Balance SheetGREAT BASIN SCIENTIFIC, INC.September 30, 2015December 1, 2014AssetsCurrent assets:Cash$7,303,711$2,017,823Accounts receivable, net345,444267,485Inventory1,033,966457,094Prepaid and other current assets574,048376,778Total current assets9,257,1693,119,180Intangible assets, net143,072216,580Property and equipment, net7,486,3844,237,467Total assets$16,886,625$7,573,227Liabilities and Stockholders’ DeficitCurrent liabilities:Accounts payable$2,107,777$1,369,169Accrued expenses1,164,634612,359Current portion of notes payable18,73249,994Notes payable—related party, net of discount500,000441,667Current portion of capital lease obligations1,229,566947,422Total current liabilities5,020,7093,420,611Notes payable, net of current portion— 5,693Capital lease obligations, net of current portion1,207,0632,156,837Derivative liability29,938,9379,998,636Total liabilities36,166,70915,581,777Commitments and contingenciesStockholders’ deficit:Preferred stock, $.001 par value, 5,000,000 shares authorized; 104,386 and 0 shares issued and outstanding, respectively104— Common stock, $.0001 par value: 200,000,000 shares authorized; 3,178,041 and 84,777 shares issued and outstanding, respectively3188Additional paid-in capital83,680,77255,996,138Accumulated deficit(102,961,278)(64,004,696)Total stockholders’ deficit(19,280,084(8,008,550)Total liabilities and stockholders’ deficit$16,886,625$7,573,227
Income StatementThree Months EndedNine Months EndedSeptember 30,September 30,2,0152,0142,0152,014Revenues$545,934$409,390$1,530,170$1,160,971Cost of sales1,102,727942,3343,369,2682,761,153Gross loss(556,793)(532,944)(1,839,098)(1,600,182)Operating expenses:Research and development2,878,3161,424,8776,284,1703,265,149Selling and marketing1,481,140479,4993,206,9571,646,782General and administrative1,795,766597,7954,132,9732,004,080(Gain) loss on sale of assets— — — (8,166)Total operating expenses6,155,2222,502,17113,624,1006,907,845Loss from operations(6,712,015)(3,035,115)(15,463,198)(8,508,027)Other income (expense):Interest expense(253,220)(314,450)(868,587)(819,235)Interest income4,74661918,0782,057Change in fair value of derivative liability20,016,848(13,900,400)(22,641,625)(13,900,400)Total other income (expense)19,768,374(14,214,231)(23,492,134)(14,717,578)Income (loss) before provision for income taxes13,056,359(17,249,346)(38,955,332)(23,225,605)Provision for income taxes— 822(1,250)(5,297)Net income (loss)13,056,359(17,248,524)(38,956,582)(23,230,902)Net income (loss) per common share—basic$21$(7,052)$(142)$(11,057)Net income (loss) per common share—diluted$16$(7,052)$(142)$(11,057)Weighted average common shares—basic625,7142,446274,2952,101Weighted average common shares—diluted752,2722,446274,2952,101
Statement of CashflowsSeptember 30, 2015December 1, 2014Cash flows from operating activities:Net loss$(38,956,582)$(23,230,902)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization1,130,826855,484Cha ...
1. Balance SheetGREAT BASIN SCIENTIFIC, INC.September 30,
2015December 1, 2014AssetsCurrent
assets:Cash$7,303,711$2,017,823Accounts receivable,
net345,444267,485Inventory1,033,966457,094Prepaid and other
current assets574,048376,778Total current
assets9,257,1693,119,180Intangible assets,
net143,072216,580Property and equipment,
net7,486,3844,237,467Total
assets$16,886,625$7,573,227Liabilities and Stockholders’
DeficitCurrent liabilities:Accounts
payable$2,107,777$1,369,169Accrued
expenses1,164,634612,359Current portion of notes
payable18,73249,994Notes payable—related party, net of
discount500,000441,667Current portion of capital lease
obligations1,229,566947,422Total current
liabilities5,020,7093,420,611Notes payable, net of current
portion— 5,693Capital lease obligations, net of current
portion1,207,0632,156,837Derivative
liability29,938,9379,998,636Total
liabilities36,166,70915,581,777Commitments and
contingenciesStockholders’ deficit:Preferred stock, $.001 par
value, 5,000,000 shares authorized; 104,386 and 0 shares issued
and outstanding, respectively104— Common stock, $.0001 par
value: 200,000,000 shares authorized; 3,178,041 and 84,777
shares issued and outstanding, respectively3188Additional paid-
in capital83,680,77255,996,138Accumulated
deficit(102,961,278)(64,004,696)Total stockholders’
deficit(19,280,084(8,008,550)Total liabilities and stockholders’
deficit$16,886,625$7,573,227
Income StatementThree Months EndedNine Months
EndedSeptember 30,September
30,2,0152,0142,0152,014Revenues$545,934$409,390$1,530,170
$1,160,971Cost of
sales1,102,727942,3343,369,2682,761,153Gross
2. loss(556,793)(532,944)(1,839,098)(1,600,182)Operating
expenses:Research and
development2,878,3161,424,8776,284,1703,265,149Selling and
marketing1,481,140479,4993,206,9571,646,782General and
administrative1,795,766597,7954,132,9732,004,080(Gain) loss
on sale of assets— — — (8,166)Total operating
expenses6,155,2222,502,17113,624,1006,907,845Loss from
operations(6,712,015)(3,035,115)(15,463,198)(8,508,027)Other
income (expense):Interest
expense(253,220)(314,450)(868,587)(819,235)Interest
income4,74661918,0782,057Change in fair value of derivative
liability20,016,848(13,900,400)(22,641,625)(13,900,400)Total
other income
(expense)19,768,374(14,214,231)(23,492,134)(14,717,578)Inco
me (loss) before provision for income
taxes13,056,359(17,249,346)(38,955,332)(23,225,605)Provision
for income taxes— 822(1,250)(5,297)Net income
(loss)13,056,359(17,248,524)(38,956,582)(23,230,902)Net
income (loss) per common share—
basic$21$(7,052)$(142)$(11,057)Net income (loss) per common
share—diluted$16$(7,052)$(142)$(11,057)Weighted average
common shares—basic625,7142,446274,2952,101Weighted
average common shares—diluted752,2722,446274,2952,101
Statement of CashflowsSeptember 30, 2015December 1,
2014Cash flows from operating activities:Net
loss$(38,956,582)$(23,230,902)Adjustments to reconcile net
loss to net cash used in operating activities:Depreciation and
amortization1,130,826855,484Change in fair value of derivative
liability22,641,62513,900,400Gain on sale of assets—
(8,166)Interest converted to preferred stock—
13,129Employee stock compensation66,391242,696Warrant
issuance and modifications54,48925,063Debt discount
amortization58,33316,667Asset disposal— 11,124Changes in
operating assets and liabilities:Increase in accounts receivable,
net(77,959)(49,011)Increase in
inventory(576,872)(61,713)Increase in prepaid and other
3. assets(197,270)(269,459)Increase in accounts
payable457,250360,882Increase in accrued
liabilities552,27542,598Net cash used in operating
activities(14,847,494)(8,151,208)Cash flows from investing
activities:Acquisition of property and
equipment(842,225)(222,584)Construction of
equipment(3,223,827)(479,196)Proceeds from sale of assets—
35,000Proceeds from sale leaseback— 1,500,000Net cash
provided by (used in) investing
activities(4,066,052)833,220Cash flows from financing
activities:Proceeds from exercise of warrants3,166,394—
Proceeds from issuance of convertible notes payable—
100,000Proceeds from issuance of convertible notes payable—
related party— 300,000Proceeds from issuance of preferred
stock— 6,569,886Proceeds from follow-on
offering21,737,625— Proceeds from issuance of notes
payable—related party250,000890,000Principal payments of
capital leases(667,630)(653,837)Principal payments of notes
payable(36,955)(390,000)Principal payments of notes payable—
related party(250,000)(33,013)Net cash provided by financing
activities24,199,4346,783,036Net increase (decrease) in
cash5,285,888(534,952)Cash, beginning of the
period2,017,8231,211,423Cash, end of the
period$7,303,711$676,471Supplemental disclosures of cash
flow information:Interest paid$818,378$775,666Income taxes
paid$1,250$6,447Supplemental schedule of non-cash investing
and financing activities:Conversion of preferred stock to
common stock$10,478$1,480,000Issuance of preferred stock as
debt discount$— $100,000Conversion of note payable to
preferred stock$— $400,000Assets acquired through capital
leases$— $807,272Initial public offering and follow-on
offering costs incurred but unpaid$41,175$531,280Property and
equipment included in accounts
payable$240,183$70,784Cashless exercise of
warrants$173,657$— Change in derivative liability from
exercised and issued warrants$24,400,224$—
4. Solution
sORIGINAL S-
1/A:http://www.sec.gov/Archives/edgar/data/1512138/00011931
2516429220/d12581ds1a.htm1)Monthly Net Cash Burn
1,576,129Months Until Cash Runs Out4.632)Current
Ratio1.84Quick Ratio1.64Cash Ratio1.45Probably Not. For
every dollar of current liabilities, the firm has 1.45 of cash with
which it could pay those liabilities.3)Days Inventory
Outstanding84(Note that I multiply by 0.75 to adjust for the 9-
month reporting period)4)Days Sales Outstanding625)Days
Payables Outstanding3776)Cash Conversion Cycle(231)Thus the
firm could essentially finance its operating cycle purely on
supplier credit. I.e., the firm's suppliers are very
lenient.7)Sales/Assets0.0906Sales/(Average Assets)0.1251Thus,
for every dollar of assets the firm makes roughly 9-13 cents of
revenue8)ROA = (Sales/Assets)*(Net Income/Sales)Sales/Assets
0.0906Net Income/Sales(25)Since the company is not yet
profitable this calculation doesn't make much sense, i.e. ROA is
negative due to the negative gross profit margin. Since Net
Income is positive for the last three months of operation, we
could calculate the ROA for the last three months to get an idea
of where the firm is headed. However, if you look closely you'll
5. notice that Net Income is not positive due to an increase in
sales, but to the "Change in Fair Value of Derivative Liability",
a non-cash item related to a change in the price of warrants that
it owes. Thus, this increase in profitability is a little suspect.
9)Gross Profit Margin(1.20)Net Profit Margin(11.56)The large
difference between the two margins is due primarily to the
firm's large R&D expense and to the "Change in Fair Value of
Derivative Liability"10)From
https://www.google.com/finance?q=NASDAQ%3AGBSN&ei=w
FiaVpHBLoa2mAGu4YDIBwThe closest comparable is
Nanosphere Inc. 11)Ideally you would pull Nanospere's data and
compare its ratio's to Great Basin's.12)20142015Monthly Net
Cash Burn7,317,9881,576,129-78%Current
Ratio0.911.84102%Net Profit Margin(20.01)(11.56)-
42%13)Company performance has improved in general. The
firm is spending less cash relative to how much they make,
they're better able to pay off short-term bills and their
profitability is increasing (i.e. its less negative).
Name:
EVALUATING STARTUP FINANCES
6. Company Name:
1. How many months until the company exhausts their cash
holdings given their
current rate of spending?
2. Will the firm have difficulty paying their bills in the short-
run?
3. How long does the company’s product sit in inventory on
average?
4. How many days does it take for the firm to collect on its
A/R?
7. 5. How many days does the company wait before paying its
vendor invoices on
average?
6. From start to finish, how long is each dollar tied up in the
production and sales
process before it is converted into cash?
Name:
7. For every dollar of assets, how many dollars of sales does
your firm generate?
8. 8. Does your company’s ROA come from its ability to create
sales or from its
ability to generate a high profit on those sales?
9. What are your company’s profit margins?
10. Which companies are in your firm’s peer group?
11. How does your company compare to its peers?
9. 12. How has your company’s performance changed over time?
13. Summarize the financial health of your company
Company Name:1. How many months until the company
exhausts their cash holdings given their current rate of
spending?2. Will the firm have difficulty paying their bills in
the short-run?3. How long does the company’s product sit in
inventory on average?4. How many days does it take for the
firm to collect on its A/R?5. How many days does the company
wait before paying its vendor invoices on average?6. From start
to finish, how long is each dollar tied up in the production and
sales process before it is converted into cash?7. For every dollar
of assets, how many dollars of sales does your firm generate?8.
Does your company’s ROA come from its ability to create sales
or from its ability to generate a high profit on those sales?9.
What are your company’s profit margins?10. Which companies
are in your firm’s peer group?11. How does your company
10. compare to its peers?12. How has your company’s performance
changed over time?13. Summarize the financial health of your
company