfaction Argument

GDT could take the formal position that LCD L38472 for OncoPrecise GXP-12 satisfies the milestone covenant in Section 7.14. Under this approach, GDT would prepare and deliver a formal compliance notice to PCNB, asserting that the covenant has been satisfied by virtue of the existing GXP-12 LCD and enclosing a copy of the LCD and supporting legal analysis.

Advantages. This approach preserves GDT's legal position and creates a record of GDT's good-faith interpretation of the covenant. If the argument were accepted by PCNB, it would resolve the covenant issue without the need for a waiver or amendment and without any additional cost or concession to the lender.

Risks. As discussed in Part III above, we assess the GXP-12 LCD argument as colorable but ultimately weaker than the counter-arguments. There is a significant risk that PCNB would reject the argument and take the position that GDT is in anticipatory or actual breach of the covenant. If PCNB rejects the argument, the resulting dispute could escalate the situation, damage the lender-borrower relationship, and reduce GDT's ability to negotiate a cooperative resolution. In a worst-case scenario, PCNB could take the position that GDT's assertion of compliance through the GXP-12 LCD demonstrates a lack of good faith and could use the assertion as a basis for taking a harder line in any subsequent waiver or amendment discussions.

Recommendation. We recommend deploying the GXP-12 LCD argument as a supporting negotiating position in the context of Option 1 (proactive engagement for a waiver or amendment), rather than as a standalone compliance strategy. The argument provides GDT with a reasonable basis for asserting that it has a plausible claim to covenant satisfaction, which strengthens its position at the negotiating table. However, relying on this argument as the sole basis for asserting compliance — without simultaneously pursuing a waiver or amendment — exposes GDT to unacceptable risk.

C. Option 3: Alternative Product Strategy

We have considered whether any other GDT product in development could achieve a Medicare coverage determination by December 31, 2024 (or, accounting for the 90-day cure period, by March 31, 2025).

Based on the information available to us regarding GDT's current product pipeline, GDT does not appear to have any other test candidates at a stage of development that would permit obtaining a Medicare coverage determination within this timeline. OncoPrecise GXP-47 was GDT's only pipeline product with clinical trial data sufficient (or projected to be sufficient) to support a coverage determination application, and the CLARITY-LUNG trial results have effectively removed GXP-47 from consideration for the foreseeable future. GDT's other early-stage research programs are not sufficiently advanced to support a coverage determination within the relevant timeframe.

Conclusion. This option is likely not viable. However, we defer to Theresa Nakamura and GDT's scientific leadership for a definitive assessment of whether any alternative product candidates could be accelerated to support a coverage strategy within the covenant timeline.

D. Option 4: Refinancing or Facility Paydown

GDT could explore refinancing the revolving facility with another lender on terms that do not include the milestone covenant, or alternatively, paying down the outstanding $9,200,000 balance to eliminate the exposure to a covenant default.

Refinancing. A refinancing would require GDT to identify a new lender willing to extend credit on acceptable terms without a comparable milestone covenant. In the current lending environment for clinical-stage life sciences companies, this may be challenging, particularly given the GXP-47 launch deferral and the associated uncertainty regarding GDT's product pipeline trajectory. Any new lender would likely require comparable or more restrictive covenants, and the process of securing a new facility would take several months — potentially extending beyond the December 31, 2024 testing date.

Facility Paydown. Paying down the $9,200,000 outstanding balance would eliminate GDT's exposure to covenant default, as a breach of the milestone covenant would have no practical consequence if there were no outstanding obligations to accelerate. However, a $9,200,000 repayment in the context of GDT's approximately $34 million annual burn rate and $6,200,000 in FY2023 revenue would be extremely significant. GDT's cash reserves would be substantially depleted, and the company's ability to fund ongoing operations — including the CLARITY-LUNG trial and the OncoPrecise GXP-12 commercial business — could be materially impaired.

A paydown of this magnitude may not be feasible without additional equity financing. GDT's financial advisor, Verdant Life Sciences Capital (Christine Lau, Managing Director), should be consulted regarding the impact on GDT's forward financial planning, cash runway projections, and the potential implications for GDT's Series D financing timeline or IPO planning. Any decision to pursue a significant equity raise or to redirect capital toward debt repayment would have strategic implications that extend well beyond the covenant issue and would require board-level consideration.

Additionally, Pinnacle Health Ventures — as GDT's majority investor holding 41.3% of fully diluted equity — should be briefed on the covenant situation and any proposed refinancing or paydown strategy. Elena Marchetti and David Ashford of PHV serve on GDT's board and have observer rights over material commercialization and reimbursement decisions. PHV's outside counsel, Ashby & Garner, LLP (Robert Garner), should also be notified as appropriate.

E. Recommended Course of Action

Based on the foregoing analysis, we recommend the following course of action:

Primary Recommendation: Pursue Option 1 (Proactive Engagement with PCNB for Waiver or Amendment), Supported by Option 2 (GXP-12 LCD Argument as Negotiating Leverage).

The proactive engagement approach offers the highest probability of a constructive resolution while preserving GDT's lender relationship and minimizing the risk of escalation. The GXP-12 LCD argument should be deployed as a supporting negotiating position to demonstrate that GDT has a good-faith basis for asserting a colorable claim to covenant compliance, which should strengthen GDT's hand in waiver or amendment discussions. We do not recommend relying on the GXP-12 LCD argument as a standalone compliance position.

Coordination with Outside Counsel. Covenant waiver and amendment negotiations with PCNB should be led by Whitford & Sable LLP (Harrison Whitford, Danielle Reeves), as GDT's regular outside counsel for corporate and credit agreement matters. Calderwood & Harkness LLP's engagement has been focused on Medicare coverage and coding strategy for OncoPrecise GXP-47, and the covenant analysis provided in this memorandum is offered as an adjunct to the reimbursement strategy assessment. Ongoing covenant negotiations and credit agreement matters should be coordinated through Whitford & Sable LLP. We are available to consult with Whitford & Sable LLP on any Medicare coverage or reimbursement-related questions that arise in the context of the waiver or amendment negotiations.

Board Briefing. GDT's board of directors should be briefed on the covenant issue at the next regularly scheduled board meeting, or at a special meeting if warranted by timing considerations. The board should be advised of the material risk of covenant breach, the strategic options available, and the recommended course of action. Given PHV's board representation and majority equity position, Elena Marchetti and David Ashford should be specifically apprised of the covenant situation.

PCNB Notification. GDT should carefully consider its obligations under the Credit Agreement with respect to notification of events that could reasonably be expected to result in a material adverse effect or covenant breach. The Credit Agreement likely contains affirmative notification obligations in Article 6 (or a comparable section) requiring the borrower to promptly notify the lender of any event or circumstance that constitutes, or could reasonably be expected to constitute, an event of default or a material adverse change. Failure to provide required notice could itself constitute a separate covenant breach or could be viewed negatively by PCNB and, in any dispute, by a court or arbitrator. We recommend that Whitford & Sable LLP review the Credit Agreement's notice provisions and advise GDT on the timing and content of any required notification to PCNB.

We note that as of the date of this memorandum, notification to PCNB has not yet occurred. We recommend calendaring June 24, 2024 as a target date for PCNB notification, which provides sufficient time for GDT and its advisors to prepare an appropriate communication and for the board to be briefed. This date should be treated as an action item requiring follow-up by GDT's General Counsel and outside counsel.

VI. Coordination with Other Advisors

The milestone covenant issue implicates multiple aspects of GDT's legal, financial, and operational affairs. We recommend that GDT coordinate with the following advisors:

Whitford & Sable LLP (Harrison Whitford; Danielle Reeves). Whitford & Sable LLP serves as GDT's regular outside counsel for corporate and credit agreement matters. Whitford & Sable should take the lead on any covenant waiver or amendment negotiations with PCNB and should conduct a comprehensive review of the Credit Agreement for related provisions, including cross-default clauses, material adverse change or material adverse effect definitions, notice requirements, and voting or consent thresholds applicable to amendments and waivers. Whitford & Sable should also review GDT's other material agreements for cross-default provisions that could be triggered by an event of default under the PCNB Credit Agreement.

Ashby & Garner, LLP (Robert Garner). Ashby & Garner, LLP serves as outside counsel to Pinnacle Health Ventures. Given PHV's board representation (Elena Marchetti, David Ashford) and observer rights over material commercialization and reimbursement decisions, and in light of PHV's majority equity position (41.3% fully diluted), Robert Garner should be briefed on the covenant situation at the appropriate time, as determined in coordination with GDT's General Counsel and Whitford & Sable LLP.

Verdant Life Sciences Capital (Christine Lau, Managing Director). Verdant Life Sciences Capital serves as GDT's financial advisor. Christine Lau should be consulted to update GDT's financial models and projections to reflect the covenant risk, including scenarios in which the revolving facility is terminated, the outstanding balance is accelerated, or the available facility capacity is reduced. Verdant should also advise on the impact of the covenant situation on GDT's Series D financing or IPO timeline planning, and on the feasibility and implications of a facility paydown or refinancing.

Summit Ridge Accounting Group, LLP (Brian Castellano). Summit Ridge serves as GDT's independent auditor. The milestone covenant issue may have implications for GDT's FY2024 financial statements, including potential going-concern analysis considerations and financial statement disclosures. If there is a material risk that GDT will be unable to satisfy the covenant and that the resulting default could impair GDT's ability to continue as a going concern, this risk may need to be disclosed in the notes to GDT's financial statements or addressed in Summit Ridge's auditor's report. Brian Castellano should be briefed on the covenant situation to ensure that any required disclosures are identified and addressed in a timely manner.

VII. Limitations and Scope

This memorandum is subject to the following limitations:

This memorandum is limited to analyzing the milestone covenant implications arising from the OncoPrecise GXP-47 launch deferral. It does not constitute a comprehensive review of all covenants, representations, warranties, or other obligations under the PCNB Credit Agreement. Other provisions of the Credit Agreement may be relevant to GDT's overall compliance posture, and a comprehensive review of the full agreement and all ancillary documents should be conducted by Whitford & Sable LLP.

Calderwood & Harkness LLP's engagement scope covers Medicare coverage and coding strategy for GDT's OncoPrecise product platform. The covenant analysis provided in this memorandum is offered as an ancillary deliverable given its direct relationship to the reimbursement engagement — specifically, the interplay between the OncoPrecise GXP-47 launch deferral and the milestone covenant. Ongoing credit agreement matters, including covenant waiver and amendment negotiations with PCNB, are outside the scope of Calderwood & Harkness's engagement and should be coordinated through Whitford & Sable LLP.

The analysis set forth in this memorandum is based on the covenant language as described to us and as provided in Section 7.14 of the Credit Agreement. We have reviewed the specific language of Section 7.14, but we have not reviewed the full Credit Agreement, the Security Agreement, or other ancillary documents. A full review of these documents is recommended and should be conducted by Whitford & Sable LLP.

We have not reviewed the negotiating history, term sheet, credit committee memoranda, or drafting correspondence related to the Credit Agreement. As discussed in Part III above, such materials may contain extrinsic evidence bearing on the parties' intent with respect to Section 7.14 and should be reviewed by Whitford & Sable LLP.

This memorandum is a privileged and confidential attorney-client communication, prepared for the exclusive use of the named recipients. It should not be disclosed to any third party — including PCNB, its counsel, or any other person or entity — without the prior written consent of Calderwood & Harkness LLP and GDT's General Counsel.

Nothing in this memorandum constitutes a guarantee of any particular outcome. The legal analysis is based on our professional judgment and is subject to the inherent uncertainties of contract interpretation and dispute resolution.

Please do not hesitate to contact Miriam Calloway (213-555-0142; m.calloway@calderwoodharkness.com) or Sean Morrissey (213-555-0189; s.morrissey@calderwoodharkness.com) with any questions regarding this memorandum or the matters discussed herein.

CALDERWOOD & HARKNESS LLP

By: ________

Miriam Calloway Partner, Healthcare & Life Sciences Practice

By: ________

Sean Morrissey Senior Associate, Healthcare & Life Sciences Practice

Date: May 28, 2024

VIII. Appendices (Referenced)

The following appendices are referenced in this memorandum and should be maintained as part of the privileged attorney-client file for this matter:

Appendix A: Relevant excerpt of Section 7.14 of the Revolving Facility Credit Agreement between Genome Dx Therapeutics Inc. and Pacific Coast National Bank, dated September 22, 2023 (Credit Agreement Ref. PCNB-GDT-RF-2023-0922).

Appendix B: Copy of Local Coverage Determination LCD L38472 (OncoPrecise GXP-12, 12-Gene Expression Panel for Early-Stage Breast Cancer Prognosis), effective August 15, 2021, issued by Cascade Fiscal Intermediaries, LLC.

Appendix C: Summary timeline — OncoPrecise GXP-47 coverage strategy milestones (including PLA code application, LCD filing, and MolDx technical assessment submission dates), CLARITY-LUNG pivotal trial milestones (including interim data readout, DSMB meeting, board deferral resolution, and projected final data readout), and PCNB Credit Agreement covenant deadlines (including Section 7.14 testing date and cure period expiration).

Appendix D: Contact information for key advisors and counterparties:

PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION Calderwood & Harkness LLP	Matter No. 1043-00002 © 2024 Calderwood & Harkness LLP. All rights reserved.
From:	Miriam Calloway, Partner, and Sean Morrissey, Senior Associate, Calderwood & Harkness LLP
To:	Theresa Nakamura, General Counsel & VP of Regulatory Affairs, and Raymond Ota, Chief Financial Officer, Genome Dx Therapeutics Inc.
Date:	May 28, 2024
Re:	Analysis of Pacific Coast National Bank Milestone Covenant (Section 7.14) — Impact of OncoPrecise GXP-47 Launch Deferral
Matter No.:	1043-00002
Credit Agreement Ref.:	PCNB-GDT-RF-2023-0922
Name	Organization	Role
Thomas Becerra	Pacific Coast National Bank	VP, Relationship Manager, Healthcare & Life Sciences Lending Group
Harrison Whitford	Whitford & Sable LLP	Partner, GDT Corporate & Credit Agreement Counsel
Danielle Reeves	Whitford & Sable LLP	Associate, GDT Corporate & Credit Agreement Counsel
Robert Garner	Ashby & Garner, LLP	Partner, PHV Outside Counsel
Christine Lau	Verdant Life Sciences Capital	Managing Director, GDT Financial Advisor
Brian Castellano	Summit Ridge Accounting Group, LLP	Partner, GDT Independent Auditor
Elena Marchetti	Pinnacle Health Ventures	Partner, GDT Board Member
David Ashford	Pinnacle Health Ventures	Principal, GDT Board Member

MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION
This memorandum constitutes a privileged and confidential attorney-client communication prepared by Calderwood & Harkness LLP for the exclusive use of Genome Dx Therapeutics Inc. This communication is protected by the attorney-client privilege and the work product doctrine. Any unauthorized disclosure, distribution, or copying of this memorandum, or its contents, is strictly prohibited.
I. Executive Summary
This memorandum analyzes the impact of the Genome Dx Therapeutics Inc. ("GDT") board of directors' May 22, 2024 resolution to defer the commercial launch of OncoPrecise GXP-47 indefinitely on GDT's compliance with the milestone covenant set forth in Section 7.14 of the Revolving Facility Credit Agreement (the "Credit Agreement") between GDT and Pacific Coast National Bank ("PCNB"), dated September 22, 2023. The board's decision, prompted by inconclusive interim results from the CLARITY-LUNG pivotal trial, effectively suspends the regulatory and reimbursement pathway that was the predicate for satisfying the milestone covenant within its stated timeline.
Our principal conclusion is that the deferral creates a material risk that GDT will be unable to satisfy the milestone covenant by the December 31, 2024 testing date. The central interpretive question is whether the existing Local Coverage Determination ("LCD") for OncoPrecise GXP-12 — specifically, LCD L38472, effective August 15, 2021, issued by Cascade Fiscal Intermediaries, LLC — constitutes an "obtain[ed]" Medicare coverage determination within the meaning of the covenant. As we analyze in detail below, while a colorable textual argument can be made that the GXP-12 LCD satisfies the covenant's requirements, the balance of interpretive considerations — including the future-tense construction of the operative language, the purposive context of the covenant, and the likely position of the lender — strongly suggests that PCNB would not accept the existing GXP-12 LCD as fulfilling Section 7.14.
As of May 2024, GDT has an outstanding draw of $9,200,000 against the $15,000,000 total revolving facility. The covenant includes a 90-day cure period, meaning that a breach as of the December 31, 2024 testing date would not ripen into an event of default until March 31, 2025, absent a cure during that period. Nevertheless, even accounting for the cure period, the timeline for obtaining a new Medicare coverage determination for OncoPrecise GXP-47 — or any other GDT product — is not feasible before March 31, 2025, given the revised CLARITY-LUNG trial data readout projections and standard LCD processing timelines.
Accordingly, we recommend that GDT take the following actions:
•  Proactively engage PCNB — through Thomas Becerra, Relationship Manager — to discuss a potential covenant waiver or amendment before year-end, rather than allowing the covenant testing date to pass without advance notice or engagement.
•  Coordinate with GDT's regular outside counsel, Whitford & Sable LLP (Harrison Whitford), to review the full Credit Agreement for related provisions (including notice obligations, cross-default clauses, and material adverse change provisions) and to lead any covenant waiver or amendment negotiations with PCNB.
•  Preserve the GXP-12 LCD satisfaction argument as a negotiating position to support waiver discussions, while recognizing its limitations as a standalone compliance argument.
•  Brief the GDT board of directors on the covenant risk at the earliest available board meeting, and ensure that GDT's financial advisor (Verdant Life Sciences Capital) and auditor (Summit Ridge Accounting Group, LLP) are made aware of the potential implications for financial planning and FY2024 disclosures.
The balance of this memorandum sets forth the factual background, detailed legal analysis, timeline considerations, and strategic recommendations supporting these conclusions.
II. Background
A. The Revolving Facility
On September 22, 2023, GDT entered into a Revolving Facility Credit Agreement with PCNB (Credit Agreement Reference: PCNB-GDT-RF-2023-0922). The key terms of the facility are as follows:
Borrower: Genome Dx Therapeutics Inc. (EIN: 83-2947156), a Delaware corporation with its principal office located at 4720 Torrey Pines Road, Suite 300, San Diego, CA 92130.
Lender: Pacific Coast National Bank, a nationally chartered banking institution with its principal office located at 633 West 5th Street, 18th Floor, Los Angeles, CA 90071.
Total Facility Amount: $15,000,000.
Maturity Date: September 22, 2026 (three-year term from execution).
Interest Rate: Secured Overnight Financing Rate ("SOFR") plus 3.75% (floating), adjusted and payable quarterly in accordance with the Credit Agreement's interest provisions.
Security: The facility is secured by a first-priority security interest in GDT's intellectual property, including fourteen (14) issued U.S. patents and seven (7) pending patent applications related to the OncoPrecise diagnostic platform, as well as GDT's accounts receivable. The security interest is documented in a separate Security Agreement executed contemporaneously with the Credit Agreement.
Current Outstanding Draw: As of the date of this memorandum, GDT has drawn $9,200,000 against the $15,000,000 facility, leaving $5,800,000 in available but undrawn capacity. GDT is current on all interest payments due under the Credit Agreement.
Relationship Manager at PCNB: Thomas Becerra, Vice President, Healthcare & Life Sciences Lending Group.
The facility was structured as a revolving credit facility to provide GDT with working capital flexibility during the commercialization phase of its OncoPrecise product platform. At the time of execution, GDT's primary commercial product was OncoPrecise GXP-12, and its principal pipeline product was OncoPrecise GXP-47, which was entering pivotal clinical trials with a projected commercial launch in 2024.
B. The Milestone Covenant — Section 7.14
Section 7.14 of the Credit Agreement contains a milestone covenant that establishes a performance-based condition tied to GDT's Medicare reimbursement trajectory. The operative language of Section 7.14 provides, in relevant part:
"Borrower shall, on or before December 31, 2024, obtain a final Medicare coverage determination (whether by LCD, NCD, or equivalent published coverage policy) for at least one proprietary laboratory-developed test developed by Borrower."
The critical elements of this covenant are as follows:
Obligation: GDT is required to "obtain" a "final Medicare coverage determination." The covenant specifies that the determination may take the form of a Local Coverage Determination (LCD), National Coverage Determination (NCD), or an "equivalent published coverage policy." The use of the disjunctive "whether by LCD, NCD, or equivalent published coverage policy" provides flexibility as to the form of the coverage determination but does not relax the requirement that the determination be "final" and constitute a "Medicare coverage determination."
Qualifying Product: The coverage determination must be for "at least one proprietary laboratory-developed test developed by Borrower." This language requires that the test be both (i) proprietary to GDT and (ii) a laboratory-developed test ("LDT") developed by GDT. The covenant does not identify any specific product by name.
Testing Date: December 31, 2024. The covenant is measured as of this date, meaning GDT must have "obtain[ed]" the qualifying coverage determination on or before this date.
Cure Period: The Credit Agreement provides a 90-day cure period following the covenant testing date. Accordingly, a failure to satisfy Section 7.14 as of December 31, 2024 would not ripen into an event of default until March 31, 2025, provided that GDT does not cure the breach during that 90-day window.
Consequences of Breach (After Cure Period): If GDT fails to satisfy the milestone covenant and the cure period expires without a cure, the failure constitutes an event of default under the Credit Agreement. Upon an event of default, PCNB is entitled to: (a) declare the entire outstanding principal balance, together with all accrued and unpaid interest, immediately due and payable; (b) terminate the revolving credit facility and any further commitment to extend credit; and (c) exercise all remedies available under the Credit Agreement and the related Security Agreement, including foreclosure on and disposition of the collateral (GDT's intellectual property and accounts receivable).
C. OncoPrecise GXP-47 Launch Deferral
On May 22, 2024, GDT's board of directors adopted a resolution to defer the commercial launch of OncoPrecise GXP-47 indefinitely. OncoPrecise GXP-47 is a 47-gene expression panel designed for non-small cell lung cancer ("NSCLC") treatment response prediction, and was GDT's principal pipeline product at the time the Credit Agreement was executed. The board's resolution followed a series of developments that called into question the test's near-term clinical and commercial viability:
CLARITY-LUNG Trial Interim Results. On March 29, 2024, interim results were released from the CLARITY-LUNG pivotal validation trial (ClinicalTrials.gov Identifier: NCT05891247). The interim analysis revealed that OncoPrecise GXP-47's performance fell below pre-specified performance benchmarks: the positive predictive value ("PPV") was measured at 0.68 against a pre-specified target of ≥ 0.75, and the negative predictive value ("NPV") was measured at 0.71 against a pre-specified target of ≥ 0.80. While these results were characterized as "inconclusive" rather than definitively negative, they represented a material shortfall from the performance thresholds that would have been necessary to support a Medicare coverage determination application.
DSMB Recommendation. On April 5, 2024, the Data Safety Monitoring Board ("DSMB") for the CLARITY-LUNG trial, chaired by Dr. Evelyn Matsuda of the Carrington Cancer Institute, met to review the interim data. The DSMB recommended continuing enrollment in the trial but formally characterized the interim results as "inconclusive and below pre-specified performance benchmarks." The DSMB did not recommend termination of the trial, but its assessment confirmed that the data as then available would not support a coverage determination submission.
Pinnacle Health Ventures Recommendation. On May 17, 2024, Pinnacle Health Ventures ("PHV"), GDT's lead institutional investor, formally recommended deferral of the OncoPrecise GXP-47 commercial launch. The recommendation was communicated by Elena Marchetti, Partner at PHV and a member of GDT's board of directors. PHV's recommendation was based on its assessment that the clinical data profile was insufficient to support a credible Medicare coverage strategy, and that proceeding with a premature launch could damage GDT's reputation with payers and jeopardize long-term reimbursement prospects.
Board Resolution. Following the PHV recommendation, GDT's board of directors adopted the May 22, 2024 resolution deferring the commercial launch indefinitely. The revised final data readout for the CLARITY-LUNG trial is now projected for Q2 2025, and any decision to resume commercial launch activities will be contingent upon satisfactory final trial results.
Impact on Calderwood & Harkness Engagement. As a direct result of the board's deferral decision, Calderwood & Harkness LLP's engagement to pursue Medicare coverage and coding for OncoPrecise GXP-47 has been wound down, with matter closure effective June 3, 2024. At the time of wind-down, the following activities had been in progress but were not completed:
•  The draft Proprietary Laboratory Analyses ("PLA") code application for OncoPrecise GXP-47 had been prepared but was never submitted to the American Medical Association ("AMA"). The next available submission deadline for the AMA CPT Editorial Panel is June 28, 2024; that deadline will pass without a submission.
•  No LCD application for OncoPrecise GXP-47 was filed with Cascade Fiscal Intermediaries, LLC ("CFI"), the Medicare Administrative Contractor for GDT's jurisdiction.
•  No MolDx technical assessment submission was made to Ridgeline Administrative Services, the MolDx program administrator. The technical assessment dossier was in early-stage preparation.
•  The overall coverage strategy timeline had targeted an LCD filing in August 2024 at the earliest, with LCD issuance projected for Q2–Q3 2025 under normal processing timelines.
The deferral of the GXP-47 launch effectively eliminates any realistic pathway to obtaining a new Medicare coverage determination for OncoPrecise GXP-47 within the timeframe established by Section 7.14 of the Credit Agreement.
D. OncoPrecise GXP-12 — Existing Medicare Coverage
GDT's existing commercial product, OncoPrecise GXP-12, is a 12-gene expression panel used in early-stage breast cancer prognosis and treatment decision-making. OncoPrecise GXP-12 is GDT's only commercially available product and its sole source of revenue.
OncoPrecise GXP-12 is reimbursed under an existing Local Coverage Determination: LCD L38472, which was issued by Cascade Fiscal Intermediaries, LLC ("CFI") and became effective on August 15, 2021. The LCD establishes Medicare coverage criteria for OncoPrecise GXP-12 when used in accordance with specified clinical indications and patient populations. The LCD remains in full force and effect as of the date of this memorandum; it has not been retired, revised, or subjected to a reconsideration process by CFI.
For GDT's fiscal year ended December 31, 2023, OncoPrecise GXP-12 generated approximately $6,200,000 in revenue. This was GDT's only source of revenue for FY2023. GDT continues to bill and receive Medicare reimbursement for OncoPrecise GXP-12 claims submitted under LCD L38472.
Critically, the GXP-12 LCD was obtained more than two years prior to the execution of the PCNB Credit Agreement on September 22, 2023. At the time the Credit Agreement was negotiated and executed, PCNB would have been aware of the existing GXP-12 LCD and the associated revenue stream, as these facts would have been reflected in GDT's financial statements, business plan materials, and loan underwriting documentation provided to PCNB during the credit approval process. This chronological fact is central to the interpretive analysis of Section 7.14, as discussed in Part III below.
III. Legal Analysis of the Milestone Covenant
A. Threshold Question: Does the Existing GXP-12 LCD Satisfy Section 7.14?
The core interpretive question presented by the GXP-47 launch deferral is whether Section 7.14's requirement that GDT "obtain a final Medicare coverage determination... for at least one proprietary laboratory-developed test developed by Borrower" can be satisfied by reference to the pre-existing LCD for OncoPrecise GXP-12 (LCD L38472), or whether the covenant requires GDT to procure a new coverage determination during the term of the Credit Agreement.
This question is one of contract interpretation. Under California law, which governs the Credit Agreement pursuant to its choice-of-law provision, a contract must be interpreted to give effect to the mutual intention of the parties at the time of contracting, insofar as that intention can be ascertained and is lawful. See Cal. Civ. Code § 1636. When the language of a contract is clear and explicit, it governs. See Cal. Civ. Code § 1638. However, where contract language is ambiguous — that is, reasonably susceptible of more than one interpretation — extrinsic evidence may be considered to determine the parties' intent. See Cal. Civ. Code § 1647; Pacific Gas & Elec. Co. v. G.W. Thomas Drayage & Rigging Co., 69 Cal. 2d 33, 37 (1968). Furthermore, "[t]he whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other." Cal. Civ. Code § 1641.
In the credit agreement context, courts and commentators have recognized that milestone covenants in loan agreements to life sciences and technology borrowers serve a distinctive function: they are designed to incentivize the borrower's achievement of specific developmental, regulatory, or commercial milestones that serve as proxies for the borrower's ability to generate the revenue necessary to service its debt obligations. See generally Practical Law Finance, Milestone Covenants in Life Sciences Lending (2023). The interpretation of such covenants is thus informed by both their text and their commercial purpose within the overall credit arrangement.
We analyze the competing arguments below.
B. Arguments That the GXP-12 LCD May Satisfy the Covenant
Several arguments support the interpretation that LCD L38472 for OncoPrecise GXP-12 satisfies the milestone covenant in Section 7.14:
1. Plain-Language Reading — "At Least One" Test. The covenant requires GDT to "obtain a final Medicare coverage determination... for at least one proprietary laboratory-developed test developed by Borrower." OncoPrecise GXP-12 is, indisputably, a proprietary laboratory-developed test developed by GDT. LCD L38472 is a "final Medicare coverage determination" in the form of an LCD — one of the specific coverage-determination formats enumerated in Section 7.14. On its face, GDT possesses a Medicare coverage determination for a qualifying test. The covenant does not specify any particular test by name, nor does it require coverage for a specific number of tests beyond the minimum of one. On a purely facial reading, the condition is satisfied.
2. No Express Requirement for a "New" Determination. Section 7.14 does not explicitly state that GDT must obtain a "new" or "additional" Medicare coverage determination. It does not reference OncoPrecise GXP-47 by name or by any identifying characteristic that would distinguish it from OncoPrecise GXP-12. The covenant language is product-agnostic. If PCNB intended to require a new or additional coverage determination — or a determination specifically for a pipeline product — it could have drafted the covenant to say so explicitly. The absence of such limiting language could be read to indicate that the covenant was drafted as a status-based condition (i.e., requiring that GDT have at least one qualifying LCD in effect) rather than an action-based obligation (i.e., requiring GDT to achieve a new LCD during the covenant period).
3. Continuing Validity of LCD L38472. LCD L38472 remains in full force and effect. It has not been retired, revised, or rescinded by CFI. GDT continues to submit Medicare claims and receive reimbursement under the LCD. The coverage determination is operative and has ongoing commercial effect. If the purpose of the covenant was to ensure that GDT had a viable Medicare reimbursement pathway for at least one product — thereby providing assurance of revenue generation capacity — that purpose is served by the continued existence and operability of the GXP-12 LCD.
4. Industry Context and Commercial Reasonableness. Medicare coverage determinations — whether LCDs or NCDs — are not obtained instantaneously. They are the product of lengthy, resource-intensive regulatory processes involving clinical evidence compilation, MolDx technical assessment review, public notice-and-comment periods, and administrative deliberation. A construction of the covenant that treats a pre-existing, actively utilized LCD as satisfying the requirement is commercially reasonable, as it recognizes the practical reality that Medicare coverage determinations represent durable regulatory assets with ongoing economic value. PCNB, as a lender with experience in healthcare and life sciences lending, would have understood this dynamic.
Taken together, these arguments present a textually grounded case that GDT already satisfies the covenant by virtue of its existing GXP-12 LCD. We note, however, that the strength of this position is materially qualified by the counter-arguments discussed below.
C. Arguments That the GXP-12 LCD Does Not Satisfy the Covenant
The following arguments support the interpretation that Section 7.14 requires GDT to obtain a new Medicare coverage determination — and that the pre-existing GXP-12 LCD does not satisfy the covenant:
1. Verb Tense — "Shall... Obtain." The use of the future-tense construction "shall... obtain" in conjunction with a specific deadline ("on or before December 31, 2024") strongly implies a forward-looking obligation. The operative verb "obtain" denotes an affirmative action to be taken in the future — the procurement of something not yet in hand. As of the Credit Agreement's execution date of September 22, 2023, GDT had already obtained LCD L38472 more than two years earlier (effective August 15, 2021). A determination already in GDT's possession at the time the Credit Agreement was executed is arguably not something GDT "shall... obtain" within the meaning of the covenant. The temporal framing of the covenant language — "on or before December 31, 2024" — reinforces the forward-looking nature of the obligation: it sets a deadline by which a future event must occur. A deadline for an event that has already occurred is a nullity. Absent a reading that requires a new or additional coverage determination, the covenant would serve no operative function. Under California law, "[a]n interpretation which gives effect [to a contract provision] is preferred to one which makes [it] nugatory." Cal. Civ. Code § 1643; see also Mastick v. TD Ameritrade, Inc., 209 Cal. App. 4th 1258, 1264 (2012) (applying the surplusage canon).
2. Purposive Interpretation. The milestone covenant was almost certainly negotiated as a performance milestone tied to GDT's product pipeline and commercialization trajectory. At the time the Credit Agreement was negotiated in mid-to-late 2023, GDT's business plan and investor materials would have highlighted OncoPrecise GXP-47 as the company's principal growth catalyst — the next-generation product expected to substantially expand GDT's market opportunity and revenue base. PCNB would have been fully aware of the existing GXP-12 LCD and the approximately $6.2 million in annual revenue it was generating. A covenant requiring GDT to achieve something it had already achieved would have been commercially purposeless. The more natural reading is that the covenant was intended to incentivize and monitor GDT's progress toward a new commercial milestone — specifically, achieving Medicare coverage for a new product — as a condition of PCNB's continued extension of credit. PCNB was underwriting not merely GDT's existing business, but its growth trajectory, and the covenant was a mechanism to ensure that trajectory was being realized.
3. "On or Before December 31, 2024" as Deadline, Not Status Check. The temporal framing of Section 7.14 is consistent with a deadline for accomplishing a milestone, not a periodic status check on an existing condition. If the parties had intended the covenant to be satisfied by the continued existence of a pre-existing LCD, the provision would more naturally have been drafted as a representation and warranty (e.g., "Borrower represents that it has obtained a final Medicare coverage determination...") or as a maintenance covenant (e.g., "Borrower shall at all times maintain a final Medicare coverage determination..."). Instead, the covenant is structured as a forward-looking affirmative covenant with a specific performance deadline — a structure that is characteristic of milestone covenants requiring the achievement of new, discrete accomplishments within defined timeframes.
4. Negotiating History and Commercial Context. While we have not reviewed the full negotiating history or term sheet for the Credit Agreement (this review should be conducted by Whitford & Sable LLP), we expect that the drafting history may contain evidence confirming that the covenant was specifically intended to require a new coverage determination. The term sheet, credit committee memoranda, or correspondence between the parties' counsel during the negotiation phase may reference OncoPrecise GXP-47 or "pipeline product" coverage as the underlying objective of the milestone covenant. If such evidence exists, it would strongly corroborate the interpretation that the pre-existing GXP-12 LCD was not intended to satisfy Section 7.14.
We recommend that Whitford & Sable LLP undertake a thorough review of the Credit Agreement negotiating file, including the term sheet, credit memoranda, and drafting correspondence, to identify any extrinsic evidence bearing on the parties' intent with respect to Section 7.14. Any such evidence could be material to the covenant analysis and to GDT's negotiating position with PCNB.
5. Lender's Likely Position. From a practical standpoint, PCNB's lending group would almost certainly take the position that the milestone covenant was a material inducement to extending the facility — designed to ensure that GDT's clinical-stage pipeline product would achieve a commercial reimbursement milestone within a defined period. Allowing GDT to point to a pre-existing, already-known LCD would, in PCNB's view, defeat the covenant's purpose and deprive the lender of the bargained-for protection. Thomas Becerra and PCNB's credit committee are unlikely to accept the GXP-12 LCD argument at face value, and pressing the argument aggressively could be perceived as a bad-faith attempt to circumvent a known obligation — potentially damaging the lender-borrower relationship at a time when GDT may need PCNB's cooperation for a waiver or amendment.
D. Assessment of Relative Strength of Arguments
We acknowledge that both sides of the interpretive question have textual support. The plain-language argument based on the "at least one proprietary laboratory-developed test" formulation — and the absence of an express requirement for a "new" or "additional" determination — provides GDT with a colorable textual basis for asserting covenant satisfaction. This argument is not frivolous and has sufficient grounding in the covenant's text to serve as a legitimate negotiating position.
However, the textual argument based on "shall... obtain" (future tense), coupled with the purposive and commercial-context arguments, strongly favors the interpretation that Section 7.14 requires a new coverage determination. A court or arbitrator presented with this dispute would, in our assessment, likely look beyond the isolated phrase "at least one" and consider the surrounding circumstances: the covenant's temporal structure, its placement as an affirmative covenant rather than a representation or maintenance covenant, the parties' awareness of the pre-existing GXP-12 LCD at the time of contracting, and the evident commercial purpose of incentivizing pipeline commercialization. Under the California interpretive framework, which permits consideration of extrinsic evidence to ascertain the parties' mutual intent, these contextual factors would carry substantial weight.
Our conclusion is that the balance of arguments suggests a material risk that PCNB would reject the GXP-12 LCD as satisfying Section 7.14. While the argument should be preserved and deployed as a negotiating position — particularly in the context of proactive engagement with PCNB regarding a covenant waiver or amendment — GDT should not rely on the GXP-12 LCD argument as the primary basis for asserting covenant compliance.
IV. Timeline and Cure Period Analysis
A. Covenant Testing Date
The covenant testing date under Section 7.14 is December 31, 2024. As of the date of this memorandum (May 28, 2024), approximately seven months remain before the testing date.
We have assessed whether it would be feasible for GDT to satisfy the milestone covenant by obtaining a new Medicare coverage determination for OncoPrecise GXP-47 (or any other product) within the remaining timeframe. Our assessment, based on our experience with the MolDx program and the LCD issuance process, is that this is not feasible for the following reasons:
PLA Code Application Timeline. A Proprietary Laboratory Analyses (PLA) code is a prerequisite for Medicare claims submission and is a practical prerequisite for initiating the LCD process. PLA code applications must be submitted to the AMA CPT Editorial Panel by specific quarterly deadlines. The next available submission deadline is June 28, 2024. Even if GDT were to resume the GXP-47 coverage strategy immediately and submit the draft PLA code application by that deadline, the application would not be reviewed until the September 2024 AMA CPT Editorial Panel meeting, with PLA code publication and effective date typically following by approximately three to four months. A PLA code would not be available until late 2024 at the earliest.
LCD Filing and Processing Timeline. Assuming a PLA code were obtained, an LCD application to CFI (or, through the MolDx program, a technical assessment submission to Ridgeline Administrative Services) would need to be filed. The LCD application was targeted for August 2024 at the earliest under the original coverage strategy. LCD issuance timelines under the MolDx program typically run six to twelve months from the date of a complete filing through the full administrative process, which includes a technical assessment review by the MolDx contractor, a proposed LCD publication and public notice-and-comment period, and final LCD issuance. Even under the most optimistic assumptions, an LCD for GXP-47 would not be issued before mid-to-late 2025.
CLARITY-LUNG Trial Data. Most fundamentally, the clinical evidence necessary to support a Medicare coverage determination for OncoPrecise GXP-47 does not currently exist. The interim results from the CLARITY-LUNG trial were inconclusive and below pre-specified performance benchmarks. The revised final data readout is projected for Q2 2025 — well beyond both the December 31, 2024 covenant testing date and the March 31, 2025 cure period expiration date. Without satisfactory final trial data, no credible LCD application could be filed, and CFI and Ridgeline Administrative Services would not favorably review a technical assessment submission based on the current data package.
Conclusion: There is no realistic pathway to obtaining a new Medicare coverage determination for OncoPrecise GXP-47 by December 31, 2024. Even if the launch deferral were reversed immediately and all coverage strategy activities were resumed on an expedited basis, the clinical, regulatory, and administrative timelines make it impossible to achieve an LCD within the covenant period.
B. 90-Day Cure Period
If GDT fails to satisfy the milestone covenant as of December 31, 2024, the Credit Agreement provides a 90-day cure period during which GDT may remedy the breach. The cure period would expire on March 31, 2025.
While the cure period provides an additional three months beyond the testing date, this extension does not materially change the feasibility analysis. As discussed above, the CLARITY-LUNG final data readout is projected for Q2 2025 — at the earliest, April or May 2025 — and even assuming the final data are favorable, the LCD filing and processing timeline would extend well beyond the March 31, 2025 cure period expiration.
The cure period does, however, serve an important practical function: it provides a window for negotiating a covenant waiver or amendment with PCNB. If GDT initiates discussions with PCNB before the December 31, 2024 testing date and is unable to reach agreement on a waiver or amendment before year-end, the 90-day cure period provides additional time to continue those negotiations before the breach ripens into an event of default. We recommend leveraging the cure period as part of a proactive engagement strategy, as discussed in Part V below.
C. Consequences of Default
Upon expiration of the cure period without satisfaction of the milestone covenant (or without a waiver or amendment from PCNB), PCNB would have the right to declare an event of default under the Credit Agreement. The consequences of an event of default would be severe and multifaceted:
Acceleration of Outstanding Balance. PCNB would be entitled to declare the entire outstanding principal balance of $9,200,000, together with all accrued and unpaid interest, fees, and other obligations, immediately due and payable. GDT would be required to repay the full accelerated amount within the timeframe specified in the Credit Agreement (typically immediately upon demand or within a short specified period).
Termination of the Revolving Facility. PCNB would have the right to terminate its commitment to extend further credit under the revolving facility. This would eliminate GDT's access to the remaining $5,800,000 in undrawn capacity, depriving the company of a critical source of working capital liquidity.
Exercise of Remedies Against Collateral. PCNB would be entitled to exercise all remedies available under the Security Agreement, including foreclosure on and disposition of GDT's intellectual property (14 issued U.S. patents and 7 pending applications related to the OncoPrecise platform) and accounts receivable. The prospect of a secured creditor foreclosing on GDT's core IP assets would represent an existential threat to the company's business and would likely trigger significant disruption to GDT's operations, investor relations, and strategic positioning.
Cross-Default Risk. GDT may have cross-default provisions in other agreements — including equipment financing agreements, lease agreements, or other commercial arrangements — that could be triggered by an event of default under the PCNB Credit Agreement. We recommend that Whitford & Sable LLP conduct a comprehensive review of GDT's material agreements to identify any cross-default provisions that could be implicated.
Financial Impact. Acceleration of $9,200,000 in the context of GDT's approximately $34 million annual burn rate and $6,200,000 in FY2023 revenue would be highly significant. GDT's cash position and runway would be materially impaired, and the company's ability to fund ongoing operations — including the CLARITY-LUNG trial and the OncoPrecise GXP-12 commercial business — could be jeopardized.
Insurance Coverage Considerations. GDT maintains a directors' and officers' liability insurance policy with Hawthorne Mutual Insurance Company (Policy No. HMI-DL-2023-04891, $10,000,000 aggregate limit) and a professional liability insurance policy with Hawthorne Mutual Insurance Company (Policy No. HMI-PL-2023-07234, $5,000,000 aggregate limit). We note that these policies are unlikely to provide coverage for a covenant default itself, as insurance policies typically exclude coverage for contractual obligations. However, if a covenant default were to give rise to related claims — such as shareholder derivative actions, investor claims, or director liability claims arising from the board's decision to defer the GXP-47 launch or the alleged failure to manage the covenant compliance risk — the D&O policy could potentially be implicated. We recommend that GDT's insurance broker review the relevant policies in light of this analysis.
V. Strategic Options and Recommendations
Based on the foregoing analysis, we have identified four strategic options for GDT's consideration. We discuss each option and its associated risks, benefits, and practical considerations below, followed by our recommended course of action.
A. Option 1: Proactive Engagement with PCNB for Covenant Waiver or Amendment
We recommend that GDT proactively approach PCNB to discuss the milestone covenant situation before the December 31, 2024 testing date. The objective of this engagement would be to negotiate either: (a) a waiver of the milestone covenant for the current testing period; or (b) an amendment to Section 7.14 extending the milestone deadline to a date that accommodates the revised CLARITY-LUNG trial timeline (e.g., December 31, 2025, or alternatively, a date falling six months following the CLARITY-LUNG final data readout).
Rationale. Proactive engagement with the lender is generally the most constructive approach to managing a foreseeable covenant compliance issue. Lenders typically respond more favorably to borrowers who identify potential issues early, communicate transparently, and propose reasonable solutions, as compared to borrowers who allow covenant breaches to occur without advance notice. By engaging PCNB before the testing date, GDT can demonstrate good faith and preserve the lender relationship, while also creating a constructive framework for negotiating reasonable modifications to the covenant.
GDT's Negotiating Leverage. While the milestone covenant situation is a material concern, GDT is not without negotiating leverage in discussions with PCNB:
•  GDT is current on all interest payments and is not in default under any other provision of the Credit Agreement.
•  The revolving facility is not fully drawn: $9,200,000 of $15,000,000 has been drawn, leaving meaningful headroom under the facility.
•  GDT's intellectual property collateral portfolio — comprising 14 issued U.S. patents and 7 pending patent applications related to the OncoPrecise platform — provides PCNB with meaningful security for its exposure. The OncoPrecise platform has demonstrated clinical and commercial validity through the GXP-12 product, and the IP portfolio has significant value in the molecular diagnostics market.
•  GDT has an existing revenue-generating product (OncoPrecise GXP-12) with active Medicare coverage under LCD L38472, generating approximately $6,200,000 in annual revenue. This revenue stream provides a baseline of debt service capacity and demonstrates GDT's commercialization capability.
•  GDT's equity investors — including Pinnacle Health Ventures and others — have invested approximately $187,000,000 in the company across multiple financing rounds. This level of institutional backing signals strong investor confidence in GDT's long-term prospects and reduces the risk that GDT will become unable to operate as a going concern.
•  The CLARITY-LUNG trial is continuing, and the DSMB has recommended continued enrollment. The trial results are characterized as "inconclusive" rather than negative, and there remains a reasonable possibility of favorable final results. The deferral of the GXP-47 launch is a timing delay, not a product failure.
Potential Consideration for Waiver. PCNB will likely require some form of consideration in exchange for granting a covenant waiver or amendment. Common forms of consideration in these situations include:
•  An amendment fee (typically 0.25%–0.50% of the outstanding balance or the facility amount);
•  An increase in the interest rate spread (e.g., an additional 25–50 basis points on the SOFR margin);
•  Enhanced reporting requirements (e.g., quarterly updates on the CLARITY-LUNG trial status and OncoPrecise GXP-47 commercialization timeline);
•  A reduced availability under the revolving facility (e.g., a temporary cap on draws or a reduction in the total commitment amount); and/or
•  Additional collateral or guarantees.
The specific terms of any waiver or amendment would be the subject of negotiation between GDT and PCNB and should be handled by Whitford & Sable LLP as GDT's corporate and credit agreement counsel.
Timing. We recommend initiating discussions with PCNB no later than mid-July 2024. This timeline provides approximately five months of negotiating runway before the December 31, 2024 testing date, which is sufficient to allow for a thorough and deliberate negotiation process. Initiating discussions earlier (e.g., immediately following the June 3, 2024 wind-down of the Calderwood & Harkness coverage engagement) would be preferable, as it would provide even greater flexibility and would underscore GDT's proactive and transparent approach.
B. Option 2: Assert GXP-12 LCD Satisfaction Argument
GDT could take the formal position that LCD L38472 for OncoPrecise GXP-12 satisfies the milestone covenant in Section 7.14. Under this approach, GDT would prepare and deliver a formal compliance notice to PCNB, asserting that the covenant has been satisfied by virtue of the existing GXP-12 LCD and enclosing a copy of the LCD and supporting legal analysis.
Advantages. This approach preserves GDT's legal position and creates a record of GDT's good-faith interpretation of the covenant. If the argument were accepted by PCNB, it would resolve the covenant issue without the need for a waiver or amendment and without any additional cost or concession to the lender.
Risks. As discussed in Part III above, we assess the GXP-12 LCD argument as colorable but ultimately weaker than the counter-arguments. There is a significant risk that PCNB would reject the argument and take the position that GDT is in anticipatory or actual breach of the covenant. If PCNB rejects the argument, the resulting dispute could escalate the situation, damage the lender-borrower relationship, and reduce GDT's ability to negotiate a cooperative resolution. In a worst-case scenario, PCNB could take the position that GDT's assertion of compliance through the GXP-12 LCD demonstrates a lack of good faith and could use the assertion as a basis for taking a harder line in any subsequent waiver or amendment discussions.
Recommendation. We recommend deploying the GXP-12 LCD argument as a supporting negotiating position in the context of Option 1 (proactive engagement for a waiver or amendment), rather than as a standalone compliance strategy. The argument provides GDT with a reasonable basis for asserting that it has a plausible claim to covenant satisfaction, which strengthens its position at the negotiating table. However, relying on this argument as the sole basis for asserting compliance — without simultaneously pursuing a waiver or amendment — exposes GDT to unacceptable risk.
C. Option 3: Alternative Product Strategy
We have considered whether any other GDT product in development could achieve a Medicare coverage determination by December 31, 2024 (or, accounting for the 90-day cure period, by March 31, 2025).
Based on the information available to us regarding GDT's current product pipeline, GDT does not appear to have any other test candidates at a stage of development that would permit obtaining a Medicare coverage determination within this timeline. OncoPrecise GXP-47 was GDT's only pipeline product with clinical trial data sufficient (or projected to be sufficient) to support a coverage determination application, and the CLARITY-LUNG trial results have effectively removed GXP-47 from consideration for the foreseeable future. GDT's other early-stage research programs are not sufficiently advanced to support a coverage determination within the relevant timeframe.
Conclusion. This option is likely not viable. However, we defer to Theresa Nakamura and GDT's scientific leadership for a definitive assessment of whether any alternative product candidates could be accelerated to support a coverage strategy within the covenant timeline.
D. Option 4: Refinancing or Facility Paydown
GDT could explore refinancing the revolving facility with another lender on terms that do not include the milestone covenant, or alternatively, paying down the outstanding $9,200,000 balance to eliminate the exposure to a covenant default.
Refinancing. A refinancing would require GDT to identify a new lender willing to extend credit on acceptable terms without a comparable milestone covenant. In the current lending environment for clinical-stage life sciences companies, this may be challenging, particularly given the GXP-47 launch deferral and the associated uncertainty regarding GDT's product pipeline trajectory. Any new lender would likely require comparable or more restrictive covenants, and the process of securing a new facility would take several months — potentially extending beyond the December 31, 2024 testing date.
Facility Paydown. Paying down the $9,200,000 outstanding balance would eliminate GDT's exposure to covenant default, as a breach of the milestone covenant would have no practical consequence if there were no outstanding obligations to accelerate. However, a $9,200,000 repayment in the context of GDT's approximately $34 million annual burn rate and $6,200,000 in FY2023 revenue would be extremely significant. GDT's cash reserves would be substantially depleted, and the company's ability to fund ongoing operations — including the CLARITY-LUNG trial and the OncoPrecise GXP-12 commercial business — could be materially impaired.
A paydown of this magnitude may not be feasible without additional equity financing. GDT's financial advisor, Verdant Life Sciences Capital (Christine Lau, Managing Director), should be consulted regarding the impact on GDT's forward financial planning, cash runway projections, and the potential implications for GDT's Series D financing timeline or IPO planning. Any decision to pursue a significant equity raise or to redirect capital toward debt repayment would have strategic implications that extend well beyond the covenant issue and would require board-level consideration.
Additionally, Pinnacle Health Ventures — as GDT's majority investor holding 41.3% of fully diluted equity — should be briefed on the covenant situation and any proposed refinancing or paydown strategy. Elena Marchetti and David Ashford of PHV serve on GDT's board and have observer rights over material commercialization and reimbursement decisions. PHV's outside counsel, Ashby & Garner, LLP (Robert Garner), should also be notified as appropriate.
E. Recommended Course of Action
Based on the foregoing analysis, we recommend the following course of action:
Primary Recommendation: Pursue Option 1 (Proactive Engagement with PCNB for Waiver or Amendment), Supported by Option 2 (GXP-12 LCD Argument as Negotiating Leverage).
The proactive engagement approach offers the highest probability of a constructive resolution while preserving GDT's lender relationship and minimizing the risk of escalation. The GXP-12 LCD argument should be deployed as a supporting negotiating position to demonstrate that GDT has a good-faith basis for asserting a colorable claim to covenant compliance, which should strengthen GDT's hand in waiver or amendment discussions. We do not recommend relying on the GXP-12 LCD argument as a standalone compliance position.
Coordination with Outside Counsel. Covenant waiver and amendment negotiations with PCNB should be led by Whitford & Sable LLP (Harrison Whitford, Danielle Reeves), as GDT's regular outside counsel for corporate and credit agreement matters. Calderwood & Harkness LLP's engagement has been focused on Medicare coverage and coding strategy for OncoPrecise GXP-47, and the covenant analysis provided in this memorandum is offered as an adjunct to the reimbursement strategy assessment. Ongoing covenant negotiations and credit agreement matters should be coordinated through Whitford & Sable LLP. We are available to consult with Whitford & Sable LLP on any Medicare coverage or reimbursement-related questions that arise in the context of the waiver or amendment negotiations.
Board Briefing. GDT's board of directors should be briefed on the covenant issue at the next regularly scheduled board meeting, or at a special meeting if warranted by timing considerations. The board should be advised of the material risk of covenant breach, the strategic options available, and the recommended course of action. Given PHV's board representation and majority equity position, Elena Marchetti and David Ashford should be specifically apprised of the covenant situation.
PCNB Notification. GDT should carefully consider its obligations under the Credit Agreement with respect to notification of events that could reasonably be expected to result in a material adverse effect or covenant breach. The Credit Agreement likely contains affirmative notification obligations in Article 6 (or a comparable section) requiring the borrower to promptly notify the lender of any event or circumstance that constitutes, or could reasonably be expected to constitute, an event of default or a material adverse change. Failure to provide required notice could itself constitute a separate covenant breach or could be viewed negatively by PCNB and, in any dispute, by a court or arbitrator. We recommend that Whitford & Sable LLP review the Credit Agreement's notice provisions and advise GDT on the timing and content of any required notification to PCNB.
We note that as of the date of this memorandum, notification to PCNB has not yet occurred. We recommend calendaring June 24, 2024 as a target date for PCNB notification, which provides sufficient time for GDT and its advisors to prepare an appropriate communication and for the board to be briefed. This date should be treated as an action item requiring follow-up by GDT's General Counsel and outside counsel.
VI. Coordination with Other Advisors
The milestone covenant issue implicates multiple aspects of GDT's legal, financial, and operational affairs. We recommend that GDT coordinate with the following advisors:
Whitford & Sable LLP (Harrison Whitford; Danielle Reeves). Whitford & Sable LLP serves as GDT's regular outside counsel for corporate and credit agreement matters. Whitford & Sable should take the lead on any covenant waiver or amendment negotiations with PCNB and should conduct a comprehensive review of the Credit Agreement for related provisions, including cross-default clauses, material adverse change or material adverse effect definitions, notice requirements, and voting or consent thresholds applicable to amendments and waivers. Whitford & Sable should also review GDT's other material agreements for cross-default provisions that could be triggered by an event of default under the PCNB Credit Agreement.
Ashby & Garner, LLP (Robert Garner). Ashby & Garner, LLP serves as outside counsel to Pinnacle Health Ventures. Given PHV's board representation (Elena Marchetti, David Ashford) and observer rights over material commercialization and reimbursement decisions, and in light of PHV's majority equity position (41.3% fully diluted), Robert Garner should be briefed on the covenant situation at the appropriate time, as determined in coordination with GDT's General Counsel and Whitford & Sable LLP.
Verdant Life Sciences Capital (Christine Lau, Managing Director). Verdant Life Sciences Capital serves as GDT's financial advisor. Christine Lau should be consulted to update GDT's financial models and projections to reflect the covenant risk, including scenarios in which the revolving facility is terminated, the outstanding balance is accelerated, or the available facility capacity is reduced. Verdant should also advise on the impact of the covenant situation on GDT's Series D financing or IPO timeline planning, and on the feasibility and implications of a facility paydown or refinancing.
Summit Ridge Accounting Group, LLP (Brian Castellano). Summit Ridge serves as GDT's independent auditor. The milestone covenant issue may have implications for GDT's FY2024 financial statements, including potential going-concern analysis considerations and financial statement disclosures. If there is a material risk that GDT will be unable to satisfy the covenant and that the resulting default could impair GDT's ability to continue as a going concern, this risk may need to be disclosed in the notes to GDT's financial statements or addressed in Summit Ridge's auditor's report. Brian Castellano should be briefed on the covenant situation to ensure that any required disclosures are identified and addressed in a timely manner.
VII. Limitations and Scope
This memorandum is subject to the following limitations:
This memorandum is limited to analyzing the milestone covenant implications arising from the OncoPrecise GXP-47 launch deferral. It does not constitute a comprehensive review of all covenants, representations, warranties, or other obligations under the PCNB Credit Agreement. Other provisions of the Credit Agreement may be relevant to GDT's overall compliance posture, and a comprehensive review of the full agreement and all ancillary documents should be conducted by Whitford & Sable LLP.
Calderwood & Harkness LLP's engagement scope covers Medicare coverage and coding strategy for GDT's OncoPrecise product platform. The covenant analysis provided in this memorandum is offered as an ancillary deliverable given its direct relationship to the reimbursement engagement — specifically, the interplay between the OncoPrecise GXP-47 launch deferral and the milestone covenant. Ongoing credit agreement matters, including covenant waiver and amendment negotiations with PCNB, are outside the scope of Calderwood & Harkness's engagement and should be coordinated through Whitford & Sable LLP.
The analysis set forth in this memorandum is based on the covenant language as described to us and as provided in Section 7.14 of the Credit Agreement. We have reviewed the specific language of Section 7.14, but we have not reviewed the full Credit Agreement, the Security Agreement, or other ancillary documents. A full review of these documents is recommended and should be conducted by Whitford & Sable LLP.
We have not reviewed the negotiating history, term sheet, credit committee memoranda, or drafting correspondence related to the Credit Agreement. As discussed in Part III above, such materials may contain extrinsic evidence bearing on the parties' intent with respect to Section 7.14 and should be reviewed by Whitford & Sable LLP.
This memorandum is a privileged and confidential attorney-client communication, prepared for the exclusive use of the named recipients. It should not be disclosed to any third party — including PCNB, its counsel, or any other person or entity — without the prior written consent of Calderwood & Harkness LLP and GDT's General Counsel.
Nothing in this memorandum constitutes a guarantee of any particular outcome. The legal analysis is based on our professional judgment and is subject to the inherent uncertainties of contract interpretation and dispute resolution.
Please do not hesitate to contact Miriam Calloway (213-555-0142; m.calloway@calderwoodharkness.com) or Sean Morrissey (213-555-0189; s.morrissey@calderwoodharkness.com) with any questions regarding this memorandum or the matters discussed herein.
CALDERWOOD & HARKNESS LLP
By: ________
Miriam Calloway Partner, Healthcare & Life Sciences Practice
By: ________
Sean Morrissey Senior Associate, Healthcare & Life Sciences Practice
Date: May 28, 2024
VIII. Appendices (Referenced)
The following appendices are referenced in this memorandum and should be maintained as part of the privileged attorney-client file for this matter:
Appendix A: Relevant excerpt of Section 7.14 of the Revolving Facility Credit Agreement between Genome Dx Therapeutics Inc. and Pacific Coast National Bank, dated September 22, 2023 (Credit Agreement Ref. PCNB-GDT-RF-2023-0922).
Appendix B: Copy of Local Coverage Determination LCD L38472 (OncoPrecise GXP-12, 12-Gene Expression Panel for Early-Stage Breast Cancer Prognosis), effective August 15, 2021, issued by Cascade Fiscal Intermediaries, LLC.
Appendix C: Summary timeline — OncoPrecise GXP-47 coverage strategy milestones (including PLA code application, LCD filing, and MolDx technical assessment submission dates), CLARITY-LUNG pivotal trial milestones (including interim data readout, DSMB meeting, board deferral resolution, and projected final data readout), and PCNB Credit Agreement covenant deadlines (including Section 7.14 testing date and cure period expiration).
Appendix D: Contact information for key advisors and counterparties:
PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT COMMUNICATION Calderwood & Harkness LLP | Matter No. 1043-00002 © 2024 Calderwood & Harkness LLP. All rights reserved.
From: | Miriam Calloway, Partner, and Sean Morrissey, Senior Associate, Calderwood & Harkness LLP
To: | Theresa Nakamura, General Counsel & VP of Regulatory Affairs, and Raymond Ota, Chief Financial Officer, Genome Dx Therapeutics Inc.
Date: | May 28, 2024
Re: | Analysis of Pacific Coast National Bank Milestone Covenant (Section 7.14) — Impact of OncoPrecise GXP-47 Launch Deferral
Matter No.: | 1043-00002
Credit Agreement Ref.: | PCNB-GDT-RF-2023-0922
Name | Organization | Role
Thomas Becerra | Pacific Coast National Bank | VP, Relationship Manager, Healthcare & Life Sciences Lending Group
Harrison Whitford | Whitford & Sable LLP | Partner, GDT Corporate & Credit Agreement Counsel
Danielle Reeves | Whitford & Sable LLP | Associate, GDT Corporate & Credit Agreement Counsel
Robert Garner | Ashby & Garner, LLP | Partner, PHV Outside Counsel
Christine Lau | Verdant Life Sciences Capital | Managing Director, GDT Financial Advisor
Brian Castellano | Summit Ridge Accounting Group, LLP | Partner, GDT Independent Auditor
Elena Marchetti | Pinnacle Health Ventures | Partner, GDT Board Member
David Ashford | Pinnacle Health Ventures | Principal, GDT Board Member

MEMORANDUM

CALDERWOOD & HARKNESS LLP

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