Great Basin Scientific, Inc. - FORM 8-K - EX-99.1 - PRESS RELEASE DATED NOVEMBER 13, 2014 - November 14, 2014

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EXHIBIT 99.1
 


 


Great Basin Scientific Announces Third Quarter 2014 Financial Results
 
Company Completes Initial Public Offering of Common Stock
 
Hitachi Chemical Makes Strategic Investment

Salt Lake City, UT - November 13, 2014 (PRNewswire) - Great Basin Scientific, Inc. (NASDAQ: GBSN), a molecular diagnostics company focused on the hospital-acquired infection market, today reported financial results for the third quarter ended September 30, 2014.  For the third quarter of 2014, revenue was $409,390, an increase of 83.2% compared to $223,470 for the third quarter of 2013.

Recent Business Highlights
 
·
Priced its initial public offering (IPO), selling 1.15 million units, consisting of 1.15 million shares of common stock and 1.15 million Class A warrants at $7 per unit for gross proceeds of $8.05 million on Oct. 8, 2014
·
Initiated a clinical trial for the Company’s Group B Strep assay in July 2014
·
Strengthened the management team with the addition of Jeffrey Rona as Chief Financial Officer
·
Hitachi Chemical made a strategic investment in the Company, purchasing $3.5 million of the Company’s Series D preferred stock in July 2014
·
Signed a new group purchasing agreement with the Premier Healthcare Alliance to offer the Toxigenic C. difficile assay to its members at specially negotiated pricing on Oct. 1; Premier serves more than 2,500 U.S. hospitals and over 81,000 other healthcare sites, and this agreement allows Premier alliance facilities to implement the Company’s sample-to-result molecular test for C. difficile without individual negotiations

“Hospital laboratories are increasingly choosing the Great Basin system for molecular diagnostic testing, and we believe our strong growth in the first three quarters of the year is due to Great Basin’s unique business model,” said Ryan Ashton, President and Chief Executive Officer of Great Basin Scientific. “We offer our instrument, the analyzer, without upfront capital expense, and our C. diff assay is competitively priced. Therefore our system allows a wider range of hospitals to adopt molecular diagnostics. The ease-of-use of our system, combined with its ability to deliver both low-plex tests and multi-plex panels, gives us a real market advantage. We recently completed our IPO and expanded our management team. We are excited about Great Basin’s continuous growth and will continue to strive to bring value to both our customers and shareholders.”


 
 
 


 
Third Quarter 2014 Financial Results:
 
·
Revenue during the three month period ended September 30, 2014, was $409,390 vs. $223,470 for the same period in 2013, which represented an increase of 83.2%
·
The Company ended the quarter with 80 U.S. customers
·
Operating expenses during the three month period ended September 30, 2014, were $2.5 million as compared to $1.9 million in the prior year period, an increase of 31.6%
·
Loss from Operations was $3.0 million for the three months ended September 30, 2014 as compared to $2.3 million for the same period in 2013, an increase of 30.4%
·
Net loss per common share for the three months ended September 30, 2014 was $117.59 per share as compared to $21.02 per share for the third quarter of 2013, an increase of 459.4%
·
Excluding the non-cash derivative liability charge, adjusted net loss per common share for the three months ended September 30, 2014 was $22.83 per share as compared to $21.02 per share for the third quarter of 2013, an increase of 8.6%

Third Quarter 2014 Operating Results
 
Revenue
 
Revenue increased by $185,920, or 83.2% in the three months ended September 30, 2014 as compared to the three months ended September 30, 2013. This increase was attributable to the increase in the sales of our C. diff products following an increase in the number of our customers.
 

2
 
 
 
Cost of Sales
 
Cost of sales increased $281,639, or 42.6%, for the three months ended September 30, 2014 as compared to the three months ended September 30, 2013.  The increase is attributable to the increased costs associated with manufacturing additional C. diff tests and the depreciation on additional analyzers needed to support the increase in customers. The gross margin increased from (195.7)% for the three months ended September 30, 2013 to (130.2)% for the three months ended September 30, 2014.
 
Research and Development
 
Research and development expenses increased by $632,187, or 79.8%, for the three months ended September 30, 2014 as compared to the three months ended September 30, 2013 as we began to ramp up efforts to prepare our next diagnostic test for clinical trials.
 
Selling and Marketing
 
Selling and marketing expenses decreased $246,485, or 34.0%, for the three months ended September 30, 2014 as compared to the three months ended September 30, 2013 as we decreased our headcount and sales and marketing activities due to a shortage of analyzers for new customers.
 
General and Administrative
 
General and administrative expenses increased $213,131, or 55.4%, for the three months ended September 30, 2014 as compared to the three months ended September 30, 2013 as we increased our business activities, raised additional capital and prepared for an initial public offering.
 
Interest Expense
 
Interest expense increased by $223,211, or 282.4%, for the three months ended September 30, 2014 as compared to the three months ended September 30, 2013 due to an increase in interest incurred on our capital lease payments and our letters of credit associated with the analyzer sale-leaseback agreement and interest on our related party note payable.
 

3
 
 
 
Liquidity and Capital Resources
 
As of September 30, 2014, Great Basin had approximately $0.7 million in cash and cash equivalents on hand, as compared to $1.2 million as of December 31, 2013.  On Oct. 8, 2014, subsequent to the end of the third quarter, the Company completed an initial public offering of common stock and warrants that raised gross proceeds of $8.05 million, with net proceeds of approximately $6.4 million after underwriting discounts, commissions and other expenses.  Including the benefit of the recent initial public offering, Great Basin had pro-forma cash of $7.1 million as of September 30, 2014.
 
Change in Fair Value of Derivative Liability
 
The change in fair value of derivative liability resulted in a non-cash expense in the amount of $13.9 million for the three months ended September 30, 2014.  The charge is the result of the increase in the fair value of Class A and Class B common warrants as a result of the increase in the value of our common stock during the period as we approached our IPO date.  The warrants had a nominal value at issuance and the previous reporting period.

Non-GAAP Financial Measures

This press release includes the following “non-GAAP financial measures” as defined by the United States Securities and Exchange Commission (SEC): adjusted Net Income and pro-forma cash. These measures may be different from non-GAAP financial measures used by other companies. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation of, or as a substitute for, the financial information prepared and presented in accordance with generally accepted accounting principles (GAAP). For a reconciliation of these non-GAAP financial measures to the nearest comparable GAAP measures, see “Reconciliation of Non-GAAP Financial Measures” included in this press release.
 

 
4
 
 

Reconciliation of Non-GAAP financial measures

Value of Derivative Liability. The Company excludes the value of the derivative liability because it is non-cash in nature and because the Company believes that the non-GAAP financial measures excluding this item provides meaningful supplemental information regarding operational performance and liquidity. The Company further believes this measure is useful to investors in that it allows for greater transparency to certain line items in its financial statements and facilitates comparisons to peer operating results.

Pro-forma cash.  The Company has included the net proceeds received from the IPO in pro-forma cash because the Company believes that it provides investors with a better understanding of the Company’s liquidity.

   
Three Months Ended
    
Nine Months Ended
  
   
September 30,
    
September 30,
  
The calculation of Adjusted Net Income follows:
  
2014
    
2013
    
2014
    
2013
  
Net loss
   $ (17,248,524 )   $ (2,428,417 )   $ (23,230,902 )   $ (6,750,136 )
Adjustment for change in derivative liability
     13,900,400       -       13,900,400       -  
Adjusted net loss
   $ (3,348,124 )   $ (2,428,417 )   $ (9,330,502 )   $ (6,750,136 )
Adjusted net loss per common share - basic and diluted
   $ (22.83 )   $ (21.02 )   $ (74.04 )   $ (58.44 )
Weighted average common shares - basic and diluted
     146,678       115,510       126,014       115,510  
                                 
                                 
The calculation of Pro-Forma Cash follows:
     September
30,
2014		                          
Cash and cash equivalents
   $ 676,471                          
Net proceeds from initial public offering
   $ 6,400,000                          
Pro-forma cash and cash equivalents
   $ 7,076,471                          
                                 

 
About Great Basin Scientific
 
Great Basin Scientific is a molecular diagnostics company that commercializes breakthrough chip-based technologies. The Company is dedicated to the development of simple, yet powerful, sample-to-result technology and products that provide fast, multiple-pathogen diagnoses of infectious diseases. The Company’s vision is to make molecular diagnostic testing so simple and cost-effective that every patient will be tested for every serious infection, reducing misdiagnoses and significantly limiting the spread of infectious disease. More information can be found on the Company’s website at www.gbscience.com.



5
 
 
 
 
Forward-Looking Statements

This press release includes forward-looking statement regarding events, trends and business prospects, which may affect our future operating results and financial position.  Forward-looking statements involve risk and uncertainties, which could cause actual results to differ materially, and reported results should not be considered as an indication of future performance.  These risk and uncertainties include, but are not limited to: (i) our limited operating history and history or losses; (ii) our ability to develop and commercialize new products and the timing of commercialization; (iii) our ability to obtain capital when needed; and (iv) other risks set forth in the Company’s filings with the Securities and Exchange Commission, including the risks set forth in the company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014.  These forward-looking statements speak only as of the date hereof and Great Basin Scientific specifically disclaims any obligation to update these forward-looking statements, except as required by law.
 
 
 

6
 
 
 
GREAT BASIN SCIENTIFIC, INC.
CONDENSED BALANCE SHEETS
September 30, 2014 and December 31, 2013
(Unaudited)
 
 
 
September 30,
 
 
December 31,
 
 
 
2014
 
 
2013
 
Assets
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
Cash
 
$
676,471
 
 
$
1,211,423
 
Accounts receivable, net of allowances of $5,482 and $5,482, respectively
 
 
233,426
 
 
 
184,415
 
Inventory
 
 
381,952
 
 
 
320,239
 
Prepaid and other current assets
 
 
895,160
 
 
 
94,421
 
Total current assets
 
 
2,187,009
 
 
 
1,810,498
 
Intangible assets, net
 
 
245,896
 
 
 
334,025
 
Property and equipment, net
 
 
3,529,265
 
 
 
3,703,582
 
Total assets
 
$
5,962,170
 
 
$
5,848,105
 
Liabilities and Stockholders' Deficit
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
Accounts payable
 
$
1,695,497
 
 
$
874,119
 
Accrued expenses
 
 
858,412
 
 
 
815,814
 
Current portion of notes payable
 
 
48,586
 
 
 
44,601
 
Notes payable - related party, net of discount of $83,333
 
 
416,667
 
 
 
—
 
Current portion of capital lease obligations
 
 
959,403
 
 
 
506,506
 
Total current liabilities
 
 
3,978,565
 
 
 
2,241,040
 
Notes payable, net of current portion
 
 
18,732
 
 
 
55,730
 
Capital lease obligations, net of current portion
 
 
2,435,625
 
 
 
2,042,359
 
Derivative liability
 
 
13,900,400
 
 
 
—
 
Total liabilities
 
 
20,333,322
 
 
 
4,339,129
 
Commitments and contingencies (see NOTE 10 LEGAL PROCEEDINGS)
 
 
 
 
 
 
 
 
Convertible preferred stock:
 
 
 
 
 
 
 
 
Series A convertible preferred stock, par value $.001; 119,987,898 and 125,000,000 shares
 
 
 
 
 
 
 
 
   authorized; 107,881,171 and 117,131,171 shares issued and outstanding, respectively
 
 
17,366,539
 
 
 
18,846,539
 
Series B convertible preferred stock, par value $.001; 59,465,350 and 100,000,000 shares
 
 
 
 
 
 
 
 
   authorized; 59,465,350 shares issued and outstanding, respectively
 
 
9,464,454
 
 
 
9,464,454
 
Series C convertible preferred stock, par value $.001; 165,877,435 and 210,000,000 shares
 
 
 
 
 
 
 
 
   authorized; 165,877,435 and 150,989,224 shares issued and outstanding, respectively
 
 
4,040,585
 
 
 
3,674,335
 
Series C-1 convertible preferred stock, par value $.001; 84,027,175 and 100,000,000 shares
 
 
 
 
 
 
 
 
   authorized; 84,027,175 shares issued and outstanding, respectively
 
 
2,067,068
 
 
 
2,067,068
 
Series D convertible preferred stock, par value $.001;  325,000,000 and 0 shares
 
 
 
 
 
 
 
 
   authorized; 306,091,710 and 0 shares issued and outstanding, respectively
 
 
6,716,765
 
 
 
—
 
Stockholders' deficit:
 
 
 
 
 
 
 
 
Common stock, $.001 par value: 1,800,000,000 and 375,000,000 shares
 
 
 
 
 
 
 
 
   authorized; 161,760 and 115,510 shares issued and outstanding, respectively
 
 
162
 
 
 
116
 
Additional paid-in capital
 
 
11,481,055
 
 
 
9,733,342
 
Accumulated deficit
 
 
(65,507,780
)
 
 
(42,276,878
)
Total stockholders' deficit
 
 
(54,026,563
)
 
 
(32,543,420
)
Total liabilities, convertible preferred stock and stockholders' deficit
 
$
5,962,170
 
 
$
5,848,105
 
 
 
7
 
 

GREAT BASIN SCIENTIFIC, INC.
CONDENSED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
 
Three Months Ended
 
 
Nine  Months Ended
 
 
 
September 30,
 
 
September 30,
 
 
 
2014
 
 
2013
 
 
2014
 
 
2013
 
Revenues
 
$
409,390
 
 
$
223,470
 
 
$
1,160,971
 
 
$
464,861
 
Cost of sales
 
 
942,334
 
 
 
660,695
 
 
 
2,761,153
 
 
 
1,078,610
 
Gross loss
 
 
(532,944
)
 
 
(437,225
)
 
 
(1,600,182
)
 
 
(613,749
)
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Research and development
 
 
1,424,877
 
 
 
792,690
 
 
 
3,265,149
 
 
 
2,678,912
 
Selling and marketing
 
 
479,499
 
 
 
725,984
 
 
 
1,646,782
 
 
 
2,066,479
 
General and administrative
 
 
597,795
 
 
 
384,664
 
 
 
2,004,080
 
 
 
1,257,109
 
(Gain) loss on sale of assets
 
 
-
 
 
 
6,504
 
 
 
(8,166
)
 
 
22,767
 
Total operating expenses
 
 
2,502,171
 
 
 
1,909,842
 
 
 
6,907,845
 
 
 
6,025,267
 
Loss from operations
 
 
(3,035,115
)
 
 
(2,347,067
)
 
 
(8,508,027
)
 
 
(6,639,016
)
Other income (expense):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
 
 
(314,450
)
 
 
(82,239
)
 
 
(819,235
)
 
 
(114,065
)
Interest income
 
 
619
 
 
 
889
 
 
 
2,057
 
 
 
2,945
 
Change in fair value of derivative liability
 
 
(13,900,400
)
 
 
-
 
 
 
(13,900,400
)
 
 
-
 
Total other income (expense)
 
 
(14,214,231
)
 
 
(81,350
)
 
 
(14,717,578
)
 
 
(111,120
)
Loss before provision for income taxes
 
 
(17,249,346
)
 
 
(2,428,417
)
 
 
(23,225,605
)
 
 
(6,750,136
)
Provision for income taxes
 
 
822
 
 
 
-
 
 
 
(5,297
)
 
 
-
 
Net loss
 
$
(17,248,524
)
 
$
(2,428,417
)
 
$
(23,230,902
)
 
$
(6,750,136
)
Net loss per common share - basic and diluted
 
$
(117.59
)
 
$
(21.02
)
 
$
(184.35
)
 
$
(58.44
)
Weighted average common shares - basic and diluted
 
 
146,678
 
 
 
115,510
 
 
 
126,014
 
 
 
115,510
 

 

8
 
 
GREAT BASIN SCIENTIFIC, INC.
CONDENSED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2014 and 2013
(Unaudited)
 
 
 
Nine Months Ended
 
 
 
September 30,
 
 
 
2014
 
 
2013
 
Cash flows from operating activities:
 
 
 
 
 
 
 
 
Net loss
 
$
(23,230,902
)
 
$
(6,750,136
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
 
 
 
 
Depreciation and amortization
 
 
855,484
 
 
 
549,629
 
Change in fair value measurement
 
 
13,900,400
 
 
 
—
 
(Gain) loss on sale of assets
 
 
(8,166
)
 
 
22,767
 
Interest converted to preferred stock
 
 
13,129
 
 
 
—
 
Employee stock compensation
 
 
242,696
 
 
 
83,317
 
Warrant issuance and modifications
 
 
25,063
 
 
 
—
 
Debt discount amortization
 
 
16,667
 
 
 
—
 
Asset disposal
 
 
11,124
 
 
 
—
 
Changes in operating assets and liabilities:
 
 
 
 
 
 
 
 
Increase in accounts receivable, net
 
 
(49,011
)
 
 
(46,400
)
Increase in inventory
 
 
(61,713
)
 
 
(95,040
)
Increase in prepaid and other assets
 
 
(269,459
)
 
 
(29,765
)
Increase in accounts payable
 
 
360,882
 
 
 
135,029
 
Increase in accrued liabilities
 
 
42,598
 
 
 
415,182
 
Net cash used in operating activities
 
 
(8,151,208
)
 
 
(5,715,417
)
Cash flows from investing activities:
 
 
 
 
 
 
 
 
Acquisition of property and equipment
 
 
(222,584
)
 
 
(774,540
)
Acquisition of intangible asset
 
 
-
 
 
 
(200,000
)
Construction of equipment
 
 
(479,196
)
 
 
(1,774,341
)
Proceeds from sale of assets
 
 
35,000
 
 
 
63,000
 
Proceeds from sale leaseback
 
 
1,500,000
 
 
 
—
 
Net cash provided by (used in) investing activities
 
 
833,220
 
 
 
(2,685,881
)
Cash flows from financing activities:
 
 
 
 
 
 
 
 
Proceeds from issuance of convertible notes payable
 
 
100,000
 
 
 
4,577,688
 
Proceeds from issuance of convertible notes payable - related party
 
 
300,000
 
 
 
—
 
Proceeds from issuance of preferred stock
 
 
6,569,886
 
 
 
—
 
Proceeds from issuance of notes payable - related party
 
 
890,000
 
 
 
—
 
Proceeds from subscriptions receivable
 
 
—
 
 
 
3,288,333
 
Principal payments of capital leases
 
 
(653,837
)
 
 
(23,677
)
Principal payments of notes payable
 
 
(390,000
)
 
 
(24,995
)
Principal payments of notes payable -related party
 
 
(33,013
)
 
 
—
 
Net cash provided by financing activities
 
 
6,783,036
 
 
 
7,817,349
 
Net increase (decrease) in cash
 
 
(534,952
)
 
 
(583,949
)
Cash, beginning of the period
 
 
1,211,423
 
 
 
1,143,009
 
Cash, end of the period
 
$
676,471
 
 
$
559,060
 
Supplemental disclosures of cash flow information:
 
 
 
 
 
 
 
 
Interest paid
 
$
775,666
 
 
$
10,021
 
Income taxes paid
 
$
6,447
 
 
$
—
 
Supplemental schedule of non-cash investing and financing activities:
 
 
 
 
 
 
 
 
Conversion of preferred stock to common stock
 
$
1,480,000
 
 
$
—
 
Issuance of preferred stock as debt discount
 
$
100,000
 
 
$
—
 
Conversion of note payable to preferred stock
 
$
400,000
 
 
$
—
 
Assets acquired through capital leases
 
$
807,272
 
 
$
—
 
Initial public offering costs incurred but unpaid
 
$
531,280
 
 
$
—
 
Property and equipment included in accounts payable
 
$
70,784
 
 
$
—
 

 
 
9
 
 

Media Contact:
Martina Schwarzkopf, Ph.D.
Russo Partners, LLC
212.845.4292
martina.schwarzkopf@russopartnersllc.com

Investor Relations Contact:
Bob Yedid
ICR
646.277.1250
Bob.Yedid@icrinc.com
 
 
 

 

10
 
 

Great Basin Scientific, Inc. Reports