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