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Great Basin Scientific Inc (NASDAQ:GBSN) Best Bet Is A Sale

To say, shareholders of Great Basin Scientific Inc (NASDAQ:GBSN) have been disappointed is an understatement. Reverse splits, dilution, and management failing to deliver have created a perfect storm of underperformance. We at Insider Financial have been following the company and saw hope after its recent share offering and saw the stock pop to 25 cents. However, after the recent earnings report, we feel the best course of action is for the company to sell itself after it gets FDA approval. We don’t think CEO Ryan Ashton is the one to lead the company to the promise land.

A close look at earnings shows growth, but not as much as we’d like to see. Total revenues for the year ended December 31, 2015 was $2.1 million, compared to $1.6 million for the year ended December 31 2014, representing an increase of 33.4%. Total revenues for the fourth quarter of 2015 were $611,870, compared to $445,283 for the same period in 2014, representing an increase of 37.4%. Continued growth in Great Basin’s customer base as well as ongoing adoption of its Group B Strep assay drove the year-over-year increase. Great Basin ended the fourth quarter with 186 U.S. customers and 31 evaluations in-progress or scheduled, compared to 143 customers and 64 evaluations during the third quarter ending September 30, 2015.

The biggest problem is the company is burning through money as fast as it can. Operating expenses were $19.7 million for the year ended December 31, 2015, as compared to $9.8 million for the year ended December 31, 2014. Research and development expenses of $8.5 million increased by $3.9 million over the full year of 2014, primarily due to clinical trials and regulatory submissions for our Staph ID/R Blood Culture and Shiga Toxin Direct assays as well as increased product pipeline development. Selling and marketing expenses increased by $2.7 million over the year ended December 31, 2014 to $5.0 million, reflecting additional sales force hires, increased selling commissions and other costs as the Company grew the customer base by 121%. General and administrative costs increased by $3.3 million over the year ended December 31, 2014, to $6.2 million due to increased business activities and costs associated with operating as a public company.

At the rate the company is burning cash, it will have to raise more money and dilute shareholders again. This is why shares have broken below the last offering price of 16 cents. GBSN priced a public offering of 39.2 million units at a price of $0.16 per unit. The company expects that the gross proceeds will be approximately $6.3 million. Each unit consists of one share of common stock and 1.5 Series E warrants. Each whole Series E warrant will entitle the holder to acquire one share of common stock, subject to adjustment, at an exercise price of $0.25 per share for a period of five years following the date they first become exercisable. The Series E warrants will not be exercisable until at least one year from the date of issuance and exercise of the Series E warrants is subject to certain stockholder approval requirements.

In October, Great Basin submitted its Shiga Toxin Direct Test to the U.S. Food & Drug Administration (FDA) for 510(k) clearance following the successful completion of a clinical trial that met all of Great Basin’s clinical objectives. Upon clearance, the test will be the only stand-alone molecular test to detect Shiga toxin-producing E. coli and the serotype O157 directly from a patient specimen. We are expecting to hear back from the FDA possibly any day now.

The key is that even with FDA approval, we don’t believe the current management team will make Great Basin successful. They are the reason the share price is where it is at now. In the best interest of the company, the board of directors needs to focus on an exit strategy. With Great Basin’s technology, the stock is currently worth a heck of a lot more than where it is trading currently and a takeover would be a drop in the bucket for a big pharma player. We will be updating Insider Financial as soon as we know more. For continuing coverage on GBSN and our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!

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Disclosure: We have no position in GBSN and have not been compensated for this article.

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Great Basin Scientific Inc (NASDAQ:GBSN) Best Bet Is A Sale
5 Comments

5 Comments

  1. Barry

    March 4, 2016 at 10:33 am

    If any potential buyer has done ANY DD on who owns the Company they are well aware that the Share Price can be manipulated to any price at any time

    70% of the Common shares are owned by ex warrant holders from Toxic Financing ….there are $22.1 Million outstanding in convertible notes (approx 110MM shares) and a R/S is scheduled for mid March which after another short session by ex Warrant Holders will KILL the Market Cap forever and either result in delisting or Bankruptcy

    Steer Clear……the Management dug their own grave…..let them rest in it peacefully

    • kenneth

      March 4, 2016 at 6:14 pm

      welp there goes my 10 bucks in penny stocks!

  2. Jake

    March 10, 2016 at 10:20 am

    I can not believe there has not been more lawsuits on the way management handled this company. They ran it into the ground and stole from the common investor.

    • Sam

      March 23, 2016 at 2:49 pm

      They got a FDA approval, does that change anything?

  3. Ron Moody

    September 8, 2016 at 9:11 pm

    This Company’s executive team/BODs reminds me of the SD Chargers owner-Alex Spanos and his mismanagement of the franchise. All in for the bucks he can get out, dedicating all his energies towards procuring a new stadium instead of producing a winning team that would benefit those who support the team and subsequently himself. When I learned he’d gotten his way I was relieved…the shock of San Diegans standing firm on principle and common sense would have overwhelmed with relief, but alas, change is hard. The perfect Segue into another area in need of change. Great Basin’s executive team and its BOD’s (tasked with corporate oversight of which managing risk is a stated duty), ignores the path that other companies when faced with financial shortfalls, yet those led by capable management pursue, that being to identify the cause of the shortfall and implement targeted strategies, such as increasing sales, lowering production/administrative costs, reducing the labor force, etc., and when warranted, replacing the captain, the crew, and the BOD’s. This is done for one reason only, not malice nor prejudice, but for the one thing that opens the door to additional financing, increases shareholder value, and in a word, stabilizes a company, the one thing the GBSN’s team has failed to wrap their corporate mind around-improved accounting fundamentals. Despite hemorrhaging capital-the lifeblood of any company, and despite great potential in the fact that they actually DO have a valuable diagnostic tool and corresponding lab tests in their sales arsenal, and a very encouraging near term pipeline of other tests, this leadership team chooses instead to roll the dice (never considered a calculated risk) by diluting shareholder value and manipulating share price. It’s as if they have never looked outside the bubble of their corporate offices (perhaps they haven’t). This is not a strategy for rectifying a problem, it is an advertisement stating management doesn’t know what the problem is, how to fix it, and moreover, doesn’t understand how such an event will be viewed by investors and investors see red, line up on the bright red spot, take a breath, squeeze and fire, and fire they have. The stock is down over 90% for the year. Even the recent FDA approval of the Shiga Toxin test didn’t give it a bump. Investors do not like this company’s management, Period. It doesn’t take much more then a robot to push the buttons to an ATM machine and that has been the history of GBSN leadership under CEO Ryan Ashton. What IS required, are innovative minds motivated by success not money, able to see potential, and imbued with a sense of fiduciary responsibility towards their benefactors, the SHAREHOLDERS. There actually are corporate leaders possessing those traits. It isn’t too late for the company. It’s down to the wire, and NASDAQ is getting set to pull the plug by de-listing the company, but this company with it’s marketable testing equipment could still turn around, if Great Basin’s leadership displayed the will to make the substantive changes necessary if this company is to cheat the hangman. I can even now hear the collective sigh of the shareholders who’ve existed with the noose of impending insolvency growing ever tighter around their necks.

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