Great Basin Scientific Inc (NASDAQ:GBSN) Finally Bounces

To say Great Basin Scientific Inc (NASDAQ:GBSN) has been a horrible investment led by incompetent management is the understatement of the year. But even a dead cat like GBSN can bounce and finally we're seeing some life from a stock many had written off for dead. The reason being is that endless dilution has been driving the share price lower and lower. Management and the board have aided and abetted this travesty by reverse splitting the stock screwing over shareholders even more. The sad part is that it never had to come to this. We urged management back in March that it was in the best interest of shareholders to sell the company. We said at the time:

"The key is that even with FDA approval, we don’t believe the current management team will make Great Basin successful. They are the reason the share price is where it is at now. In the best interest of the company, the board of directors needs to focus on an exit strategy. With Great Basin’s technology, the stock is currently worth a heck of a lot more than where it is trading currently and a takeover would be a drop in the bucket for a big pharma player."

We had hoped that the worst might have been over after GBSN received not just one, but two FDA approvals within one week. On March 23, GBSN announced that it received FDA 510(k) clearance for its Shiga Toxin Direct Test. Then on March 28, the company announced that it received FDA 510(k) clearance for its First Multiplex Panel. These two announcements were great news, however, the 1-for-35 reverse split of its common stock overshadowed the FDA approvals.Recently, GBSN released Q1 numbers that showed revenues for the first quarter were $731,422, versus $458,730 for the same period in 2015, representing a 59.4% year-over-year increase. The company had 222 revenue-generating U.S. customers as of March 31, 2016, representing 119.8% growth year over year. CEO Ryan Ashton said:

“Great Basin continues to execute on our strategic initiatives for 2016, and are on track to meet our previously-stated guidance of ending the year with 300 to 325 customers, launching our two recently FDA-cleared tests and starting five clinical trials this calendar year, two of which will begin in the first half of the year. The investments we made in the first quarter facilitated the Company’s ability to make those goals a reality.”

While the company is growing, GBSN continues to burn money and dilute shareholders. The net loss in Q1 was $33.7 million. The only positive was that it was better than the $71.2 million loss the year before. During the first quarter of 2016, the company received cashless warrant exercises for 5,229,973 Series C Warrants. GBSN settled 5,091,815 of the cashless warrant exercises through the issuance of 1,520,888 shares of common stock and settled 138,158 of the cashless warrant exercises with cash in the amount of $314,879. In addition, 121,540 underwriter unit purchase options were exercised for cash proceeds of $1,335,950. Pursuant to the exercise of these options, 121,540 shares of Series E Convertible Preferred Stock were issued and immediately converted into 232 shares of common stock and 972,230 Series C Warrants were issued and immediately cashless exercised into 346,667 shares of common stock.This week, GBSN announced that it has initiated a clinical trial for its sample-to-result Bordatella Direct Test, which will detect, directly from patient specimen, Bordatella pertussis, a bacterium causing a highly contagious respiratory disease commonly known as whooping cough. This is the first of five clinical trials the company plans to initiate in 2016. Great Basin said that it intends to submit its 510(K) Clearance application for the Bordatella Direct Test to the U.S. Food & Drug Administration (FDA) in the fourth quarter of this year, on-track with guidance previously issued by the company.Currently trading with a market cap of $14 million, it's a hard call to say whether the worse is over for long suffering shareholders. What's interesting about Wednesday's bounce is that it came the day after GBSN issued news. In other words, shares rose on a no news day, which can be construed as bullish. It can also be viewed as just shorts covering and booking profits. One thing's for sure, we will continue to monitor GBSN and provide the latest updates and analysis. For continuing coverage on GBSN, sign up for our free newsletter today and get our next hot stock pick!Disclosure: We have no position in GBSN and have not been compensated for this article.