As filed with the Securities and Exchange Commission on December 2, 2016

Registration Statement No. 333-213144

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

Amendment No. 1
to
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

 

GREAT BASIN SCIENTIFIC, INC.

(Exact name of registrant as specified in its charter)

 

Delaware		3841		83-0361454
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

420 E. South Temple, Suite 520
Salt Lake City, UT 84111
(801) 990-1055

(Address and telephone number of registrant’s principal executive offices)

 

Ryan Ashton
Chief Executive Officer
Great Basin Scientific, Inc.
420 E. South Temple, Suite 520
Salt Lake City, UT 84111
(801) 990-1055

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

Copies to:

Jason Brenkert Dorsey & Whitney LLP 1400 Wewatta Street, Suite 400 Denver, Colorado 80202 (303) 629-3450		Robert Charron Ellenoff Grossman & Schole LLP 1345 Avenue of the Americas New York, New York 10105 Direct: (212) 931-8704

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company x

The registrant is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended. This registration statement complies with the requirements that apply to an issuer that is an emerging growth company.

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CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered		Proposed Maximum Aggregate Offering Price(1)				Amount of Registration Fee
Units, each consisting of (a) one share of Series G Mandatorily Convertible Preferred Stock, par value $0.001, stated value $1,000 per share, and (b) a Series I Warrant to purchase Common Stock, par value $0.0001 per share		$	8,000,000			$	805.6
Series G Mandatorily Convertible Preferred Stock, par value $0.001, stated value $1,000 per share(3)
Series I Warrants to Purchase Common Stock, par value $0.0001 per share, underlying Units(3)
Common stock par value $0.0001 per share, issuable under the Series G 12.5% Mandatorily Convertible Preferred Stock and the Series I Warrants(2)		$	12,000,000			$	1,208.4
Total		$	20,000,000			$	2,014

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS		SUBJECT TO COMPLETION		DATED DECEMBER 2, 2016

Units, Series G     % Mandatorily Convertible Preferred Stock and Series I
Warrants to Purchase Common Stock
(     shares of Common Stock underlying the Series G     % Mandatorily Convertible Preferred Stock and Series I Warrants)

 

We are offering an aggregate of up to      Units , representing $ of units, or “Units,” each consisting of: (i) one share of our Series G     % Mandatorily Convertible Preferred Stock, par value $0.001 per share, with a stated value of  $1,000 per share, or “Series G Preferred Stock,” which is initially convertible into      shares of our common stock, par value $0.0001 per share, or “Common Stock;” and (ii) a Series I Warrant to purchase      shares of our Common Stock. The Units will not be issued or certificated. The Series G Preferred Stock and Series I Warrants are immediately separable and will be issued separately, but will be purchased together as a unit in this offering. This prospectus also covers (a) up to shares of Common Stock issuable upon conversion of the Series G Preferred Stock and exercise of the Series I Warrants.

The Series G Preferred Stock is convertible into shares of Common Stock by dividing the stated value of the Preferred Stock by the conversion price. The conversion price is equal to the lesser of: (i) $     per share of Common Stock, referred to as the “Set Price;” and (ii)     % of the lowest volume weighted average trading price of the Common Stock during the five trading days ending on, and including the date of delivery of a notice of conversion, subject to adjustment as provided for in the Certificate of Designation. Each Series I Warrant will be exercisable for a number of shares of Common Stock determined as 100% of the total shares of Common Stock into which one share of Series G Preferred Stock sold in this offering is convertible based on the Set Price.

The Set Price will be determined as the closing bid price for the Common Stock as reported on the date of effectiveness of this registration statement. The initial conversion price, subject to adjustment as provided for in the Certificate of Designation, for the Series G Preferred Stock will be the Set Price and the Set Price will be the Series I Warrant initial exercise price, subject to adjustment as described in the form of Series I Warrant. Based on the closing bid price of the Common Stock as of December   , 2016, the Set Price would be $    . As a result, at that date and assuming such Set Price: (i) one share of Series G Preferred Stock would be convertible into      shares of the Common Stock and, assuming      Units are sold, all shares of the Series G Preferred Stock would be convertible into      shares of Common Stock; and (ii) one Series I Warrant would permit the holder to acquire      shares of the Common Stock at an initial exercise price of  $     and allow all Series I Warrants to be exercised for a total of      shares of Common Stock at an initial exercise price of  $    .

We have not made any arrangements to place funds raised in this offering in an escrow, trust or similar account. Any investor who purchases securities in this offering will have no assurance that other purchasers will invest in this offering. Accordingly, if we file for bankruptcy protection or a petition for insolvency bankruptcy is filed by creditors against us, your funds will become part of the bankruptcy estate and administered according to the bankruptcy laws. We anticipate that the offering will end no later than 15 business days after the effective date of the registration statement of which this prospectus is a part, and it will not be extended. Closing of the offering is subject to customary closing conditions including but not limited delivery of officer certificates and legal opinions and the continued accuracy of representations and warranties. We may determine in our sole discretion to terminate the offering at any time prior to closing. We will not accept funds prior to closing. Funds will be maintained in the accounts of the placement agent prior to closing. In the event the offering is terminated prior to closing, the placement agent will return any collected proceeds to investors promptly without reduction.

This offering is being made in the United States only to investors which qualify as “institutional investors” under the state securities laws and regulations of their state of domicile.

Our common stock is quoted on the OTCQB marketplace under the symbol “GBSN.” On December 1, 2016, the last reported sales price of our common stock on the OTCQB was $0.01 per share. There is no established trading market for the Series G Preferred Stock or Series I Warrants and we do not expect an active trading market to develop. In addition, we do not intend to list the Series G Preferred Stock or Series I Warrants on any securities exchange or other trading market. Without an active trading market, the liquidity of the Series G Preferred Stock and Series I Warrants will be limited.

We are an “emerging growth company” as that term is used in the Jumpstart Our Business Startups Act of 2012 and, as such, have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings. See “Prospectus Summary —  Implications of Being an Emerging Growth Company.”

Investing in our securities involves risks. You should carefully read and consider the “Risk Factors” beginning on page 18 of this prospectus before investing.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

		Per Unit				Total
Public offering price		$				$
Placement agent fees(1)		$				$
Proceeds to us, before expenses		$				$

We have engaged Roth Capital Partners, LLC to act as our exclusive placement agent in connection with this offering (the “placement agent”). The placement agent is an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act of 1933, as amended. The placement agent may engage one or more sub-placement agents or selected dealers to assist with this offering. The placement agent is not purchasing the securities offered by us and is not required to sell any specific number or dollar amount of securities but will assist us in this offering on a commercially reasonable “best efforts” basis. There are no arrangements to place the funds raised in this offering in an escrow, trust or similar account. We have agreed to pay the placement agent a cash fee equal to 7% of the gross proceeds from the sale of the Units. We have also agreed to reimburse the placement agent for its reasonable out-of-pocket legal expenses up to $75,000 and other reasonable out-of-pocket expenses up to $25,000. We estimate that the total expenses of this offering, excluding the placement agent fees, will be approximately $    . Because there is no minimum offering amount required as a condition to closing in this offering, the actual public offering amount, placement agent fees, and proceeds to us, if any, are not presently determinable and may be substantially less than the total maximum offering amounts set forth above. See “Plan of Distribution” beginning on page 130 of this prospectus for more information on this offering and the placement agent arrangements. All costs associated with the registration will be borne by us.

Delivery of the securities offered hereby is expected to be made on or about           , 2016, subject to the satisfaction of certain conditions.

 

Roth Capital Partners

The date of this prospectus is           , 2016

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PROSPECTUS SUMMARY			1
RISK FACTORS			18
CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS			48
DILUTION			49
USE OF PROCEEDS			51
MARKET PRICE HISTORY			52
DIVIDEND POLICY			52
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			53
BUSINESS			67
MANAGEMENT			86
EXECUTIVE AND DIRECTOR COMPENSATION			91
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			100
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS			101
DESCRIPTION OF CERTAIN INDEBTEDNESS			104
DESCRIPTION OF CAPITAL STOCK			110
DESCRIPTION OF OFFERED SECURITIES			126
PLAN OF DISTRIBUTION			130
LEGAL MATTERS			133
EXPERTS			133
WHERE YOU CAN FIND MORE INFORMATION			134

You should rely only on the information contained in this prospectus and any free writing prospectus prepared by us or on our behalf. We have not, and the placement agent has not, authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the placement agent is not, making an offer to sell the securities offered hereby in any jurisdiction where the offer is not permitted. The information contained in this prospectus and any free writing prospectus that we have authorized for use in connection with this offering is accurate only as of the date of those respective documents, regardless of the time of delivery of this prospectus or any authorized free writing prospectus or the time of issuance or sale of any securities. Our business, financial condition, results of operations and prospects may have changed since those dates. You should read this prospectus and any free writing prospectus that we have authorized for use in connection with this offering in their entirety before making an investment decision. You should also read and consider the information in the documents to which we have referred you in the section of this prospectus entitled “Where You Can Find More Information.”

We are offering to sell, and seeking offers to buy, the securities only in jurisdictions where offers and sales are permitted. The distribution of this prospectus and the offering of the securities in certain jurisdictions may be restricted by law. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the securities and the distribution of this prospectus outside the United States. This prospectus does not constitute, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy, any securities offered by this prospectus by any person in any jurisdiction in which it is unlawful for such person to make such an offer or solicitation.

This prospectus contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to

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herein have been filed, will be filed, or will be incorporated by reference as exhibits to the registration statement of which this prospectus is a part, and you may obtain copies of those documents as described below under the section entitled “Where You Can Find More Information.”

The representations, warranties and covenants made by us in any agreement that is filed as an exhibit to any document that is incorporated by reference in this prospectus were made solely for the benefit of the parties to such agreement, including, in some cases, for the purpose of allocating risk among the parties to such agreements, and should not be deemed to be a representation, warranty or covenant to you. Moreover, such representations, warranties or covenants were accurate only as of the date when made. Accordingly, such representations, warranties and covenants should not be relied on as accurately representing the current state of our affairs.

This prospectus contains market data and industry statistics and forecasts that are based on independent industry publications and other publicly available information. Although we believe that these sources are reliable, we do not guarantee the accuracy or completeness of this information, and we have not independently verified this information. Although we are not aware of any misstatements regarding the market and industry data presented in this prospectus, these estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” and any related free writing prospectus. Accordingly, investors should not place undue reliance on this information.

Our logo and some of our trademarks are used in this prospectus, which remain our sole intellectual property. This prospectus also includes trademarks, tradenames, and service marks that are the property of other organizations. Solely for convenience, our trademarks and tradenames referred to in this prospectus appear without the ^TM symbol, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or the right of the applicable licensor to these trademarks and tradenames.

Unless the context requires otherwise references to “Great Basin Scientific,” “Great Basin”, our “Company,” “we,” “us” or “our” refer to Great Basin Scientific, Inc., a Delaware corporation, doing business as Great Basin Corporation.

Note Regarding Reverse Stock Split

Our board of directors has approved for submission to a vote of our stockholders the grant of authority to the board of directors to amend our Certificate of Incorporation to effect a reverse split of our common stock, which we refer to as the December 2016 Reverse Stock Split. We have set December 13, 2016 as the date for our special meeting of stockholders to vote on this proposal and the increase in authorized capital described immediately below. If our stockholders approve this proposal, our board of directors will have the authority, but not the obligation, to implement the Reverse Stock Split, at any time on or before February 28, 2017, in a ratio of not less than 1-for-200 and not more than 1-for-300, with the final ratio to be determined at the discretion of our board of directors. Unless we indicate otherwise, the information in this prospectus does not reflect the pro forma impact of the December Reverse Stock Split.

Note Regarding Increase in Authorized Capital

Our board of directors has approved for submission to a vote of our stockholders the grant of authority to the board of directors to amend our Certificate of Incorporation to increase our authorized shares of common stock from 200,000,000 to 1,500,000,000. We have set December 13, 2016 as the date for our special meeting of stockholders to vote on this proposal. Unless we indicate otherwise, the information in this prospectus does not reflect the potential increase in authorized capital.

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PROSPECTUS SUMMARY

The following information is a summary of the prospectus and it does not contain all of the information you should consider before investing in our securities. You should read the entire prospectus carefully, including the “Risk Factors” section and our financial statements and the notes relating to the financial statements contained in this prospectus, before making an investment decision.

Our Company

We are a molecular diagnostic testing company focused on the development and commercialization of our patented, molecular diagnostic platform designed to test for infectious disease, especially hospital-acquired infections. We believe that small to medium sized hospital laboratories, those under 400 beds, are in need of simpler and more affordable molecular diagnostic testing methods. We market a system that combines both affordability and ease-of-use, when compared to other commercially available molecular testing methods, which we believe will accelerate the adoption of molecular testing in small to medium sized hospitals. Our system includes an analyzer, which we provide for our customers’ use without charge in the United States, and a diagnostic cartridge, which we sell to our customers. For purposes of this prospectus, we use the term “assay(s)” to describe our existing diagnostic test product as well as our diagnostic test products under development. Our testing platform has the capability to identify up to 64 individual targets at one time. If the assay identifies one to three targets, we refer to them as low-plex tests, or tests, and if they identify four or more targets we refer to them as multi-plex panels, or panels. We currently have four commercially available tests, our first for clostridium difficile, or C. diff, which received clearance from the Food and Drug Administration, or FDA, in April 2012, our second for Group B Strep, which received clearance from the FDA in April 2015 and launched commercially in June 2015, our third for Shiga Toxin Direct, or STEC, which received clearance from the FDA in March of 2016 and launched commercially in August 2016 and the fourth Staphylococcus Identification and Resistance Blood Culture Panel, or Staph ID/R panel, which received FDA clearance in March of 2016 and launched commercially in September 2016. Our customers consist of hospitals, clinics, laboratories and other healthcare providers in the United States, the European Union and New Zealand.

Molecular diagnostic testing generally reduces test time from days to hours compared to culture methods, and typically provides much more accurate results than non-molecular rapid assays. Culture testing utilizes a sample taken from a patient, which is incubated in a culture medium; the operator waits for the microorganisms, if there are any, to grow until they are in large enough quantities to be detected. This method can take days and in some cases requires highly trained laboratory technicians to perform the tests and interpret the results. The accuracy of culture-based methods has been shown to be lower than that of molecular-based approaches. For example, in a multi-arm, multicenter clinical study using our C. diff test, we increased detection sensitivity nearly 20% as compared to the culture-based arm. Molecular testing methods, like our system, utilize technologies to multiply the DNA from a small sample until it can be detected by an automated, visual system. A key difference between our system and other molecular systems is our use of a low-cost, but highly sensitive, semiconductor chip based detection system. This allows us to utilize existing components, for example digital camera components, to provide visual evidence of the result. This provides more accurate answers generally in hours and can be operated by technicians with less extensive training than is required for culture testing. We believe these advantages can lead to shortened hospital stays and improved patient outcomes, resulting in reduced costs for hospitals that implement molecular testing in their labs. We believe this improvement in the time to result and the quality of those results has led to a fast-growing market for molecular diagnostic systems at hospitals. We believe our system is well positioned to meet this need and attract new customers. As of September 30, 2016, we had 276 customers worldwide (255 in the United States and 21 in the rest of the world), who use an aggregate of 510 of our analyzers.

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The first step to acquiring a customer is an evaluation. During the evaluation period, potential customers utilize our system alongside their current testing method (molecular or non-molecular) and at the end of the evaluation period determine if they are interested in switching to our system, as evidenced by the purchase of our diagnostic tests on a recurring basis, or by remaining with their current testing method. This period, which we refer to as our sales cycle was an average of approximately 74 days in 2014, 65 days in the first half of 2015, 35 days in the second half of 2015 and 11 days in the nine month period ended September 30, 2016. We believe that the improvement in our sales cycle is due to process improvements we have made in our selling process and increased acceptance by our market of small to medium hospitals of Molecular Diagnostic testing for infectious diseases. Our recent customer and evaluation history is as follows:

		Total U.S. Customers				C. diff Customers				C. diff Penetration				Group B Strep Customers				Group B Strep Penetration
Third Quarter 2014			80				80				100	%			0				NA
Fourth Quarter 2014			84				84				100	%			0				NA
First Quarter 2015			101				101				100	%			0				NA
Second Quarter 2015			115				115				100	%			0				NA
Third Quarter 2015			143				142				99	%			25				17	%
Fourth Quarter 2015			186				185				99	%			47				25	%
First Quarter 2016			222				219				99	%			61				27	%
Second Quarter 2016			260				253				97	%			78				30	%
Third Quarter 2016			255				248				97	%			78				30	%

As our STEC and Staph ID/R assays commercially launched in August 2016 and September 2016, respectively, we don’t have meaningful penetration and win rates for those assays as of the date of the prospectus.

We refer to the percentage of customers that elect to switch to our platform and purchase our diagnostic tests after receiving and evaluating our platform as our “win rate.” This is a metric that we use to determine our sales efficiency and our market acceptance. Our win rate calculation is determined without any minimum or recurring purchase threshold. Our win rates over various periods since we launched our C. diff product commercially are as follows:

		Number of Evaluations				Win Rate
Full Year 2013			86				69	%
Full Year 2014			49				76	%
Full Year 2015			125				85	%
1st Quarter 2016			40				85	%
2nd Quarter 2016			49				88	%
3rd Quarter 2016			24				79	%
Since Commercial Launch (as of September 30, 2016)			373				80	%

We believe our platform has the ability to provide small to medium sized hospitals with an easy-to-use, affordable solution when compared to other commercially available sample-to-result molecular testing methods — one that provides accurate results in 45 to 115 minutes depending on the assay — to meet the rapidly evolving needs of providers and their patients.

We formally launched the sale of our C. diff test in the United States in the third quarter of 2012. Since this launch, we have generated limited revenues of $6.7 million as of September 30, 2016, including $2.2 million in the 9 months ended September 30, 2016 from the sale of our tests. We have generated substantial losses since inception and have an accumulated deficit of $204.9 million at September 30, 2016. Our auditor included a paragraph in their 2015 audit opinion expressing substantial doubt as to our ability to continue as a going concern due to our cash position and other concerns as disclosed in the footnotes to the audited financial statements.

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Our Products and Our Product Candidates

Our FDA Cleared Tests

Our Assays in Clinical Development

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Our Assays in Development

Product Markets

Based on published research we believe that fewer than half of all hospitals are currently using molecular testing for their infectious disease testing. More importantly, we believe that a far smaller fraction of all testing done in hospital labs is molecular. We believe that as molecular testing becomes more cost effective, its advantages of faster time to result and higher sensitivity relative to legacy testing methods will lead more and more hospitals to convert to molecular testing.

Our diagnostic assays are currently sold in the United States, Europe and New Zealand. Our primary focus is in the U.S. where we utilize a direct sales and support team. We utilize distributors in certain key European countries and New Zealand. If we decide to increase our efforts internationally we expect they will be augmented by marketing partners and distributors in other strategic areas as we expand internationally.

Implications of Being an Emerging Growth Company

We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an emerging growth company, we intend to take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:

We may take advantage of these provisions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1 billion or more;

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(ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of our initial public offering (our “IPO”); (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission. We have taken advantage of reduced reporting requirements in this prospectus. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you have beneficial ownership. In addition, we have elected to opt-in to the extended transition period for new or revised accounting standards. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates.

Recent Corporate Developments

On December 7, 2015, the Company entered into an Amendment Agreement Number Two (the “Second Amendment Agreement”) with the holders of our Series C Warrants to effect amendments to the Series C Warrants. Pursuant to Section 9 of the Series C Warrants, the amendments are binding on all of the issued and outstanding Series C Warrants effective as of December 7, 2015.

In addition to some administrative changes, the Series C Warrants were amended to provide that if they are not exercised by the end of the business day on January 21, 2016, they will automatically be exchanged for shares of our common stock pursuant to their existing cashless exercise provision and, in the case of holders that would hold more than 4.99% of our issued and outstanding on such date, pre-funded rights convertible, subject to a 4.99% blocker, without additional payment for shares of our common stock equal to the number of shares of common stock above 4.99% to be delivered pursuant to conversion at the end of the business day on January 21, 2016. On January 21, 2016, we announced the expiration and conversion of all outstanding Series C Warrants into shares of common stock.

On December 8, 2015, we held a special meeting (the “Special Meeting”) of our stockholders. At the Special Meeting, the stockholders approved an amendment to the Company’s Seventh Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) to effect a reverse stock split of the Company’s common stock at a ratio between 1 to 50 and 1 to 60, such ratio to be determined by the board of directors of the Company (the “Board”), and to reduce the par value of the Company’s common stock from $0.001 to $0.0001 (the “Reverse Stock Split”). Immediately after the Special Meeting, the Board held a meeting and approved the Reverse Stock Split at a ratio of 1 to 60, such Reverse Stock Split went effective at 12:01 am EST on December 11, 2015. Unless we indicate otherwise, the information in this prospectus reflects the impact of the Reverse Stock Split.

On December 30, 2015, we closed a $22.1 million senior secured convertible note financing (the “2015 Convertible Note Financing”) pursuant to a Securities Purchase Agreement dated December 28, 2015 (the “2015 SPA”) between the Company and certain buyers as set forth in the Schedule of buyers of our convertible notes attached to the 2015 SPA. In connection with the 2015 Convertible Note Financing we issued $22.1 million aggregate principal amount of senior secured convertible notes (the “2015 Notes”) and Series D common stock purchase warrants exercisable to acquire 1,252 shares of common stock (the “Series D warrants”), which amount acquirable upon exercise of the Series D warrant represents 16.6% of the fully-diluted issued and outstanding common stock as calculated pursuant to the 2015 SPA. Under the terms of the 2015 Notes, we received an initial release from restricted accounts of $4.6 million at the close of the 2015 Convertible Note Financing. Pursuant to the terms of the 2015 Notes, prior to the release from our restricted accounts of the remaining cash purchase price of $13.8 million in subsequent tranches, we must meet certain equity conditions as described therein. Until we meet certain equity conditions outlined in the convertible notes to receive the remaining cash purchase price of $13.8 million, the remaining amounts will be held in restricted accounts. We consider the cash in the restricted accounts to be assets of the Company which constitutes valid and sufficient consideration for the issuance of the 2015 Notes in the aggregate principal amount of $22.1 million. In the event we are unable to meet the equity conditions outlined in the 2015 Notes and are unable to redeem in cash any installment payments that become due under the 2015 Notes, the 2015 Notes may go into default and be subject to the default and redemption provisions contained in the 2015 Notes. The cash contained in the restricted accounts will be returned to the holders and the aggregate

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principal amount of the convertible notes will be reduced accordingly. See “Description of Certain Indebtedness — 2015 Convertible Note Financing — Note Equity Conditions” for a summary of the equity conditions set forth in the 2015 Notes.

On January 28, 2016, we filed a preliminary proxy statement with the SEC regarding a special meeting of our stockholders to be held on March 24, 2016 (the “Additional Special Meeting”). At the Additional Special Meeting, our stockholders were asked to approve (1) an amendment to the Certificate of Incorporation to effect an additional reverse stock split (the “Additional Reverse Stock Split”) at a ratio between 1-to-20 and 1-to-35 and effective upon a date to be determined by the Board and (2) for purposes of complying with NASDAQ Listing Rule 5635(d), the issuance of shares of our common stock underlying the 2015 Notes and related Series D warrants issued by us in the 2015 Convertible Note Financing without giving effect to the exchange cap in the convertible notes in an amount that may be equal to or exceed 20% of our common stock outstanding before the issuance of the 2015 Notes and related Series D warrants and certain subordination warrants and without giving effect to the exercise price floor of such Series D warrants and subordination warrants (the “NASDAQ 20% Issuance Proposal”). Under the terms of the Series E Warrants we were obligated to increase our authorized shares of common stock either by effecting a reserve stock split or by increasing our authorized shares of common stock so as to permit the exercise in full of the Series E Warrants. The Additional Reverse Stock Split was intended, in part, to satisfy that obligation. On March 24, 2016, we held the Additional Special Meeting. At the Additional Special Meeting, the stockholders approved an amendment to the Certificate of Incorporation to effect the Additional Reverse Stock Split at a ratio between 1-to-20 and 1-to-35 with such ratio to be determined by the Board. Immediately after the Additional Special Meeting, the Board approved the Additional Reverse Stock Split at a ratio of 1-to-35, such Additional Reverse Stock Split went into effect at 5:00 pm EDT on March 30, 2016. At the Additional Special Meeting, the stockholders also approved the NASDAQ 20% Issuance Proposal. Unless we indicate otherwise, the information in this prospectus reflects the impact of the Additional Reverse Stock Split.

On February 8, 2016, we entered into a settlement agreement with Dawson James Securities, Inc. (“Dawson James”) in relation to a disagreement between us and Dawson James regarding performance under an underwriting agreement between us and Dawson James dated October 8, 2014 (the “Underwriting Agreement”). In settlement of the claims of both us and Dawson related to the Underwriting Agreement and without either party admitting liability, we entered into a consulting agreement with Dawson James pursuant to which Dawson James has agreed to provide us with financial advisory services for the 12-month term of the agreement in consideration of us paying them an aggregate consulting fee of $800,000 (payable $200,000 upon execution of the consulting agreement and $50,000 at the beginning of each month for twelve months beginning on March 2, 2016). Additionally, Dawson James agreed to terminate its right of first refusal under the Underwriting Agreement in consideration of the Company making a one-time payment to Dawson James of $80,000. The parties provided mutual releases of all claims against the other party as of the date of the settlement agreement. Dawson James is not participating in this public offering of securities.

On February 8, 2016, we and certain of the buyers of our 2015 Notes holding enough of the 2015 Notes and Series D warrants to constitute the Required Holders (as defined under Section 9 (e) of the 2015 SPA) entered into an amendment agreement, whereby we and the buyers of our 2015 Notes agreed to: (i) amend the 2015 SPA to reduce the number of shares of our common stock we are initially required to reserve for issue upon conversion of the 2015 Notes and exercise of the Series D warrants from 120,000,000 to 85,000,000 from February 8, 2016 until 11:59:59 pm New York Time on March 31, 2016; (ii) amend the 2015 SPA such that from and after 12:00:00 am New York time on April 1, 2016, the required number of shares of common stock we are required to reserve shall revert back to 120,000,000; (iii) amend the 2015 SPA, the 2015 Notes and the Series D warrants, to reflect the reduction in the required reserve amount of shares of common stock; (iv) provide that if our public offering of securities pursuant to Registration Statement on Form S-1 (File No. 333-207761) triggers the anti-dilution provisions in the convertible notes and results in the required reserve amount under those agreements being higher than the initial required reserve amount of 85,000,000, then the definition of required reserve amount in such agreement is amended to equal the initial required reserve amount from the effective date of the Amendment Agreement until 11:59:59 pm New York Time on March 31, 2016 (which was effected); (v) provide that from and after 12:00:00 am New York time on April 1, 2016, the holders waive any right to contest or otherwise attempt to prevent the issuance of shares of common

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stock upon the exercise of Pre-Funded Series F Warrants if there is an authorized share failure under the terms of the 2015 Notes and Warrants and (vi) amend the 2015 SPA to extend the time period we have to call a special meeting of our stockholders to vote on certain matters concerning the 2015 Notes and Series D warrants from 65 days after the closing of the 2015 Convertible Note Financing (March 4, 2016) to 11:59:59 pm New York time on March 31, 2016 (which deadline was met).

On February 16, 2016, we and certain of the buyers of our 2015 Notes holding enough of the 2015 Notes and Series D warrants to constitute the Required Holders under Section 9 (e) of the 2015 SPA related to the 2015 Convertible Note Financing and the Section 10 of the registration rights agreements related thereto, entered into an amendment agreement to the registration rights agreement, whereby we and the buyers of our 2015 Notes agreed to amend the registration rights agreements to: (i) extend the deadline for filing the initial registration statement required thereunder registering our shares of common stock issuable upon conversion of the 2015 Notes and exercise of the Series D warrants to February 29, 2016, (ii) extend the deadline for bringing such registration statement effective to March 30, 2016 if the SEC does not review such registration statement and April 14, 2016 if the SEC does review such registration statement, (iii) decrease the number of shares of our common stock we are required to register pursuant to the registration rights agreement in the case where such number exceeds our authorized and unreserved shares of common stock and (iv) covenant that outside of shares of our common stock reserved for issuance on February 13, 2016 and shares of common stock to be issued or issuable pursuant to our public offering of securities pursuant to a Registration Statement on Form S-1 (File No. 333-207761), we will not reserve shares of common stock for issuance unless (i) a number of shares of common stock equal to least 120,000,000 or such additional number of shares of common stock as shall then be necessary to effect the conversion of all of the 2015 Notes and the exercise of all of the Series D warrants then outstanding (in each case, without regard to any limitations on conversions or exercises) have been reserved for the issuance and (ii) all shares of common stock required to be registered on that date pursuant to the terms of the registration rights agreement, as amended, without giving effect to any cutbacks provided for in Section 1(cc) or Section 1(g) of the registration rights agreement, as amended, related to a reduction due to insufficient authorized and unreserved shares of common stock have been either registered under an effective registration statement or filed with the SEC under a registration statement within the timeframe required for such filing under the registration rights agreement and we have no reason to believe such registration statement will not be made effective by the applicable deadline set forth in the registration rights agreement. The amendment agreement also contains a waiver by the holders of any prior breach by the Company under the registration rights agreement for failing to file the initial registration statement by the original filing deadline.

On February 24, 2016, we closed a public offering of 39.2 million units at a public offering price of $0.16 per unit. The gross proceeds from the offering of the units was approximately $6.3 million. Each 2,800 units consist of one share of common stock and 4,200 Series E warrants. Each 2,800 Series E warrants entitles the holder to acquire one share of common stock, subject to adjustment, at an exercise price of $700.00 per share for a period of five years following the date they first become exercisable. The Series E warrants were not exercisable until at least one year from the date of issuance and exercise of the Series E warrants were subject to certain stockholder approval requirements.

On March 1, 2016, we filed the initial registration statement required pursuant to the registration rights agreement related to the 2015 Notes. Subsequently, we received comments to the initial registration statement from the staff of the SEC regarding the registration for resale of shares of common stock issuable upon conversion of the 2015 Notes and requesting certain amendments to the terms of the 2015 Notes regarding (i) the release of the cash from certain restricted accounts, (ii) the elimination of equity conditions required for settlement of the convertible notes in shares of common stock, (iii) the elimination of the noteholders ability to accelerate or defer installment payments and (iv) other related provisions, prior to allowing the initial registration statement to be declared effective. As a result of the staff’s review and ongoing discussions, on April 20, 2016, we withdrew the initial registration statement.

On March 30, 2016, we received notices of deferral pursuant to section 8(d) of the 2015 Notes from each of the holders of such convertible notes notifying us of each such holder’s election to defer the entire installment amount due such holder on April 29, 2016 (for which a pre-installment payment was due on March 31, 2016) until the next installment date of May 31, 2016 (for which pre-installment was due on April 29, 2016).

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On April 4, 2016, we entered into certain warrant exchange agreements each by and between us and a holder of our outstanding Series E Warrants, pursuant to which we and each such holder agreed to exchange outstanding Series E Warrants for shares of common stock. All of the issued and outstanding Series E Warrants were exchanged for 8,127 shares of common stock.

On April 13, 2016, we received a staff determination letter from the NASDAQ Stock Market indicating that we had not regained compliance with NASDAQ listing requirements regarding having a minimum value of listed securities of $35 million by April 11, 2016 and that our shares of common stock were subject to delisting unless we requested a hearing with the NASDAQ Listing Qualifications Panel. On April 20, 2016, we requested a hearing with the NASDAQ Listing Qualifications Panel. On June 23, 2016, the NASDAQ Listing Qualifications Panel issued a determination granting our request for the continued listing of our common stock on The NASDAQ Capital Market. . The Company’s continued listing on NASDAQ is subject to, among other things, the Company evidencing compliance with its plan to meet the minimum $35 million market value of listed securities requirement by October 10, 2016. In order to satisfy the market value of listed securities requirement, the Company must evidence a market capitalization of at least $35 million for a minimum of 10 consecutive business days on or before October 10, 2016.

On April 28, 2016, we received notices of deferral pursuant to section 8(d) of the 2015 Notes from each of the holders of such 2015 Notes notifying us of each such holder’s election to defer the entire installment amount due such holder on both April 29, 2016 (for which a pre-installment payment was due on March 31, 2016) and May 31, 2016 (for which pre-installment was due on April 29, 2016) until the next installment date of June 30, 2016 (for which pre-installment will be due on June 1, 2016).

On May 3, 2016, the holders of the 2015 Notes voluntarily removed restrictions on the Company’s use of an aggregate of $1.0 million previously funded to the Company and authorized the release of those funds from the restricted accounts of the Company.

On May 11, 2016, we and certain of the buyers holding enough of the 2015 Notes and Series D Warrants to constitute the required holders under Section 10 of the registration rights agreement entered into Amendment Agreement No. 3 to the Registration Rights Agreement (the “Third Amendment Agreement”). In the Third Amendment Agreement we and the buyers agreed to extend the deadline for bringing the initial registration statement effective registering our shares of common stock issuable upon conversion of the 2015 Notes and exercise of the Series D Warrants to the date which is the earlier of May 31, 2016 and the fifth (5^th) business day after the date we are notified (orally or in writing, whichever is earlier) by the SEC that such initial registration statement will not be subject to further review. As noted below, the requirements of the Registration Rights Agreement were subsequently suspended until August 31, 2016.

Under the Third Amendment Agreement, the buyers also waived (i) any breach of the registration rights agreement prior to May 11, 2016 under Section 2(a) of the registration rights agreement for our failure to have the initial registration statement brought effective by the initial effectiveness deadline, prior to the date of Third Amendment Agreement and (ii) the buyer’s rights to Registration Delay Payments (as defined under the registration rights agreement) prior to the date of the Third Amendment Agreement for our failure to have the initial registration statement brought effective by the initial effectiveness deadline.

On May 18, 2016, the holders of the 2015 Notes voluntarily removed restrictions on the Company’s use of an aggregate of $1.0 million previously funded to the Company and authorized the release of those funds from the restricted accounts of the Company.

On May 24, 2016, we and certain buyers holding enough of the 2015 Notes and Series D Warrants to constitute the required holders under Section 9(e) of the 2015 SPA and Section 19 of the 2015 Notes entered into waiver agreements to waive (i) the breach by us of Section 4(n)(ii) of the 2015 SPA solely with respect to (x) us filing of the Registration Statement on Form S-1 (No. 333-211334) related to an offering of units, (y) our filing of an amendment to the Registration Statement on Form S-1 (No. 333-211334) in the calendar week starting on May 23, 2016 and (z) our consummation of the offering of units pursuant to the Registration Statement on Form S-1 (No. 333-211334), as amended by the amendment described in the immediately

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preceding clause (y), and (ii) the event of default arising under Section 4(a)(x) of the 2015 Notes due to our failure to comply with Section 4(n)(ii) of the 2015 SPA as described in the immediately preceding clause (i) above.

On June 1, 2016, we closed the referenced public offering of 3.16 million units at a public offering price of $1.90 per unit. The gross proceeds from the offering of the units was approximately $6 million. Each 80 units consist of one share of common stock and 80 Series G warrants. Each 80 Series G warrants entitles the holder to acquire one share of common stock, subject to adjustment, at an exercise price of $152.00 per share for a period of five years following the date they first become exercisable. See “Description of Share Capital — Warrants — Series G Warrants.”

On June 1, 2016, we received notices of deferral pursuant to section 8(d) of the 2015 Notes from each of the holders of such convertible notes notifying us of each such holder’s election to defer the entire installment amount due such holder on June 30, 2016 (for which a pre-installment payment was due on June 1, 2016) and all prior deferred installment amounts until the next installment date of July 31, 2016 (for which pre-installment was due on July 2, 2016).

On June 29, 2016, the Company and certain buyers holding enough of the 2015 Notes and Series D Warrants to constitute the required holders under Section 9(e) of the 2015 SPA and Section 19 of the 2015 Notes entered into waiver agreements to waive: (i) the Company’s restriction to incur Indebtedness (as defined in the 2015 Notes) in accordance with Section 17(a) of the 2015 Notes, (ii) the Company’s restriction to incur Liens (as defined in the 2015 Notes) in accordance with Section 17(b) of the 2015 Notes, (iii) the Company’s restriction to incur Indebtedness that ranks pari passu with the 2015 Notes pursuant to Section 16 of the 2015 Notes and (iv) the Company’s restriction in incur Liens (as defined in the 2015 Notes) on certain types of intellectual property in accordance with Section 17(g) of the 2015 Notes, in each case of clauses (i) through (iii), solely with respect to entering into the Notes and related documents thereto and consummating the transactions contemplated thereby (collectively, the “2015 Note Waiver”). Further the Company and certain buyers holding enough of the 2015 Notes and Series D Warrants to constitute the required holders under Section 10 of the registration rights agreement entered into between the Company and the holders of the 2015 Notes and Series D Warrants entered into waiver agreements to waive: (i) any breach prior to and including June 29, 2016 under Section 2(a) of the registration rights agreement for the Company’s failure to have the initial registration statement brought effective by the initial effectiveness deadline, (ii) any right to Registration Delay Payments (as defined under the registration rights agreement) prior to and including June 29, 2016 for failure to meet its obligations under Section 2(a), and (iii) compliance with the registration requirements of Section 2(a) from and including June 29, 2016, through August 31, 2016.

On June 29, 2016, the Company and certain investors who executed subscription agreements in the June 2016 unit offering representing on the closing date of such unit offering at least sixty-seven percent (67%) of the aggregate number of shares of common stock purchased in the unit offering pursuant to the subscription agreements entered into waiver agreements to waive the lock-up on issuance of securities contained in Section 18 of the subscription agreements solely with respect to the Company’s offering and consummation of the 2016 Notes and Series H Warrants, the offer and issuance of the placement agent warrants and the offer and issuance of the subordination warrants to be issued in connection with the 2016 Notes and Series H Warrants.

On July 1, 2016, the Company closed on the Securities Purchase Agreement dated June 29, 2016 (the “2016 SPA”) with certain investors pursuant to which the Company has agreed to issue $75 million in principal face amount of senior secured convertible notes of the Company (the “2016 Notes”) and related Series H common stock purchase warrants (the “Series H Warrants”) (the “2016 Convertible Note Financing”). The Buyers purchased 2016 Notes and related Series H Warrants through payment of cash at a discount for the 2016 Notes and related Series H Warrants. The 2016 Notes were issued and sold to the Buyers by each Buyer paying at the closing (1) 8.8235% (approximately $6 million) of its applicable aggregate cash purchase price to the Company by wire transfer of immediately available funds and (2) 91.1765% (approximately $62 million) of its applicable aggregate cash purchase price to an account of the Company established for such Buyer by wire transfer of immediately available funds, such purchase price to be held and in accordance with and pursuant to the terms and conditions of an account control agreement between the Buyer and the

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bank. Until we meet certain equity conditions outlined in the 2016 Notes to receive the remaining cash purchase price of $62 million, the remaining amounts will be held in restricted accounts. We consider the cash in the restricted accounts to be assets of the Company which constitutes valid and sufficient consideration for the issuance of the 2016 Notes in the aggregate principal amount of $75 million. In the event we are unable to meet the equity conditions outlined in the 2016 Notes and are unable to redeem in cash any installment payments that become due under the 2016 Notes, the 2016 Notes may go into default and be subject to the default and redemption provisions contained in the 2016 Notes. The cash contained in the restricted accounts will be returned to the holders and the aggregate principal amount of the 2016 Notes will be reduced accordingly. See “Description of Certain Indebtedness — 2016 Convertible Note Financing — Note Equity Conditions” for a summary of the equity conditions set forth in the 2016 Notes.

In consideration of the Utah Autism Foundation and Springforth Investments LLC entering into subordination agreements with the collateral agent for the 2016 Notes, the Company has agreed to issue to the entities warrants exercisable for 21,094 shares of common stock (the “2016 Subordination Warrants”). The 2016 Subordination Warrants have the same material terms and conditions as the Series H Warrants.

In connection with the 2016 Convertible Note Offering on July 1, 2016, the exercise prices or conversion prices of certain of our issued and outstanding securities were automatically adjusted to take into account the Offering and the Conversions. The exercise prices or conversion prices of the following securities were adjusted as follows: The Class A and Class B Warrant exercise prices were adjusted from $152.00 per share of common stock to $107.20 per share of common stock. The Series B Warrants exercise price was adjusted from $1,337,498 per share of common stock to $325,598 per share of common stock. Certain common stock warrant exercise prices were adjusted from $152.00 per share of common stock to $107.20 per share of common stock. The Series D Warrants and Subordination Warrants exercise price was adjusted from $152.00 per share of common stock to $126.40 per share of common stock. The Series G Warrants exercise price was adjusted from $152.00 per share of common stock to $107.20 per share of common stock. In addition, the consummation of the Offering is an issuance that triggers an adjustment to the conversion price of the 2015 Notes applicable to optional conversions by the holders of the Notes (conversion pursuant to amortization payments under the Notes are not adjusted pursuant to subsequent equity offerings as they are based on a discount to current market prices for the common stock). Therefore, the conversion price of the Notes was adjusted from $152.00 per share of common to $126.40 per share of common stock.

On July 1, 2016, Mantyla McReynolds, LLC (“Mantyla”), the Company’s former independent registered public accountants, merged with BDO USA, LLP (“BDO”). As a result of this transaction, on July 14, 2016, we received notice that instead of Mantyla, BDO would now stand for appointment as the Company’s independent registered public accountants for the fiscal year ending December 31, 2016. Effective July 18, 2016, the Company, after review and approval of the Company’s Audit Committee, appointed BDO as the Company’s new independent registered public accounting firm for and with respect to the fiscal year ending December 31, 2016.

From July 1, 2016, through the termination of the 2015 Notes upon exchange for Series F Preferred Stock on November 3, 2016 (as described below), we issued to certain holders of the 2015 Notes 94,976,855 shares of our common stock upon conversion of installment payments under the 2015 Notes at conversion prices ranging from $37.24 per share to $0.02 per share.

In connection with the conversions of the installment payments under the 2015 Notes, from July 1 through November 3, 2016, the exercise prices or conversion prices of certain of our issued and outstanding securities were periodically and automatically adjusted based on the changing conversion price of the 2015 Notes. As of the date hereof, the exercise price for the Class A and Class B Warrants is $0.02 per share of common stock, the exercise price for the Common Warrants is $0.02 per share of common stock, the exercise price of the Series B Warrants is $91,675 per share of common stock, exercise price of the Series D and 2015 Subordination Warrants is $0.02 per share of common stock, the exercise price for the Series G Warrants is $0.02 per share of common stock, and the exercise price of the Series H and 2016 Subordination Warrants is $0.02 per share.

On August 4, 2016, we entered into an Amendment to the Spring Forth Promissory Note with Spring Forth Investments, LLC to extend the maturity date of a $500,000 promissory note issued by the Company to

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Spring Forth in connection with a loan provided by Spring Forth to the Company from July 18, 2016 to July 18, 2017. The effective date of the Amendment was July 18, 2016.

On August 10, 2016, we filed a preliminary proxy statement with the SEC regarding our annual meeting of our stockholders to be held on September 12, 2016 (the “Annual Meeting”). At the Annual Meeting, our stockholders were being asked to approve along with director appointments and approval of the auditors (1) for purposes of complying with NASDAQ Listing Rule 5635(d), the exchange of our Series E Warrants for shares of our common stock, (2) for purposes of complying with NASDAQ Listing Rule 5635(d), the issuance of shares of our common stock underlying the 2016 Notes and related Series H warrants issued by us in the 2016 Convertible Note Financing without giving effect to the exchange cap in the 2016 Notes in an amount that may be equal to or exceed 20% of our common stock outstanding before the issuance of the 2016 Notes and related Series H warrants and certain subordination warrants and without giving effect to the exercise price floor of such Series H warrants and subordination warrants (the “NASDAQ 20% Issuance Proposal”), (3) an amendment to the Certificate of Incorporation to effect an additional reverse stock split (the “September 2016 Reverse Stock Split”) at a ratio between 1-to-40 and 1-to-80 and effective upon a date to be determined by the Board and (4) approving an amendment to the Certificate of Incorporation to increase the numbers of shares of common stock authorized from 200,000,000 to 350,000,000. On September 12, 2016, we held the Annual Meeting. At the Annual Meeting, the stockholders approved an amendment to the Certificate of Incorporation to effect the September 2016 Reverse Stock Split at a ratio between 1-to-40 and 1-to-80 with such ratio to be determined by the Board. Immediately after the Annual Meeting, the Board approved the September 2016 Reverse Stock Split at a ratio of 1-to-80, such September 2016 Reverse Stock Split went into effect at 12:01 am EDT on September 16, 2016. At the Annual Meeting, the stockholders also approved the NASDAQ 20% Issuance Proposal for the 2016 Notes and the Series E Warrant exchange. The stockholders did not approve the increase in authorized shares of common stock. Unless we indicate otherwise, the information in this prospectus reflects the impact of the September 2016 Reverse Stock Split.

On August 17, 2016, we and certain 2015 Note Buyers holding enough of the 2015 Notes and Series D Warrants to constitute the required holders under Section 9(e) of the 2015 SPA and Section 19 of the 2015 Notes entered into waiver agreements to waive (i) the breach by the Company of Section 4(n)(ii) of the 2015 SPA solely with respect to (x) the Company’s filing of the Registration Statement on Form S-1 (No. 333-213144) related to an offering of Units, (y) the Company’s filing of amendments to the Registration Statement on Form S-1 (No. 333-213144) to complete the offering of Units and (z) the Company’s consummation of the offering of Units pursuant to the Registration Statement on Form S-1 (No. 333-213144) no later than September 30, 2016 and (ii) the event of default arising under Section 4(a)(x) of the 2015 Notes due to the Company’s failure to comply with Section 4(n)(ii) of the 2015 SPA as described in the immediately preceding clause (i) above.

On August 17, 2016, the Company and certain 2016 Note Buyers holding enough of the 2016 Notes and Series H Warrants to constitute the required holders under Section 9(e) of the 2016 SPA and Section 19 of the 2016 Notes entered into waiver agreements to waive (i) the breach by the Company of Section 4(n)(ii) of the SPA solely with respect to (x) the Company’s filing of the Registration Statement on Form S-1 (No. 333-213144) related to an offering of Units, (y) the Company’s filing of amendments to the Registration Statement on Form S-1 (No. 333-213144) to complete the offering of Units and (z) the Company’s consummation of the offering of Units pursuant to the Registration Statement on Form S-1 (No. 333-213144) no later than September 30, 2016 and (ii) the event of default arising under Section 4(a)(x) of the 2016 Notes due to the Company’s failure to comply with Section 4(n)(ii) of the 2016 SPA as described in the immediately preceding clause (i) above.

On September 19, 2016, we entered into separate agreements (each, a “Leak-Out Agreement”) with each of the 2015 Note Buyers. In each Leak-Out Agreement, the Company and a 2015 Note Buyer agreed that during the period commencing on September 20, 2016 through November 1, 2016, neither such 2015 Note Buyer nor any of its affiliates will sell, directly or indirectly, on any trading day more than a fixed percentage (as designated in such Leak-Out Agreement, which, in the aggregate for all 2015 Note Buyers, equals approximately 35%) of the trading volume of our common stock on the Nasdaq Capital Market, unless our common stock is then trading above the lower of (x) $5.50 or (y) 120% of the closing bid price of our common stock as of the trading day immediately preceding such date of determination.

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On October 2, 2016, we entered into separate exchange agreements (each, an “Exchange Agreement”) with each of the 2015 Note Buyers, pursuant to which, among other things each of the parties thereto agreed to the following:

The Exchange is subject to customary closing conditions, including without limitation that no unwaived event of default under the Notes exists and is continuing and that the arithmetic average of the daily dollar trading volume of our common stock during the twenty trading days prior to the Exchange is at least $300,000.

On October 17, 2016, we entered into separate agreements (each, an “Amended Leak-Out Agreement”) with each of the 2015 Note Buyers. In each Amended Leak-Out Agreement, the Company and a 2015 Note Buyer agreed that during the period commencing on October 17, 2016 through and including October 21, 2016, neither such Buyer nor any of its affiliates will sell, directly or indirectly, on any trading day more than a fixed percentage (as designated in such Leak-Out Agreement, which, in the aggregate for all 2015 Note Buyers, equals approximately 40%) of the trading volume of our common stock on the Nasdaq Capital Market, unless our common stock is then trading above the lower of (x) $5.50 or (y) 120% of the closing bid price of our common stock as of the trading day immediately preceding such date of determination.

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On November 2, 2016, the Company separately amended and restated the Exchange Agreements (each, an “Amended Exchange Agreement”) with each of the 2015 Note Buyers, pursuant to which, among other things, the following occurred (or will occur, as applicable):

On November 2, 2016, we filed a Certificate of Designation for Series E Preferred Stock to the Certificate of Incorporation. The Certificate of Designation reduced, pursuant to Section 151(g) of the Delaware General Corporation Law, the number of authorized Series E Preferred Shares from 2,860,200 Series E Preferred Shares to 74,380 Series E Preferred Shares, the number of Series E Preferred Shares issued and outstanding as of November 2, 2016. Pursuant to the provisions of Section 151(g) of the Delaware General Corporation Law, the 2,785,820 authorized Series E Preferred Shares eliminated pursuant to the reduction return to the available undesignated preferred stock of the Company and may be re-designated into another series of preferred stock.

On November 2, 2016, the Company and certain of the 2015 Note Buyers holding enough of the Notes and Warrants to constitute the Required Holders under Section 10 of the Registration Rights Agreement entered into Amendment Agreement No.4 to the Registration Rights Agreement (the “Fourth Amendment Agreement”). In the Fourth Amendment Agreement, the Company and the 2015 Note Buyers agreed to extend the deadline for bringing the initial registration statement effective registering our shares of common stock issuable upon conversion of the Notes and exercise of the Warrants to the date which is the earlier of March 1, 2017 and the fifth (5th) business day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that such initial registration statement will not be subject to further review. Under the Fourth Amendment Agreement, the 2015 Note Buyers also waived (i) any breach of the Registration Rights Agreement prior to November 2, 2016 under Section 2(a) of the Registration Rights Agreement for the Company’s failure to have the initial registration statement brought effective by the initial effectiveness deadline, prior to the date of Fourth Amendment Agreement and (ii) the holder’s right to Registration Delay Payments (as defined under the Registration Rights Agreement) prior to the date of the Fourth Amendment Agreement for the Company’s failure to have the initial registration statement brought effective by the initial effectiveness deadline.

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On November 3, 2016, in connection with the issuance of the Series F Preferred Stock, the exercise and conversion prices of certain outstanding securities were automatically adjusted to take into account the conversion price of the Series F Preferred Stock. Accordingly, the exercise price for our Series D Warrants, 2015 Subordination Warrants, Series H Warrants and 2016 Subordination Warrants were adjusted to $0.02 per share of common stock. The exercise price of our Series B Warrants was adjusted to $91,975 per share of common stock. The conversion price of our 2016 Notes was adjusted to $1.00 per share of common stock.

From November 3, 2016 through December 1, 2016, we have issued 104,800,000 shares of common stock upon the mandatory conversion of 2,096 shares of Series F Preferred Stock at a conversion price of $0.02 per share.

Our Corporate Information

We are a Delaware corporation headquartered in Salt Lake City, Utah that does business as Great Basin Corporation. We were originally incorporated as Diagnostic Micro Arrays, Inc., a Nevada corporation, on June 27, 2003, and we commenced operations in January of 2005. On April 19, 2006, we changed our name to Great Basin Scientific, Inc. On August 12, 2008, we took steps to change our corporate domicile from Nevada to Delaware by forming a Delaware corporation with the same name, Great Basin Scientific, Inc., and merging the Nevada corporation with and into the Delaware corporation. As a result of this merger, the Delaware corporation was the sole surviving entity, continuing operations as Great Basin Scientific, Inc. and doing business as Great Basin Corporation.

Our fiscal year ends December 31 of each year. Our principal executive offices are located at 420 E. South Temple, Suite 520, Salt Lake City, UT 84111. Our telephone number is (801) 990-1055. Our website address is www.gbscience.com. The information contained on, or that can be accessed through, our website is not incorporated by reference in this prospectus and should not be considered a part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.

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THE OFFERING

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Unless otherwise indicated, all information in this prospectus:

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RISK FACTORS

An investment in the securities being offered in this prospectus involves a high degree of risk. Before you invest in the securities, you should give careful consideration to the following risk factors, in addition to the other information included in this prospectus, including our financial statements and related notes incorporated by reference herein. The occurrence of any of the adverse developments described in the following risk factors could materially and adversely harm our business, financial condition, results of operations or prospects. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.

Risks Relating to Our Financial Position and Need for Additional Capital

We expect that we will need substantial additional funding to expand our commercialization efforts for our C. diff and Group B Strep assay and other new assays.

Molecular diagnostic development, which includes research and development, pre-clinical and human clinical trials, is a time-consuming and expensive process that takes years to complete. We expect that our expenses will increase substantially as we move new assays through human clinical trials, seek regulatory approvals, and pursue development of additional innovations. If we obtain marketing approval for the diagnostic tests that we develop, license, or acquire, we expect to incur significant commercialization expenses related to regulatory compliance requirements, sales and marketing, manufacturing, and distribution. Net loss for the nine-month periods ended September 30, 2016 and 2015 was approximately $83.0 million and $39.0 million, respectively. Net loss for the years ended December 31, 2015 and 2014, was approximately $57.9 million and $21.7 million, respectively. As of September 30, 2016, December 31, 2015, and December 31, 2014, we had an accumulated deficit of $204.9 million, $121.9 million, and $64.0 million, respectively. As discussed in Note 3 to the audited financial statements, our recurring operating losses from operations and our need for additional sources of capital to fund our ongoing operations raise substantial doubt about our ability to continue as a going concern. We expect to continue to incur operating losses for the foreseeable future, and we anticipate these losses will increase as we continue our development and commercialization of our platform, and seek regulatory approval for additional assays. Accordingly, our ability to continue as a going concern depends on our ability to obtain additional financing to fund our operations, and there can be no assurance that additional financing will be available to us or that such financing, if available, will be available on favorable terms. Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods.

We expect that we will need additional funding to manufacturer analyzers to be used by potential customers during the sales evaluation phase.

Our potential customers evaluate the performance of our products through the use of analyzers that we manufacture and provide at no cost. Our ability to grow our customer base depends upon our ability to obtain additional financing to fund the manufacturing of analyzers to deliver to such potential customers.

Our inability to raise capital on acceptable terms in the future may cause us to delay, diminish, or curtail certain operational activities, including research and development activities, clinical trials, sales and marketing, and other operations, in order to reduce costs and sustain the business, and such inability would have a material adverse effect on our business and financial condition.

We expect capital outlays and operating expenditures to increase over the next several years as we work to expand our commercial activities, expand our development activities, conduct clinical trials, expand manufacturing operations and expand our infrastructure. We may need to raise additional capital to, among other things:

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Our present and future funding requirements will depend on many factors, including but not limited to:

We may not be able to continue to operate as a going concern.

Our former independent registered public accounting firm has included an explanatory paragraph relating to our ability to continue as a going concern in its report on our audited financial statements. Our ability to continue as a going concern is contingent upon, among other factors, the release of restricted cash related to our convertible notes upon satisfaction of the conditions set forth in the terms of the convertible notes or obtaining alternate financing. We cannot provide any assurance that we will be able to raise additional capital. If we are unable to secure additional capital or gain access to the cash in the restricted accounts, we may be required to curtail our business plans and initiatives and take additional measures to reduce costs in order to conserve our cash in amounts sufficient to sustain operations and meet our obligations.

We have a history of highly dilutive financings and reverse stock splits which amplifies the dilutive effect of these financings on our stockholders. Any investment in our common stock will likely be highly diluted through the future conversion of our outstanding derivative securities and our likely future capital raising efforts.

In the past 12 months, we have conducted three (3) stock splits to address the Company’s need to issue shares of common stock to raise capital to fund ongoing operations. These stock splits were as follows:

Date		Reverse Split Ratio
12/11/2015		60 to 1
3/30/2016		35 to 1
9/16/2016		80 to 1
Cumulative Ratio		168,000 to 1

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The multiple stock splits permitted us to issue a large number of shares of common stock pursuant to issued and outstanding convertible securities as well as conduct several public offerings to raise additional capital for operations. The conversion of these derivative securities resulted in the substantial dilution of stockholders over the course of the last 12 months. The following table sets forth the number of post-split shares that were issued upon conversion of these derivative securities, the post-split average conversion price, the number of pre-split shares (being the number of share equivalents prior to the three reverse stock splits, calculated by multiplying post-split shares by the cumulative ratio of 168,000 to 1) and the pre-split equivalent conversion prices.

Security		Post-Split Shares Issued				Post-Split Average Conversion Price				Pre-Split Equivalent Shares Issued				Pre-Split Equivalent Conversion Price
Series C Warrants			27,054			$	374,640				4,545,072,000			$	2.23
2015 Senior Convertible Notes			94,976,855			$	0.14				15,956,111,640,000			$	0.00
Series F Preferred Stock			104,800,000			$	0.02				17,606,400,000,000			$	0.00
Total			199,803,909				—				33,567,056,712,000				—

The large number of pre-split equivalent shares of common stock issued is due primarily to three factors: (1) the conversion price of the 2015 Senior Convertible Notes being tied to a discount to the market price on the date of the installment payments, (2) the continued decline in the price of the Company’s shares of common stock following each of the reverse splits and (3) the conversion of a large number of Series F Preferred Stock at the current post conversion price of $0.02 per $1,000 principal amount of each share of Series F Preferred Stock. Following each reverse split, the issuance of common stock pursuant to these derivative securities and other market factors resulted in a rapid decline in the market price of our common stock. This decline in market price resulted in a greater number of shares of common stock being issued to settle conversion of these derivative securities which was amplified over time by the cumulative effective of the reverse split ratios.

The proposed December 2016 Reverse Stock Split is likely to have a similar effect on the dilution of stockholders, especially if the authorized share increase is approved by stockholders. In the case where we conduct a 300 to 1 reverse split and obtain the authorized share increase, we will have approximately 1.5 billion shares of common stock to issue under our authorized capital. It is anticipated that the Company will issue a majority of those shares of common stock primarily as follows (i) to settle conversion of the Company’s outstanding Series F Preferred Stock, (ii) to settle conversion of the Company’s outstanding $75 million of 2016 Senior Secured Convertible Notes and (iii) to raise additional capital through a public or private offering of securities.

Both the Series F Preferred Stock (beginning July 2017) and the 2016 Senior Secured Convertible Notes have conversion prices that are tied to a discount to the Company’s recent average trading volume. As a result, if the stockholders approve this reverse stock split and the stock price again declines, the number of post-split shares that must be issued to settle these securities will increase and the pre-split equivalent number of shares will increase rapidly due to the large proposed ratios of 1-to-200 and 1-to-300. The dilution to current stockholders will be substantial; similar to the effect of past stock splits.

Raising additional capital may cause dilution to our existing stockholders, and restrict our operations or require us to relinquish certain intellectual property rights.

We may seek additional capital through a combination of public and private equity offerings, debt financings, strategic partnerships and alliances, licensing arrangements and grants. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing stockholders may be diluted, and the terms may include liquidation or other preferences that adversely affect the rights of our stockholders. Debt and receivables financings may be coupled with an equity component, such as warrants to purchase shares, which could also result in dilution of our existing stockholders’ ownership. The incurrence of indebtedness would result in increased fixed payment obligations and could also result in certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates, or grant licenses on terms that are not favorable to us. A failure to obtain adequate funds may cause us to curtail certain operational activities, including research and development, regulatory trials,

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sales and marketing, and manufacturing operations, in order to reduce costs and sustain the business, and would have a material adverse effect on our business and financial condition.

The issuance of shares of our common stock pursuant to the Series D warrants, 2016 Notes and related Series H warrants and the Series F Preferred Stock will result in significant dilution to our stockholders.

Our stockholders will experience significant dilution as a result of shares of our common stock issued pursuant to outstanding Series D warrants, 2016 Notes and related Series H warrants and our Series F Preferred Stock. Under the Series D warrants, 2016 Notes and related Series H warrants and Series F Preferred Stock, we are required to have reserved or have designated for future issuance a number of shares of common stock necessary to effect the conversion of such convertible notes and preferred stock and the exercise of the Series D warrants and Series H warrants, subject to potential future anti-dilution adjustments.

The price at which the Company will convert the 2016 Notes installment amounts is equal to the lowest of (i) the then prevailing conversion price, (ii) 80% of the arithmetic average of the lower of (i) the three lowest daily weighted average prices of the common stock during the twenty (20) consecutive trading day period ending on the trading day immediately preceding the installment date and (iii) the weighted average price of the common stock on the trading day immediately preceding the installment date, subject in all cases to a floor price of $1.00.

For conversions at the election of the holder that are not subject to a floor price, and at the current conversion rate of $1.00 for such conversions, the $75 million in principal amount of 2016 Notes would be convertible into 75,000,000 shares of our common stock. For conversions in relation to the 2016 Notes amortization payments on the convertible notes, if all amortization payments are made at an 80% discount to the current market price per share, approximately $0.02 per share, then we could potentially issue up to approximately 3.75 billion shares of our common stock.

Further, we issued Series D warrants issuable to acquire 16.6% of our issued and outstanding shares of common stock on a fully-diluted basis, which are subject to a one time reset on December 31, 2016 to 16.6% of our fully diluted shares of common stock on that date. As of November 14, 2016, the Series D warrants were exercisable to acquire 1,252 shares of common stock at an exercise price of $0.02 per share, subject to adjustment for subsequent issuances.

Further, we issued Series H warrants exercisable as of November 14, 2016, to acquire 703,125 shares of common stock at an exercise price of $0.02 per share, subject to adjustment for certain subsequent issuances.

The Series F Preferred Stock is initially convertible at the election of the holder into shares of our common stock at a conversion price equal to $0.02, subject to adjustments. From and after July 3, 2017, the Series F Preferred Stock shall be convertible at a conversion price equal to 85% of the arithmetic average, in each case of the lower of (i) the three lowest daily weighted average prices of the our common stock during the twenty (20) consecutive trading day period ending on the trading day immediately preceding the date of determination and (iii) the weighted average price of the our common stock on the trading day immediately preceding the date of determination. On November 3, 2016, 2,098 Series F Preferred shares were mandatorily converted into 104.9 million shares of our common stock at a conversion price of $0.02 per share. Due to shares held in abeyance as described below, as of November 14, 2016 we had converted 1,152 Series F Preferred Shares into shares of common stock pursuant to the mandatory conversion. 946 additional Series F Preferred shares remain to be mandatorily converted for the issuance of 47,300,000 shares of common stock. On November 3, 2018, so long as no Triggering Event then exists, any remaining Preferred Shares then outstanding shall be converted into shares of our common stock at a conversion price of $0.02 per share. In each case, shares of our common stock will be held in abeyance to the extent necessary to satisfy limitations on beneficial ownership as described in the Certificate of Designations for the Series F Preferred Stock. As of November 14, 2016, based on 7,284 shares of Series F Preferred Stock issued and outstanding, at a conversion price of $0.02 per share, we could potentially issue up to 364,200,000 shares of our common stock on conversion of Series F Preferred Stock.

Due to the variable nature of the adjustments of the 2016 Notes and Series F Preferred Stock conversion prices and the formula which sets certain conversion prices of these securities based on a discount to the then current market price, the Company could issue more shares of common stock upon conversion of these

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securities than anticipated above. This is especially the case if the Company conducts a reverse stock split which increases the per share price in the market but such price subsequently drops below the immediate post-split price. Although we have the option to settle the principal payments on the convertible notes in cash and certain conversion and exercise restrictions are placed upon the holders of the convertible notes and Series D warrants and Series H Warrants, the issuance of material amounts of common stock by us would cause our stockholders to experience significant dilution in their investment in our Company.

Market and economic conditions may negatively impact our business, financial condition and share price.

Concerns over inflation, energy costs, geopolitical issues, the U.S. mortgage market and a declining real estate market, unstable global credit markets and financial conditions, and volatile oil prices have led to periods of significant economic instability, diminished liquidity and credit availability, declines in consumer confidence and discretionary spending, diminished expectations for the global economy and expectations of slower global economic growth going forward, increased unemployment rates, and increased credit defaults in recent years. Our general business strategy may be adversely affected by any such economic downturns, volatile business environments and continued unstable or unpredictable economic and market conditions. If these conditions continue to deteriorate or do not improve, it may make any necessary debt or equity financing more difficult to complete, more costly, and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance, and share price and could require us to delay or abandon development or commercialization plans. In addition, there is a risk that one or more of our current and future service providers, manufacturers, suppliers, hospitals and other medical facilities, our third party payors, and other partners could be negatively affected by these difficult economic times, which could adversely affect our ability to attain our operating goals on schedule and on budget or meet our business and financial objectives.

Our ability to use our net operating loss carryforwards is limited.

As of December 31, 2015, we had federal income tax net operating loss, or NOL, carryforwards of approximately $11.5 million and state income tax NOL carryforwards of approximately $8.2 million. These NOL carryforwards, if not previously used, will begin to expire in 2025. During 2015 we experienced a shift in our stock ownership within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, or under applicable state tax laws that currently subject our NOL carryforwards to an annual limitation. Accordingly, we were required to write off $23.2 million of net operating loss carryforwards. As a result, if we earn net taxable income in the future, the limitations on our ability to use our NOL carryforwards to reduce U.S. federal and state tax liabilities will result in increased future tax liability to us.

The design of our internal control over financial reporting is ineffective.

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. The Company has performed an assessment of our internal control of financial reporting as required by section 404(a) of the Sarbanes Oxley Act. Since the Company is considered to be an “emerging growth company”, we are not required to obtain an attestation of our assessment from the auditors under section 404(b) of the Sarbanes Oxley Act.

In 2014, we identified a material weakness in our system of internal control over financial reporting relating to processes and controls over properly identifying and accounting for transactions of a complex or non-routine nature. We made progress in this area in 2015. For example, we recognized the need to engage independent consultants to assist with accounting for certain complex transactions. However, due to the nature of our complex transactions, we could not complete the fair valuations in a timely manner. Accordingly, we believe the material weakness has not been fully remediated. In addition, while performing our assessment of internal control of financial reporting, management identified certain design deficiencies relating to segregation of duties, review and approval, and verification procedures, primarily resulting from the limited number of our accounting staff available to perform such procedures. Additionally, management identified certain design deficiencies to access over information systems. Based on the evaluation of our disclosure controls and procedures as of December 31, 2015, our chief executive officer and chief financial officer concluded that, as a result of material weaknesses in our internal control over financial reporting, our disclosure controls and procedures were not effective as of December 31, 2015.

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Risks Related to the Convertible Note Financings

Our obligations to the holders of our 2016 Notes are secured by a security interest in substantially all of our assets, so if we default on those obligations, the convertible note holders could foreclose on our assets.

Our obligations under the 2016 Notes and the transaction documents relating to those convertible notes are secured by a security interest in substantially all of our assets. As a result, if we default under our obligations under the convertible notes or the transaction documents, the holders of the convertible notes, acting through their appointed agent, could foreclose on their security interests and liquidate some or all of these assets, which would harm our business, financial condition and results of operations and could require us to reduce or cease operations.

The holders of the 2016 Notes have certain additional rights upon an event of default under such convertible notes which could harm our business, financial condition and results of operations and could require us to reduce or cease or operations.

Under the 2016 Notes, the holders have certain rights upon an event of default. Such rights include (i) the remaining principal amount of the convertible notes bearing interest at a rate of 10% per annum, (ii) during the event of default the conversion price being adjusted to the lowest of (a) the conversion price then in effect, (b) 75% of the lowest weighted average price of the common stock during the 30 consecutive trading day period ending on the trading day immediately preceding the date of the event of default conversion and (c) 75% of the weighted average price of the common stock on the date of the applicable event of default conversion, and (iii) the holder having the right to demand redemption of all or a portion of the convertible notes, as described below. At any time after certain notice requirements for an event of default are triggered, a holder of convertible notes may require us to redeem all or any portion of the convertible note by delivering written notice. Each portion of the convertible note subject to redemption would be redeemed by us in cash by wire transfer of immediately available funds at a price equal to the greater of (x) 125% of the conversion amount being redeemed and (y) the product of (A) the conversion amount being redeemed and (B) the quotient determined by dividing (I) the greatest closing price of the shares of common stock during the period beginning on the date immediately preceding such event of default and ending on the date the holder delivers the redemption notice, by (II) the lowest conversion price in effect during such period. We may not have sufficient funds to settle the redemption price and, as described above, this could trigger rights under the security interest granted to the holders and result in the foreclosure of their security interests and liquidation of some or all of our assets.

The exercise of any of these rights upon an event of default could substantially harm our financial condition and force us to reduce or cease operations.

Risk Related to Our Series F Preferred Stock

Holders of our Series F Preferred Stock have certain additional rights upon the occurrence of certain triggering events which could harm our business, financial condition and results of operations and could require us to reduce or cease or operations.

Under the Certificate of Designations for the Series F Preferred Stock, the holders will have certain rights upon a “Triggering Event” (as defined in the Certificate of Designations for the Series F Preferred Stock). Such rights include (i) the remaining principal amount of the Preferred Shares bearing interest at a rate of 10% per annum, (ii) during the Triggering Event the conversion price being adjusted to the lowest of (a) the conversion price then in effect, (b) 75% of the lowest weighted average price of the our common stock during the 30 consecutive trading day period ending on the trading day immediately preceding the date of the Triggering Event conversion and (c) 75% of the weighted average price of the our common stock on the date of the applicable Triggering Event conversion, and (iii) the holder having the right to demand redemption of all or any number of the preferred shares.

At any time after the earlier of the holder’s receipt of a notice of an Triggering Event and the holder becoming aware of an Triggering Event and ending on the 15th trading day after the later of (x) the date such Triggering Event is cured and (y) the holder’s receipt of an Triggering Event notice, the holder may require the Company to redeem all or any number of the preferred shares at a price equal to the greater of (x) 125%

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of the conversion amount being redeemed and (y) the product of (A) the conversion amount being redeemed and (B) the quotient determined by dividing (I) the greatest closing price of the shares of our common stock during the period beginning on the date immediately preceding such Triggering Event and ending on the date the holder delivers the redemption notice, by (II) the lowest conversion price in effect during such period.

“Triggering Event” includes, but is not limited to (and subject to the ability to cure in certain instances): (i) (A) the suspension from trading for more than an aggregate of ten (10) trading days in any 365-day period or (B) the failure of the our common stock to be listed on an eligible market; (ii) the Company’s (i) failure to convert the Series F Preferred Shares or related warrants by delivery of the required number of shares of our common stock within five (5) trading days after the applicable conversion or exercise date, (ii) notice of its intention not to comply with a request for conversion or exercise of the Series F Preferred Shares or related warrants or (iii) the Company fails to have sufficient authorized shares to convert the Series F Preferred Shares and related warrants in full for 75 consecutive days. (iii) any payment failure; (iv) any default under, redemption of or acceleration prior to maturity of more than $100,000, individually or in the aggregate, of Indebtedness of the Company or any of its Subsidiaries; (v) certain bankruptcy events; (vii) a final judgment or judgments for the payment of money aggregating in excess of $250,000, individually or in the aggregate, are rendered against the Company or any of its Subsidiaries and which judgments are not, within sixty (60) days after the entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within seventy-five (75) days after the expiration of such stay; provided, however, that any judgment which is covered by insurance or an indemnity from a credit worthy party shall not be included in calculating the $250,000 amount set forth above so long as the Company provides each holder a written statement from such insurer or indemnity provider (which written statement shall be reasonably satisfactory to such holder) to the effect that such judgment is covered by insurance or an indemnity and the Company will receive the proceeds of such insurance or indemnity within forty-five (45) days of the issuance of such judgment; (viii) breaches of representations, warranties and covenants in the Certificate of Designations for the Series F Preferred Stock and related transaction documents; or (ix) the Company’s failure for any reason after the date that is six (6) months immediately following the Issuance Date to satisfy the current public information requirement under Rule 144(c) of the 1933 Act.

The triggering and exercise of any of these rights could substantially harm our financial condition and force us to reduce or cease operations.

Holders of our Series F Preferred Stock have voting rights on an as converted basis. These rights permit the holders of the Series F Preferred Stock to vote up to certain percentage of our outstanding voting securities.

The holders of the preferred shares may have interests in matters brought before the shareholders that are different than holders of common stock. The holders of Series F Preferred Stock have the right to vote with holders of shares of our common stock, voting together as one class on all matters, with each Series F Preferred share entitling the holder thereof to cast that number of votes per share as is equal to the aggregate number of shares of our common stock into which it is then convertible (without regard to any limitations on conversion set forth in the Certificate of Designations for the Series F Preferred Stock including without limitation, the maximum percentage and/or the failure to have a sufficient number of shares of common stock reserved or available for issuance pursuant to the Certificate of Designations for the Series F Preferred Stock) using the record date for determining the stockholders of the Company eligible to vote on such matters as the date as of which the conversion price is calculated; provided, that no holder (together with such holder’s attribution parties) shall be permitted to have a number of votes in excess of such aggregate number of votes granted to the holders of 9.99% of the shares our common stock then outstanding (including any votes with respect to any shares of our common stock and preferred stock beneficially owned by the holder or such holder’s attribution parties).

The holders of the Series F Preferred Stock may have interests in matters brought before the shareholders that are different than the interests of holders of our common stock. Specifically, the holders of our Series F Preferred Stock are also holders of our 2016 Notes and their interests in relation to shareholder matters that affect the 2016 Notes will be different that the interests of holders of our common stock. While the Series F Preferred Stock holders do not act as a group in the instances where their interests are aligned, their ability to cast votes on an as converted basis may affect the outcome of any shareholder votes on such matters.

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Risks Related to Owning our Common Stock and Other Securities

The price of our common stock may fluctuate substantially.

The market price of our common stock has been and may continue to be subject to wide fluctuation in response to various factors, some of which are beyond our control. Some factors that may cause the market price of our common stock to fluctuate, in addition to the other risks mentioned in this “Risk Factors” section and elsewhere in this prospectus, are:

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In addition, if any of the market for stocks in our industry or industries related to our industry, or the stock market in general, experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition and results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.

Certain of our outstanding warrants and convertible securities have anti-dilution provisions triggered by the issuance of shares of common stock and securities exercisable for shares of our common stock at prices below the then current exercise prices for such warrants, including this offering of Units, pursuant to which the exercise price of such warrants or conversion price of such convertible securities will be adjusted downward and could make it more likely that such warrants are exercised or such convertible securities are converted and dilute our current stockholders.

The exercise price for each of the Class A Warrants, Class B Warrants, Series D Warrants, Series G Warrants, Series H Warrants, certain other warrants, 2015 Subordination Warrants and 2016 Subordination Warrants and the conversion price of the 2015 Notes and 2016 Notes is subject to adjustment in the event we issue common stock or securities convertible into common stock at a price lower than the then-current exercise price or conversion price, as the case may be. The exercise price of the Series B Warrants is subject to adjustment in the event we issue common stock or securities convertible into common stock at a price lower than the current market price. See “Description of Capital Stock — Warrants”.

Specifically, based on the assumed offering price of per Unit in this offering, the following securities will be adjusted as follows:

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If we issue shares of common stock or securities exercisable or convertible for shares of common stock that trigger these provisions, then the exercise price for these warrants will be reduced according to their provisions, in most cases, to the per share price of the triggering transaction. This includes the issuance of Units under this offering and the issuance of shares of common stock upon conversion of the 2015 Notes and 2016 Notes. A reduction in the exercise price of these warrants will make it more likely that they are exercised resulting in further dilution to our then current stockholders.

Broker-dealers may be discouraged from effecting transactions in our shares of common stock because they are considered a penny stock and are subject to the penny stock rules.

Our shares of common stock are currently considered a “penny stock.” The SEC has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. The shares of common stock are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors.” The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC, which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the shares of common stock. Consequently, these penny stock rules may affect the ability of broker-dealers to trade in the shares of common stock.

Future sales and issuances of our common stock or rights to purchase common stock could result in additional dilution of the percentage ownership of our stockholders and could cause our share price to fall.

We expect that significant additional capital will be needed in the future to continue our planned operations, including expanding research and development, funding clinical trials, purchasing of capital equipment, hiring new personnel, commercializing our diagnostic tests, and continuing activities as an operating public company. To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights superior to our existing stockholders.

We do not intend to pay cash dividends on our shares of common stock so any returns will be limited to the value of our shares.

We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited to the increase, if any, of our share price.

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We are an “emerging growth company” and will be able to avail ourselves of reduced disclosure requirements applicable to emerging growth companies, which could make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Investors may find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We may take advantage of these reporting exemptions until we are no longer an “emerging growth company.” We will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of our IPO; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission.

We have elected to use the extended transition periods for complying with new or revised accounting standards.

We have elected to use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”) for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transaction period provided in Section 7(a)(2)(B). As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates.

We may be at risk of securities class action litigation.

We may be at risk of securities class action litigation. This risk is especially relevant for us due to our dependence on positive clinical trial outcomes and regulatory approvals of our diagnostic tests. In the past, life science companies have experienced significant stock price volatility, particularly when associated with binary events such as clinical trials and product approvals. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business and results in a decline in the market price of our common stock.

Our management is required to devote substantial time to compliance initiatives.

As a public company, we incur significant legal, accounting and other expenses that we did not incur as a newly formed entity. The Sarbanes-Oxley Act, as well as rules subsequently implemented by the Securities and Exchange Commission and NASDAQ, have imposed various new requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Our management and other personnel devote a substantial amount of time to these new compliance initiatives. Moreover, these rules and regulations increase our legal and financial compliance costs and make some activities more time consuming and costly. We expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain the same or similar coverage.

Provisions of our Seventh Amended and Restated Certificate of Incorporation, as amended, our Amended and Restated Bylaws and Delaware law could make an acquisition of our Company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove the current members of our board of directors and management.

Certain provisions of our Seventh Amended and Restated Certificate of Incorporation, as amended, or our Certificate, and our Amended and Restated Bylaws (our “Bylaws”), could discourage, delay or prevent a

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merger, acquisition or other change of control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. Furthermore, these provisions could prevent or frustrate attempts by our stockholders to replace or remove members of our board of directors. These provisions also could limit the price that investors might be willing to pay in the future for our common stock, thereby depressing the market price of our common stock. Stockholders who wish to participate in these transactions may not have the opportunity to do so. These provisions:

In addition, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which may, unless certain criteria are met, prohibit large stockholders, in particular those owning 15% or more of the voting rights on our common stock, from merging or combining with us for a prescribed period of time.

Risks Related to Our Business and Industry

We have a limited commercial history upon which to base our prospects, have not generated profits and do not expect to generate profits for the foreseeable future. We may never achieve or sustain profitability.

We began operations in January 2005, and we have a limited operating history. We have not earned significant revenue to-date, and do not expect to earn significant revenue in the near future. We had a net loss for the nine-month periods ended September 30, 2016 and 2015 of approximately $83.0 million and $39.0 million, respectively. Net loss for the years ended December 31, 2015 and 2014, was approximately $57.9 million and $21.7 million, respectively. As of September 30, 2016, December 31, 2015, and December 31, 2014, we had an accumulated deficit of $204.9 million, $121.9 million, and $64.0 million, respectively. Potential investors should be aware of the difficulties normally encountered by a new enterprise, many of which are beyond our control, including substantial risks and expenses in the course of developing new diagnostic tests, establishing or entering new markets, organizing operations and marketing procedures. The likelihood of our success must be considered in light of these risks, expenses, complications and delays, and the competitive environment in which we operate. There is, therefore, nothing at this time upon which to base an assumption that our business plan will prove successful, and we may not be able to generate significant revenue, raise additional capital or operate profitably. We will continue to encounter risks and difficulties frequently experienced by early commercial stage companies, including scaling up our infrastructure and headcount, and may encounter unforeseen expenses, difficulties or delays in connection with our growth. In addition, as a result of the start-up nature of our business, we can be expected to continue to sustain substantial operating expenses without generating sufficient revenues to cover expenditures. As discussed in Note 3 to the audited financial statements, our recurring operating losses from operations and our need for additional sources of capital to fund our ongoing operations raise substantial doubt about our ability to continue as a going concern. Any investment in our Company is therefore highly speculative and could result in the loss of your entire investment.

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Our near-term success is dependent upon our ability to expand our customer base.

Our current customer base is composed of hospitals and testing laboratories that use our C. diff, Group B Strep and other assays. Our success will depend, in part, upon our ability to expand our customer base and increase revenue by adding new products. Attracting new customers requires substantial time and expense. Any failure to expand our existing customer base would adversely affect our operating results. Many factors could affect the market acceptance and commercial success of our assays, including:

If we cannot successfully develop, maintain, commercialize, or obtain regulatory approvals for new and existing diagnostic assays, our financial results will be harmed and our ability to compete will be harmed.

Our financial performance depends in part upon our ability to successfully develop and market new assays in a rapidly changing technological and economic environment, and to maintain and successfully commercialize previously cleared assays. If we fail to successfully introduce new assays or do not maintain approval for previously FDA-cleared assays, we could lose customers and market share. We could also lose market share if our competitors introduce new assays or technologies that render our assays less competitive or obsolete. In addition, delays in the introduction of new assays due to regulatory, developmental or other obstacles could negatively impact our revenue and market share, as well as our earnings. Factors that can influence our ability to introduce new assays, the timing associated with new product approvals and commercial success of these assays include:

We are subject to many laws and governmental regulations and any adverse regulatory action may materially adversely affect our financial condition and business operations.

Our assays for C. diff, Group B Strep, Staph ID/R and STEC and any assays that we develop and commercialize in the future are subject to regulation by numerous government agencies, including the FDA and comparable foreign agencies. To varying degrees, each of these agencies requires us to comply with laws and regulations governing the development, testing, manufacturing, labeling, marketing and distribution of our assays. In particular, FDA regulations govern activities such as product development, product testing, product labeling, product storage, premarket clearance or approval, manufacturing, advertising, promotion, product sales, reporting of certain product failures and distribution. Our assays will require 510(k) clearance from the FDA prior to marketing. Clinical trials are required to support a 510(k) submission.

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We may be unable to obtain marketing clearance for our assays in development. If such approval is obtained, it may:

Our facilities are subject to periodic inspection by the FDA and foreign regulatory agencies and conformance to the FDA’s Quality System Regulation (the “QSR”) and current Good Manufacturing Practice requirements, as well as applicable foreign or international standards. The results of these inspections can include inspectional observations regarding potential violations of the Food, Drug and Cosmetic Act (the “FDCA”) and related laws, warning letters, restrictions on medical device sales and other forms of enforcement.

Since 2009, the FDA has significantly increased its oversight of companies subject to its regulations, including medical device companies, by hiring new investigators and stepping up inspections of manufacturing facilities. The FDA has recently also significantly increased the number of warning letters issued to companies. If the FDA were to conclude that we are not in compliance with applicable laws or regulations, or that any of our medical devices are ineffective or pose an unreasonable health risk, the FDA could ban such medical devices, detain or seize adulterated or misbranded medical devices, order a recall, repair, replacement, or refund of such devices, refuse to grant pending pre-market approval applications or require certificates of foreign governments for exports, and/or require us to notify health professionals and others that the devices present unreasonable risks of substantial harm to the public health. The FDA may also impose operating restrictions on a company-wide basis, enjoin and restrain certain violations of applicable law pertaining to medical devices and assess civil or criminal penalties against our officers, employees or us. The FDA may also recommend prosecution to the U.S. Department of Justice. Any adverse regulatory action, depending on its magnitude, may restrict us from effectively marketing and selling our diagnostic tests.

Foreign governmental regulations have become increasingly stringent and more common, and we may become subject to more rigorous regulation by foreign governmental authorities in the future. Penalties for a company’s non-compliance with foreign governmental regulation could be severe, including revocation or suspension of a company’s business license and criminal sanctions. Any domestic or foreign governmental law or regulation imposed in the future may have a material adverse effect on us.

Our current and potential customers in the United States and elsewhere may also be subject, directly or indirectly, to applicable anti-kickback, fraud and abuse, false claims, transparency, health information privacy and security and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm, administrative burdens and diminished profits and future earnings.

The life sciences industry is highly competitive and subject to rapid technological change. If our competitors and potential competitors develop superior assays and technologies, our competitive position and results of operations would suffer.

We face intense competition from a number of companies that offer assays in our target markets, many of which have substantially greater financial resources and larger, more established marketing, sales and service operations than we do. The life sciences industry is characterized by rapid and continuous technological innovation. We may need to develop new technologies for our existing product and our assays to be competitive. One or more of our current or future competitors could render our existing products or assays under development obsolete or uneconomical by technological advances. We may also encounter other problems in the process of delivering new assays to the marketplace, such as problems related to FDA clearance or regulations, design, development or manufacturing of such assays, and as a result we may be unsuccessful in selling such assays. Our future success depends on our ability to compete effectively against current technologies, as well as to respond effectively to technological advances by developing and marketing assays that are competitive in the continually changing technological landscape.

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If our assays do not perform as expected or the reliability of the technology on which our assays are based is questioned, we could experience delayed or reduced market acceptance of our assays, increased costs and damage to our reputation.

Our success depends on the market’s confidence that we can provide reliable, high-quality analyzers and diagnostic cartridges. We believe that customers in our target markets are likely to be particularly sensitive to product defects and errors. Our reputation and the public image of our assays or technologies may be impaired if our assays fail to perform as expected or our assays are perceived as difficult to use. Despite quality control testing, defects or errors could occur in our assays or technologies.

In the future, if our assays experience a material defect or error, this could result in loss or delay of revenues, delayed market acceptance, product recalls, damaged reputation, diversion of development resources, legal claims, increased insurance costs or increased service and warranty costs, any of which could harm our business. Such defects or errors could also prompt us to amend certain warning labels or narrow the scope of the use of our assays, either of which could hinder our success in the market. Even after any underlying concerns or problems are resolved, any widespread concerns regarding our technology or any manufacturing defects or performance errors in our assays could result in lost revenue, delayed market acceptance, damaged reputation, increased service and warranty costs and claims against us.

If our international distributor relationships are not successful, our ability to market and sell our assays will be harmed and our financial performance will be adversely affected.

Outside of the United States, we depend on relationships with distributors for the marketing and sales of our assays in various geographic regions, and we have a limited ability to influence their efforts. Relying on distributors for our sales and marketing could harm our business for various reasons, including:

If any of our products, or the malfunctioning of our products, causes or contributes to a death or a serious injury, we will be subject to medical device reporting regulations, which can result in voluntary corrective actions or agency enforcement actions.

Under the FDA medical device reporting regulations, medical device manufacturers are required to report to the FDA information that a device has or may have caused or contributed to a death or serious injury or has malfunctioned in a way that would likely cause or contribute to death or serious injury if the malfunction of the device were to recur. If we fail to report these events to the FDA within the required timeframes, or at all, FDA could take enforcement action against us. Any such adverse event involving our assays could also result in future voluntary corrective actions, such as recalls or customer notifications, or agency action, such as inspection or enforcement action. Any corrective action, whether voluntary or involuntary, as well as defending ourselves in a lawsuit, will require the dedication of our time and capital, distract management from operating our business, and may harm our reputation and financial results.

Our assays may in the future be subject to product recalls. A recall of our products, either voluntarily or at the direction of the FDA or another governmental authority, including a third-country authority, or the discovery of serious safety issues with our products, could have a significant adverse impact on us.

The FDA and similar foreign governmental authorities have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture. In the case of the FDA, the authority to require a recall must be based on an FDA finding that there is reasonable probability that the device would cause serious injury or death. In addition, foreign governmental bodies have the authority to require the recall of our products in the event of material deficiencies or defects in design or manufacture. Manufacturers may, under their own initiative, recall a product if any material deficiency in a

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device is found. The FDA requires that certain classifications of recalls be reported to the FDA within ten working days after the recall is initiated. A government-mandated or voluntary recall by us or one of our international distributors could occur as a result of an unacceptable risk to health, component failures, malfunctions, manufacturing errors, design or labeling defects or other deficiencies and issues. Recalls of any of our assays would divert managerial and financial resources and have an adverse effect on our reputation, results of operations and financial condition, which could impair our ability to produce our products in a cost-effective and timely manner in order to meet our customers’ demands. We may also be subject to liability claims, be required to bear other costs, or take other actions that may have a negative impact on our future sales and our ability to generate profits. Companies are required to maintain certain records of recalls, even if they are not reportable to the FDA or another third-country competent authority. We may initiate voluntary recalls involving our products in the future that we determine do not require notification of the FDA or another third-country competent authority. If the FDA disagrees with our determinations, it could require us to report those actions as recalls. A future recall announcement could harm our reputation with customers and negatively affect our sales. In addition, the FDA could take enforcement action for failing to report the recalls when they occur.

We are also required to follow detailed recordkeeping requirements for all Company-initiated medical device corrections and removals. In addition, in December 2012, the FDA issued a draft guidance intended to assist the FDA and industry in distinguishing medical device recalls from product enhancements. Per the guidance, if any change or group of changes to a device that addresses a violation of the FDCA, that change would generally constitute a medical device recall and require submission of a recall report to the FDA.

If we become subject to claims relating to improper handling, storage or disposal of hazardous materials, we could incur significant cost and time to comply.

Our research and development processes involve the controlled storage, use and disposal of hazardous materials, including biological hazardous materials. We are subject to foreign, federal, state and local regulations governing the use, manufacture, storage, handling and disposal of materials and waste products. We may incur significant costs complying with both existing and future environmental laws and regulations. In particular, we are subject to regulation by the Occupational Safety and Health Administration, or OSHA, and the Environmental Protection Agency, or EPA, and to regulation under the Toxic Substances Control Act and the Resource Conservation and Recovery Act in the United States. OSHA or the EPA may adopt additional regulations in the future that may affect our research and development programs. The risk of accidental contamination or injury from hazardous materials cannot be eliminated completely. In the event of an accident, we could be held liable for any damages that result, and any liability could exceed the limits or fall outside the coverage of our workers’ compensation insurance. We may not be able to maintain insurance on acceptable terms, if at all.

Our diagnostic cartridges have not been manufactured on a high volume scale and are subject to unforeseen scale-up risks.

Although we have developed a process to manufacture diagnostic cartridges for our current volume of sales, there can be no assurance that we can manufacture our diagnostic cartridges at a scale that is adequate for our future commercial needs. We may face significant or unforeseen difficulties in manufacturing our diagnostic cartridges, including but not limited to:

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These and other difficulties may only become apparent when scaling up to the manufacturing process of our diagnostic cartridges to a more substantive commercial scale. If our diagnostic cartridges cannot be manufactured in sufficient commercial quantities or manufacturing is delayed, our future prospects could be significantly impacted and our financial prospects would be materially harmed.

We or our suppliers may experience development or manufacturing problems or delays that could limit the growth of our revenue or increase our losses.

We may encounter unforeseen situations in the manufacturing of our diagnostic cartridges that could result in delays or shortfalls in our production. Our suppliers may also face similar delays or shortfalls. In addition, our or our suppliers’ production processes may have to change to accommodate any significant future expansion of our manufacturing capacity, which may increase our or our suppliers’ manufacturing costs, delay production of our diagnostic cartridges, reduce our product gross margin and adversely impact our business. If we are unable to satisfy demand for our diagnostic cartridges by successfully manufacturing and shipping our diagnostic cartridges in a timely manner, our revenue could be impaired, market acceptance for our assays could be adversely affected and our customers might instead purchase our competitors’ assays. In addition, developing manufacturing procedures for assays under development may require developing specific production processes for those assays. Developing such processes could be time consuming and any unexpected difficulty in doing so can delay the introduction of a product.

We are dependent on single source suppliers for some of the components and materials used in our assays, and supply chain interruptions could negatively impact our operations and financial performance.

Our assays are manufactured by us and we obtain supplies from a limited number of suppliers. In some cases, critical components required to manufacture our assays may only be available from a sole supplier or limited number of suppliers, any of whom would be difficult to replace. The supply of any of our manufacturing materials may be interrupted because of poor vendor performance or other events outside our control, which may require us, among other things, to identify alternate vendors and result in lost sales and increased expenses. Even if the manufacturing materials that we source are available from other parties, the time and effort involved in validating the new supplies and obtaining any necessary regulatory approvals for substitutes could impede our ability to replace such components in a timely manner or at all.

We expect to rely on third parties to conduct studies of our assays under development that will be required by the FDA or other regulatory authorities and those third parties may not perform satisfactorily.

We do not have the ability to independently conduct the field trial studies or other studies that may be required to obtain FDA and other regulatory clearances or approvals for our assays. Accordingly, we expect to rely on third parties, such as independent testing laboratories and hospitals, to conduct such studies. Our reliance on these third parties will reduce our control over these activities. These third-party contractors may not complete activities on schedule or conduct studies in accordance with regulatory requirements or our study design. We cannot control whether they devote sufficient time, skill and resources to our studies. Our reliance on third parties that we do not control will not relieve us of any applicable requirement to prepare, and ensure compliance with, various procedures required under good clinical practices. If these third parties do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, if the third parties need to be replaced or if the quality or accuracy of the data they obtain is compromised due to their failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our studies may be extended, delayed, suspended or terminated, and we may not be able to obtain regulatory approval for additional assays.

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Any clinical trials that we may conduct may not begin on time, or at all, may not be completed on schedule, or at all, or may be more expensive than we expect, which could prevent or delay regulatory approval of our assays or impair our financial position.

The commencement or completion of any clinical trials that we may conduct may be delayed or halted for numerous reasons, including, but not limited to, the following:

Our clinical trial costs will increase if we have material delays in those trials or if we need to perform more or larger trials than planned. Adverse events during a clinical trial could cause us to repeat a trial, terminate a trial or cancel an entire program. Should our clinical development plan be delayed, this could have a material adverse effect on our operations and financial condition.

Product liability claims could adversely impact our financial condition and our earnings and impair our reputation.

Our business exposes us to potential product liability risks that are inherent in the design, manufacture and marketing of medical devices. Device failures, manufacturing defects, design flaws, or inadequate disclosure of product-related risks or product-related information with respect to our assays could result in an unsafe condition regarding, injury to, or death of, a patient. The occurrence of such a problem could result in product liability claims or a recall of, or safety alert relating to, one or more of our assays. Product liability claims or product recalls in the future, regardless of their ultimate outcome, could have a material adverse effect on our business and reputation and on our ability to attract and retain customers for our assays.

Healthcare policy changes, including U.S. healthcare reform legislation signed in 2010, may have a material adverse effect on us.

In March 2010, the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act of 2010, or PPACA, were signed into law. The legislation imposes a 2.3% excise tax on medical device manufacturers. This significant tax burden on our industry could have a material, negative impact on our results of operations and our cash flows. Other elements of this legislation, such as comparative effectiveness research, an independent payment advisory board, payment system reforms, including shared savings pilots, and other provisions, could meaningfully change the way healthcare is developed and delivered, and may materially impact numerous aspects of our business.

Adverse changes in reimbursement policies and procedures by payors may impact our ability to market and sell our assays that are subject to reimbursement.

Healthcare costs have risen significantly over the past decade, and there have been and continue to be proposals by legislators, regulators and third-party payors to decrease costs. Third-party payors are increasingly challenging the prices charged for medical products and services and instituting cost containment

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measures to control or significantly influence the purchase of medical products and services. For example, the PPACA, among other things, reduced and/or limited Medicare reimbursement to certain providers. The Budget Control Act of 2011, as amended by subsequent legislation, further reduces Medicare’s payments to providers by 2 percent through fiscal year 2024. These reductions may reduce providers’ revenues or profits, which could affect their ability to purchase new technologies. Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek to control healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Legislation could be adopted in the future that limits payments for our products from governmental payors. In addition, commercial payors such as insurance companies, could adopt similar policies that limit reimbursement for medical device manufacturers’ products. Therefore, we cannot be certain that those of our assays that will be subject to reimbursement will be reimbursed at a cost-effective level. We face similar risks relating to adverse changes in reimbursement procedures and policies in other countries where we market or intend to market our assays. Reimbursement and healthcare payment systems vary significantly among international markets. Our inability to obtain international reimbursement approval, or any adverse changes in the reimbursement policies of foreign payors, could negatively affect our ability to sell our assays and have a material adverse effect on our business and financial condition.

Consolidation in the healthcare industry could have an adverse effect on our revenues and results of operations.

Many healthcare industry companies, including healthcare systems, are consolidating to create new companies with greater market power. As the healthcare industry consolidates, competition to provide goods and services to industry participants will become more intense. These industry participants may try to use their market power to negotiate price concessions or reductions for diagnostic tests. If we are forced to reduce our prices because of consolidation in the healthcare industry, our projected revenues would decrease and our earnings, financial condition, and/or cash flows would suffer.

If we or our distributors do not comply with the U.S. federal and state fraud and abuse laws, including anti-kickback laws for any products approved in the U.S., or with similar foreign laws where we market our products, we could face significant liability.

There are numerous United States federal and state laws pertaining to healthcare fraud and abuse, including anti-kickback laws, false claims, and physician transparency laws. Our relationships with physicians and surgeons, hospitals and our independent distributors are subject to scrutiny under these laws. Violations of these laws are punishable by criminal and civil sanctions, including significant fines, damages and monetary penalties and in some instances, imprisonment and exclusion from participation in federal and state healthcare programs, including the Medicare, Medicaid and Veterans Administration health programs.

Healthcare fraud and abuse regulations are complex, and even minor irregularities can potentially give rise to claims that a statute or prohibition has been violated. The laws that may affect our ability to operate include:

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Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusion from federal healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. To enforce compliance with the federal laws, the U.S. Department of Justice, or DOJ, has recently increased its scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Dealing with investigations can be time and resource consuming and can divert management’s attention from the business. In addition, settlements with the DOJ or other law enforcement agencies have forced healthcare providers to agree to additional onerous compliance and reporting requirements as part of a consent decree or corporate integrity agreement. Any violations of these laws, or any action against us for violation of these laws, even if we successfully defend against it, could have a material adverse effect on our reputation, business and financial condition.

Many foreign countries have enacted similar laws addressing fraud and abuse in the healthcare sector. The shifting commercial compliance environment and the need to build and maintain robust and expandable systems to comply with different compliance requirements in multiple jurisdictions increases the possibility that we may run afoul of one or more of the requirements.

The implementation of the reporting and disclosure obligations of the Physician Payments Sunshine Act/Open Payments provisions of the Health Care Reform Law could adversely affect our business upon commercialization of our product in the U.S.

The federal Physician Payments Sunshine Act, being implemented as the Open Payments Program, requires device manufacturers to engage in extensive tracking of payments and other transfers of value made to physicians and teaching hospitals, as well as physician ownership and investment interests, and public reporting of such data to the Centers for Medicare and Medicaid Services annually. Although we have and expect to continue to have substantially compliant programs and controls in place to comply with the Physician Payments Sunshine Act requirements and similar state and foreign laws, our compliance with the Physician Payments Sunshine Act and similar state and foreign transparency laws imposes additional costs on us. Additionally, failure to comply with the Physician Payment Sunshine Act or similar state or foreign laws may subject us to monetary penalties.

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Our ability to compete depends on our ability to attract and retain talented employees.

Our future success depends on our ability to identify, attract, train, integrate and retain highly qualified technical, development, sales and marketing, managerial and administrative personnel. Competition for highly skilled individuals is extremely intense and we face difficulty identifying and hiring qualified personnel in many areas of our business. We may not be able to hire and retain such personnel at compensation levels consistent with our existing compensation and salary structure. Many of the companies with which we compete for hiring experienced employees have greater resources than we have. If we fail to identify, attract, train, integrate and retain highly qualified and motivated personnel, our reputation could suffer and our business, financial condition and results of operations could be adversely affected.

Our future success also depends on the continued service and performance of our senior management team. The replacement of members of our senior management team likely would involve significant time and costs, and the loss of any these individuals may delay or prevent the achievement of our business objectives.

Changes in tax laws or exposure to additional income tax liabilities could have a material impact on our financial condition and results of operations.

We are subject to income taxes as well as non-income based taxes in both the United States and various foreign jurisdictions. Changes in existing tax laws, treaties, regulations or policies or the interpretation or enforcement thereof, or the enactment or adoption of new tax laws, treaties, regulations or policies could materially impact our effective tax rate.

If we do not achieve, sustain or successfully manage our anticipated growth, our business and prospects will be harmed.

If we are unable to obtain or sustain adequate revenue growth, our financial results could suffer. Furthermore, significant growth will place strains on our management and our operational and financial systems and processes and our operating costs may escalate even faster than planned. If we cannot effectively manage our expanding operations and our costs, we may not be able to grow effectively or we may grow at a slower pace. Additionally, if we do not successfully forecast the timing of regulatory authorization for our additional tests, marketing and subsequent demand for our diagnostic tests or manage our anticipated expenses accordingly, our operating results will be harmed.

Other companies or institutions have commercial assays or may develop and market novel or improved methods for infectious disease diagnostics, which may make our diagnostic platform less competitive or obsolete.

The market for diagnostics is large and established, and our competitors may possess significantly greater financial resources and have larger development and commercialization capabilities than we do. We may be unable to compete effectively against these competitors either because their diagnostic platforms are superior or because they may have more expertise, experience, financial resources or stronger business relationships.

Demand for our assays depends in part on the operating budgets and hospital-acquired infection rates of our customers, a reduction in which could limit demand for our assays and adversely affect our business.

In the near term, we expect that our revenue will be derived primarily from sales of our C. diff and Group B Strep assays to hospitals. The demand for our assays will depend in part upon the prevalence of C. diff and Group B Strep at the hospitals of these customers and impacted by other factors beyond our control, such as:

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Our operating results may fluctuate due to reductions and delays in expenditures by our customers. Any decrease in our customers’ budgets or expenditures, or in the size, scope or frequency of operating expenditures, could materially and adversely affect our business, operating results and financial condition.

New technologies, techniques or assays could emerge that might offer better combinations of price and performance than our current C. diff, Group B Strep, Staph ID/R and e. coli assays or future assays and analyzers.

It is critical to our success that we anticipate changes in technology and customer requirements and to successfully introduce, on a timely and cost-effective basis, new, enhanced and competitive technologies that meet the needs of current and prospective customers. If we do not successfully innovate and introduce new technology into our product lines or manage the transitions to new product offerings, our revenues, results of operations and business will be adversely impacted. Competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements. We anticipate that we will face increased competition in the future as existing companies and competitors develop new or improved diagnostic tests and as new companies enter the market with new technologies.

Due to our fixed overhead costs and the depreciation of our analyzers at customer sites included in cost of sales and the costs associated with our current hand-build cartridge manufacturing process we have in the past experienced substantial negative gross margins. We will need to increase our sales volumes significantly and automate our cartridge manufacturing process in order to achieve profitability.

We had negative gross margins of 169% and 120% during the nine months ended September 30, 2016 and 2015, respectively. The components of our cost of sales include cost of materials, supplies, labor for manufacturing, equipment and facility expenses associated with manufacturing. Facility expenses include allocated overhead comprised of rent, equipment depreciation and utilities. Due to our fixed overhead costs we will continue to experience negative gross margins unless and until we are able to significantly increase our sales volume. In addition, we currently hand-build our diagnostic cartridges. We are working to automate portions of our manufacturing and assembly process, which we believe will reduce our cartridge manufacturing costs. However, there is no assurance that we will be successful in automating our manufacturing process, and our failure to do so will materially limit our ability to reduce our cost of sales in the future.

If we experience a significant disruption in our information technology systems or if we fail to implement new systems and software successfully, our business could be adversely affected.

We depend on information systems to manufacture products, process orders, manage inventory, process shipments to customers and respond to customer inquiries. If we were to experience a prolonged disruption in the information technology systems that involve our interactions with customers and suppliers, it could result in the loss of sales and customers, which could adversely affect our business.

Risks Related to Intellectual Property

The extent to which we can protect our business and technologies through intellectual property rights that we own, acquire or license is uncertain.

We employ a variety of proprietary and patented technologies and methods in connection with the assays that we sell or are developing. We license some of these technologies from third parties. We cannot provide any assurance that the intellectual property rights that we own or license provide effective protection from competitive threats or that we would prevail in any litigation in which our intellectual property rights are challenged. In addition, we may not be successful in obtaining new proprietary or patented technologies or methods in the future, whether through acquiring ownership or through licenses from third parties.

Our currently pending or future patent applications may not result in issued patents, and we cannot predict how long it may take for a patent to issue on any of our pending patent applications, assuming a patent does issue.

Other parties may challenge patents issued or exclusively licensed to us, or courts or administrative agencies may hold our patents or the patents we license on an exclusive basis to be invalid or unenforceable. We may

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not be successful in defending challenges made against our patents and other intellectual property rights. Any third-party challenge to any of our patents could result in the unenforceability or invalidity of some or all of the claims of such patents and could be time consuming and expensive.

The extent to which the patent rights of life sciences companies effectively protect their diagnostic tests and technologies is often highly uncertain and involves complex legal and factual questions for which important legal principles remain unresolved.

No consistent policy regarding the proper scope of allowable claims of patents held by life sciences companies has emerged to date in the United States. Various courts, including the U.S. Supreme Court, have rendered decisions that impact the scope of patentability of certain inventions or discoveries relating to diagnostic tests or genomic diagnostic testing. These decisions generally stand for the proposition that inventions that recite laws of nature are not themselves patentable unless they have sufficient additional features that provide practical assurance that the processes are genuine inventive applications of those laws rather than patent drafting efforts designed to monopolize a law of nature itself. What constitutes a “sufficient” additional feature for this purpose is uncertain. Although we do not generally rely on gene sequence patents, this evolving case law in the United States may adversely impact our ability to obtain new patents and may facilitate third-party challenges to our existing owned and exclusively licensed patents.

We cannot predict the breadth of claims that may be allowed or enforced in patents we own or in those to which we have exclusive license rights. For example:

Changes in either the patent laws or in interpretations of patent laws in the United States or other countries may diminish the value of our intellectual property rights.

On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted, redefine prior art, may affect patent litigation and switch the U.S. patent system from a “first-to-invent” system to a “first-to-file” system. Under a first-to-file system, assuming the other requirements for patentability are met, the first inventor to file a patent application generally will be entitled to the patent on an invention regardless of whether another inventor had made the invention earlier. The U.S. Patent and Trademark Office, or USPTO, recently developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, including the first-to-file provisions in particular, only became effective on March 16, 2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our owned and licensed patent applications and the

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enforcement or defense of issued patents that we own or license, all of which could have a material adverse effect on our business and financial condition.

Patent applications in the United States and many foreign jurisdictions are not published until at least eighteen months after filing and it is possible for a patent application filed in the United States to be maintained in secrecy until a patent issues on the application. In addition, publications in the scientific literature often lag behind actual discoveries. We therefore cannot be certain that others have not filed patent applications that cover inventions that are the subject of pending applications that we own or exclusively license or that we were the first to invent the technology (if filed prior to the Leahy-Smith Act) or first to file (if filed after the Leahy-Smith Act). Our competitors may have filed, and may in the future file, patent applications covering technology that is similar to or the same as our technology. Any such patent application may have priority over patent applications that we own and, if a patent issues on such patent application, we could be required to obtain a license to such patent in order to carry on our business. If another party has filed a U.S. patent application covering an invention that is similar to, or the same as, an invention that we own, we may have to participate in an interference or other proceeding in the USPTO or a court to determine priority of invention in the United States, for applications and patents made prior to the enactment of the Leahy-Smith Act. For applications and patents made following the enactment of the Leahy-Smith Act, we may have to participate in a derivation proceeding to resolve disputes relating to inventorship. The costs of these proceedings could be substantial, and it is possible that such efforts would be unsuccessful, resulting in our inability to obtain or retain any U.S. patent rights with respect to such invention.

In addition, the laws of foreign jurisdictions may not protect our rights to the same extent as the laws of the United States. For example, European patent law restricts the patentability of methods of treatment of the human body more than U.S. law does. Publications of discoveries in scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, or that we or our licensors were the first to file for patent protection of such inventions. Moreover, the USPTO might require that the term of a patent issuing from a pending patent application be disclaimed and limited to the term of another patent that is commonly owned or names a common inventor. As a result, the issuance, scope, validity, term, enforceability and commercial value of our patent rights are highly uncertain.

The patent prosecution process is expensive and time-consuming, is highly uncertain and involves complex legal and factual questions. Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.

Our success depends in large part on our ability to obtain and maintain patent protection in the United States and other countries with respect to our proprietary technology and product candidates. We seek to protect our proprietary position by filing in the United States and in certain foreign jurisdictions patent applications related to our novel technologies and product candidates that are important to our business.

The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. In addition, we may not pursue or obtain patent protection in all major markets. Moreover, in some circumstances, we may not have the right to control the preparation, filing or prosecution of patent applications, or to maintain the patents, covering technology that we license from third parties. In some circumstances, our licensors may have the right to enforce the licensed patents without our involvement or consent, or to decide not to enforce or to allow us to enforce the licensed patents. Therefore, these patents and patent applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. If any of our licensors fail to maintain such patents, or lose rights to those patents, the rights that we have licensed may be reduced or eliminated and our right to develop and commercialize any of our product candidates that are the subject of such licensed rights could be adversely affected.

Our pending and future patent applications may not result in patents being issued which protect our technology or products, in whole or in part, or which effectively prevent others from commercializing

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competitive technologies and products. In particular, during prosecution of any patent application, the issuance of any patents based on the application may depend upon our ability to generate additional nonclinical or clinical data that support the patentability of our proposed claims. We may not be able to generate sufficient additional data on a timely basis, or at all. Moreover, changes in either the patent laws or interpretation of the patent laws in the United States or other countries may diminish the value of our patents or narrow the scope of our patent protection.

Moreover, we may be subject to a third-party pre-issuance submission of prior art to the USPTO, or become involved in opposition, derivation, reexamination, inter partes review, post-grant review or interference proceedings or other patent office proceedings or litigation, in the United States or elsewhere, challenging our patent rights or the patent rights of others. An adverse determination in any such submission or proceeding could reduce the scope of, or invalidate, our patent rights; allow third parties to commercialize our technology or products and compete directly with us, without payment to us; or result in our inability to manufacture or commercialize products without infringing third-party patent rights. In addition, if the breadth or strength of protection provided by our owned and licensed patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.

Obtaining and maintaining our patent protection depends upon compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent prosecution process and following the issuance of a patent. There are situations in which noncompliance with these requirements can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case if our patent were in force.

Our intellectual property rights may not be sufficient to protect our competitive position and to prevent others from manufacturing, using or selling competing assays.

The scope of our owned and exclusively licensed intellectual property rights may not be sufficient to prevent others from manufacturing, using or selling competing assays. Competitors could purchase our product and attempt to replicate some or all of the competitive advantages we derive from our development efforts, willfully infringe our intellectual property rights, design around our protected technology or develop their own competitive technologies and thereby avoid infringing our intellectual property rights. If our intellectual property is not sufficient to effectively prevent our competitors from developing and selling similar diagnostic tests, our competitive position and our business could be adversely affected.

Our platform depends on certain technologies that are licensed to us. We do not control these technologies and any loss of our rights to them could prevent us from manufacturing our assays.

We rely on licenses to various proprietary technologies that are material to our business, including the development of certain future assays. We have entered into non-exclusive licenses with Biohelix Corp., or Biohelix, a subsidiary of Quidel Corporation and a license with Integrated DNA Technologies, Inc. that has certain exclusive and non-exclusive fields. Our rights to use these technologies will be subject to the continuation of and our compliance with the terms of those licenses.

We may become involved in disputes relating to our intellectual property rights, and may need to resort to litigation in order to defend and enforce our intellectual property rights.

Extensive litigation regarding patents and other intellectual property rights has been common in the medical diagnostic testing industry. Litigation may be necessary to assert infringement claims, protect trade secrets or know-how and determine the enforceability, scope and validity of certain proprietary rights. Litigation may even be necessary to resolve disputes of inventorship or ownership of proprietary rights. The defense and prosecution of intellectual property lawsuits, USPTO interference or derivation proceedings and related legal

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and administrative proceedings (e.g., a re-examination) in the United States and internationally involve complex legal and factual questions. As a result, such proceedings are costly and time consuming to pursue, and their outcome is uncertain.

Even if we prevail in such a proceeding in which we assert our intellectual property rights against third parties, the remedy we obtain may not be commercially meaningful or adequately compensate us for any damages we may have suffered. If we do not prevail in such a proceeding, our patents could potentially be declared to be invalid, unenforceable or narrowed in scope, or we could otherwise lose valuable intellectual property rights. Similar proceedings involving the intellectual property we exclusively license could also have an impact on our business. Further, if any of our other owned or exclusively licensed patents are declared invalid, unenforceable or narrowed in scope, our competitive position could be adversely affected.

We could face claims that our activities or the manufacture, use or sale of our assays infringe the intellectual property rights of others, which could cause us to pay damages or licensing fees and limit our ability to sell some or all of our assays and services.

Our research, development and commercialization activities may infringe or be claimed to infringe patents or other intellectual property rights owned by other parties of which we may be unaware because the relevant patent applications may have been filed but not yet published. Certain of our competitors and other companies have substantial patent portfolios, and may attempt to use patent litigation as a means to obtain a competitive advantage or to extract licensing revenue. In addition to patent infringement claims, we may also be subject to other claims relating to the violation of intellectual property rights, such as claims that we have misappropriated trade secrets or infringed third party trademarks. The risks of being involved in such litigation may also increase as we gain greater visibility as a public company and as we gain commercial acceptance of our diagnostic tests and move into new markets and applications for our assays.

Regardless of merit or outcome, our involvement in any litigation, interference or other administrative proceedings could cause us to incur substantial expense and could significantly divert the efforts of our technical and management personnel. Any public announcements related to litigation or interference proceedings initiated or threatened against us could cause our share price to decline. An adverse determination, or any actions we take or agreements we enter into in order to resolve or avoid disputes, may subject us to the loss of our proprietary position or to significant liabilities, or require us to seek licenses that may include substantial cost and ongoing royalties. Licenses may not be available from third parties, or may not be obtainable on satisfactory terms. An adverse determination or a failure to obtain necessary licenses may restrict or prevent us from manufacturing and selling our diagnostic tests and offering our services. These outcomes could materially harm our business, financial condition and results of operations.

We may not be able to adequately protect our intellectual property outside of the United States.

The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States, and many companies have encountered significant problems in protecting and defending such rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to medical devices, diagnostic testing and biotechnology, which could make it difficult for us to stop the infringement of our patents and for licensors, if they were to seek to do so, to stop infringement of patents that are licensed to us. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business. Additionally, prosecuting and maintaining intellectual property (particularly patent) rights are very costly endeavors, and for these and other reasons we may not pursue or obtain patent protection in all major markets. We do not know whether legal and government fees will increase substantially and therefore are unable to predict whether cost may factor into our global intellectual property strategy.

In addition to the risks associated with patent rights, the laws in some foreign jurisdictions may not provide protection for our trade secrets and other intellectual property. If our trade secrets or other intellectual property are misappropriated in foreign jurisdictions, we may be without adequate remedies to address these issues. Additionally, we also rely on confidentiality and assignment of invention agreements to protect our intellectual property in foreign jurisdictions. These agreements may provide for contractual remedies in the event of

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misappropriation, but we do not know to what extent, if any, these agreements, and any remedies for their breach, will be enforced by a foreign court. If our intellectual property is misappropriated or infringed upon and an adequate remedy is not available, our future prospects will likely diminish. The sale of diagnostic tests that infringe our intellectual property rights, particularly if such diagnostic tests are offered at a lower cost, could negatively impact our ability to achieve commercial success and may materially and adversely harm our business.

Our failure to secure trademark registrations could adversely affect our business and our ability to market our assays and product candidates.

Our trademark applications in the United States and any other jurisdictions where we may file may not be allowed for registration, and our registered trademarks may not be maintained or enforced. During trademark registration proceedings, we may receive rejections. Although we are given an opportunity to respond to those rejections, we may be unable to overcome such rejections. In addition, in the USPTO and in corresponding foreign agencies, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our applications and/or registrations, and our applications and/or registrations may not survive such proceedings. Failure to secure such trademark registrations in the United States and in foreign jurisdictions could adversely affect our business and our ability to market our diagnostic tests and product candidates.

We may be unable to adequately prevent disclosure of trade secrets and other proprietary information, or the misappropriation of the intellectual property we regard as our own.

We rely on trade secrets to protect our proprietary know how and technological advances, particularly where we do not believe patent protection is appropriate or obtainable. Nevertheless, trade secrets are difficult to protect. We rely in part on confidentiality agreements with our employees, consultants, third party contractors, third party collaborators and other advisors to protect our trade secrets and other proprietary information. These agreements generally require that the other party to the agreement keep confidential and not disclose to third parties all confidential information developed by us or made known to the other party by us during the course of the other party’s relationship with us. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. Monitoring unauthorized disclosure is difficult, and we do not know whether the steps we have taken to prevent such disclosure are, or will be, adequate. If we were to seek to pursue a claim that a third party had illegally obtained and was using our trade secrets, it would be expensive and time consuming, and the outcome would be unpredictable. Further, courts outside the United States may be less willing to protect trade secrets. In addition, others may independently discover our trade secrets and proprietary information and therefore be free to use such trade secrets and proprietary information. Costly and time consuming litigation could be necessary to enforce and determine the scope of our proprietary rights. In addition, our trade secrets and proprietary information may be misappropriated as a result of breaches of our electronic or physical security systems in which case we may have no legal recourse. Failure to obtain, or maintain, trade secret protection could enable competitors to use our proprietary information to develop assays that compete with our assays or cause additional, material adverse effects upon our competitive business position.

We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

As is common in our industry, we employ individuals who were previously employed at other companies in our industry or in related industries, including our competitors or potential competitors. We may be subject to claims that we or these employees have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.

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Risks Associated with our Proposed Reverse Stock Split

Our stockholders are being asked to approve a proposal to authorize our board of directors to effect a reverse stock split of our common stock. There are risks associated with a reverse stock split, if it is effected.

Our stockholders are being asked to approve a proposal to effect a reverse stock split of our issued and outstanding common stock, if our board of directors, in its discretion, determines to effect a reverse stock split, by a ratio of not less than 1-for-200 and not more than 1-for-300 at any time prior to February 28, 2017, with the exact ratio to be set at a whole number within this range as determined by the board of directors in its sole discretion, referred to as the “December 2016 Reverse Stock Split.” If our stockholders approve such proposal, we expect to effect a 1-for-200 to 1-for-300 reverse stock split of our issued and outstanding common stock. However, the board of directors reserves the right to elect to abandon and not effect the December 2016 Reverse Stock Split if it determines, in its sole discretion, that effecting the December 2016 Reverse Stock Split is not in the best interests of our Company and our stockholders. If we implement the December 2016 Reverse Stock Split we will be subject to certain risks associated with it, including the following:

Additional Risks Related to this Offering

We will have broad discretion over the use of the net proceeds of this offering.

We currently intend to allocate the net proceeds received from this offering as described under “Use of Proceeds” on page 51 of this prospectus. However, management will have broad discretion in the actual application of the net proceeds, and may elect to allocate net proceeds differently from that described under “Use of Proceeds” if management believes it would be in our best interests to do so. Furthermore, as at the date hereof, we have no definitive plans for the expenditure of certain net proceeds of this offering and there can be no assurance as to how such funds may be expended. Certain of the net proceeds of this offering, including corporate general and administrative expenses and exploration/development, are currently unallocated and as such may be expended at the discretion of our management. Accordingly, although such allocations are based on the current expectation of our management, there may be circumstances where, for business reasons, a reallocation of funds may be necessary, as may be determined at our discretion. Our shareholders may not agree with the manner in which management chooses to allocate and spend the net proceeds. The failure by our management to apply these funds effectively could have a material adverse effect on our business.

Investors in this offering will experience immediate and substantial dilution.

The public offering price of the Units offered pursuant to this prospectus is substantially higher than the net tangible book value per share of our Common Stock. Therefore, if you purchase Units in this offering, you will incur immediate and substantial dilution in the net tangible book value per share of Common Stock underlying the Series G Preferred Stock and the Series I Warrants from the price per Unit that you pay for the securities. Based on the sale of      Units at a public offering price of $     per Unit in this offering (and an assumed Set Price of $     per share), you will suffer immediate dilution of approximately $ per share in the net tangible book value of the Common Stock. Moreover, as described under “Prospectus Summary — The Offering,” we have a substantial number of stock options, warrants to purchase Common

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Stock and convertible notes convertible into Common Stock outstanding. If the holders of outstanding options, warrants and convertible notes exercise or converts those options, warrants or convertible notes at prices below the public offering price, you will incur further dilution.

The offering price determined for this offering is not an indication of our value.

The per-Unit offering price and the initial conversion price of the Series G Preferred Stock and the initial exercise price of the Series I Warrants may not necessarily bear any relationship to the book value of our assets, past operations, cash flows, losses, financial condition or any other established criteria for value. You should not consider the offering price for the Units as an indication of the value of the Common Stock underlying the Series G Preferred Stock and the Series I Warrants. After the date of this prospectus, the Common Stock may trade at prices above or below the price per share of Common Stock imputed by the offering price.

There is a limited public trading market for the Common Stock.

The Common Stock is currently quoted on OTCQB under the trading symbol “GBSN.” There is a limited public trading market for the Common Stock. Without an active trading market, there can be no assurance of any liquidity or resale value of the Common Stock, and shareholders may be required to hold shares of the Common Stock for an indefinite period of time.

There is no public market for the Units, the Series G Preferred Stock and the Series I Warrants.

There is no established public trading market for the Units, the Series G Preferred Stock and the Series I Warrants offered by this prospectus and we do not expect a market to develop. In addition, we do not intend to apply to list the Units, the Series G Preferred Stock or the Series I Warrants on any national securities exchange or other nationally recognized trading system. Without an active market, the liquidity of the Units, the Series G Preferred Stock and the Series I Warrants will be limited.

As a holder of the Series G Preferred Stock or Series I Warrants you have no voting rights.

You will have no voting rights as a holder of the Series G Preferred Stock or Series I Warrants. Our Common Stock and Series F Preferred Stock are currently the only classes of our securities that carry full voting rights.

We expect that the market value of the Series G Preferred Stock and Series I Warrants will be significantly affected by changes in the market price of our Common Stock, which could change substantially at any time.

We expect that the market value of the Series G Preferred Stock and Series I Warrants will depend on a variety of factors, including, without limitation, the market price of our Common Stock. Each of these factors may be volatile, and may or may not be within our control. For example, we expect the market value of the Series G Preferred Stock and Series I Warrants will increase with increases in the market price of our Common Stock. As described in another risk factor, the market price of the Common Stock has been volatile in the past and could fluctuate widely in response to various factors.

We may issue additional shares of our Common Stock or instruments convertible or exercisable into our Common Stock, including in connection with exercise of the Series G Preferred Stock and Series I Warrants, and thereby materially and adversely affect the market price of our Common Stock, and, in turn, the market value of the Series G Preferred Stock and Series I Warrants.

Subject to certain contractual limitations we are under, we may offer and sell additional shares of our Common Stock or other securities convertible into or exercisable for our Common Stock during the life of the Series G Preferred Stock and Series I Warrants. We cannot predict the size of future issuances or the effect, if any, that they may have on the market price for our Common Stock. If we issue additional shares of our Common Stock or instruments convertible or exercisable into our Common Stock, it may materially and adversely affect the price of our Common Stock and, in turn, the market value of the Series G Preferred Stock and Series I Warrants. Furthermore, as described in a different risk factor above, the conversion or exercise of some or all of our outstanding derivative securities, including the Series G Preferred Stock and Series I

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Warrants, will dilute the ownership interests of existing shareholders, and any sales in the public market of shares of our Common Stock issuable upon any such conversion or exercise could adversely affect prevailing market prices of our Common Stock or the market value of the Series G Preferred Stock and Series I Warrants.

Holders of the Series G Preferred Stock and Series I Warrants will be entitled to only limited rights with respect to our Common Stock, and will be subject to all changes made with respect to our Common Stock to the extent holders receive shares of Common Stock pursuant to the terms of the Series G Preferred Stock and Series I Warrants.

Holders of the Series G Preferred Stock and Series I Warrants will be entitled to only limited rights with respect to our Common Stock until the time at which they become holders of our Common Stock pursuant to the terms of the Series G Preferred Stock and Series I Warrants, but will be subject to all changes affecting our Common Stock before that time. For example, if an amendment is proposed to our articles of incorporation requiring shareholder approval and the record date for determining the shareholders of record entitled to vote on the amendment occurs before the date you are deemed to be a record holder of our Common Stock, you generally will not be entitled to vote on the amendment, although you will nevertheless be subject to any changes affecting our Common Stock.

The exercise price of the Series I Warrants will not be adjusted for certain dilutive events.

While the exercise price of the Series I Warrants does adjust for stock splits and share dividends and is subject to a one-time adjustment pursuant to its terms based on the market price on the relevant reset date, the exercise prices of the Series I Warrants is not subject to adjustment upon a future issuances of securities, including, without limitation, capital stock, options and convertible securities. Such issuances, transactions or occurrences that may adversely affect the market price of our Common Stock or the market value of the Series I Warrants without resulting in an adjustment of the exercise prices of the Series I Warrants.

You may receive less valuable consideration than expected because the value of our Common Stock may decline after you convert the Series G Preferred Stock or exercise the Series I Warrants issued in this offering, but before we settle our obligation thereunder.

A converting or exercising holder will be exposed to fluctuations in the value of our Common Stock during the period from the date such holder converts the Series G Preferred Stock or surrenders Series I Warrants for exercise until the date we settle our exercise obligation. Upon conversion of the Series G Preferred Stock and exercise of the Series I Warrants, we will be required to deliver the shares of our Common Stock, on the third business day following the relevant conversion or exercise date. Accordingly, if the price of our Common Stock decreases during this period, the value of the shares that you receive will be adversely affected and would be less than the value on the exercise date.

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CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve risks and uncertainties. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the reasons described in our “Prospectus Summary,” “Use of Proceeds,” “Risk Factors,” “Management Discussion and Analysis of Financial Condition and Result of Operations,” and “Business” sections. In some cases, you can identify these forward — looking statements by terms such as “anticipate,” “believe,” “continue,” “could,” “depends,” “estimate,” “expects,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or the negative of those terms or other similar expressions, although not all forward-looking statements contain those words.

We have based these forward looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including risks described in the section titled “Risk Factors” and elsewhere in this prospectus, regarding, among other things:

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These risks are not exhaustive. Other sections of this prospectus may include additional factors that could adversely impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in, or implied by, any forward looking statements. You should read this prospectus with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. Except as required by law, we undertake no obligation to update publicly any forward looking statements for any reason after the date of this prospectus or to conform these statements to actual results or to changes in our expectations.

We qualify all of our forward looking statements by these cautionary statements.

DILUTION

Dilution is the amount by which the purchase price paid by the purchasers for the securities offered in this offering will exceed the as-adjusted net tangible book value (deficit) per share of our Common Stock after the offering.

The net tangible book value of our common stock as of September 30, 2016 was approximately $44.0 million, or approximately $17.36 per share (based on 2,536,564 shares outstanding on September 30, 2016). Net tangible book value per share is equal to the amount of our total tangible assets, less total liabilities (except derivative liabilities), divided by the aggregate number of shares of common stock outstanding.

After giving effect to the issuance of 162,946,491 shares of common stock subsequent to September 2016 in settlement of convertible note amortization payments, our pro forma net tangible book value of as September 30, 2016 would have been approximately $49.7 million, or approximately $0.30 per share (based on 165,483,055 shares of our common stock outstanding on November 18 12, 2016).

Purchasers of Units in this offering will experience substantial and immediate dilution in net tangible book value per share of our Common Stock for financial accounting purposes immediately following the closing. The calculations below are based on there being 2,536,564 shares outstanding on September 30, 2016 and 165,483,055 shares of our common stock outstanding giving effect to shares issued after September 30, 2016 pursuant to the conversion of 2015 Notes and Series F Preferred Stock.

The Units offered in this offering contain shares of Series G Preferred Stock that are convertible into shares of Common Stock. The following table illustrates this dilution based on (i) the offering of an aggregate of      Units at a public offering price of $     per Unit, and (ii) the issuance of      shares of Common Stock upon conversion of the Series G Preferred Stock at an assumed Set Price of $     based on the closing bid price of the Common Stock on            , 2016.

Assumed public offering price per share (assumed conversion of Preferred Stock as described above)		$
Net tangible book value (deficit) per share as of September 30, 2016		$	17.36
Increase in pro forma net tangible book value (deficit) per share attributable to new investors		$
Pro forma, as-adjusted, net tangible book value (deficit) per share after this offering and after giving effect to the issuance of shares after September 30, 2016		$
Dilution per share to investors in this offering		$

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The Units offered in this offering also include Series I Warrants, each of which is assumed to be exercisable into      shares of Common Stock before adjustment based on an assumed Set Price of $    . In the tables below, we illustrate this dilution based on (i) the offering of an aggregate of      Units at a public offering price of $     per Unit, and (ii) the issuance of     shares of Common Stock upon exercise of Series I Warrants at an assumed exercise price of $     per share based on the closing bid price of the Common Stock on            , 2016.

Assumed public offering price per share (assumed exercise of Series I Warrants as described above)		$
Net tangible book value (deficit) per share as of September 30, 2016		$	17.36
Increase in pro forma net tangible book value (deficit) per share attributable to new investors		$
Pro forma, as-adjusted, net tangible book value (deficit) per share after this offering and after giving effect to the issuance of shares after September 30, 2016		$
Dilution per share to investors in this offering		$

The number of shares of our outstanding common stock reflected in the discussion and table above is based on 2,536,564 shares of common stock outstanding as of September 30, 2016 and excludes, as of that date:

This discussion does not take into account further dilution to new investors that could occur upon the exercise of outstanding options and warrants, including the Series I Warrants offered in this offering, having a per share exercise price less than the public offering price per unit in this offering.

If we raise additional capital in the future, we may in the future sell substantial additional amounts of Common Stock or securities convertible into or exercisable for Common Stock. We may also choose to raise additional capital due to market conditions or other strategic considerations even if we believe we have sufficient funds for our current or future operating plans. The issuance of these securities could result in further dilution to our shareholders.

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USE OF PROCEEDS

We estimate that the net proceeds of this offering will be approximately $    million, assuming the sale of      Units at an assumed public offering price of $    per Unit, after deducting estimated placement agent fees and estimated offering expenses payable by us and excluding the proceeds, if any, from the exercise of the Series I Warrants. We will receive additional proceeds from any cash exercise of the Series I Warrants offered by this prospectus. We cannot provide any assurance as to the amount or timing of receipt of any additional proceeds from exercise of the Series I Warrants.

A $    increase (decrease) in the assumed public offering price of $    per Unit, would increase (decrease) the expected net cash proceeds of the offering to us by approximately $    million, assuming the aggregate number of Units sold remains the same. An increase (decrease) of      in the assumed aggregate number of Units sold in this offering would increase (decrease) the expected net cash proceeds of the offering to us by approximately $    million, assuming that the assumed public offering price for each such security remains the same.

We expect the net proceeds from this offering will allow us to fund our operations for up to [•] months following the closing of the offering, including the completion of our planned clinical trials and filing with the FDA new diagnostic tests. We intend to use the net proceeds from this offering as reflected in the following use of proceeds tables. The use of proceeds table assumes that we raise 10%, 50% or 100% of the securities offered in this offering:

			10	%			50	%			100	%
Research and Development		$				$				$
Sales and Marketing		$				$				$
Manufacturing Analyzers for Customers			—			$				$
Automation of Manufacturing Facility and increasing Manufacturing Capacity			—				—			$
General Corporate Purposes		$				$				$
Total		$				$				$

This expected use of net proceeds from this offering represents our intentions based upon our current plans and business conditions. The amounts and timing of our actual expenditures may vary significantly depending on numerous factors, including the status of and results from clinical trials of additional trials and the continued market acceptance of our C. diff test, Group B Strep test and our other commercially available tests. As a result, our management will retain broad discretion over the allocation of the net proceeds from this offering. We may find it necessary or advisable to use the net proceeds from this offering for other purposes, and we will have broad discretion in the application of net proceeds from this offering. Furthermore, we anticipate that we will need to secure additional funding before we reach profitability. Although certain proceeds of this offering will be used for clinical and regulatory development of our diagnostic tests, we may need to raise additional proceeds to complete the clinical and regulatory development of these diagnostic tests. We anticipate any additional funds necessary to complete clinical and regulatory development of these diagnostic tests, if any, would be sought through a later public offering of debt or equity or from existing investors.

Pending our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments and U.S. government securities.

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MARKET PRICE HISTORY

Market Information

Our common stock is currently quoted on the OTCQB under the symbol “GBSN.”

The following table contains, for the periods indicated, the intraday high and low sale prices per share of our common stock. Prior to the date of our initial public offering, there was no public market for our common stock. As a result, we have not set forth other quarterly information with respect to the high and low prices for our common stock for the two most recent fiscal years. The below prices retroactively apply our December 11, 2015 60-to-1 reverse stock split, our March 30, 2016 35-to-1 reverse stock split and our September 16, 2016 80-to-1 reverse stock split.

On October 11, 2016 our common stock was suspended from trading on the NASDAQ Capital Market and transferred to being quoted on the OTCQB. The below quotations from on or after October 11, 2016, reflect inter-dealer prices, without retail mark-up, markdown or commission and may not necessarily represent actual transactions.

		High				Low
2014
Fourth Quarter		$	1,525,440.00			$	356,160.00
2015
First Quarter		$	708,960.00			$	248,640.00
Second Quarter		$	1,024,800.00			$	423,360.00
Third Quarter		$	537,600.00			$	8,400.00
Fourth Quarter		$	36,960.00			$	2,632.00
2016
First Quarter		$	2,660.00			$	294.40
Second Quarter		$	628.00			$	134.40
Third Quarter		$	140.80				2.20
Fourth Quarter (through November 18, 2016)		$	2.32			$	0.02

As of November 18, 2016, there were approximately 474 shareholders of record for our common stock. A substantially greater number of stockholders may be “street name” or beneficial holders, whose shares are held of record by banks, brokers and other financial institutions.

As of November 18, 2016, the last reported sale price of our common stock on OTCQB was $0.02.

DIVIDEND POLICY

We have never declared or paid, and do not anticipate declaring or paying, any cash dividends on any of our capital stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends in the foreseeable future. Future determination as to the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then existing conditions, including our operating results, financial conditions, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing elsewhere in this prospectus. Except for historical information contained herein, the following discussion and analysis contains forward-looking statements which are subject to known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from those expressed or implied by such forward-looking statements. We discuss such risks, uncertainties and other factors throughout this prospectus and specifically under section titled “Risk Factors”.

Overview of Our Business

We are a molecular diagnostic testing company. We are focused on improving patient care through the development and commercialization of our patented, low-cost, molecular diagnostic platform for testing for infectious disease, especially hospital- acquired infections. We believe our platform has the ability to transform molecular testing for infectious diseases at small to medium sized hospitals by providing an affordable solution that meets the rapidly evolving needs of patients and providers.

We believe there is a fast-growing market for molecular diagnostic systems being purchased by hospital microbiology labs to replace culture and other legacy testing formats. We believe our platform is well positioned to meet this need. Our platform provides results in 45 to 115 minutes depending on the test. Molecular testing generally reduces test time from days to hours, and provides more accurate results, which we believe leads to shortened hospital stays and improved patient outcomes, all of which leads to reduced cost for hospitals that implement molecular testing in their labs.

Our platform is an automated molecular diagnostic system, consisting of an analyzer and associated assay cartridge. Our platform utilizes a sample-to-result format, which means that once a patient specimen is received, it undergoes limited processing before it is placed in the analyzer where the assay is run without further technician intervention. This reduces assay complexity and eliminates the need for highly trained and expensive molecular technicians to run the tests. Our platform is designed to enable simple, rapid and cost-effective analysis of multiple pathogens from a single clinical sample, which will allow small to medium sized community hospitals that traditionally could not afford more expensive or complex molecular diagnostic testing platforms to modernize their laboratory testing and provide better patient care at an affordable cost.

In November 2012, we launched our first FDA-cleared test for C. diff, a bacteria that causes life-threatening gastrointestinal distress in hospital patients. We currently sell our diagnostic test cartridge in the United States through a direct sales force and we use distributors in the European Union and New Zealand. As of September 30, 2016, we had 276 customers worldwide (255 in the United States and 21 in the rest of the world), who use an aggregate of 510 of our analyzers. Our easy to use platform allows small to medium sized hospitals that we believe could not previously afford more expensive or complex molecular diagnostic systems to modernize their laboratory testing and provide better patient care at an affordable cost.

In addition to our C. diff assay, we have developed two additional tests, Group B Strep assay for which we received FDA clearance in April 2015 and launched commercially in June 2015 and Shiga toxin producing E. coli, or STEC, for which we received FDA clearance in March 2016 and launched commercially in August 2016. We also received FDA clearance in March of 2016 for Staph ID/R. Additionally, we have five other assays in various stages of product development: (i) a pre-surgical nasal screen for Staphylococcus aureus, or SA, (ii) a food borne pathogen panel, (iii) a panel for candida blood infections (iv) a test for pertussis and, (v) a test for CT/NG.

Since inception, we have incurred net losses from operations each year and we expect to continue to incur losses for the foreseeable future. Our losses attributable to operations for the fiscal year ending December 31, 2015 and the nine months ended September 30, 2016 were approximately $57.9 million and $83.0 million, respectively. As of September 30, 2016, we had an accumulated deficit of $204.9 million.

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Financial Operations Overview

Revenue

We derive our revenue from the sale of single use assays sold through our dedicated sales force in the United States, and in the European Union and New Zealand through a network of distributors. Revenue is recognized when all four of the following criteria are met: (1) persuasive evidence that an arrangement exists; (2) delivery of the products has occurred; (3) the selling price of the product is fixed or determinable; and (4) collectability of that price is reasonably assured. Change in title to the product and recognition of revenue from sales of the assays occurs at the time of shipment.

We believe our revenue from the sale of our assays will increase as we expand our sales and marketing efforts, and as we introduce new assays into the market. We expect that our revenue will continue to be primarily attributable to sales of our assays in the United States.

Our material increases in revenues since the inception of our business have been attributable to increases in the volume of goods being sold as a result of increases in the number of customers. As of September 30, 2016, we have four commercial products, our C. diff assay, our Group B Strep assay, our Staph ID/R panel and our Shiga Toxin Direct Test. The average price has not materially changed since their commercial releases.

Cost of Sales

The components of our cost of sales include cost of materials, supplies, labor for manufacturing and support personnel, equipment, and facility expenses associated with manufacturing. We depreciate the cost of each analyzer that is at a customer site over a period of 5 years on a straight line basis, and include that cost in cost of sales. We perform all of our manufacturing activities at our facility located in Salt Lake City, Utah. Facility expenses include allocated overhead comprised of rent, equipment depreciation, and utilities. We expect our cost of sales in absolute dollars to increase, as the number of diagnostic cartridges we manufacture increases. However, we also expect that as assay volumes increase we will realize manufacturing efficiencies, which would result in a decrease in our cost of sales as a percentage of revenue. We also license certain technologies for our C. diff assay, which are described elsewhere in this prospectus. Pursuant to the terms of these license agreements, we pay royalty fees in the aggregate equal to 14% of our worldwide “Net Sales” of those products that use these technologies (as defined and adjusted pursuant to the terms of the applicable license agreements).

Research and Development

All research and development costs, including those funded by third parties, are expensed as incurred. Research and development costs consist of engineering, product development, clinical trials, test-part manufacturing, testing, developing and validating the manufacturing process, manufacturing, facility, and regulatory-related costs. Research and development costs also include employee cash compensation, employee and non-employee stock-based compensation, supplies and materials, consultant services, and travel related to research activities.

In 2015 and 2016 we incurred additional research and development costs as we continued to develop new assays, and as we advanced the development of our product candidates, including our Group B Strep, Staph ID/R, and shiga toxin producing e. coli assays. In particular, we conducted clinical trials for the Staph ID/R and shiga toxin producing e. coli product candidates, which increased our research and development expenses. Additionally, we have five other assays in various stages of product development: (i) a pre-surgical nasal screen for Staphylococcus aureus, or SA, (ii) a food borne pathogen panel, (iii) a panel for candida blood infections, (iv) a test for pertussis, and (v) a test for CT/NG. We plan to continue the development of these products and conduct clinical trials in 2016, which will increase our research and development expenses.

Sales and Marketing

Sales and marketing expenses primarily consist of salaries, benefits, and other related costs, including stock-based compensation, for personnel employed in sales, marketing, and training. In addition, our sales and marketing expenses include commissions and bonuses paid to our sales representatives, generally based on the number of new customers obtained and other objectives attained.

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We expect our sales and marketing expenses to continue to increase as we introduce new assays, such as our Staph ID/R assays and shiga toxin producing e. coli assays, if approved, and seek to enhance our commercial infrastructure, including increasing our sales force and marketing efforts. Additionally, we expect our commissions to continue to increase in absolute terms over time, but to decline as a percentage of revenue.

General and Administrative Expenses

General and administrative expenses primarily consist of salaries, benefits, and other related costs, including stock-based compensation, for certain members of our executive team and other personnel employed in finance, legal, compliance, administrative, information technology, customer service, executive, and human resource departments. General and administrative expenses include allocated facility expenses, related travel expenses, and professional fees for accounting and legal services.

We expect our general and administrative expenses will increase due to costs associated with our public and private funding efforts as we continue to raise capital for our business needs. Our expenses related to compliance with the rules and regulations of the Securities and Exchange Commission and the NASDAQ Capital Market, as well as investor relations activities and other administrative and professional services, will continue to increase as we grow our business.

Gain or Loss on Sale of Assets

Analyzers used outside the United States are sold to the customer and the sale is accounted for as a sale of fixed assets. For these limited situations, management has elected to sell the fixed asset analyzers as opposed to placing them with international customers (thereby not retaining title over the analyzers), as it would be impractical to retain ownership due to, among other reasons, the Company lacking the necessary personnel needed to service international customers, the need to comply with the additional laws and regulations of countries outside the United States to which the Company is not currently subject, and the added costs to recover, reconfigure, ship, and redeploy fixed asset analyzers that have been used internationally. A corresponding loss on the sale of assets is recorded for the difference in the sales price from the cost of the analyzers. Other fixed assets of the Company are sold from time to time after the usefulness has ended. A corresponding gain or loss on the sale of other assets is recorded for the difference in the sales price from the cost of the asset.

Interest Income and Other Income

Interest income and other income primarily consist of interest earned on our cash.

Interest Expense

Interest expense consists of interest on capital leases, notes payable, letters of credit, as well as the amortization of debt discounts. In certain debt transactions that have components required to be measured at fair value, the excess of the fair value over the proceeds received is recorded as an interest expense.

Loss on Extinguishment of Warrants

We entered into an agreement where certain common stock warrants were exchanged for a convertible note payable and warrants. This is considered an extinguishment of a liability as there is both the addition and elimination of a substantive conversion option at the date of exchange. The accounting of an extinguishment of a liability requires the difference between the fair value of the warrants extinguished and the fair value of the consideration provided be recorded as a loss in the statement of operations.

Change in Fair Value of Derivative Liability

We have issued certain common stock warrants that contain a price adjustment clause which states that in the event the Company issues common stock for a price less than the exercise price of warrants, the exercise price will be reduced to the issuance price of the common stock. We have also issued convertible notes payable that contain a conversion feature that could result in modification of the conversion price to issue a variable amount of additional common shares. The Company has determined that the warrants are accounted for as a derivative liability, and the conversion feature of the convertible notes is an embedded derivative. These derivatives are recorded at fair value measured at the transaction date and again at each reporting period. Any difference in fair value between the transaction date and future reporting periods must be recognized in earnings for the period.

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Results of Operations

Comparison of the Years Ended December 31, 2015 and 2014

The following table sets forth our results of operations for the years ended December 31, 2015 and December 31, 2014:

		Years Ended December 31,
		2015				2014
Revenue		$	2,142,040			$	1,606,254
Cost of sales			4,813,415				3,968,185
Gross loss			(2,671,375	)			(2,361,931	)
Operating expenses:
Research and development			8,485,668				4,609,913
Selling and marketing			5,007,320				2,301,610
General and administrative			6,241,433				2,928,186
(Gain) loss on sale of assets			—				(8,166	)
Total operating expenses			19,734,421				9,831,543
Loss from operations			(22,405,796	)			(12,193,474	)
Interest expense			(11,757,445	)			(1,136,054	)
Interest income			18,193				3,176
Loss on extinguishment of warrants			(4,038,063	)			—
Change in fair value of derivative liability			(19,714,808	)			(8,396,169	)
Provision for income taxes			(1,250	)			(5,297	)
Net loss		$	(57,899,169	)		$	(21,727,818	)

Revenue

Revenue increased by $535,786, or 33.4% in the twelve months ended December 31, 2015 to $2,142,040, as compared to $1,606,254 in same period of 2014. This increase was attributable to the number of customers in the U.S. increasing to 186 at December 31, 2015 as compared to 84 at December 31, 2014.

Cost of Sales

Cost of sales increased $845,230, or 21.3%, in the twelve months ended December 31, 2015 to $4,813,415, as compared to $3,968,185 for the same period of 2014. The increase is due mainly to a $453,806 increase in costs associated with manufacturing additional C. diff assays to meet the increased demand for our product, $314,745 in depreciation on additional analyzers and manufacturing equipment needed to support the increase in customers, and a $76,679 increase in royalties. The negative gross margin decreased from 147.0% in the year ended December 31, 2014 to 124.7% in the year ended December 31, 2015, primarily due to the decrease in the cost of our C. diff assays due to increased production that allowed for economies of scale and the allocation of fixed costs over a greater number of units, as well as increased utilization of capacity in our analyzer manufacturing.

Research and Development

Research and development expenses increased $3,875,755, or 84.1%, in the twelve months ended December 31, 2015 to $8,485,668, as compared to $4,609,913 for the same period of 2014. The increase was due to an increase in salaries of $1,425,033 as the result of hiring new developers and scientists, the increased cost of $1,352,191 for the supply of internal assays and research and development materials associated with the development of our new products, an increase of $500,053 in costs associated with our clinical trials for Staph ID/R and shiga toxin producing e. coli product candidates, an increase of $257,332 in outside development consultants, and all other expenses of $341,146.

Selling and Marketing

Selling and marketing expenses increased $2,705,710, or 117.6%, in the twelve months ended December 31, 2015 to $5,007,320, as compared to $2,301,610 for the same period of 2014. The increase was due primarily to an increase of $2,063,978 in salaries for new sales and marketing personnel as well as increased sales

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commissions as a result of new customers, an increase of $269,740 in travel costs, an increase of $237,988 in marketing and public relations costs as we have expanded our marketing efforts, and an increase in all other expenses of $134,004.

General and Administrative

General and administrative expenses increased $3,313,247, or 113.2%, in the twelve months ended December 31, 2015 to $6,241,433, as compared to $2,928,186 for the same period of 2014. The increase was due to an increase in salaries in the amount of $1,106,664 due to increased accounting and human resource personnel as well as executive bonuses awarded during the year, an increase in legal, accounting, and investor relations fees of $707,122 associated with our public and debt offerings, an increase in non-cash compensation of $499,822 due to the fair value of the issuance of the subordination warrants, an increase in board of directors fees, directors and officers and other general insurance in the amount of $623,451, and an increase in all other expenses of $376,188.

Interest Expense

Interest expense increased by $10,621,391, or 934.9% in the twelve months ended December 31, 2015 to $11,757,445, as compared to $1,136,054 for the same period of 2014. The increase was due to a non-cash charge in the amount of $10,657,904 as the result of the excess of the fair value of the components of our convertible note payable over the proceeds we received in the transaction. This was partially offset by a $36,513 decrease in all other debt payments amortized to interest.

Interest Income

Interest income increased by $15,017, or 472.8% in the twelve months ended December 31, 2015, as compared to the same period of 2014, due to an increase in our average cash balance during 2015.

Loss on Extinguishment of Warrants

The loss on extinguishment of warrants in the amount of $4,038,063 in the twelve months ended December 31, 2015 was due to the extinguishment of 1,050,000 Series C Warrants for $2.1 million in convertible notes payable and associated Series D Warrants. This is considered an extinguishment of a liability, as there is both the addition and elimination of a substantive conversion option at the date of exchange. The accounting of an extinguishment of a liability requires the difference between the fair value of the warrants extinguished and the fair value of the consideration provided be recorded as a loss in the statement of operations. The fair value of the $2.1 million convertible note and warrants issued as consideration for the exchange was $6,378,303 and the fair value of the Series C Warrants was $2,340,240.

Change in fair value of derivative liability

The loss in earnings resulting from the change in fair value of derivative liability increased by $11,318,639, or 134.8%, in the twelve months ended December 31, 2015 to $19,714,808, as compared to $8,396,169 for the same period of 2014. The increase was due mainly to the follow-on offering of the sale of Units in February 2015. The excess of the fair value on the transaction date of the components of the offering over the net proceeds resulted in an increase of $32,738,211 to the loss in earnings. This increase was partially offset by a decrease in the derivative liability of $21,419,572, which represents the change in the estimated fair value of warrants accounted for as derivative liabilities during the twelve months ended December 31, 2015. This decrease was caused mainly by the decrease in the common stock price.

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Comparison of the three months ended September 30, 2016 compared to the three months ended September 30, 2015

Revenue

		Three months ended September 30,								Increase
		2016				2015				$				%
C. diff		$	625,827			$	521,164			$	104,663				20	%
Group B Strep			108,730				24,770				83,960				339	%
STEC			1,260				—				1,260				—
		$	735,817			$	545,934			$	189,883				35	%

Revenue increased 35% for three months ended September 30, 2016, as compared to the three months ended September 30, 2015. Revenue derived from the sale of STEC assays began since the product was commercially launched in August 2016. There was no revenue from the sale of SIDR assays during the third quarter, as the product did not launch until the last day of September 2016, but SIDR revenue is expected during the fourth quarter of 2016. The 35% increase in total sales was attributable to the number of customers increasing to 255 by September 30, 2016, as compared to 143 at the end of September 30, 2015. In addition, the number of analyzers placed with customers rose to 510 at September 30, 2016, as compared to 336 at the end of September of the prior year. During 2016, the Company was intensely focused on building its customer base and placing additional analyzers in the field. While the increase in customers and analyzers was not always directly proportional to the increase in the Company’s traditional C. diff sales, the Company anticipates selling higher quantities of existing assays, as well as new assays to this larger customer group once new products come to market.

Cost of sales

		Three months ended September 30,
		2016								2015								Increase
		Expense				% of revenue				Expense				% of revenue				$				%
Materials and direct labor		$	703,070				96	%		$	449,000				82	%		$	254,070				57	%
Indirect labor, overhead, and royalties			1,077,966				146	%			429,618				79	%			648,348				151	%
Analyzer depreciation			380,943				52	%			224,109				41	%			156,834				70	%
		$	2,161,979				294	%		$	1,102,727				202	%		$	1,059,252				96	%

The overall cost of direct labor for the third quarter of 2016 increased as a percentage of revenue as compared to the third quarter of 2015 due to the hiring of production workers for additional daily shifts due to both an increase in production of existing assays, and in anticipation of production of our new STEC and Staph ID/R assays. These two assays were launched in August and September of 2016. Similarly, indirect labor and overhead increased as a percentage of revenue due to anticipated demand for new assays, along with underutilization of capacity in our analyzer manufacturing group. During periods when analyzers are being manufactured, the group’s labor and overhead costs are allocated to the cost of the analyzers produced and expensed eventually through depreciation. Otherwise, the group’s costs are expensed directly to cost of sales during the period incurred. Depreciation of analyzers also increased since the number of analyzers placed in the field grew from 336 at September 30, 2015, to 510 at September 30, 2016.

Operating Expenses

		Three months ended September 30,								Increase
		2016				2015				$				%
Research and development		$	3,737,415			$	2,878,316			$	859,099				30	%
Selling and marketing			1,644,075				1,481,140				162,935				11	%
General and administrative			2,464,159				1,795,766				668,393				37	%
		$	7,845,649			$	6,155,222			$	1,690,427				27	%

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Research and Development

Research and development expenses increased 30% during the three months ended September 30, 2016, due to an increase of $187,126 for hiring new developers and scientists, an increase of $589,768 for additional costs for clinical trials, experimental assays, and outside consultants, all related to the development of new products, and a net increase of all other research and development expenses aggregating $82,205.

Selling and Marketing

The third-quarter 2016 increase in sales and marketing expenses was due to $160,091 in higher salaries and travel costs resulting from an increase in sales and marketing personnel, stemming from the increase in efforts to add customers and sell additional existing and newly-developed assays. These higher costs included increased commissions related to the increase in new customers, and were also the result of efforts to place additional analyzers in the field. Also included in the increase was $36,028 in other expenses, offset by a $33,184 decrease in promotional assay costs as two new products were finally launched to customers.

General and Administrative

The increase in general and administrative expenses during the third quarter of 2016 resulted from increased rent expense of $111,696, as well as $676,582 in increased legal and consulting fees incurred during 2016 because of increased financing activities. In addition, there were $50,411 in other general and administrative expenses, which were offset by a $170,296 decrease in compensation and travel expenses over the prior year related to certain one-time expenses incurred during 2015.

Interest Expense

Interest expense for the three months ended September 30, 2016 increased by $138.0 million, from $253,220 to $138.2 million, as compared to the three months ended September 30, 2015. The increase was due mainly to the $119.2 million loss on the issuance of the 2016 convertible note, $18.5 million in debt discount amortizations on our convertible notes, which we didn’t have during the third quarter of 2015 and $244,900 increase in all other interest.

Change in Fair Value of Derivative Liability

The change in the fair value of the derivative liability resulted in a gain in earnings for the three months ended September 30, 2016 of $135.7 million, as compared to a gain in earnings of $20.0 million for the three months September 30, 2015. This resulted in an increase in the gain recorded in earnings by $115.7 million for the three months ended September 30, 2016. During 2016’s third quarter we had a decrease in the fair value of our conversion feature and warrants associated with the 2016 Notes in the amount of $102.1 million, a decrease in the fair value of our conversion feature and warrants associated with the 2015 Notes in the amount of $28.3 million, and a decrease in the fair value of all other derivative securities in the amount of $5.3 million. These decreases were all a result of the decrease in the value of our common stock during the third quarter.

During the three months ended September 30, 2015, the fair value of all the derivative securities decreased by $20.0 million, also due to the decrease in the value of our common stock during the period.

Comparison of the Nine months ended September 30, 2016 compared to the nine months ended September 30, 2015

Revenue

		Nine months ended September 30,								Increase
		2016				2015				$				%
C. diff		$	1,934,736			$	1,503,600			$	431,136				29	%
Group B Strep			260,200				26,570				233,630				879	%
STEC			1,260				—				1,260				—
		$	2,196,196			$	1,530,170			$	666,026				44	%

Revenue increased 44% for nine months ended September 30, 2016, as compared to the nine months ended September 30, 2015. Revenue derived from the sale of STEC assays began since the product was

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commercially launched in August 2016. There was no revenue from the sale of SIDR assays during the third quarter, as the product did not launch until the last day of September 2016, but SIDR revenue is expected during the fourth quarter of 2016. The 44% increase in total sales was attributable to the number of customers increasing to 255 by September 30, 2016, as compared to 143 at the end of September 30, 2015. In addition, the number of analyzers placed with customers rose to 510 at September 30, 2016, as compared to 336 at the end of September of the prior year. During 2016, the Company was intensely focused on building its customer base and placing additional analyzers in the field. While the increase in customers and analyzers was not always directly proportional to the increase in the Company’s traditional C. diff sales, the Company anticipates selling higher quantities of existing assays, as well as new assays to this larger customer group once new products come to market.

Cost of Sales

		Nine months ended September 30,
		2016								2015								Increase
		Expense				% of revenue				Expense				% of revenue				$				%
Materials and direct labor		$	1,958,445				89	%		$	1,233,768				81	%		$	724,677				59	%
Indirect labor, overhead, and royalties			2,917,074				133	%			1,483,408				97	%			1,433,666				97	%
Analyzer depreciation			1,036,576				47	%			652,092				43	%			384,484				59	%
		$	5,912,095				269	%		$	3,369,268				220	%		$	2,542,827				75	%

The overall cost of direct labor increased as a percentage of revenue due to the hiring of production workers during the third quarter of 2016 for additional daily shifts in anticipation of increased production of STEC and Staph ID/R assays. These two assays were launched in August and September of 2016. Similarly, indirect labor and overhead increased as a percentage of revenue due to anticipated demand for new assays, along with underutilization of capacity in our analyzer manufacturing group. During periods when analyzers are being manufactured, the group’s labor and overhead costs are allocated to the cost of the analyzers produced and expensed eventually through depreciation. Otherwise, the group’s costs are expensed directly to cost of sales during the period incurred. Depreciation of analyzers also increased since the number of analyzers placed in the field grew from 336 at September 30, 2015, to 510 at September 30, 2016.

Operating Expenses

		Nine months ended September 30,								Increase
		2016				2015				$				%
Research and development		$	9,492,887			$	6,284,170			$	3,208,717				51	%
Selling and marketing			4,892,903				3,206,957				1,685,946				53	%
General and administrative			7,163,214				4,132,973				3,030,241				73	%
		$	21,549,004			$	13,624,100			$	7,924,904				58	%

Research and Development

Research and development expenses increased 51% during the nine months ended September 30, 2016, as compared to the same period during the prior year, due to an increase of $899,860 for hiring new developers, scientists, and recruiting costs, an increase of $1.9 million for additional costs for clinical trials, experimental assays, and outside consultants, all related to the development of new products, and a net increase of all other research and development expenses aggregating $382,539.

Selling and Marketing

The 2016 increase in sales and marketing expenses as compared to 2015 was due to primarily to $1.4 million in higher salaries, travel, and promotional assay costs resulting from an increase in sales and marketing personnel and their increased efforts to add customers and sell additional existing and newly-developed assays. These higher expenses included increased commissions related to the increase in new customers, and were also the result of efforts to place additional analyzers in the field. All other expenses increased $311,764.

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General and Administrative

The increase in general and administrative expenses for the first three quarters of 2016 compared to 2015 resulted from an increase of $502,632 related to the hiring of additional accounting and human resource personnel, as well as $232,351 in increased rent expense, all to accommodate growth experienced during 2016 and growth anticipated in the future. In addition, there was $1.7 million in increased legal and consulting fees incurred during 2016 because of increased financing activities. There was also a $201,883 in additional corporate registration and property tax expenses, and $441,022 in all other general and administrative expenses.

Interest Expense

Interest expense for the nine months ended September 30, 2016 increased by $149.8 million, from $868,587 to $150.7 million, as compared to the nine months ended September 30, 2015. The increase was due mainly to the $119.2 million loss on the issuance of the 2016 convertible note, $30.4 million in debt discount amortizations on our convertible notes, which we didn’t have during the prior year and $212,415 increase in all other interest.

Net Gain on Exchange and Issuance of Warrants

The exchange and issuance of warrants during the nine months ended September 30, 2016 resulted in a net gain of $3.4 million. During the nine months ended September 30, 2016, we recognized a gain on the exchange of Series E Warrants in the amount of $4.1 million. This gain was partially offset by a loss on the issuance of our Series G Warrants in the amount of $0.7 million. We did not have a warrant exchange and issuance during the nine months ended September 30, 2015.

Change in Fair Value of Derivative Liability

The change in fair value of the derivative liability resulted in a gain in earnings of $106.9 million for the nine months ended September 30, 2016 as compared to loss in earnings of $22.6 million for the nine months ended September 30, 2015. During the nine months ended September 30, 2016, we had a decrease in the fair value of our conversion feature and warrants associated with the 2016 Notes in the amount of $102.1 million and a decrease in the fair value of all other derivative securities in the amount of $4.8 million. These decreases were the result of the decrease in the value of our common stock during the period.

During the nine months ended September 30, 2015 we were required to record a charge in the amount of $55.6 million to record the derivative liability on the issuance date of our Series C warrants offered as part of the follow-on offering. This charge was partially offset by an amount of $33.0 million due to the decrease in the fair value of all derivative securities as a result of the decrease in the value of our common stock during the period.

Liquidity and Capital Resources

We have funded our operations to date primarily with net proceeds from our IPO, our follow-on public offerings, cash exercises of warrants, sales of our preferred stock, convertible notes, and revenues from operations. At September 30, 2016, we had unrestricted cash of $809,763, and restricted cash of $69.1 million. The restricted cash is related to convertible notes we entered into in December 2015 and July 2016, and the restrictions on the use of the cash will be released during the rest of 2016 and 2017 as certain equity conditions are met. The cash will be used to finance the continued growth in product sales, to invest in further product development, and to meet ongoing corporate needs.

In February 2016, we completed a follow-on public offering, whereby 39,200,000 units were sold at a price of $0.16 per unit for net proceeds of $5.0 million after deducting underwriting commissions and offering costs. Each group of 2,800 units converted into one share of our common stock, along with 4,200 Series E Warrants to purchase one share of common stock.

In June 2016, we completed another follow-on public offering, whereby 3,160,000 units were sold at a price of $1.90 per unit for net proceeds of $5.3 million after deducting underwriting commissions and offering costs. Each group of 80 units converted into one share of our common stock, along with 80 Series G Warrants to purchase one share of common stock.

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In July 2016, we entered into a securities purchase agreement to issue $75 million of original issue discount convertible notes and related Series H Warrants and Subordination Warrants to purchase common stock. We received $68 million in total proceeds, of which $62 million was placed in restricted accounts. Currently, the notes are convertible into 75,000,000 shares of common stock, the Series H Warrants are convertible into 703,125 shares of common stock, and the Subordination Warrants are convertible into 21,094 shares of common stock.

We have limited liquidity and have not yet established a stabilized source of revenue sufficient to cover operating costs, based on our current estimated burn rate. Accordingly, as discussed herein, our continuation as a going concern is dependent upon our ability to generate greater revenue through increased sales and/or our ability to raise additional funds through the capital markets.

Summary Statement of Cash Flows for the Nine Months ended September 30, 2016 and 2015

The following table summarizes our cash flows for the periods indicated:

		Nine months ended September 30,
		2016				2015
Cash used in operating activities		$	(24,138,118	)		$	(14,847,494	)
Cash used in investing activities			(2,908,404	)			(4,066,052	)
Cash provided by financing activities			23,068,526				24,199,434
Net increase (decrease) in cash		$	(3,977,996	)		$	5,285,888

Cash Flows from Operating Activities

Cash used in operating activities for the nine months ended September 30, 2016 was $24.1 million. The net loss of $82.5 million was offset by non-cash items of $30.4 million for the convertible note debt discount amortization, $119.2 million for the loss on the issuance of convertible note, $17.2 million for the loss on the extinguishment of debt, $1.9 million for the increase in depreciation and amortization, and $196,315 in all other non-cash items. These non-cash increases were partially offset by $106.9 million change in the fair value of the derivative liability, and $3.4 million for a non-cash net gain on the exchange and issuance of warrants. The change in operating assets and liabilities resulted in a further use of cash of $288,648, primarily due to a rise in inventory and accounts receivable amounts attributable to the launch of new products and sales increases, offset partially by a related net rise in accounts payable, accrued liabilities and vendor prepayments.

Cash used in operating activities for the nine months ended September 30, 2015 was $14.8 million. The net loss of $39.0 million was offset by other non-cash items of $22.6 million for the increase in fair value of derivative liability, $1.1 million for the increase in depreciation and amortization, and a $179,213 net increase in all other non-cash items. The change in operating assets and liabilities further offset the net loss by another $157,424 due to a $552,275 increase in accrued liabilities due mainly to payroll, and a $457,250 increase in accounts payable related to the growth in our operations and the timing of payments. These were partially offset by an increase of $576,872 in inventory, a $197,270 increase in prepaid and other assets, and a $77,959 increase in accounts receivable

Cash Flows from Investing Activities

Cash used in investing activities was $2.9 million for the nine months ended September 30, 2016, and was related to the costs associated with the construction of analyzers and other equipment in the amount of $2.0 million, and the purchase of equipment in the amount of $912,862.

Cash used in investing activities was $4.1 million for the nine months ended September 30, 2015, and was related to the purchase of equipment in the amount of $842,225, and the costs associated with the construction of analyzers and other equipment in the amount of $3.2 million.

Cash Flows from Financing Activities

Cash provided by financing activities for the nine months ended September 30, 2016 was $23.1 million, comprised of net proceeds of $10.7 million from the sale of units in our follow-on offerings, the release of $6.7 million in funds from our restricted cash accounts, net proceeds of $5.5 million from the issuance of

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convertible notes payable, and $1.4 million in proceeds from the exercise of underwriter purchase warrants and Series G Warrrants. These were partially offset by $314,879 for the cash settlement of the exercise of Series C Warrants, and $955,455 in payments made on capital leases and notes payable.

Cash provided by financing activities for the nine months ended September 30, 2015 was $24.2 million, comprised of net proceeds of $21.7 million from the sale of units in our follow-on offering, proceeds of $250,000 from related-party notes payable, and $3.2 million in proceeds from the exercise of warrants, partially offset by $954,585 in payments made on capital leases, notes payable, and related-party notes payable.

Satisfaction of our cash obligations for the next 12 months and our ability to continue as a going concern

Our condensed unaudited financial statements have been prepared on a going concern basis which contemplates the realization of assets and the liquidation of liabilities in the ordinary course of business. At September 30, 2016, we had unrestricted and restricted cash amounts of $809,763 and $69.1 million, respectively. We have incurred substantial losses from operations and negative operating cash flows which raise substantial doubt about our ability to continue as a going concern. We sustained a net loss for the nine months ended September 30, 2016 of $83.0 million and a net loss for the year ended December 31, 2015 of $57.9 million. We have an accumulated deficit of $204.9 million as of September 30, 2016. During the nine months ended September 30, 2016, cash used for operations was $24.1 million. Whether and when we can attain profitability and positive cash flows from operations is uncertain.

We intend to continue to develop our products and expand our customer base, but we do not have sufficient realized revenues or operating cash flows in order to finance these activities internally. As a result, we have obtained and intend to continue to obtain financing in order to fund our working capital and development needs. In February 2016, we obtained financing by completing a follow-on offering for net proceeds of $5.0 million, and in June 2016, we completed another follow-on offering for net proceeds of $5.3 million. In July 2016, we signed and issued convertible notes for net proceeds of $68 million, of which a net $5.4 million was immediately available while the rest of the proceeds were placed in the Company’s restricted accounts. Through September 30, 2016, we have drawn from restricted accounts a total of $6.7 million related to both our July 2016 and December 2015 convertible notes. However, in order to continue operations we will need to obtain additional financing in addition to the anticipated release of restrictions from funds currently in the Company’s restricted accounts under the terms of our convertible notes. We believe the release of restrictions on funds related to the December 2015 Notes in relation to the exchange of the December 2015 Notes for Series F Preferred Stock will allow us to continue operations through mid-December 2016. We anticipate that we will require an additional $7 million in financing by mid-December 2016 to bridge the gap between the funds released upon the exchange of the 2015 Notes, until funds can be released from restricted cash accounts under the terms of the 2016 Notes. If we don’t receive at least $7 million in financing by mid-December of 2016, the Company will not be able to continue operations as currently planned, and will be required to either curtail or cease operations.

We have been able to meet our short-term needs through private placements of convertible preferred securities, an initial public offering (“IPO”), follow-on public offerings, convertible debt and the sale and leaseback of analyzers used to report test results. We will continue to seek funding through the issuance of additional equity securities, debt financing, the sale and leaseback of analyzers, or a combination of these items. Any proceeds received from these items could provide the needed funds for continued operations and development programs. We can provide no assurance that we will be able to obtain sufficient additional financing that we need to alleviate doubt about our ability to continue as a going concern. If we are able to obtain sufficient additional financing proceeds, we cannot be certain that this additional financing will be available on acceptable terms, if at all. To the extent we raise additional funds by issuing equity securities, our stockholders will likely experience significant dilution. Any debt financing, if available, may involve restrictive covenants that impact our ability to conduct business. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. If we are unable to obtain additional financings, the impact on our operations will be material and adverse.

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Critical Accounting Policies

The preparation of the financial statements requires us to make assumptions, estimates and judgments that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Certain of our more critical accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. On an ongoing basis, we evaluate our judgments, including those related to inventories, receivables, recoverability of long-lived assets and the fair value of our preferred and common stock and related instruments. We use historical experience and other assumptions as the basis for our judgments and making these estimates. Because future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Any changes in those estimates will be reflected in our financial statements as they occur. While our significant accounting policies are more fully described in the footnotes to our financial statements included elsewhere in this Form 10-Q, we believe that the following accounting policies and estimates are most critical to a full understanding and evaluation of our reported financial results. The critical accounting policies addressed below reflect our most significant judgments and estimates used in the preparation of our financial statements.

As an emerging growth company, we have elected to opt-in to the extended transition period for new or revised accounting standards. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates.

Revenue Recognition

We derive our revenue from the sale of single use assays sold through our dedicated sales force in the United States, and through a network of distributors in the European Union and New Zealand. Revenue is recognized when all four of the following criteria are met: (1) persuasive evidence that an arrangement exists; (2) delivery of the products has occurred; (3) the selling price of the product is fixed or determinable; and (4) collectability of that price is reasonably assured. Change in title to the product and recognition of revenue from sales of assays occurs at the time of shipment.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are generated from the sale of assays to end users in the United States and to a network of distributors outside the United States. These accounts receivable are recorded at the invoiced amount, net of allowances for doubtful amounts. We routinely review outstanding accounts receivable balances for estimated uncollectible accounts and establish or adjust the allowances for doubtful accounts receivable using the specific identification method and record a reserve for amounts not expected to be fully recovered. Actual balances are not applied against the reserve until substantially all collection efforts have been exhausted. We do not have customer acceptance provisions, but we provide our customers a limited right of return for defective assays.

Inventories

Inventories are stated at the lower of cost or market with cost determined according to the average cost method. Manufactured inventory consists of raw material, direct labor and manufacturing overhead cost components. We review the components of our inventory on a regular basis for excess and obsolete inventory and make appropriate adjustments when necessary. We have made adjustments to, and it is reasonably possible that we may be required to make further adjustments to, the carrying value of inventory in future periods.

Long-Lived Assets

Long-lived tangible assets, including property and equipment, and definite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. We regularly evaluate whether events or circumstances have occurred that indicate possible impairment and rely on a number of factors, including expected future operating results, business plans, economic projections, and anticipated future cash flows. We use an estimate of the future undiscounted net cash flows and comparisons to like-kind assets, as appropriate, of the related asset over the remaining life in measuring whether the assets are recoverable. Measurement of the amount of impairment, if any, is based upon the difference between the asset’s carrying value and estimated fair value. Fair value is determined

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through various valuation techniques, including cost-based, market and income approaches as considered necessary. We amortize intangible assets on a straight-line basis over their estimated useful lives.

Our long-lived assets include our analyzers used by hospitals in the United States to run the assays they buy from us. There are no contractual terms with respect to the usage of our analyzers by our customers. Hospitals are under no contractual commitment to use our analyzers. We maintain ownership of these analyzers and, when requested, we can remove the analyzers from the customer’s site. We do not currently charge for the use of our analyzers and there are no minimum purchase commitments of our assays. As our analyzer is used numerous times over several years, often by many different customers, analyzers are capitalized as property and equipment once they have been placed in service. Once placed in service, analyzers are carried at cost, less accumulated depreciation. Depreciation is computed using the straight-line method based on average estimated useful lives. The estimated useful life of our analyzers is determined based on a variety of factors including in reference to associated product life cycles, and average 5 years. As analyzers are integral to the performance of our diagnostic tests, depreciation of analyzers is recognized as a cost of sales.

Analyzers used outside the United States are sold to the customer and the sale is accounted for as a sale of fixed assets. Since inception, the Company has not focused nor placed significant emphasis on developing international markets for the Company’s product. The Company has never had an international sales force and has never manufactured analyzers specifically for international markets. Over the past two years on occasion, small, international sales opportunities have come along through international distributors. The analyzers that were sold to them were part of the fixed asset pool of analyzers the Company has, and many of these specific analyzers had been previously placed at customer locations within the United States. Sale of the fixed asset analyzers in these limited international opportunities have not been based on established product price listings as no such listing exists or has been publicly marketed to customers; instead, the final sales price has been a negotiated amount based on the sale of a functioning fixed asset analyzer, whether or not that analyzer was previously used at another customer site. Similar to other fixed asset sales, there were no stated or implied warranties or other continuing service requirements made with the sale of these assets. For these limited situations, management has elected to sell the fixed asset analyzers as opposed to placing them with international customers (thereby not retaining title over the analyzers) as it would be impractical for us to retain ownership due to, among other reasons, the Company lacking the necessary personnel needed to service international customers, the need to comply with the additional laws and regulations of countries outside the United States to which the Company is not currently subject, and the added costs to recover, reconfigure, ship and redeploy fixed asset analyzers that have been used internationally. During the nine months ended September 30, 2016 there were no analyzers sold to international distributors.

Derivative Instruments

The Company accounts for derivative instruments under the provisions of ASC 815 Derivatives and Hedging. ASC 815 requires the Company to record derivative instruments at their fair value. Changes in the fair value of derivatives are recognized in earnings. As a result of certain terms, conditions and features included in our convertible notes and certain common stock purchase warrants granted by the Company, those securities are required to be accounted for as derivatives at estimated fair value, with changes in fair value recognized in earnings.

Income Taxes

We are required to determine the aggregate amount of income tax expense or loss based upon tax statutes in jurisdictions in which we conduct business. In making these estimates, we adjust our results determined in accordance with generally accepted accounting principles for items that are treated differently by the applicable taxing authorities. Deferred tax assets and liabilities resulting from these differences are reflected on our balance sheet for temporary differences in loss and credit carryforwards that will reverse in subsequent years. We also establish a valuation allowance against deferred tax assets when it is more likely than not that some or all of the deferred tax assets will not be realized. Valuation allowances are based, in part, on predictions that management must make as to our results in future periods. The outcome of events could differ over time which would require that we make changes in our valuation allowance.

The tax effects from an uncertain tax position can be recognized in the financial statements only if the position is more likely than not of being sustained if the position were to be challenged by a taxing authority.

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We examined the tax positions taken in tax returns and determined that there are no uncertain tax positions. As a result, we recorded no uncertain tax liabilities in our balance sheet.

Stock Based Compensation

We measure and recognize compensation expense for stock options granted to our employees and directors, based on the estimated fair value of the award on the grant date. Historically, for all periods prior to our IPO, the fair values of the shares of common stock underlying our stock-based awards were estimated on each grant date by our board of directors. In order to determine the fair value of our common stock underlying option grants, our board of directors considered, among other things, contemporaneous valuations of our common stock prepared by an unrelated third-party valuation firm in accordance with the guidance provided by the Statements of Standards for Valuation Services No. 1 of the American Institute of Certified Public Accountants. Since our IPO, our board of directors determines the fair value of each share of underlying common stock based on the closing price of our common stock on the date of grant.

We use the Black-Scholes valuation model to estimate the fair value of stock option awards. The fair value is recognized as expense, net of estimated forfeitures, over the requisite service period, which is generally the vesting period of the respective award on a straight-line basis.

Off-Balance Sheet Arrangements

We currently do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Controls and Procedures

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. Our independent public registered accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting until the first year we are no longer an “emerging growth company.”

We have evaluated our disclosure controls and procedures and concluded that, as a result of material weaknesses in our internal control over financial reporting as disclosed in our annual report on Form 10-K for the year ended December 31, 2015, and in our quarterly report on Form 10-Q for the three and nine months ended September 30, 2016, our disclosure controls and procedures were not effective.

We identified a material weakness in our system of internal control over financial reporting relating to processes and controls over properly identifying and accounting for transactions of a complex or non-routine nature. Management also identified certain design deficiencies relating to segregation of duties, review and approval, and verification procedures, primarily resulting from the limited number of our accounting staff available to perform such procedures. Additionally, management identified certain design deficiencies to access over information systems.

We continue to take steps to remediate the underlying causes of the material weakness. As of September 30, 2016, we are in the process of implementing and improving our controls and processes. We are in the process of hiring additional accounting and IT personnel to help improve our segregation of duties. In January 2016, we engaged a third-party consultant to assist us in making further improvements to our existing internal controls over financial reporting, and we are in the process of formalizing, documenting, and implementing written policies and procedures for the review of our various financial reporting processes. We also continue to engage third-party consultants to provide support and to assist us with our evaluation of complex technical accounting matters. We believe these additional resources will enable us to broaden the scope and quality of our controls relating to the oversight and review of financial statements and our application of relevant accounting policies. Furthermore, we continue to implement and improve systems to automate certain financial reporting processes and to improve information accuracy. However, these remediation efforts are still in process and have not yet been completed. Because of this material weakness, there is heightened risk that a material misstatement of our annual or quarterly financial statements will not be prevented or detected.

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BUSINESS

References herein to “we,” “us” or “our” refer to Great Basin Scientific, Inc., doing business as “Great Basin Corporation Inc.,” unless the context specifically requires otherwise.

Overview of Our Business

We are a molecular diagnostic testing company. We are focused on improving patient care through the development and commercialization of our patented, low-cost, molecular diagnostic platform for testing for infectious disease, especially hospital-acquired infections. We believe our platform has the ability to transform molecular testing for infectious diseases at small to medium sized hospitals by providing an affordable solution that meets the rapidly evolving needs of patients and providers.

We believe there is a fast-growing market for molecular diagnostic systems being purchased by hospital microbiology labs to replace culture and other legacy testing formats. We believe our platform is well positioned to meet this need. Our platform provides results in 45 to 115 minutes depending on the test. Molecular testing generally reduces test time from days to hours, and provides more accurate results, which we believe leads to shortened hospital stays and improved patient outcomes, all of which leads to reduced cost for hospitals that implement molecular testing in their labs.

Our platform is an automated molecular diagnostic system, consisting of an analyzer and associated assay cartridge. Our platform utilizes a sample-to-result format, which means that once a patient specimen is received, it undergoes limited processing before it is placed in the analyzer where the assay is run without further technician intervention. This reduces assay complexity and eliminates the need for highly trained and expensive molecular technicians to run the tests. Our platform is designed to enable simple, rapid and cost-effective analysis of multiple pathogens from a single clinical sample, which will allow small to medium sized community hospitals that traditionally could not afford more expensive or complex molecular diagnostic testing platforms to modernize their laboratory testing and provide better patient care at an affordable cost.

In November 2012, we launched our first FDA-cleared test for C. diff, a bacteria that causes life-threatening gastrointestinal distress in hospital patients. We currently sell our diagnostic test cartridge in the United States through a direct sales force and we use distributors in the European Union and New Zealand. As of September 30, 2016, we had 276 customers worldwide (255 in the United States and 21 in the rest of the world), who use an aggregate of 510 of our analyzers. Our easy to use platform allows small to medium sized hospitals that we believe could not previously afford more expensive or complex molecular diagnostic systems to modernize their laboratory testing and provide better patient care at an affordable cost.

In addition to our C. diff assay, we have commercialized three additional tests, Group B Strep assay for which we received FDA clearance in April 2015 and launched commercially in June 2015, Shiga toxin producing E. coli, or STEC, for which we received FDA clearance in March 2016 and launched commercially in August 2016 and Staph ID/R for which we received FDA clearance in March of 2016 and launched commercially in September 2016. Additionally, we have five other assays in various stages of product development: (i) a test for pertussis, (ii) a food borne pathogen panel, (iii) a pre-surgical nasal screen for Staphylococcus aureus, or SA, (iv) a panel for candida blood infections and, (v) a test for CT/NG.

Since inception, we have incurred net losses from operations each year and we expect to continue to incur losses for the foreseeable future. Our losses attributable to operations for the fiscal year ending December 31, 2015 and the nine months ended September 30, 2016 were approximately $57.9 million and $83.0 million, respectively. As of September 30, 2016, we had an accumulated deficit of $204.9 million.

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Our Strategy

Our goal is to become the leading provider of sample-to-result, multiplex and low-plex molecular diagnostic testing in infectious disease by leveraging the strengths of our affordable diagnostic testing platform. We intend to expand the use of our platform by targeting small to medium sized hospitals in the United States with fewer than 400 beds. We believe that our low-cost platform will be attractive to these hospitals in particular, which may not otherwise have sufficient resources to justify the purchase of a molecular diagnostic sample-to-result solution. To achieve this objective, we intend to do the following:

The Great Basin Platform

Our platform, which employs a combination of proprietary and patented technology, consists of a bench top analyzer with a touch screen (or, in early models, a laptop computer) into which our self-contained, single-use diagnostic cartridges are inserted. We believe that our platform is user friendly and intuitive and provides the hospital with the ability to perform molecular diagnostic assays in an efficient and cost-effective manner.

The Analyzer		The Diagnostic Cartridge		The User Placing the Diagnostic Cartridge into the Analyzer

Once a patient specimen is received in the lab, a technician will typically perform no more than three to five steps of sample preparation before placing the sample in our disposable diagnostic cartridge and inserting it in the analyzer where the assay is run without further technician intervention. Our four FDA-cleared assays were rated by Clinical Laboratory Improvement Amendments of 1988, or CLIA, as moderately complex, which

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typically eliminates the need for highly-trained and expensive molecular technicians to run the assays, bringing additional cost benefit to our customers. We expect our future assays to be rated moderately complex or meet CLIA waiver criteria, which is reserved for assays that are simple and are judged by the FDA to present a low risk for erroneous results.

Our platform provides accurate results in 45 to 115 minutes depending on the assays. The speed of our assays allows for early diagnosis and treatment, which we believe can lead to better patient outcomes and reduced cost to the hospital.

We believe that our platform and related assays offer small-to-medium sized hospitals the following benefits:

Our Molecular Testing Process

In our molecular testing process, a clinician places a clinical specimen — processed or unprocessed — into the diagnostic cartridge (such as stool or blood), caps the cartridge and then places the diagnostic cartridge into the analyzer. The assay routine is initiated in the analyzer and starts a simple automated process. Within the instrument, mechanical valves are present to control the flow of fluid through the cartridge and to pierce the blister packs containing the required buffers, solutions and reagents to perform the selected assay. Low cost, reliable heaters are present for assay processing. Imaging occurs with a compact digital camera placed over a window in the cartridge above the chip. Proprietary software interprets the image and provides a clinical result to the laboratory.

The disposable diagnostic cartridge contains — in blister packs or freeze dried pellets — all of the reagents required to run the applicable assay. The three steps of a molecular assay (sample preparation, amplification, and detection) are performed in chambers present on the cartridge. All waste is collected in a chamber that is part of the diagnostic cartridge, significantly reducing the risk of lab contamination. After the assay is completed and the result is obtained, the diagnostic cartridge is disposed of with the hospital’s other medical waste.

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To simplify processing within the analyzer, fluids are moved within the diagnostic cartridge through relatively large channels by exploiting pressure differences. Proprietary features have been designed into the diagnostic cartridge to allow for bubble-free fluid movement and sensor design permits accurate and precise volumetric delivery.

Our Assay Menu

We have received FDA clearance for four assays C. diff, Group B Strep, Staph ID/R and E. coli and a CE mark for three assays, C. diff, Group B Strep and STEC. We began marketing the C. diff test in Europe in the first quarter of 2012 and in the United States in the fourth quarter of 2012. We received clearance from the FDA in April 2015 for our second diagnostic test for Group B Strep and launched this test commercially in June of 2015. We received clearance from the FDA in March of 2016 for STEC and launched this test commercially in August of 2016. We also received FDA clearance for our Staph ID/R trial in March of 2016 and expect to launch the commercial launch in the third quarter of 2016. Additionally, we have five other assays in various stages of product development: (i) a test for pertussis, (ii) a food borne pathogen panel, (iii) a pre-surgical nasal screen for Staphylococcus aureus, or SA, (iv) a panel for candida blood infections and, (v) a test for CT/NG.

Our Commercial Tests:

C. diff Test

C. diff infections are often life-threatening and can create a significant financial burden for hospitals. As a hospital-acquired infection, costs associated with the care of patients with C. diff are not covered by insurance or Medicaid/Medicare. An independent peer reviewed paper, published in the American Journal of Infection Control in 2012, highlights a significant reduction in C. diff infection rates when a hospital switched from culture to molecular testing — reducing cost and improving patient outcomes.

Our C. diff test is a rapid medical diagnostic test for the detection of C. diff, a gram-positive bacteria that causes severe diarrhea and other intestinal disorders. The test detects the presence of the C. diff toxin B gene, or tcdB gene, in the pathogenicity locus, or PaLOC region of C. diff, present in all known toxigenic strains, to diagnose the toxin in a patient’s stool. The test requires minimal sample preparation and can deliver results in 90 minutes. A swab from loose stool is placed into transfer solution and a portion of this solution is placed into the diagnostic cartridge. The diagnostic cartridge is then placed into the analyzer.

Group B Strep Test

Group B streptococcus, or Group B Strep, is a bacterium that colonizes in the warm moist areas of many humans. Harmless to healthy adults, it can be transmitted to a newborn during childbirth and is the single largest cause of meningitis in newborn infants. For this reason nearly every pregnant woman in the United States is tested for Group B Strep in the late third trimester. Historically this test was done by culture, but based on the recent introduction and sales of other Group B Strep molecular diagnostic tests, we believe labs are switching to molecular testing.

Our Group B Strep test is designed to detect Group B Strep from an anal/vaginal swab taken from a pregnant woman. Hospitals can use our test to identify Group B Strep colonization in pregnant women, who can then be treated with antibiotics to reduce the risk of transmission to the baby, reducing the risk of development of sepsis in the newborn. We received clearance from the FDA in April 2015 for our Group B Strep test and launched it commercially in June 2015.

Shiga Toxin Direct (STEC) Test

Escherichia coli (E. coli) bacteria normally live in the intestines of healthy people and animals. Most varieties of E. coli are harmless or cause relatively brief diarrhea, but a few strains, such as E. coli O157:H7, can cause severe abdominal cramps, bloody diarrhea and vomiting.

Our STEC Test is designed to be a rapid test that identifies Shiga toxin produced by E. coli, including E. coli O157 specifically which is the most serious type of E. coli contracted from contaminated food. We received FDA clearance for our STEC test in March 2016. We launched the product commercially in August of 2016.

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Staphylococcus Identification and Resistance Blood Infection Panel

Staphylococcus aureus is a major cause of hospital and community-acquired infections and is associated with high rates of morbidity and mortality. Methicillin-resistant Staphylococcus aureus, or MRSA, is a potentially life-threatening infection that most frequently occurs in the hospital setting. Rapid diagnosis of Staph blood infections has been shown, in a report published in Clinical Practice in 2010, to save up to approximately $7,000 per patient and shorten length of hospital stay by 6.2 days.

Our Staph ID/R panel is designed to be a multiplex panel to (i) identify species of Staphylococcus infections based on the detection of highly discriminatory and specific DNA sequences within a bacterial replication gene, (ii) detect the mecA gene, which confers drug resistance, directly from positive blood cultures and (iii) provide information on the antibiotic resistance profile of the bacteria. This test is designed to produce a result in less than one hour.

We received FDA clearance for our Staph ID/R panel in March 2016. We launched the product commercially in September of 2016.

Our Assays in Clinical Testing

Pertussis

Pertussis, also known as whooping cough, is a highly contagious respiratory disease caused by the bacterium Bordetella pertussis. In 2012, there were over 48,000 cases reported in the United States and over 16 million worldwide. We started the clinical trial in the second quarter of 2016. Our Pertussis test is not cleared by the FDA or available for commercial sale.

Stool Bacterial Pathogenic Panel

According to the Agency for Healthcare Research and Quality, there were nearly five million U.S. hospital visits in 2010 for gastrointestinal distress that suggested food-borne illness. In 2010, inpatient costs attributable to patients suffering from gastrointestinal infections cost the healthcare system nearly $1.8 billion. One of the challenges faced by physicians assessing a patient with symptoms of gastrointestinal infection is determining the underlying cause.

We expect that our Stool Bacterial Pathogenic panel will detect the main causes of food poisoning. If approved, we believe that hospitals will be able to use our panel to identify the causative pathogen of food poisoning and provide appropriate treatment quickly, improving patient outcomes. Additionally, the results may be used to aid public health agencies to track causes of food poisoning outbreaks. We started the clinical trial in the second quarter of 2016. Our Stool Bacterial Pathogenic panel is not cleared by the FDA or available for commercial sale.

Our Assays in Development

Staphyloccocus aureus Pre-Surgical Nasal Screen

Staphyloccocus aureus (SA) often colonizes the nasal passages and other warm moist areas in healthy humans. Harmless in most circumstances, the colonization represents real risk to patients undergoing surgery. In fact studies have shown the relative risk of post-surgical infection is up to eight and a half times greater in carriers of SA than in non-carriers.

We expect that our SA nasal screening test will be a rapid test for the presence of SA in the nasal passages of a pre-surgical patient. If approved, we believe that hospitals will be able to use our test to identify pre-surgical patients who are SA carriers and treat those patients with topical antibiotics, which has been shown in multiple peer-reviewed studies to significantly reduce the risk of post-surgical infection. Our SA pre-surgical nasal screen test is not cleared by the FDA or available for commercial sale.

Candida Blood Infections Panel

According to the United States Center for Disease Control there are 46,000 Candida blood infections annually in the U.S. Candida infections, although rare, have mortality rates as high as 40% if not diagnosed quickly. Our candida panel is a multiplex panel that will be designed to identify five species of Candida directly from positive blood cultures. We expect to complete product development in the first half of 2017.

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Chlamydia tracomatis/Neisseria gonorrhoeae.

According to the CDC, there are over 1.4 million new reported CT infections each year however, it is estimated that there are over 2.8 million infections in the U.S. CT can cause cervicitis in women and urethritis and proctitis in both men and women. Chlamydial infections in women can lead to serious consequences including pelvic inflammatory disease (PID), tubal factor infertility, ectopic pregnancy, and chronic pelvic pain. Gonorrhea is a very common infectious disease. CDC estimates that approximately 820,000 new gonorrheal infections occur in the United States each year, and that less than half of these infections are detected and reported to CDC.1 CDC estimates that 570,000 of them were among young people 15 – 24 years of age. In 2013, 333,004 cases of gonorrhea were reported to CDC. We expect to complete the pre-clinical development of our CT/NG test in the first half of 2017.

Our Technology

Our proprietary and patented technology is based on detection of DNA targets on a coated silicon chip with results visible to the naked eye. DNA naturally forms a double-stranded structure, with each strand binding with high affinity and selectivity to a complementary strand. Our technology can detect DNA target strands of interest by attaching complementary strands of DNA to the chip surface, called capture probes, using our proprietary technology and processes. The capture probe can thereby immobilize the DNA target of interest. In order for the DNA target to be detected, it is labeled with biotin, a small molecule which can be used to create a signal in the diagnostic test. Biotin, immobilized onto the chip surface via DNA target hybridization to the DNA probe, will bind to a molecule which recognizes biotin and is conjugated to a signal generating enzyme, horseradish peroxidase, or HRP. Immobilized HRP can be reacted with a complex mixture to create a large colored product which deposits on the chip surface. This deposit causes the color of the chip surface to change. This color change is readily apparent to the naked eye as a dot in the vicinity of the DNA probe. In order to create tests with appropriate sensitivity for the given clinical indication, we can either amplify the quantity of DNA targets of interest or amplify the biotin-based signal. Each of these amplification approaches also serve to label DNA target(s) of interest with biotin.

Our Technology: Detection of On-chip Helicase Dependent Amplification (HDA) Reactions

Within the cartridge three distinct processes occur: sample processing, amplification, and detection. During sample processing, the specimen is treated to remove clinical matrices such as blood or feces that may interfere with assay results and is treated to break open cells to release potential DNA targets. Next, the sample is subjected to target amplification to create billions of copies of target DNA to improve assay sensitivity and to label each target with biotin. Finally, detection is triggered by hybridization of the biotin-labeled target DNA with capture probes on the chip surface. The chip is currently configured to hold as many as 64 probes, including controls, each of which can be configured to detect a different target DNA, enabling highly multiplexed testing. If signal amplification is used, a proprietary polymer is added to the detection reaction, which converts each target DNA associated biotin into 80 additional biotins to improve detection sensitivity. All waste generated from the assay is stored in a self-contained waste chamber which significantly reduces contamination risk.

Target Amplification.  Helicase-dependent amplification, or HDA, is a process that utilizes an enzyme, helicase, to unwind double-stranded DNA to create two single strands through isothermal, or single temperature, amplification. Once this DNA is single-stranded, complementary DNA primers, which are short

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pieces of DNA that are complementary to the DNA target, can hybridize. Through the action of an enzyme, DNA polymerase, the DNA primers grow, or extend, to create a complementary strand of the DNA target, creating double-stranded DNA again. This process can be repeated and the degree of copying, or amplification, is exponential, so that billions of copies can be created. HDA is a method already commercially available for detection of DNA targets, however, it is a mistake-prone process. DNA primers can incorrectly hybridize to non-target DNA at lower temperatures and be copied, creating so-called primer artifacts, which leads to tests that are slow and poorly sensitive.

Our patented target amplification approach, termed blocked primer-mediated, helicase-dependent amplification, or bpHDA, utilizes blocked primers to enhance test speed and sensitivity. Blocked primers are DNA primers that contain a block at lower temperatures, where most incorrect hybridization events occur, preventing extension of the DNA primers or copying of the DNA target. As the temperature is raised, incorrect hybridization events are not stable and fall apart, but hybridization of DNA primers to complementary DNA targets is still very strong and an enzyme, RNase H, becomes active which can remove the block in blocked primers hybridized to DNA targets only. As a result, the accuracy of the process is dramatically improved, leading to faster and more sensitive tests. In order to label the DNA target for detection, each DNA primer has a biotin molecule attached to one end.

Our platform is also capable of performing polymerase chain reaction, or PCR, which is a widely used method of DNA amplification. Our Group B Strep test is our first commercial test to utilize PCR.

Signal Amplification.  Our patented signal amplification approach, which we refer to as AMPED, utilizes a bridging molecule to connect the biotin label on each DNA target to a polymer containing 80 biotins, thereby amplifying the signal up to 80 times in our diagnostic tests. The AMPED polymer works in the presence of blood, mucus, and feces typically present in clinical samples, thereby simplifying sample processing. The AMPED signal amplification process takes approximately 20 to 30 minutes and is a more rapid approach for detection of DNA targets than target DNA amplification, which typically takes 45 to 120 minutes. The patented AMPED polymer is highly water soluble and stable and displays low non-specific binding properties, which are critical requirements for highly specific signal amplification approaches.

Based on papers published in peer-reviewed journals, we believe our AMPED detector to be among the most sensitive in the industry with a proven limit of detection of 20,000 DNA molecules. We believe this limit of detection will be more than adequate for us to develop assays focused on the nascent “direct from whole blood” market which we believe has the potential to be exceptionally disruptive by eliminating the need for culturing blood prior to testing. Currently patients suspected of having a blood infection (sepsis) have their blood drawn. That sample is then cultured for a day before testing, but published studies consistently show that treatment within 12 hours of symptoms has significant clinical benefit. Direct from whole blood testing has the potential to eliminate the need for culture, speeding diagnosis to under 12 hours, thus potentially improving patient morbidity and mortality.

Diagnostic Cartridges.  Our patent-pending diagnostic cartridges are self-contained devices specifically configured for a given diagnostic assay. The diagnostic cartridge is injection molded and includes features such as reaction chambers, a waste chamber, and channels to direct the movement of fluids. The diagnostic cartridge also contains a coated silicon detection chip consisting of an array of up to 64 DNA probes, including controls. Integrated into the diagnostic cartridge are lance devices for the reagent blister packs and stirring devices. Reaction chambers and fluid channels are covered with a clear thermoplastic to form liquid-tight features. All of the reagents necessary to perform the assay are stored within blister packs affixed to the cartridge, other than the target amplification reagents, which are stored as a freeze-dried pellet. The diagnostic cartridge utilizes patent-pending methods for controlling the flow of fluid and managing air to prevent bubbles. The diagnostic cartridge also contains bar coded information related to the test, including the cartridge lot number and expiration date.

Analyzer.  The analyzer is an on-demand system controlled by an external touch screen or laptop. Each analyzer contains a module into which individual diagnostic cartridges are placed. Once a diagnostic cartridge has been loaded with a clinical specimen, the cartridge is inserted into the analyzer. The cartridge is then advanced onto a platform allowing access from above and below. The analyzer has three main sub-platforms to execute the diagnostic test: reagent flow control, thermal control, and the optical imaging platforms. To

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control reagent flow and delivery, valve actuators, which control fluid movements, and lance actuators, which lance blister packs, are located below the cartridge. Motors for mixing reactions and stepper motors, which serve to flatten blister packs and drive fluid into reagent channels, are located above the cartridge. Optical sensors located adjacent to the fluidic paths in the cartridge are used to determine fluidic movements. Compression valves are used to isolate regions of the cartridge for individual steps of the diagnostic assay. Multiple resistive heaters with thermocouple feedback are used to control temperature for each of the steps of the process. Once the test is complete a digital camera captures the resulting visible features. Processing and filtering techniques and multiple custom algorithms are used to determine test results, which are displayed on the touch screen or printed automatically.

The touch screen controls each analyzer, provides power and analyzes and stores data. Technicians can load patient identification numbers and reagent lot codes by using the included bar code scanner or the touch screen.

Advantages of Our Technology

Low Cost Design.  Our technology was designed to use injection molded parts and filled blister packs can be produced in high volumes at relatively low cost. Production of the coated silicon chip uses existing semi-conductor processes and capital equipment. Our isothermal target amplification uses a relatively inexpensive heater which does not need to actively manage heat with coolers and fans. A low cost digital camera captures the visible results. Our proprietary DNA probe chemistry enables us to produce assays at relatively low cost.

Easy to Perform On-demand Testing.  Our technology uses a sample-to-result approach. The customer loads a liquid clinical specimen into the diagnostic cartridge, closes it, inserts it into the analyzer and enters patient information to initiate each assay. The results are automatically generated with no user interpretation or intervention required. Hands-on time is less than 10 minutes for our C. diff test and we expect hands-on time to be generally less than 5 minutes for assays under development. Additionally, on-demand testing allows the technician to test samples as they come into the laboratory. Finally, the presence of comprehensive built-in controls means that the technician is not required to test external control samples to assure the quality of assay results. This allows laboratories to be more efficient with limited resources.

High Performance Assay Results.  Our technology is capable of highly specific and sensitive detection of nucleic acids. For target DNA from multiple pathogen types, we can routinely detect fewer than three organisms using our bpHDA target amplification approach and have detected the identity of as few as 100 organisms using our AMPED signal amplification approach. Because the speed of bpHDA is only limited by the speed of the enzymes, we have demonstrated the ability to detect target DNA in less than 20 minutes of amplification time.

High Content Panels.  Each of the 64 capture probes in our cartridge act independently to produce highly specific and sensitive detection for a given DNA target. The chip is optimized so that changes as small as a single base in DNA target sequence can be readily detected, allowing for detection of clinically meaningful mutations in DNA target samples. Our bpHDA technology is highly specific, allowing for simultaneous amplification of multiple DNA targets. The AMPED approach can be used to directly detect clinical specimens, thereby eliminating typical limitations of multiplexing. We expect the combination of highly multiplexed amplification and detection will allow for information-rich, multi-target panel results that allow clinicians to both rule-out and rule-in causes of disease. We believe this approach will lower testing costs and speed up the time to appropriate patient treatment, improving patient outcomes.

Ease of Development of New Assays.  Early diagnostic test prototypes can be developed using our standard 96 well plates capable of processing 96 samples in a single experiment, rather than processing individual samples in the analyzer. We believe that this capability allows us to more easily develop and optimize new assays before transferring the design to the instrumented platform. Additionally, well-established software tools enable us to design and develop DNA probes and primers. The flexibility of the cartridge design allows for utilization of an efficient, low-cost approach for sample processing.

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License Agreements

BioHelix.  We hold non-exclusive licenses to key technologies from BioHelix related to isothermal amplification of nucleic acid targets, utilizing helicase-dependent amplification, or HDA. The term of this license agreement extends until the expiration of all the patents associated with the licensed patent rights, or until such time as we elect to terminate with 30 days’ notice. This license is limited to the fields of human diagnostic testing utilizing our solid chip surface detection and contains diligence and U.S. preference provisions. To date, these technologies have resulted in three issued U.S. patents, one issued European patent and one pending international patent family. In addition, these technologies may include related technologies that BioHelix may develop in the future. The BioHelix technologies are the basis of our nucleic acid amplification approach. In May of 2013, Quidel Corporation, a competitor of ours, purchased BioHelix. We pay a royalty fee for the licensing of this technology based on a percentage of our “Net Sales” of assays using these technologies (as defined in the license agreement).

IDT.  In August 2010, we entered into a license agreement with Integrated DNA Technologies, or IDT, related to the use of blocked primers in combination with HDA. The term of this license agreement extends until the expiration of all the patents associated with the licensed patent rights, or until such time as we elect to terminate with 90 days’ notice. The license is exclusive to the fields of amplification utilizing HDA and detection of diagnostic targets in human in-vitro diagnostic testing, but is non-exclusive to all oncology and human papilloma virus targets or markers. These technologies have resulted in four pending U.S. patent applications and one issued European patent. We pay a royalty fee for the license of this technology based on a percentage of our “Net Sales” of products using these technologies (as defined in the license agreement).

Pursuant to the terms of these license agreements, we pay royalty fees in the aggregate equal to 14% of our worldwide “Net Sales” of those products that use these technologies (as defined and adjusted pursuant to the terms of the applicable license agreements). Our C. diff product is our only commercial product that uses these technologies. Our products under review by the FDA and all of our products under development do not use these technologies and will not be subject to royalty fees.

Market Opportunity

We believe the global market for molecular diagnostic testing is approximately $5.0 billion per year and will experience a growth rate of approximately 12% per year over the course of the next several years based on research published by outside market research firms. We believe our proprietary sample-to-result platform is best suited to address a subset of this market, including hospital-acquired infections and other infectious diseases.

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We anticipate that the market for the molecular diagnostic assays on which we are focused will increase significantly over the next several years. We believe that many factors are driving growth of this market, particularly the accelerating adoption of molecular testing inside the hospital micro-biology lab. Based on published research we believe that fewer than half of all hospitals are currently using molecular testing for their infectious disease testing. More importantly, we believe that a far smaller fraction of all testing done in hospital labs is molecular. We believe that as molecular testing becomes more cost effective, its advantages of faster time to result and higher sensitivity relative to legacy testing methods will lead more and more hospitals to convert to molecular testing.

Our diagnostic tests are currently sold in the United States, Europe and New Zealand. We currently utilize a direct sales and support team in the United States and in certain key European countries and New Zealand utilize distributors, which we expect will be augmented by marketing partners and distributors in other strategic areas as we expand internationally.

According to the US Center for Disease Control, in 2011 there were approximately 5,700 hospitals in the United States, approximately 4,900 of which are under 400 beds and which we refer to as small to medium sized hospitals. According to outside research, fewer than half of those smaller hospitals have made the switch to molecular methods for diagnosing infectious disease. Based on our competitors’ public statements and published independent reports, we believe that 20% of small-to-medium sized hospitals have a sample to result molecular system. We believe these hospitals are excellent candidates for our molecular diagnostic systems. We believe that our platform will enable these hospitals — many of which could not previously afford more expensive or complex molecular diagnostic testing platforms — to modernize their laboratory testing and provide better patient care at an affordable cost.

The first step to acquiring a customer is an evaluation. During the evaluation period, potential customers utilize our platform alongside their current testing method (molecular or non-molecular) and at the end of the evaluation period determine if they are interested in switching to our platform, as evidenced by the purchase of our assays on a recurring basis, or by remaining with their current testing method. Our recent customer and evaluation history is as follows:

		Total U.S. Customers				C. diff Customers				C. diff Pentration				Group B Strep Customers				Group B Strep Penetration
Third Quarter 2014			80				80				100	%			0				NA
Fourth Quarter 2014			84				84				100	%			0				NA
First Quarter 2015			101				101				100	%			0				NA
Second Quarter 2015			115				115				100	%			0				NA
Third Quarter 2015			143				142				99	%			25				17	%
Fourth Quarter 2015			186				185				99	%			47				25	%
First Quarter 2016			222				219				99	%			61				27	%
Second Quarter 2016			260				253				97	%			78				30	%
Third Quarter 2016			255				248				97	%			78				30	%

Research and Development

As of September 30, 2016 we had 51 employees focused on research and development. Our research and development expenditures were approximately $3.7 million and $2.9 million for the three months ended September 30, 2016 and 2015, respectively. The increase in research and development expenses from 2015 to 2016 was primarily due to our focus on growing our diagnostic assay pipeline. In the future we expect our research and development expenses to continue to increase as we allocate additional resources to developing and obtaining regulatory approval for assays under development. We will also allocate research and development resources to improve our product reliability and enhance our diagnostic cartridge manufacturing process.

In addition to the four assays we have cleared we have six assays in late stage development. Our product offerings will include low-plex tests, multi-plex panels and direct from whole blood tests or panels.

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Our molecular assay for Group B Strep is a class II device for which we received FDA clearance in April 2015. The molecular test detects Group B Strep from rectal/vaginal swabs obtained from pregnant women and incubated overnight in culture medium. The study was performed at three U.S. hospital laboratories: Indiana University School of Medicine; Medical College of Wisconsin; and Tricore Laboratories. Each site tested approximately 250 growth positive LIM broths (750 – 800 total samples). Each tested sample was compared to a gold standard culture-based method.

Our molecular panel for Staphylococcus blood infections, Staph ID/R, is a class II device for which we received FDA clearance in March of 2016. To support the submission we completed a multi-center study. The clinical sites collectively tested approximately 831 samples. Each sample was compared to two culture reference methods as required by the FDA, an automated biochemical method for species identification and cefoxitin disk diffusion for mecA gene detection.

Our molecular assay for Shiga toxin producing E. coli, STEC, is a class II device for which we received FDA clearance in March of 2016. To support the submission we completed a multi-center study. The clinical sites collectively tested approximately 1,082 samples. Each sample was compared to three different reference methods, an FDA approved broth/EIA test to detect Shiga toxin, a validated DNA sequencing method also to detect Shiga toxin, and a plate culture/latex agglutination test to detect serotype O157.

Manufacturing

We manufacture our proprietary diagnostic cartridges and analyzers in Salt Lake City, Utah. We currently hand-build our diagnostic cartridges and purchase materials at higher per unit cost due to lower purchase volumes. We believe that investment in automation of portions of our manufacturing and assembly process and volume purchase pricing will significantly improve our gross margins and enhance our ability to provide a low cost solution to customers. We perform reagent formulation, diagnostic cartridge manufacturing and packaging of final components and diagnostic cartridges in accordance with applicable guidelines for medical device manufacturing. We currently lease approximately 33,000 square feet of manufacturing space, which we believe will be adequate to meet our manufacturing needs for the foreseeable future. The lease expires in April 2017 and has two options, each for a three year renewal term. We also rely on third party suppliers, including sole source suppliers in certain instances, for certain reagents used in our products and much of the disposable component molding for our test cartridges.

We have implemented a quality management platform designed to comply with FDA regulations and ISO standards governing diagnostic medical device products. These regulations carefully control the design, manufacture, testing and release of diagnostic testing products, as well as raw material receipt and control. We also have controlled methods for the consistent manufacturing of our proprietary diagnostic cartridge, and analyzers at our facility.

Headquarters

We have signed a lease for approximately 35,540 square feet of office space in various suites located at 420 E. South Temple, Salt Lake City, UT 84111 for use as our executive offices and labs. Base rent payments due under the lease are expected to be approximately $3,472,875 in the aggregate over the term of the lease of 65 months that began on December 1, 2015.

Sales and Marketing

Our current sales and marketing strategy is to expand the installed base and utilization of our platform and diagnostic assays. Our C. diff test is sold in the United States through a nine person direct sales force and a technical specialist service organization of four, which is supported by a centralized team of marketing, customer support, and technical support personnel.

Our sales representatives typically have experience in molecular diagnostic testing and a network of hospital contacts within their respective territories. We utilize our representatives’ knowledge along with market research databases to target and qualify our customers. We execute a variety of sales campaigns and strategies to meet the buying criteria of the different customer segments we serve. To support our expanding molecular assay menu and the anticipated growth in our customer base, we continue to make investments in these customer facing organizations.

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In the United States, our sales cycle typically includes customer evaluations, a decision to use our platform and then validations of our platform and the C. diff test. Upon successful validation the evaluating entity becomes a customer. This process has taken between 25 and 64 days from the time we install the analyzer at the evaluation site and has been decreasing. We believe that the sales cycle has been reduced over time due to higher market acceptance of molecular testing for infectious diseases and improvement we have made to the selling process. For example, for our customers that run the C. diff test, during 2014 the sales cycle was 74 days, during the first half of 2015 the sales cycle was 65 days, during the second half of 2015 was 35 days and 11 days in the first nine months of 2016.

The analyzer is provided to the customer for their use with our assay but we retain ownership and control of the analyzer; we refer to our relationship with our customers as a vending machine model (or modified razor/razor blade). The customer buys our proprietary diagnostic cartridge from us and utilizes one disposable test cartridge each time they run an assay. Our revenue from U.S. customers is derived solely from the sales of assays.

We refer to the percentage of customers that elect to switch to our platform and purchase our diagnostic tests after receiving and evaluating our platform as our “win rate”. This is a metric that we use to determine our sales efficiency and our market acceptance. Our win rate calculation is determined without any minimum or recurring purchase threshold. Our win rates over various periods since we launched our C. diff product commercially are as follows:

		Number of Evaluations				Win Rate
Full Year 2013			86				69	%
Full Year 2014			49				76	%
Full Year 2015			125				85	%
1st Quarter 2016			40				85	%
2nd Quarter 2016			49				88	%
3rd Quarter 2016			24				79	%
Since Commercial Launch			373				80	%

We offer our C. diff test and our platform for sale in the European Union and New Zealand through a network of distributors. Unlike the U.S. market, we sell the platform and assay to the distributor, who then sells them directly to the customer.

Customers

In the nine months ended September 30, 2016, we did not have any customer that represented more than 5% of our total revenue.

For the year ended December 31, 2015, our largest customer, Vista Clinical Lab, represented 7.4% of our total revenue.

We define customers in terms of the number of customer sites actively reporting results using our platform. As of September 30, 2016, we had 276 customers worldwide (255 in the United States and 21 in the rest of the world), who use an aggregate of 510 analyzers.

Our U.S. customers represented approximately 99% of our total revenue for the nine months ended September 30, 2016 and 98% of our total revenue for the 12 months ended December 31, 2015. We do not enter into sales agreements with our U.S. customers and sell our products using purchase orders. We enter into distribution agreements with distribution partners for sales outside the U.S.

Competition

We primarily compete with other molecular diagnostic testing manufacturers, such as Cepheid, Meridian Bioscience, Inc., Nanosphere, Inc., Qiagen NV, Roche Diagnostics, Quidel Corporation, bioMerieux (which recently acquired Biofire Diagnostics, Inc.), T2 Biosystems, Becton, Dickinson and Company, GenMark Diagnostics, Inc., Hologic and others. We believe that we compete primarily on the basis of our platform’s speed, accuracy, ease of use and relatively low cost. We believe that the approval of additional assays will make our solution more attractive to our customers and prospective customers.

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Many of our competitors have substantially greater financial, technical, research and other resources and larger, more established marketing, sales and distribution organizations than we do. Many of our competitors also offer broader product lines and have greater brand recognition than we do. Moreover, our existing and new competitors may make rapid technological developments that may result in our technologies and products becoming obsolete before we recover the expenses incurred to develop them or before they generate significant revenue.

Intellectual Property, Proprietary Technology

We integrate capabilities in platform design, development, production and DNA amplification technologies, along with design, development and manufacture of primers, probes, dyes, quenchers and other individual reagent components. We have and are continuing to develop our own proprietary intellectual property along with licensing specific third-party technologies.

We have an issued patent covering bpHDA, which is used in our C. diff test. bpHDA, or Blocked Primer Helicase Dependent Amplification, is our patented technology creating “target-dependent hot start” functionality in HDA amplification reactions. bpHDA utilizes a blocked primer technology such that amplification is not activated until the target analyte of interest is bound to the blocked primer at an elevated temperature used for HDA amplification, wherein the block is removed by a highly specific enzyme, allowing for amplification to proceed. We believe this approach significantly improves assay speed and limits of sensitivity such that single cells present in clinical specimens may be amplified to detectable levels in as few as 17 minutes. Multiplex product development is also simplified, allowing for more complex assays in a single reaction with up to four unique primer sets demonstrated to work since December 31, 2014.

(BP)-HDA: Great Basin Proprietary Hot Start Amplification Technology

We also have an issued patent for our amplification method in the presence of the coated silicon chip, a method which we intend to use in each of our assays. We also have an issued patent for the AMPED signal amplification method, which we intend to utilize in assays currently under development. The issued patents described above were issued in the United States and each expires in 2028. Our issued patents are pending in Europe and Canada as well. All current maintenance fees payable regarding these issued patents have been paid.

Our competitive success will be affected in part by our continued ability to obtain and maintain patent protection for our inventions, technologies and discoveries, including intellectual property that includes technologies that we license. We have patents covering technologies of our own and have licensed technologies from others. Our pending patent applications may lack priority over applications submitted by third parties or may not result in the issuance of patents. Even if issued, our patents may not be sufficiently broad to provide protection against competitors with similar technologies and may be challenged, invalidated or circumvented.

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In addition to patents, we rely on a combination of trade secrets, copyright and trademark laws, nondisclosure agreements, licenses and other contractual provisions and technical measures to maintain and develop our competitive position with respect to intellectual property. Nevertheless, these measures may not be adequate to safeguard the technology underlying our products. For example, employees, consultants and others who participate in the development of our products may breach their agreements with us regarding our intellectual property, and we may not have adequate remedies for the breach. We also may not be able to effectively protect our intellectual property rights in some foreign countries, as many countries do not offer the same level of legal protection for intellectual property as the United States. Furthermore, for a variety of reasons, we may decide not to file for patent, copyright or trademark protection outside of the United States. Our trade secrets could become known through other unforeseen means. Notwithstanding our efforts to protect our intellectual property, our competitors may independently develop similar or alternative technologies or products that are equal or superior to our technology. Our competitors may also develop similar products without infringing on any of our intellectual property rights or design around our proprietary technologies. Furthermore, any efforts to enforce our proprietary rights could result in disputes and legal proceedings that could be costly and divert attention from our business. We could also be subject to third-party claims that we require additional licenses for our products, and such claims could interfere with our business. If our products infringe the intellectual property rights of others, we could face costly litigation, which could cause us to pay substantial damages and limit our ability to sell some or all of our products. Even if our products were determined not to infringe the intellectual property rights of others, we could incur substantial costs in defending any such claims.

We hold non-exclusive licenses to key technologies from BioHelix related to isothermal amplification of nucleic acid targets, utilizing helicase-dependent amplification, or HDA. This license is limited to the fields of human diagnostic testing utilizing our solid chip surface detection and contains diligence and U.S. preference provisions. To date, these technologies have resulted in three issued U.S. patents, one issued European patent and one pending international patent family. Additionally, these technologies may include related technologies that BioHelix may develop in the future. The BioHelix technologies are the basis of our DNA amplification approach. In August 2010, we entered into a license agreement with Integrated DNA Technologies, or IDT, related to the use of blocked primers. The license is exclusive to the fields of amplification utilizing HDA and detection of diagnostic targets in human in-vitro diagnostics, but is non-exclusive to all oncology and human papilloma virus targets or markers. These technologies have resulted in three pending U.S. patent applications and one issued European patent.

Government Regulation

The design, development, manufacture, testing and sale of our molecular diagnostic assays are subject to regulation by numerous governmental authorities, principally the FDA, and corresponding state and foreign regulatory agencies.

Regulation by the FDA

In the United States, the FDCA, FDA regulations and other federal and state statutes and regulations govern, among other things, medical device design and development, pre-clinical and clinical testing, premarket clearance or approval, registration and listing, manufacturing, labeling, storage, advertising and promotion, sales and distribution, export and import, and post-market surveillance. The FDA regulates the design, manufacturing, servicing, sale and distribution of medical devices, including molecular diagnostic test kits and instrumentation platforms. Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as FDA refusal to approve pending applications, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties and criminal prosecution.

Unless an exemption applies, each medical device we wish to distribute commercially in the United States will require marketing authorization from the FDA prior to distribution. The two primary types of FDA marketing authorization required applicable to a device are premarket notification, also called 510(k) clearance, and premarket approval, also called PMA. The type of marketing authorization required is generally linked to the classification of the device. The FDA classifies medical devices into one of three classes (Class I, II or III) based on the degree of risk the FDA determines to be associated with a device and the level of regulatory control deemed necessary to ensure the device’s safety and effectiveness. Devices requiring fewer

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controls because they are deemed to pose lower risk are placed in Class I. Class I devices are deemed to pose the least risk and are subject only to general controls applicable to all devices, such as requirements for device labeling and adherence to the FDA’s current Good Manufacturing Practices and Quality Platform Requirements, as reflected in its QSR. Class II devices are intermediate risk devices that are subject to general controls and may also be subject to special controls such as performance standards, product-specific guidance documents, special labeling requirements, patient registries or post-market surveillance. Class III devices are high risk devices for which insufficient information exists to assure safety and effectiveness solely through general or special controls. Class III devices include life-sustaining, life-supporting or implantable devices, devices of substantial importance in preventing impairment of human health, or which present a potential, unreasonable risk of illness or injury.

Most Class I devices and some Class II devices are exempted by regulation from FDA’s premarket review requirement and can be commercialized without prior authorization from the FDA. Some Class I devices that have not been so exempted and most Class II devices are eligible for marketing through the 510(k) clearance process. By contrast, devices placed in Class III generally require PMA or 510(k) de novo clearance prior to commercial marketing. We anticipate that our molecular assays for Staphylococcus blood infections, Shiga toxin producing E. coli, and Staph ID/R will each be a Class II device requiring a 510(k) clearance.

510(k) Clearance

To obtain 510(k) clearance for a medical device, an applicant must submit a premarket notification to the FDA demonstrating that the device is “substantially equivalent” to a device legally marketed in the United States that is not subject to PMA, commonly known as the “predicate device.” A device is substantially equivalent if, with respect to the predicate device, it has the same intended use and has either (i) the same technological characteristics or (ii) different technological characteristics and the information submitted demonstrates that the device is as safe and effective as a legally marketed device and does not raise different questions of safety or effectiveness. Demonstration of substantial equivalence may require clinical data. Although completion of the 510(k) review process is targeted for 90 days, these reviews typically take longer (e.g., up to 12 months or more) due to stoppage of the FDA review clock to address requests for additional information. Payment of a user fee is required for the FDA to initiate review of a 510(k) submission.

After a device has received 510(k) clearance for a specific intended use, any change or modification that significantly affects its safety or effectiveness, such as a significant change in the design, materials, method of manufacture or intended use, may require a new 510(k) clearance or PMA. The determination as to whether or not a modification could significantly affect the device’s safety or effectiveness is initially left to the manufacturer using available FDA guidance; however, the FDA may review this determination to evaluate the regulatory status of the modified product at any time and may require the manufacturer to cease marketing and recall the modified device until 510(k) clearance or PMA is obtained. The manufacturer may also be subject to significant regulatory fines or penalties.

Before submitting a medical device for 510(k) clearance, a series of studies (e.g., method comparison, precision, reproducibility, interference and stability studies) must be conducted to characterize the performance of the test.

In addition, clinical studies may be required to validate these performance characteristics in a clinical setting as well as to ensure that the intended users can perform the test successfully.

Although clinical investigations of most devices are subject to the investigational device exemption, or IDE, requirements, clinical investigations of molecular diagnostic tests, including our assays and assays under development, are generally exempt from the IDE requirements. Thus, clinical investigations by intended users for intended uses of our assays generally do not require the FDA’s prior approval, provided the clinical evaluation testing is non-invasive, does not require an invasive sampling procedure that presents a significant risk, does not intentionally introduce energy into the subject and is not used as a diagnostic procedure without confirmation by another medically established test or procedure. In addition, products must be appropriately labeled per FDA regulations to reflect the intended use of the product (e.g., for research use only or for investigational use only) and distribution controls must be established to assure that such products are distributed for those specified purposes.

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PMA Applications

PMA applications must be supported by valid scientific evidence, which typically requires extensive performance data, including technical, pre-clinical, clinical and stability data, to demonstrate the safety and effectiveness of the device. A PMA application must also include a complete description of the device and its components, a detailed description of the methods, facilities and controls used to manufacture the device, and the proposed labeling. Payment of a user fee is required for FDA to initiate review of a PMA application.

During the PMA application review period, the FDA may request additional information or clarification of information provided in the application. In addition, the FDA will conduct a pre-approval inspection of the manufacturing facility or facilities to ensure compliance with the QSR, which requires manufacturers to follow design, testing, control, documentation and other quality assurance procedures.

Although FDA review of an initial PMA application is required by statute to take between six to ten months, these reviews typically take longer (e.g., up to 2 years) due to stoppage of the FDA review clock to address requests for additional information. The FDA can delay, limit or deny approval of a PMA application for many reasons, including:

If the FDA evaluations of both the PMA application and the manufacturing facilities are favorable, the FDA will either issue an approval letter or an approvable letter, which may contain conditions that must be met in order to secure final approval of the PMA application. If the FDA’s evaluation of the PMA application or manufacturing facilities is not favorable, the FDA will deny approval of the application or issue a “not approvable” letter. A “not approvable” letter will outline the deficiencies in the application and, where practical, will identify what is necessary to make the application approvable. The FDA may also determine that additional studies (pre-clinical and/or clinical studies) are necessary, in which case the PMA may be delayed for several months or years while these studies are conducted and the subsequent amendment to the PMA application is submitted. Once granted, approval of the PMA application may be withdrawn by the FDA if compliance with post-approval requirements, conditions of approval or other regulatory standards are not maintained or problems are identified following initial marketing.

Post-approval modifications to the manufacturing process, labeling, device specifications, materials or design of a Class III device may require approval of a PMA supplement. PMA supplements require submission of technical data to support implementation of the proposed change to the Class III device. Payment of a user fee is required for FDA to initiate review of a PMA supplement.

Regulation after FDA Clearance or Approval

Any devices we manufacture or distribute pursuant to clearance or approval by the FDA are subject to comprehensive and continuing regulation by the FDA and certain state agencies. We are required to adhere to applicable regulations setting forth detailed GMP requirements, as set forth in the QSR, which includes testing, control and documentation requirements. Non-compliance with these standards can result in fines, injunctions, civil penalties, recalls or seizures of products, total or partial suspension of production, refusal of the government to grant 510(k) clearance or PMA of devices, withdrawal of marketing approvals and criminal prosecutions. We have designed and implemented quality platform processes within our manufacturing facilities in order to comply with FDA’s GMP requirements.

Because we are a medical device manufacturer, we must also comply with the FDA’s medical device reporting requirements whenever there is evidence that reasonably suggests that one of our products may have caused or contributed to a death or serious injury. We must also report any incident in which our product has malfunctioned if that malfunction would likely cause or contribute to a death or serious injury if it were to recur.

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Labeling, advertising, and promotional activities are subject to scrutiny by the FDA and, in certain circumstances, by the Federal Trade Commission. Medical devices approved or cleared by the FDA may not be promoted for unapproved or uncleared uses, otherwise known as “off-label” promotion. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability, including substantial monetary penalties and criminal prosecution. We have implemented quality platform processes and advertising/promotional policies designed to comply with these requirements.

Our facilities are also subject to periodic inspection by the FDA and foreign regulatory agencies for, among other things, conformance to the FDA’s QSR and current Good Manufacturing Practice requirements, as well as applicable foreign or international standards. The results of these inspections can include inspectional observations, which are recorded on FDA Form 483, regarding potential violations of the FDCA and related laws, warning letters, or other forms of enforcement. On February 27, 2013, the FDA issued a Form 483 after inspecting our manufacturing facility in Salt Lake City, Utah. The Form 483 included 17 observations of non-compliance with FDA’s requirements. These observations included the material finding of the FDA’s inspection which were noted in the Form 483 were that we did not have appropriate environmental testing to ensure that our contamination controls were adequate and our design history file was not complete. The FDA’s observations listed on a Form 483 do not constitute a final determination that we were in violation of any law or regulation and in response to the Form 483 we took corrective actions to address all 17 observations, including revising manufacturing and quality procedures, training personnel, and reconfiguring our existing manufacturing facilities, and informed the FDA that all observations had been resolved in a final update letter on February 7, 2014. We received a letter from the FDA, dated July 22, 2014, informing us that the inspection is closed. We do not anticipate the FDA to take further action or provide further notice with regard to this matter.

International Regulations

International sales of medical devices are subject to foreign governmental regulations, which vary substantially from country to country. The time required to obtain certification or approval by a foreign country may be longer or shorter than that required for FDA approval, and the requirements may differ.

The European Union, or EU, which consists of 25 member countries, has adopted numerous directives and has promulgated voluntary standards regulating the design, manufacture, labeling, clinical trials and adverse event reporting for medical devices. Devices that comply with the requirements of relevant directives will be entitled to bear CE conformity marking, and, accordingly, can be commercially distributed throughout the member states of the European Union and other countries that comply with or mirror these directives. The method for assessing conformity varies depending upon the type and class of the product, but normally involves a combination of self-assessment by the manufacturer and a third-party assessment by a notified body, which is an independent and neutral institution appointed by a country to conduct the conformity assessment. This third-party assessment may consist of an audit of the manufacturer’s quality system and specific testing of the manufacturer’s device. Such an assessment in one country within the EU is required for a manufacturer to commercially distribute the product throughout the EU. In addition, compliance with voluntary harmonizing standards ISO 9001 and ISO 13845 issued by the International Organization for Standards establishes the presumption of conformity with the essential requirements for a CE marking. In order to maintain CE Mark certification, we are subject to both announced and unannounced inspections by the notified body. Significant changes to the device or manufacturer’s quality system are also subject to approval by the notified body. Reporting of certain adverse events and product recalls to the national health authorities is required for compliance with the directive. Member states may also require registration of devices and translation of labeling into national languages.

Environmental Regulations

We are also subject to numerous federal, state and local laws relating to such matters as safe working conditions, manufacturing practices, environmental protection, fire hazard control and disposal of hazardous or potentially hazardous substances. Some of these laws require us to obtain licenses or permits to conduct our operations. We have numerous policies and quality platform procedures in place to ensure compliance with these laws and to minimize the risk of occupational exposure to hazardous materials. We do not expect the operations of our products to produce significant quantities of hazardous or toxic waste or radiation that would

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require the use of extraordinary disposal practices. Although the costs to comply with these applicable laws and regulations have not been material, we cannot predict the impact on our business of new or amended laws or regulations or any changes in the way existing and future laws and regulations are interpreted or enforced, nor can we ensure we will be able to obtain or maintain any required licenses or permits.

Export Regulations

Medical devices that are legally marketed in the United States may be exported anywhere in the world without prior FDA notification or approval. Devices that have not been approved or cleared in the United States must follow the export provisions of the FDCA. Depending on which section of the FDCA we may export under, we may need to request an export permit letter or export certificate, or we may need to submit a simple notification. Export certificates may be requested by foreign customers or foreign governments to provide proof of the products’ status as regulated by the FDA. The export certificate is prepared by FDA and contains information about a product’s regulatory or marketing status in the United States.

Clinical Laboratory Improvement Amendments of 1988 (“CLIA”)

The use of our assays is also affected by CLIA, and related federal and state regulations, which provide for regulation of laboratory testing. Any customers using our assays for clinical use in the United States will be regulated under CLIA, which establishes quality standards for all laboratory testing to ensure the accuracy, reliability and timeliness of patient test results regardless of where the test was performed. In particular, these regulations mandate that clinical laboratories must be certified by the federal government or a federally approved accreditation agency, or must be located in a state that has been deemed exempt from CLIA requirements because the state has in effect laws that provide for requirements equal to or more stringent than CLIA requirements. Moreover, these laboratories must meet quality assurance, quality control and personnel standards, and they must undergo proficiency testing and inspections. The CLIA standards applicable to clinical laboratories are based on the complexity of the method of testing performed by the laboratory, which range from “waived” to “moderate complexity” to “high complexity.” We expect our future assays to all be rated moderately complex or meet the CLIA waiver criteria for tests that are simple and are judged by the FDA to process a low risk for erroneous results.

Foreign Government Regulation

Although it is not a current focus we intend to market our products in European and other select international markets in the future. The regulatory pre-market requirements for molecular devices vary from country to country. Some countries impose product standards, packaging requirements, labeling requirements and import restrictions on devices. Each country has its own tariff regulations, duties and tax requirements. Failure to comply with applicable foreign regulatory requirements may subject us to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution. For products sold in the European Economic Area, we have self-declared a Declaration of Conformity under the relevant sections of the applicable European Community standards and other normative documents.

Fraud and Abuse Regulations

We are subject to numerous federal and state healthcare anti-fraud laws, including the federal anti-kickback statute and False Claims Act that are intended to reduce waste, fraud and abuse in the healthcare industry. These laws are broad and subject to evolving interpretations. They prohibit many arrangements and practices that are lawful in industries other than healthcare, including certain payments for consulting and other personal services, some discounting arrangements, the provision of gifts and business courtesies, the furnishing of free supplies and services, and waivers of payments. In addition, many states have enacted or are considering laws that limit arrangements between medical device manufacturers and physicians and other healthcare providers and require significant public disclosure concerning permitted arrangements. These laws are vigorously enforced against medical device manufacturers and have resulted in manufacturers paying significant fines and penalties and being subject to stringent corrective action plans and reporting obligations. We must — and do — operate our business within the requirements of these laws and, if we are ever accused of violating them, we could be forced to expend significant resources on investigation, remediation and monetary penalties.

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Employees

As of September 30, 2016, we had 182 full-time employees located in Salt Lake City, Utah and other locations throughout the United States. We also contract for hire with approximately three outside consultants and contractors.

Legal Proceedings

On April 5, 2016 and May 31, 2016, Great Basin Scientific, Inc., received notices from the Utah Labor Commission, Occupational Safety and Health Division (ULC) and/or the Occupational Safety and Health Administration (OSHA) that former employee Christina Steele filed a claim alleging retaliation in violation of the Utah Occupational Safety and Health Act as well as the Corporate and Criminal Fraud Accountability Act of 2002, the Sarbanes-Oxley Act and the Occupational Safety and Health Act, among other claims relating to her employment. Ms. Steele alleges that Great Basin retaliated against her by terminating her employment after she allegedly acted as a whistleblower by allegedly raising concerns with management. Ms. Steele seeks lost wages, future wages, consequential losses, emotional distress damages, interest, fees and costs. The OSHA charge remains under investigation.

On June 15, 2016, Ms. Steele also filed a complaint against Great Basin Scientific, Inc. in the United States District Court for the District of Utah alleging retaliation in violation of the False Claims Act based on similar alleged facts. Ms. Steele seeks back pay, special damages, consequential damages, compensatory damages, interest, fees and costs. On August 15, 2016, Great Basin Scientific, Inc. filed a motion to dismiss Ms. Steele’s claims. On November 21, 2016, the United States District Court for the District of Utah granted the Company's motion to dismiss and dismissed Ms. Steele's claims with prejudice. Judgement was entered in favor of Great Basin Scientific, Inc. on November 28, 2016. It is unknown whether Ms. Steele will appeal the court's dismissal but she remains within time to do so.

The Company asserts that the claims are without merit and that the employee resigned and was not terminated.

We are not currently a party to any other material pending legal proceeding or regulatory or government investigations. We may become involved in litigation from time to time relating to claims arising in the ordinary course of our business. We do not believe that the ultimate resolution of the investigation by the ULC or OSHA, the claim filed in the United States District Court or other claims in the ordinary course of business would have a material effect on our business, results of operations, financial condition or cash flows. However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a material effect on our business, results of operations, financial condition and cash flows.

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MANAGEMENT

Executive Officers and Directors

Set forth below is a list of the names, ages as of November 30, 2016 and positions, and a brief account of the business experience of the individuals who serve as our executive officers and directors as of the date of this prospectus.

Name		Age		Position
Ryan Ashton		56		President, Chief Executive Officer and Director
Robert Jenison		50		Chief Technology Officer and Senior Vice President of Research
Jeffrey Rona		48		Chief Financial Officer
David Spafford		56		Director and Executive Chairman
Kirk Calhoun		72		Director
Ronald Labrum		60		Director
Sam Chawla		41		Director

Ryan Ashton — President, Chief Executive Officer and Director.  Mr. Ashton joined us in January 2005 and has served as our President, Chief Executive Officer and a Director since then. Prior to joining us, from 2001 to 2005 he served as the CEO of Printelligent Corporation. From 1999 to 2001 he served as the Vice President of Sales and Marketing at Inari Inc., a venture-funded technology start-up. Prior to that, Mr. Ashton was hired, in 1989, as a marketing manager of Megahertz Corporation, a manufacturer of communications products for mobile computing, by 1991 he was responsible for all sales and marketing for Megahertz Corporation. By the time his tenure with Megahertz Corporation ended when it was sold to U.S. Robotics in 1995, he was serving as Senior Vice President, Sales and Marketing.

We believe that Mr. Ashton possesses attributes that qualify him to serve as a member of our board of directors, including his depth of operating, strategic, transactional and senior management experience, in addition to his intimate knowledge of our Company, as he has been the CEO since 2005, overseeing the development of the technology and the commercialization of our first product.

Robert Jenison — Chief Technology Officer and Senior Vice President of Research.  Mr. Jenison has served as Chief Technology Officer since 2006. From 1999 – 2006, Mr. Jenison was Associate Director, R&D of Thermo BioStar where he was responsible for establishing a molecular diagnostic testing business. From 1992 – 1999, Mr. Jenison was a Senior Research Associate at Nexstar Pharmaceuticals responsible for aptamer development. From 1990 – 1992, Mr. Jenison was a Scientist at ISIS Pharmaceuticals. From 1989 – 1990, Mr. Jenison was a Research Associate at Research Institute, Scripps Clinic. Mr. Jenison received a B.A.Sc. in Chemistry and Biochemistry from the University of California, San Diego.

Jeffrey A. Rona — Chief Financial Officer.  Mr. Rona has served as the Chief Financial Officer since our IPO in 2014. Prior to that he was a financial consultant to Great Basin since 2013 and has served as the Managing Director of Rona Capital, LLC, a life sciences-focused transactional advisory consultancy, since 2011. From 2006 to 2011, Mr. Rona was the Chief Business Officer of GlobeImmune a private life sciences company. Prior to that, from 2003 to 2006, Mr. Rona was the Chief Financial Officer for AlgoRx Pharmaceuticals, a private life sciences company that was merged into a public traded company, Corgentech Inc. Mr. Rona was in the Investment Banking Department at UBS Warburg, a global securities and investment banking firm, from 2000 to 2002. From 1998 to 2000, Mr. Rona served as the Director of Finance and Corporate Development at Antigenics Inc., a life sciences company that went public in 2000, and Mr. Rona was responsible for running the IPO process. In 1998, Mr. Rona was employed by Carr & Company, a private equity firm. From 1990 – 1997, Mr. Rona was with Coopers and Lybrand and its wholly owned subsidiary Coopers & Lybrand Securities, serving in a variety of capacities. Mr. Rona received a B.S. in Accounting from Case Western Reserve University in 1990. Mr. Rona is a trustee of the PKD Foundation (Polysystic Kidney Disease), a not-for-profit foundation.

David Spafford — Director and Executive Chairman.  Mr. Spafford is a founding investor of Great Basin and has served as Chairman of our board of directors since its inception. Mr. Spafford was a co-founder, director and senior executive officer of Megahertz Corporation. Megahertz Corporation completed an initial

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public offering in 1993 and was acquired by U.S. Robotics in 1995 in a transaction valued at approximately $450 million. Since 1994 Mr. Spafford has focused on angel investing and philanthropic work.

We believe Mr. Spafford possesses specific attributes that qualify him to serve as a member of our board of directors and as our Executive Chairman, including the depth of his sales and marketing and operating experience and his intimate knowledge of our business as a founder, investor and member of the board of directors since our inception.

Kirk Calhoun — Director.  Mr. Calhoun became a director at our last annual meeting of stockholders on May 27, 2015. Mr. Calhoun is a Certified Public Accountant (non-practicing) with a background in auditing and accounting. Mr. Calhoun joined Ernst & Young LLP, a public accounting firm, in 1965 and served as a partner of the firm from 1975 until his retirement in 2002. Mr. Calhoun currently serves on the board and audit committee of Ryerson Holding Corporation (NYSE: RYI). Mr. Calhoun has served previously on the boards and audit committees of five public companies in the pharmaceutical industry up until the dates of their respective sales, including Abraxis Bioscience, Inc., Myogen, Inc., Aspreva Pharmaceuticals Company, Replidyne, Inc. and Adams Respiratory Therapeutics, Inc. Mr. Calhoun also currently serves on the boards of three private companies, including NeuroSigma, Inc., a developer of products that treat major neurological and neuropsychiatric disorders such as epilepsy and depression. Mr. Calhoun received a B.S. in Accounting from the University of Southern California.

We believe that Mr. Calhoun brings to the board of directors experience and skills in finance, management and corporate governance, developed over his career in public accounting and through his service as an audit committee financial expert on various public company boards and his service as a director of other life sciences companies. Mr. Calhoun was recommended for the board of directors by members of the board of directors based on these qualifications.

Sam Chawla — Director.  Mr. Chawla became a director upon the completion of our initial public offering in 2014. Mr. Chawla is a Portfolio Manager of Perceptive Advisors LLC, an investment fund focused on the healthcare sector. Mr. Chawla leads Perceptive’s Credit Opportunities Fund. Prior to joining Perceptive Advisors in 2013, Mr. Chawla was a Managing Director at UBS Securities LLC in the Global Healthcare Group, where he led origination and execution of financing and advisory assignments for healthcare companies, with a focus on the diagnostics sector. Mr. Chawla’s investment banking experience centered on strategic advisory, including M&A buy-side and sell-side assignments, and financial advisory, including equity and debt capital raises, for both public and private healthcare companies. Prior to joining UBS in September 2010, Mr. Chawla was a Director (from January 2009 to September 2010) and a Vice President (from July 2007 to January 2009) in the Healthcare Investment Banking Group of Credit Suisse LLC, which he originally joined as an investment banker in 2002. Mr. Chawla also worked at Bloomberg L.P. and Pelican Life Sciences. Mr. Chawla received an M.B.A. from Georgetown University and a B.A. in Economics from Johns Hopkins University. Mr. Chawla is also a director of VBI Vaccines, Inc. (NASDAQ:VBVI).

Mr. Chawla brings to the board of directors significant investment banking, mergers and acquisitions, financing and advisory expertise focusing on the healthcare sector, particularly in the diagnostic laboratory industry. Mr. Chawla’s experience and knowledge in these areas are important to the board of directors’ ability to help guide us in evaluating optimal short and long term strategic plans as well as providing insight and guidance in pursing growth through strategic opportunities.

Ronald Labrum — Director.  Mr. Labrum became a Director of the board of directors upon the completion of our initial public offering in 2014. From 2007 until 2012, Mr. Labrum served as the Chief Executive Officer of Fenwal, Inc., a provider of products and technologies that support and improve blood collection, processing and transfusion medicine. From 2004 to 2006, Mr. Labrum served as the Chief Executive Officer of Cardinal Health, Inc.’s Healthcare Supply Chain Services, which includes medical products distribution, pharmaceutical distribution, nuclear pharmacy services and the specialty distribution businesses of Cardinal Health, Inc. During 2004, Mr. Labrum served as Chairman and Chief Executive Officer of Integrated Provider Solutions and Cardinal Health — International, both divisions of Cardinal Health, Inc. Prior to 2004, Mr. Labrum served as executive vice president of Cardinal Health, Inc. and Group President of the Medical Products and Services segment. Mr. Labrum joined Cardinal Health in 1999 with the acquisition of Allegiance Healthcare Corporation, originally American Hospital Supply Corp., where he was president of Allegiance

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Manufacturing and Distribution. Mr. Labrum is also a director of Aptalis Pharma Inc. and Procure Treatment Centers, Inc., which are both privately held companies, and Wright Medical Group, Inc. (NASDAQ:WMGI).

Mr. Labrum possesses attributes that qualify him to serve as a member of our board of directors including his significant management and operating experience within the healthcare sector and specifically within the diagnostic sector.

Other Key Personnel

Set forth below is a brief account of the business experience of certain other of our key personnel as of the date of this prospectus.

Wesley C. Lindsey — Vice President of Product Development.  Mr. Lindsey has been Vice President of Product Development since 2013, prior to that he was our Director of Product Development from 2010 to 2013. From 2008 to 2010, he was an Associate Director, Assay Development, Infectious Disease for Nanosphere, Inc. Prior to entering this role, Mr. Lindsey was a scientist at Somalogic, Inc. He has also held positions at BioStar, Visible Genetics and R.C.McEntire & Co. He holds a Ph.D. in Genetics and Molecular Biology from Emory University, an M.B.A. from Georgia State University and a B.S. in Biology from Furman University.

Sandra Nielsen — Vice President of Marketing and Customer Support.  Ms. Nielsen has served as the Vice President of Marketing and Customer Support since 2010. Ms. Nielsen served as the Vice President of Marketing since she joined us in 2010. From 2005 to 2010, Ms. Nielsen served as senior director of marketing for the Data Solutions business unit (formerly Edustructures) of Pearson PLC. From 2004 to 2005, Ms. Nielsen served as the senior director of marketing for Omniture. Previously, she held director-level marketing positions at iBahn (an Internet Service provider serving the Hospitality industry) and Viewpoint Digital (a digital content creation company).

Laurence Rea — Vice President, Engineering.  Mr. Rea has served in multiple operating and engineering roles since he joined us in 2008. From 2007 through 2008 Mr. Rea was site manager for Inverness/BioStar where he was responsible for the management of the business unit. From 2006 to 2007 Mr. Rea was VP of Operations for Thermo BioStar and managed the engineering, manufacturing and supply chain for the IVD business unit. From 2000 – 2006, Mr. Rea was Director of Engineering and Thin Film Deposition at Thermo BioStar where he was responsible for creation of thin film deposition surface coatings and manufacturing process for BioStar core products and new molecular diagnostics development. Prior to joining Thermo BioStar, Mr. Rea was a senior engineer with Quantum Corp. responsible for development and commercialization of advanced thin film technologies for hard disk products. Mr. Rea received a B.S. in Physics from the University of Colorado, Boulder.

Other Involvement in Certain Legal Proceedings

None of our directors or executive officers has been involved in any bankruptcy or criminal proceedings, nor have there been any judgments or injunctions brought against any of our directors or executive officers during the last ten years that we consider material to the evaluation of the ability and integrity of any director or executive officer.

Board Composition and Election of Directors

Our board of directors currently consists of five directors. Certain members of our board of directors were elected pursuant to the provisions of a voting agreement with certain holders of our preferred stock. The voting agreement terminated upon the closing of our IPO. Pursuant to our Certificate, as long as Hitachi Chemical Co., Ltd., or Hitachi owns at least 5% of the issued and outstanding shares of our capital stock, Hitachi is entitled to elect one Class III director. Except for the rights of Hitachi and the rights of holders of preferred stock, if any, none of our stockholders will have any special rights regarding the election or designation of members of our board of directors.

Our board of directors consists of five members. In accordance with our Certificate our board of directors is divided into three classes.

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Class I consists of Mr. Spafford and Mr. Calhoun, Class II consists of Mr. Labrum and Mr. Chawla, and Class III consists of Mr. Ashton. In the event Hitachi elects a director, such director shall be a Class III director. All directors hold office until their successors have been elected and qualified or until their earlier death, resignation or removal. At each annual meeting of stockholders after the initial classification, the successors to directors whose terms will then expire will serve from the time of election and qualification until the third annual meeting following election and until their successors are duly elected and qualified. The number of directors to constitute the whole board of directors shall consist of not fewer than three and not more than twelve directors, as fixed from time to time by resolution adopted by a majority of the entire board of directors. The section of our Bylaws relating to the size of our board of directors may not be altered, amended or repealed except by the board of directors or by the affirmative vote of holders of at least two-thirds of our outstanding voting stock. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one third of the directors. This classification of the board of directors may have the effect of delaying or preventing changes in control or management.

Director Independence

Under the listing requirements and rules of The NASDAQ Capital Market, independent directors must comprise a majority of our board of directors as a listed company within one year of the closing of our IPO. The board of directors has determined that Mr. Calhoun, Mr. Labrum and Mr. Chawla are independent directors as defined under Section 5605(a)(2) of The NASDAQ Stock Market Rules.

Board Committees

Our board of directors has established an audit committee, a compensation committee, and a nominating and corporate governance committee, each of which operates under a written charter that has been approved by our board of directors.

Our board of directors has determined that the members of the audit committee, the compensation committee and the nominating and corporate governance committee are independent directors under The NASDAQ Marketplace Rules, including, in the case of all of the members of our audit committee, the independence requirements contemplated by Rule 10A-3 under the Exchange Act. In making such determination, the board of directors considered the relationships that each director has with our Company and all other facts and circumstances that the board of directors deemed relevant in determining director independence, including the beneficial ownership of our capital stock by each director.

Audit Committee.  Our audit committee is comprised of Mr. Calhoun (Chair), Mr. Chawla and Mr. Labrum. Our board of directors has determined that Mr. Calhoun and Mr. Labrum are audit committee financial experts, as defined by the rules of the Securities and Exchange Commission, and both satisfy the financial sophistication requirements of applicable NASDAQ rules.

Our audit committee is authorized to:

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Compensation Committee.  Our compensation committee is comprised of Mr. Chawla (chair), Mr. Labrum, and Mr. Calhoun. None of the members of our compensation committee at any time has been one of our officers or employees.

Our compensation committee is authorized to:

Nominating and Governance Committee.  Our Nominating and Governance Committee is comprised of Mr. Labrum (Chair), Mr. Calhoun, and Mr. Chawla.

Our nominating and governance committee is authorized to:

Insider Participation and Other Relationships

Ryan Ashton, our Chief Executive Officer, is also a member of our board of directors. David Spafford and Ryan Ashton, two of our directors, are also significant stockholders, each having a beneficial ownership of 1.7% and less than 1.00%, respectively, of our outstanding common stock equivalents immediately before this offering.

Since January 1, 2013, we had certain debt obligations to Mr. Ashton and Mr. Spafford and issued Mr. Ashton and Mr. Spafford certain warrants to purchase shares of common stock in connection with their personal guarantees of our obligations, each as more fully described under “Certain Relationships and Related Person Transactions.”

There are no family relationships among any of our directors or executive officers.

Code of Business Conduct and Ethics

Our board of directors has adopted a written Code of Business Conduct and Ethics applicable to our employees, officers and directors, including those officers responsible for financial reporting. The Code of Business Conduct and Ethics is available on our website at www.gbscience.com. We expect that any amendments to the code, or any waivers of its requirements, will be disclosed on our website.

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EXECUTIVE AND DIRECTOR COMPENSATION

Summary Compensation Table

The following table sets forth the compensation paid or accrued during the fiscal years ended December 31, 2014 and December 31, 2015 to our chief executive officer and our other executive officers. We collectively refer to these officers as our “named executive officers”.

Name and Principal Position		Year				Salary ($)				Bonus ($)				Option Awards(10) ($)				All Other Compensation ($)				Total ($)
Ryan Ashton President, Chief Executive Officer and Director			2015				425,000	(1)			255,000				—				14,654	(4)			694,654
			2014				330,792				—				105,720				17,545	(5)			454,057
Robert Jenison Chief Technology Officer			2015				250,000	(2)			75,000				—				21,072	(6)			346,072
			2014				230,000				—				60,789				18,411	(7)			309,200
Jeffrey Rona Chief Financial Officer			2015				325,000	(3)			97,500				—				21,072	(8)			443,572
			2014				67,997				—				152,352				400,585	(9)			620,934

Narrative to Summary Compensation Table

Our board of directors periodically reviews and, when appropriate, adjusts the compensation of management. Our management is eligible to participate in any other compensation or benefit plans, as approved by the board of directors, made available to our other employees, including without limitation, stock option plans, health insurance plans, and 401(k) plans.

During the fiscal years ended December 31, 2014 and December 31, 2015, equity awards of 425,784 options exercisable for 9 shares of common stock at exercise prices ranging from $336,000 to $1,176,000 per share were issued to directors and officers in connection with their compensation. These options have vesting periods ranging from three to four years and all expire 10 years after the date of grant. Additional information about certain warrants issued as consideration for guaranties of our obligations can be found under the section of Item 13 of this Amendment.

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Mr. Rona’s additional compensation in 2014 was given in exchange for financial consulting services provided to us as an affiliate of Liberty Tree Advisors, LLC, or Liberty Tree, and as a member of Rona Capital, LLC, or Rona Capital, for which Mr. Rona served as Managing Director. These payments include an aggregate of $54,000 paid for consulting services from January 2014 to April 2014, including $22,000 that was paid to Liberty Tree and $32,000 that was paid to Rona Capital. The services provided by Mr. Rona after these initial payments were performed pursuant to two financial advisory agreements dated April 15, 2014, which we refer to herein as the Rona Agreements. We entered into an initial Financial Advisory Agency Agreement, the First Rona Agreement with Rona Capital wherein Rona Capital provided us with financial advisory services related to our previous financing activities prior to the Offering. Under the First Rona Agreement, we paid Rona Capital a total of $100,000 in fees and bonuses, and issued Rona Capital warrants to purchase 36,000 Series D Units (which are separable into 1 share of our common stock, 36,000 Class A warrants exercisable for 1 share of common stock and 36,000 Class B warrants exercisable for 1 share of common stock). In addition, we reimbursed Rona Capital for reasonable out-of-pocket expenses incurred in connection with our activities under the First Rona Agreement totaling $17,030. We agreed to indemnify Rona Capital for claims arising from the First Rona Agreement, subject to certain exceptions.

We also entered into a second Financial Advisory Agency Agreement, the Second Rona Agreement, with Rona Capital, wherein Rona Capital provided us with financial advisory services related to our previous financing activities. We paid Rona Capital $15,000 per every 30-day period ending September 30, 2014 and additional cash amounts on the achievement of specified milestones, including $50,000 upon the filing of our S-1 with the SEC and $100,000 upon the closing of the IPO. We also issued to Mr. Rona options to purchase shares of our common stock such that together, Rona Capital and Mr. Rona own 1% of our outstanding equity that vest upon continued service to us as an employee. On October 8, 2014, we issued 50,784 options exercisable for 1 share of common stock to Mr. Rona to satisfy this obligation. In addition, we reimbursed Rona Capital for reasonable out-of-pocket expenses incurred in connection with our activities under the Second Rona Agreement. We have paid Rona Capital $15,000 per month and $200,000 in bonuses under the Second Rona Agreement for a total of $245,000. We also agreed to indemnify Rona Capital for claims arising from the Second Rona Agreement, subject to certain exceptions.

Employment, Change in Control and Severance Disclosure

We have entered into employment agreements with Ryan Ashton, Jeffrey Rona and Robert Jenison. These employment agreements provide for at-will employment and set forth each officer’s initial base salary, initial equity grant amount and eligibility for employee benefits. In addition, each of our named executive officers has executed a form of our standard confidential information and invention assignment agreement. The key terms of these employment agreements are described below. Other than the employment agreements described below, we have not entered into any arrangements providing for payments or benefits in connection with the resignation, severance, retirement or other termination of any of our named executive officers, changes in their compensation or a change in control.

Ryan Ashton

We have entered into an employment agreement with Mr. Ashton to be our Chief Executive Officer and a member of our board of directors. The employment agreement provides for “at-will” employment and sets forth his initial annual base salary of $425,000 and his eligibility to participate in our employee benefit plans and programs, as in effect from time to time. Mr. Ashton would also be entitled to severance in the event of a termination without cause or a constructive termination within one year of a change of control in an amount equal to two times Mr. Ashton’s annual base salary at the time of such termination, which amount would be paid in a lump sum within 60 days of such termination. In addition, upon such termination we would also pay to Mr. Ashton an amount equal to 100% of his target employee bonus in equal monthly installments over the six-month period following such termination.

Jeffrey Rona

We have entered into an employment agreement with Mr. Rona to be our Chief Financial Officer. The employment agreement provides for “at-will” employment and sets forth his initial annual base salary of $325,000 and his eligibility to participate in our employee benefit plans and programs, as in effect from time to time. Mr. Rona would also be entitled to severance in the event of a termination without cause or a

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constructive termination within one year of a change of control in an amount equal to one half of Mr. Rona’s annual base salary at the time of such termination if Mr. Rona were terminated prior to completing six months of service to us or a full year’s base salary if Mr. Rona were terminated after providing at least six months of service to us, which amount would be paid in a lump sum within 60 days of such termination. In addition, upon such termination we would also pay to Mr. Rona an amount equal to 50% of his target employee bonus in equal monthly installments over the six-month period following such termination.

Robert Jenison

We have entered into an employment agreement Mr. Jenison to be our Chief Technology Officer and Senior Vice President of Research. The employment agreement provides for “at-will” employment and sets forth his initial annual base salary of $250,000 and his eligibility to participate in our employee benefit plans and programs, as in effect from time to time. Mr. Jenison would also be entitled to severance in the event of a termination without cause or a constructive termination within one year of a change of control in an amount equal to Mr. Jenison’s annual base salary at the time of such termination, which amount would be paid in a lump sum within 60 days of such termination. In addition, upon such termination we would also pay to Mr. Jenison an amount equal to 50% of his target employee bonus in equal monthly installments over the six-month period following such termination.

Outstanding Equity Awards as of December 31, 2015

The following sets forth information concerning the number and value of common stock of unexercised options held by each Named Executive Officer as of December 31, 2015.

		OPTION AWARDS
Name		Number of Securities Underlying Unexercised Options Exercisable (#)				Number of Securities Underlying Unexercised Options Unexercisable (#)				Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)				Option Exercise Price ($)(1)				Option Expiration Date
Ryan Ashton			1				—				—			$	588,000				2/14/2020	(2)
			1				1				—			$	336,000				4/11/2024	(3)
Jeffrey Rona			1				1				—			$	1,176,000				10/5/2014	(4)
Robert Jenison			1				—				—			$	588,000				7/22/2017	(5)
			1				—				—			$	588,000				11/7/2017	(6)
			1				—				—			$	588,000				2/14/2020	(7)
			1				—				—			$	588,000				7/26/2016	(8)
			1				1				—			$	336,000				4/11/2014	(9)

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Employee Benefit Plans

The Great Basin Scientific, Inc. 2014 Omnibus Incentive Plan

In connection with our IPO, we adopted our Omnibus Plan, which was approved by our board of directors and stockholders. Our stockholders also approved an amendment to our Omnibus Plan on June 2, 2015. The compensation committee of our board of directors (also referred to herein as the “committee”) has the authority to administer the Omnibus Plan and has full power and authority to determine when and to whom awards will be granted, and the type, amount, form of payment and other terms and conditions of each award, consistent with the provisions of the Omnibus Plan. Subject to the provisions of the Omnibus Plan, the committee may amend or waive the terms and conditions, or accelerate the exercisability, of an outstanding award. The committee has authority to interpret the Omnibus Plan and establish rules and regulations for the administration of the Omnibus Plan. In addition, the Omnibus Plan provides that our board of directors may generally exercise the powers of the committee at any time. Any employee, officer, non-employee directors, consultant, independent contractor or advisor providing services to us or any of our affiliate or any such person to whom an offer of employment or engagement with us or any of our affiliates is extended, who is selected by the committee, is eligible to receive awards under the Omnibus Plan.

The aggregate number of shares of common stock that may be issued under all stock-based awards made under the Omnibus Plan is 178 shares, which adjusts automatically on the first day of each fiscal quarter to an amount equal to the greater of (i) fifteen percent (15%) of the number of shares of common stock outstanding on the last day of the immediately preceding fiscal quarter or (ii) 178 shares, provided that this amount cannot exceed 500,000 shares. Any shares of our common stock subject to any award that is terminated or forfeited without delivery of any shares will be available for future awards under the Omnibus Plan. The shares of common stock issuable under the Omnibus Plan may be drawn from shares of authorized but unissued common stock or from shares of common stock that we acquire. No eligible person may be granted any stock options, stock appreciation rights or performance awards denominated in shares of our common stock, for more than 120 shares of our common stock in the aggregate in any calendar year.

If the committee or our board of directors determines that any dividend or other distribution (whether in the form of cash, shares of our common stock, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares of our common stock or other securities, issuance of warrants or other rights to purchase shares of our common stock or other securities or other event identified by the committee as affecting shares of our common stock such that an adjustment is necessary or appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Omnibus Plan, then the committee or the board of directors shall, in such manner as it may deem equitable, adjust any or all of (i) the number and type of shares of common stock (or other securities or other property) that thereafter may be made the subject of awards, (ii) the number and type of shares of common stock (or other securities or other property) subject to outstanding awards, (iii) the purchase price or exercise price with respect to any award and (iv) the share limitations contained in the Omnibus Plan.

Under the Omnibus Plan, the committee is permitted and authorized to make the following grants to all eligible persons:

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The term of awards will not be longer than ten years, or in the case of incentive stock options, longer than five years with respect to holders of more than 10% of our common stock. The committee may permit accelerated vesting of an award upon the occurrence of certain events, including a change in control, regardless of whether the award is assumed, substituted or otherwise continued in effect by the successor corporation. The acceleration of vesting in the event of a change in the ownership or control may be seen as an anti-takeover provision and may have the effect of discouraging a merger proposal, a takeover attempt or other efforts to gain control of us.

Awards under the Omnibus Plan may be subject to performance goals, including revenue, cash flow, gross profit, earnings before interest and taxes, earnings before interest, taxes, depreciation and amortization, net earnings, earnings per share, margins (including one or more of gross, operating and net income margins), returns (including one or more of return on assets, equity, investment, capital, revenue and total stockholder return), stock price, economic value added, working capital, market share, cost reductions, workforce satisfaction and diversity goals, employee retention, customer satisfaction, completion of key projects and

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strategic plan development and implementation. The goals may reflect absolute entity or business unit performance or a relative comparison to the performance of a peer group of entities or other external measure of the selected performance criteria.

Unless earlier discontinued or terminated by the board of directors, the Omnibus Plan will expire on the tenth anniversary of the Omnibus Plan’s effective date. No awards may be made after that date. However, unless otherwise expressly provided in the Omnibus Plan or an applicable award agreement, any award granted under the Omnibus Plan prior to expiration may extend beyond the end of such period through the award’s normal expiration date. Our board of directors may amend, suspend or terminate the Omnibus Plan at any time, provided that our board of directors will get stockholder approval when necessary to not violate the rules of The NASDAQ Capital Market, to increase the number of shares of common stock authorized under the Omnibus Plan, to reprice options or SARs, to permit the grant of options or SARs with an exercise price less than the fair market value of the common stock, to prevent the grant of options or SARs that would qualify under Section 162(m) of the Code or increase the maximum term permitted for options and SARs as specified in the Omnibus Plan. The committee may not amend an outstanding award in a manner that adversely affects the holder of the award without the holder’s consent.

The Great Basin Scientific, Inc. 2014 Stock Option Plan

The Great Basin Scientific, Inc. 2014 Stock Option Plan, which we refer to as the 2014 Stock Option Plan, was adopted by our board of directors on April 18, 2014 and approved by our stockholders on April 21, 2014 and became effective on April 18, 2014. The compensation committee of our board of directors has authority to administer the 2014 Stock Option Plan and will have full power and authority to determine when and to whom awards will be granted, and the type, amount, form of payment and other terms and conditions of each award, consistent with the provisions of the 2014 Stock Option Plan. Subject to the provisions of the 2014 Stock Option Plan, the compensation committee may amend or waive the terms and conditions, or accelerate the exercisability, of an outstanding award. The compensation committee has authority to interpret the 2014 Stock Option Plan and establish rules and regulations for the administration of the 2014 Stock Option Plan. In addition, our board of directors may generally exercise the powers of the compensation committee at any time. Any employee, officer, consultant, independent contractor or director providing services to us or any of our affiliates, who is selected by the compensation committee, is eligible to receive awards under the 2014 Stock Option Plan.

The aggregate number of shares of common stock that may be issued under all stock-based awards made under the 2014 Stock Option Plan is 358 shares. Any shares of common stock that are used by a participant as full or partial payment to us of the purchase price relating to an award, or in connection with the satisfaction of tax obligations relating to an award, shall again be available for granting awards (other than incentive stock options) under the 2014 Stock Option Plan. Additionally, shares of our common stock subject to any award that are terminated or forfeited without delivery of any shares will be available for future awards under the 2014 Stock Option Plan. The shares of common stock issuable under the 2014 Stock Option Plan may be drawn from shares of authorized but unissued common stock or from shares of common stock that we acquire. No eligible person may be granted any award or awards under the 2014 Stock Option Plan, the value of which award or awards is based solely on an increase in the value of shares of common stock after the date of grant of such award or awards, and which is intended to represent “qualified performance based compensation” with the meaning of Section 162(m) of Code, for more than shares of our common stock (subject to adjustment in the event of a stock split or similar corporate event), in the aggregate in any taxable year.

If the compensation committee determines that any dividend or other distribution (whether in the form of cash, shares of our common stock, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares of our common stock or other securities, issuance of warrants or other rights to purchase shares of our common stock or other securities or other event identified by the compensation committee as affecting shares of our common stock such that an adjustment is necessary or appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the 2014 Stock Option Plan, then the compensation committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and type of shares of common stock (or other securities or other property) that thereafter may

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be made the subject of awards, (ii) the number and type of shares of common stock (or other securities or other property) subject to outstanding awards, (iii) the purchase price or exercise price with respect to any award and (iv) the share limitations contained in the 2014 Stock Option Plan.

Under our 2014 Stock Option Plan, the compensation committee is permitted and authorized to make the following grants to all eligible persons:

The term of awards will not be longer than ten years, or in the case of incentive stock options, longer than five years with respect to holders of more than 10% of our common stock. The compensation committee may permit accelerated vesting of an award upon the occurrence of certain events, including a change in control, regardless of whether the award is assumed, substituted or otherwise continued in effect by the successor corporation. The acceleration of vesting in the event of a change in the ownership or control may be seen as an anti-takeover provision and may have the effect of discouraging a merger proposal, a takeover attempt or other efforts to gain control of us.

Awards under the 2014 Stock Option Plan may be subject to performance goals, including revenue, cash flow, gross profit, earnings before interest and taxes, earnings before interest, taxes, depreciation and amortization, net earnings, earnings per share, margins (including one or more of gross, operating and net income margins), returns (including one or more of return on assets, equity, investment, capital, revenue and total stockholder return), stock price, economic value added, working capital, market share, cost reductions, workforce satisfaction and diversity goals, employee retention, customer satisfaction, completion of key projects and strategic plan development and implementation. The goals may reflect absolute entity or business unit performance or a relative comparison to the performance of a peer group of entities or other external measure of the selected performance criteria.

Unless earlier discontinued or terminated by the board of directors, the 2014 Stock Option Plan will expire on April 17, 2024. No awards may be made after that date. However, unless otherwise expressly provided in an applicable award agreement, any award granted under the 2014 Stock Option Plan prior to expiration may extend beyond the end of such period through the award’s normal expiration date. Our board of directors may amend, suspend or terminate the 2014 Stock Option Plan at any time, provided that our board of directors will get stockholder approval when necessary to not violate the rules of The NASDAQ Capital Market, to allow the grant of incentive stock options, to increase the number of shares of common stock authorized under the 2014 Stock Option Plan, to grant or reprice options or SARs with an exercise price less than the fair market

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value of the common stock, or to prevent the grant of options or SARs that would qualify under Section 162(m) of the Code. The compensation committee may not amend an outstanding award in a manner that adversely affects the holder of the award without the holder’s consent.

We do not intend to make any future stock options grants under the 2014 Stock Option Plan, as all future grants will be made pursuant to the Omnibus Plan.

The Great Basin Inc. 2006 Stock Option Plan and Tender Offer

On August 7, 2014, we launched a tender offer to eligible employees to exchange all of the stock options held by such employees under the Great Basin Scientific, Inc. 2006 Stock Option Plan, or the 2006 Stock Option Plan, for new options under the 2014 Stock Option Plan. Following the expiration of the tender offer on September 5, 2014, we accepted for exchange eligible options to purchase an aggregate of up to 10 shares of our common stock. In accordance with the terms and conditions of the tender offer, on September 9, 2014, we granted new options exercisable into 10 shares of our common stock with an exercise price of $568,000 per share in exchange for the cancellation of such tendered options. After the tender offer, options to purchase up to 1 share of our common stock remain outstanding under the 2006 Stock Option Plan.

All of the named executive officers holding stock options under the 2006 Stock Option Plan participated in the tender offer. The objective of the tender offer was to provide employees who elected to participate with new options, the terms of which preserve the original incentive effect of our equity incentive programs in light of market and industry wide economic conditions, and resolve uncertainty concerning documentation and approval of the options. The terms of the 2006 Stock Option Plan are substantially similar to the 2014 Stock Option Plan.

We do not intend to make any future stock options grants under the 2006 Stock Option Plan, as all future grants will be made pursuant to the Omnibus Plan.

Director Compensation

Members of our board of directors who are our employees do not receive any fees for their service on our board of directors or for their service as a chair or committee member. Ryan Ashton is our only employee director. Our non-employee directors earned the following compensation for their service during our fiscal year ended December 31, 2015:

Name		Fees Earned or Paid in Cash ($)				Stock Awards ($)				Option Awards ($)(2)				Non-Equity Incentive Plan Compensation ($)				All Other Compensation ($)				Total ($)
David Spafford			358,000				—				—				21,072	(3)			—				379,702
Stephen Aldous			20,832	(1)			—				—				—				—				20,832
Ronald Labrum			51,250				—				—				—				—				51,250
Sam Chawla			53,000				—				—				—				—				53,000
Kirk Calhoun(4)			30,918	(1)			—				39,595				—				—				70,531

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The following are the compensatory arrangements for our non-employee directors:

Director Position		Annual Payment
Executive Chairman Retainer		$	180,000
Director Retainer paid to all directors		$	35,000
Lead Director Supplement		$	35,000
Audit Committee Chair		$	10,000
Audit Committee Member		$	5,000
Compensation Committee Chair		$	10,000
Compensation Committee Member		$	5,000
Nominating and Corporate Governance Committee Chair		$	5,000
Nominating and Corporate Governance Committee Member		$	3,000

Ryan Ashton, our Chief Executive Officer, will not be receiving the fees set forth above.

Also, we adopted the 2014 Omnibus Plan, which permits the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, and other stock-based awards.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. Shares of Common Stock that may be acquired by an individual or group within 60 days of November 30, 2016, pursuant to the exercise of options or warrants, are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table. Percentage of ownership is based on 199,883,055 shares of Common Stock outstanding as of November 30, 2016.

Except as indicated in footnotes to this table, we believe that the stockholders named in this table have sole voting and investment power with respect to all shares of Common Stock shown to be beneficially owned by them, based on information provided to us by such stockholders. Unless otherwise indicated, the address for each director and executive officer listed is: c/o Great Basin Scientific, Inc., 2441 South 3850 West, Salt Lake City, UT 84120.

Name of Beneficial Owner		Number of Common Share Equivalents Beneficially Owned				Percent
Named Executive Officers and Directors:
Ryan Ashton(1)			3					*
David Spafford(2)			58					*
Robert Jenison(3)			1					*
Jeffrey Rona(4)			3					*
Sam Chawla(5)			4					*
Ron Labrum(6)			4					*
Kirk Calhoun(7)			1					*
All Executive Officers and Directors as a Group (7 Persons)			74					*
Other Five Percent Stockholders:

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CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

Since January 1, 2013, we were a participant in certain transactions and relationships with related persons as more fully described below.

Convertible Notes and Related Warrants

Since January 1, 2014, we have debt obligations to certain persons in connection with convertible notes with related persons as described below. Each of these notes converts to shares of common stock as set forth below.

In February 2015, we entered into a loan agreement for $250,000 with Spring Forth Investments, LLC, an entity controlled by Mr. Spafford. The loan bears interest at a rate of twelve percent (12%) per year and has a maturity date of the earlier of (i) 90 days from the date of the loan agreement or (ii) five days after the closing of a registered public offering of our securities. We paid off this loan with a portion of the proceeds from our February 2015 follow-on offering.

On July 18, 2014, we issued a convertible promissory note with 20% interest and 20,000 Series D Units to Spring Forth Investments, LLC, an entity controlled by Mr. David Spafford. The consideration paid by Mr. Spafford for the note and Units was $500,000. The maturity date on the note is July 18, 2015, which can be extended to July 18, 2016 at our option if we pay $10,000 to Mr. Spafford as compensation for the extension. On April 18, 2015, we extended the maturity date on the note pursuant to this option. This financing was for general working capital purposes.

On March 10, 2014, we issued a convertible promissory note with an 8% interest rate and warrants to purchase 6 shares of Common Stock to DRS, LLC, an entity controlled by David Spafford, one of our directors. The consideration paid by DRS, LLC for the note and warrants was $100,000. The maturity date for the promissory note was March 10, 2015, or upon a qualified equity financing of at least $5 million. This financing was for general working capital purposes. The principal balance of this note, along with accrued interest of $3,112 converted to 20,622 Series D Units at $5.00 per unit in July 2014.

On February 26, 2014, we issued a convertible promissory note with an 8% interest rate and warrants to purchase 12 shares of Common Stock to Ryan Ashton, our Chief Executive Officer. The consideration paid by Mr. Ashton for the note and warrants was $200,000. The maturity date for the promissory note was February 26, 2015, or upon or a qualified equity financing of at least $5 million. This financing was for general working capital purposes. The principal balance of this note, along with accrued interest of $6,751 converted to 41,350 Series D Units at $5.00 per unit in July 2014.

During 2013, we issued promissory notes to SSA Ventures, LLC and SBS Charitable Remainder Trust U/A/D November 27, 1995 (entities controlled by Mr. Aldous) reflecting obligations of $571,000 and $2,000,000 respectively. The principal balance of these notes, along with accrued interest of $21,901 and $67,068 respectively, converted to shares of Series C Preferred Stock at $4.92 per share.

During 2013, we issued a promissory note to Bourne Spafford Charitable Trust U/A/D May 15, 1995 (controlled by Mr. Spafford) reflecting an obligation of $200,000. This note had an 8% interest rate. The principal and $7,540 of accrued interest converted into shares of Series C Preferred Stock at $4.92 per share.

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During 2013, we issued a promissory note to Krispen Family Holdings, LC, a greater than 5% stockholder, reflecting an obligation of $571,000. This note had an 8% interest rate. The principal and $24,154 of accrued interest converted into shares of Series C Preferred Stock at $4.92 per share.

During 2012 we issued convertible promissory notes to Spring Forth Investments LLC and the Bourne Spafford Charitable Trust U/A/D May 15, 1995 (entities controlled by Mr. Spafford) in the aggregate amount of $2,880,000. Each of these notes had an 8% interest rate. The principal and $52,655 of accrued interest converted into shares of Series B Preferred Stock at $32.00 per share. In connection with our IPO, these shares of Series B Preferred Stock converted into shares of our common stock.

During 2012 and 2013, we issued convertible notes to Krispen Family Holdings, LC in the aggregate amount of $2,880,000. Each of these notes had an 8% interest rate. The principal and $36,331 of accrued interest converted into shares of Series B Preferred Stock at $32.00 per share.

During 2012 and 2013, we issued convertible notes to SSA Ventures, LLC in the aggregate amount of $2,880,000. Each of these notes had an 8% interest rate. The principal and $39,700 of accrued interest converted into shares of Series B Preferred Stock at $32.00 per share.

On December 30, 2015, in relation to the agreement of Spring Forth Investments, LLC and Utah Autism Foundation agreeing to enter into subordination agreements in relation to our financing of convertible notes and related Series D warrants, we issued Spring Forth Investments, LLC and Utah Autism Foundation warrants to purchase 38 shares of common stock on the same general terms and conditions of the Series D warrants.

On July 1, 2016, in relation to the agreement of Spring Forth Investments, LLC and Utah Autism Foundation agreeing to enter into subordination agreements in relation to our financing of convertible notes and related Series D warrants, we issued Spring Forth Investments, LLC and Utah Autism Foundation warrants to purchase 21,094 shares of common stock on the same general terms and conditions of the Series H warrants.

Master Lease Agreement with Onset and Related Warrants and Letters of Credit

We entered into a Master Lease Agreement to provide for the sale-leaseback of molecular diagnostic analyzers. We have completed two lease schedules under this lease agreement: Lease Schedule 001 dated October 16, 2013, amended December 10, 2013, for the sale of 125 molecular diagnostic analyzers for a purchase price of $2,500,000, which are being leased back for 36 monthly payments of $74,875 and Lease Schedule 002 dated March 14, 2014, amended March 18, 2014, for the sale of 75 molecular diagnostic analyzers for a purchase price of $1,500,000, which are being leased back for 24 monthly payments of $64,665. At the end of the lease term of Schedule 001, the lease will automatically renew for twelve additional months at the current monthly rate unless we give written notice 150 days prior to the end of the lease. If timely notice is given we have the opportunity to: 1) repurchase the analyzers for a purchase price determined by lessor not to exceed forty percent of the original costs; or 2) terminate the lease, return the property and enter into a new lease with new property that replaces the property of the old lease. Both we and the lessor will have the right to reject any terms of option 1 or 2 and if rejected, the 12 month extension will apply. Schedule 002 includes similar end of term options as found in Schedule 001, except that if we give timely notice, we have the option to purchase the analyzers at a price to be determined by lessor and us. Schedule 002 also includes a provision that during the first 14 months of the base period of the Schedule, provided there is no event of default and if we complete a successful capital raise, then lessor will use commercially acceptable best efforts to rewrite this Schedule 002 at more favorable terms. We are accounting for these transactions as a capital lease sale-leaseback in accordance with ASC 840 “Leases.”

Our obligations pursuant to the sale-leaseback agreement are secured by letters of credit obtained by Spring Forth Investments, LLC, an entity controlled by David Spafford, and Utah Autism Foundation, an entity for which Mr. Spafford serves on the Board of Trustees and as a Founder Trustee, in an aggregate amount of $3,000,000. These letters of credit were issued by a bank for the benefit of the lessor. Pursuant to three reimbursement agreements we entered into with those entities in connection with the letters of credit, we have agreed to pay each of them 10% interest per annum on the total amount of the letter of credit. Under the reimbursement agreements, we are also obligated to reimburse those third parties for any draws made under the letters of credit. As of December 31, 2014, no draws on either letter of credit had taken place. Our

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obligations under the reimbursement agreements are secured by a security interest in all of our assets pursuant to security agreements effective the dates of the respective lease schedule.

Ryan Ashton, our chief executive officer, and David Spafford, one of our directors, each personally guaranteed our obligations under the sale-lease agreement. These guarantees cover “the full amount of liability for any amounts due” from us to Onset under the lease agreement. On November 25, 2013, we issued Mr. Ashton warrants to purchase 24 shares of common stock and Mr. Spafford warrants to purchase 24 shares of common stock, each in compensation for their personal guarantees of our obligations under the lease agreement, with an exercise price of $4,200.00 per share.

The foregoing constitutes a summary of the material terms of the lease documents and is qualified in its entirety by the full text of the lease documents, copies of which are filed as exhibits to the registration statement of which this prospectus forms a part.

Voting Agreement

On February 16, 2010 we entered into a voting agreement under which certain holders of our preferred stock, including entities affiliated with certain of our directors, have agreed to vote in a certain way on certain matters, including with respect to the election of directors. In connection with the issuance of Series D Preferred Stock, the Voting Agreement was amended and restated on April 21, 2014 and July 30, 2014. Pursuant to the July 2014 amendment and restatement, (i) the parties agreed to vote their shares to set the size of the board of directors at five directors, (ii) the holders of common stock, voting as a separate class, elect one director to our board of directors (initially Ryan Ashton), and (iii) for long as Hitachi owns 5% of the issued and outstanding shares of our capital stock, Hitachi will be entitled to elect one director. Upon the closing of our IPO, the board of directors election voting provisions contained in the voting agreement terminated; however, pursuant to the terms of the Series D Stock Purchase Agreement and our Certificate, Hitachi will continue to be entitled to elect one director.

Investor Rights Agreement

On February 16, 2010, we entered into an investor rights agreement with the holders of our outstanding Series A Preferred Stock, including entities affiliated with certain of our directors. On November 26, 2013, the investor rights agreement was amended in connection with the issuance of Series C Preferred Stock and Series C-1 Preferred Stock. On April 21, 2014, the investor rights agreement was amended in connection with the issuance of Series D Preferred Stock and on July 30, 2014 the investor rights agreement and was further amended in connection with the issuance of additional shares of Series D Preferred Stock. In connection with our IPO, each share of Series A, Series C, Series C-1 and Series D Preferred Stock was converted into one share of our common stock.

For a description of these registration rights, see the section titled “Description of Capital Stock — Registration Rights.”

Other Relationships

Sandra Nielsen, who became the domestic partner of Ryan Ashton in 2012, is employed by us as our Vice President of Marketing and Customer Support. In 2015, Ms. Nielsen received a salary of $205,000, commissions of $201,576 and a bonus of $61,500. Ms. Nielsen also received a stock option grant in 2014 for 1 share of stock.

Indemnification Provisions

We intend to enter into indemnification agreements with each of our directors and officers. These indemnification agreements, and our Certificate and Bylaws, require us to indemnify our directors and officers to the fullest extent permitted by Delaware law.

Policies and Procedures for Transactions with Related Persons

Our Audit Committee is responsible for reviewing any potential conflict of interest situations, on an ongoing basis, any future proposed transaction, or series of transactions, with related persons, and either approve or disapprove each reviewed transaction or series of related transactions with related persons.

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We have adopted a written policy and procedures with respect to related person transactions, which includes specific provisions for the approval of related person transactions. Pursuant to this policy, related person transactions include a transaction, arrangement or relationship or series of similar transactions, arrangements or relationships, in which we and certain enumerated related persons participate, the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and the related person has a direct or indirect material interest.

If a related person transaction is identified, such transaction must be reviewed and approved or ratified by our Audit Committee. If it is impracticable for our Audit Committee to review such transaction, the transaction will be reviewed by the chair of our Audit Committee, whereupon the chair of our Audit Committee will report to the Audit Committee the approval or disapproval of such transaction.

In reviewing and approving related person transactions, the Audit Committee, or its chair, considers all information that the Audit Committee, or its chair, believes to be relevant and important to a review of the transaction. The Audit Committee or its chair, as the case may be, approves only those related person transactions that are determined to be in, or not inconsistent with, our best interests and that of our stockholders, taking into account all available relevant facts and circumstances available to the Audit Committee or the chair. These facts and circumstances will typically include, but not be limited to, the benefits of the transaction to us; the impact on a director’s independence in the event the related person is a director, an immediate family member of a director or an entity in which a director is a partner, stockholder or executive officer; the availability of other sources for comparable products or services; the terms of the transaction; and the terms of comparable transactions that would be available to unrelated third parties or to employees generally. No member of the Audit Committee will participate in any review, consideration or approval of any related person transaction with respect to which the member or any of his or her immediate family members is the related person.

DESCRIPTION OF CERTAIN INDEBTEDNESS

Leasing Facility and Letters of Credit

We entered into a Master Lease Agreement to provide for the sale-leaseback of molecular diagnostic analyzers. We have completed two lease schedules under this lease agreement: Lease Schedule 001 dated October 16, 2013, amended December 10, 2013, for the sale of 125 molecular diagnostic analyzers for a purchase price of $2,500,000, which are being leased back for 36 monthly payments of $74,875 and Lease Schedule 002 dated March 14, 2014, amended March 18, 2014, for the sale of 75 molecular diagnostic analyzers for a purchase price of $1,500,000, which are being leased back for 24 monthly payments of $64,665. At the end of the lease term of Schedule 001, the lease will automatically renew for twelve additional months at the current monthly rate unless we give written notice 150 days prior to the end of the lease. If timely notice is given we have the opportunity to: 1) repurchase the analyzers for a purchase price determined by lessor not to exceed forty percent of the original costs; or 2) terminate the lease, return the property and enter into a new lease with new property that replaces the property of the old lease. Both we and the lessor will have the right to reject any terms of option 1 or 2 and if rejected, the 12 month extension shall apply. Schedule 002 includes similar end of term options as found in Schedule 001, except that if we give timely notice, we have the option to purchase the analyzers at a price to be determined by lessor and us. Schedule 002 also includes a provision that during the first 14 months of the base period of the Schedule, provided there is no event of default and if we complete a successful capital raise, then lessor will use commercially acceptable best efforts to rewrite this Schedule 002 at more favorable terms. We are accounting for these transactions as a capital lease sale-leaseback in accordance with ASC 840 “Leases.”

Our obligations pursuant to the sale-leaseback agreement are secured by letters of credit obtained by Spring Forth Investments LLC and Utah Autism Foundation in an aggregate amount of $3,000,000. These letters of credit were issued by a bank for the benefit of the lessor. Pursuant to three reimbursement agreements we entered into with those entities in connection with the letters of credit, we have agreed to pay each of them 10% interest per annum on the total amount of the letter of credit. Under the reimbursement agreements, dated October 30, 2013 and March 21, 2014, we are also obligated to reimburse those third parties for any draws made under the letters of credit. As of July 31, 2014, no draws on the line of credit had taken place. Our

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obligations under the reimbursement agreements are secured by a security interest in all of our assets pursuant to security agreements effective the dates of the respective lease schedule.

Ryan Ashton, our chief executive officer, and David Spafford, one of our directors, each personally guaranteed our obligations under the lease agreement. These guarantees cover the full amount of liability for any amounts due from us to Onset under the lease agreement. On November 25, 2013, we issued Mr. Ashton warrants to purchase 1 share of common stock and Mr. Spafford warrants to purchase 1 share of common stock, each in compensation for their personal guarantees of our obligations under the lease agreement, with an exercise price of $336,000 per share.

On December 30, 2015, Spring Forth Investments LLC and Utah Autism Foundation agreed to enter into subordination agreements with the collateral agent in the convertible note financing whereby each agreed to subordinate their debt to the convertible notes issued in the convertible note financing. As consideration for entering into subordination agreements with the collateral agent in the convertible note financing, we agreed to issue to the entities Series D warrants exercisable for 38 shares of common stock (the “Subordination Warrants”). The Subordination Warrants have the same general terms and conditions of the Series D warrants.

The foregoing constitutes a summary of the material terms of the lease documents and is qualified in its entirety by the full text of the lease documents, copies of which are filed as exhibits to the registration statement of which this prospectus forms a part.

Promissory Notes

On July 18, 2014, we issued a promissory note with 20% interest and 20,000 Series D Units to David Spafford. The consideration paid by Mr. Spafford for the note and Series D Units was $500,000. The original maturity date on the note was July 18, 2015, but was extended to July 18, 2016 at our option by paying $10,000 to Mr. Spafford as compensation for the extension. Another extension was signed extending the due date to July 18, 2017. This financing was for general working capital purposes.

In February 2015, the Company entered into another loan with David Spafford for $250,000 with 12% interest. In April 2015, the Company paid off the note along with accrued interest in the amount of $4,192 and a termination fee of $12,500.

2015 Convertible Note Financing

On December 30, 2015, we issued 2015 Notes to certain investors for an aggregate principal amount of $22.1 million. The 2015 Notes provided that we would repay the principal amount of 2015 Notes in 12 equal installments (each an “Installment Date”) beginning 4 months after the original date of issuance. On each installment date, assuming the equity conditions were met, including but not limited to those set forth below, the installment payment would automatically be converted into shares of common stock, provided however that we could elect prior to any Installment Date to redeem all or a portion of the installment amount in cash.

As of November 3, 2016, we had issued 94,976,855 shares of Common Stock upon conversion of 2015 Notes pursuant to installment payments. On November 3, 2016, the Company exchanged all of the remaining 2015 Notes outstanding, approximately $8.4 million in aggregate principal amount thereof, for 8,436 shares of a new class of Series F Convertible Preferred Stock, par value $0.001 per share, pursuant to a certificate of designations, preferences and rights of the Series F Preferred Stock.

2016 Convertible Note Financing

On July 1, 2016, we issued 2016 Notes for an aggregate principal amount of $75 million. The 2016 Notes provide that we will repay the principal amount of 2016 Notes in 15 equal installments (each an “Installment Date”) beginning on the fifth trading day following January 30, 2017 (the “First Amortization Date”), and thereafter the last business day of each calendar month through to the maturity date. On each installment date, assuming the equity conditions are met, including but not limited to those set forth below, the installment payment shall automatically be converted into shares of common stock, provided however that we may elect prior to any Installment Date to redeem all or a portion of the installment amount in cash. The 2016 Notes and the related Series H Warrants were issued and sold at the closing with (1) 8.8235% (approximately $6 million) of its applicable aggregate cash purchase price paid to the Company by wire transfer of

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immediately available funds and (2) 91.1765% (approximately $62 million) of its applicable aggregate cash purchase price to an account of the Company established for such Buyer (a “2016 Master Restricted Account”) by wire transfer of immediately available funds, such purchase price to be held and in accordance with and pursuant to the terms and conditions of an account control agreement between the Buyer and the bank (a “2016 Master Control Account Agreement”). We consider the cash in the restricted accounts to be assets of the Company permitting us to issue 2016 Notes in the aggregate principal amount of $75 million. In the event we are unable to meet the equity conditions outlined in the 2016 Notes, the cash contained in the restricted accounts will be promptly returned to the holders by each holder providing a notice for the release of the funds back to such holder and the aggregate principal amount of the 2016 Notes will be reduced accordingly. See “Description of Certain Indebtedness — convertible note financing — 2016 Note Equity Conditions” for a summary of the equity conditions set forth in the 2016 notes.

Conversion Features of the 2016 Notes

The price at which the Company will convert the installment amounts for the 2016 Notes is equal to the lowest of (i) the then prevailing conversion price, (ii) 80% of the arithmetic average of the lower of (i) the three lowest daily weighted average prices of the common stock during the twenty (20) consecutive trading day period ending on the trading day immediately preceding the Installment Date and (iii) the weighted average price of the common stock on the trading day immediately preceding the Installment Date, subject in all cases to a floor price of $1.00.

Any holder of a 2016 Note may by notice to us accelerate up to four future installment payments to any applicable Installment Date, in which case we will deliver shares of common stock for the conversion of such accelerated payments. The holder of a 2016 Note may also by notice to us defer any installment payment to a later Installment Date.

At any time after issuance, the 2016 Notes will be convertible at the election of the holder into shares of our common stock at a conversion price of $2.00, subject to adjustment. Conversion of the 2016 Note is subject to a blocker provision which prevents any holder from converting into shares of common stock if their beneficial ownership of the common stock would exceed either 4.99% or 9.99% of our issued and outstanding common stock, as elected by the holder at Closing. The conversion price is subject to certain adjustments upon the occurrence of certain dilutive events, including the issuance of certain options or convertible securities, and upon the occurrence of certain corporate events, including stock splits and dividends. At any time after the issue of the 2016 Notes, so long as there has been no failure of the equity conditions during the applicable measurement periods, the Company will have the right to redeem all, but not less than all, of the conversion amount then remaining under the 2016 Notes at a price equal to the greater of (x) 125% of the conversion amount being redeemed and (y) the product of (A) the conversion amount being redeemed and (B) the quotient determined by dividing (I) the greatest closing price of the shares of common stock during the period beginning on the date immediately preceding our notice of redemption and ending on the Company redemption date, by (II) the lowest conversion price in effect during such period.

Release of Funds to us from Proceeds of the 2016 Convertible Note Financing

The remaining aggregate cash purchase price will be released to us as follows: (i) $6 million on the First Amortization Date, (ii) $8 million after the fifth trading day after the last business day of the calendar month following the First Amortization Date and (iii) $3,692,308 on the 75^th trading day after the initial date the shares of common stock underlying the 2016 Notes are eligible to be resold pursuant to Rule 144 of the Securities Act of 1933, as amended (the “144 Date”) and each 30^th calendar day thereafter until all restricted cash has become unrestricted and released.

Note holders’ rights upon occurrence of Event of Default

Under the 2016 Notes, the holders will have certain rights upon an “Event of Default” (as defined in the 2015 Notes). Such rights include (i) the remaining principal amount of the 2016 Notes bearing interest at a rate of 10% per annum, (ii) during the Event of Default the conversion price being adjusted to the lowest of (a) the conversion price then in effect, (b) 75% of the lowest weighted average price of the common stock during the 30 consecutive trading day period ending on the trading day immediately preceding the date of the event of default conversion and (c) 75% of the weighted average price of the common stock on the date of the

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applicable event of default conversion, (iii) the holder having the right to demand redemption of all or a portion of the 2016 Notes and (iv) the triggering rights under the security interest granted to the holders, resulting in the foreclosure of their security interests and liquidation of some or all of our assets.

At any time after the earlier of the holder’s receipt of a notice of an Event of Default and the holder becoming aware of an Event of Default and ending on the 15^th trading day after the later of (x) the date such Event of Default is cured and (y) the holder’s receipt of an Event of Default notice, the holder may require the Company to redeem all or any portion of the 2016 Note by delivering written notice to the Company. Each portion of the 2016 Note subject to redemption shall be redeemed by the Company in cash by wire transfer of immediately available funds at a price equal to the greater of (x) 125% of the conversion amount being redeemed and (y) the product of (A) the conversion amount being redeemed and (B) the quotient determined by dividing (I) the greatest closing price of the shares of common stock during the period beginning on the date immediately preceding such Event of Default and ending on the date the holder delivers the redemption notice, by (II) the lowest conversion price in effect during such period.

“Event of Default” under the 2016 Notes includes, but is not limited to (and subject to the ability to cure in certain instances): (i) (A) the suspension from trading for more than an aggregate of ten (10) trading days in any 365-day period or (B) or failure of the common stock to be listed on an eligible market; (ii) failure to cure conversion failures of the 2016 Notes or exercise failures of the Series H Warrants; (iii) certain failures to have enough authorized and unreserved shares of common stock to satisfy conversions of the 2016 Notes or exercises of the Series H Warrants; (iv) the Company’s failure to pay to the holder any amounts when and as due under the 2016 Notes or any other transaction document; (v) any default under, redemption of or acceleration prior to maturity of more than $100,000, individually or in the aggregate, of indebtedness of the Company; (vi) voluntary bankruptcy of the Company; (vii) involuntary bankruptcy, receivership or other similar proceedings before a court; (viii) subject to certain limitations, a final judgment or judgments for the payment of money aggregating in excess of $250,000, individually or in the aggregate, not covered by insurance; (ix) breaches of the representations, warranties and covenants in the transaction documents only if such breach continues for a period of at least an aggregate of five (5) Trading Days; (x) any breach or failure in any respect to comply with either Sections 8, 17 or 18 of the 2016 Note; (xi) the Company fails to perform or comply with any covenant or agreement contained in the pledge and security agreement related to the 2016 Notes (the “2016 Security Agreement); (xii) the Company shall fail to perform or comply with any covenant or agreement contained in any 2016 Master Control Account Agreement; (xiii) any material provision of any security document or 2016 Master Control Account Agreement (as determined by the applicable holder) shall at any time for any reason cease to be valid and binding on or enforceable against the Company; (xiv) any 2016 Security Document, 2016 Master Control Account Agreement or any other security document, after delivery thereof pursuant hereto, shall for any reason fail or cease to create a valid and perfected; (xv) any bank at which any deposit account, blocked account, lockbox account or other account of the Company is maintained shall fail to comply with any material term of any deposit account, blocked account, lockbox account or other similar agreement to which such bank is a party; (xvi) any material damage to, or loss, theft or destruction of, any collateral or a material amount of property of the Company, if any such event or circumstance could reasonably be expected to have a material adverse effect; (xvii) a false or inaccurate certification (including a false or inaccurate deemed certification) by the Company that the equity conditions are satisfied or that there has been no equity conditions failure or as to whether any Event of Default has occurred; (xviii) the Company’s failure for any reason after the date that is six (6) months immediately following the date of issuance to satisfy the current public information requirement under Rule 144(c) of the Securities Act; (xix) if as of the applicable date of determination (A) the holder of this Note is not an affiliate of the Company and (B) the shares of Common Stock issuable pursuant to the terms of the 2016 Notes and/or exercise of the Series H Warrants are eligible to be resold by the holder either pursuant to an effective registration statement in favor of the holder or Rule 144 of the Securities Act, the failure of such shares of Common Stock issuable pursuant to the terms of the 2016 Notes and/or such Series H Warrant, as applicable, to be issued and delivered to the holder without any restrictive legends; or (xx) any Event of Default occurs with respect to any other convertible notes.

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2016 Note Covenants

We made certain negative covenants in the 2016 Notes, pursuant to which we agreed not to: (a) incur or guarantee, assume or suffer to exist any indebtedness, other than permitted indebtedness; (b) allow or suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets of the Company other than permitted liens; (c) redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents all or any portion of any indebtedness other than the 2016 Notes in an Event of Default shall have occurred; (d) redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents all or any portion of any indebtedness (other than the 2016 Notes), prior to the scheduled maturity date of such indebtedness; (e) redeem or repurchase its equity interest or declare or pay any cash dividend or distribution; (f) make, any change in the nature of its business; (g) encumber or allow any liens on, any of its intellectual property other than permitted liens; or (h) enter into, renew, extend or be a party to, any transaction or series of related transactions (including, without limitation, the purchase, sale, lease, transfer or exchange of property or assets of any kind or the rendering of services of any kind) with any affiliate, except in the ordinary course of business.

We made certain affirmative covenants in the 2016 Notes, pursuant to which we agreed to: (a) maintain and preserve its existence, rights and privileges, and become or remain duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary, except where failure to do so would not result in a material adverse effect; (b) maintain and preserve all of its properties which are reasonably necessary in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted, and comply at all times with the material provisions of all leases to which it is a party as lessee or under which it occupies property, so as to prevent any loss or forfeiture thereof or thereunder; (c) maintain insurance with responsible and reputable insurance companies or associations with respect to its properties) and business, in such amounts and covering such risks as is required by any governmental authority having jurisdiction with respect thereto or as is carried generally in accordance with sound business practice by companies in similar businesses similarly situated; and (d) maintain and preserve all of its intellectual property rights which are reasonably necessary in the proper conduct of its business.

2016 Note Equity Conditions

The 2016 Notes provide that prior to the release of the remaining cash purchase price of the 2016 Notes, we are required to meet certain equity conditions including, but not limited to: (i) all shares of common stock issuable pursuant to the terms of the 2016 Notes, including the shares of common stock issuable upon the conversion requiring the satisfaction of the equity conditions (in each case, without regard to any restriction or limitation on conversions), shall be eligible for sale pursuant to Rule 144 without any volume limitation by the holder and no failure to have current public information under Rule 144 exists, and without the need for registration under any applicable federal or state securities laws; (ii) on each day during the required measuring period, the common stock is designated for quotation on an acceptable exchange or market and shall not have been suspended from trading on such exchange or market (other than suspensions of not more than five (5) days and occurring prior to the applicable date of determination due to business announcements by the Company); (iii) during the measuring period, the Company shall have delivered all shares of common stock pursuant to the terms of the 2016 Notes and upon exercise of the Series H Warrants to the holders on a timely basis; (iv) the shares of common stock issuable upon conversion may be issued in full without violating beneficial owner limitations and Nasdaq regulations as set forth in the 2016 Notes; (v) during the measuring period, the Company shall not have failed to timely make any payments within five (5) Business Days of when such payment is due; (vi) during the measuring period, there shall not have occurred either (A) the public announcement of a pending, proposed or intended fundamental transaction which has not been abandoned, terminated or consummated, (B) an Event of Default (as described below) or (C) an event that with the passage of time or giving of notice would constitute an Event of Default; (vii) the Company shall have no knowledge of any fact that would cause all shares of common stock issuable pursuant to the terms of the 2016 Notes, not to be eligible for sale pursuant to Rule 144 without any volume limitation by the holder (including, without limitation, by virtue of an existing or expected public information failure under Rule 144) and any applicable state securities laws; (viii) during the measuring period, the Company otherwise shall have

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been in compliance with and shall not have breached any provision, covenant, representation or warranty of any documents related to the 2016 Note transaction; (ix) the holder shall not be in possession of any material, nonpublic information received from the Company; (x) the shares of common stock issuable upon conversion are duly authorized and listed and eligible for trading without restriction on an eligible market; (xi) the daily dollar trading volume of the common stock as reported by Bloomberg for each trading day during the measuring period shall be at least $800,000; (xii) on each trading day during the measuring period, the weighted average price of the common stock equals or exceeds $1.30 (as adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction); and (xiii) the Company shall have a number of shares of common stock duly authorized and reserved for the issuance pursuant to the terms of this 2016 Note that is equal to, or greater than, the quotient obtained by dividing (A) 165.5% of the applicable release amount, by (B) the conversion floor price (as set forth in the 2016 Note).

2016 Security Agreement

We entered into the 2016 Security Agreement with the lead investor, in its capacity as collateral agent for all holders of the 2016 Notes. The 2016 Security Agreement creates a first priority security interest (second priorty so long as the 2015 are outstanding) in all of our personal property of every kind and description, tangible or intangible, whether currently owned and existing or created or acquired in the future, including in this collateral any and all cash released from the control accounts described above. We agreed to certain conditions on our maintenance and use of the collateral, including but not limited to the location of equipment and inventory, the condition of equipment, the payment of taxes and prevention of liens or encumbrances, the maintenance of insurance, the protection of intellectual property rights, and limitations on transfers and sales.

Upon the occurrence of an “Event of Default” under this 2016 Security Agreement, the collateral agent will have certain rights including taking control of the collateral and, in certain circumstances, selling the collateral to cover obligations owed to the holders of the convertible notes pursuant to its terms.

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DESCRIPTION OF CAPITAL STOCK

Authorized Capital

Our authorized capital stock consists of 200,000,000 shares of common stock, par value $0.0001 per share and 5,000,000 shares of preferred stock, par value $0.001 per share. The following is a summary of the rights of our common and preferred stock and some of the provisions of our Certificate, and Bylaws, our outstanding warrants, and the Delaware General Corporation Law. Because it is only a summary, it does not contain all the information that may be important to you. For a complete description you should refer to our Certificate, Bylaws, and the warrants, copies of which have been filed as exhibits to the registration statement of which this prospectus is a part, as well as the relevant provisions of the Delaware General Corporation Law.

Common Stock

As of November 18, 2016, there were 165,483,055 shares of common stock issued and outstanding held by 474 stockholders of record. As of November 18, 2016, there were outstanding options to purchase 74 shares of common stock, warrants to purchase 764,087 shares of common stock and convertible debt that would convert into 75,000,000 shares of common stock based on exercise prices and conversion rates for such securities on November 18, 2016.

Voting Rights.  Holders of our common stock are entitled to one vote for each share of common stock held of record on all matters submitted to a vote of the holders of common stock. The affirmative vote of the holders of sixty percent of the voting power of all of the shares of the stock outstanding entitled to vote thereon, voting as a single class, is required to alter, amend or repeal certain provisions of our Certificate, providing for undesignated Preferred Stock, the election and removal of directors, our classified board of directors, the calling of special meetings of stockholders, and director liability and indemnification.

Dividends.  Subject to certain preferences applicable to outstanding preferred stock, each share of common stock is entitled to receive dividends as may be declared by our board of directors from time to time out of funds legally available therefor.

Liquidation.  In the event of our liquidation, dissolution or winding up, the holders of common stock are entitled to share ratably in all assets remaining after payment in full of all of our creditors and payment of the liquidation preference of any outstanding preferred stock.

Rights and Preferences.  Holders of our common stock have no preemptive, conversion, subscription or other rights, and there are no redemption or sinking fund provisions applicable to our common stock. The rights, preferences and privileges of the holders of our common stock are subject to and may be adversely affected by the rights of the holders of shares of any series of our preferred stock that we may designate in the future.

Preferred Stock

Our board of directors has the authority, without further action by our stockholders, to issue up to 5,000,000 shares of preferred stock in one or more series and to fix the number, rights, preferences, privileges and restrictions thereof. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences and sinking fund terms, and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of common stock.

The issuance of our preferred stock could adversely affect the voting power of holders of common stock and the likelihood that such holders will receive dividend payments and payments upon liquidation. In addition, the issuance of preferred stock could have the effect of delaying, deferring or preventing a change of control or other corporate action. We have no current plan to issue any shares of preferred stock.

Series E Convertible Preferred Stock

In connection with the Follow-on Offering, we issued as part of the Units shares of Series E Convertible Preferred Stock pursuant to a Certificate of Designation approved by our board of directors. As of November 18, 2016, we had 74,380 Series E Convertible Preferred Stock issued and outstanding convertible into 2 shares of common stock at a conversion ratio of 1 for 42,000. The Series E Convertible Preferred Stock will not be convertible by the holder of such preferred stock to the extent (and only to the extent) that the

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holder or any of its Affiliates would beneficially own in excess of 4.99% of our common stock. For purposes of the limitation described in this paragraph, beneficial ownership and all determinations and calculations are determined in accordance with Section 13(d) of the Exchange Act and the rule and regulations promulgated thereunder.

Pursuant to the Certificate of Designation, if we enter into a “Fundamental Transaction”, each share of Series E Convertible Preferred Stock shall be automatically converted into four shares of our common stock, subject to the 4.99% of beneficial ownership limitation discussed in the previous paragraph. A “Fundamental Transaction” includes, but is not limited to, (1) a consolidation, merger stock or share purchase or other business combination in which our shareholders immediately prior to such consolidation or merger hold less than 50% of the outstanding voting stock after such consolidation or merger (not including any shares of our voting stock held by the person or entity making or party to, or associated or affiliated with the person or entity making or party to, such stock purchase or other business combination), (2) sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of our properties or assets, or (3) allowing any person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of our outstanding voting stock (not including any shares of our voting stock held by the person or entity making or party to, or associated or affiliated with the person or entity making or party to, such purchase, tender or exchange offer), or (4) any person or group becoming a beneficial owner of 50% of the aggregate ordinary voting power represented by our issued and outstanding voting stock.

The Series E Convertible Preferred Stock has no voting rights, except that the holders of shares of at least a majority of the Series E Convertible Preferred Stock will be able to effect or validate any amendment, alteration or repeal of any of the provisions of the Certificate of Designation that materially and adversely affects the powers, preferences or special rights of the Series E Convertible Preferred Stock, whether by merger or consolidation or otherwise; provided, however, that in the event of an amendment to terms of the Series E Convertible Preferred Stock, including by merger or consolidation, so long as the Series E Convertible Preferred Stock remains outstanding with the terms thereof materially unchanged, or the Series E Convertible Preferred Stock is converted into, preference securities of the surviving entity, or its ultimate parent, with such powers, preferences or special rights, taken as a whole, not materially less favorable to the holders of the Series E Convertible Preferred Stock than the powers, preferences or special rights of the Series E Convertible Preferred Stock, taken as a whole, the occurrence of such event will not be deemed to materially and adversely affect such powers, preferences or special rights of the Series E Convertible Preferred Stock, and in such case such holders shall not have any voting rights with respect to the occurrence of such events. An amendment to the terms of the Series E Convertible Preferred Stock only requires the vote of the holders of Series E Convertible Preferred Stock.

With respect to payment of dividends and distribution of assets upon liquidation or dissolution or winding up of the Company, the Series E Preferred Stock shall rank equal to our common stock. No sinking fund has been established for the retirement or redemption of the Series E Convertible Preferred Stock. As such, the Series E Convertible Preferred Stock is not subject to any restriction on the repurchase or redemption of shares by us due to an arrearage in the payment of dividends or sinking fund installments.

The Series E Convertible Preferred Stock also has no liquidation rights or preemption rights, and there are no special classifications of our board of directors related to the Series E Convertible Preferred Stock.

Series F Convertible Preferred Stock

Stated Value of Series F Preferred Shares

Each Series F Preferred Share shall have a stated value of $1,000 and a par value of $0.001 per share.

Dividends

The Series F Preferred Shares shall be entitled to dividends, on an as converted basis, with the holders of our common stock, but will not accrue additional dividends unless a Triggering Event has occurred and is continuing, in which case dividends will accrue at a default rate of 10 per annum. There are no sinking fund provisions applicable to the Series F Preferred Stock.

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Liquidation Rights

In the event of a voluntary or involuntary liquidation, the holders of Series F Preferred Shares shall be entitled to receive in cash out of the assets of the Company, whether from capital or from earnings available for distribution to its stockholders (the “Liquidation Funds”), before any amount shall be paid to the holders of any of shares of capital stock junior to the Series F Preferred Stock, but pari passu with any stock on parity with the Series F Preferred Stock then outstanding, an amount per Series F Preferred Share equal to the greater of (A) the conversion amount thereof on the date of such payment and (B) the amount per share such holder would receive if such holder converted such Series F Preferred Shares into Common Stock immediately prior to the date of such payment (without regard to any limitations on the conversion of each Series F Preferred Share), provided that if the Liquidation Funds are insufficient to pay the full amount due to the holders and holders of shares of on parity, then each holder and each holder of parity stock shall receive a percentage of the Liquidation Funds equal to the full amount of Liquidation Funds payable to such holder and such holder of parity stock as a liquidation preference, in accordance with their respective certificate of designations (or equivalent), as a percentage of the full amount of Liquidation Funds payable to all holders of Series F Preferred Shares and all holders of shares of parity stock. All the preferential amounts to be paid to the holders of Series F Preferred Stock shall be paid or set apart for payment before the payment or setting apart for payment of any amount for, or the distribution of any Liquidation Funds of the Company to the holders of shares of junior in connection with a liquidation.

Rights upon Distribution of Assets

If the Company shall declare or make any dividend or other distributions of its assets (or rights to acquire its assets) to any or all holders of shares of Common Stock, by way of return of capital or otherwise (including without limitation, any distribution of cash, stock or other securities, property, options, evidence of indebtedness or any other by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (the “Distributions”), then each holder of Series F Preferred Stock, as holders of Series F Preferred Shares, will be entitled to such Distributions as if such holder had held the number of shares of Common Stock acquirable upon complete conversion of the Series F Preferred Shares (without taking into account any limitations or restrictions on the convertibility of the Series F Preferred Shares) immediately prior to the date on which a record is taken for such Distribution or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for such Distributions (provided, however, that to the extent that such holder’s right to participate in any such Distribution would result in such holder and the other Attribution Parties exceeding the Maximum Percentage, then such holder shall not be entitled to participate in such Distribution to such extent (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such Distribution (and beneficial ownership) to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of such holder until such time or times as its right thereto would not result in such holder and the other Attribution Parties exceeding the Maximum Percentage, at which time or times, if any, such Holder shall be granted such Distribution to the same extent as if there had been no such limitation).

Voting Rights

The holders of Series F Preferred Shares shall have the right to vote with holders of shares of our common stock, voting together as one class on all matters, with each Series F Preferred Share entitling the holder thereof to cast that number of votes per share as is equal to the aggregate number of shares of our common stock into which it is then convertible (without regard to any limitations on conversion set forth in the Certificate of Designations for the Series F Preferred Stock including without limitation, the maximum percentage and/or the failure to have a sufficient number of shares of common stock reserved or available for issuance pursuant to the Certificate of Designations for the Series F Preferred Stock) using the record date for determining the stockholders of the Company eligible to vote on such matters as the date as of which the conversion price is calculated; provided, that no holder (together with such holder’s attribution parties) shall be permitted to have a number of votes in excess of such aggregate number of votes granted to the holders of 9.99% of the shares our common stock then outstanding (including any votes with respect to any shares of our common stock and preferred stock beneficially owned by the holder or such holder’s attribution parties).

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Voluntary Conversion

The Series F Preferred Shares will be initially convertible at the election of the holder into shares of our common stock at a conversion price equal to $0.02, subject to adjustment as described below. From and after July 3, 2017, the Series F Preferred Shares shall be convertible at a conversion price equal to 85% of the arithmetic average, in each case of the lower of (i) the three lowest daily weighted average prices of the our common stock during the twenty (20) consecutive trading day period ending on the trading day immediately preceding the date of determination and (iii) the weighted average price of the our common stock on the trading day immediately preceding the date of determination.

The conversion price is subject to certain adjustments upon the occurrence of certain dilutive events, including the issuance of certain options or convertible securities, and upon the occurrence of certain corporate events, including stock splits and dividends.

Automatic Conversion

On November 3, 2016, 2,098 Series F Preferred Shares were mandatorily converted into 104.9 million shares of our common stock at a conversion price of $0.02 per share. On November 3, 2018, so long as no Triggering Event then exists, any remaining Series F Preferred Shares then outstanding shall be converted into shares of our common stock at a conversion price of $0.02 per share. In each case, shares of our common stock will be held in abeyance to the extent necessary to satisfy limitations on beneficial ownership as described below.

Limitations on Conversions

Conversion of the Series F Preferred Shares are subject to a blocker provision which prevents any holder from converting into shares of our common stock if their beneficial ownership of the our common stock would exceed either 4.99% or 9.99% of the Company’s issued and outstanding our common stock, as elected by the holder at Closing.

Company Optional Redemption

At any time after the issue of the Series F Preferred Shares, so long as there has been no failure of the equity during the applicable measurement periods, the Company shall have the right to redeem all, but not less than all, of the conversion amount then remaining under the Series F Preferred Shares at a price equal to the greater of (x) 125% of the conversion amount being redeemed and (y) the product of (A) the conversion amount being redeemed and (B) the quotient determined by dividing (I) the greatest closing price of the shares of our common stock during the period beginning on the date immediately preceding the Company’s notice of redemption and ending on the Company redemption date, by (II) the lowest conversion price in effect during such period.

Triggering Events

Under the Certificate of Designations for the Series F Preferred Stock, the holders will have certain rights upon an “Triggering Event” (as defined in the Certificate of Designations for the Series F Preferred Stock). Such rights include (i) the remaining principal amount of the Series F Preferred Shares bearing interest at a rate of 10% per annum, (ii) during the Triggering Event the conversion price being adjusted to the lowest of (a) the conversion price then in effect, (b) 75% of the lowest weighted average price of the our common stock during the 30 consecutive trading day period ending on the trading day immediately preceding the date of the Triggering Event conversion and (c) 75% of the weighted average price of the our common stock on the date of the applicable Triggering Event conversion, and (iii) the holder having the right to demand redemption of all or any number of the Series F Preferred Shares.

At any time after the earlier of the holder’s receipt of a notice of an Triggering Event and the holder becoming aware of an Triggering Event and ending on the 15^th trading day after the later of (x) the date such Triggering Event is cured and (y) the holder’s receipt of an Triggering Event notice, the holder may require the Company to redeem all or any number of the Preferred Share by delivering written notice to the Company. Each Preferred Share subject to redemption shall be redeemed by the Company in cash by wire transfer of immediately available funds at a price equal to the greater of (x) 125% of the conversion amount being redeemed and (y) the product of (A) the conversion amount being redeemed and (B) the quotient

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determined by dividing (I) the greatest closing price of the shares of our common stock during the period beginning on the date immediately preceding such Triggering Event and ending on the date the holder delivers the redemption notice, by (II) the lowest conversion price in effect during such period.

“Triggering Event” includes, but is not limited to (and subject to the ability to cure in certain instances):

Fundamental Transactions

The Series F Preferred Shares will also provide the holders with certain rights upon the occurrence of a fundamental transaction, including but not limited to assumption rights and redemption rights upon any change of control.

Covenants

The Company will make certain negative covenants in the Series F Preferred Shares, pursuant to which the Company agrees, among other things, not to: (a) incur or guarantee, assume or suffer to exist any indebtedness, other than permitted indebtedness; (b) allow or suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets of the Company other than permitted liens; (c) redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents all or any portion of any indebtedness other than the Series F Preferred Shares in an Triggering Event shall have occurred; (d) redeem, defease, repurchase, repay or make any payments in respect of, by the payment of cash or cash equivalents all or any portion of any indebtedness, prior to the scheduled maturity date of such indebtedness; (e) redeem or repurchase its equity interest or declare or pay any cash dividend or distribution; (f) make, any change in the nature of its business; (g) encumber or allow any liens on, any of its intellectual property other than permitted liens; or (h) enter into, renew, extend or be a party

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to, any transaction or series of related transactions (including, without limitation, the purchase, sale, lease, transfer or exchange of property or assets of any kind or the rendering of services of any kind) with any affiliate, except in the ordinary course of business.

The Company will make certain affirmative covenants in the Series F Preferred Shares, pursuant to which the Company agrees to, among other things: (a) maintain and preserve its existence, rights and privileges, and become or remain duly qualified and in good standing in each jurisdiction in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary, except where failure to do so would not result in a Material Adverse Effect; (b) maintain and preserve all of its properties which are reasonably necessary in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted, and comply at all times with the material provisions of all leases to which it is a party as lessee or under which it occupies property, so as to prevent any loss or forfeiture thereof or thereunder; (c) maintain insurance with responsible and reputable insurance companies or associations with respect to its properties) and business, in such amounts and covering such risks as is required by any governmental authority having jurisdiction with respect thereto or as is carried generally in accordance with sound business practice by companies in similar businesses similarly situated; and (d) maintain and preserve all of its intellectual property rights which are reasonably necessary in the proper conduct of its business.

Exchange Rights

In the event the Company enters into a Subsequent Placement (as defined in the 2015 SPA) while any of the Series F Preferred Shares remains outstanding (other than (x) to the extent prohibited by applicable law and then only if the Company is unable under applicable law to affect a transaction with the holders substantially and/or economically equivalent as determined by the Required Holders to such Exchange (as defined below) or (y) with respect to Excluded Securities), each holder may, in its sole and absolute discretion, exchange (an “Exchange”) all or any portion of the outstanding Conversion Amount, and/or other amounts then payable under such Holder’s Series F Preferred Shares (such exchanged amount, the “Exchange Amount”), as purchase price for the securities to be offered in such Subsequent Placement in connection with, and otherwise upon the same terms available to other investors generally in connection with, such Subsequent Placement

Delaware Anti-Takeover Law and Charter and Bylaws Provisions

We are subject to the provisions of Section 203 of the Delaware General Corporation Law. Subject to exceptions, Section 203 prohibits a publicly-held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years from the date of the transaction in which the person became an interested stockholder, unless the interested stockholder attained this status with the approval of the board of directors or unless the business combination is approved in a prescribed manner. A “business combination” includes mergers, asset sales and other transactions resulting in a financial benefit to the interested stockholder. Subject to exceptions, an “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years did own, 15% or more of the corporation’s outstanding voting stock. This statute could prohibit or delay the accomplishment of mergers or other takeover or change in control attempts with respect to us and, accordingly, may discourage attempts to acquire us. In addition, provisions of our Certificate and Bylaws may make it more difficult to acquire control of us. These provisions could deprive stockholders of the opportunity to realize a premium on the shares of common stock owned by them and may adversely affect the prevailing market price of our common stock. These provisions are intended to:

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Classified board of directors; Removal and Filling Vacancies.  Our Certificate and Bylaws provide for our board of directors to be divided into three classes of directors serving staggered, three-year terms. The classification of our board of directors has the effect of requiring at least two annual stockholder meetings, instead of one, to replace a majority of members of the board of directors. Subject to the rights of Hitachi Chemical Co., Ltd. and the rights of the holders of any outstanding series of preferred stock, our Certificate authorizes only the board of directors to fill vacancies, including newly created directorships. Accordingly, this provision could prevent a stockholder from obtaining majority representation on our board of directors by enlarging the board of directors and filling the new directorships with its own nominees. Our Certificate also provides that directors may be removed by stockholders only for cause and only by the affirmative vote of holders of a majority of the outstanding shares of voting stock.

Special Stockholder Meetings.  Our Bylaws provide that special meetings of the stockholders for any purpose or purposes, unless required by law, shall be called by the chairman of the board of directors, the chief executive officer or a majority of the board of directors. This limitation on the right of stockholders to call a special meeting could make it more difficult for stockholders to initiate actions that are opposed by the board of directors. These actions could include the removal of an incumbent director or the election of a stockholder nominee as a director. They could also include the implementation of a rule requiring stockholder ratification of specific defensive strategies that have been adopted by the board of directors with respect to unsolicited takeover bids. In addition, the limited ability of the stockholders to call a special meeting of stockholders may make it more difficult to change the existing board of directors and management.

Amendment of Provisions in the Certificate of Incorporation.  Our Certificate requires the affirmative vote of the holders of sixty percent of the voting power of all of the shares of the stock outstanding entitled to vote thereon, voting as a single class, shall be to alter, amend or repeal Article V, Article VI, Article VIII, or Article IX of our Certificate or the provisions of Article IV of our Certificate providing for undesignated Preferred Stock. These provisions of our Certificate relate to the election and removal of directors, our classified board of directors, special meetings of stockholders, and director liability and indemnification.

These voting requirements and provisions will make it more difficult for minority stockholders to make changes in our Certificate that could be designed to facilitate the exercise of control over us.

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Amendment of Provisions in our Bylaws.  Our Bylaws include provisions that:

Each of these bylaw provisions may not be altered, amended or repealed except by the board of directors or by the affirmative vote of holders of at least two-thirds of our outstanding voting stock.

These voting requirements and provisions make it more difficult for minority stockholders to make changes to our Bylaws that could be designed to facilitate the exercise of control over us.

Rights of First Refusal

Under the 2016 SPA, the Company has agreed that until the later of (x) July 1, 2019 and (y) date no 2016 Notes are outstanding, the Company shall not, (i) directly or indirectly, offer, sell, grant any option to purchase, or otherwise dispose of (or announce any offer, sale, grant or any option to purchase or other disposition of) any of its or its subsidiaries’ equity or equity equivalent securities, including without limitation any debt, preferred stock or other instrument or security that is, at any time during its life and under any circumstances, convertible into or exchangeable or exercisable for common stock or common stock equivalents unless the Company shall have first offered to issue and sell to or exchange with the buyers of the 2016 Notes at least thirty five percent (35%) of the securities offered in such offering, allocated among such buyers based on such buyer’s pro rata portion of the aggregate principal amount of 2016 Notes purchased under the 2016 SPA.

Stock Options

As of November 18, 2016, options to purchase an aggregate of 55 shares of common stock were outstanding under the 2006 Stock Option Plan and 2014 Stock Option Plan. Options to purchase an aggregate of 19 shares of common stock were outstanding under the Omnibus Plan and 159 additional shares of common stock were available for future grants the Omnibus Plan.

On August 7, 2014, we launched a tender offer to eligible employees to exchange all of the stock options held by such employees under the 2006 Stock Option Plan for new options under the 2014 Stock Option Plan. Following the expiration of the tender offer on September 5, 2014, we accepted for exchange eligible options to purchase 10 shares of our common stock. In accordance with the terms and conditions of the tender offer, on September 9, 2014, we granted new options exercisable into 10 shares of our common stock with an exercise price of $588,000 per share in exchange for the cancellation of such tendered options. All of the named executive officers holding options issued under the 2006 Stock Option Plan participated in the tender offer. The objective of the tender offer was to provide employees who elected to participate with new options, the terms of which preserve the original incentive effect of our equity incentive programs in light of market and industry wide economic conditions.

Warrants

As of November 18, 2016, we had outstanding 68,911,099 warrants to purchase shares of common stock comprised of (i) 372,331 common warrants to purchase 19 shares of common stock, (ii) 1,532,598 warrants to purchase 52 shares of common stock that were issued as “Class A Warrants”, (iii) 1,310,956 warrants to

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purchase 33 shares of common stock that were issued as “Class B Warrants”, (iv) 1,074,082 warrants to purchase 36 shares of common stock that were issued as Series B Warrants upon exercise of Series A Warrants, (v) 3,503,116 warrants to purchase 1,252 shares of common stock that were issued as “Series D warrants” (vi) 105,516 warrants to purchase 38 shares of our common stock that were issued as “2015 Subordination Warrants”, (vii) 3,075,000 warrants to purchase 38,438 shares of our common stock that were issued as “Series G Warrants”, (viii) 56,250,000 warrants exercisable for 703,125 shares of our common stock that were issued as “Series H Warrants”, (ix) 1,687,500 warrants to purchase 21,094 shares of our common stock that were issued as “2016 Subordination Warrants”. Each Class A Warrant represents the right to purchase one share of our common stock for every 168,000 warrants at an exercise price of $0.02 per share. Each Class B Warrant represents the right to purchase one share of our common stock for every 168,000 warrants at an exercise price of $0.02 per share. Each Series B Warrant represents the right to purchase one share of our common stock for every 168,000 warrants at an exercise price of $     per share. Each Series D Warrant and 2015 Subordination Warrant represents the right to acquire one share of our common stock for every 2,800 warrants at an exercise price of $0.02 per share. Each Series G Warrant represents the right to purchase one share of our common stock for every 80 warrants at an exercise price of $0.02 per share. Each Series H Warrant and 2016 Subordination Warrant represents the right to purchase one share of our common stock for every 80 warrants at an exercise price of $0.02 per share. The exercise price for each of the Class A Warrants, Class B Warrants, Series D Warrants, 2015 Subordination Warrants, Series G Warrant, Series H Warrants and 2016 Subordination Warrants is subject to adjustment in the event we issue common stock or securities convertible into common stock at a price lower than the then-current exercise price. The exercise price of the Series B Warrants is subject to adjustment in the event we issue common stock or securities convertible into common stock at a price lower than the current market price.

Class A and Class B Warrants

The Class A Warrants and Class B Warrants are subject to the terms of a Unit Purchase Agreement, a Class A Warrant and a Class B Warrant, as applicable. The following is a brief summary of the terms applicable to the Class A Warrants and Class B Warrants, although this summary is subject in all respects to the provisions contained in the form of the Unit Purchase Agreement, Class A Warrant, and Class B Warrants attached exhibits hereto.

Exercisability.  Each Class A Warrant and Class B Warrant is exercisable for one share of our common stock for every 168,000 warrants. The Class A and Class B Warrants are exercisable at any time on or after the original date of issuance until the seventh anniversary of the initial closing issuing such warrants. Each Class A Warrant and Class B Warrant is exercisable, at the option of each holder, in whole or in part, by delivering to us a duly executed exercise notice accompanied by payment in full for the number of shares of our common stock purchased upon such exercise (except in the case of a cashless exercise as discussed below). The number of shares of common stock that may be acquired by any holder upon any exercise of a Class A Warrant or Class B Warrant will be limited to the extent necessary to insure that, following such exercise (or other issuance), the total number of shares of common stock then beneficially owned by such holder and its affiliates and any other persons whose beneficial ownership of common stock would be aggregated with the holder’s for purposes of Section 13(d) of the Exchange Act does not exceed 4.99% of the total number of issued and outstanding shares of common stock (including for such purpose the shares of common stock issuable upon such exercise). We refer to this as the beneficial ownership limitation. The holder may elect to increase this beneficial ownership limitation to any other percentage, provided that any such increase will not be effective until 61 days after such written notice is delivered.

Cashless Exercise.  If at any time during the warrant exercisability period our common stock begins trading on a national securities exchange and an effective registration statement has not been filed to cover the resale of the shares underlying the Class A Warrants and the Class B Warrants, the Class A Warrants and Class B Warrants may be exercised by means of a “cashless exercise” in which a warrant holder will be entitled to surrender a portion of the shares of common stock subject to the warrant in lieu of cash for the exercise price.

Exercise Price.  The exercise price of the Class A Warrants is $0.02 per share. The exercise price of the Class B Warrants is $0.02 per share. The exercise price for each of the Class A Warrants and the Class B Warrants is subject to adjustment in the event we issue common stock or securities convertible into common stock at a price lower than the then-current exercise price The respective exercise prices of the Class A

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Warrants and Class B Warrants are further subject to appropriate adjustment in the event of stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our common stock.

Transferability.  Subject to applicable securities laws, the Class A Warrants and Class B Warrants may be transferred at the option of the holders upon surrender of the Class A Warrants and Class B Warrants to us together with the appropriate instruments of transfer.

Listing.  There is no established public trading market for the Class A Warrants or Class B Warrants and we do not expect a market to develop. In addition, we do not intend to apply for listing of the Class A Warrants or Class B Warrants on any national securities exchange.

Fundamental Transactions.  If, while any Class A Warrants or Class B Warrants are outstanding, we consummate any fundamental transaction, as described in the Class A Warrants and Class B Warrants and generally including any consolidation or merger into another corporation, or the sale, lease or conveyance to another corporation or entity of all or substantially all of our assets, the holder of any outstanding warrants will receive upon exercise of the Class A Warrants or Class B Warrants, the securities or other consideration to which a holder of the number of shares of common stock then deliverable upon the exercise of such warrants would have been entitled upon the fundamental transaction. Furthermore, we cannot enter into a fundamental transaction unless the successor entity assumes in writing all of our obligations to the holders of the Class A Warrants and Class B Warrants.

Rights as Stockholder.  Except as otherwise provided in the Class A Warrants or Class B Warrants or by virtue of a holder’s ownership of shares of our common stock, the holders of the warrants do not have the rights or privileges of holders of our common stock, including any voting rights, until they exercise their warrants.

Waivers and Amendments.  Any term of the Warrants may be amended or waived with our written consent and the written consent of the majority holders of the Warrants.

Series B Warrants

The Series B Warrants are subject to the terms of the Series B Warrant. The following is a brief summary of the terms applicable to the Series B Warrants, although this summary is subject in all respects to the provisions contained in the form of the Series B Warrant, which is attached as an exhibit hereto.

Exercisability.  Each Series B Warrant is exercisable for one share of common stock for every 168,000 warrants. The Series B Warrants are exercisable at any time on or after the original date of issuance until the sixth anniversary of the date of issuance. Each Series B Warrant is exercisable, at the option of each holder, in whole or in part, by delivering to the warrant agent, or, in the case of a cashless exercise, to us, a duly executed exercise notice accompanied by payment in full for the number of shares of our common stock purchased upon such exercise (except in the case of a cashless exercise as discussed below). The number of shares of common stock that may be acquired by any holder upon any exercise of a Series B Warrant will be limited to the extent necessary to insure that, following such exercise (or other issuance), the total number of shares of common stock then beneficially owned by such holder and its affiliates and any other persons whose beneficial ownership of common stock would be aggregated with the holder’s for purposes of Section 13(d) of the Exchange Act does not exceed 4.99% of the total number of issued and outstanding shares of common stock (including for such purpose the shares of common stock issuable upon such exercise). We refer to this as the beneficial ownership limitation. The holder may elect to increase this beneficial ownership limitation to any other percentage, provided that any such increase will not be effective until 61 days after such written notice is delivered.

Cashless Exercise.  If at any time during the warrant exercisability period our common stock begins trading on a national securities exchange and an effective registration statement has not been filed to cover the resale of the shares underlying the Series B Warrants, the Series B Warrants, as the case may be, may be exercised by means of a “cashless exercise” in which a warrant holder will be entitled to surrender a portion of the shares of common stock subject to the warrant in lieu of cash for the exercise price.

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Exercise Price.  The exercise price of the Series B Warrants is $91,675 per share. The exercise price for each of the Series B Warrants is subject to adjustment in the event we issue common stock or securities convertible into common stock at a price lower than the then-current market price. The exercise price for each of the Series B Warrants is further subject to appropriate adjustment in the event of stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our common stock.

Transferability.  Subject to applicable securities laws, the Series B Warrants may be transferred at the option of the holders upon surrender of the Series B Warrants to us or the warrant agent together with the appropriate instruments of transfer.

Listing.  There is no established public trading market for the Series B Warrants and we do not expect a market to develop. In addition, we do not intend to apply for listing of the Series B Warrants on any national securities exchange.

Fundamental Transactions.  If, while any Series B Warrants are outstanding, we consummate any fundamental transaction, as described in the Series B Warrants, generally including any consolidation or merger into another corporation, or the sale, lease or conveyance to another corporation or entity of all or substantially all of our assets, the holder of any outstanding warrants will receive upon exercise of the Series B Warrants, the securities or other consideration to which a holder of the number of shares of common stock then deliverable upon the exercise of such warrants would have been entitled upon the fundamental transaction. Furthermore, we cannot enter into a fundamental transaction unless the successor entity assumes in writing all of our obligations to the holders of the Series B Warrants.

Rights as Stockholder.  Except as otherwise provided in the Series B Warrants, or by virtue of a holder’s ownership of shares of our common stock, the holders of the Series B Warrants do not have the rights or privileges of holders of our common stock, including any voting rights, until they exercise their warrants.

Waivers and Amendments.  Any term of the Series B Warrants may be amended or waived with our written consent and the written consent of the majority holders of the Series B Warrants.

Series D Warrants

The Series D Warrants were originally issued in connection with the 2015 Convertible Note Financing. The Series D Warrants are exercisable for 1,252 shares of common stock. On December 31, 2016, the number of warrants issuable upon exercise of the Series D Warrants will be increased by the difference, if positive, obtained by subtracting (x) the shares of common stock issuable under the Series D Warrants on the date of issuance from (y) 16.6% of the sum of the number of shares of common stock actually outstanding on December 31, 2016, plus the number of shares of common stock deemed to be outstanding pursuant to all outstanding options or convertible securities of the Company.

Each Series D Warrant is exercisable by the holder beginning six months after the date of issuance and continuing for a period five years thereafter. Each 2,800 Series D Warrants are exercisable for one share of stock at a price of $0.02 per share.

The Series D Warrants are exercisable on a cashless basis in the event that there is no effective registration statement under the Securities Act covering the resale of the shares of Common Stock issuable upon exercise of the Series D Warrants.

The exercise price of the Series D Warrants is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting our common stock. The exercise price of the Series D Warrants is also subject to anti-dilution adjustments for any issuance of common stock or rights to acquire common stock for consideration per share less than the exercise price of the Series D Warrants from the date of issuance in this offering. For purposes of these adjustments, dilutive issuances do not include securities issued under existing instruments, under board-approved equity incentive plans or in certain strategic transactions.

2015 Subordination Warrants

The 2015 Subordination Warrants were issued to Spring Forth Investments LLC and Utah Autism Foundation in relation to their agreement to enter into subordination agreements with the collateral agent in the 2015

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Convertible Note Financing whereby each agreed to subordinate their debt to the 2015 Notes issued in the 2015 Convertible Note Financing. The 2015 Subordination Warrants have the same general terms and conditions of the Series D Warrants.

The 2015 Subordination Warrants are exercisable for 38 shares of common stock. On December 31, 2016, the number of warrants issuable upon exercise of the 2015 Subordination Warrants will be increased by the difference, if positive, obtained by subtracting (x) the shares of common stock issuable under the 2015 Subordination Warrants on the date of issuance from (y) 0.5% of the sum of the number of shares of common stock actually outstanding on December 31, 2016, plus the number of shares of common stock deemed to be outstanding pursuant to all outstanding options or convertible securities of the Company. Each 2015 Subordination Warrant is exercisable by the holder beginning six months after the date of issuance and continuing for a period five years thereafter. Each 2,800 2015 Subordination Warrants are exercisable for one share of stock at a price of $0.02 per share.

The exercise price of the 2015 Subordination Warrants is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting our common stock. The exercise price of the 2015 Subordination Warrants is also subject to anti-dilution adjustments for any issuance of common stock or rights to acquire common stock for consideration per share less than the exercise price of the 2015 Subordination Warrants from the date of issuance in this offering. For purposes of these adjustments, dilutive issuances do not include securities issued under existing instruments, under board-approved equity incentive plans or in certain strategic transactions.

Series G Warrants

Exercise Price and Duration.  The Series G Warrants entitle the holders thereof to purchase up to an aggregate of 38,438 shares of our common stock. Each 80 Series G warrants are exercisable into one share of common stock at an exercise price of $0.02 per share, subject to adjustment as described below, and will expire five years after the date they are issued.

Anti-Dilution Protection.  The exercise price of the Series G Warrants is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting our common stock. The exercise price of the Series G Warrants is also subject to anti-dilution adjustments for any issuance of common stock or rights to acquire common stock for consideration per share less than the exercise price of the Series G Warrants from the date of issuance in this offering subject to a floor of $0.10 per share of common stock. For purposes of these adjustments, dilutive issuances do not include securities issued under existing instruments, under board-approved equity incentive plans or in certain strategic transactions. Notwithstanding the foregoing, “dilutive issuances” shall include the 2015 Notes and any shares of common stock issued pursuant to the 2015 Notes.

Cashless Exercise.  If, at the time a holder exercises its Series G Warrant, there is no effective registration statement registering, or the prospectus contained therein is not available for an issuance of the shares underlying the Series G Warrant to the holder, then in lieu of making the cash payment otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead to receive upon such exercise (either in whole or in part) the net number of shares of common stock determined according to a formula set forth in the Series G Warrant.

Fundamental Transactions.  If, at any time while the Series G Warrants are outstanding, (A) the Company, directly or indirectly, in one or more related transactions, (i) consolidates or merges with or into (whether or not the Company is the surviving corporation) another person, or (ii) sells, assigns, transfers, conveys or otherwise disposes of all or substantially all of the properties or assets of the Company to any other person, or (iii) makes, or allows any other person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of common stock (not including any shares of common stock held by the person(s) making or party to, or affiliated with any of the persons making or party to, such purchase, tender or exchange offer); or (iv) consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other person whereby such other person acquires more than 50% of the outstanding shares of common stock (not including any shares of common stock held by the person(s) making or party to, or affiliated with any of the persons making or party to, such stock purchase agreement or other business

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combination), or (v) reorganizes, recapitalizes or reclassifies its common stock, (B) the Company, directly or indirectly, through one or more related transactions, allows any person or group to be or become the “beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act), directly or indirectly, of more than 50% of the aggregate voting power represented by issued and outstanding common stock, or (C) the Company, directly or indirectly, through one or more related transactions, issues or enters into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of this definition, in which case this definition shall be construed and implemented in a manner to correct this definition or any portion of this definition which may be defective or inconsistent with the intended treatment of such instrument or transaction (each, a “Fundamental Transaction”), then each holder shall have the right thereafter to receive, upon exercise of a Series G Warrant, the same amount and kind of securities, cash or property as such holder would have been entitled to receive upon the occurrence of such Fundamental Transaction if the holder had been, immediately prior to such Fundamental Transaction, the holder of the number of shares of common stock then issuable upon exercise of the Series G Warrant. Any successor to us, surviving entity or the corporation purchasing or otherwise acquiring such assets shall assume the obligation to deliver to the holder such alternate consideration, and the other obligations, under the Series G Warrant. Notwithstanding the preceding paragraph, in the event of any Fundamental Transaction, the holders of the Series G Warrants will be entitled to receive, in lieu of our shares and at the holders’ option, cash in an amount equal to the Black Scholes Value (as defined in the form of Series G Warrant) of the remaining unexercised portion of the Series G Warrant on the date of the transaction.

Transferability.  The Series G Warrants may be transferred at the option of the Series G Warrant holder upon surrender of the Series G Warrants with the appropriate instruments of transfer.

Exercisability.  The Series G Warrants will be exercisable, at the option of each holder, in whole or in part, by delivering to us a duly executed exercise notice accompanied by payment in full for the number of shares of our common stock purchased upon such exercise (except in the case of a cashless exercise as discussed above). A holder (together with its affiliates) may not exercise any portion of the warrant to the extent that the holder would beneficially own more than 4.99% (or at the election of the holder, 9.99%) of our outstanding common stock after exercise. The holder may increase or decrease this beneficial ownership limitation to any other percentage of our common stock outstanding immediately after the exercise not in excess of 9.99%, upon notice to us, provided that, in the case of an increase, such increase shall not be effective for 61 following the written notice to us.

Waivers and Amendments.  Subject to certain exceptions, the terms of a Series G Warrant may be amended or waived only with the written consent of the holder.

Series H Warrants

The Series H Warrants were originally issued in connection with the 2016 Convertible Note Financing. The Series H Warrants are exercisable for 703,125 shares of common stock.

Each Series H Warrant is exercisable by the holder beginning six months after the date of issuance and continuing for a period five years thereafter. Each 80 Series H Warrant is exercisable for one share of common stock at a price of $0.02 per share subject to adjustments as described below.

The Series H Warrants are exercisable on a cashless basis in the event that there is no effective registration statement under the Securities Act covering the resale of the shares of Common Stock issuable upon exercise of the Series H Warrants.

The exercise price of the Series H Warrants is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting our common stock. The exercise price of the Series H Warrants is also subject to anti-dilution adjustments for any issuance of common stock or rights to acquire common stock for consideration per share less than the exercise price of the Series H Warrants from the date of issuance in this offering. For purposes of these adjustments, dilutive issuances do not include securities issued under existing instruments, under board-approved equity incentive plans or in certain strategic transactions.

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2016 Subordination Warrants

The 2016 Subordination Warrants were issued to Spring Forth Investments LLC and Utah Autism Foundation in relation to their agreement to enter into subordination agreements with the collateral agent in the 2016 Convertible Note Financing whereby each agreed to subordinate their debt to the 2016 Notes issued in the 2016 Convertible Note Financing. The 2016 Subordination Warrants have the same general terms and conditions of the Series H Warrants.

The 2016 Subordination Warrants are exercisable for 21,094 shares of common stock. Each 2016 Subordination Warrant is exercisable by the holder beginning six months after the date of issuance and continuing for a period five years thereafter. Each 80 2016 Subordination Warrants are exercisable into one share of common stock at an exercise price of $0.02 per share subject to adjustments as described below.

The exercise price of the 2016 Subordination Warrants is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting our common stock. The exercise price of the 2016 Subordination Warrants is also subject to anti-dilution adjustments for any issuance of common stock or rights to acquire common stock for consideration per share less than the exercise price of the 2016 Subordination Warrants from the date of issuance in this offering. For purposes of these adjustments, dilutive issuances do not include securities issued under existing instruments, under board-approved equity incentive plans or in certain strategic transactions.

Registration Rights under Investor Rights Agreement

Certain holders of shares of our common stock, including certain holders of five percent of our capital stock and entities affiliated with certain of our directors are entitled to certain rights with respect to registration of such shares under the Securities Act. These shares are referred to as registrable securities. The holders of these registrable securities possess registration rights pursuant to the terms of the investor rights agreement and are described in additional detail below. The investor rights agreement was originally entered into on February 16, 2010 and was amended and restated on November 26, 2013 in connection with our Series C and Series C-1 preferred stock financing. As of January 6, 2016, no holders are entitled to rights with respect to the registration of their shares of common stock under the Securities Act pursuant to the investor rights agreement. The registration of shares of our common stock pursuant to the exercise of the registration rights described below would enable the holders to trade these shares without restriction under the Securities Act when the applicable registration statement is declared effective. We will pay the registration expenses, other than underwriting discounts, selling commissions and stock transfer taxes, of the shares registered pursuant to such registration statement.

The demand, piggyback and Form S-3 registration rights described below will expire on October 8, 2017, or, with respect to any particular holder, at such time that such holder can sell its shares under Rule 144 of the Securities Act during any three month period.

Demand Registration Rights

The holders of the registrable securities will be entitled to certain demand registration rights. At any time on or after February 16, 2015 until the expiration of the investor rights agreement, the holders of at least a majority of the registrable securities then outstanding, may make a written request that we register all or a portion of their shares, subject to certain specified exceptions. Such request for registration must cover securities the aggregate offering price of which, before payment of underwriting discounts and commissions, would exceed $5,000,000.

Piggyback Registration Rights

The holders of registrable securities are entitled to notice of our public offering of securities pursuant to a Registration Statement on Form S-1 (File No. 333-207761), and we expect the necessary percentage of holders will waive their rights to include their shares of registrable securities in our public offering of securities pursuant to a Registration Statement on Form S-1 (File No. 333-207761). If we propose to register for offer and sale any of our securities under the Securities Act in another offering, either for our own account or for the account of other security holders, the holders of these shares will be entitled to certain “piggyback” registration rights allowing them to include their shares in such registration, subject to certain marketing and other limitations. As a result, whenever we propose to file a registration statement under the Securities Act,

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including a registration statement on Form S-3 as discussed below, other than with respect to a demand registration or a registration statement on Forms S-4 or S-8 or related to stock issued upon conversion of debt securities, the holders of these shares are entitled to notice of the registration and have the right, subject to limitations that the underwriter may impose on the number of shares included in the registration, to include their shares in the registration.

Form S-3 Registration Rights

The holders of the registrable securities will be entitled to certain Form S-3 registration rights. Any holder of these shares can make a request that we register for offer and sale their shares on Form S-3 if we are qualified to file a registration statement on Form S-3, subject to certain specified exceptions. Such request for registration on Form S-3 must cover securities the aggregate offering price of which, before payment of the underwriting discounts and commissions, equals or exceeds $1,000,000. We will not be required to effect more than two registrations on Form S-3 within any 12 month period.

Convertible Note Financing Registration Rights

In connection with the convertible note financing, we entered into a registration rights agreement. Under the terms of the registration rights agreement, we agreed to register for resale by the buyers under the Securities Act the shares of common stock issuable upon conversion of the convertible notes and exercise of the Series D Warrants.

We agreed to file such registration statement within 45 calendar days of the closing of the convertible note financing and bring such registration statement effective by the earlier of (x) (i) in the event that the registration statement is not subject to a review by the SEC, 75 calendar days after the closing or (ii) in the event that the registration statement is subject to a review by the SEC, 90 calendar days after the closing and (y) the fifth business day after the date we are notified by the SEC that such registration statement will not be reviewed or will not be subject to further review. Subsequently, we entered into an amendment agreement to the registration rights agreement pursuant to which the filing deadlines were extended to February 29, 2016 for the filing of the registration statement, March 30, 2016 to bring the registration statement effective if it is not subject to SEC review and April 14, 2016 to bring the registration statement effective if it is subject to SEC review.

On May 11, 2016, we and certain of the buyers holding enough of the convertible notes and Series D Warrants to constitute the required holders under Section 10 of the registration rights agreement entered into Amendment Agreement No. 3 to the Registration Rights Agreement (the “Third Amendment Agreement”). In the Third Amendment Agreement we and the buyers agreed to extend the deadline for bringing the initial registration statement effective registering our shares of common stock issuable upon conversion of the convertible notes and exercise of the Series D Warrants to the date which is the earlier of May 31, 2016 and the fifth (5^th) business day after the date we are notified (orally or in writing, whichever is earlier) by the SEC that such initial registration statement will not be subject to further review.

Under the Third Amendment Agreement, the buyers also waived (i) any breach of the registration rights agreement prior to May 11, 2016 under Section 2(a) of the registration rights agreement for our failure to have the initial registration statement brought effective by the initial effectiveness deadline, prior to the date of Third Amendment Agreement and (ii) the buyer’s rights to Registration Delay Payments (as defined under the registration rights agreement) prior to the date of the Third Amendment Agreement for our failure to have the initial registration statement brought effective by the initial effectiveness deadline.

On June 29, 2016, the Company and certain buyers holding enough of the 2015 Notes and Series D Warrants to constitute the required holders under Section 10 of the registration rights agreement entered into between the Company and the holders of the 2015 Notes and Series D Warrants entered into waiver agreements to waive: (i) any breach prior to and including June 29, 2016 under Section 2(a) of the registration rights agreement for the Company’s failure to have the initial registration statement brought effective by the initial effectiveness deadline, (ii) any right to Registration Delay Payments (as defined under the registration rights agreement) prior to and including June 29, 2016 for failure to meet its obligations under Section 2(a), and (iii) compliance with the registration requirements of Section 2(a) from and including June 29, 2016, through August 31, 2016.

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If we fail to make our filing deadlines or fail to maintain the registration statement for the required periods of time, we will be required pay to each holder an amount in cash equal to one percent (1.0%) of the aggregate principal amount outstanding of the convertible notes as of the applicable date of determination, whether or not included in such registration statement, on each of the following dates: (i) the day of a registration failure, (ii) the day of a filing failure; (iii) the day of an effectiveness failure; (iv) the initial day of a maintenance failure; and (v) on the thirtieth day after the date of a registration, filing, effectiveness, or maintenance failure and every thirtieth day thereafter until such failure is cured (in each case, prorated for periods of less than thirty days).

We agreed to keep any registration statements required by the registration rights agreement effective until the earlier of (i) the date as of which the investors may sell all of the registered shares of common stock covered by such registration statement without restriction or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1) (or any successor thereto) promulgated under the Securities Act or (ii) the date on which the investors shall have sold all of the registered shares of common stock covered by such registration statement.

On November 2, 2016, the Company and certain of the 2015 Note Buyers holding enough of the Notes and Warrants to constitute the Required Holders under Section 10 of the Registration Rights Agreement entered into Amendment Agreement No.4 to the Registration Rights Agreement (the “Fourth Amendment Agreement”). In the Fourth Amendment Agreement, the Company and the 2015 Note Buyers agreed to extend the deadline for bringing the initial registration statement effective registering our shares of common stock issuable upon conversion of the Notes and exercise of the Warrants to the date which is the earlier of March 1, 2017 and the fifth (5th) business day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that such initial registration statement will not be subject to further review. Under the Fourth Amendment Agreement, the 2015 Note Buyers also waived (i) any breach of the Registration Rights Agreement prior to November 2, 2016 under Section 2(a) of the Registration Rights Agreement for the Company’s failure to have the initial registration statement brought effective by the initial effectiveness deadline, prior to the date of Fourth Amendment Agreement and (ii) the holder’s right to Registration Delay Payments (as defined under the Registration Rights Agreement) prior to the date of the Fourth Amendment Agreement for the Company’s failure to have the initial registration statement brought effective by the initial effectiveness deadline.

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DESCRIPTION OF OFFERED SECURITIES

We are offering an aggregate of up to     Units, each consisting of (i) one share of our Series G Preferred Stock and (ii) a Series I Warrant to purchase     shares of our Common Stock. The Units will not be issued or certificated. The Series G Preferred Stock and Series I Warrants are immediately separable and will be issued separately, but will be purchased together as a unit in this offering. This prospectus also covers up     to shares of Common Stock issuable upon conversion of the Series G Preferred Stock and exercise of the Series I Warrants.

Description of Common Stock

The material terms and provisions of our common stock and each other class of our securities which qualifies or limits our common stock are described under the heading “Description of Capital Stock” above.

Description of Series G Preferred Stock

Our authorized preferred stock consists of 5,000,000 shares. As of November 18, 2016, there were 74,380 shares of Series E Preferred Stock outstanding, 7,284 shares of Series F Preferred Stock outstanding, and no shares of Series G Preferred Stock outstanding. The following is a summary of the material terms of the Series G Preferred Stock. This summary is not complete and is qualified in its entirety by reference to the Certificate of Designation and our Certificate of Incorporation, each as filed by us with the office of the Secretary of State of Delaware. You should review a copy of the Certificate of Designation attached hereto as Annex A for a complete description of the terms and conditions applicable to the Series G Preferred Stock offered by this prospectus.

Form.  The Series G Preferred Stock will be issued in book entry form, although investors will be permitted to request the issuance of individual stock certificates.

Amount of Preferred Stock Shares.  Each purchaser of Units will receive one share of Series G Preferred Stock for each Unit purchased. Each share of Series G Preferred Stock has a par value of $0.001 and an initial stated value of $1,000 (subject to adjustment).

Ranking.  The Series G Preferred Stock will rank in parity to our outstanding Series F Preferred Stock and senior to our outstanding Series E Preferred Stock and Common Stock and other classes of capital stock with respect to dividend, redemption and distributions of assets upon liquidation, dissolution or winding up, unless the holders of a majority of the outstanding shares of Series G Preferred Stock consent to the creation of parity stock or senior preferred stock.

Voting Rights.  With certain exceptions, as described in the Certificate of Designation for the Series G Preferred Stock, the Series G Preferred Shares have no voting rights. However, as long as any shares of Series G Preferred Shares remain outstanding, we may not, without the affirmative vote of holders of a majority of the then outstanding shares of Series G Preferred Stock: (a) alter or change adversely the powers, preferences or rights given to the Series G Preferred Stock or alter or amend the Certificate of Designation for the Series G Preferred Stock; (b) authorize or create any class of stock ranking as to dividends, redemption or distribution of assets upon liquidation, dissolution or winding up senior to, or otherwise pari passu with, the Series G Preferred Stock; (c) amend our articles of incorporation or other charter documents in any manner that adversely affects any rights of the holders of Series G Preferred Stock; (d) increase the number of authorized shares of Series G Preferred Stock; or (e) enter into any agreement with respect to any of the foregoing.

Liquidation Preference.  Upon our voluntary or involuntary liquidation, dissolution or winding up, before the payment of any amount to the holder of shares of junior stock, but pari passu with any parity stock, the holders of Series G Preferred Stock are entitled to receive an amount equal to the stated value of the Series G Preferred Stock plus any accrued but unpaid dividends thereon and all liquidated damages and other amounts then due and owing. If there are insufficient assets to pay in full such amounts, then the available assets shall be ratably distributed to the holders of Series G Preferred Stock in accordance with the respective amounts that would be payable on such shares if all amounts payable thereon were paid in full. The Certificate of Designation for the Series G Preferred Stock does not provide for any restriction on the repurchase of Series G Preferred Shares by us while there is an arrearage in the payment of dividends of the Series G Preferred Shares.

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Dividends.  Holders of Series G Preferred Stock are entitled to receive cumulative dividends at the rate of% per annum, payable on the first business day of each month commencing on, to holders of record on the 15th day of the preceding month, and on each conversion date. We are currently not permitted to pay cash dividends under the terms of the Colorado Business Corporations Act and we will so advise the holders of Series G Preferred Stock at the closing of this offering. If we do not have funds legally available to pay cash dividends, such dividends accrete to and increase the outstanding stated value of the Series G Preferred Stock. If the Series G Preferred Stock remains outstanding after dividends will cease to accrue on such date if we meet certain equity conditions, as further described below. Any dividends that are not paid within three trading days following the applicable payment date other than dividends that accrete to and increase the stated value shall continue to accrue and shall incur a late fee at the rate of    % per annum or the lesser maximum rate permitted by applicable law, which shall accrue daily from the applicable payment date through and including the date of actual payment in full. There are no sinking fund provisions applicable to the Series G Preferred Stock.

Voluntary Conversion.  Each share of Series G Preferred Stock is convertible at any time after (i) in the case of certificated shares, the date of issuance and (ii) in the case of shares of Series G Preferred Stock held in electronic form through a broker, bank as other nominee, the second trading day following the date of issuance, at the holder’s option into a number of shares of Common Stock equal to its then stated value divided by the conversion price.

Mandatory Conversion.  On             we will have the right to cause each holder of Series G Preferred Stock to convert all or part of such holder’s Series G Preferred Stock, plus all accrued but unpaid dividends thereon and all liquidated damages and other amounts then due and owing, to shares of our Common Stock, subject to the satisfaction of certain equity and other conditions set forth in the Certificate of Designation for the Series G Preferred Stock. If all of the equity conditions are satisfied other than the requirement that we are able to issue shares of Common Stock upon mandatory conversion of the Series G Preferred Stock without triggering the beneficial ownership limitation described below, then we will convert shares of Series G Preferred Stock in the maximum amount permitted and the balance of the Series G Preferred Stock will remain outstanding, the dividends will cease to accrue and the full-ratchet price protection described below and the negative covenants described below become null and void and of no further force and effect.

Limitations on Conversion.  A holder of Series G Preferred Stock may not convert shares of Series G Preferred Stock and we may not issue shares of Common Stock under the Series G Preferred Stock if, after giving effect to the conversion or issuance, the holder together with its affiliates would beneficially own in excess of 9.99% of the outstanding shares of our Common Stock. At each holder’s option, the cap may be increased or decreased to any other percentage not in excess of 9.99%, except that any increase will not be effective until the 61st day after notice to us.

Conversion Price.  Generally, the conversion price for the Series G Preferred Stock shall be equal to the lesser of: (a) the Set Price of $    , subject to adjustment, a reset and a floor; and (b)    % of the lowest volume weighted average price for our Common Stock as reported at the close of trading on the market reporting trade prices for the Common Stock during the five trading days ending on, and including, the date that a notice of conversion is tendered to us. In connection with a mandatory conversion by us, the conversion price shall be the lesser of: (y) the then Set Price; and (z)    % of the lowest volume weighted average price for our Common Stock as reported at the close of trading on the market reporting trade prices for the Common Stock during the five trading days ending on, and including,     . In addition, on the earlier of  (I) the redemption or repayment in full of our convertible notes due    , and (II) the maturity date of such notes, the then Set Price shall be reduced, and only reduced, to the lower of: (A) the then Set Price; and (B) 100% of the volume weighted average price for our Common Stock as reported at the close of trading on the market reporting trade prices for the Common Stock on such date. In no event shall the conversion price be less than $    (20% of the market price determined on the date the offering is declared effective by the Securities and Exchange Commission). The Set Price is also subject to adjustment for stock splits, stock dividends, distributions of Common Stock or securities convertible, exercisable or exchangeable for Common Stock, subdivisions, combinations and reclassifications. Further, if we in the future, among other things, sell or grant securities or rights to acquire shares of Common Stock (other than certain exempt issuances) at an effective price that is lower than the then Set Price, the then Set Price shall be reduced to such lower price.

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Purchase Rights.  Holders of Series G Preferred Stock are entitled to acquire our securities or rights to purchase our securities or property granted, issued or sold pro rata to the holders of our Common Stock on an “as if exercised for Common Stock” basis.

Rights upon Distribution.  Holders of Series G Preferred Stock are entitled to receive any dividend or other distribution of our assets (or rights to acquire our assets) declared or made to holders of our Common Stock on an “as if exercised for Common Stock” basis.

Fundamental Transactions.  The Certificate of Designation for the Series G Preferred Stock prohibits us from entering into transactions constituting a “fundamental transaction” (as defined in the Certificate of Designation for the Series G Preferred Stock) unless the successor entity assumes all of our obligations under the Certificate of Designation for the Series G Preferred Stock and the other transaction documents in a written agreement approved by each holder of Series G Preferred Stock. Further, after a “fundamental transaction,” upon conversion of the Series G Preferred Stock, the holders of Series G Preferred Stock shall have the right to receive, for each share of our Common Stock that would have been issuable upon conversion but for such “fundamental transaction,” the number of shares of common stock of the successor or acquiring corporation plus any additional consideration receivable as a result of such “fundamental transaction.” The definition of ”fundamental transactions” includes, but is not limited to, mergers, a sale of all or substantially all our assets, certain tender offers and other transactions that result in a change of control.

Market and Exchange Listing.  The Series G Preferred Stock is a new issue of securities and currently there is no market for the securities. We do not intend to list or qualify for quotation the Series G Preferred Stock on any securities exchange or market.

Negative Covenants.  So long as any Preferred Stock is outstanding, without the consent of holders of at least 51% of the stated value of the then outstanding Preferred Stock, we may not (a) amend our charter documents in any manner that materially and adversely affects any rights of the holders of Preferred Stock, (b) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of our Common Stock and other junior securities, subject to certain exceptions, (c) pay cash dividends or make distribution on junior securities, (d) enter into certain affiliate transactions, and (e) enter into any agreement with respect to any of the foregoing.

Description of Series I Warrants

The following is a brief summary of certain terms and conditions provisions of the Series I Warrants offered by this prospectus and is subject in all respects to the provisions contained in the Series I Warrant, a form of which is attached to this prospectus as Annex B. As of the date of this prospectus there are no Series I Warrants outstanding. You should review a copy of the attached form of Series I Warrant for a complete description of the terms and conditions applicable to the warrant offered by this prospectus.

Form.  The Series I Warrants will be issued as individual warrant agreements to the investors substantially in the form attached hereto as Annex B.

Amount of Series I Warrant Shares.  Each purchaser of Units will receive a Series I Warrant exercisable into      shares of Common Stock. The number of shares of Common Stock issuable upon exercise of any Series I Warrant will be fixed at the closing of this offering,

Exercisability.  The Series I Warrants will be exercisable at any time after their issuance up to the date that is five years after issuance. The Series I Warrants will be exercisable, at the option of each holder, in whole or in part by delivering to us a duly executed exercise notice and, at any time a registration statement registering the issuance of the shares of Common Stock underlying the Series I Warrants under the Securities Act is effective and available for the issuance of such shares, by payment in full in immediately available funds for the number of shares of Common Stock purchased upon such exercise. No fractional shares of Common Stock will be issued in connection with the exercise of a Series I Warrant, but rather the number of shares of Common Stock to be issued shall be rounded up to the nearest whole number.

Registration of Series I Warrant Shares.  The issuance of shares of Common Stock upon exercise of the Series I Warrants is registered on the registration statement of which this prospectus is a part. If a registration

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statement under the Securities Act covering the exercise of the Series I Warrants is not available in the future, then we expect that the Series I Warrants will be exercisable on a cashless basis.

Cashless Exercise.   If the issuance of the shares of Common Stock issuable upon exercise of a Series I Warrant is not covered by a registration statement under the Securities Act, the holder may, in its sole discretion, elect to exercise a Series I Warrant through a cashless exercise, in which case the holder would receive upon such exercise the “net number” of shares of Common Stock determined according to the formula set forth in the Series I Warrant.

Limitations on Exercise and Issuance.  A holder may not exercise a Series I Warrant and we may not issue shares of Common Stock under the Series I Warrants if, after giving effect to the exercise or issuance, the holder together with its affiliates would beneficially own in excess of 9.99% of the outstanding shares of our Common Stock. At each holder’s option, the cap may be increased or decreased to any other percentage not in excess of 9.99%, except that any increase will not be effective until the 61^st day after notice to us.

Exercise Price.  The initial exercise price per share of Common Stock purchasable upon exercise of the Series I Warrants is $    per share of Common Stock. The exercise price of the Series I Warrants is subject to adjustments for stock splits or similar events. Further, the exercise price is subject to a reset. If on the earlier of the date of (i) repayment in full of our convertible notes due on             and (ii) the maturity date of such note, the exercise price exceeds     % of the lowest volume weighted average price of our Common Stock during the five consecutive trading day period ending on, and including, such date, the exercise price will be reset to such lower price.

Transferability.   Subject to applicable laws, the Series I Warrants may be offered for sale, sold, transferred or assigned without our consent. However, there is no established public trading market for the Series I Warrants and we do not expect one to develop.

Purchase Rights.  The holders of the Series I Warrants are entitled to acquire options, convertible securities or rights to purchase our securities or property granted, issued or sold pro rata to the holders of our Common Stock on an “as if exercised for Common Stock” basis.

Fundamental Transactions.  The Series I Warrants prohibit us from entering into transactions constituting a “fundamental transaction” (as defined in the Series I Warrants) unless the successor entity assumes all of our obligations under the Series I Warrants and the other transaction documents in a written agreement approved by the “required holders” of the Series I Warrants. The definition of “fundamental transactions” includes, but is not limited to, mergers, a sale of all or substantially all our assets, certain tender offers and other transactions that result in a change of control.

Rights as a Shareholder.  Except as otherwise provided in the Series I Warrants or by virtue of such holder’s ownership of shares of Common Stock, the holder of a Series I Warrant does not have the rights or privileges of a holder of Common Stock, including any voting rights, until the holder exercises the Series I Warrant.

Amendment and Waiver.  The provisions of a Series I Warrant may be amended or waived and we may take action prohibited by the Series I Warrant, or omit to perform any act required by the Series I Warrant, only if we have obtained the written consent of the “required holders” (as defined in the Series I Warrants).

Market and Exchange Listing.  The Series I Warrants are a new issue of securities and currently there is no market for the securities. We do not intend to list or qualify for quotation the Series I Warrants on any securities exchange or market.

Transfer Agent, Registrar, Warrant Agent and Preferred Stock Agent

American Stock Transfer & Trust Company is (i) the transfer agent and registrar for our common stock and our Series E Convertible Preferred Stock and Series F Convertible Preferred Stock, and (ii) the warrant agent for our Series A, Series B, Series C, Series D, Series G and Series H Warrants.

Stock Market Listing

Our common stock is quoted on the OTCQB under the symbol “GBSN”.

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PLAN OF DISTRIBUTION

Roth Capital Partners, LLC, which we refer to as the placement agent, has agreed to act as the exclusive placement agent in connection with this offering. We have entered into a placement agent agreement, dated            , 2016 with the placement agent. The placement agent is not purchasing or selling any of the Units offered by this prospectus, nor is it required to arrange the purchase or sale of any specific number or dollar amount of the Units but has agreed to use its commercially reasonable “best efforts” to arrange for the sale of all of the Units offered hereby. We may not sell the entire amount of Units offered pursuant to this prospectus.

This offering is being made in the United States only to investors which qualify as “institutional investors” under the state securities laws and regulations of their state of domicile. We will enter into subscription agreements directly with institutional investors. The public offering prices set forth on the cover page of this prospectus have been determined based upon arm’s-length negotiations between the purchasers and us. The placement agent may engage sub-placement agents or selected dealers to assist in the placement of the Units offered hereby.

Placement Agent’s Fees and Expenses

We have agreed to pay the placement agent an aggregate cash placement fee equal to 7% of the gross proceeds from the sale of the Units in this offering.

The following table shows the per unit and total cash placement agent’s fees (where applicable) we will pay to the placement agent in connection with the sale of the Units offered pursuant to this prospectus assuming the purchase of all of the Units offered hereby:

		Per Unit				Total
Public offering price		$				$
Placement agent fees		$				$
Proceeds to us, before expenses		$				$

We have agreed to reimburse the placement agent for certain of its out-of-pocket legal expenses in an aggregate amount not to exceed $75,000 and other reasonable out-of-pocket expenses up to $25,000, subject to FINRA Rule 5110(f)(2)(D)(i).

The maximum total cash placement agent’s fee payable to the placement agent will not exceed a maximum of $    .

If we decide to make an offering of our equity, equity-linked or debt securities at any time within twelve months, we have granted the placement agent the right to act as the exclusive placement agent or lead placement agent and sole book runner, as applicable, for such offering under a separate agreement containing terms and conditions customary for the placement agent and mutually agreed upon by us and the placement agent.

If the offering hereunder is not consummated, the placement agent shall be entitled to the foregoing cash placement fee to the extent that capital is provided by investors that the placement agent introduced to us, or conducted discussions on our behalf, in any offering of securities by us or our affiliates within six months.

Our obligation to issue and sell the Units offered hereby to the purchasers is subject to the conditions set forth in the subscription agreements, which may be waived by us at our discretion. A purchaser’s obligation to purchase the units offered hereby is subject to the conditions set forth in the subscription agreement as well, which may also be waived.

We estimate the total offering expenses of this offering that will be payable by us, excluding the placement agent’s fee, will be approximately $350,000, which includes legal and printing costs, various other fees and reimbursement of the placements agent’s expenses. At the closing, American Stock Transfer & Trust Company will make a book-entry in its system for the Series G Preferred Stock and each investor will be set a notification of such book-entry. No certificates will be issued for the Series G Preferred Stock unless otherwise requested by the investor. We will mail the Series I Warrants directly to the investors at the respective addresses set forth in their subscription agreement with us.

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Indemnification

We have agreed to indemnify the placement agent against liabilities under the Securities Act of 1933, as amended. We have also agreed to contribute to payments the placement agent may be required to make in respect of such liabilities.

Lock-up Agreements

We have agreed, subject to certain exceptions, for a period of 90 days after the date of this prospectus, not to offer, sell, contract to sell or dispose of any shares of common stock or any securities convertible or exercisable for common stock, subject to certain limited exceptions, without the prior written consent of the placement agent. The placement agent may, in its sole discretion and at any time or from time to time before the termination of the lock-up period, without notice, waive this restriction.

In addition, pursuant to the subscription agreement we have also agreed that for a period of ninety (90) days from the date of the subscription agreement, we will not, without the prior written consent of investors that purchased in the aggregate 67% of the shares of common stock in this offering pursuant to a subscription agreement, directly or indirectly offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of, any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock, other than “Exempt Issuance” as defined in the Series I Warrants and shares of common stock issuable under the convertible notes.

Electronic Distribution

This prospectus may be made available in electronic format on websites or through other online services maintained by the placement agent, or by an affiliate. Other than this prospectus in electronic format, the information on the placement agent’s website and any information contained in any other website maintained by the placement agent is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or the placement agent, and should not be relied upon by investors.

The foregoing does not purport to be a complete statement of the terms and conditions of the placement agent agreement and subscription agreements. A copy of the placement agent agreement and the form of subscription agreement with the investors are included as exhibits to the registration statement of which this prospectus forms a part. See “Where You Can Find More Information” on page 134.

Regulation M Restrictions

The placement agent will be deemed to be an underwriter within the meaning of Section 2(a)(11) of the Securities Act, and any commissions received by it and any profit realized on the resale of the Units sold by it while acting as a principal may be deemed to be underwriting discounts or commissions under the Securities Act. As an underwriter, the placement agent would be required to comply with the requirements of the Securities Act and the Exchange Act, including, without limitation, Rule 10b-5 and Regulation M under the Exchange Act. These rules and regulations may limit the timing of purchases and sales of shares of common stock and warrants by the placement agent acting as a principal. Under these rules and regulations, the placement agent:

Other

From time to time, the placement agent and its affiliates have provided, and may in the future provide, various investment banking, financial advisory and other services to us and our affiliates for which services they have received, and may in the future receive, customary fees. In the course of their businesses, the placement agent and its affiliates may actively trade our securities or loans for their own account or for the accounts of customers, and, accordingly, the placement agent and its affiliates may at any time hold long or short positions in such securities or loans.