Non-GAAP Financial MeasureThis letter includes an Adjusted Net Loss "non-GAAP financial measure" as defined by the Securities and Exchange Commission. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation of, or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles (GAAP). For reconciliation of this non-GAAP financial measures to the nearest comparable GAAP measure, see "Reconciliation of Non-GAAP Financial Measure" included in this letter. Reconciliation of Non-GAAP Financial Measure Adjusted Net Loss The Company excludes certain non-cash items in calculating adjusted net loss because they are non-cash in nature and because the Company believes that the non-GAAP financial measures, which exclude these items, provide meaningful supplemental information regarding operational performance. The Company further believes this measure is useful to investors in that it allows for greater transparency to certain line items in its financial statement and facilitates comparisons to peer operating results.
|GREAT BASIN SCIENTIFIC, INC.|
|ADJUSTED NET LOSS|
|Three Months Ended|
|The calculation of adjusted net loss is as follows:||2016||2015|
|Net income (loss)||$||(29,047,775||)||$||13,056,359|
|Adjustment for amortization of debt discount in interest||18,530,055||-|
|Adjustment for loss on issuance of note in interest||119,185,886||-|
|Adjustment for loss on extinguishment of debt||17,292,463||-|
|Adjustment for change in fair value of derivative liability||(135,727,676||)||(20,016,848||)|
|Adjusted net loss||$||(9,767,047||)||$||(6,906,489||)|
Loss on Issuance of Convertible Note in InterestThe loss on issuance of note that is included in interest for the three months ended September 30, 2016 resulted in non-cash other expense recorded in earnings in the amount of $119.2 million. This is a non-cash charge resulting from the issuance of the 2016 Notes which due to the conversion features and warrants issued with the convertible notes were required to be accounted for as derivative liabilities. The fair value of the derivative liability amounts in excess of the $68 million proceeds received on the convertible notes was $119.2 million which was recognized as a cost of capital at issuance and accordingly charged to interest expense. Loss on Extinguishment of Debt The loss on extinguishment of debt for the three months ended September 30, 2016 resulted in a non-cash other expense recorded in earnings in the amount of $17.3 million. This non-cash expense is the result of the payment of $8 million in principal on the 2015 Notes through the issuance of 2.1 million shares of common stock. Due to the nature of the conversion feature of the notes, conversions were deemed to be extinguishments for accounting purposes and accordingly a loss in the amount of $17.3 million was recognized. Change in Fair Value of Derivative Liability The change in fair value of the derivative liability for the three months ended September 30, 2016 resulted in a non-cash gain in earnings in the amount of $135.7 million. The Company had a decrease in fair value of its conversion feature and warrants associated with the 2015 and 2016 Notes and a decrease in the fair value of all other derivative securities, which was a result of the decrease in the value of its common stock during the third quarter of 2016. During the three months ended September 30, 2015, the fair value of all derivative securities decreased by $20 million, also due to the decrease in the value of the Company's common stock during the period.
Forward-Looking StatementsThis letter contains forward-looking statements regarding events, trends and business prospects, which may affect future operating results and financial position, including but not limited to statements regarding the potential future commercial success of the Company's assays, the Company's continued revenue growth, adding the Company's systems to larger hospitals and labs, expanding assays at existing customers, investments yielding higher revenue per customer, expanded customer base and new assays in the future, building the Company's total revenue base, anticipated timing of future clinical trials, increasing sales per instrument, and reducing seasonality in the Company's revenue stream, anticipated future financing activity and use of funds from future financings, the Company becoming self-funded at some point in the future and other similar statements. Forward-looking statements involve risk and uncertainties, which could cause actual results to differ materially, and reported results should not be considered an indication of future performance. These risks and uncertainties include, but are not limited to: (i) our limited operating history and history of losses; (ii) our ability to develop and commercialize new products and the timing of commercialization; (iii) our ability to obtain capital when needed; and (iv) other risks set forth in the Company's filings with the Securities and Exchange Commission, including the risks set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2015 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2016. These forward-looking statements speak only as of the date hereof and Great Basin Scientific specifically disclaims any obligation to update these forward-looking statements, except as required by law.
Investor Relations Contact:Betsy HartmanGreat Basin Scientific385.email@example.com