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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 11/10/21 Biolase, Inc. 10-Q 9/30/21 84:13M Donnelley … Solutions/FA |
Document/Exhibit Description Pages Size
1: 10-Q Quarterly Report HTML 1.32M
2: EX-10.1 Material Contract HTML 72K
3: EX-10.2 Material Contract HTML 74K
4: EX-10.3 Material Contract HTML 80K
5: EX-10.4 Material Contract HTML 51K
6: EX-31.1 Certification -- §302 - SOA'02 HTML 29K
7: EX-32.1 Certification -- §906 - SOA'02 HTML 25K
14: R1 Document and Entity Information HTML 78K
15: R2 Consolidated Balance Sheets (Unaudited) HTML 133K
16: R3 Consolidated Balance Sheets (Unaudited) HTML 50K
(Parenthetical)
17: R4 Consolidated Statements Of Operations And HTML 129K
Comprehensive Loss (Unaudited)
18: R5 Consolidated Statements Of Redeemable Preferred HTML 185K
Stock and Stockholders' Equity (Unaudited)
19: R6 Consolidated Statements Of Redeemable Preferred HTML 25K
Stock And Shareholders' Equity (Parenthetical)
20: R7 Consolidated Statements Of Cash Flows (Unaudited) HTML 140K
21: R8 Description of Business and Basis of Presentation HTML 41K
22: R9 Summary of Significant Accounting Policies HTML 41K
23: R10 Revenue Recognition HTML 170K
24: R11 Redeemable Preferred Stock and Stockholders' HTML 342K
Equity
25: R12 Inventory HTML 47K
26: R13 Property, Plant, and Equipment HTML 71K
27: R14 Intangible Assets and Goodwill HTML 29K
28: R15 Accrued Liabilities HTML 122K
29: R16 Debt HTML 149K
30: R17 Leases HTML 123K
31: R18 Commitments and Contingencies HTML 37K
32: R19 Segment Information HTML 85K
33: R20 Concentrations HTML 94K
34: R21 Income Taxes HTML 36K
35: R22 Summary of Significant Accounting Policies HTML 50K
(Policies)
36: R23 Revenue Recognition (Tables) HTML 154K
37: R24 Redeemable Preferred Stock and Stockholders' HTML 309K
Equity (Tables)
38: R25 Inventory (Tables) HTML 47K
39: R26 Property, Plant, and Equipment (Tables) HTML 67K
40: R27 Accrued Liabilities (Tables) HTML 118K
41: R28 Debt (Tables) HTML 95K
42: R29 Leases (Tables) HTML 115K
43: R30 Segment Information (Tables) HTML 78K
44: R31 Concentrations (Tables) HTML 91K
45: R32 Description of Business and Basis of Presentation HTML 50K
- Additional Information (Detail)
46: R33 Revenue Recognition - Additional Information HTML 33K
(Detail)
47: R34 Summary of Opening and Closing Balances of HTML 34K
Contract Liabilities (Detail)
48: R35 Summary of Disaggregation of Revenues Related to HTML 33K
Geographic Areas (Detail)
49: R36 Summary of Revenues Disaggregated by Timing of HTML 34K
Goods and Services Transferred (Detail)
50: R37 Summary of Sales by End Market (Detail) HTML 33K
51: R38 Redeemable Preferred Stock and Stockholders' HTML 181K
Equity - Additional Information (Detail)
52: R39 Classification of Compensation Expense Associated HTML 36K
with Share-Based Payments (Detail)
53: R40 Assumptions Used in Estimating Fair Value of Stock HTML 31K
Options Granted (Detail)
54: R41 Summary of Option Activity (Detail) HTML 66K
55: R42 Summary of Unvested Stock Option Activity (Detail) HTML 39K
56: R43 Fair Value Disclosures Related to Grants, HTML 34K
Exercises and Vested Options (Detail)
57: R44 Summary of Unvested Restricted Stock Units HTML 45K
(Detail)
58: R45 Summary of Warrant Activity (Detail) HTML 48K
59: R46 Components of Inventory (Detail) HTML 32K
60: R47 Inventory - Additional Information (Detail) HTML 25K
61: R48 Summary of Property, Plant, and Equipment (Detail) HTML 46K
62: R49 Property, Plant, and Equipment - Additional HTML 26K
Information (Detail)
63: R50 Intangible Assets and Goodwill - Additional HTML 34K
Information (Detail)
64: R51 Components of Accrued Liabilities (Detail) HTML 46K
65: R52 Changes in Initial Product Warranty Accrual and HTML 37K
Expenses Under Initial and Extended Warranties
(Detail)
66: R53 Accrued Liabilities - Additional Information HTML 41K
(Detail)
67: R54 Debt - Summary of Principal Outstanding and HTML 41K
Unamortized Discount (Detail)
68: R55 Debt - Additional Information (Detail) HTML 313K
69: R56 Debt - Summary of Future Minimum Principal and HTML 56K
Interest Payments (Detail)
70: R57 Leases - Additional Information (Detail) HTML 57K
71: R58 Leases - Information related to Right-of-use HTML 32K
Assets and Liabilities (Detail)
72: R59 Leases - Schedule of Maturities of Lease HTML 44K
Liabilities (Detail)
73: R60 Leases - Future Minimum Rental Commitments Under HTML 42K
Lease Agreements (Detail)
74: R61 Commitments and Contingencies - Additional HTML 60K
Information (Detail)
75: R62 Segment Information - Additional Information HTML 37K
(Detail)
76: R63 Summary of Net Revenue by Geographic Location HTML 33K
(Detail)
77: R64 Summary of Property, Plant and Equipment by HTML 31K
Geographic Location (Detail)
78: R65 Concentrations - Summary of Net Revenue from HTML 46K
Various Products (Detail)
79: R66 Concentrations - Additional Information (Detail) HTML 40K
80: R67 Income Taxes - Additional Information (Detail) HTML 34K
82: XML IDEA XML File -- Filing Summary XML 149K
13: XML XBRL Instance -- biol-20210930_htm XML 3.07M
81: EXCEL IDEA Workbook of Financial Reports XLSX 105K
9: EX-101.CAL XBRL Calculations -- biol-20210930_cal XML 195K
10: EX-101.DEF XBRL Definitions -- biol-20210930_def XML 712K
8: EX-101.LAB XBRL Labels -- biol-20210930_lab XML 1.73M
12: EX-101.PRE XBRL Presentations -- biol-20210930_pre XML 1.20M
11: EX-101.SCH XBRL Schema -- biol-20210930 XSD 249K
83: JSON XBRL Instance as JSON Data -- MetaLinks 460± 704K
84: ZIP XBRL Zipped Folder -- 0000950170-21-004164-xbrl Zip 344K
| 10-Q |
4
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM i 10-Q
i ☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
i September 30, i 2021 /
or
i ☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: i 001-36385
i BIOLASE, INC.
(Exact name of registrant as specified in its charter)
i Delaware |
|
i 87-0442441 |
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
i 27042 Towne Centre Drive, i Suite 270
i Lake Forest, i California i 92610
(Address of principal executive offices) (Zip Code)
( i 949) i 361-1200
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act
Title of each class |
|
Trading symbol(s) |
|
Name of each exchange on which registered |
i Common stock at par value $0.001 per share |
|
i BIOL |
|
i The NASDAQ Stock Market LLC (NASDAQ Capital Market) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. i Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). i Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
|
☐ |
|
Accelerated filer |
|
¨ |
i Non-accelerated filer |
|
☒ |
|
Smaller reporting company |
|
i ☒ |
|
|
|
|
Emerging growth company |
|
i ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes ☐ No i ☒
As of November 4, 2021, the registrant had i 153,279,540 shares of common stock, $0.001 par value per share, outstanding.
BIOLASE, INC.
INDEX
|
|
|
|
Page |
PART I. |
|
|
2 |
|
Item 1. |
|
|
2 |
|
|
|
Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 |
|
2 |
|
|
|
3 |
|
|
|
|
4 |
|
|
|
|
6 |
|
|
|
|
7 |
|
Item 2. |
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
25 |
Item 3. |
|
|
35 |
|
Item 4. |
|
|
35 |
|
PART II |
|
|
36 |
|
Item 1. |
|
|
36 |
|
Item 1A. |
|
|
36 |
|
Item 5 |
|
|
36 |
|
Item 6. |
|
|
37 |
|
|
40 |
|||
1
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BIOLASE, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except per share data)
|
|
September 30, |
|
|
|
|||
|
|
|
|
2020 |
|
|||
ASSETS |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
i 33,385 |
|
|
$ |
i 17,564 |
|
Restricted cash |
|
|
i 204 |
|
|
|
i 312 |
|
Accounts receivable, less allowance of $ i 2,871 and $ i 4,017 as of September 30, 2021 and December 31, 2020, respectively |
|
|
i 3,637 |
|
|
|
i 3,059 |
|
Inventory |
|
|
i 14,062 |
|
|
|
i 11,157 |
|
Prepaid expenses and other current assets |
|
|
i 1,366 |
|
|
|
i 3,018 |
|
Total current assets |
|
|
i 52,654 |
|
|
|
i 35,110 |
|
Property, plant, and equipment, net |
|
|
i 889 |
|
|
|
i 782 |
|
Goodwill |
|
|
i 2,926 |
|
|
|
i 2,926 |
|
Right of use asset |
|
|
i 1,823 |
|
|
|
i 1,976 |
|
Other assets |
|
|
i 222 |
|
|
|
i 231 |
|
Total assets |
|
$ |
i 58,514 |
|
|
$ |
i 41,025 |
|
LIABILITIES, REDEEMABLE PREFERRED STOCK AND |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
i 3,597 |
|
|
$ |
i 2,651 |
|
Accrued liabilities |
|
|
i 6,182 |
|
|
|
i 6,667 |
|
Deferred revenue, current portion |
|
|
i 2,278 |
|
|
|
i 1,905 |
|
Current portion of term loans, net of discount |
|
|
i 1,400 |
|
|
|
i — |
|
Total current liabilities |
|
|
i 13,457 |
|
|
|
i 11,223 |
|
Deferred revenue |
|
|
i 294 |
|
|
|
i 374 |
|
Warranty accrual |
|
|
i 472 |
|
|
|
i 384 |
|
Non current term loans, net of discount |
|
|
i 12,114 |
|
|
|
i 16,186 |
|
Non current operating lease liability |
|
|
i 1,557 |
|
|
|
i 1,774 |
|
Other liabilities |
|
|
i 298 |
|
|
|
i 1,056 |
|
Total liabilities |
|
|
i 28,192 |
|
|
|
i 30,997 |
|
Commitments and contingencies — Note 11 |
|
|
|
|
|
|
||
Stockholders' equity: |
|
|
|
|
|
|
||
Series F Preferred stock, par value $ i i 0.001 / per
share; i i 18 / shares |
|
|
i 34 |
|
|
|
i 118 |
|
Common stock, par value $ i i 0.001 / per
share; i i 180,000 / shares |
|
|
i 153 |
|
|
|
i 98 |
|
Additional paid-in capital |
|
|
i 292,948 |
|
|
|
i 261,573 |
|
Accumulated other comprehensive loss |
|
|
( i 558 |
) |
|
|
( i 385 |
) |
Accumulated deficit |
|
|
( i 262,255 |
) |
|
|
( i 251,376 |
) |
Total stockholders' equity |
|
|
i 30,322 |
|
|
|
i 10,028 |
|
Total liabilities, redeemable preferred stock and stockholders' equity |
|
$ |
i 58,514 |
|
|
$ |
i 41,025 |
|
See accompanying notes to unaudited consolidated financial statements.
2
BIOLASE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited, in thousands, except per share data)
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
|
|||||||||||
|
|
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|||||
Net revenue |
|
$ |
i 9,531 |
|
|
$ |
i 6,539 |
|
|
$ |
i 26,780 |
|
|
$ |
i 14,260 |
|
Cost of revenue |
|
|
i 4,689 |
|
|
|
i 4,265 |
|
|
|
i 15,157 |
|
|
|
i 9,692 |
|
Gross profit |
|
|
i 4,842 |
|
|
|
i 2,274 |
|
|
|
i 11,623 |
|
|
|
i 4,568 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales and marketing |
|
|
i 3,451 |
|
|
|
i 2,678 |
|
|
|
i 10,315 |
|
|
|
i 7,475 |
|
General and administrative |
|
|
i 2,479 |
|
|
|
i 2,300 |
|
|
|
i 8,613 |
|
|
|
i 7,446 |
|
Engineering and development |
|
|
i 1,540 |
|
|
|
i 963 |
|
|
|
i 4,506 |
|
|
|
i 2,644 |
|
Loss on patent litigation settlement |
|
|
i 29 |
|
|
|
i — |
|
|
|
i 190 |
|
|
|
i — |
|
Total operating expenses |
|
|
i 7,499 |
|
|
|
i 5,941 |
|
|
|
i 23,624 |
|
|
|
i 17,565 |
|
Loss from operations |
|
|
( i 2,657 |
) |
|
|
( i 3,667 |
) |
|
|
( i 12,001 |
) |
|
|
( i 12,997 |
) |
Gain (Loss) on foreign currency transactions |
|
|
( i 36 |
) |
|
|
i 53 |
|
|
|
( i 172 |
) |
|
|
( i 68 |
) |
Interest expense, net |
|
|
( i 569 |
) |
|
|
( i 568 |
) |
|
|
( i 1,727 |
) |
|
|
( i 1,782 |
) |
Gain on debt forgiveness |
|
|
i — |
|
|
|
i — |
|
|
|
i 3,014 |
|
|
|
i — |
|
Other income, net |
|
|
i — |
|
|
|
i 4,209 |
|
|
|
i — |
|
|
|
i 4,209 |
|
Non-operating gain (loss), net |
|
|
( i 605 |
) |
|
|
i 3,694 |
|
|
|
i 1,115 |
|
|
|
i 2,359 |
|
Loss before income tax (provision) benefit |
|
|
( i 3,262 |
) |
|
|
i 27 |
|
|
|
( i 10,886 |
) |
|
|
( i 10,638 |
) |
Income tax (provision) benefit |
|
|
( i 14 |
) |
|
|
( i 15 |
) |
|
|
i 7 |
|
|
|
( i 49 |
) |
Net income (loss) |
|
|
( i 3,276 |
) |
|
|
i 12 |
|
|
|
( i 10,879 |
) |
|
|
( i 10,687 |
) |
Other comprehensive loss items: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency translation adjustments |
|
|
( i 90 |
) |
|
|
i 111 |
|
|
|
( i 173 |
) |
|
|
i 167 |
|
Comprehensive income (loss) |
|
$ |
( i 3,366 |
) |
|
$ |
i 123 |
|
|
$ |
( i 11,052 |
) |
|
$ |
( i 10,520 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) |
|
$ |
( i 3,276 |
) |
|
$ |
i 12 |
|
|
$ |
( i 10,879 |
) |
|
$ |
( i 10,687 |
) |
Deemed dividend on convertible preferred stock |
|
|
( i 9 |
) |
|
|
( i 17,378 |
) |
|
|
( i 546 |
) |
|
|
( i 17,378 |
) |
Net loss attributable to common stockholders |
|
$ |
( i 3,285 |
) |
|
$ |
( i 17,366 |
) |
|
$ |
( i 11,425 |
) |
|
$ |
( i 28,065 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per share attributable to common stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
( i 0.02 |
) |
|
$ |
( i 0.21 |
) |
|
$ |
( i 0.08 |
) |
|
$ |
( i 0.56 |
) |
Diluted |
|
$ |
( i 0.02 |
) |
|
$ |
( i 0.21 |
) |
|
$ |
( i 0.08 |
) |
|
$ |
( i 0.56 |
) |
Shares used in the calculation of net loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
i 151,941 |
|
|
|
i 81,341 |
|
|
|
i 145,809 |
|
|
|
i 50,366 |
|
Diluted |
|
|
i 151,941 |
|
|
|
i 81,341 |
|
|
|
i 145,809 |
|
|
|
i 50,366 |
|
See accompanying notes to unaudited consolidated financial statements.
3
BIOLASE, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
(Unaudited, in thousands)
|
|
Mezzanine |
|
|
|
Stockholders' Equity |
|
||||||||||||||||||||||||||||||||||
|
|
Series E |
|
|
|
Common Stock |
|
|
Additional |
|
|
Series F |
|
|
Accumulated |
|
|
Accumulated |
|
|
Total |
|
|||||||||||||||||||
|
|
Shares |
|
|
Amount |
|
|
|
Shares |
|
|
Amount |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Loss |
|
|
Deficit |
|
|
Equity |
|
||||||||||
Balances, June 30, 2021 |
|
|
— |
|
|
$ |
— |
|
|
|
|
i 151,236 |
|
|
$ |
i 151 |
|
|
$ |
i 292,517 |
|
|
|
— |
|
|
$ |
i 35 |
|
|
$ |
( i 468 |
) |
|
$ |
( i 258,979 |
) |
|
$ |
i 33,256 |
|
Sale of common stock |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Exercise of stock option |
|
|
— |
|
|
|
— |
|
|
|
|
i 176 |
|
|
|
— |
|
|
|
i 66 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 66 |
|
Issuance of restricted shares |
|
|
— |
|
|
|
— |
|
|
|
|
i 260 |
|
|
|
— |
|
|
|
i 164 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 164 |
|
Conversion of Series F |
|
|
— |
|
|
|
— |
|
|
|
|
i 25 |
|
|
|
— |
|
|
|
i 10 |
|
|
|
— |
|
|
|
( i 10 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Deemed dividend on Series F |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
( i 9 |
) |
|
|
— |
|
|
|
i 9 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Issuance of stock from |
|
|
— |
|
|
|
— |
|
|
|
|
i 1,600 |
|
|
|
i 2 |
|
|
|
( i 2 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
i 192 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 192 |
|
Exercise of common stock |
|
|
— |
|
|
|
— |
|
|
|
|
i 25 |
|
|
|
— |
|
|
|
i 10 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 10 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 3,276 |
) |
|
|
( i 3,276 |
) |
Foreign currency |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 90 |
) |
|
|
— |
|
|
|
( i 90 |
) |
Balances, September 30, 2021 |
|
|
— |
|
|
$ |
— |
|
|
|
|
i 153,322 |
|
|
$ |
i 153 |
|
|
$ |
i 292,948 |
|
|
|
— |
|
|
$ |
i 34 |
|
|
$ |
( i 558 |
) |
|
$ |
( i 262,255 |
) |
|
$ |
i 30,322 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balances, December 31, 2020 |
|
|
— |
|
|
$ |
— |
|
|
|
|
i 97,709 |
|
|
$ |
i 98 |
|
|
$ |
i 261,573 |
|
|
|
i 1 |
|
|
$ |
i 118 |
|
|
$ |
( i 385 |
) |
|
$ |
( i 251,376 |
) |
|
$ |
i 10,028 |
|
Sale of common stock |
|
|
— |
|
|
|
— |
|
|
|
|
i 14,000 |
|
|
|
i 14 |
|
|
|
i 13,277 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 13,291 |
|
Exercise of stock option |
|
|
— |
|
|
|
— |
|
|
|
|
i 176 |
|
|
|
— |
|
|
|
i 66 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 66 |
|
Issuance of common stock |
|
|
— |
|
|
|
— |
|
|
|
|
i 500 |
|
|
|
i 1 |
|
|
|
i 509 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 510 |
|
Issuance of restricted shares |
|
|
— |
|
|
|
— |
|
|
|
|
i 260 |
|
|
|
— |
|
|
|
i 164 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 164 |
|
Conversion of Series F |
|
|
— |
|
|
|
— |
|
|
|
|
i 1,577 |
|
|
|
i 2 |
|
|
|
i 628 |
|
|
|
( i 1 |
) |
|
|
( i 630 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Deemed dividend on Series F |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
( i 546 |
) |
|
|
— |
|
|
|
i 546 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Issuance of stock from |
|
|
— |
|
|
|
— |
|
|
|
|
i 3,381 |
|
|
|
i 3 |
|
|
|
( i 3 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
i 2,253 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 2,253 |
|
Exercise of common stock |
|
|
— |
|
|
|
— |
|
|
|
|
i 35,719 |
|
|
|
i 35 |
|
|
|
i 15,027 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 15,062 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 10,879 |
) |
|
|
( i 10,879 |
) |
Foreign currency |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 173 |
) |
|
|
— |
|
|
|
( i 173 |
) |
Balances, September 30, 2021 |
|
|
— |
|
|
$ |
— |
|
|
|
|
i 153,322 |
|
|
$ |
i 153 |
|
|
$ |
i 292,948 |
|
|
|
— |
|
|
$ |
i 34 |
|
|
$ |
( i 558 |
) |
|
$ |
( i 262,255 |
) |
|
$ |
i 30,322 |
|
See accompanying notes to unaudited consolidated financial statements.
4
BIOLASE, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
(Unaudited, in thousands)
|
|
Mezzanine |
|
|
|
Stockholders' Equity |
|
||||||||||||||||||||||||||||||||||
|
|
Series E |
|
|
|
Common Stock |
|
|
Additional |
|
|
Series F |
|
|
Accumulated |
|
|
Accumulated |
|
|
Total |
|
|||||||||||||||||||
|
|
Shares |
|
|
Amount |
|
|
|
Shares |
|
|
Amount |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Loss |
|
|
Deficit |
|
|
Equity |
|
||||||||||
Balances, June 30, 2020 |
|
|
— |
|
|
$ |
— |
|
|
|
|
i 50,322 |
|
|
$ |
i 50 |
|
|
$ |
i 247,149 |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
( i 645 |
) |
|
$ |
( i 245,246 |
) |
|
$ |
i 1,308 |
|
Issuance of Series F Convertible |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 18 |
|
|
|
i 2,411 |
|
|
|
— |
|
|
|
— |
|
|
|
i 2,411 |
|
Beneficial conversion on Series F |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
i 2,700 |
|
|
|
— |
|
|
|
( i 2,700 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Deemed dividend on Series F |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
( i 17,378 |
) |
|
|
— |
|
|
|
i 17,378 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Conversion of Series F Participating |
|
|
— |
|
|
|
— |
|
|
|
|
i 42,370 |
|
|
|
i 43 |
|
|
|
i 16,905 |
|
|
|
( i 17 |
) |
|
|
( i 16,948 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Reclassification of July 2020 Warrants |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
i 9,450 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 9,450 |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
i 513 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 513 |
|
Issuance of stock from RSUs, net |
|
|
— |
|
|
|
— |
|
|
|
|
i 191 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Exercise of June 2020 Warrants |
|
|
— |
|
|
|
— |
|
|
|
|
i 116 |
|
|
|
— |
|
|
|
i 46 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 46 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 12 |
|
|
|
i 12 |
|
Foreign currency translation adjustment |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 111 |
|
|
|
— |
|
|
|
i 111 |
|
Balances, September 30, 2020 |
|
|
— |
|
|
$ |
— |
|
|
|
|
i 92,999 |
|
|
$ |
i 93 |
|
|
$ |
i 259,385 |
|
|
|
i 1 |
|
|
$ |
i 141 |
|
|
$ |
( i 534 |
) |
|
$ |
( i 245,234 |
) |
|
$ |
i 13,851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balances, December 31, 2019 |
|
|
i 70 |
|
|
$ |
i 3,965 |
|
|
|
|
i 31,459 |
|
|
$ |
i 31 |
|
|
$ |
i 235,594 |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
( i 701 |
) |
|
$ |
( i 234,547 |
) |
|
$ |
i 377 |
|
Conversion of Series E |
|
|
— |
|
|
$ |
— |
|
|
|
|
i 6,957 |
|
|
$ |
i 7 |
|
|
$ |
i 3,958 |
|
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
i 3,965 |
|
Sale of common stock |
|
|
— |
|
|
|
— |
|
|
|
|
i 10,800 |
|
|
|
i 11 |
|
|
|
i 3,861 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 3,872 |
|
Sale of common stock warrants |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
i 3,031 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 3,031 |
|
Issuance of Series F Convertible |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 18 |
|
|
|
i 2,411 |
|
|
|
— |
|
|
|
— |
|
|
|
i 2,411 |
|
Beneficial conversion on Series F |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
i 2,700 |
|
|
|
— |
|
|
|
( i 2,700 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Deemed dividend on Series F |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
( i 17,378 |
) |
|
|
— |
|
|
|
i 17,378 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Conversion of Series F Participating |
|
|
( i 70 |
) |
|
|
( i 3,965 |
) |
|
|
|
i 42,370 |
|
|
|
i 43 |
|
|
|
i 16,905 |
|
|
|
( i 17 |
) |
|
|
( i 16,948 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Reclassification of July 2020 Warrants |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
i 9,450 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 9,450 |
|
Stock offering costs |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
( i 856 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 856 |
) |
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
i 1,846 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 1,846 |
|
Warrants issued in connection |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
i 67 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 67 |
|
Issuance of stock from RSUs, net |
|
|
— |
|
|
|
— |
|
|
|
|
i 1,297 |
|
|
|
i 1 |
|
|
|
i 161 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 162 |
|
Exercise of June 2020 Warrants |
|
|
— |
|
|
|
— |
|
|
|
|
i 116 |
|
|
|
— |
|
|
|
i 46 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 46 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( i 10,687 |
) |
|
|
( i 10,687 |
) |
Foreign currency translation adjustment |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
i 167 |
|
|
|
— |
|
|
|
i 167 |
|
Balances, September 30, 2020 |
|
|
— |
|
|
$ |
— |
|
|
|
|
i 92,999 |
|
|
$ |
i 93 |
|
|
$ |
i 259,385 |
|
|
|
i 1 |
|
|
$ |
i 141 |
|
|
$ |
( i 534 |
) |
|
$ |
( i 245,234 |
) |
|
$ |
i 13,851 |
|
See accompanying notes to unaudited consolidated financial statements.
5
BIOLASE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
|
|
Nine Months Ended |
|
|||||
|
|
|
||||||
|
|
|
|
2020 |
|
|||
Cash Flows from Operating Activities: |
|
|
|
|
|
|
||
Net loss |
|
$ |
( i 10,879 |
) |
|
$ |
( i 10,687 |
) |
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
i 281 |
|
|
|
i 527 |
|
Provision for bad debts |
|
|
( i 162 |
) |
|
|
i 1,263 |
|
Provision for sales returns |
|
|
i — |
|
|
|
i 87 |
|
Inventory write-offs and disposals |
|
|
( i 117 |
) |
|
|
i — |
|
Amortization of discount on lines of credit |
|
|
i 126 |
|
|
|
i 123 |
|
Amortization of debt issuance costs |
|
|
i 290 |
|
|
|
i 240 |
|
Patent litigation mark-to-market |
|
|
i 190 |
|
|
|
i — |
|
Change in fair value of warrants |
|
|
i — |
|
|
|
( i 5,850 |
) |
Issuance of restricted shares |
|
|
i 164 |
|
|
|
i — |
|
Issuance costs for common stock warrants |
|
|
i — |
|
|
|
i 1,640 |
|
Stock-based compensation |
|
|
i 1,488 |
|
|
|
i 2,367 |
|
Gain on debt forgiveness |
|
|
( i 3,014 |
) |
|
|
i — |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
( i 417 |
) |
|
|
i 4,017 |
|
Inventory |
|
|
( i 2,788 |
) |
|
|
( i 1,597 |
) |
Prepaid expenses and other current assets |
|
|
i 235 |
|
|
|
i 430 |
|
Accounts payable and accrued liabilities |
|
|
i 705 |
|
|
|
( i 3,445 |
) |
Deferred revenue |
|
|
i 292 |
|
|
|
( i 562 |
) |
Net cash and cash equivalents used in operating activities |
|
|
( i 13,606 |
) |
|
|
( i 11,447 |
) |
Cash Flows from Investing Activities: |
|
|
|
|
|
|
||
Purchases of property, plant, and equipment |
|
|
( i 396 |
) |
|
|
( i 78 |
) |
Net cash and cash equivalents used in investing activities |
|
|
( i 396 |
) |
|
|
( i 78 |
) |
Cash Flows from Financing Activities: |
|
|
|
|
|
|
||
Proceeds from the sale of common stock |
|
|
i 13,291 |
|
|
|
i 6,912 |
|
Proceeds from the sale of common stock warrants |
|
|
i — |
|
|
|
i 15,300 |
|
Proceeds from the issuance of Series F Convertible Preferred Stock |
|
|
i — |
|
|
|
i 2,700 |
|
Payments of equity offering costs |
|
|
( i 6 |
) |
|
|
( i 1,281 |
) |
Payment of July 2020 Warrant issuance costs |
|
|
i — |
|
|
|
( i 1,640 |
) |
Borrowings on other long-term loans |
|
|
i — |
|
|
|
i 3,140 |
|
Principal payment on loan |
|
|
i — |
|
|
|
( i 700 |
) |
Borrowings on credit facility |
|
|
i — |
|
|
|
i 3,000 |
|
Repayment of credit facility |
|
|
i — |
|
|
|
( i 3,000 |
) |
Proceeds from the exercise of common stock warrants |
|
|
i 16,560 |
|
|
|
i 46 |
|
Payment of debt issuance costs |
|
|
( i 25 |
) |
|
|
( i 75 |
) |
Proceeds from exercise of stock options |
|
|
i 66 |
|
|
|
i — |
|
Net cash and cash equivalents provided by financing activities |
|
|
i 29,886 |
|
|
|
i 24,402 |
|
Effect of exchange rate changes |
|
|
( i 171 |
) |
|
|
i 181 |
|
Increase in cash, cash equivalents and restricted cash |
|
|
i 15,713 |
|
|
|
i 13,058 |
|
Cash, cash equivalents and restricted cash, beginning of period |
|
|
i 17,876 |
|
|
|
i 6,101 |
|
Cash, cash equivalents and restricted cash, end of period |
|
$ |
i 33,589 |
|
|
$ |
i 19,159 |
|
Supplemental cash flow disclosure: |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
i 1,328 |
|
|
$ |
i 1,438 |
|
Cash received for interest |
|
$ |
i 44 |
|
|
$ |
i — |
|
Cash paid for income taxes |
|
$ |
i 154 |
|
|
$ |
i 21 |
|
Cash paid for operating leases |
|
$ |
i 185 |
|
|
$ |
i 417 |
|
Non-cash settlement of liability |
|
$ |
i 510 |
|
|
$ |
i 151 |
|
Non-cash right-of-use assets obtained in exchange for lease obligation |
|
$ |
i 48 |
|
|
$ |
i 2,037 |
|
Deemed dividend on preferred stock |
|
$ |
i 546 |
|
|
$ |
i 17,378 |
|
Warrants issued in connection with debt instruments |
|
$ |
i — |
|
|
$ |
i 67 |
|
See accompanying notes to unaudited consolidated financial statements.
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1—DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
BIOLASE, Inc. (“BIOLASE” and, together with its consolidated subsidiaries, the “Company”) is a leading provider of advanced laser systems for the dental industry. The Company develops, manufactures, markets, and sells laser systems that provide significant benefits for dental practitioners and their patients. The Company’s proprietary systems allow dentists, periodontists, endodontists, pediatric dentists, oral surgeons, and other dental specialists to perform a broad range of minimally invasive dental procedures, including cosmetic, restorative, and complex surgical applications. The Company’s laser systems are designed to provide clinically superior results for many types of dental procedures compared to those achieved with drills, scalpels, and other conventional instruments. Potential patient benefits include less pain, fewer shots, faster healing, decreased fear and anxiety, and fewer appointments. Potential practitioner benefits include improved patient care and the ability to perform a higher volume and wider variety of procedures and generate more patient referrals.
Basis of Presentation
The unaudited consolidated financial statements include the accounts of BIOLASE and its wholly-owned subsidiaries and have been prepared on a basis consistent with the December 31, 2020 audited consolidated financial statements and include all material adjustments, consisting of normal recurring adjustments and the elimination of all material intercompany transactions and balances, necessary to fairly present the information set forth therein. The unaudited consolidated financial statements do not include all the footnotes, presentations, and disclosures normally required by accounting principles generally accepted in the United States of America (“GAAP”) for complete consolidated financial statements.
The consolidated results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results for the full year. The accompanying consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended December 31, 2020, included in BIOLASE’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2021 (the “2020 Form 10-K”).
Liquidity and Management’s Plans
The Company incurred losses from operations and used cash in operating activities for the three and nine months ended September 30, 2021 and for the years ended December 31, 2020, 2019, and 2018.
As of September 30, 2021, the Company had working capital of approximately $ i 39.2 million. The Company’s principal sources of liquidity as of September 30, 2021 consisted of approximately $ i 33.6 million in cash, cash equivalents, and restricted cash, $ i 3.6 million of net accounts receivable, and unused availability under the PMB Loan (as defined below) of approximately $ i 2.8 million. As of December 31, 2020, the Company had working capital of approximately $ i 23.9 million, $ i 17.9 million in cash, cash equivalents and restricted cash and $ i 3.1 million of net accounts receivable. The increase in cash, cash equivalents, and restricted cash since December 31, 2020 was primarily due to gross proceeds of $ i 14.4 million from the issuance of common stock and $ i 16.6 million from warrants exercised in the nine months ended September 30, 2021. See Note 4 to the consolidated financial statements for additional information on these common stock issuances and warrant exercises.
Additional capital requirements may depend on many factors, including, among other things, the rate at which the Company’s business grows, the COVID-19 pandemic and the actions taken to contain it, demands for working capital, manufacturing capacity, and any acquisitions that the Company may pursue. From time to time, the Company could be required, or may otherwise attempt, to raise capital through either equity or debt offerings. The Company cannot provide assurance that it will be able to successfully enter into any such equity or debt financings in the future or that the required capital would be available on acceptable terms, if at all, or that any such financing activity would not be dilutive to its’ stockholders.
COVID-19 Risk and Uncertainties and CARES Act
The COVID-19 pandemic severely impacted global economic activity, and many countries and many states in the United States reacted to the COVID-19 pandemic by instituting quarantines, mandating business and school closures and restricting travel. These mandated business closures included dental office closures worldwide, in large part, for all but emergency procedures. The ability of the Company’s salespeople to call on dental customers during these closures was greatly limited. In addition, most dental shows and workshops scheduled in 2020 were canceled. As a result of reduced sales due to the COVID-19 pandemic and actions taken to contain it, cash generated from the Company’s operations during 2020 were less than anticipated. Given the uncertainties regarding the
7
ongoing and future effects of COVID-19, there is no assurance that sales will return to normal levels during the remainder of 2021 or at any time thereafter.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act") was signed into law. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer-side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property.
The Company analyzed the provisions of the CARES Act and determined that it will not have a material impact on its future financial condition, results of operations, or liquidity, other than approximately $ i 1.8 million received as part of the Employee Retention Credit.
/NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of these consolidated financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”) requires the Company to make estimates and assumptions that affect amounts reported in the consolidated financial statements and the accompanying notes. Significant estimates in these consolidated financial statements include allowances on accounts receivable, inventory, and deferred taxes, as well as estimates for accrued warranty expenses, goodwill and the ability of goodwill to be realized, revenue deferrals, effects of stock-based compensation and warrants, contingent liabilities, and the provision or benefit for income taxes. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may differ materially from those estimates.
Critical Accounting Policies
Information with respect to the Company’s critical accounting policies, which management believes could have the most significant effect on the Company’s reported results and require subjective or complex judgments by management as discussed in the Company’s 2020 audited financial statements included in the 2020 Form 10-K. Management believes that there have been no significant changes during the nine months ended September 30, 2021 in the Company’s critical accounting policies from those disclosed in the Company’s 2020 audited financial statements included in the 2020 Form 10-K.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market (or, if none exists, the most advantageous market) for the specific asset or liability at the measurement date (referred to as the “exit price”). The fair value is based on assumptions that market participants would use, including a consideration of non-performance risk. Under the accounting guidance for fair value hierarchy, there are three levels of measurement inputs. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable, either directly or indirectly. Level 3 inputs are unobservable due to little or no corroborating market data.
The Company’s financial instruments, consisting of cash, cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities, and the SWK Loan (as defined below) as discussed in Note 9, approximate fair value because of the nature of these items.
Concentration of Credit Risk, Interest Rate Risk and Foreign Currency Exchange Rate
Financial instruments which potentially expose the Company to a concentration of credit risk consist principally of cash and cash equivalents, restricted cash, and trade accounts receivable. The Company maintains its cash and cash equivalents and restricted cash with established commercial banks. At times, balances may exceed federally insured limits. To minimize the risk associated with trade accounts receivable, management performs ongoing credit evaluations of customers’ financial condition and maintains relationships with the Company’s customers that allow management to monitor current changes in business operations so the Company can respond as needed. The Company does not, generally, require customers to provide collateral before it sells them its products. However, the Company has required certain distributors to make prepayments for significant purchases of products.
Substantially all of the Company’s revenue is denominated in U.S. dollars, including sales to international distributors. Only a small portion of its revenue and expenses is denominated in foreign currencies, principally the Euro and Indian Rupee. The Company’s foreign currency expenditures primarily consist of the cost of maintaining offices, consulting services, and employee-related costs. During the three and nine months ended September 30, 2021 and 2020, respectively, the Company did not enter into any
8
hedging contracts. Future fluctuations in the value of the U.S. dollar may affect the price competitiveness of the Company’s products outside the U.S.
Recent Accounting Pronouncements
Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification (“ASC”).
The Company considers the applicability and impact of all ASUs. ASUs not listed below were assessed and determined not to be applicable or are expected to have minimal impact on the Company’s consolidated financial position and results of operations.
Recently Issued Accounting Standards
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This ASU clarifies the accounting for modifications or exchanges of freestanding equity-classified written call options (i.e. warrants) so that the transaction should be treated as an exchange of the original instrument for a new instrument. This standard is effective for fiscal years beginning after December 15, 2021 on a prospective basis, with early adoption permitted. The adoption of this update is not expected to have a material impact on the Company's consolidated financial position and results of operations.
In December 2019, the FASB issued ASU 2019-12, Income Taxes – Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by clarifying and amending existing guidance related to the recognition of franchise tax, the evaluation of a step-up in the tax basis of goodwill and the effects of enacted changes in tax laws or rates in the effective tax rate computation, among other clarifications. ASU 2019-12 is effective for annual periods beginning after December 15, 2020, including interim periods within those fiscal years, and early adoption is permitted. The Company adopted this guidance effective January 1, 2021, and the adoption of this standard did not have a material impact on its consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). This ASU reduces the number of accounting models for convertible debt instruments and convertible preferred stock and amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related earnings per share guidance. This standard is effective for the Company beginning on January 1, 2022, with early adoption permitted only in the first quarter of 2021. Adoption is either a modified retrospective method or a fully retrospective method of transition. The Company is currently assessing the impact the new guidance will have on its consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The standard’s main goal is to improve financial reporting by requiring earlier recognition of credit losses on financing receivables and other financial assets in scope and to replace the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company will be required to use a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. The standard will be effective for the Company beginning January 1, 2023, with early adoption permitted beginning January 1, 2019. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements.
NOTE 3—REVENUE RECOGNITION
Contracts with Customers
Revenue for sales of products and services is derived from contracts with customers. The products and services promised in customer contracts include delivery of laser systems, imaging systems, and consumables as well as certain ancillary services such as training and extended warranties. Contracts with each customer generally state the terms of the sale, including the description, quantity and price of each product or service. Payment terms are stated in the contract and vary according to the arrangement. Because the customer typically agrees to a stated rate and price in the contract that does not vary over the life of the contract, the Company’s contracts do not contain variable consideration. The Company establishes a provision for estimated warranty expense.
9
Performance Obligations
At contract inception, the Company assesses the products and services promised in its contracts with customers. The Company then identifies performance obligations to transfer distinct products or services to the customers. In order to identify performance obligations, the Company considers all of the products or services promised in contracts regardless of whether they are explicitly stated or are implied by customary business practices.
Revenue from products and services transferred to customers at a single point in time accounted for i i 88 / % of net revenue for the three and nine months ended September 30, 2021 and i 86% and i 78% of net revenue for the three and nine months ended September 30, 2020, respectively. The majority of the Company’s revenue recognized at a point in time is for the sale of laser systems and consumables. Revenue from these contracts is recognized when the customer is able to direct the use of and obtain substantially all of the benefits from the product which generally coincides with title transfer during the shipping process.
Revenue from services transferred to customers over time accounted for i i 12 / % of net revenue for the three and nine months ended September 30, 2021 and i 14% and i 22% of net revenue for the three and nine months ended September 30, 2020, respectively. The majority of the Company’s revenue that is recognized over time relates to product training and extended warranties. Deferred revenue attributable to undelivered elements, which primarily consists of product training, totaled approximately $ i 1.0 million and $ i 0.7 million as of September 30, 2021 and December 31, 2020, respectively.
Transaction Price Allocation
The transaction price for a contract is allocated to each distinct performance obligation and recognized as revenue when, or as, each performance obligation is satisfied. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using the best estimate of the standalone selling price of each distinct good or service in a contract. The primary method used to estimate standalone selling price is the observable price when the good or service is sold separately in similar circumstances and to similar customers.
Significant Judgments
Revenue is recorded for extended warranties over time as the customer benefits from the warranty coverage. This revenue will be recognized equally throughout the contract period as the customer receives benefits from the Company's promise to provide such services. Revenue is recorded for product training as the customer attends a training program or upon the expiration of the obligation, which is generally after nine months.
The Company also has contracts that include both the product sales and product training as performance obligations. In those cases, the Company records revenue for product sales at the point in time when the product has been shipped. The customer obtains control of the product when it is shipped, as all shipments are made FOB shipping point, and after the customer selects its shipping method and pays all shipping costs and insurance. The Company has concluded that control is transferred to the customer upon shipment.
Accounts Receivable
Accounts receivable are stated at estimated net realizable value. The allowance for doubtful accounts is based on an analysis of customer accounts and the Company’s historical experience with accounts receivable write-offs.
10
Contract Liabilities
The Company performs its obligations under a contract with a customer by transferring products and/or services in exchange for consideration from the customer. The Company typically invoices its customers as soon as control of an asset is transferred and a receivable for the Company is established. The Company, however, recognizes a contract liability when a customer prepays for goods and/or services and the Company has not transferred control of the goods and/or services. The opening and closing balances of the Company’s contract liabilities are as follows (in thousands):
|
|
September 30, |
|
|
|
|||
|
|
|
|
2020 |
|
|||
Undelivered elements (training, installation, product |
|
$ |
i 1,015 |
|
|
$ |
i 670 |
|
Extended warranty contracts |
|
|
i 1,557 |
|
|
|
i 1,609 |
|
Total deferred revenue |
|
|
i 2,572 |
|
|
|
i 2,279 |
|
Less: long-term portion of deferred revenue |
|
|
( i 294 |
) |
|
|
( i 374 |
) |
Deferred revenue — current |
|
$ |
i 2,278 |
|
|
$ |
i 1,905 |
|
The balance of contract assets was immaterial as the Company did not have a significant amount of uninvoiced receivables at September 30, 2021 and December 31, 2020.
The amount of revenue recognized during the nine months ended September 30, 2021 and 2020 that was included in the opening contract liability balance related to undelivered elements was $ i 0.2 million and $ i 0.3 million, respectively. The amounts related to extended warranty contracts was $ i 1.1 million and $ i 2.0 million, for the nine months ended September 30, 2021 and 2020, respectively.
Disaggregation of Revenue
The Company disaggregates revenue from contracts with customers into geographical regions and by the timing of when goods and services are transferred. The Company determined that disaggregating revenue into these categories depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by regional economic factors.
The Company’s revenues related to the following geographic areas were as follows (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
|
|||||||||||
|
|
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|||||
United States |
|
$ |
i 5,939 |
|
|
$ |
i 4,755 |
|
|
$ |
i 17,024 |
|
|
$ |
i 10,079 |
|
International |
|
|
i 3,592 |
|
|
|
i 1,784 |
|
|
|
i 9,756 |
|
|
|
i 4,181 |
|
Total net revenue |
|
$ |
i 9,531 |
|
|
$ |
i 6,539 |
|
|
$ |
i 26,780 |
|
|
$ |
i 14,260 |
|
Information regarding revenues disaggregated by the timing of when goods and services are transferred is as follows (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
|
|||||||||||
|
|
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|||||
Revenue recognized over time |
|
$ |
i 1,116 |
|
|
$ |
i 898 |
|
|
$ |
i 3,269 |
|
|
$ |
i 3,143 |
|
Revenue recognized at a point in time |
|
|
i 8,415 |
|
|
|
i 5,641 |
|
|
|
i 23,511 |
|
|
|
i 11,117 |
|
Net revenue |
|
$ |
i 9,531 |
|
|
$ |
i 6,539 |
|
|
$ |
i 26,780 |
|
|
$ |
i 14,260 |
|
The Company’s sales by end market were as follows (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
|
|||||||||||
|
|
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|||||
End-customer |
|
$ |
i 5,939 |
|
|
$ |
i 5,087 |
|
|
$ |
i 17,024 |
|
|
$ |
i 9,845 |
|
Distributors |
|
|
i 3,592 |
|
|
|
i 1,452 |
|
|
|
i 9,756 |
|
|
|
i 4,415 |
|
Net revenue |
|
$ |
i 9,531 |
|
|
$ |
i 6,539 |
|
|
$ |
i 26,780 |
|
|
$ |
i 14,260 |
|
11
Shipping and Handling Costs and Revenues
Shipping and freight costs are treated as fulfillment costs. For shipments to end-customers, the customer bears the shipping and freight costs and has control of the product upon shipment. For shipments to distributors, the distributor bears the shipping and freight costs, including insurance, tariffs and other import/export costs.
/
NOTE 4—REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
BIOLASE's board of directors (the "Board"), without further stockholder authorization, may issue from time to time up to i 1,000,000 shares of the Company’s preferred stock. Of the i 1,000,000 shares of preferred stock, i 69,565 shares are designated as Series E Participating Convertible Preferred Stock, par value $ i 0.001 per share (“Series E Preferred Stock”), and i 18,000 shares are designated as Series F Convertible Preferred Stock, par value $ i 0.001 per share (“Series F Preferred Stock”).
Common Stock
On February 10, 2021, BIOLASE issued and sold in an underwritten bought deal offering an aggregate of i 14,000,000 shares of common stock at a price of $ i 1.03 per share less underwriting discounts and commissions (the "Equity Offering"). The Company received gross proceeds of approximately $ i 14.4 million before deducting underwriting discounts and commissions and estimated offering expenses of $ i 1.1 million.
Preferred Stock
Series F Convertible Preferred Stock
On July 23, 2020, the Company consummated the sale of an aggregate of i 18,000 shares of Series F Preferred Stock and i 45,000,000 warrants (the “July 2020 Warrants”), with each warrant exercisable for one share of BIOLASE common stock, through a registered rights offering the Company completed on July 22, 2020 (the “Rights Offering”). Each share of Series F Preferred Stock is convertible at the Company’s option at any time on or after July 22, 2021 or at the option of the holder at any time, into the number of shares of BIOLASE common stock determined by dividing the $ i 1,000 stated value per share of the Series F Preferred Stock by a conversion price of $ i 0.40 per share. Each share of Series F Preferred Stock is convertible into i 2,500 shares of common stock, and each July 2020 Warrant entitles the holder thereof to purchase one share BIOLASE common stock at a conversion price of $ i 0.40 per share.
In accordance with applicable accounting standards, the $ i 18.0 million gross proceeds from the Rights Offering were allocated to the Series F Preferred Stock and the July 2020 Warrants in the amount of $ i 2.7 million and $ i 15.3 million, respectively. The allocation was based on the fair value of the July 2020 Warrants of $ i 15.3 million as of the commitment date, with the residual proceeds of $ i 2.7 million allocated to the Series F Preferred Stock.
The Series F Preferred Stock contained a beneficial conversion feature which resulted in a deemed dividend to preferred stockholders of approximately $ i 2.7 million, upon immediate accretion. Additionally, the July 2020 Warrants were recognized as a discount to the Series F Preferred Stock, with the conversion of approximately i 18,000 and i 17,000 Series F Preferred Stock to common stock as of September 30, 2021 and December 31, 2020 respectively. Upon conversion, this discount was accreted and also recognized as a deemed dividend to preferred stockholders in the amount of $ i 0.5 million and $ i 14.7 million for the nine months ended September 30, 2021 and the year ended December 31, 2020, respectively.
Approximately i 251 and i 882 shares of Series F Preferred Stock remained outstanding as of September 30, 2021 and December 31, 2020, respectively.
Redeemable Preferred Stock
Series E Participating Convertible Preferred Stock
As of September 30, 2021 and December 31, 2020, there were i i i i no / / / shares of Series E Preferred Stock issued and outstanding.
Stock-Based Compensation
2002 Stock Incentive Plan
The 2002 Stock Incentive Plan (as amended effective as of May 26, 2004, November 15, 2005, May 16, 2007, May 5, 2011, June 6, 2013, October 30, 2014, April 27, 2015, and May 6, 2017, the “2002 Plan”) was replaced by the 2018 Plan (as defined below) with respect to future equity awards. Persons eligible to receive awards under the 2002 Plan included officers, employees, directors of the Company, and consultants. As of September 30, 2021, a total of i 3,110,000 shares have been authorized for issuance under the
12
2002 Plan, of which approximately 1,036,00 shares of common stock have been issued pursuant to options that were exercised and restricted stock units ("RSUs") that were vested, approximately i 879,000 shares of common stock have been reserved for options that are outstanding, and no shares of common stock remain available for future grants.
2018 Stock Incentive Plan
At the 2018 annual meeting of stockholders, the Company’s stockholders approved the 2018 Long-Term Incentive Plan (as amended, the “2018 Plan”) which was amended by Amendment No. 1 to the 2018 Plan, approved by the Company’s stockholders at a special meeting on September 21, 2018, Amendment No. 2 to the 2018 Plan, as approved by the Company’s stockholders on May 15, 2019, Amendment No. 3 to the 2018 Plan, as approved by the Company’s stockholders on May 13, 2020, and Amendment No. 4 to the 2018 Plan, as approved by the Company's stockholders on June 11, 2021. Although the increase of i 24,700,000 in the number of shares of BIOLASE common stock available for issuance under the 2018 Plan was approved by the stockholders on June 11, 2021, the proposal to amend BIOLASE's certificate of incorporation to increase the number of authorized shares of BIOLASE common stock was not approved by stockholders at the meeting. Therefore, the shares available for issuance under the 2018 Plan only increased by the number of remaining shares authorized for issuance. The purposes of the 2018 Plan are (i) to align the interests of the Company’s stockholders and recipients of awards under the 2018 Plan by increasing the proprietary interest of such recipients in the Company’s growth and success; (ii) to advance the interests of the Company by attracting and retaining non-employee directors, officers, other employees, consultants, independent contractors, and agents; and (iii) to motivate such persons to act in the long-term best interests of the Company and its stockholders.
Under the terms of the 2018 Plan, approximately i 36,921,000 shares of BIOLASE common stock are available for issuance; however, because the increase in the number of authorized shares under the certificate of incorporation was not approved by stockholders at the 2021 annual meeting, only approximately i 2.4 million shares are available for future grants as of the date of these unaudited consolidated financial statements. As of September 30, 2021, a total of approximately i 4,744,000 shares of the Company’s common stock have been reserved for issuance upon the exercise of outstanding options and or settlement of unvested RSUs under the 2018 Plan.
The Company recognized stock-based compensation expense of $ i 0.2 million and $ i 1.5 million for the three and nine months ended September 30, 2021, respectively, and $ i 0.8 million and $ i 2.4 million for the three and nine months ended September 30, 2020, respectively. As of September 30, 2021 and 2020, the Company had approximately $ i 0.8 million and $ i 1.4 million, respectively, of total unrecognized compensation expense, net of estimated forfeitures, related to unvested share-based compensation arrangements. The Company expects that expense to be recognized over a weighted-average period of i 1.5 years. As of September 30, 2021 and December 31, 2020, $ i 0.0 million and $ i 0.9 million of the total stock compensation cost related to performance-based awards was recognized as a liability.
The following table summarizes the income statement classification of compensation expense associated with share-based payments (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
|
|||||||||||
|
|
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|||||
Cost of revenue |
|
$ |
i 25 |
|
|
$ |
i 79 |
|
|
$ |
i 138 |
|
|
$ |
i 208 |
|
Sales and marketing |
|
|
i 62 |
|
|
|
i 183 |
|
|
|
i 291 |
|
|
|
i 571 |
|
General and administrative |
|
|
i 61 |
|
|
|
i 517 |
|
|
|
i 777 |
|
|
|
i 1,424 |
|
Engineering and development |
|
|
i 44 |
|
|
|
i 68 |
|
|
|
i 282 |
|
|
|
i 164 |
|
Total |
|
$ |
i 192 |
|
|
$ |
i 847 |
|
|
$ |
i 1,488 |
|
|
$ |
i 2,367 |
|
The stock option fair values were estimated using the Black-Scholes option-pricing model with the following assumptions:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
|
|||||||||||
|
|
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|||||
Expected term (years) |
|
|
i 6.1 |
|
|
N/A |
|
|
|
i 6.1 |
|
|
|
i 5.5 |
|
|
Volatility |
|
|
i 111 |
% |
|
|
i — |
% |
|
|
i 111 |
% |
|
|
i 103 |
% |
Annual dividend per share |
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
||||
Risk-free interest rate |
|
|
i 0.98 |
% |
|
|
i — |
% |
|
|
i 0.86 |
% |
|
|
i 0.37 |
% |
13
A summary of option activity for the nine months ended September 30, 2021 is as follows (in thousands, except per share data):
|
|
|
|
|
Weighted |
|
|
Weighted |
|
|
|
|
||||
|
|
|
|
|
Average |
|
|
Contractual |
|
|
Aggregate |
|
||||
|
|
Shares |
|
|
Exercise |
|
|
Term |
|
|
Intrinsic |
|
||||
Options outstanding at December 31, 2020 |
|
|
i 2,398 |
|
|
$ |
i 2.96 |
|
|
|
i 7.2 |
|
|
$ |
i 53 |
|
Granted at fair market value |
|
|
i 50 |
|
|
$ |
i 0.87 |
|
|
|
|
|
|
|
||
Exercised |
|
|
( i 176 |
) |
|
$ |
i 0.38 |
|
|
|
|
|
|
|
||
Forfeited, cancelled, or expired |
|
|
( i 102 |
) |
|
$ |
i 7.78 |
|
|
|
|
|
|
|
||
Options outstanding at September 30, 2021 |
|
|
i 2,170 |
|
|
$ |
i 2.89 |
|
|
|
i 6.6 |
|
|
$ |
i 286 |
|
Options exercisable at September 30, 2021 |
|
|
i 2,052 |
|
|
$ |
i 3.00 |
|
|
|
i 6.5 |
|
|
$ |
i 277 |
|
Vested options expired during the period |
|
|
i 91 |
|
|
$ |
i 8.48 |
|
|
|
|
|
|
|
||
A summary of unvested stock option activity for the nine months ended September 30, 2021 is as follows (in thousands, except per share data):
|
|
|
|
|
Weighted |
|
||
|
|
|
|
|
Average Grant |
|
||
|
|
Shares |
|
|
Date Fair Value |
|
||
Unvested options at December 31, 2020 |
|
|
i 1,323 |
|
|
$ |
i 0.34 |
|
Granted |
|
|
i 50 |
|
|
$ |
i 0.72 |
|
Vested |
|
|
( i 1,256 |
) |
|
$ |
i 0.31 |
|
Unvested options at September 30, 2021 |
|
|
i 117 |
|
|
$ |
i 0.73 |
|
/
Fair value disclosures related to grants, exercises and vested options are as follows (in thousands, except per share amounts):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
|
|||||||||||
|
|
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|||||
Proceeds from stock options exercised |
|
$ |
i 66 |
|
|
$ |
i — |
|
|
$ |
i 66 |
|
|
$ |
i — |
|
Tax benefit related to stock options exercised (1) |
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
||||
Intrinsic value of stock options exercised (2) |
|
$ |
i 42 |
|
|
$ |
i — |
|
|
$ |
i 42 |
|
|
$ |
i — |
|
Weighted-average fair value of options granted |
|
$ |
i 0.49 |
|
|
$ |
i — |
|
|
$ |
i 0.72 |
|
|
$ |
i 0.29 |
|
Total fair value of stock options vested during the period |
|
$ |
i 8 |
|
|
$ |
i 34 |
|
|
$ |
i 395 |
|
|
$ |
i 188 |
|
Restricted Stock Units
During the nine months ended September 30, 2021, the Company granted approximately i 2.8 million RSUs and the Company canceled approximately i 0.1 million RSUs with performance-based vesting due to non-achievement of the performance targets.
14
A summary of unvested RSU activity for the nine months ended September 30, 2021 is as follows (in thousands, except per share amounts):
|
|
|
|
|
Weighted |
|
||
|
|
|
|
|
Average Grant |
|
||
|
|
Shares |
|
|
Date Fair Value |
|
||
Unvested RSUs at December 31, 2020 |
|
|
i 3,672 |
|
|
$ |
i 0.66 |
|
Granted |
|
|
i 2,808 |
|
|
$ |
i 0.83 |
|
Vested |
|
|
( i 3,772 |
) |
|
$ |
i 0.69 |
|
Forfeited or cancelled |
|
|
( i 601 |
) |
|
$ |
i 1.33 |
|
Unvested RSUs at September 30, 2021 |
|
|
i 2,107 |
|
|
$ |
i 0.63 |
|
Warrants
The Company issues warrants to acquire shares of BIOLASE common stock as approved by the Board. During the first quarter of 2021, the Company received proceeds of $ i 15.0 million from warrants exercised in 2021 and $ i 1.5 million from warrants exercised at the end of the fourth quarter of 2020, which was a receivable included in other current assets as of December 31, 2020.
A summary of warrant activity for the nine months ended September 30, 2021 is as follows (in thousands, except exercise price amounts):
|
|
|
|
|
Weighted |
|
||
|
|
|
|
|
Average |
|
||
|
|
Shares |
|
|
Exercise |
|
||
Warrants outstanding, December 31, 2020 |
|
|
i 54,052 |
|
|
$ |
i 0.62 |
|
Exercised |
|
|
( i 35,790 |
) |
|
$ |
i 0.43 |
|
Forfeited, cancelled, or expired |
|
|
( i 407 |
) |
|
$ |
i 10.00 |
|
Warrants outstanding at September 30, 2021 |
|
|
i 17,855 |
|
|
$ |
i 0.80 |
|
Warrants exercisable at September 30, 2021 |
|
|
i 17,855 |
|
|
$ |
i 0.80 |
|
Vested warrants expired during the period |
|
|
( i 407 |
) |
|
$ |
i 10.00 |
|
See Note 9 for information on the Western Alliance Warrants, the SWK Warrants, and the DPG Warrants (each as defined below).
Phantom Awards and Stock Appreciation Rights
During the nine months ended September 30, 2021, the Company issued i 10.1 million phantom RSUs in lieu of stock-settled RSUs historically granted for leadership bonuses and non-employee director service. The phantom RSUs have either time-based or performance-based vesting conditions and will be settled in cash in 2024 with the Company's option to settle the award in BIOLASE common stock at the sole discretion of the Board. These phantom RSUs are included as a component of long-term liability on the consolidated balance sheet and are not considered stock-based compensation due to the cash-settlement feature of the award. If at any time the determination is made to settle the phantom RSUs in BIOLASE common stock, the awards will be included as a component of additional paid-in capital on the consolidated balance sheet. The expense recognized during the three and nine months ended September 30, 2021 was $ i i 0.2 / million.
During the nine months ended September 30, 2021, the Company issued i 0.7 million stock appreciation rights ("SARs") in lieu of stock-settled RSUs historically granted for non-employee director service. Upon exercise, the SARs will be settled in cash with the Company's option to settle in BIOLASE common stock at the sole discretion of the Board. These SARS are included in accrued liabilities on the consolidated balance sheet and are not considered stock-based compensation due to the cash-settlement feature of the award. If at any time the determination is made to settle in BIOLASE common stock, the awards will be included as a component of additional paid-in capital on the consolidated balance sheet. The expense recognized during the three and nine months ended September 30, 2021 was $ i 0.1 million and $ i 0.2 million, respectively.
Net Loss Per Share – Basic and Diluted
Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of BIOLASE common stock outstanding for the period. In computing diluted net loss per share, the weighted average
15
number of shares of common stock outstanding is adjusted to reflect the effect of potentially dilutive securities. Net income (loss) is adjusted for any deemed dividends to preferred stockholders to compute net income attributable to common stockholders.
Outstanding stock options, RSUs, and warrants to purchase approximately i 24.0 million and i 67.2 million shares were not included in the calculation of diluted loss per share amounts for the periods ended September 30, 2021 and September 30, 2020, respectively, as their effect would have been anti-dilutive. Also excluded in the calculation of diluted loss per share amount for the three and nine months ended September 30, 2021 are the i 627,500 shares of BIOLASE common stock issuable upon conversion of the i 251 shares of Series F Preferred Stock outstanding as of September 30, 2021.
/NOTE 5—INVENTORY
Inventory is valued at the lower of cost or net realizable value and is comprised of the following (in thousands):
|
|
September 30, |
|
|
|
|||
|
|
|
|
2020 |
|
|||
Raw materials |
|
$ |
i 5,122 |
|
|
$ |
i 3,721 |
|
Work-in-process |
|
|
i 1,784 |
|
|
|
i 1,158 |
|
Finished goods |
|
|
i 7,156 |
|
|
|
i 6,278 |
|
Inventory |
|
$ |
i 14,062 |
|
|
$ |
i 11,157 |
|
/
Inventory has been reduced by estimates for excess and obsolete amounts totaling $ i i 0.7 / million as of September 30, 2021 and December 31, 2020.
NOTE 6—PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment, net is comprised of the following (in thousands):
|
|
September 30, |
|
|
|
|||
|
|
|
|
2020 |
|
|||
Building |
|
$ |
i 215 |
|
|
$ |
i 229 |
|
Leasehold improvements |
|
|
i 90 |
|
|
|
i 52 |
|
Equipment and computers |
|
|
i 7,876 |
|
|
|
i 7,477 |
|
Furniture and fixtures |
|
|
i 471 |
|
|
|
i 465 |
|
Construction in progress |
|
|
i — |
|
|
|
i 46 |
|
Total |
|
|
i 8,652 |
|
|
|
i 8,269 |
|
Accumulated depreciation and amortization |
|
|
( i 7,931 |
) |
|
|
( i 7,664 |
) |
Property, plant, and equipment, net before land |
|
|
i 721 |
|
|
|
i 605 |
|
Land |
|
|
i 168 |
|
|
|
i 177 |
|
Property, plant, and equipment, net |
|
$ |
i 889 |
|
|
$ |
i 782 |
|
/
Depreciation and amortization expense related to property, plant, and equipment totaled $ i 0.1 million and $ i 0.3 million for the three and nine months ended September 30, 2021 and $ i 0.1 million and $ i 0.5 million for the three and nine months ended September 30, 2020, respectively.
NOTE 7—INTANGIBLE ASSETS AND GOODWILL
The Company conducted its annual impairment test of goodwill as of December 31, 2020 and determined that there was i no impairment. The Company also tests its intangible assets and goodwill between the annual impairment tests if events occur or circumstances change that would more likely than not reduce the fair value of the Company or its assets below their carrying amounts. For intangible assets subject to amortization, the Company performs its impairment test when indicators, such as reductions in demand or significant economic slowdowns, are present. i No events have occurred since December 31, 2020 through the date of these unaudited consolidated financial statements that would trigger further impairment testing of the Company’s intangible assets and goodwill.
As of September 30, 2021 and December 31, 2020, the Company had goodwill of $ i i 2.9 / million. As of September 30, 2021 and December 31, 2020, all intangible assets have been fully amortized and i i i i no / / / amortization expense was recognized during the three and nine months ended September 30, 2021 and 2020.
/16
NOTE 8—ACCRUED LIABILITIES
Accrued liabilities are comprised of the following (in thousands):
|
|
September 30, |
|
|
|
|||
|
|
|
|
2020 |
|
|||
Payroll and benefits |
|
$ |
i 3,017 |
|
|
$ |
i 3,552 |
|
Settlement accrual |
|
|
i 680 |
|
|
|
i — |
|
Warranty accrual, current portion |
|
|
i 545 |
|
|
|
i 748 |
|
Lease liability |
|
|
i 404 |
|
|
|
i 305 |
|
Taxes |
|
|
i 357 |
|
|
|
i 165 |
|
Accrued professional services |
|
|
i 283 |
|
|
|
i 281 |
|
Accrued insurance premium |
|
|
i — |
|
|
|
i 885 |
|
Other |
|
|
i 896 |
|
|
|
i 731 |
|
Accrued liabilities |
|
$ |
i 6,182 |
|
|
$ |
i 6,667 |
|
The CARES Act allows employers to defer the deposit and payment of the employer's share of Social Security taxes through December 31, 2020. Under the CARES Act, the Company deferred $ i 0.4 million as of September 30, 2021. The deferred liability is included in accrued payroll and benefits.
As of September 30, 2021, a settlement accrual liability of $ i 0.7 million related to the CAO Settlement Agreement (as defined below) was included in current accrued liabilities. See Note 11 for additional information.
Changes in the initial product warranty accrual and the expenses incurred under the Company’s initial and extended warranties are included within accrued liabilities and were as follows (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
|
|||||||||||
|
|
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|||||
Balance, beginning of period |
|
$ |
i 551 |
|
|
$ |
i 853 |
|
|
$ |
i 1,132 |
|
|
$ |
i 1,110 |
|
Provision for estimated warranty cost |
|
|
i 832 |
|
|
|
i 345 |
|
|
|
i 1,129 |
|
|
|
i 575 |
|
Warranty expenditures |
|
|
( i 366 |
) |
|
|
( i 344 |
) |
|
|
( i 1,244 |
) |
|
|
( i 831 |
) |
Balance, end of period |
|
|
i 1,017 |
|
|
|
i 854 |
|
|
|
i 1,017 |
|
|
|
i 854 |
|
Less: long-term portion of warranty accrual |
|
|
i 472 |
|
|
|
i 204 |
|
|
|
i 472 |
|
|
|
i 204 |
|
Current portion of warranty accrual |
|
$ |
i 545 |
|
|
$ |
i 650 |
|
|
$ |
i 545 |
|
|
$ |
i 650 |
|
The Company's Waterlase laser systems sold domestically are covered by a warranty against defects in material and workmanship for a period of up to i one year from the date of sale to the end-user by the Company or a distributor. The Company's diode systems sold domestically are covered by a warranty against defects in material and workmanship for a period of up to i two years from the date of sale to the end-user by the Company or a distributor. Waterlase systems and diode systems sold internationally are covered by a warranty against defects in material and workmanship for a period of up to i 28 months from date of sale to the international distributor. The Company's laser systems warranty covers parts and service for sales in its North American territories and parts only for international distributor sales.
In North America and select international locations, the Company sells extended warranty contracts to its laser systems end users that cover the period after the expiration of the Company's standard warranty coverage for its laser systems. Extended warranty coverage provided under the Company's service contracts varies by the type of system and the level of service desired by the customer. Products or accessories remanufactured, refurbished, or sold by unauthorized parties, voids all warranties in place for such products and exempts the Company from liability issues relating to the use of such products. The Company distributes extended warranties on certain imaging products, including its digital radiography products. However, all imaging products that the Company distributes are initially covered by manufacturer’s warranties.
/17
NOTE 9—DEBT
The following table presents the details of the principal outstanding and unamortized discount (in thousands):
|
|
September 30, |
|
|
|
|||
|
|
|
|
2020 |
|
|||
SWK Loan |
|
$ |
i 14,300 |
|
|
$ |
i 14,300 |
|
PPP Loan |
|
|
i — |
|
|
|
i 2,980 |
|
EIDL Loan |
|
|
i 150 |
|
|
|
i 150 |
|
Discount and debt issuance costs on SWK Loan |
|
|
( i 936 |
) |
|
|
( i 1,244 |
) |
Total |
|
|
i 13,514 |
|
|
|
i 16,186 |
|
Current term loans, net of discount |
|
|
( i 1,400 |
) |
|
|
i — |
|
Non current term loans, net of discount |
|
$ |
i 12,114 |
|
|
$ |
i 16,186 |
|
/
The Company recognized approximately $ i 0.6 million and $ i 1.7 million in interest expense for the three and nine months ended September 30, 2021 and $ i 0.6 million and $ i 1.8 million in interest expense for the three and nine months ended September 30, 2020, respectively. The weighted-average interest rate as of September 30, 2021 was i 12.25%.
The future minimum principal and interest payments as of September 30, 2021 are as follows (in thousands):
|
|
Principal |
|
|
Interest (1) |
|
||
Remainder of 2021 |
|
$ |
i — |
|
|
$ |
i 443 |
|
2022 |
|
|
i 2,100 |
|
|
|
i 1,716 |
|
2023 |
|
|
i 2,800 |
|
|
|
i 1,393 |
|
2024 |
|
|
i 9,400 |
|
|
|
i 1,899 |
|
2025 |
|
|
i 1 |
|
|
|
i 8 |
|
2026 and thereafter |
|
|
i 149 |
|
|
|
i 88 |
|
Total future payments |
|
$ |
i 14,450 |
|
|
$ |
i 5,547 |
|
|
|
|
|
|
|
|
||
(1) Estimated using London Interbank Bank Offered Rate (“LIBOR”) as of September 30, 2021 |
|
|
|
|
|
|
||
Lines of Credit
Pacific Mercantile Bank
On October 28, 2019, the Company entered into a loan and security agreement (the “Loan Agreement”) with Pacific Mercantile Bank, as lender (“PMB”), which provides for a revolving line of credit (the “PMB Loan”) in a maximum principal amount not to exceed the lesser of (i) $ i 3 million or (ii) the sum of i 90% of the Eligible Accounts (as defined in the Loan Agreement) plus i 75% of the Eligible Inventory (as defined in the Loan Agreement, and subject to certain limitations set forth therein); provided that the maximum principal amount of the PMB Loan may be reduced from time to time in PMB’s good faith business judgment as set forth in the Loan Agreement. Borrowings under the PMB Loan may be used for working capital. The PMB Loan matures on i October 28, 2021, unless earlier terminated.
The Company’s obligations under the PMB Loan are secured by a security interest in substantially all of the Company’s property. No borrowings may be made under the PMB Loan Agreement unless and until Exim Bank agrees to guarantee the PMB Loan and the Company has entered into a borrower agreement with Exim Bank.
Borrowings under the PMB Loan bear interest at a daily rate equal to the prime rate published in the Wall Street Journal, plus i 1.5% per annum; provided, that the interest rate in effect on any day shall not be less than i 6.0% per annum. Additionally, the Company is required to pay an initial and annual fee of $ i 52,500 to Exim Bank.
The PMB Loan Agreement requires the Company to maintain unrestricted cash at PMB plus unused availability under the PMB Loan in an amount equal to at least the Burn Rate. “Burn Rate” means the Company’s net profit/net loss plus depreciation plus amortization plus stock-based compensation plus the change in the accounts receivable reserve, measured on a trailing three-month basis. In addition, the PMB Loan Agreement contains customary affirmative and negative covenants for financings of its type (subject to customary exceptions).
As of September 30, 2021 and December 31, 2020, the Company had i i no / borrowings outstanding and unused availability under the PMB Loan of approximately $ i 2.8 million and $ i 2.3 million, respectively.
18
Term Loan
On November 9, 2018, the Company entered into a i five-year secured Credit Agreement (the “Credit Agreement”) with SWK Funding LLC (“SWK”), pursuant to which the Company has borrowed $ i 14.3 million (“SWK Loan”) as of September 30, 2021. The Company’s obligations under the Credit Agreement are secured by substantially all of the Company’s assets. Under the terms of the Credit Agreement and subsequent amendments as discussed in the Company’s 2020 Form 10-K, repayment of the SWK Loan is interest-only through the second quarter of 2022, paid quarterly with the option to extend the interest-only period. Principal repayments begin in the second quarter of i 2022 and will be approximately $ i 0.7 million quarterly until the SWK Loan matures in the second quarter of i 2024. The loan bears interest of i 10% plus LIBOR floor of 2.25% i or another index that approximates LIBOR as close as possible if and when LIBOR no longer exists.
In light of the Company's increase in working capital from the Equity Offering and cash received from warrants exercised, the Company entered into the Seventh Amendment to the Credit Agreement (the “Seventh Amendment”) with SWK on February 24, 2021, which provides for adjusted minimum aggregate revenue and EBITDA requirements at the end of certain periods, to the extent that the Company's liquid assets are less than $ i 15 million. While the Company's liquid assets are at or above $ i 15 million, no financial maintenance covenants are applicable.
For the Seventh Amendment, the Company paid an incremental amendment fee of $ i 25,000, which is being amortized over the remaining life of the loan as of the date of the amendment.
As of September 30, 2021, the Company was in compliance with debt covenants of the Credit Agreement.
Paycheck Protection Program Loan
On April 14, 2020, the Company was granted a loan (the “PPP Loan”) under the Paycheck Protection Program from PMB in the aggregate amount of $ i 2,980,000, pursuant to the Paycheck Protection Program under the CARES Act.
The PPP Loan, which was in the form of a note dated i April 13, 2020 issued by BIOLASE, matures on i April 13, 2022 and bears interest at a rate of i 1.0% per annum. Interest is payable monthly commencing on i November 1, 2020. The note may be prepaid at any time prior to maturity with i no prepayment penalties. Funds from the PPP Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020. The Company recorded the principal amount of approximately $ i 3.0 million due on the PPP Loan in non-current term loans in the consolidated balance sheet as of December 31, 2020. Interest on the PPP Loan was not material. The Company believes it used the entire PPP Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the PPP Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.
In July 2020, the Company amended the provisions of the PPP Loan. The amendment modifies the original payment deferment period from six months to the date that the United States Small Business Administration (“SBA") remits the Company’s loan forgiveness to PMB or if no forgiveness is requested to ten months after the end of the 24-week measurement period. The amendment also increased the amount of non-payroll costs eligible for loan forgiveness from i 25% to i 40%. During 2020, the Company requested forgiveness in accordance with the application requirements.
In June 2021, the Company received a reply to its request, and the PPP Loan along with all accrued interest was forgiven by the SBA. The amount of loan forgiveness is presented as a component of non-operating (gain) loss on the Company's consolidated statement of operations. The SBA may undertake a review of a loan of any size during the i six-year period following forgiveness of the loan. i The review may include the loan forgiveness application, as well as whether the Company received the proper loan amount. There can be no assurance as to the result of any such SBA review.
EIDL Loan
On May 22, 2020, the Company executed the standard loan documents required for securing a loan (the “EIDL Loan”) from the SBA under its Economic Injury Disaster Loan assistance program in light of the impact of the COVID-19 pandemic on the Company’s business. The principal amount of the EIDL Loan is $ i 150,000, with proceeds to be used for working capital purposes. Interest on the EIDL Loan accrues at the rate of i 3.75%, per annum and i installment payments, including principal and interest, are due monthly beginning in July 2021 and are i payable through July 2050. In April 2021, the SBA announced that it was extending the first payment due date for all loans until i 2022, or 24 months from the loan execution date. The Company is obligated to begin making payments on this EIDL Loan starting in May 2022.
19
Western Alliance Warrants
On March 6, 2018, the Company issued to Western Alliance warrants (the “Original Western Alliance Warrants”) to purchase up to the number of shares of common stock equal to $ i 120,000 divided by the applicable exercise price at the time such warrants are exercised. The Original Western Alliance Warrants are fully vested and exercisable. The Original Western Alliance Warrants may be exercised with a cash payment from Western Alliance, or, in lieu of a cash payment, Western Alliance may convert the warrants into a number of shares, in whole or in part. The initial exercise price of the warrants was $ i 2.35 per share. On September 27, 2018, the Company entered into the Second Modification Agreement to amend the Original Business Financing Agreement. In connection with the Second Modification Agreement, the Original Western Alliance Warrants were terminated, and the Company issued new warrants (the “Western Alliance Warrants”) to purchase up to the number of shares of common stock equal to $ i 120,000 divided by the exercise price of $ i 2.13, which was the closing price of the Company’s common stock on September 27, 2018. The Western Alliance Warrants are immediately exercisable and expire on i September 27, 2028. These warrants contain down-round features that require the Company to adjust the exercise price proportionately should the Company issue shares at a price per share less than the exercise price. The sale of common stock in the second quarter of 2020 triggered an adjustment to the exercise price to approximately $ i 0.60 per share. The impact of the adjustment to the exercise price was not material.
SWK Warrants
In connection with the Credit Agreement, on November 9, 2018, the Company issued to SWK warrants (the “SWK Warrants”) to purchase up to i 372,023 shares of BIOLASE common stock. The SWK Warrants were immediately exercisable and expire on i November 9, 2026. The initial exercise price of the SWK Warrants was $ i 1.34, which was the average closing price of BIOLASE common stock for the i ten trading days immediately preceding November 9, 2018. These warrants contain down-round features that require the Company to adjust the exercise price proportionately should the Company issue shares at a price per share less than the exercise price. The fair value of the SWK Warrants was estimated using the Black-Scholes option-pricing model with the following assumptions: expected term of i 8 years; volatility of i 81.79%; annual dividend per share of $ i 0.00; and risk-free interest rate of i 3.13%; and resulted in an estimated fair value of $ i 0.4 million.
In November 2019, these warrants were consolidated and the exercise price was adjusted to $ i 1.00, and in March 2020, the exercise price was adjusted a second time to $ i 0.49. The impact of both reprice events was de minimis to the consolidated financial statements. In connection with the Fifth Amendment, the Company entered into a Third Amendment to the SWK Warrant Agreement. Under this amendment, the Company granted to SWK i 63,779 additional common stock warrants at an exercise price of approximately $ i 0.39. All other terms and conditions to the additional warrants were the same as those previously granted. The Company also revised the exercise price of the i 487,198 common stock warrants held by SWK to $ i 0.39. The Company measured the fair value of the 63,779 warrants granted using the Black-Scholes. The fair value of the additional warrants and the aggregate impact of the exercise price adjustments in previous amendments to the Warrant Agreement were less than $ i 0.1 million and not material to the consolidated financial statements. Due to the repricing that occurred in the second quarter of 2020, the down round features of these warrants was not triggered by the Company’s June 2020 sale of common stock.
DPG Warrants
In connection with the SWK Loan, the Company paid a finder’s fee to Deal Partners Group ("DPG") of $ i 0.4 million cash and issued warrants to purchase up to i 279,851 shares of common stock (the “DPG Warrants”). The DPG Warrants were issued on November 14, 2018, were exercisable immediately, and expire on i November 9, 2026. The initial exercise price of the DPG Warrants was $ i 1.34 which was the average closing price of the Company’s common stock for the i ten trading days immediately preceding November 9, 2018. These warrants contain down-round features that require the Company to adjust the exercise price proportionately should the Company issue shares at a price per share less than the exercise price. The fair value of the DPG Warrants of $ i 0.3 million was estimated using the Black-Scholes option pricing model with the following assumptions: expected term of i 8 years; volatility of i 81.79%; annual dividend per share of $ i 0.00; and risk-free interest rate of i 3.13%. In May 2019 the Company issued i 149,727 warrants to purchase common stock at a weighted average exercise price of $ i 2.17 to SWK and DPG.
In November 2019, the exercise price of the DPG Warrants issued on November 14, 2018 was adjusted from $ i 1.34 per share to $ i 0.88 per share and the exercise price of the DPG Warrants issued on May 7, 2019 was adjusted from $ i 2.17 per share to $ i 1.42 per share. The impact of the reprice was de minimis to the unaudited consolidated financial statements. The June 2020 sale of common stock triggered the down round features of these warrants, and in August 2020, the Company adjusted the exercise price of these warrants to $ i 0.62 and $ i 0.38 per share. The impact of this reprice was not material.
The value of both the SWK Warrants and the DPG Warrants was recognized as a discount on the SWK Loan and is being amortized on a straight-line basis which approximates the effective-interest method, over the loan term of i five years. Additionally, based on the adoption of ASU 2017-11 in the fourth quarter of 2018, these warrants are classified as equity in the consolidated balance sheet as of September 30, 2021 and December 31, 2020.
/20
NOTE 10—LEASES
The Company enters into operating leases primarily for real estate, office equipment, and fleet vehicles. Lease terms generally range from one to i five years, and often include options to renew for i one year. The Company leases its i 11,000 square foot corporate headquarters pursuant to a lease that expires on i December 31, 2025 and leases a manufacturing facility located in Corona, California, which expires on i June 30, 2025. The Company also leases additional office space and certain office equipment under various operating lease arrangements.
On January 22, 2020, the Company entered into a i five-year real property lease agreement for an approximately i 11,000 square foot facility in Corona, California and moved its manufacturing operations. The lease commenced on i July 1, 2020.
On February 4, 2020, the Company also entered into a i 66-month real property lease agreement for office space of approximately i 11,000 square feet of office space in Foothill Ranch, California. The lease commenced on i July 1, 2020.
Information related to the Company’s right-of-use assets and related liabilities were as follows (in thousands):
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
September 30, |
|
|
|
|||||||||||
|
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|||||
Cash paid for operating lease liabilities |
$ |
i 62 |
|
|
$ |
i 87 |
|
|
$ |
i 185 |
|
|
$ |
i 417 |
|
Right-of-use assets obtained in exchange for new operating |
$ |
i - |
|
|
$ |
i 1,440 |
|
|
|
i 48 |
|
|
$ |
i 2,037 |
|
Weighted-average remaining lease term |
i 3.8 years |
|
|
i 4.9 years |
|
|
i 3.8 years |
|
|
i 5.2 years |
|
||||
Weighted-average discount rate |
|
i 12.3 |
% |
|
|
i 12.3 |
% |
|
|
i 12.3 |
% |
|
|
i 12.3 |
% |
/
Lease expense consists of payments for real property, office copiers, and IT equipment. The Company recognizes payments for non-lease components such as common area maintenance in the period incurred. As of September 30, 2021, the Company had no significant leases that had not commenced.
The Company allocates lease cost amongst lease and non-lease components. The Company excludes short-term leases (those with lease terms of less than i one year at inception) from the measurement of lease liabilities or right-of-use assets.
Maturities of lease liabilities as of September 30, 2021 for leases that have commenced are as follows (in thousands):
|
|
|
||
|
$ |
i 624 |
|
|
2023 |
|
|
i 621 |
|
2024 |
|
|
i 613 |
|
2025 |
|
|
i 519 |
|
2026 and thereafter |
|
|
i 121 |
|
Total future minimum lease obligations |
|
|
i 2,498 |
|
Less imputed interest |
|
|
( i 537 |
) |
Total lease liabilities |
|
$ |
i 1,961 |
|
|
|
|
|
|
Current operating lease liabilities, included in |
|
$ |
i 404 |
|
Non current lease liabilities |
|
|
i 1,557 |
|
Total lease liabilities |
|
$ |
i 1,961 |
|
As of September 30, 2021, right-of-use assets were $ i 1.8 million and lease liabilities were $ i 2.0 million.
Rent expense totaled $ i 0.2 million and $ i 0.6 million for the three and nine months ended September 30, 2021 and $ i 0.1 million and $ i 0.5 million for the three and nine months ended September 30, 2020.
21
Future minimum rental commitments under lease agreements, as of September 30, 2021, with non-cancelable terms greater than one year for each of the years ending December 31 are as follows (in thousands):
|
|
|
Year Ended |
|
|
|
|
|
December 31, |
|
|
Remainder of 2021 |
|
|
$ |
i 166 |
|
2022 |
|
|
|
i 610 |
|
2023 |
|
|
|
i 624 |
|
2024 |
|
|
|
i 609 |
|
2025 and thereafter |
|
|
|
i 489 |
|
Total future minimum lease obligations |
|
|
|
i 2,498 |
|
Less imputed interest |
|
|
|
( i 537 |
) |
Total lease liabilities |
|
|
$ |
i 1,961 |
|
NOTE 11—COMMITMENTS AND CONTINGENCIES
On April 24, 2012, CAO Group, Inc. (“CAO”) filed a lawsuit against BIOLASE in the District of Utah alleging that BIOLASE’s ezlase dental laser infringes on U.S. Patent No. 7,485,116 (the “116 Patent”). On September 9, 2012, CAO amended its complaint, adding claims for (1) business disparagement/injurious falsehood under common law and (2) unfair competition under 15 U.S.C. Section 1125(a). The additional claims stem from a press release that BIOLASE issued on April 30, 2012, which CAO claims contained false statements that are disparaging to CAO and its diode product. The amended complaint sought injunctive relief, treble damages, attorneys’ fees, punitive damages, and interest. Until January 24, 2018, this lawsuit was stayed in connection with United States Patent and Trademark Office proceedings relating to the 116 Patent, which proceedings ultimately culminated in a January 27, 2017 decision by the United States Court of Appeals for the Federal Circuit, affirming the findings of the Patent Trial and Appeal Board, which were generally favorable to the Company. On January 25, 2018, CAO moved for leave to file a second amended complaint to add certain claims, which filing the Company did not oppose.
On January 23, 2018, CAO filed a lawsuit against BIOLASE in the Central District of California alleging that BIOLASE’s diode lasers infringe on U.S. Patent Nos. 8,337,097, 8,834,497, 8,961,040 and 8,967,883. The complaint sought injunctive relief, treble damages, attorneys’ fees, punitive damages, and interest.
On i January 25, 2019 (the “Effective Date”), BIOLASE entered into a settlement agreement (the “CAO Settlement Agreement”) with CAO. Pursuant to the CAO Settlement Agreement, CAO agreed to dismiss with prejudice the lawsuits filed by CAO against the Company in April 2012 and January 2018. In addition, CAO granted to the Company and its affiliates a non-exclusive, non-transferable (except as provided in the CAO Settlement Agreement), royalty-free, fully-paid, worldwide license to the licensed patents for use in the licensed products and agreed not to sue the Company, its affiliates or any of its manufacturers, distributors, suppliers or customers for use of the licensed patents in the licensed products, and the parties agreed to a mutual release of claims. i The Company agreed (i) to pay to CAO, within i five days of the Effective Date, $ i 500,000 in cash, (ii) to issue to CAO, within i 30 days of the Effective Date, i 500,000 restricted shares of common stock of the Company (the “Stock Consideration”), and (iii) to pay to CAO, within i 30 days of December 31, 2021, an amount in cash equal to the difference (if positive) between $ i 1,000,000 and the value of the Stock Consideration on December 31, 2021. / The Stock Consideration vests and becomes transferrable on December 31, 2021, subject to the terms of a restricted stock agreement entered into between the parties. The Company considered this a Type I subsequent event and recognized a $ i 1.5 million contingent loss on patent litigation settlement in its consolidated statement of operations for the year ended December 31, 2018. In January 2019, the Company paid CAO $ i 500,000 in cash. On January 31, 2019, the case was dismissed with prejudice. During the three-month period ended March 31, 2019, the Company recorded an additional loss on patent litigation of $ i 0.2 million which represented the change in fair value of the restricted stock to be issued to CAO at March 31, 2019. Subsequent to March 31, 2019, the Company reversed the additional loss commensurate with the fluctuations in the Company’s share price. In August 2020, the Company signed a Letter Agreement to terminate the Manufacturing Agreement and purchase from CAO raw materials and other inventory held by CAO as part of the original CAO Settlement Agreement.
In February 2021, the Company issued i 500,000 restricted shares of common stock in satisfaction of its obligation to issue the Stock Consideration to CAO under the CAO Settlement Agreement and reduced the accrued liability to $ i 0.6 million. As of September 30, 2021, the remaining accrued liability related to the CAO Settlement Agreement was included in current accrued liabilities in the amount of $ i 0.7 million. As of December 31, 2020, the accrued liability related to the CAO Settlement Agreement was $ i 1.0 million and was included in non-current other liabilities.
/NOTE 12—SEGMENT INFORMATION
The Company currently operates in a single business segment. Management uses one measurement of profitability and does not segregate its business for internal reporting. For the three and nine months ended September 30, 2021, sales to customers in the United
22
States accounted for approximately i 62% and i 64% of net revenue and international sales accounted for approximately i 38% and i 36% of net revenue, respectively. For the three and nine months ended September 30, 2020, sales to customers in the United States accounted for approximately i 73% and i 71% of net revenue and international sales accounted for approximately i 27% and i 29% of net revenue, respectively. i i i i No / / / individual country, other than the United States, represented more than 10% of total net revenue during the three and nine months ended September 30, 2021 or 2020.
Net revenue by geographic location based on the location of customers was as follows (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
|
|||||||||||
|
|
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|||||
United States |
|
$ |
i 5,939 |
|
|
$ |
i 4,755 |
|
|
$ |
i 17,024 |
|
|
$ |
i 10,079 |
|
International |
|
|
i 3,592 |
|
|
|
i 1,784 |
|
|
|
i 9,756 |
|
|
|
i 4,181 |
|
Total net revenue |
|
$ |
i 9,531 |
|
|
$ |
i 6,539 |
|
|
$ |
i 26,780 |
|
|
$ |
i 14,260 |
|
/
Property, plant, and equipment by geographic location was as follows (in thousands):
|
|
September 30, |
|
|
|
|||
|
|
|
|
2020 |
|
|||
United States |
|
$ |
i 618 |
|
|
$ |
i 486 |
|
International |
|
|
i 271 |
|
|
|
i 296 |
|
Total |
|
$ |
i 889 |
|
|
$ |
i 782 |
|
NOTE 13—CONCENTRATIONS
Revenue from the Company’s products are as follows (dollars in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||||||||||||||||||
|
|
September 30, |
|
|
|
|||||||||||||||||||||||||||
|
|
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|||||||||||||||||||||
Laser systems |
|
$ |
i 6,084 |
|
|
|
i 63.8 |
% |
|
$ |
i 3,712 |
|
|
|
i 56.7 |
% |
|
$ |
i 16,588 |
|
|
|
i 61.9 |
% |
|
$ |
i 6,854 |
|
|
|
i 48.1 |
% |
Consumables and other |
|
$ |
i 2,331 |
|
|
|
i 24.5 |
% |
|
|
i 1,929 |
|
|
|
i 29.5 |
% |
|
|
i 6,923 |
|
|
|
i 25.9 |
% |
|
|
i 4,263 |
|
|
|
i 29.9 |
% |
Services |
|
$ |
i 1,116 |
|
|
|
i 11.7 |
% |
|
|
i 898 |
|
|
|
i 13.8 |
% |
|
|
i 3,269 |
|
|
|
i 12.2 |
% |
|
|
i 3,143 |
|
|
|
i 22.0 |
% |
Total net revenue |
|
$ |
i 9,531 |
|
|
|
i 100.0 |
% |
|
$ |
i 6,539 |
|
|
|
i 100.0 |
% |
|
$ |
i 26,780 |
|
|
|
i 100.0 |
% |
|
$ |
i 14,260 |
|
|
|
i 100.0 |
% |
/
i i i i No / / / individual customer represented more than i i i i 10 / / / % of the Company’s revenue for the three and nine months ended September 30, 2021 or 2020.
The Company maintains its cash and cash equivalents in money market investment accounts with established commercial banks. Such cash deposits periodically exceed the Federal Deposit Insurance Corporation insured limit.
i i No / individual customer represented more than i i 10 / % of the Company’s accounts receivable at September 30, 2021 and December 31, 2020.
The Company currently purchases certain key components of its products from single suppliers. Although there are a limited number of manufacturers of these key components, management believes that other suppliers could provide similar key components on comparable terms. A change in suppliers, however, could cause delays in manufacturing and a possible loss of sales, which could adversely affect the Company’s business, results of operations and financial condition.
/NOTE 14—INCOME TAXES
The Company accounts for income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Management evaluates the need to establish a valuation allowance for deferred tax assets based upon the amount of existing temporary differences, the period in which they are expected to be recovered, and expected levels of taxable income. A valuation allowance to reduce deferred tax assets is established when it is “more likely than not” that some or all of the deferred tax assets will not be realized. Based on the Company’s
23
net losses in prior years, management has determined that a full valuation allowance against the Company’s net deferred tax assets is appropriate.
Accounting for uncertainty in income taxes prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return and provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company has elected to classify interest and penalties as a component of its income tax provision. With respect to the liability for unrecognized tax benefits, including related estimates of penalties and interest, the Company did i i no / t record a liability for unrecognized tax benefits for the three and nine months ended September 30, 2021 and 2020. The Company does not expect any changes to its unrecognized tax benefit for the next 12 months that would materially impact its consolidated financial statements.
During the three and nine months ended September 30, 2021, the Company recorded an income tax provision of $ i 14,000 and income tax benefit of $ i 7,000, respectively, resulting in an effective tax rate of i 0.4% and i 0.1%, respectively. During the three and nine months ended September 30, 2020, the Company recorded an income tax provision of $ i 15,000 and $ i 49,000, respectively, resulting in an effective tax rate of i 55.6% and i 0.5%, respectively. The income tax provisions and benefit for the three and nine months ended September 30, 2021 and 2020 were calculated using the discrete year-to-date method. The effective tax rate differs from the statutory tax rate of i 21% primarily due to the existence of valuation allowances against net deferred tax assets and current liabilities resulting from the estimated state income tax liabilities and foreign tax liability.
/24
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (this “Form 10-Q”) and our audited consolidated financial statements and related notes included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2021 (the “2020 Form 10-K”).
In addition to historical information, this discussion and analysis contains “forward-looking statements” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that involve risks, uncertainties, and assumptions, which could cause actual results to differ materially from management's expectations. Such forward-looking statements include statements, predictions, or expectations regarding expected revenue, sales and marketing expenses, general and administrative expenses, investments in engineering and development and other investment activities, interest rate fluctuations, future liquidity, potential collaborations, market opportunities, plans with respect to a new device being developed for endodontists, our use of proceeds from the PPP Loan (as defined below), COVID-19, seasonality and the reasons therefor, operating and other expenses, anticipated cash needs, our strategy and any other statement that is not historical fact. Forward-looking statements are identified by the use of words such as “may,” “might,” “will,” “intend,” “should,” “could,” “can,” “would,” “continue,” “expect,” “believe,” “anticipate,” “estimate,” “predict,” “outlook,” “potential,” “plan,” “seek,” "forecast," and similar expressions and variations or the negatives of these terms or other comparable terminology.
The forward-looking statements contained in this Form 10-Q are based on the expectations, estimates, projections, beliefs, and assumptions of our management based on information available to management as of the date on which this Form 10-Q was filed with the SEC, or as of the date on which the information incorporated by reference was filed with the SEC, as applicable, all of which are subject to change. Forward-looking statements are subject to risks, uncertainties, and other factors that are difficult to predict and could cause actual results to differ materially from those stated or implied by our forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to:
25
Further information about factors that could materially affect the Company, including our results of operations and financial condition, is contained under “Risk Factors” in Item 1A in the 2020 Form 10-K and under "Risk Factors" in Part II, Item 1A of the Form 10-Q for the quarter ended June 30, 2021 (the "Second Quarter Form 10-Q"). Except as required by law, we undertake no obligation to revise or update any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, new information or changes to future results over time or otherwise.
Overview
We are a leading provider of advanced laser systems for the dental industry. We develop, manufacture, market, and sell laser systems that provide significant benefits for dental practitioners and their patients. Our proprietary systems allow dentists, periodontists, endodontists, oral surgeons, and other dental specialists to perform a broad range of minimally invasive dental procedures, including cosmetic, restorative, and complex surgical applications. Our laser systems are designed to provide clinically superior results for many types of dental procedures compared to those achieved with drills, scalpels, and other conventional instruments. Potential patient benefits include less pain, fewer shots, faster healing, decreased fear and anxiety, and fewer appointments. Potential practitioner benefits include improved patient care and the ability to perform a higher volume and wider variety of procedures and generate more patient referrals.
We offer two categories of laser system products: Waterlase (all-tissue) systems and diode (soft-tissue) systems. Our flagship brand, Waterlase, uses a patented combination of water and laser energy and is FDA cleared for over 80 clinical indications to perform most procedures currently performed using drills, scalpels, and other traditional dental instruments for cutting soft and hard tissue. For example, Waterlase safely debrides implants without damaging or significantly affecting surface temperature and is the only effective, safe solution to preserving sick implants. In addition, Waterlase disinfects root canals more efficiently than some traditional chemical methods. We also offer our diode laser systems to perform soft tissue, pain therapy, and cosmetic procedures, including teeth whitening. As of September 30, 2021 we had approximately 300 issued and 35 pending United States and international patents, the majority of which are related to Waterlase technology. From 1998 through December 31, 2020, we sold over 41,200 laser systems in
26
over 80 countries around the world. Contained in this total are approximately 13,600 Waterlase systems, including over 9,100 Waterlase MD, MDX, Express and iPlus systems.
Business and Outlook
Our Waterlase systems precisely cut hard tissue, bone, and soft tissue with minimal or no damage to surrounding tissue and dental structures. Our diode systems, which include the Epic system, are designed to complement our Waterlase systems, and are used only in soft tissue procedures, pain therapy, hygiene, and cosmetic applications, including teeth whitening. The diode systems, together with our Waterlase systems, offer practitioners a broad product line with a range of features and price points.
We also manufacture and sell consumable products and accessories for our laser systems. Our Waterlase and diode systems use disposable laser tips of differing sizes and shapes depending on the procedure being performed. We also market flexible fibers and hand pieces that dental practitioners replace at some point after initially purchasing laser systems. For our Epic systems, we sell teeth whitening gel kits.
Due to the limitations associated with traditional and alternative dental instruments, we believe there is a large market opportunity for all-tissue dental laser systems that provide superior clinical outcomes, reduce the need to use anesthesia, help reduce trauma, pain, and discomfort associated with dental procedures, and increase patient acceptance for treatment protocols.
Our strategy is to increase awareness and demand for (i) our products among dental practitioners by educating dental practitioners and patients about the clinical benefits of our product suite and (ii) our laser systems among patients by educating patients about the clinical benefits of the Waterlase and diode systems. An important goal of ours is to increase consumables revenue by selling more single-use accessories used by dental practitioners when performing procedures using our dental laser systems. In the short term, we are striving for operating excellence through lean enterprise initiatives, with a specific focus on our sales strategy and cash flow management, coupled with optimizing our engineering capabilities to develop innovative new products.
We also seek to create value through innovation and leveraging existing technologies into adjacent medical applications. We plan to expand our product line and clinical applications by developing enhancements and transformational innovations, including new clinical solutions for dental applications and for other adjacent medical applications. In particular, we believe that our existing technologies can provide significant improvements over existing standards of care in fields including ophthalmology, otolaryngology, orthopedics, podiatry, pain management, aesthetics/dermatology, veterinary, and consumer products. We plan to continue to explore potential collaborations to apply our proprietary laser technologies with expanded FDA-cleared indications to other medical applications in the future.
The Company experienced revenue growth of 46% and 88% for the three and nine months ended September 30, 2021, compared to the same periods in 2020, primarily due to the negative impact of COVID-19 during 2020 and high demand from new users for the Company's dental lasers. The Company is currently forecasting revenue for fiscal year 2021 to be significantly above fiscal year 2020, which was significantly impacted by COVID-19. Although there are signs of recovery from the impact of COVID-19 both domestically and internationally, given the uncertainties regarding the ongoing and future effects of COVID-19, no assurance can be provided that the recovery will continue.
To educate providers and increase patient access to our products, over the past year, we have formed specialist training programs focused on expanding awareness of the benefits of our dental lasers among dental specialists. For example, during the second quarter of 2021, we launched the Waterlase Pediatric Dental Academy (the "WPDA") for pediatric dentists. This program provides clinicians with an immersive training experience through peer-led learning and best practice sharing to help ensure appropriate use of Waterlase technology in clinical practices. During the first quarter of 2021, we also launched an innovative and first-of-its-kind training program in the periodontal community. This program fosters peer-led learning about dental lasers from leading clinicians, featuring online meetings and case reviews by experts in the field. Additionally, during the fourth quarter of 2020, we launched the Waterlase Endo Academy, a community of leading endodontists dedicated to improving patient outcomes with new technology, and announced a collaboration with Einstein Healthcare Network’s Residency in Endodontics to train endodontics residents in the use of Waterlase dental lasers. In the fourth quarter of 2021, we launched the Epic Hygiene Academy which seeks to bring together leaders in the dental hygiene profession to provide improved continuing education in delivering superior patient care through laser technology.
In April 2021, we also announced plans to develop a new EdgePRO laser-assisted microfluidic irrigation device for endodontists with EdgeEndo, a global leader in commercializing endodontic products. The new microfluidic irrigation device is being developed to offer a solution to endodontists seeking more from their current cleaning and disinfecting techniques. The EdgePRO will be built upon BIOLASE’s patented and proven platform that has been shown to significantly improve debridement, cleaning, and disinfection by up to 99% using the most advanced laser light sound technology.
27
Recent Developments
Impact of Coronavirus (COVID-19) on Our Operations
In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China. The novel coronavirus spread to over 100 countries, including every state in the United States. On March 11, 2020, the World Health Organization declared COVID-19, the disease caused by the novel coronavirus, a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to the coronavirus outbreak. This outbreak severely impacted global economic activity, and many countries and many states in the United States have reacted to the outbreak by instituting quarantines, mandating business and school closures and restricting travel. These mandated business closures included dental office closures in Europe and the United States for all but emergency procedures. Our salespeople were unable to call on dental customers during these closures. In addition, most dental shows and workshops scheduled in 2020 were canceled. Given the uncertain status of COVID-19 cases, there is no assurance that the Company’s sales will return to normal levels during 2021 or at any time thereafter. See Item 1A — “Risk Factors” for additional information regarding the potential impact of the COVID-19 pandemic on our business, results of operations and financial condition.
Critical Accounting Policies
The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and revenues and expenses reported during the period. Information with respect to our critical accounting policies that we believe could have the most significant effect on our reported results and require subjective or complex judgments by management is contained in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of the 2020 Form 10-K. There have been no significant changes during the nine months ended September 30, 2021 in our critical accounting policies from those disclosed in Item 7 of the 2020 Form 10-K.
Results of Operations
The following table sets forth certain data from our unaudited operating results, expressed in thousands and as percentages of net revenue:
|
|
Three Months Ended |
|
Nine Months Ended |
|||||||||||||||||||||||
|
|
September 30, |
|
||||||||||||||||||||||||
|
|
|
2020 |
|
2021 |
|
2020 |
||||||||||||||||||||
Net revenue |
|
$ |
9,531 |
|
100.0 |
% |
|
$ |
6,539 |
|
100.0 |
% |
|
$ |
26,780 |
|
100.0 |
% |
|
$ |
14,260 |
|
100.0 |
% |
|||
Cost of revenue |
|
|
4,689 |
|
49.2 |
% |
|
|
4,265 |
|
65.2 |
% |
|
|
15,157 |
|
56.6 |
% |
|
|
9,692 |
|
68.0 |
% |
|||
Gross profit |
|
|
4,842 |
|
50.8 |
% |
|
|
2,274 |
|
34.8 |
% |
|
|
11,623 |
|
43.4 |
% |
|
|
4,568 |
|
32.0 |
% |
|||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Sales and marketing |
|
|
3,451 |
|
36.2 |
% |
|
|
2,678 |
|
41.0 |
% |
|
|
10,315 |
|
38.5 |
% |
|
|
7,475 |
|
52.4 |
% |
|||
General and |
|
|
2,479 |
|
26.0 |
% |
|
|
2,300 |
|
35.2 |
% |
|
|
8,613 |
|
32.2 |
% |
|
|
7,446 |
|
52.2 |
% |
|||
Engineering and |
|
|
1,540 |
|
16.2 |
% |
|
|
963 |
|
14.7 |
% |
|
|
4,506 |
|
16.8 |
% |
|
|
2,644 |
|
18.5 |
% |
|||
Loss on patent litigation settlement |
|
|
29 |
|
0.3 |
% |
|
|
— |
|
— |
% |
|
|
190 |
|
0.7 |
% |
|
|
— |
|
— |
% |
|||
Total operating expenses |
|
|
7,499 |
|
78.7 |
% |
|
|
5,941 |
|
90.9 |
% |
|
|
23,624 |
|
88.2 |
% |
|
|
17,565 |
|
123.2 |
% |
|||
Loss from operations |
|
|
(2,657) |
|
(27.9) |
% |
|
|
(3,667) |
|
(56.1) |
% |
|
|
(12,001) |
|
(44.8) |
% |
|
|
(12,997) |
|
(91.1) |
% |
|||
Non-operating gain (loss), net |
|
|
(605) |
|
(6.3) |
% |
|
|
3,694 |
|
56.5 |
% |
|
|
1,115 |
|
4.2 |
% |
|
|
2,359 |
|
16.5 |
% |
|||
Loss before income tax (provision) benefit |
|
|
(3,262) |
|
(21.6) |
% |
|
|
27 |
|
0.4 |
% |
|
|
(10,886) |
|
(49.0) |
% |
|
|
(10,638) |
|
(74.6) |
% |
|||
Income tax (provision) benefit |
|
|
(14) |
|
(0.1) |
% |
|
|
(15) |
|
(0.2) |
% |
|
|
7 |
|
0.0 |
% |
|
|
(49) |
|
-0.3 |
% |
|||
Net income (loss) |
|
$ |
(3,276) |
|
(21.5) |
% |
|
$ |
12 |
|
0.2 |
% |
|
$ |
(10,879) |
|
(49.0) |
% |
|
$ |
(10,687) |
|
(74.9) |
% |
|||
Non-GAAP Disclosure
In addition to the financial information prepared in conformity with GAAP, we provide certain historical non-GAAP financial information. Management believes that these non-GAAP financial measures assist investors in making comparisons of period-to-period operating results and that, in some respects, are indicative of our ongoing core performance.
Management believes that the presentation of this non-GAAP financial information provides investors with greater transparency and facilitates comparison of operating results across a broad spectrum of companies with varying capital structures, compensation strategies, derivative instruments, and amortization methods, which provides a more complete understanding of our financial
28
performance, competitive position, and prospects for the future. However, the non-GAAP financial measures presented in this Form 10-Q have certain limitations in that they do not reflect all of the costs associated with the operations of our business as determined in accordance with GAAP. Therefore, investors should consider non-GAAP financial measures in addition to, and not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. Further, the non-GAAP financial measures presented by us may be different from similarly named non-GAAP financial measures used by other companies.
Adjusted EBITDA
Management uses Adjusted EBITDA in its evaluation of our core results of operations and trends between fiscal periods and believes that these measures are important components of its internal performance measurement process. Adjusted EBITDA is defined as net loss before interest, taxes, depreciation and amortization, patent litigation settlements, stock-based compensation, debt forgiveness, and the change in allowance for doubtful accounts. Management uses adjusted EBITDA in its evaluation of our core results of operations and trends between fiscal periods and believes that these measures are important components of its internal performance measurement process. Therefore, investors should consider non-GAAP financial measures in addition to, and not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. Further, the non-GAAP financial measures presented by us may be different from similarly named non-GAAP financial measures used by other companies.
The following table contains a reconciliation of non-GAAP Adjusted EBITDA to GAAP net loss attributable to common stockholders (in thousands):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
|
|||||||||||
|
|
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|||||
GAAP net loss attributable to common stockholders |
|
$ |
(3,285 |
) |
|
$ |
(17,366 |
) |
|
$ |
(11,425 |
) |
|
$ |
(28,065 |
) |
Deemed dividend on convertible preferred stock |
|
|
9 |
|
|
|
17,378 |
|
|
|
546 |
|
|
|
17,378 |
|
GAAP net income (loss) |
|
$ |
(3,276 |
) |
|
$ |
12 |
|
|
$ |
(10,879 |
) |
|
$ |
(10,687 |
) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense, net |
|
|
569 |
|
|
|
568 |
|
|
|
1,727 |
|
|
|
1,782 |
|
Income tax provision (benefit) |
|
|
14 |
|
|
|
15 |
|
|
|
(7 |
) |
|
|
49 |
|
Depreciation and amortization |
|
|
101 |
|
|
|
46 |
|
|
|
281 |
|
|
|
527 |
|
Change in allowance for doubtful accounts |
|
|
(83 |
) |
|
|
256 |
|
|
|
(162 |
) |
|
|
1,263 |
|
Loss on patent litigation settlement |
|
|
29 |
|
|
|
— |
|
|
|
190 |
|
|
|
— |
|
Stock-based and other non-cash compensation |
|
|
192 |
|
|
|
847 |
|
|
|
1,488 |
|
|
|
2,367 |
|
Gain on debt forgiveness |
|
|
— |
|
|
|
— |
|
|
|
(3,014 |
) |
|
|
— |
|
Other (income) expense, net |
|
|
— |
|
|
|
(4,209 |
) |
|
|
— |
|
|
|
(4,209 |
) |
Adjusted EBITDA |
|
$ |
(2,454 |
) |
|
$ |
(2,465 |
) |
|
$ |
(10,376 |
) |
|
$ |
(8,908 |
) |
Comparison of Results of Operations
Three Months Ended September 30, 2021 Compared with Three Months Ended September 30, 2020
Net Revenue: The following table summarizes our unaudited net revenue by category, including each category’s percentage of our total revenue, for the three months ended September 30, 2021 and 2020, as well as the amount of change and percentage of change in each revenue category (dollars in thousands):
|
|
Three Months Ended |
|
|
|
|
|
|
|
|||||||||||||||
|
|
September 30, |
|
|
Amount |
|
|
Percent |
|
|||||||||||||||
|
|
2021 |
|
|
2020 |
|
|
Change |
|
|
Change |
|
||||||||||||
Laser systems |
|
$ |
6,084 |
|
|
|
63.8 |
% |
|
$ |
3,712 |
|
|
|
56.7 |
% |
|
$ |
2,372 |
|
|
|
63.9 |
% |
Consumables and other |
|
|
2,331 |
|
|
|
24.5 |
% |
|
|
1,929 |
|
|
|
29.5 |
% |
|
|
402 |
|
|
|
20.8 |
% |
Services |
|
|
1,116 |
|
|
|
11.7 |
% |
|
|
898 |
|
|
|
13.8 |
% |
|
|
218 |
|
|
|
24.3 |
% |
Net revenue |
|
$ |
9,531 |
|
|
|
100.0 |
% |
|
$ |
6,539 |
|
|
|
100.0 |
% |
|
$ |
2,992 |
|
|
|
45.8 |
% |
29
The following table summarizes our unaudited net revenue by geographic location based on the location of customers for the three months ended September 30, 2021 and 2020, as well as the amount of change and percentage of change in each geographic revenue category (dollars in thousands):
|
|
Three Months Ended |
|
|
|
|
|
|
|
|||||||||||||||
|
|
September 30, |
|
|
Amount |
|
|
Percent |
|
|||||||||||||||
|
|
2021 |
|
|
2020 |
|
|
Change |
|
|
Change |
|
||||||||||||
United States |
|
$ |
5,939 |
|
|
|
62.3 |
% |
|
$ |
4,755 |
|
|
|
72.7 |
% |
|
$ |
1,184 |
|
|
|
24.9 |
% |
International |
|
|
3,592 |
|
|
|
37.7 |
% |
|
|
1,784 |
|
|
|
27.3 |
% |
|
|
1,808 |
|
|
|
101.3 |
% |
Net revenue |
|
$ |
9,531 |
|
|
|
100.0 |
% |
|
$ |
6,539 |
|
|
|
100.0 |
% |
|
$ |
2,992 |
|
|
|
45.8 |
% |
Typically, we experience fluctuations in revenue from quarter to quarter due to seasonality. Revenue in the first quarter typically is lower than average, and revenue in the fourth quarter typically is higher than average, due to the buying patterns of dental practitioners. We believe that this trend exists because a significant number of dentists purchase their capital equipment towards the end of the calendar year in order to maximize their practice earnings while seeking to minimize their taxes. They often use certain tax incentives, such as accelerated depreciation methods for purchasing capital equipment, as part of their year-end tax planning. In addition, revenue in the third quarter may be affected by vacation patterns which can cause revenue to be flat or lower than in the second quarter of the year. Our historical seasonal fluctuations may also be impacted by sales promotions used by large dental distributors that encourage end-of-quarter and end-of-year buying in our industry.
Total net revenue increased by $3.0 million, or 46%, during the three months ended September 30, 2021 as compared to the same period in 2020 primarily due to worldwide dental office closures in 2020 as a result of the global COVID-19 pandemic. In the U.S., net revenue increased by $1.2 million, or 25%, for the three months ended September 30, 2021 as compared to the same period in 2020. Outside the U.S., net revenue increased by $1.8 million, or 101%, during the three months ended September 30, 2021 as compared to the same period in 2020. We believe dental offices in the U.S. have returned to prior patient volume resulting in better revenue results, while patient volume in many countries outside the U.S. are still lagging from their pre-COVID-19 levels.
Cost of Revenue and Gross Profit: The following table summarizes our unaudited cost of revenue and gross profit for the three months ended September 30, 2021 and 2020, as well as the amount of change and percentage of change (dollars in thousands):
|
|
Three Months Ended |
|
|
|
|
|
|
|
|||||||||||||||
|
|
September 30, |
|
|
Amount |
|
|
Percent |
|
|||||||||||||||
|
|
2021 |
|
|
2020 |
|
|
Change |
|
|
Change |
|
||||||||||||
Net revenue |
|
$ |
9,531 |
|
|
|
100.0 |
% |
|
$ |
6,539 |
|
|
|
100.0 |
% |
|
$ |
2,992 |
|
|
|
45.8 |
% |
Cost of revenue |
|
|
4,689 |
|
|
|
49.2 |
% |
|
|
4,265 |
|
|
|
65.2 |
% |
|
|
424 |
|
|
|
9.9 |
% |
Gross profit |
|
$ |
4,842 |
|
|
|
50.8 |
% |
|
$ |
2,274 |
|
|
|
34.8 |
% |
|
$ |
2,568 |
|
|
|
112.9 |
% |
Gross profit as a percentage of revenue typically fluctuates with product and regional mix, selling prices, product costs and revenue levels. Gross profit for the three months ended September 30, 2021, was $4.8 million, or 51% of net revenue, an increase of approximately $2.6 million, or 113%, as compared with gross profit of $2.3 million, or 35% of net revenue, for the same period in 2020. The increase in gross profit reflects the impact of the increase in revenues for the period combined with an increase in average selling prices for products sold in the U.S. during the third quarter of 2021 compared to the same period in 2020 and the effect of an Employee Retention Credit under the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") of $0.4 million received during the three months ended September 30, 2021.
Operating Expenses: The following table summarizes our unaudited operating expenses (including as a percentage of net revenue) for the three months ended September 30, 2021 and 2020, as well as the amount of change and percentage of change (dollars in thousands):
|
|
Three Months Ended |
|
|
|
|
|
|
|
|||||||||||||||
|
|
September 30, |
|
|
Amount |
|
|
Percent |
|
|||||||||||||||
|
|
2021 |
|
|
2020 |
|
|
Change |
|
|
Change |
|
||||||||||||
Sales and marketing |
|
$ |
3,451 |
|
|
|
36.2 |
% |
|
$ |
2,678 |
|
|
|
41.0 |
% |
|
$ |
773 |
|
|
|
28.9 |
% |
General and administrative |
|
|
2,479 |
|
|
|
26.0 |
% |
|
|
2,300 |
|
|
|
35.2 |
% |
|
|
179 |
|
|
|
7.8 |
% |
Engineering and development |
|
|
1,540 |
|
|
|
16.2 |
% |
|
|
963 |
|
|
|
14.7 |
% |
|
|
577 |
|
|
|
59.9 |
% |
Loss on patent litigation settlement |
|
|
29 |
|
|
|
0.3 |
% |
|
|
— |
|
|
|
— |
% |
|
|
29 |
|
|
|
100.0 |
% |
Total operating expenses |
|
$ |
7,499 |
|
|
|
78.7 |
% |
|
$ |
5,941 |
|
|
|
90.9 |
% |
|
$ |
1,558 |
|
|
|
26.2 |
% |
Sales and Marketing Expense. Sales and marketing expenses during the three months ended September 30, 2021 increased by $0.8 million, or 29%, as compared to the same period in 2020. This increase is primarily due to $0.4 million in sales commission, $0.3
30
million in increased advertising expenses and related consulting costs, and $0.4 million in increased travel and trade show related expenses from the impact of the COVID-19 pandemic on our business operations in 2020. These increases were partially offset by $0.3 million favorable variance from the effect of an Employee Retention Credit under the CARES Act received during the three months ended September 30, 2021.
General and Administrative Expense. General and administrative expenses during the three months ended September 30, 2021 increased by $0.2 million, or 8%, compared to the same period in 2020, primarily due to $0.6 million related to legal and consulting fees incurred in connection with the special stockholders meeting to be held in the fourth quarter of 2021, partially offset by a $0.4 million change in the provision for doubtful accounts, which decreased $0.1 million during the three months ended September 30, 2021 compared to a $0.3 million increase during three months ended September 30, 2020.
Engineering and Development Expense. Engineering and development expenses during the three months ended September 30, 2021 increased by $0.6 million, or 60%, compared to the same period in 2020, primarily due to a $0.3 million increase in legal and consulting fees and a $0.2 million increase in payroll expenses driven by an increase in engineering projects for 2021 as compared to 2020. Although our primary focus will be on our sales and marketing efforts in the remainder of 2021, we expect to continue our investment in engineering and development activity during the period.
Loss on Patent Litigation Settlement. Loss on patent litigation settlement during the three months ended September 30, 2021 was consistent with the same period in 2020.
Non-Operating Income (Loss)
Gain (Loss) on Foreign Currency Transactions. We realized an approximately $36 thousand loss on foreign currency transactions during the three months ended September 30, 2021 compared to an approximately $53 thousand gain on foreign currency transactions during the three months ended September 30, 2020, primarily due to exchange rate fluctuations between the U.S. dollar and Euro, as well as other foreign currencies.
Interest Expense, Net. Interest expense was $0.6 million during the three months ended September 30, 2021 and was consistent with the same period in 2020.
Other Income, Net. Other income for the three months ended September 30, 2020, is comprised of a $5.8 million gain on the change in fair value of the July 2020 Warrants offset by the costs to issue the July 2020 warrants of approximately $1.6 million.
Income Tax (Provision) Benefit. We use a discrete year-to-date method in calculating quarterly provision for income taxes. Our provision for income taxes for the three months ended September 30, 2021 was consistent with the same period in 2020. For additional information regarding income taxes, see Part I, Item I, Note 14 – Income Taxes.
Net Income (Loss). For the reasons stated above, our net loss totaled approximately $3.3 million for the three months ended September 30, 2021 compared to a net income of $12 thousand for the three months ended September 30, 2020.
Comparison of Results of Operations
Nine Months Ended September 30, 2021 Compared with Nine Months Ended September 30, 2020
Net Revenue: The following table summarizes our unaudited net revenues by category, including each category’s percentage of our total revenue, for the nine months ended September 30, 2021 and 2020, as well as the amount of change and percentage of change in each revenue category (dollars in thousands):
|
|
Nine Months Ended |
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
September 30, |
|
|
Amount |
|
|
Percent |
|
||||||||||||||||||
|
|
2021 |
|
|
2020 |
|
|
Change |
|
|
Change |
|
|||||||||||||||
Laser systems |
|
$ |
|
16,588 |
|
|
|
61.9 |
% |
|
$ |
|
6,854 |
|
|
|
48.1 |
% |
|
$ |
|
9,734 |
|
|
|
142.0 |
% |
Consumables and other |
|
|
|
6,923 |
|
|
|
25.9 |
% |
|
|
|
4,263 |
|
|
|
29.9 |
% |
|
|
|
2,660 |
|
|
|
62.4 |
% |
Services |
|
|
|
3,269 |
|
|
|
12.2 |
% |
|
|
|
3,143 |
|
|
|
22.0 |
% |
|
|
|
126 |
|
|
|
4.0 |
% |
Net revenue |
|
$ |
|
26,780 |
|
|
|
100.0 |
% |
|
$ |
|
14,260 |
|
|
|
100.0 |
% |
|
$ |
|
12,520 |
|
|
|
87.8 |
% |
31
The following table summarizes our unaudited net revenue by geographic location based on the location of customers for the nine months ended September 30, 2021 and 2020, as well as the amount of change and percentage of change in each geographic revenue category (dollars in thousands):
|
|
Nine Months Ended |
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
September 30, |
|
|
Amount |
|
|
Percent |
|
||||||||||||||||||
|
|
2021 |
|
|
2020 |
|
|
Change |
|
|
Change |
|
|||||||||||||||
United States |
|
$ |
|
17,024 |
|
|
|
63.6 |
% |
|
$ |
|
10,079 |
|
|
|
70.7 |
% |
|
$ |
|
6,945 |
|
|
|
68.9 |
% |
International |
|
|
|
9,756 |
|
|
|
36.4 |
% |
|
|
|
4,181 |
|
|
|
29.3 |
% |
|
|
|
5,575 |
|
|
|
133.3 |
% |
Net revenue |
|
$ |
|
26,780 |
|
|
|
100.0 |
% |
|
$ |
|
14,260 |
|
|
|
100.0 |
% |
|
$ |
|
12,520 |
|
|
|
87.8 |
% |
Total net revenue increased by $12.5 million, or 88%, during the nine months ended September 30, 2021 as compared to the same period in 2020 primarily due to worldwide dental office closures in 2020 as a result of the global COVID-19 pandemic. In the U.S., net revenue increased by $6.9 million, or 69%, for the nine months ended September 30, 2021 as compared to the same period in 2020. Outside the U.S., net revenue increased by $5.6 million, or 133%, during the nine months ended September 30, 2021 as compared to the same period in 2020.
Cost of Revenue and Gross Profit: The following table summarizes our unaudited cost of revenue and gross profit for the nine months ended September 30, 2021 and 2020, as well as the amount of change and percentage of change (dollars in thousands):
|
|
Nine Months Ended |
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
September 30, |
|
|
Amount |
|
|
Percent |
|
||||||||||||||||||
|
|
2021 |
|
|
2020 |
|
|
Change |
|
|
Change |
|
|||||||||||||||
Net revenue |
|
$ |
|
26,780 |
|
|
|
100.0 |
% |
|
$ |
|
14,260 |
|
|
|
100.0 |
% |
|
$ |
|
12,520 |
|
|
|
87.8 |
% |
Cost of revenue |
|
|
|
15,157 |
|
|
|
56.6 |
% |
|
|
|
9,692 |
|
|
|
68.0 |
% |
|
|
|
5,465 |
|
|
|
56.4 |
% |
Gross profit |
|
$ |
|
11,623 |
|
|
|
43.4 |
% |
|
$ |
|
4,568 |
|
|
|
32.0 |
% |
|
$ |
|
7,055 |
|
|
|
154.4 |
% |
Gross profit as a percentage of revenue typically fluctuates with product and regional mix, selling prices, product costs and revenue levels. Gross profit for the nine months ended September 30, 2021, was $11.6 million, or 43% of net revenue, an increase of approximately $7.1 million, or 154%, as compared with gross profit of $4.6 million, or 32% of net revenue, for the same period in 2020. The increase in gross profit reflects the impact of the increase in revenues combined with an increase in average selling prices for products sold in the U.S. during the first nine months of 2021 compared to the same period in 2020 and the effect of Employee Retention Credits under the CARES Act of $0.7 million received during the nine months ended September 30, 2021.
Operating Expenses: The following table summarizes our unaudited operating expenses (including as a percentage of net revenue) for the nine months ended September 30, 2021 and 2020, as well as the amount of change and percentage of change (dollars in thousands):
|
|
Nine Months Ended |
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
September 30, |
|
|
Amount |
|
|
Percent |
|
||||||||||||||||||
|
|
2021 |
|
|
2020 |
|
|
Change |
|
|
Change |
|
|||||||||||||||
Sales and marketing |
|
$ |
|
10,315 |
|
|
|
38.5 |
% |
|
$ |
|
7,475 |
|
|
|
52.4 |
% |
|
$ |
|
2,840 |
|
|
|
38.0 |
% |
General and administrative |
|
|
|
8,613 |
|
|
|
32.2 |
% |
|
|
|
7,446 |
|
|
|
52.3 |
% |
|
|
|
1,167 |
|
|
|
15.7 |
% |
Engineering and development |
|
|
|
4,506 |
|
|
|
16.8 |
% |
|
|
|
2,644 |
|
|
|
18.5 |
% |
|
|
|
1,862 |
|
|
|
70.4 |
% |
Loss on patent litigation settlement |
|
|
|
190 |
|
|
|
0.7 |
% |
|
|
|
— |
|
|
|
— |
% |
|
|
|
190 |
|
|
|
100.0 |
% |
Total operating expenses |
|
$ |
|
23,624 |
|
|
|
88.2 |
% |
|
$ |
|
17,565 |
|
|
|
123.2 |
% |
|
$ |
|
6,059 |
|
|
|
34.5 |
% |
Sales and Marketing Expense. Sales and marketing expenses during the nine months ended September 30, 2021 increased by $2.8 million, or 38%, as compared to the same period in 2020. This increase is primarily due to $0.7 million in compensation expense and bonus incentives for achieving sales targets, $0.9 million in increased advertising expenses and related consulting costs, $0.9 million in sales commissions, and $0.8 million in increased travel and trade show related expenses from the impact of the COVID-19 pandemic on our business operations in 2020. These increases were partially offset by $0.5 million from the effect of Employee Retention Credits under the CARES Act received during the nine months ended September 30, 2021.
General and Administrative Expense. General and administrative expenses during the nine months ended September 30, 2021 increased by $1.2 million, or 16%, compared to the same period in 2020, primarily due to $1.4 million related to fees incurred in connection with stockholder meetings held in the first and second quarter of 2021, and to be held in the fourth quarter of 2021, $0.4 million in severance expense, $0.3 million in compensation and leadership bonus awards, and $0.3 million in legal and audit fees. These increases were partially offset by a $1.4 million change in allowance for doubtful accounts, which decreased $0.1 million
32
during the nine months ended September 30, 2021 compared to a $1.3 million increase during the nine months ended September 30, 2020.
Engineering and Development Expense. Engineering and development expenses during the nine months ended September 30, 2021 increased by $1.9 million, or 70%, compared to the same period in 2020, primarily due to a $0.5 million increase in legal and consulting fees and a $0.8 million increase in payroll expenses driven by an increase in engineering projects for 2021 as compared to 2020. Although our primary focus will be on our sales and marketing efforts in the remainder of 2021, we expect to continue our investment in engineering and development activity during the period.
Loss on Patent Litigation Settlement. Loss on patent litigation settlement during the nine months ended September 30, 2021 was $0.2 million due to the change in fair value of the remaining accrued liability.
Non-Operating Income (Loss)
Gain (Loss) on Foreign Currency Transactions. We realized a $0.2 million loss on foreign currency transactions during the nine months ended September 30, 2021, compared to a $0.1 million loss during the same period in 2020. The loss was primarily due to exchange rate fluctuations between the U.S. dollar and Euro, as well as other foreign currencies.
Interest Expense, Net. Interest expense was $1.7 million during the nine months ended September 30, 2021, compared to interest expense of $1.8 million during the same period in 2020. We expect interest expense to fluctuate depending on the movement in the London Interbank Bank Offered Rate (“LIBOR”) through the remainder of 2021 and the outstanding balance of our revolving line of credit with Pacific Mercantile Bank (the "PMB Loan"), if any.
Gain on Debt Forgiveness. Gain on debt forgiveness was $3.0 million for the nine months ended September 30, 2021 due to the approval of the Company's request for forgiveness of the loan received under the Paycheck Protection Program under the CARES Act (the "PPP Loan").
Other Income, Net. Other income for the nine months ended September 30, 2020, is comprised of a $5.8 million gain on the change in fair value of the July 2020 Warrants offset by the costs to issue the July 2020 warrants of approximately $1.6 million.
Income Tax (Provision) Benefit. We use a discrete year-to-date method in calculating quarterly provision for income taxes. Our benefit from income taxes was approximately $7 thousand for the nine months ended September 30, 2021 as compared to a provision of approximately $49 thousand for the same period in 2020. For additional information regarding income taxes, see Part I, Item I, Note 14 – Income Taxes.
Net Loss. For the reasons stated above, our net loss totaled approximately $10.9 million for the nine months ended September 30, 2021 compared to a net loss of $10.6 million for the nine months ended September 30, 2020.
Liquidity and Capital Resources
At September 30, 2021, we had approximately $33.6 million in cash, cash equivalents and restricted cash. Management defines cash and cash equivalents as highly liquid deposits with original maturities of 90 days or less when purchased. The increase in cash, cash equivalents, and restricted cash was primarily due to gross proceeds of $14.4 million from the issuance of common stock and $16.6 million from warrants exercised during the nine months ended September 30, 2021.
The following table summarizes our change in cash, cash equivalents and restricted cash (in thousands):
|
|
Nine Months Ended |
|
|||||
|
|
|
||||||
|
|
|
|
2020 |
|
|||
Net cash flows used in operating activities |
|
$ |
(13,606 |
) |
|
$ |
(11,447 |
) |
Net cash flows used in investing activities |
|
|
(396 |
) |
|
|
(78 |
) |
Net cash flows provided by financing activities |
|
|
29,886 |
|
|
|
24,402 |
|
Effect of exchange rate changes |
|
|
(171 |
) |
|
|
181 |
|
Net change in cash, cash equivalents and restricted |
|
$ |
15,713 |
|
|
$ |
13,058 |
|
33
Operating Activities
Net cash used in operating activities consists of our net loss, adjusted for our non-cash charges, plus or minus working capital changes. Cash used in operating activities for the nine months ended September 30, 2021 totaled $13.6 million and was primarily comprised of our net loss of $10.9 million, gain on PPP Loan forgiveness of $3.0 million, and a net decrease in operating assets and liabilities of $2.0 million, partially offset by stock-based compensation expense of $1.5 million. The net decrease in our operating assets and liabilities was primarily due to a $2.8 million increase in inventory as we have increased inventory levels to try to mitigate the impact of supply disruptions from potential product shortages and delivery delays due to COVID-19.
Investing Activities
Cash used in investing activities for the nine months ended September 30, 2021 totaled $0.4 million and was comprised of the purchase of property, plant, and equipment. We expect cash flows from investing activities to remain minimal through the remainder of 2021.
Financing Activities
Net cash provided by financing activities for the nine months ended September 30, 2021 totaled $29.9 million primarily due to the sale of common stock from our February 2021 equity offering for net proceeds of $13.3 million and $16.6 million from the exercise of common stock warrants described below.
Effect of Exchange Rate
The $0.2 million effect of exchange rate on cash for the nine months ended September 30, 2021 was due to recognized loss on foreign currency transactions, primarily driven by changes in the Euro during the period.
Future Liquidity Needs
As of September 30, 2021, we had working capital of approximately $39.2 million. Our principal sources of liquidity as of September 30, 2021 consisted of approximately $33.6 million in cash, cash equivalents and restricted cash and $3.6 million of net accounts receivable.
Although the Company received gross proceeds of approximately $14.4 million from an equity offering in February 2021 and $16.6 million for warrant exercises subsequent to December 31, 2020, the Company may still have to raise additional capital in the future. Additional capital requirements may depend on many factors, including, among other things, the rate at which the Company’s business grows, the COVID-19 pandemic and the actions taken to contain it, demands for working capital, manufacturing capacity, and any acquisitions that the Company may pursue. From time to time, the Company could be required, or may otherwise attempt, to raise capital through either equity or debt offerings. The Company cannot provide assurance that it will be able to successfully enter into any such equity or debt financings in the future or that the required capital would be available on acceptable terms, if at all, or that any such financing activity would not be dilutive to its stockholders.
The Company has historically experienced losses from operations and has used cash and cash equivalents in operating activities. To be able to discharge our liabilities and commitments in the normal course of business, we must increase sales of our products, control or potentially reduce expenses, and establish profitable operations in order to generate cash from operations or obtain additional funds when needed.
We intend to improve our financial condition and ultimately improve our financial results by increasing revenues through expansion of our product offerings, continuing to expand and develop our field sales force and distributor relationships both domestically and internationally, forming strategic arrangements within the dental and medical industries, educating dental and medical patients as to the benefits of our advanced medical technologies, and reducing expenses.
Term Loan
The information set forth in Note 9 – Debt – Term Loan is hereby incorporated herein by reference.
Revolving Credit Facility
The information set forth in Note 9 – Debt – Lines of Credit – Pacific Mercantile Bank is hereby incorporated herein by reference.
34
Paycheck Protection Program Loan
The information set forth in Note 9 – Debt – Paycheck Protection Program Loan is hereby incorporated herein by reference.
EIDL Loan
The information set forth in Note 9 – Debt – EIDL Loan is hereby incorporated herein by reference.
Equity Offering
On February 10, 2021, BIOLASE issued and sold in an underwritten bought deal offering an aggregate of 14,000,000 shares of common stock at a price of $1.03 per share less underwriting discounts and commissions (the "Equity Offering"). The Company received gross proceeds of approximately $14.4 million before deducting underwriting discounts and commissions and estimated offering expenses.
Recent Accounting Pronouncements
For a description of recently issued and adopted accounting pronouncements, including the respective dates of adoption and expected effects on our results of operations and financial condition, please refer to Part I, Item 1, Note 2 – Summary of Significant Accounting Policies, which is incorporated herein by this reference.
Additional Information
BIOLASE®, ZipTip®, ezlase®, eztips®, ComfortPulse®, Waterlase®, Waterlase Dentistry®, Waterlase Express®, iLase®, iPlus®, Epic®, Epic Pro®, WCLI®, World Clinical Laser Institute®, Waterlase MD®, Waterlase Dentistry®, and EZLase® are registered trademarks of BIOLASE, and Pedolase™ is a trademark of BIOLASE. All other product and company names are registered trademarks or trademarks of their respective owners.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management has evaluated, with the participation of our President and Chief Executive Officer, the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our President and Chief Executive Officer has concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.
Changes in Internal Controls over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
35
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the ordinary course of business, we may periodically become subject to legal proceedings and claims arising in connection with ongoing business activities. The results of litigation and claims cannot be predicted with certainty, and unfavorable resolutions are possible and could materially and adversely affect our results of operations, cash flows and financial position. In addition, regardless of the outcome, litigation could have an adverse impact on us because of defense costs, diversion of management resources and other factors. While the outcome of such proceedings and claims cannot be predicted with certainty, there are no matters, as of September 30, 2021, that, in the opinion of management, will have a material adverse effect on our financial position, results of operations or cash flows.
ITEM 1A. RISK FACTORS
There have been no material changes to our risk factors from those disclosed under “Risk Factors” in Part I, Item 1A of the 2020 Form 10-K and under "Risk Factors" in Part II, Item 1A of the Second Quarter Form 10-Q. The risks and uncertainties described in the 2020 Form 10-K and the Second Quarter Form 10-Q are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also materially adversely affect our business, financial condition, or results of operations.
ITEM 5. OTHER INFORMATION
None.
36
ITEM 6. EXHIBITS
|
|
|
|
|
|
|||||||
Exhibit |
|
Description |
|
Filed Herewith |
|
Form |
|
Period Ending/Date of Report |
|
Exhibit |
|
Filing Date |
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1.1 |
|
|
|
|
S-1, Amendment |
|
12/23/2005 |
|
3.1 |
|
12/23/2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1.2 |
|
|
|
|
8-K |
|
05/10/2012 |
|
3.1 |
|
05/16/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1.3 |
|
|
|
|
8-A/A |
|
11/04/2014 |
|
3.1.3 |
|
11/04/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1.4 |
|
|
|
|
S-3 |
|
07/21/2017 |
|
3.4 |
|
07/21/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1.5 |
|
|
|
|
8-K |
|
05/10/2018 |
|
3.1 |
|
05/11/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1.6 |
|
|
|
|
8-K |
|
05/28/2020 |
|
3.1 |
|
06/01/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1.7 |
|
Certificate of Elimination of Series B Junior Participating Cumulative Preferred Stock |
|
|
|
8-K |
|
11/10/2015 |
|
3.1 |
|
11/12/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1.8 |
|
|
|
|
8-K |
|
04/18/2017 |
|
3.2 |
|
04/20/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1.9 |
|
|
|
|
8-K |
|
10/29/2019 |
|
3.1 |
|
10/30/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1.10 |
|
|
|
|
8-K |
|
07/15/2020 |
|
3.1 |
|
07/22/2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.2 |
|
Seventh Amended and Restated Bylaws of the Registrant, adopted on October 8, 2018 |
|
|
|
8-K |
|
10/08/2018 |
|
3.1 |
|
10/09/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
4.1 |
|
|
|
|
8-K |
|
11/03/2014 |
|
99.1 |
|
11/07/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.2 |
|
|
|
|
8-K |
|
08/01/2016 |
|
99.1 |
|
08/02/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.3 |
|
|
|
|
DEF14A |
|
|
|
D |
|
05/19/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37
4.4 |
|
Warrant to Purchase Stock issued on March 6, 2018 to Western Alliance Bank |
|
|
|
10-K |
|
12/31/2017 |
|
4.4 |
|
03/14/2018 |
|
|
|
|
|
|
|
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4.5 |
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Warrant to Purchase Stock issued on September 27, 2018 to Western Alliance Bank |
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10-Q |
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09/30/2018 |
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4.1 |
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11/14/2018 |
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4.6 |
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Warrant to Purchase Stock issued on September 27, 2018 to SWK Funding LLC |
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10-Q |
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09/30/2019 |
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4.2 |
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11/14/2018 |
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4.7 |
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Warrant to Purchase Stock issued on May 7, 2019 to SWK Funding LLC |
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10-Q |
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03/31/2019 |
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4.7 |
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05/10/2019 |
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4.8 |
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10-Q |
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09/30/2019 |
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4.8 |
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11/08/2019 |
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4.9 |
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Warrant to Purchase Stock issued on May 15, 2020 to SWK Funding LLC |
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S-1/A |
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06/19/2020 |
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4.14 |
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06/19/2020 |
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4.10 |
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8-K |
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06/08/2020 |
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4.1 |
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06/09/2020 |
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4.11 |
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8-K |
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07/15/2020 |
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4.2 |
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07/22/2020 |
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4.12 |
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8-K |
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07/15/2020 |
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4.1 |
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07/22/2020 |
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10.1* |
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X |
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10.2* |
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X |
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10.3* |
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X |
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10.4* |
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X |
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31.1 |
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X |
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32.1 |
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** |
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101 |
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The following unaudited financial information from the Company’s Quarterly Report on Form 10-Q, for the period ended September 30, 2021, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations and Comprehensive Loss, (iii) Consolidated Statements of Cash Flows, (iv) Notes to Consolidated Financial Statements |
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101.INS |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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38
101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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* Compensatory contract or arrangement
** Furnished herewith.
39
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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BIOLASE, INC. |
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(Registrant) |
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By: |
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/s/ JOHN R. BEAVER |
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Date |
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President and Chief Executive Officer |
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(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) |
40
| This ‘10-Q’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 9/27/28 | ||||
| 11/9/26 | ||||
| 12/31/25 | ||||
| 6/30/25 | ||||
| 1/1/23 | ||||
| 9/30/22 | ||||
| 4/13/22 | ||||
| 1/1/22 | ||||
| 12/31/21 | 10-K | |||
| 12/15/21 | 4 | |||
| Filed on: | 11/10/21 | 8-K | ||
| 11/4/21 | DEFA14A | |||
| 10/28/21 | ||||
| For Period end: | 9/30/21 | |||
| 7/22/21 | ||||
| 6/30/21 | 10-Q | |||
| 6/11/21 | 4, 8-K | |||
| 3/31/21 | 10-K, 10-Q | |||
| 2/24/21 | 8-K | |||
| 2/10/21 | 8-K | |||
| 1/1/21 | ||||
| 12/31/20 | 10-K | |||
| 12/15/20 | 424B3 | |||
| 11/1/20 | ||||
| 9/30/20 | 10-Q | |||
| 7/23/20 | 4, S-1 | |||
| 7/22/20 | 4, 8-K | |||
| 7/1/20 | 424B4, EFFECT | |||
| 6/30/20 | 10-Q | |||
| 5/22/20 | 8-K, SC 13D/A | |||
| 5/13/20 | 4, 8-K, DEF 14A, PRE 14A | |||
| 4/14/20 | ||||
| 4/13/20 | PRE 14A | |||
| 3/27/20 | ||||
| 3/13/20 | ||||
| 3/11/20 | ||||
| 2/15/20 | ||||
| 2/4/20 | ||||
| 1/22/20 | ||||
| 12/31/19 | 10-K, SD | |||
| 10/28/19 | 424B4, 8-K | |||
| 5/15/19 | 8-K, DEF 14A | |||
| 5/7/19 | ||||
| 3/31/19 | 10-Q | |||
| 1/31/19 | 8-K | |||
| 1/25/19 | 8-K | |||
| 1/1/19 | ||||
| 12/31/18 | 10-K, SD | |||
| 11/14/18 | 10-Q | |||
| 11/9/18 | ||||
| 9/27/18 | 8-K | |||
| 9/21/18 | 4, 8-K, DEF 14A | |||
| 3/6/18 | 8-K | |||
| 1/25/18 | 4, 424B3, EFFECT | |||
| 1/24/18 | ||||
| 1/23/18 | CORRESP | |||
| 5/6/17 | ||||
| 1/27/17 | ||||
| 4/27/15 | 4, 8-K | |||
| 10/30/14 | ||||
| 6/6/13 | 4, 8-K, DEF 14A, PRE 14A | |||
| 9/9/12 | ||||
| 4/30/12 | 8-K | |||
| 4/24/12 | 8-K | |||
| 5/5/11 | 4, 8-K, DEF 14A | |||
| 5/16/07 | 4, 8-K, DEF 14A | |||
| 11/15/05 | 4, 8-K, DEF 14A, PRE 14A | |||
| 5/26/04 | 3, 4, DEF 14A | |||
| List all Filings | ||||