SEC Info - Biolase, Inc. - ‘10-Q’ for 9/30/23

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Biolase, Inc. – ‘10-Q’ for 9/30/23

On: Thursday, 11/9/23, at 4:52pm ET · For: 9/30/23 · Accession #: 950170-23-62187 · File #: 1-36385

Previous ‘10-Q’: ‘10-Q’ on 8/10/23 for 6/30/23 · Latest ‘10-Q’: This Filing · 17 References:

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

11/09/23  Biolase, Inc.                     10-Q        9/30/23   81:12M                                    Donnelley … Solutions/FA

Quarterly Report — Form 10-Q

Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                    HTML   3.71M 
 2: EX-31.1     Certification -- §302 - SOA'02                      HTML     28K 
 3: EX-31.2     Certification -- §302 - SOA'02                      HTML     28K 
 4: EX-32.1     Certification -- §906 - SOA'02                      HTML     25K 
 5: EX-32.2     Certification -- §906 - SOA'02                      HTML     25K 
11: R1          Document and Entity Information                     HTML     77K 
12: R2          Consolidated Balance Sheets (Unaudited)             HTML    135K 
13: R3          Consolidated Balance Sheets (Unaudited)             HTML     51K 
                (Parenthetical)                                                  
14: R4          Consolidated Statements Of Operations And           HTML    123K 
                Comprehensive Loss (Unaudited)                                   
15: R5          Consolidated Statements Of Redeemable Preferred     HTML    160K 
                Stock and Stockholders' Equity (Unaudited)                       
16: R6          Consolidated Statements Of Cash Flows (Unaudited)   HTML    116K 
17: R7          Description of Business and Basis of Presentation   HTML     42K 
18: R8          Summary of Significant Accounting Policies          HTML     36K 
19: R9          Revenue Recognition                                 HTML    158K 
20: R10         Convertible Redeemable Preferred Stock and          HTML    300K 
                Stockholders' Equity                                             
21: R11         Inventory                                           HTML     47K 
22: R12         Property, Plant, and Equipment                      HTML     69K 
23: R13         Intangible Assets and Goodwill                      HTML     32K 
24: R14         Accrued Liabilities                                 HTML    111K 
25: R15         Debt                                                HTML     91K 
26: R16         Leases                                              HTML    113K 
27: R17         Segment Information                                 HTML     79K 
28: R18         Concentrations                                      HTML     88K 
29: R19         Income Taxes                                        HTML     35K 
30: R20         Summary of Significant Accounting Policies          HTML     45K 
                (Policies)                                                       
31: R21         Revenue Recognition (Tables)                        HTML    142K 
32: R22         Redeemable Preferred Stock and Stockholders'        HTML    213K 
                Equity (Tables)                                                  
33: R23         Inventory (Tables)                                  HTML     44K 
34: R24         Property, Plant, and Equipment (Tables)             HTML     63K 
35: R25         Accrued Liabilities (Tables)                        HTML    110K 
36: R26         Debt (Tables)                                       HTML     79K 
37: R27         Leases (Tables)                                     HTML    104K 
38: R28         Segment Information (Tables)                        HTML     73K 
39: R29         Concentrations (Tables)                             HTML     85K 
40: R30         Description of Business and Basis of Presentation   HTML     70K 
                - Additional Information (Detail)                                
41: R31         Revenue Recognition - Additional Information        HTML     33K 
                (Detail)                                                         
42: R32         Revenue Recognition - Summary of Opening and        HTML     34K 
                Closing Balances of Contract Liabilities (Detail)                
43: R33         Revenue Recognition - Summary of Disaggregation of  HTML     35K 
                Revenues Related to Geographic Areas (Detail)                    
44: R34         Revenue Recognition - Summary of Revenues           HTML     35K 
                Disaggregated by Timing of Goods and Services                    
                Transferred (Detail)                                             
45: R35         Revenue Recognition - Summary of Sales by End       HTML     35K 
                Market (Detail)                                                  
46: R36         Convertible Redeemable Preferred Stock and          HTML    286K 
                Stockholders' Equity - Additional Information                    
                (Detail)                                                         
47: R37         Classification of Compensation Expense Associated   HTML     43K 
                with Share-Based Payments (Detail)                               
48: R38         Summary of Option Activity (Detail)                 HTML     56K 
49: R39         Summary of Option Activity (Parenthetical)          HTML     24K 
                (Details)                                                        
50: R40         Summary of Unvested Stock Option Activity (Detail)  HTML     40K 
51: R41         Summary of Unvested Stock Option Activity           HTML     35K 
                (Parenthetical) (Details)                                        
52: R42         Fair Value Disclosures Related to Grants,           HTML     25K 
                Exercises and Vested Options (Detail)                            
53: R43         Summary of Unvested Restricted Stock Units          HTML     53K 
                (Detail)                                                         
54: R44         Summary of Warrant Activity (Detail)                HTML     48K 
55: R45         Inventory - Components of Inventory (Detail)        HTML     32K 
56: R46         Inventory - Additional Information (Detail)         HTML     27K 
57: R47         Property, Plant, and Equipment - Summary of         HTML     45K 
                Property, Plant, and Equipment (Detail)                          
58: R48         Property, Plant, and Equipment - Additional         HTML     32K 
                Information (Detail)                                             
59: R49         Intangible Assets and Goodwill - Additional         HTML     40K 
                Information (Detail)                                             
60: R50         Accrued Liabilities - Components of Accrued         HTML     43K 
                Liabilities (Detail)                                             
61: R51         Accrued Liabilities - Changes in Initial Product    HTML     37K 
                Warranty Accrual and Expenses Under Initial and                  
                Extended Warranties (Detail)                                     
62: R52         Accrued Liabilities - Additional Information        HTML     32K 
                (Detail)                                                         
63: R53         Debt - Summary of Principal Outstanding and         HTML     44K 
                Unamortized Discount (Detail)                                    
64: R54         Debt - Additional Information (Detail)              HTML     82K 
65: R55         Debt - Summary of Future Minimum Principal and      HTML     51K 
                Interest Payments (Detail)                                       
66: R56         Leases - Additional Information (Detail)            HTML     57K 
67: R57         Leases - Information related to Right-of-use        HTML     33K 
                Assets and Liabilities (Detail)                                  
68: R58         Leases - Schedule of Maturities of Lease            HTML     42K 
                Liabilities (Detail)                                             
69: R59         Leases - Future Minimum Rental Commitments Under    HTML     37K 
                Lease Agreements (Detail)                                        
70: R60         Commitments and Contingencies - Additional          HTML     25K 
                Information (Detail)                                             
71: R61         Segment Information - Additional Information        HTML     37K 
                (Detail)                                                         
72: R62         Segment Information - Summary of Net Revenue by     HTML     33K 
                Geographic Location (Detail)                                     
73: R63         Segment Information - Summary of Property, Plant    HTML     30K 
                and Equipment by Geographic Location (Detail)                    
74: R64         Concentrations - Summary of Net Revenue from        HTML     44K 
                Various Products (Detail)                                        
75: R65         Concentrations - Additional Information (Detail)    HTML     38K 
76: R66         Income Taxes - Additional Information (Detail)      HTML     33K 
79: XML         IDEA XML File -- Filing Summary                      XML    146K 
77: XML         XBRL Instance -- biol-20230930_htm                   XML   2.69M 
78: EXCEL       IDEA Workbook of Financial Report Info              XLSX    155K 
 9: EX-101.CAL  XBRL Calculations -- biol-20230930_cal               XML    164K 
 7: EX-101.DEF  XBRL Definitions -- biol-20230930_def                XML    819K 
10: EX-101.LAB  XBRL Labels -- biol-20230930_lab                     XML   1.69M 
 6: EX-101.PRE  XBRL Presentations -- biol-20230930_pre              XML   1.22M 
 8: EX-101.SCH  XBRL Schema -- biol-20230930                         XSD    253K 
80: JSON        XBRL Instance as JSON Data -- MetaLinks              519±   833K 
81: ZIP         XBRL Zipped Folder -- 0000950170-23-062187-xbrl      Zip    394K

‘10-Q’ — Quarterly Report

Document Table of Contents

Page	(sequential)	(alphabetic)	↑Top
		Alternative Formats (Word, et al.) Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022 Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and September 30, 2022 Consolidated Statements of Convertible Redeemable Preferred Stock and Stockholders' Equity for the three and nine months ended September 30, 2023 and September 30, 2022 Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2023 and September 30, 2022 Controls and Procedures Defaults Upon Senior Securities Exhibits Financial Information Financial Statements (Unaudited) Legal Proceedings Management's Discussion and Analysis of Financial Condition and Results of Operations Mine Safety Disclosures Notes to Consolidated Financial Statements Other Information Quantitative and Qualitative Disclosures About Market Risk Risk Factors Signatures Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
1	1st Page – Filing Submission
"	Financial Information
"	Financial Statements (Unaudited)
"	Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022
"	Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2023 and September 30, 2022
"	Consolidated Statements of Convertible Redeemable Preferred Stock and Stockholders' Equity for the three and nine months ended September 30, 2023 and September 30, 2022
"	Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and September 30, 2022
"	Notes to Consolidated Financial Statements
"	Management's Discussion and Analysis of Financial Condition and Results of Operations
"	Quantitative and Qualitative Disclosures About Market Risk
"	Controls and Procedures
"	Other Information
"	Legal Proceedings
"	Risk Factors
"	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
"	Defaults Upon Senior Securities
"	Mine Safety Disclosures
"	Exhibits
"	Signatures

This is an HTML Document rendered as filed. [ Alternative Formats ]

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10-Q

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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 2023 /


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, 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 2, 2023, the registrant had i 2,296,777 shares of common stock, $0.001 par value per share, outstanding.

BIOLASE, INC.

INDEX


		Page
PART I.	FINANCIAL INFORMATION	2
Item 1.	Financial Statements (Unaudited):	2
	Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022	2
	Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2023 and September 30, 2022	3
	Consolidated Statements of Convertible Redeemable Preferred Stock and Stockholders’ Equity for the three and nine months ended September 30, 2023 and September 30, 2022	4
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and September 30, 2022	8
	Notes to Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38
PART II	OTHER INFORMATION	39
Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	41
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	42
Signatures		44

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BIOLASE, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)


	September 30,			December 31,
	2023			2022
ASSETS	(unaudited)
Current assets:
Cash and cash equivalents	$	i 7,809		$	i 4,181
Accounts receivable, less allowance of $ i 2,201 and $ i 2,164 as of September 30, 2023 and December 31, 2022, respectively		i 4,388			i 5,841
Inventory		i 13,824			i 15,884
Prepaid expenses and other current assets		i 1,761			i 3,053
Total current assets		i 27,782			i 28,959
Property, plant, and equipment, net		i 6,049			i 4,278
Goodwill		i 2,926			i 2,926
Right-of-use assets, leases		i 1,718			i 1,768
Other assets		i 270			i 255
Total assets	$	i 38,745		$	i 38,186
LIABILITIES, CONVERTIBLE REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	i 7,178		$	i 5,786
Accrued liabilities		i 7,613			i 9,210
Deferred revenue, current portion		i 2,191			i 2,111
Current portion of term loans, net of discount		i 2,800			i 700
Total current liabilities		i 19,782			i 17,807
Deferred revenue		i 236			i 418
Warranty accrual		i 463			i 360
Non-current term loans, net of discount		i 11,307			i 13,091
Non-current operating lease liability		i 995			i 1,259
Other liabilities		i 78			i 362
Total liabilities		i 32,861			i 33,297
Mezzanine Equity
Series H Convertible Preferred stock, par value $ i 0.001 per share; i 370 shares authorized, i i 5 / shares issued and outstanding as of September 30, 2023		i 300			i —
Series J Convertible Preferred stock, par value $ i 0.001 per share; i 160 shares authorized, i i 38 / shares issued and outstanding as of September 30, 2023		i 5,252			i —
Total mezzanine equity		i 5,552			i —
Stockholders' equity:
Common stock, par value $ i i 0.001 / per share; i i 180,000 / shares authorized, i i 2,266 / and i i 77 / shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		i 2			i —
Additional paid-in capital		i 312,523			i 301,790
Accumulated other comprehensive loss		( i 719	)		( i 733	)
Accumulated deficit		( i 311,474	)		( i 296,168	)
Total stockholders' equity		i 332			i 4,889
Total liabilities, convertible redeemable preferred stock and stockholders' equity	$	i 38,745		$	i 38,186

See accompanying notes to unaudited consolidated financial statements.

BIOLASE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except per share data)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

2023

2022

2023

2022

Net revenue

i 10,921

i 12,010

i 35,674

i 34,411

Cost of revenue

i 7,175

i 9,565

i 22,474

i 22,096

Gross profit

i 3,746

i 2,445

i 13,200

i 12,315

Operating expenses:

Sales and marketing

i 3,402

i 5,008

i 14,214

i 15,224

General and administrative

i 2,679

i 3,109

i 7,495

i 8,825

Engineering and development

i 1,362

i 1,979

i 4,352

i 5,177

Total operating expenses

i 7,443

i 10,096

i 26,061

i 29,226

Loss from operations

( i 3,697

)

( i 7,651

)

( i 12,861

)

( i 16,911

)

Loss on foreign currency transactions

( i 307

)

( i 329

)

( i 522

)

( i 552

)

Interest expense, net

( i 598

)

( i 424

)

( i 1,758

)

( i 1,287

)

Other income (expenses), net

i 28

i —

( i 119

)

i —

Non-operating loss, net

( i 877

)

( i 753

)

( i 2,399

)

( i 1,839

)

Loss before income tax (provision) benefit

( i 4,574

)

( i 8,404

)

( i 15,260

)

( i 18,750

)

Income tax (provision) benefit

( i 15

)

i 17

( i 46

)

( i 23

)

Net loss

( i 4,589

)

( i 8,387

)

( i 15,306

)

( i 18,773

)

Other comprehensive loss items:

Foreign currency translation adjustments

( i 105

)

( i 152

)

i 14

( i 415

)

Comprehensive loss

( i 4,694

)

( i 8,539

)

( i 15,292

)

( i 19,188

)

Net loss

( i 4,589

)

( i 8,387

)

( i 15,306

)

( i 18,773

)

Deemed dividend on convertible preferred stock

i —

( i 217

)

Net loss attributable to common stockholders

( i 4,589

)

( i 8,387

)

( i 15,306

)

( i 18,990

)

Net loss per share attributable to common stockholders:

Basic and Diluted - Note 1

( i i 3.89 /

)

( i i 110.36 /

)

( i i 22.28 /

)

( i i 287.73 /

)

Shares used in the calculation of net loss per share:

Basic and Diluted - Note 1

i i 1,179 /

i i 76 /

i i 687 /

i i 66 /

See accompanying notes to unaudited consolidated financial statements.

BIOLASE, INC.

CONSOLIDATED STATEMENTS OF CONVERTIBLE REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY

(In thousands)

(Unaudited)

Mezzanine
Equity

Stockholders' Equity

Series H
Convertible Redeemable
Preferred Stock

Series I
Redeemable
Preferred Stock

Series J
Convertible Redeemable
Preferred Stock

Common Stock

Additional
Paid-in

Accumulated
Other
Comprehensive

Accumulated

Total
Stockholders'

Amount

Capital

Loss

Deficit

Equity

Balance, June 30, 2023

i 12

i 720

i 85

—

i 1,019

i 1

i 314,119

( i 614

)

( i 306,885

)

i 6,621

Issuance of Series H Convertible Preferred Stock, net of fees

—

i 32

—

i 32

Conversion of Series H Convertible Preferred Stock

( i 7

)

( i 420

)

—

i 25

—

i 420

—

i 420

Redemption of Series I Redeemable Preferred Stock

—

( i 85

)

—

Issuance of Series J Convertible Preferred Stock, net of fees

—

i 75

i 10,330

—

( i 7,611

)

—

( i 7,611

)

Exercise of Series J Convertible Preferred Stock Warrants

—

i 3

i 410

—

( i 148

)

—

( i 148

)

Conversion of Series J Convertible Preferred Stock

—

( i 40

)

( i 5,488

)

i 1,222

i 1

i 5,487

—

i 5,488

Stock-based compensation

—

i 224

—

i 224

Net loss

—

( i 4,589

)

( i 4,589

)

Foreign currency
translation adjustment

—

( i 105

)

—

( i 105

)

Balance, September 30, 2023

i 5

i 300

—

i 38

i 5,252

i 2,266

i 2

i 312,523

( i 719

)

( i 311,474

)

i 332

Balance, December 31, 2022

—

i 77

—

i 301,790

( i 733

)

( i 296,168

)

i 4,889

Sale of common stock and pre-funded warrants, net of fees

—

i 172

—

i 8,503

—

i 8,503

Issuance of Series H Convertible Preferred Stock, net of fees

i 175

i 12,115

—

( i 9,345

)

—

( i 9,345

)

Exercise of Series H Convertible Preferred Stock Warrants

i 20

i 1,200

—

( i 430

)

—

( i 430

)

Conversion of Series H Convertible Preferred Stock

( i 190

)

( i 13,015

)

—

i 680

i 1

i 13,014

—

i 13,015

Issuance of Series I Redeemable Preferred Stock

—

i 85

—

Redemption of Series I Redeemable Preferred Stock

—

( i 85

)

—

Issuance of Series J Convertible Preferred Stock, net of fees

—

i 75

i 10,330

—

( i 7,611

)

—

( i 7,611

)

Exercise of Series J Convertible Preferred Stock Warrants

—

i 3

i 410

—

( i 148

)

—

( i 148

)

Conversion of Series J Convertible Preferred Stock

—

( i 40

)

( i 5,488

)

i 1,222

i 1

i 5,487

—

i 5,488

Issuance of stock from
RSUs, net

—

i 1

—

Stock-based compensation

—

i 1,149

—

i 1,149

Exercise of common stock warrants

—

i 114

—

i 114

—

i 114

Net loss

—

( i 15,306

)

( i 15,306

)

Foreign currency
translation adjustment

—

i 14

—

i 14

Balance, September 30, 2023

i 5

i 300

—

i 38

i 5,252

i 2,266

i 2

i 312,523

( i 719

)

( i 311,474

)

i 332

See accompanying notes to unaudited consolidated financial statements.

BIOLASE, INC.

CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY

(In thousands)

(Unaudited)

Mezzanine
Equity

Stockholders' Equity

Series G
Redeemable
Preferred Stock

Common Stock

Additional
Paid-in

Series F
Convertible
Preferred Stock

Accumulated
Other
Comprehensive

Accumulated

Total
Stockholders'

Amount

Capital

Amount

Loss

Deficit

Equity

Balance, June 30, 2022

—

i 69

—

i 300,421

—

( i 886

)

( i 277,920

)

i 21,615

Sale of common stock and pre-funded warrants, net of fees

—

( i 214

)

—

( i 214

)

Issuance of stock from RSUs, net

—

i 1

—

Stock-based compensation

—

i 996

—

i 996

Exercise of common stock warrants

—

i 2

—

Net loss

—

( i 8,387

)

( i 8,387

)

Foreign currency translation adjustment

—

( i 152

)

—

( i 152

)

Balance, September 30, 2022

—

i 72

—

i 301,203

—

( i 1,038

)

( i 286,307

)

i 13,858

Balance, December 31, 2021

—

i 62

—

i 293,331

—

i 34

( i 623

)

( i 267,534

)

i 25,208

Sale of common stock and pre-funded warrants, net of fees

—

i 7

—

i 5,635

—

i 5,635

Issuance of Series G Redeemable
Preferred Stock

i 154

—

Redemption of Series G Redeemable
Preferred Stock

( i 154

)

—

Conversion of Series F Convertible Preferred Stock

—

i 251

—

( i 251

)

—

Deemed dividend on Series F
Convertible Preferred Stock

—

( i 217

)

—

i 217

—

Issuance of stock from RSUs, net

—

i 1

—

Liability award reclass

—

i 596

—

i 596

Stock-based compensation

—

i 1,607

—

i 1,607

Exercise of common stock warrants

—

i 2

—

Net loss

—

( i 18,773

)

( i 18,773

)

Foreign currency translation adjustment

—

( i 415

)

—

( i 415

)

Balance, September 30, 2022

i —

—

i 72

—

i 301,203

—

( i 1,038

)

( i 286,307

)

i 13,858

See accompanying notes to unaudited consolidated financial statements.

BIOLASE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended
	September 30,
	2023			2022
Cash Flows from Operating Activities:
Net loss	$	( i 15,306	)	$	( i 18,773	)
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:
Depreciation		i 2,133			i 369
Provision for bad debts		i 60			i 56
Provision for inventory excess and obsolescence		i —			i 245
Inventory write-offs and disposals		i —			i 1,486
Amortization of debt issuance costs		i 320			i 197
Change in fair value of warrants		( i 104	)		i —
Issuance costs for warrants		i 447			i —
Stock-based compensation		i 1,050			i 1,691
Changes in operating assets and liabilities:
Accounts receivable		i 1,393			( i 664	)
Inventory		( i 720	)		( i 5,229	)
Prepaid expenses and other current assets		i 1,322			( i 850	)
Accounts payable and accrued liabilities		( i 2,301	)		i 664
Deferred revenue		( i 102	)		( i 371	)
Net cash and cash equivalents used in operating activities		( i 11,808	)		( i 21,179	)
Cash Flows from Investing Activities:
Purchases of property, plant, and equipment		( i 1,126	)		( i 3,256	)
Net cash and cash equivalents used in investing activities		( i 1,126	)		( i 3,256	)
Cash Flows from Financing Activities:
Proceeds from the sale of common stock and pre-funded warrants, net of fees		i 8,503			i 5,635
Proceeds from the sale of Convertible Preferred Stock, net of fees		i 5,490			i —
Proceeds from the sale of warrants, net of fees		i 1,743			i —
Principal payment on loan		i —			( i 1,000	)
Proceeds from the exercise of common stock warrants		i 114			i —
Proceeds from the exercise of preferred share warrants		i 699			i —
Net cash and cash equivalents provided by financing activities		i 16,549			i 4,635
Effect of exchange rate changes		i 13			( i 415	)
Increase (decrease) in cash, cash equivalents and restricted cash		i 3,628			( i 20,215	)
Cash, cash equivalents and restricted cash, beginning of period		i 4,181			i 30,175
Cash and cash equivalents, end of period	$	i 7,809		$	i 9,960
Supplemental cash flow disclosure:
Cash paid for interest	$	i 1,419		$	i 1,110
Cash received for interest	$	i 7		$	i 23
Cash paid for income taxes	$	i 12		$	i 39
Cash paid for operating leases	$	i 230		$	i 219
Non-cash right-of-use assets obtained in exchange for lease obligation	$	i 483		$	i 562
Deemed dividend on preferred stock	$	i —		$	i 217
Common stock issued upon exercise of preferred stock	$	i 18,503		$	i —

See accompanying notes to unaudited consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1—DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

The Company

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, 2022 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 unaudited consolidated results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results for the full year. The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended December 31, 2022, included in BIOLASE’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the Securities and Exchange Commission (the “SEC”) on March 28, 2023 (the “2022 Form 10-K”).

Reverse Stock Split

At a special meeting of BIOLASE stockholders held on July 20, 2023 (the "special meeting"), BIOLASE stockholders approved an amendment to BIOLASE’s Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"), to effect i a reverse stock split of BIOLASE common stock, at a ratio between one-for-two (1:2) and one-for-one hundred (1:100). Immediately after the special meeting, BIOLASE's board of directors (the "Board") approved a one-for-one hundred (1:100) reverse stock split of the outstanding shares of BIOLASE common stock (the “2023 Reverse Stock Split”). On July 26, 2023, BIOLASE filed an amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware to effect the 2023 Reverse Stock Split, which became effective on July 27, 2023. The amendment did not change the number of authorized shares of BIOLASE common stock.

Except as the context otherwise requires, all common stock share numbers, share price amounts (including exercise prices, conversion prices, and closing market prices), shares issued upon the conversion of preferred shares, and shares issued upon the exercise of warrants contained in the unaudited consolidated financial statements and notes thereto have been retroactively adjusted to reflect the 2023 Reverse Stock Split.

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, 2023 and for the years ended December 31, 2022, 2021, and 2020. The Company’s recurring losses, level of cash used in operations, and potential need for additional capital, along with uncertainties surrounding the Company’s ability to raise additional capital, raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

As of September 30, 2023, the Company had working capital of approximately $ i 8.0 million. The Company’s principal sources of liquidity as of September 30, 2023 consisted of approximately $ i 7.8 million in cash and cash equivalents and $ i 4.4 million of net accounts receivable. As of December 31, 2022, the Company had working capital of approximately $ i 11.2 million, $ i 4.2 million in cash and cash equivalents and $ i 5.8 million of net accounts receivable. The increase in cash and cash equivalents since December 31, 2022 was primarily due to $ i 8.5 million net proceeds from the January 2023 public offering, $ i 3.7 million net proceeds from the May 2023

public offering, $ i 3.5 million net proceeds from the September 2023 public offering, and $ i 0.8 million proceeds from the exercise of warrants. This increase was partially offset by a net loss of $ i 15.3 million and $ i 1.1 million in capital expenditures. For additional information on the January 2023 public offering, the May 2023 public offering, and the September 2023 public offering, refer to Note 4 – Convertible Redeemable Preferred Stock and Stockholders’ Equity—Warrants.

Additional capital requirements may depend on many factors, including, among other things, the rate at which the Company’s business grows, demands for working capital, manufacturing capacity, and any acquisitions that the Company may pursue. The Company expects that it will be required 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.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of these consolidated financial statements in conformity with 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, the provision or benefit for income taxes, and preferred stock. 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, is discussed in the Company’s 2022 audited financial statements included in the 2022 Form 10-K. Management believes that there have been no significant changes during the nine months ended September 30, 2023 in the Company’s critical accounting policies from those disclosed in the Company’s 2022 audited financial statements included in the 2022 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, accounts receivable, accounts payable, accrued liabilities, warrants, and the SWK Loan (as defined below) as discussed in Note 9 – Debt, approximate fair value because of the relative short maturity of these items and the market interest rates the Company could obtain.

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 and trade accounts receivable. The Company maintains its cash and cash equivalents 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 its 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, 2023 and 2022, respectively, the Company did not enter into any 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 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 Company adopted this guidance effective January 1, 2023, and the adoption of this standard did not have a significant impact 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 expenses.

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 87% and i 89% of net revenue for the three and nine months ended September 30, 2023, respectively, and i 83% and i 87% of net revenue for the three and nine months ended September 30, 2022, 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 13% and i 11% of net revenue for the three and nine months ended September 30, 2023, respectively, and i 17% and i 13% of net revenue for the three and nine months ended September 30, 2022, 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 i 0.4 / million as of September 30, 2023 and December 31, 2022.

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 when the customer attends a training program or upon the expiration of the obligation, which is generally after six 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.

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. i The opening and closing balances of the Company’s contract liabilities are as follows (in thousands):


	September 30,			December 31,
	2023			2022
Undelivered elements (training, installation, product and support services)	$	i 364		$	i 447
Extended warranty contracts		i 2,063			i 2,082
Total deferred revenue		i 2,427			i 2,529
Less: long-term portion of deferred revenue		( i 236	)		( i 418	)
Deferred revenue — current	$	i 2,191		$	i 2,111

The balance of contract assets was immaterial as the Company did not have a significant amount of uninvoiced receivables at September 30, 2023 and December 31, 2022.

The amount of revenue recognized during the nine months ended September 30, 2023 and 2022 that was included in the opening contract liability balance related to undelivered elements was $ i 0.3 million and $ i 0.7 million, respectively. The amount of revenue recognized related to extended warranty contracts was $ i 1.5 million and $ i 1.3 million, for the nine months ended September 30, 2023 and 2022, 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,

2023

2022

2023

2022

United States

i 7,298

i 8,413

i 24,797

i 24,290

International

i 3,623

i 3,597

i 10,877

i 10,121

Net revenue

i 10,921

i 12,010

i 35,674

i 34,411

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,

2023

2022

2023

2022

Revenue recognized over time

i 1,366

i 2,076

i 3,950

i 4,406

Revenue recognized at a point in time

i 9,555

i 9,934

i 31,724

i 30,005

Net revenue

i 10,921

i 12,010

i 35,674

i 34,411

The Company’s sales by end market were as follows (in thousands):

Three Months Ended

Nine Months Ended

September 30,

2023

2022

2023

2022

End-customer

i 7,298

i 8,413

i 24,797

i 24,290

Distributors

i 3,623

i 3,597

i 10,877

i 10,121

Net revenue

i 10,921

i 12,010

i 35,674

i 34,411

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—CONVERTIBLE REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

The Board, without further stockholder authorization, may authorize the issuance from time to time of up to i 1,000,000 shares of the Company’s preferred stock. Of the i 1,000,000 shares of preferred stock, as of September 30, 2023, i 370,000 shares were designated as Series H, par value $ i 0.001 per share, i 160,000 shares were designated as Series J, par value $ i 0.001 per share, and i 125,000 shares were designated as Series I, par value $ i 0.001 per share.

Preferred Stock

Series J Preferred Stock

On September 13, 2023, the Company consummated the sale of i 75,000 Units (the "Units") with each Unit consisting of (A) one share of BIOLASE Series J Convertible Redeemable Preferred Stock, par value $ i 0.001 per share and a stated value equal to $ i 100.00 (the “Series J Convertible Preferred Stock”), and (B) one warrant (the “Series J Warrants”) to purchase one-half of one ( i 0.50) share of Series J Convertible Preferred Stock, at a price to the public of $ i 60.00 per Unit, less underwriting discounts and commissions. The public offering price of $ i 60.00 per Unit reflects the issuance of the Series J Convertible Preferred Stock with an original issue discount of i 40%. The Company filed a registration statement on Form S-1 in September 2023, which registered the Units, the Series J Convertible Preferred Stock, the Series J Warrants and the shares of Series J Convertible Preferred Stock and common stock underlying such securities and additional shares of Series J Convertible Preferred Stock that will be issued, if and when the Board declares such dividends, as paid in-kind dividends (“PIK dividends”) at a rate of i 20% per annum and the shares of Common Stock issuable upon conversion of the Series J Convertible Preferred Stock issued as PIK dividends. The registration statement was declared effective on September 13, 2023 and the offering closed on September 18, 2023. Each Warrant has an exercise price of $ i 30.00 per share, is exercisable for one-half of one ( i 0.5) share of Series J Convertible Preferred Stock, is immediately exercisable and will expire one (1) year from the date of issuance.

Each share of Series J Convertible Preferred Stock is convertible at the option of the holder at any time into the number of shares of BIOLASE common stock determined by dividing the $ i 100.00 stated value per share by a conversion price of $ i 3.26. Each outstanding share of Series J Convertible Preferred Stock is mandatorily redeemable by the Company in cash on September 13, 2024 (the "Series J Maturity Date").

Gross proceeds from the offering were $ i 4.5 million before broker fees and related expenses of approximately $ i 1.0 million. In accordance with applicable accounting standards, the $ i 4.5 million gross proceeds were allocated to the Series J Convertible Preferred

Stock and the Series J Warrants in the amount of $ i 3.5 million and $ i 1.0 million, respectively. The allocation was based on the fair value of the Series J Warrants of $ i 1.0 million as of the commitment date, with the residual proceeds of $ i 3.5 million allocated to the Series J Convertible Preferred Stock. Net proceeds allocated to the Series J Convertible Preferred Stock and Series J warrants was $ i 2.7 million and $ i 0.8 million respectively.

The Series J Convertible Preferred stock was classified as mezzanine equity on the consolidated balance sheet as they are contingently redeemable prior to the Series J Maturity Date and the conversion from preferred shares to shares of BIOLASE common stock is at the option of the holder at any time before the Series J Maturity Date. The Series J warrants were classified as accrued liabilities on the consolidated balance sheet as the warrants are convertible into preferred shares, which are mandatorily redeemable in cash upon the Series J Maturity Date if they are not converted to shares of BIOLASE common stock before such date.

The Series J Convertible Preferred Stock was issued at a discount with the total redemption value of the Series J Convertible Preferred Shares and PIK Dividends of $ i 10.3 million. The redemption value in excess of the net proceeds received allocated to the Series J Convertible Preferred Shares was $ i 7.6 million and was recognized as a decrease in additional paid-in-capital at the commitment date. Upon conversion of Series J warrants to Series J Convertible Preferred shares, the value of the Series J Convertible Preferred shares issued is the stated value per share plus the PIK dividend. The redemption value in excess of the net proceeds received from the exercise of warrants and the fair value of such warrants is recognized as a decrease in additional paid-in-capital at the conversion date.

During the three months ended September 30, 2023, i 5,960 of the Series J warrants were converted to i 2,980 Series J Convertible Preferred shares and during the three months ended September 30, 2023, i 39,849 Series J Convertible Preferred shares were converted to BIOLASE common stock.

Series H Preferred Stock

On May 24, 2023, the Company consummated the sale of i 175,000 Units (the "Units") with each Unit consisting of (A) one share of BIOLASE Series H Convertible Redeemable Preferred Stock, par value $ i 0.001 per share and a stated value equal to $ i 50.00 (the “Series H Convertible Preferred Stock”), and (B) one warrant (the “Series H Warrants”) to purchase one-half of one ( i 0.50) share of Series H Convertible Preferred Stock, at a price to the public of $ i 26.00 per Unit, less underwriting discounts and commissions. The public offering price of $ i 26.00 per Unit reflects the issuance of the Series H Convertible Preferred Stock with an original issue discount of i 48%. The Company filed a registration statement on Form S-1 in May 2023, which registered the Units, the Series H Convertible Preferred Stock, the Series H Warrants and the shares of Series H Convertible Preferred Stock and common stock underlying such securities and additional shares of Series H Convertible Preferred Stock that will be issued, if and when the Board declares such dividends, as paid in-kind dividends (“PIK dividends”) at a rate of i 20% and the shares of Common Stock issuable upon conversion of the Series H Convertible Preferred Stock issued as PIK dividends. The registration statement was declared effective on May 24, 2023 and the offering closed on May 26, 2023. Each Warrant has an exercise price of $ i 13.00 per share, is exercisable for one-half of one ( i 0.5) share of Series H Convertible Preferred Stock, is immediately exercisable and will expire two (2) years from the date of issuance.

Each share of Series H Convertible Preferred Stock is convertible at the option of the holder at any time into the number of shares of BIOLASE common stock determined by dividing the $ i 50.00 stated value per share by a conversion price of $ i 13.98 (as adjusted for the 2023 Reverse Stock Split). Each outstanding share of Series H Convertible Preferred Stock is mandatorily redeemable by the Company in cash on May 24, 2025 (the "Series H Maturity Date").

Gross proceeds from the offering were $ i 4.6 million before broker fees and related expenses of approximately $ i 0.9 million. In accordance with applicable accounting standards, the $ i 4.6 million gross proceeds were allocated to the Series H Convertible Preferred Stock and the Series H Warrants in the amount of $ i 3.4 million and $ i 1.2 million, respectively. The allocation was based on the fair value of the Series H Warrants of $ i 1.2 million as of the commitment date, with the residual proceeds of $ i 3.4 million allocated to the Series H Convertible Preferred Stock. Net proceeds allocated to the Series H Convertible Preferred Stock and Series H warrants was $ i 2.7 million and $ i 1.0 million respectively.

The Series H Convertible Preferred stock was classified as mezzanine equity on the consolidated balance sheet as they are contingently redeemable prior to the Series H Maturity Date and the conversion from preferred shares to shares of BIOLASE common stock is at the option of the holder at any time before the Series H Maturity Date. The Series H warrants were classified as accrued liabilities on the consolidated balance sheet as the warrants are convertible into preferred shares, which are mandatorily redeemable in cash upon the Series H Maturity Date if they are not converted to shares of BIOLASE common stock before such date.

The Series H Convertible Preferred Stock was issued at a discount with the total redemption value of the Series H Convertible Preferred Shares and PIK Dividends of $ i 10.5 million. The redemption value in excess of the net proceeds received allocated to the Series H Convertible Preferred Shares was $ i 7.8 million and was recognized as a decrease in additional paid-in-capital at the commitment date. Upon conversion of Series H warrants to Series H Convertible Preferred shares, the value of the Series H Convertible Preferred shares issued is the stated value per share plus the PIK dividend. The redemption value in excess of the net proceeds received from the exercise of warrants and the fair value of such warrants is recognized as a decrease in additional paid-in-capital at the conversion date.

During the nine months ended September 30, 2023, i 40,000 of the Series H warrants were converted to i 20,000 Series H Convertible Preferred shares and during the three and nine months ended September 30, 2023, i 7,000 and i 190,000 Series H Convertible Preferred shares were converted to BIOLASE common stock, respectively.

The mezzanine classified Series H Convertible Preferred Stock are presented at their maximum redemption value that includes accretion related to the PIK dividends. During the three months ended September 30, 2023, the Company determined a revision was necessary in its accounting for the redemption value of the PIK dividends related to its Series H Convertible Preferred Stock. This revision would have increased additional paid in capital and reduced mezzanine equity at the time of issuance by approximately $1.6 million. Due to conversions, the impact was immaterial as of June 30, 2023, and September 30, 2023. The Company has modified the disclosures related to the Series H Convertible Preferred Stock within the Consolidated Statements of Convertible Redeemable Preferred Stock and Stockholders' Equity for the nine months ended September 30, 2023, to reflect the revision.

Series I Preferred Stock

On June 5, 2023, the Board declared a dividend of one one-thousandth of a share of Series I Preferred Stock, par value $ i 0.001 per share ("Series I Preferred Stock"), for each share of BIOLASE common stock outstanding as of June 16, 2023 (as calculated on a pre 2023 Reverse Stock Split basis). The certificate of designation for the Series I Preferred Stock provided that all shares of Series I Preferred Stock not present in person or by proxy at any meeting of stockholders held to vote on the 2023 Reverse Stock Split immediately prior to the opening of the polls at such meeting would be automatically redeemed (the “Series I Initial Redemption”) and that any outstanding shares of Series I Preferred Stock that have not been redeemed pursuant to the Series I Initial Redemption would be redeemed in whole, but not in part, (i) if and when ordered by the Board or (ii) automatically upon the effectiveness of the amendment to the Certificate of Incorporation effecting the 2023 Reverse Stock Split that was subject to the vote (the "Series I Subsequent Redemption"). On July 20, 2023, the Series I Initial Redemption occurred, and on July 27, 2023, the Series I Subsequent Redemption occurred. As a result, no shares of Series I Preferred Stock remain outstanding as of July 27, 2023.

Series G Preferred Stock

On March 1, 2022, the Board declared a dividend of one one-thousandth of a share of Series G Preferred Stock, par value $ i 0.001 per share ("Series G Preferred Stock"), for each share of BIOLASE common stock outstanding as of close of market on March 25, 2022 (as calculated on a pre 2022 Reverse Stock Split basis). The certificate of designation for the Series G Preferred Stock provided that all shares of Series G Preferred Stock not present in person or by proxy at the 2022 Annual Meeting immediately prior to the opening of the polls at the 2022 Annual Meeting would be automatically redeemed (the “Series G Initial Redemption”) and that any outstanding shares of Series G Preferred Stock that have not been redeemed pursuant to the Series G Initial Redemption would be redeemed in whole, but not in part, (i) if and when ordered by the Board or (ii) automatically upon the effectiveness of the amendment to the Certificate of Incorporation effecting the 2022 Reverse Stock Split that was subject to the vote at the 2022 Annual Meeting (the “Series G Subsequent Redemption”). On April 28, 2022, both the Series G Initial Redemption and the Series G Subsequent Redemption occurred. As a result, no shares of Series G Preferred Stock remain outstanding. On June 6, 2022, the Series G Preferred Stock was eliminated.

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, par value $ i 0.001 per share ("Series F Preferred Stock"), and i 45,000,000 warrants (the “July 2020 Warrants”), exercisable for i 18,000 shares 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 was 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 1,000 per share. Each share of Series F Preferred Stock was convertible into one share of common stock, and i 2,500 July 2020 Warrants entitled the holder thereof to purchase one share BIOLASE common stock at an exercise price of $ i 1,000 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. Upon conversion, including the conversion described below, this discount was accreted and also recognized as a deemed dividend to preferred stockholders in the amount of $ i 0.2 million, $ i 0.5 million and $ i 14.7 million for the years ended December 31, 2022, 2021, and 2020, respectively.

The remaining shares of Series F Preferred Stock were converted into shares of BIOLASE common stock in the first quarter of 2022 with i i no / ne outstanding as of September 30, 2023 and December 31, 2022. On March 3, 2022, the Series F Preferred Stock was eliminated.

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 to the Company. As of September 30, 2023, a total of i 1,244 shares have been authorized for issuance under the 2002 Plan, of which approximately i 908 shares of BIOLASE common stock have been issued pursuant to options that were exercised and restricted stock units ("RSUs") that were vested, approximately i 159 shares of common stock have been reserved for options that are outstanding, and i 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 effective as of September 21, 2018, May 15, 2019, May 13, 2020, June 11, 2021, and April 27, 2023, the “2018 Plan”). 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 42,212 shares of BIOLASE common stock remain available for issuance as of September 30, 2023. As of September 30, 2023, a total of i 112,268 shares of common stock have been authorized for issuance under the 2018 Plan, of which approximately i 5,797 shares have already been issued and approximately i 62,079 shares of the Company’s common stock have been reserved for issuance upon the exercise of outstanding options or stock appreciation rights ("SARs"), and/or settlement of unvested RSUs or phantom awards under the 2018 Plan.

The Company recognized stock-based compensation expense of $ i 0.3 million and $ i 1.1 million for the three and nine months ended September 30, 2023, respectively, and $ i 0.6 million and $ i 1.7 million for the three and nine months ended September 30, 2022, respectively. As of September 30, 2023 and 2022, the Company had approximately $ i 0.7 million and $ i 1.8 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 1.0 years.

The following table summarizes the statement of operations classification of compensation expense associated with share-based payments (in thousands):

Three Months Ended

Nine Months Ended

September 30,

2023

2022

2023

2022

Cost of revenue

i 7

i 20

i 30

i 133

Sales and marketing

i 46

i 136

i 347

i 448

General and administrative

i 198

i 403

i 603

i 927

Engineering and development

i 25

i 32

i 70

i 183

Total

i 276

i 591

i 1,050

i 1,691

A summary of option activity for the nine months ended September 30, 2023 is as follows (in thousands, except per share data):

Weighted

Weighted
Average
Remaining

Average

Contractual

Aggregate

Exercise
Price

Term
(Years)

Intrinsic
Value (1)

Options outstanding as of December 31, 2022

i 1

i 7,254.45

i 5.8

i —

Forfeited, cancelled, or expired (2)

i —

i 12,184.46

—

Options outstanding as of September 30, 2023

i 1

i 6,445.54

i 5.3

i —

Options exercisable as of September 30, 2023

i 1

i 6,445.54

i 5.3

i —

Vested options expired during the period ended September 30, 2023

i —

(1)

The intrinsic value calculation does not include negative values, which can occur when the fair market value on the reporting date is less than the exercise price of the award.

(2)

Shares rounded to less than i 1,000 as adjusted for the 2023 reverse stock split.

A summary of unvested stock option activity for the nine months ended September 30, 2023 is as follows (in thousands, except per share data):


			Weighted
			Average Grant
	Shares (1)		Date Fair Value
Unvested options as of December 31, 2022		i —	$	i 1,229.99
Vested		i —	$	i 1,229.99
Unvested options as of September 30, 2023		i —	$	i -

(1)

Rounded to less than i 1,000 shares as adjusted for the 2023 reverse stock split.

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,				September 30,
	2023		2022		2023		2022
Total fair value of stock options vested during the period	$	i —	$	i 12	$	i 1	$	i 35

Stock Option Activity

There were no option grants or exercises during the three and nine months ended September 30, 2023 and 2022.

Restricted Stock Units

A summary of unvested RSU activity for the nine months ended September 30, 2023 is as follows (in thousands, except per share amounts):


				Weighted
				Average Grant
	Shares			Date Fair Value
Unvested RSUs as of December 31, 2022		i 4		$	i 525.72
Granted		i 56		$	i 11.46
Vested		( i 8	)	$	i 192.09
Forfeited or cancelled		( i 2	)	$	i 116.41
Unvested RSUs as of September 30, 2023		i 50		$	i 19.80

Warrants

The Company issues warrants to acquire shares of BIOLASE common stock as approved by the Board.

September 2023 Public Offering

On September 13, 2023, the Company entered into the Underwriting Agreement, pursuant to which the Company agreed to sell in a firm commitment underwritten public offering i 75,000 units, with each Unit consisting of (A) one share of the Company’s Series J Convertible Redeemable Preferred Stock, par value $ i 0.001 per share (the “Series J Convertible Preferred Stock”), and (B) one warrant to purchase one-half of one ( i 0.50) share of Series J Convertible Preferred Stock, at a price to the public of $ i 60.00 per Unit, less underwriting discounts and commissions. Each Warrant has an exercise price of $ i 30.00 per share, is exercisable for one-half of one ( i 0.5) share of Series J Convertible Preferred Stock, is immediately exercisable and will expire one (1) year from the date of issuance.

Based on the terms and conditions of the September 2023 public offering, the Company determined that liability classification was appropriate for the warrants and recognized the gross proceeds from the issuance allocated to the warrants in excess of par of $ i 1.0 million in accrued liabilities and expensed issuance costs of $ i 0.2 million allocated to the warrants.

May 2023 Public Offering

On May 24, 2023, the Company entered into the Underwriting Agreement, pursuant to which the Company agreed to sell in a firm commitment underwritten public offering i 175,000 units, with each Unit consisting of (A) one share of the Company’s Series H Convertible Redeemable Preferred Stock, par value $ i 0.001 per share (the “Series H Convertible Preferred Stock”), and (B) one warrant to purchase one-half of one ( i 0.50) share of Series H Convertible Preferred Stock, at a price to the public of $ i 26.00 per Unit, less underwriting discounts and commissions. Each Warrant has an exercise price of $ i 13.00 per share, is exercisable for one-half of one ( i 0.5) share of Series H Convertible Preferred Stock, is immediately exercisable and will expire two (2) years from the date of issuance.

Based on the terms and conditions of the May 2023 public offering, the Company determined that liability classification was appropriate for the warrants and recognized the gross proceeds from the issuance allocated to the warrants in excess of par of $ i 1.2 million in accrued liabilities and expensed issuance costs of $ i 0.2 million allocated to the warrants.

January 2023 Public Offering

On January 9, 2023, the Company completed a public offering, pursuant to which the Company agreed to issue, in a registered direct offering, i 171,678 shares of BIOLASE common stock, par value $ i 0.001 per share, and pre-funded warrants to purchase i 114,035 shares of BIOLASE common stock with an exercise price of $ i 1.00 per share. The purchase price for one share of common stock was determined to be $ i 35.00, and the purchase price for one January 2023 Pre-Funded Warrant was determined to be $ i 34.00. The Company received aggregate gross proceeds from the transactions of approximately $ i 9.9 million, before deducting underwriting discounts and commissions and other transaction expenses paid by the Company.

Based on the terms and conditions of the January 2023 public offering, the Company determined that equity classification was appropriate for the pre-funded warrants and recognized the net proceeds from the issuance of common stock and pre-funded warrants in excess of par of $ i 8.5 million in additional paid-in capital.

June 2022 Direct Offering and Private Placement

On June 27, 2022, the Company entered into a Securities Purchase Agreement with certain accredited institutional investors, pursuant to which the Company agreed to issue to the Purchasers (as defined therein), (i) in a registered direct offering, i 6,787 shares of BIOLASE common stock, and pre-funded warrants to purchase i 7,266 shares of BIOLASE common stock (the “June 2022 Pre-Funded Warrants”) with an exercise price of $ i 0.1 per share, and (ii) in a concurrent private placement, warrants to purchase i 14,054 shares of BIOLASE common stock (each a "Common Warrant" and together with the June 2022 Pre-Funded Warrants, the “June 2022 Warrants”). The combined purchase price for one share of BIOLASE common stock and one Common Warrant was $ i 462.5, and the combined purchase price for one June 2022 Pre-Funded Warrant and one Common Warrant was $ i 462.4. In the offering and concurrent private placement, the Company received aggregate gross proceeds of approximately $ i 6.5 million before deducting fees to the placement agent and other transaction expenses.

Based on the terms and conditions of the June 2022 Warrants, the Company determined that equity classification was appropriate and recognized the net proceeds in excess of par of $ i 5.6 million in additional paid-in capital.

A summary of the share equivalent of warrant activity for the nine months ended September 30, 2023 is as follows (in thousands, except exercise price amounts):


				Weighted
				Average
	Shares			Exercise Price
Warrants outstanding as of December 31, 2022		i 21		$	i 656.23
Granted or Issued		i 1,577		$	i 24.53
Exercised		( i 277	)	$	i 13.67
Warrants outstanding as of September 30, 2023		i 1,321		$	i 36.82
Warrants exercisable as of September 30, 2023		i 1,321		$	i 36.82
Vested warrants expired during the period ended September 30, 2023		i —		$	i —

Phantom Awards and Stock Appreciation Rights

Since March 31, 2021, the Company has issued i 4,401 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 could 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. At inception, these phantom RSUs were included as a component of long-term liability on the consolidated balance sheet and were not considered stock-based compensation due to the cash-settlement feature of the award and the then current limitation on the number of remaining shares authorized for issuance. In 2022, as a result of the 2022 Reverse Stock Split, the phantom awards were reclassed to equity and included as a component of additional paid-in-capital in the amount of $ i 0.1 million, with a portion remaining as a component of long-term liability on the consolidated balance sheet due to certain guaranteed minimums, and the expense subsequent to the remeasurement date considered stock-based compensation. The expense recognized during the three and nine months ended September 30, 2023 was $ i 0.1 million and $ i 0.3 million, respectively, and the expense recognized during the three and nine months ended September 30, 2022 was $ i 0.1 million. As of September 30, 2023, $ i 0.5 million was included in accrued liabilities and $ i 0.2 million was included in additional paid-in-capital on the consolidated balance sheet. The balance included in long-term liabilities and additional paid-in-capital as of December 31, 2022, was $ i 0.3 million and $ i 0.1 million, respectively.

During the year ended December 31, 2021, the Company issued approximately i 386 SARs in lieu of stock-settled RSUs historically granted for non-employee director service. Upon exercise, the SARs could be settled in cash with the Company's option to settle in BIOLASE common stock at the sole discretion of the Board. These SARS were included in accrued liabilities on the consolidated balance sheet and not considered stock-based compensation due to the cash-settlement feature of the award and limitation on the number of remaining shares authorized for issuance. In 2022, as a result of the 2022 Reverse Stock Split, the SARs were reclassed to equity and included as a component of additional paid-in-capital on the consolidated balance sheet in the amount of $ i 0.5 million. These SARs were fully vested in 2022. i i No / expense was recognized during the three and nine months ended September 30, 2023. i No expense was recognized during the three months ended September 30, 2022, and the expense recognized during the nine months ended September 30, 2022 was $ i 0.3 million and was included in additional paid-in-capital on the consolidated balance sheet as of December 31, 2022.

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 number of shares of common stock outstanding is adjusted to reflect the effect of potentially dilutive securities. Net loss is adjusted for any deemed dividends to preferred stockholders to compute net income attributable to common stockholders. The January 2023 Pre-Funded Warrants were included in the calculation of basic and diluted loss per share for the three and nine months ended September 30, 2023 as the underlying warrant shares are issuable for little or no cash consideration.

Outstanding stock options, RSUs, preferred shares, and warrants to purchase approximately i 2,537,031 and i 26,480 shares were not included in the calculation of diluted loss per share amounts for the periods ended September 30, 2023 and September 30, 2022, respectively, as their effect would have been anti-dilutive.

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,		December 31,
	2023		2022
Raw materials	$	i 6,566	$	i 6,697
Work-in-process		i 1,850		i 1,871
Finished goods		i 5,408		i 7,316
Inventory	$	i 13,824	$	i 15,884

Inventory has been reduced by estimates for excess and obsolete amounts totaling $ i 1.7 million and $ i 2.2 million as of September 30, 2023 and December 31, 2022, respectively.

During the three months ended June 30, 2023, $ i 1.7 million of inventory was reclassed to property, plant and equipment for lasers transferred to potential customers and other sales representatives without any payment in prior periods.

NOTE 6—PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment, net is comprised of the following (in thousands):


	September 30,			December 31,
	2023			2022
Building	$	i 197		$	i 199
Leasehold improvements		i 1,250			i 464
Equipment and computers		i 14,528			i 8,566
Furniture and fixtures		i 519			i 475
Construction in progress		i 71			i 2,957
Total		i 16,565			i 12,661
Accumulated depreciation		( i 10,669	)		( i 8,538	)
Property, plant, and equipment, net before land		i 5,896			i 4,123
Land		i 153			i 155
Property, plant, and equipment, net	$	i 6,049		$	i 4,278

Depreciation expense related to property, plant, and equipment totaled $ i 0.6 million and $ i 2.1 million for the three and nine months ended September 30, 2023, respectively, and $ i 0.1 million and $ i 0.4 million for the three and nine months ended September 30, 2022, respectively.

During the three months ended June 30, 2023, the Company revised its accounting for laser equipment transferred as part of its marketing efforts to potential customers and other sales representatives without any payment. As a result, a cumulative adjustment of $ i i 0.8 / million was recorded to depreciation expense in the three months ended June 30, 2023. If the December 31, 2022 balance sheet was conformed to current period presentation, in addition to recording the cumulative adjustment to retained earnings, the adjustment would have decreased inventory by $ i 1.7 million and increased property, plant and equipment, net by $ i 0.9 million.

NOTE 7—INTANGIBLE ASSETS AND GOODWILL

The Company conducted its annual impairment test of goodwill as of September 30, 2023 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. During the fourth quarter ended December 31, 2022, due to the sustained decrease in the stock price of BIOLASE common stock decreasing the implied fair value of the business, the Company performed a quantitative assessment of impairment over goodwill and determined that there was no impairment to our goodwill. Goodwill was valued using an equally weighted income approach and market approach. The unobservable inputs utilized in determining the fair value of the goodwill, which is categorized as a Level 3 instrument, are the discount rate of i 15.7% and various revenue growth rates utilized in the financial forecast of future cash flows.

Due to the further decrease in the stock price of BIOLASE common stock during the three months ended March 31, 2023 decreasing the implied fair value of the business, the Company performed an additional quantitative assessment of impairment over

goodwill and determined that there was i no impairment to our goodwill as of March 31, 2023. Goodwill was valued using an equally weighted income approach and market approach. The unobservable inputs utilized in determining the fair value of the goodwill, which is categorized as a Level 3 instrument, are the discount rate of i 25.0% and various revenue growth rates utilized in the financial forecast of future cash flows. i No events have occurred since March 31, 2023 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, 2023 and December 31, 2022, the Company had goodwill of $ i i 2.9 / million. As of September 30, 2023 and December 31, 2022, 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, 2023 and 2022.

NOTE 8—ACCRUED LIABILITIES

Accrued liabilities are comprised of the following (in thousands):


	September 30,		December 31,
	2023		2022
Payroll and benefits	$	i 2,541	$	i 4,674
Preferred stock warrant liability		i 1,529		i —
Warranty accrual, current portion		i 1,364		i 1,293
Operating lease liability		i 877		i 638
Accrued professional services		i 359		i 591
Taxes		i 301		i 432
Accrued insurance premium		i —		i 490
Other		i 642		i 1,092
Accrued liabilities	$	i 7,613	$	i 9,210

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,

2023

2022

2023

2022

Balance, beginning of period

i 1,772

i 1,233

i 1,653

i 1,086

Provision for estimated warranty cost

i 997

i 1,255

i 2,957

i 2,715

Warranty expenditures

( i 942

)

( i 1,011

)

( i 2,783

)

( i 2,324

)

Balance, end of period

i 1,827

i 1,477

i 1,827

i 1,477

Less: long-term portion of warranty accrual

i 463

i 416

i 463

i 416

Current portion of warranty accrual

i 1,364

i 1,061

i 1,364

i 1,061

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 24 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.

NOTE 9—DEBT

The following table presents the details of the principal outstanding and unamortized discount (in thousands):


	September 30,			December 31,
	2023			2022
SWK Loan	$	i 14,650		$	i 14,650
EIDL Loan		i 150			i 150
Discount and debt issuance costs on SWK Loan		( i 693	)		( i 1,009	)
Total		i 14,107			i 13,791
Current term loans, net of discount		i 2,800			i 700
Non-current term loans, net of discount	$	i 11,307		$	i 13,091

The Company recognized approximately $ i 0.6 million and $ i 1.8 million in interest expense for the three and nine months ended September 30, 2023, respectively, and $ i 0.4 million and $ i 1.3 million in interest expense for the three and nine months ended September 30, 2022, respectively. The weighted-average interest rate as of September 30, 2023 was i 14.13%.

The future minimum principal and interest payments as of September 30, 2023 are as follows (in thousands):


	Principal		Interest (1)
Remainder of 2023	$	i 700	$	i 489
2024		i 2,800		i 1,690
2025		i 11,150		i 741
2026		i —		i 9
2027 and thereafter		i 150		i 89
Total future payments	$	i 14,800	$	i 3,018

(1)

Estimated using London Interbank Bank Offered Rate (“LIBOR”) as of September 30, 2023

Term Loan

On November 9, 2018, the Company entered into a i five-year secured Credit Agreement (as amended, restated, and supplemented from time to time, the “Credit Agreement”) with SWK Funding LLC (“SWK”), pursuant to which the Company has outstanding principal of $ i 13.3 million (“SWK Loan”) as of September 30, 2023. In addition, pursuant to the Credit Agreement, we are required to pay certain exit fees totaling $ i 1.4 million upon loan termination which are recorded as a debt premium. 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 2022 Form 10-K, repayment of the SWK Loan is interest-only for the first two years, paid quarterly, with the option to extend the interest-only period. Principal repayments were to begin in the first quarter of 2021. On June 30, 2022 the Company entered into the ninth amendment to the Credit Agreement (the "Ninth Amendment"), which extended the interest-only period by two quarters from May 2023 to November 2023. On December 30, 2022, the Company entered into the tenth amendment to the Credit Agreement, which lowered the required minimum consolidated unencumbered liquid assets from $ i 3 million to $ i 2.5 million and removed the conditional minimum last twelve months aggregate revenue and EBITDA as of the end of the twelve-month period ended December 31, 2022. In connection with the Ninth Amendment, the Company prepaid $ i 1.0 million of the outstanding loan balance. Principal repayments begin in November 2023 and will be $ i 0.7 million quarterly until the SWK Loan matures in May i 2025. The loan bears interest of i 9% plus LIBOR with a floor of i 1.25% or another index that approximates LIBOR as close as possible if and when LIBOR no longer exists.

As of September 30, 2023, the Company was in compliance with the debt covenants of the Credit Agreement.

EIDL Loan

On May 22, 2020, the Company executed the standard loan documents required for securing a loan (the “EIDL Loan”) from the Small Business Administration (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 the 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. In March 2022, the SBA announced that it was extending the first payment due date for all loans an additional six months, or 30 months from the loan execution date. The Company began making payments on the EIDL Loan starting in November 2022. Fixed payments are first applied to any accrued interest. /

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 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 for its manufacturing operations. The lease commenced on i July 1, 2020. On December 10, 2021, the Company entered into a lease for an additional i 15,000 square feet at its facility. This additional lease commenced on i February 1, 2022 and expires on i June 30, 2025.

On February 4, 2020, the Company also entered into a i 66-month real property lease agreement for office space of approximately i 12,000 square feet of office space in Lake Forest, California. The lease commenced on i July 1, 2020. On May 26, 2022, the Company entered into an additional lease at this location to expand the leased space by an additional i 8,000 square feet for an additional training facility and model dental office. The lease commenced on March 8, 2023 and expires December 31, 2025.

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,						September 30,
	2023			2022			2023			2022
Cash paid for operating lease liabilities	$	i 70		$	i 84		$	i 230		$	i 219
Right-of-use assets obtained in exchange for new operating lease obligations	$	i —		$	i —		$	i 483		$	i 562
Weighted-average remaining lease term	i 2.0 years			i 2.9 years			i 2.0 years			i 2.9 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, 2023, 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, 2023 for leases that have commenced are as follows (in thousands):


	September 30,
2024	$	i 1,047
2025		i 875
2026		i 207
2027 and thereafter		i —
Total future minimum lease obligations		i 2,129
Less imputed interest		( i 257	)
Total lease liabilities	$	i 1,872

Current operating lease liabilities, included in accrued liabilities	$	i 877
Non-current lease liabilities		i 995
Total lease liabilities	$	i 1,872

As of September 30, 2023, right-of-use assets were $ i 1.7 million and lease liabilities were $ i 1.9 million.

Rent expense totaled $ i 0.3 million and $ i 0.9 million for the three and nine months ended September 30, 2023 and $ i 0.3 million and $ i 0.8 million for the three and nine months ended September 30, 2022.

Future minimum rental commitments under lease agreements, as of September 30, 2023, 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 2023	$	i 263
2024		i 1,046
2025		i 817
2026		i 3
2027 and thereafter		i —
Total future minimum lease obligations		i 2,129
Less imputed interest		( i 257	)
Total lease liabilities	$	i 1,872

NOTE 11—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, 2023, sales to customers in the United States accounted for approximately i 67% and i 70% of net revenue, respectively, and international sales accounted for approximately i 33% and i 30% of net revenue, respectively. For the three and nine months ended September 30, 2022, sales to customers in the United States accounted for approximately i 70% and i 71% of net revenue, respectively, and international sales accounted for approximately i 30% 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, 2023 or 2022.

Net revenue by geographic location based on the location of customers was as follows (in thousands):

Three Months Ended

Nine Months Ended

September 30,

2023

2022

2023

2022

United States

i 7,298

i 8,413

i 24,797

i 24,290

International

i 3,623

i 3,597

i 10,877

i 10,121

Net revenue

i 10,921

i 12,010

i 35,674

i 34,411

Property, plant, and equipment by geographic location was as follows (in thousands):


	September 30,		December 31,
	2023		2022
United States	$	i 5,814	$	i 4,032
International		i 235		i 246
Total	$	i 6,049	$	i 4,278

NOTE 12—CONCENTRATIONS

Revenue from the Company’s products are as follows (dollars in thousands):


	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2023				2022				2023				2022
Laser systems	$	i 6,647	i 60.9	%	$	i 7,302	i 60.8	%	$	i 21,666	i 60.7	%	$	i 21,626	i 62.9	%
Consumables and other		i 2,908	i 26.6	%		i 2,632	i 21.9	%		i 10,058	i 28.2	%		i 8,379	i 24.3	%
Services		i 1,366	i 12.5	%		i 2,076	i 17.3	%		i 3,950	i 11.1	%		i 4,406	i 12.8	%
Net revenue	$	i 10,921	i 100.0	%	$	i 12,010	i 100.0	%	$	i 35,674	i 100.0	%	$	i 34,411	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, 2023 or 2022.

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.

As of September 30, 2023, accounts receivable from one customer totaled approximately i 10% of total gross accounts receivable. The entire balance is either current or outstanding for less than 90 days. As of December 31, 2022 accounts receivable from one customer totaled approximately i 12% of total gross accounts receivable. The entire balance was either current or outstanding for less than 30 days.

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 13—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 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 i i no / / / t record a liability for unrecognized tax benefits for the three and nine months ended September 30, 2023 and 2022. 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, 2023, the Company recorded an income tax provision of $ i 15,000 and $ i 46,000, respectively, resulting in an effective tax rate of i i 0.3 / %. During the three and nine months ended September 30, 2022, the

Company recorded an income tax benefit of $ i i 17,000 / and an income tax provision of $ i i 23,000 / , resulting in an effective tax rate of ( i 0.2%) and i 0.1%, respectively. The income tax provisions and benefit for the three and nine months ended September 30, 2023 and 2022 were calculated using the discrete year-to-date method. The effective tax rate differs from the statutory tax rate of i 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.

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, 2022, filed with the Securities and Exchange Commission (the “SEC”) on March 28, 2023 (the “2022 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 investment activities, future liquidity, potential collaborations, market opportunities, plans with respect to products and services, future demand for improved dental care and dental laser equipment, 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:

•

substantial doubt about our ability to continue as a going concern;

•

losses that we have experienced for each of the past three years;

•

our inability to meet our redemption obligations under the existing convertible redeemable preferred stock;

•

our failure to comply or regain compliance with the continued listing requirements of the Nasdaq Capital Market;

•

global economic uncertainty and volatility in financial markets;

•

inability to raise additional capital on terms acceptable to us;

•

our relationships with, and the efforts of, third-party distributors;

•

failure in our efforts to train dental practitioners or to overcome the hesitation of dentists and patients to adopt laser technologies;

•

inconsistencies between future data and our clinical results;

•

competition from other companies, including those with greater resources;

•

our inability to successfully develop and commercialize enhanced or new products that remain competitive with products or alternative technologies developed by others;

•

the inability of our customers to obtain third-party reimbursement for their use of our products;

•

limitations on our ability to use net operating loss carryforwards;

•

problems in manufacturing our products;

•

warranty obligations if our products are defective;

•

adverse publicity regarding our technology or products;

•

adverse events to our patients during the use of our products, regardless of whether caused by our products;

•

issues with our suppliers, including the failure of our suppliers to supply us with a sufficient amount or adequate quality of materials;

•

rapidly changing standards and competing technologies;

•

our inability to effectively manage and implement our growth strategies;

•

risks associated with operating in international markets, including potential liabilities under the Foreign Corrupt Practices Act;

•

breaches of our information technology systems;

•

seasonality;

•

litigation, including the failure of our insurance policies to cover certain expenses relating to litigation and our inability to reach a final settlement related to certain litigation;

•

disruptions to our operations at our primary manufacturing facility;

•

loss of our key management personnel or our inability to attract or retain qualified personnel;

•

risks and uncertainties relating to acquisitions, including difficulties integrating acquired businesses successfully into our existing operations and risks of discovering previously undisclosed liabilities;

•

failure to meet covenants in the Credit Agreement, dated as of November 9, 2018 (as amended from time to time, the “Credit Agreement”), by and between BIOLASE and SWK Funding LLC and related risks of foreclosure triggered by an event of default under the Credit Agreement;

•

interest rate risk, which could result in higher expense in the event of interest rate increases;

•

obligations to make debt payments under the Credit Agreement;

•

risks of foreclosure triggered by an event of default under the Credit Agreement;

•

failure to comply with the reporting obligations of the Exchange Act and Section 404 of the Sarbanes-Oxley Act of 2002, as amended or maintain adequate internal control over financial reporting;

•

climate change initiatives;

•

failure of our intellectual property rights to adequately protect our technologies and potential third-party claims that our products infringe their intellectual property rights;

•

changes in government regulation or the inability to obtain or maintain necessary governmental approvals;

•

our failure to comply with existing or new laws and regulations, including fraud and abuse and health information privacy and securities laws;

•

changes in the regulatory requirements of the Food and Drug Administration (“FDA”) applicable to laser products, dental devices, or both;

•

recall or other regulatory action concerning our products after receiving FDA clearance or approval; and

•

risks relating to ownership of our common stock, including high volatility, and dilution.

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 2022 Form 10-K and Item 1A of Part II of this 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

BIOLASE, Inc. (“BIOLASE” and, together with its consolidated subsidiaries, the “Company,” “we,” “our” or “us”) is 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, 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. 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.

We offer two categories of laser system products: Waterlase (all-tissue) systems and diode (soft-tissue) systems. Our flagship brand, the 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 an effective, safe solution for preserving sick implants. In addition, Waterlase disinfects root canals more efficiently than some traditional chemical methods. We offer our diode laser systems to perform soft tissue, pain therapy, and cosmetic procedures, including teeth whitening. As of December 31, 2022 we maintained approximately 259 active and 24 pending United States and international patents, with the majority relating to our Waterlase technology. Our patent portfolio is regularly evaluated, and we strategically prioritize our core patents to ensure optimal intellectual property coverage while minimizing annual maintenance fees. From 1998 through December 31, 2022, we have sold over 45,500 laser systems in over 80 countries around the world, and we believe that Waterlase iPlus is the world’s best-selling all-tissue dental laser. Since 1998, we have been the global leading innovator, manufacturer, and marketer of dental laser systems.

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 line of diode laser systems, we sell teeth whitening gel kits. During the quarter ended September 30, 2023, the sale of lasers accounted for approximately 61% of our total sales, and consumables, accessories, and services accounted for approximately 39% of our total sales.

We currently operate in a single reportable business segment. We had net revenues of $10.9 million and $35.7 million for the three and nine months ended September 30, 2023, respectively, and net revenues of $12.0 million and $34.4 million for the three months ended September 30, 2022, respectively. We had net losses of $4.6 million and $15.3 million for the three and nine months ended September 30, 2023, respectively, and $8.4 million and $18.8 million for the three and nine months ended September 30, 2022, respectively. We had total assets of $38.7 million and $38.2 million as of September 30, 2023 and December 31, 2022, respectively.

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.

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 decline of 9% and revenue growth of 4% for the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022. The Company is currently forecasting revenue for fiscal year 2023 to be

above fiscal year 2022, as the Company's strategy described above continues to generate sales to new customers and additional consumable sales to existing customers.

Recent Developments

Series J Preferred Stock

On September 13, 2023, BIOLASE entered into an underwriting agreement (the “Underwriting Agreement”), pursuant to which BIOLASE agreed to sell to the underwriters in a firm commitment underwritten public offering 75,000 units (each, a “Unit”), with each Unit consisting of (A) one share of the Company’s Series J Convertible Redeemable Preferred Stock, par value $0.001 per share and a stated value equal to $100.00 (the “Series J Convertible Preferred Stock”), and (B) one warrant (each, a “Warrant” and collectively, the “Series J Warrants”) to purchase one-half of one (0.50) share of Series J Convertible Preferred Stock, at a price to the public of $60.00 per Unit, less underwriting discounts and commissions. The public offering price of $60.00 per Unit reflects the issuance of the Series J Convertible Preferred Stock with an original issue discount of 40%. BIOLASE also registered under the Registration Statement additional shares of Series J Convertible Preferred Stock that will be issued, if and when the Board declares such dividends, as paid in-kind dividends (“PIK dividends”) and the shares of Common Stock issuable upon conversion of the Series J Convertible Preferred Stock issued as PIK dividends. Each Warrant has an exercise price of $30.00 per share, is exercisable for one-half of one (0.5) share of Series J Convertible Preferred Stock, is immediately exercisable and will expire one (1) year from the date of issuance. Gross proceeds from the offering were $4.5 million before broker fees and related expenses.

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 2022 Form 10-K. There have been no significant changes during the nine months ended September 30, 2023 in our critical accounting policies from those disclosed in Item 7 of the 2022 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,								September 30,
	2023				2022				2023				2022
Net revenue	$	10,921	100.0	%	$	12,010	100.0	%	$	35,674	100.0	%	$	34,411	100.0	%
Cost of revenue		7,175	65.7	%		9,565	79.6	%		22,474	63.0	%		22,096	64.2	%
Gross profit		3,746	34.3	%		2,445	20.4	%		13,200	37.0	%		12,315	35.8	%
Operating expenses:
Sales and marketing		3,402	31.2	%		5,008	41.7	%		14,214	39.8	%		15,224	44.2	%
General and administrative		2,679	24.5	%		3,109	25.9	%		7,495	21.0	%		8,825	25.7	%
Engineering and development		1,362	12.5	%		1,979	16.5	%		4,352	12.2	%		5,177	15.0	%
Total operating expenses		7,443	68.2	%		10,096	84.1	%		26,061	73.0	%		29,226	84.9	%
Loss from operations		(3,697)	(33.9)	%		(7,651)	(63.7)	%		(12,861)	(36.0)	%		(16,911)	(49.1)	%
Non-operating loss, net		(877)	(8.0)	%		(753)	(6.3)	%		(2,399)	(6.7)	%		(1,839)	(5.4)	%
Loss before income tax (provision) benefit		(4,574)	(41.9)	%		(8,404)	(70.0)	%		(15,260)	(42.7)	%		(18,750)	(54.5)	%
Income tax (provision) benefit		(15)	(0.1)	%		17	0.2	%		(46)	(0.1)	%		(23)	(0.1)	%
Net loss	$	(4,589)	(42.0)	%	$	(8,387)	(69.8)	%	$	(15,306)	(42.8)	%	$	(18,773)	(54.6)	%

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 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, stock-based and other non-cash compensation, severance expense, change in allowance for doubtful accounts, increase in inventory reserves, and other (income) expense, net. 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,						September 30,
	2023			2022			2023			2022
GAAP net loss attributable to common stockholders	$	(4,589	)	$	(8,387	)	$	(15,306	)	$	(18,990	)
Deemed dividend on convertible preferred stock		—			—			—			217
GAAP net loss	$	(4,589	)	$	(8,387	)	$	(15,306	)	$	(18,773	)
Adjustments:
Interest expense, net		598			424			1,758			1,287
Income tax (provision) benefit		15			(17	)		46			23
Depreciation		560			122			2,133			369
Severance expense		1			—			230			—
Change in allowance for doubtful accounts		18			(87	)		60			56
Stock-based and other non-cash compensation		276			591			1,050			1,691
Increase in inventory reserves		—			1,731			—			1,731
Other (income) expense, net		(28	)		—			119			—
Adjusted EBITDA	$	(3,149	)	$	(5,623	)	$	(9,910	)	$	(13,616	)

Other (income) expense for the three and nine months ended September 30, 2023 relates to issuance costs from the May 2023 public offering that were allocated to the Series H warrants, and issuance costs from the September 2023 public offering that were allocated to the Series J warrants and immediately expensed due to the liability classification of the warrants. These expenses were partially offset by gains recorded on the revaluation of these warrants during the periods.

Comparison of Results of Operations

Three Months Ended September 30, 2023 Compared with Three Months Ended September 30, 2022

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, 2023 and 2022, 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
	2023				2022				Change			Change
Laser systems	$	6,647	60.9	%	$	7,302	60.8	%	$	(655	)		(9.0	)%
Consumables and other		2,908	26.6	%		2,632	21.9	%		276			10.5	%
Services		1,366	12.5	%		2,076	17.3	%		(710	)		(34.2	)%
Net revenue	$	10,921	100.0	%	$	12,010	100.0	%	$	(1,089	)		(9.1	)%

The following table summarizes our unaudited net revenue by geographic location based on the location of customers for the three months ended September 30, 2023 and 2022, 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
	2023				2022				Change			Change
United States	$	7,298	66.8	%	$	8,413	70.0	%	$	(1,115	)		(13.3	)%
International		3,623	33.2	%		3,597	30.0	%		26			0.7	%
Net revenue	$	10,921	100.0	%	$	12,010	100.0	%	$	(1,089	)		(9.1	)%

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.

Net revenue during the three months ended September 30, 2023 decreased by $1.1 million, or 9% as compared to the same period in 2022 primarily due to a decrease in laser systems sales in the U.S. from the impact of the current macro-economic environment causing extended sales cycles, which includes increased interest rates, and from lower product training revenue recognized during the three months ended September 30, 2023 compared to the same period in 2022. The decrease was partially offset by an increase in consumables and other revenue from improved utilization of installed laser systems. Net revenue was $10.9 million during the three months ended September 30, 2023 compared to $12.0 million for the same period in 2022.

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, 2023 and 2022, as well as the amount of change and percentage of change (dollars in thousands):


	Three Months Ended
	September 30,								Amount			Percent
	2023				2022				Change			Change
Net revenue	$	10,921	100.0	%	$	12,010	100.0	%	$	(1,089	)		(9.1	)%
Cost of revenue		7,175	65.7	%		9,565	79.6	%		(2,390	)		(25.0	)%
Gross profit	$	3,746	34.3	%	$	2,445	20.4	%	$	1,301			53.2	%

Gross profit as a percentage of net revenue typically fluctuates with product and regional mix, selling prices, product costs and revenue levels. Gross profit for the three months ended September 30, 2023, was $3.7 million, or 34% of net revenue, an increase of approximately $1.3 million, or 53%, as compared with gross profit of $2.4 million, or 20% of net revenue, for the same period in 2022. The increase of 14% in gross profit as a percentage of net revenue when compared to the same period in 2022 reflects the improvement from supply chain issues that resulted in a $1.7 million charge to inventory reserves and warranty expenses during the three months ended September 30, 2022 compared to the same period in 2023, along with the impact of the favorable mix from higher margin consumables sales during the three months ended September 30, 2023 and various other cost savings initiatives implemented

late in the second quarter of 2023. This improvement was partially offset by lower product training revenue recognized during the three months ended September 30, 2023 compared to the same period in 2022.

Operating Expenses: The following table summarizes our unaudited operating expenses (including as a percentage of net revenue) for the three months ended September 30, 2023 and 2022, as well as the amount of change and percentage of change (dollars in thousands):


	Three Months Ended
	September 30,								Amount			Percent
	2023				2022				Change			Change
Sales and marketing	$	3,402	31.2	%	$	5,008	41.7	%	$	(1,606	)		(32.1	)%
General and administrative		2,679	24.5	%		3,109	25.9	%		(430	)		(13.8	)%
Engineering and development		1,362	12.5	%		1,979	16.5	%		(617	)		(31.2	)%
Total operating expenses	$	7,443	68.2	%	$	10,096	84.1	%	$	(2,653	)		(26.3	)%

Sales and Marketing Expense. Sales and marketing expenses during the three months ended September 30, 2023 decreased by $1.6 million, or 32%, as compared to the same period in 2022. This decrease of $1.6 million is primarily due to a $1.0 million decrease in compensation expense during the three months ended September 30, 2023, as well as a decrease in commissions and bonus incentives for achieving lower sales targets, $0.3 million in decreased advertising spending, and $0.3 million in lower travel and tradeshow-related expenses.

General and Administrative Expense. General and administrative expenses during the three months ended September 30, 2023 decreased by $0.4 million, or 14%, compared to the same period in 2022. This decrease of $0.4 million is primarily due to a $0.6 million decrease in compensation and bonus incentives from the impact of our cost savings initiatives implemented during the latter part of the second quarter of 2023 and from achieving lower sales targets, partially offset by a $0.2 million increase in expenses of our special shareholder meeting held during the third quarter of 2023 to obtain approval for our reverse stock split.

Engineering and Development Expense. Engineering and development expenses during the three months ended September 30, 2023 decreased by $0.6 million, or 31%, compared to the same period in 2022. This decrease of $0.6 million is primarily from the impact of our cost savings initiatives implemented during the latter part of the second quarter of 2023 , as well as fewer engineering projects for 2023 as compared to 2022.

Non-Operating Loss

Loss on Foreign Currency Transactions. We realized an approximately $0.3 million loss on foreign currency transactions during the three months ended September 30, 2023 and 2022, respectively, 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, 2023 compared to $0.4 million for the same period in 2022, an increase of 41%. This increase was due to the rise in interest rates on our term loan.

Income Tax Provision. 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, 2023 was consistent with the same period in 2022. For additional information regarding income taxes, see Part I, Item I, Note 13 – Income Taxes.

Net Loss. For the reasons stated above, our net loss totaled approximately $4.6 million for the three months ended September 30, 2023 compared to a net loss of $8.4 million for the three months ended September 30, 2022.

Nine Months Ended September 30, 2023 Compared with Nine Months Ended September 30, 2022

Net Revenue: The following table summarizes our unaudited net revenue by category, including each category’s percentage of our total revenue, for the nine months ended September 30, 2023 and 2022, 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
	2023				2022				Change			Change
Laser systems	$	21,666	60.7	%	$	21,626	62.9	%	$	40			0.2	%
Consumables and other		10,058	28.2	%		8,379	24.3	%		1,679			20.0	%
Services		3,950	11.1	%		4,406	12.8	%		(456	)		(10.3	)%
Net revenue	$	35,674	100.0	%	$	34,411	100.0	%	$	1,263			3.7	%

The following table summarizes our unaudited net revenue by geographic location based on the location of customers for the nine months ended September 30, 2023 and 2022, 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
	2023				2022				Change		Change
United States	$	24,797	69.5	%	$	24,290	70.6	%	$	507		2.1	%
International		10,877	30.5	%		10,121	29.4	%		756		7.5	%
Net revenue	$	35,674	100.0	%	$	34,411	100.0	%	$	1,263		3.7	%

Net revenue during the nine months ended September 30, 2023 increased by $1.3 million, or 4% as compared to the same period in 2022, primarily due to an increase in worldwide consumables and other revenue from improved utilization of installed laser systems. This increase was partially offset by a decrease in product training revenue during the nine months ended September 30, 2023 compared to the same period in 2022. Net revenue was $35.7 million during the nine months ended September 30, 2023 compared to $34.4 million for the same period in 2022.

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, 2023 and 2022, as well as the amount of change and percentage of change (dollars in thousands):


	Nine Months Ended
	September 30,								Amount		Percent
	2023				2022				Change		Change
Net revenue	$	35,674	100.0	%	$	34,411	100.0	%	$	1,263		3.7	%
Cost of revenue		22,474	63.0	%		22,096	64.2	%		378		1.7	%
Gross profit	$	13,200	37.0	%	$	12,315	35.8	%	$	885		7.2	%

Gross profit as a percentage of net revenue typically fluctuates with product and regional mix, selling prices, product costs and revenue levels. Gross profit for the nine months ended September 30, 2023, was $13.2 million, or 37% of net revenue, an increase of approximately $0.9 million, or 7%, as compared with gross profit of $12.3 million, or 36% of net revenue, for the same period in 2022. The increase of 1% in gross profit as a percentage of net revenue reflects the improvement from supply chain issues that resulted in a $1.7 million charge to inventory during the nine months ended September 30, 2022 compared to the same period in 2023. This inventory charge was driven by the supply chain issues that required us to change to new suppliers along with end of life designation for certain products and components, which resulted in higher inventory reserves and warranty expenses. The improvement is also due to the impact of the favorable mix from higher margin consumables sales during the nine months ended September 30, 2023. This improvement was partially offset by the carry-over of the supply chain issues and related warranty expenses to the first three months of 2023, as well as lower product training revenue recognized during the three months ended September 30, 2023 compared to the same period in 2022.

Operating Expenses: The following table summarizes our unaudited operating expenses (including as a percentage of net revenue) for the nine months ended September 30, 2023 and 2022, as well as the amount of change and percentage of change (dollars in thousands):


	Nine Months Ended
	September 30,								Amount			Percent
	2023				2022				Change			Change
Sales and marketing	$	14,214	39.9	%	$	15,224	44.3	%	$	(1,010	)		(6.6	)%
General and administrative		7,495	21.0	%		8,825	25.6	%		(1,330	)		(15.1	)%
Engineering and development		4,352	12.2	%		5,177	15.0	%		(825	)		(15.9	)%
Total operating expenses	$	26,061	73.1	%	$	29,226	84.9	%	$	(3,165	)		(10.8	)%

Sales and Marketing Expense. Sales and marketing expenses during the nine months ended September 30, 2023 decreased by $1.0 million, or 7%, as compared to the same period in 2022. This decrease of $1.0 million is primarily due to $1.4 million in lower compensation expense during the nine months ended September 30, 2023 from a decrease in commissions and bonus incentives for achieving lower sales targets, $0.6 million in decreased advertising spending, and $0.2 million in lower travel and tradeshow-related expenses. These decreases were partially offset by $1.2 million in recognition of depreciation expense for equipment used in sales and marketing for demos, training and educational purposes, of which $0.8 million was non-recurring.

General and Administrative Expense. General and administrative expenses during the nine months ended September 30, 2023 decreased by $1.3 million, or 15%, compared to the same period in 2022. This decrease of $1.3 million is primarily due to an $0.8 million decrease in legal and consulting spending and a $0.5 million decrease in compensation and bonus incentives from the impact of our cost savings initiatives implemented during the latter part of the second quarter of 2023 and from achieving lower sales targets.

Engineering and Development Expense. Engineering and development expenses during the nine months ended September 30, 2023 decreased by $0.8 million, or 16%, compared to the same period in 2022. This decrease is primarily from the impact of our cost savings initiatives implemented during the latter part of the second quarter of 2023, as well as fewer engineering projects for 2023 as compared to 2022.

Non-Operating Loss

Loss on Foreign Currency Transactions. We realized an approximately $0.5 million loss on foreign currency transactions during the nine months ended September 30, 2023 compared to an approximately $0.6 million loss on foreign currency transactions during the nine months ended September 30, 2022, 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 $1.8 million during the nine months ended September 30, 2023 compared to $1.3 million for the same period in 2022, an increase of 39%. This increase was due to the rise in interest rates on our term loan.

Other (Income) Expense, Net. Other Expenses during the nine months ended September 30, 2023 was $0.1 million and relates to issuance costs from the September 2023 public offering that were allocated to the Series J warrants and from the May 2023 public offering that were allocated to the Series H warrants and immediately expensed due to the liability classification of the warrants. These expenses were partially offset by gains recorded on the revaluation of these warrants during the period.

Income Tax Provision. We use a discrete year-to-date method in calculating quarterly provision for income taxes. Our provision for income taxes for the nine months ended September 30, 2023 was consistent with the same period in 2022. For additional information regarding income taxes, see Part I, Item I, Note 13 – Income Taxes.

Net Loss. For the reasons stated above, our net loss totaled approximately $15.3 million for the nine months ended September 30, 2023 compared to a net loss of $18.8 million for the nine months ended September 30, 2022.

Liquidity and Capital Resources

At September 30, 2023, we had approximately $7.8 million in cash and cash equivalents compared to $4.2 million as of December 31, 2022. Management defines cash and cash equivalents as highly liquid deposits with original maturities of 90 days or less when purchased. The increase in cash and cash equivalents from December 31, 2022 was primarily due to $8.5 million net proceeds from the January 2023 public offering, $3.7 million net proceeds from the May 2023 public offering, $3.5 million net proceeds from the September 2023 public offering, and $0.8 million proceeds from the exercise of warrants, partially offset by a net loss of $15.3 million and $1.1 million in capital expenditures during the nine months ended September 30, 2023. The Company

incurred losses from operations and used cash in operating activities for the three and nine months ended September 30, 2023 and for the years ended December 31, 2022, 2021, and 2020. The Company’s recurring losses, level of cash used in operations, and potential need for additional capital, along with uncertainties surrounding the Company’s ability to raise additional capital, raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

The following table summarizes our change in cash, cash equivalents and restricted cash (in thousands):


	Nine Months Ended
	September 30,
	2023			2022
Net cash flows used in operating activities	$	(11,808	)	$	(21,179	)
Net cash flows used in investing activities		(1,126	)		(3,256	)
Net cash flows provided by financing activities		16,549			4,635
Effect of exchange rate changes		13			(415	)
Net change in cash, cash equivalents and restricted cash	$	3,628		$	(20,215	)

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, 2023 totaled $11.8 million and was primarily comprised of our net loss of $15.3 million.

Investing Activities

Cash used in investing activities for the nine months ended September 30, 2023 totaled $1.1 million and was comprised of the purchase of property, plant, and equipment. We expect cash flows used in investing activities to decrease in the remainder of 2023 due to the completion of our new training facility.

Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2023 totaled $16.5 million and was derived from the $8.5 million net proceeds from the January 2023 public offering, $3.7 million net proceeds from the May 2023 public offering, $3.5 million net proceeds from the September 2023 public offering and $0.8 million proceeds from the exercise of warrants.

Effect of Exchange Rate

The $13 thousand effect of exchange rate on cash for the nine months ended September 30, 2023 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, 2023, we had working capital of approximately $8.0 million. Our principal sources of liquidity as of September 30, 2023 consisted of approximately $7.8 million in cash and cash equivalents and $4.4 million of net accounts receivable.

The Company will need 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, demands for working capital, manufacturing capacity, and any acquisitions that the Company may pursue. The Company expects that it will be required 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 will be available on acceptable terms, if at all, or that any such financing activity will 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.

The Company’s recurring losses, level of cash used in operations, and potential need for additional capital, along with uncertainties surrounding the Company’s ability to raise additional capital, raise substantial doubt about the Company’s ability to

continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

In order for the Company to continue operations beyond the next 12 months and be able to discharge its liabilities and commitments in the normal course of business, it must either raise additional capital or 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 will endeavor 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; however, there is no assurance that will be able to improve our financial condition.

Term Loan

The information set forth in Part I, Item 1, Note 9 – Debt – Term Loan is hereby incorporated herein by reference.

EIDL Loan

The information set forth in Part I, Item 1, Note 9 – Debt – EIDL Loan is hereby incorporated herein by reference.

January 2023 Public Offering

On January 9, 2023, the Company completed a public offering and issued an aggregate of 171,678 shares of BIOLASE common stock at a price of $35.00 per share and pre-funded warrants to purchase 114,035 shares of BIOLASE common stock with an exercise price of $1.00 per share at a price of $34.00 per share. The Company received gross proceeds of approximately $9.9 million, before deducting underwriting discounts and commissions and estimated offering expenses.

May 2023 Public Offering

On May 26, 2023, the Company completed a public offering and issued, 175,000 units, with each Unit consisting of (A) one share of the Company’s Series H Convertible Redeemable Preferred Stock, par value $0.001 per share, and (B) one warrant to purchase one-half of one (0.50) share of Series H Convertible Preferred Stock, at a price to the public of $26.00 per Unit, less underwriting discounts and commissions. Each Warrant has an exercise price of $13.00 per share, is exercisable for one-half of one (0.5) share of Series H Convertible Preferred Stock, is immediately exercisable and will expire two (2) years from the date of issuance. The Company received gross proceeds of approximately $4.6 million, before deducting underwriting discounts and commissions, estimated offering expenses, and before the exercise of warrants.

September 2023 Public Offering

On September 18, 2023, the Company completed a public offering and issued, 75,000 units, with each Unit consisting of (A) one share of the Company’s Series J Convertible Redeemable Preferred Stock, par value $0.001 per share, and (B) one warrant to purchase one-half of one (0.50) share of Series J Convertible Preferred Stock, at a price to the public of $60.00 per Unit, less underwriting discounts and commissions. Each Warrant has an exercise price of $30.00 per share, is exercisable for one-half of one (0.5) share of Series J Convertible Preferred Stock, is immediately exercisable and will expire one (1) year from the date of issuance. The Company received gross proceeds of approximately $4.5 million, before deducting underwriting discounts and commissions, estimated offering expenses, and before the exercise of warrants.

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

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management has evaluated, with the participation of our President and Chief Executive Officer and our Chief Financial Officer, the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our President and Chief Executive Officer and Chief Financial Officer have 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.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information set forth in “Legal Proceedings” in Part I, Item 3 of the 2022 Form 10-K is hereby incorporated herein by reference.

ITEM 1A. RISK FACTORS

A description of the risk factors associated with our business is contained in “Risk Factors” in Part I, Item 1A of the 2022 Form 10-K. There have been no material changes to our Risk Factors as previously reported, except for the addition of the Risk Factors below.

Failure to meet NASDAQ’s continued listing requirements could result in the delisting of our common stock, negatively impact the price of our common stock and negatively impact our ability to raise additional capital.

On January 11, 2023, we received a deficiency letter from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market (“Nasdaq”) notifying us that, for the last 30 consecutive business days, ending on January 10, 2023, the bid price for our common stock had closed below the minimum $1.00 per share requirement for continued inclusion on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”). In accordance with Nasdaq rules, we were provided an initial period of 180 calendar days, or until July 10, 2023 (the “Compliance Date”), to regain compliance with the Bid Price Rule.

On June 8, 2023, we were notified by the Staff of Nasdaq that we did not meet the minimum closing bid price requirement of $1.00 for continued listing, as set forth in the Bid Price Rule, as the Staff has determined that as of June 8, 2023, the Company’s securities had a closing bid price of $0.10 or less for ten consecutive trading days, from May 24, 2023 through June 7, 2023. As such, the Staff has determined to delist the Company’s common stock from the Nasdaq Capital Market and to suspend trading of the common stock at the opening of business on June 20, 2023, and file a Form 25-NSE with the SEC. We timely requested a hearing to appeal this determination, which stayed the suspension of our common stock pending the panel’s decision.

We subsequently requested the Panel grant us a temporary exception to regain compliance with the Bid Price Rule. On July 5, 2023, the Panel granted us an exception until August 11, 2023 to demonstrate bid price compliance subject to us taking the following actions: (i) on July 20, 2023, we shall obtain stockholder approval for a reverse stock split at a ratio that is sufficient to regain and maintain long term compliance with the Bid Price Rule; (ii) on or before July 31, 2023, we shall effect a reverse stock split and, thereafter, maintain a $1.00 closing bid price for a minimum of ten consecutive business days; and (iii) on August 11, 2023, we shall have demonstrated compliance with the Bid Price Rule, by evidencing a closing bid price of $1.00 or more per share for a minimum of ten consecutive trading sessions.

On July 20, 2023, BIOLASE held a special meeting of BIOLASE stockholders where the stockholders approved an amendment to our Certificate of Incorporation to effect a reverse stock split of BIOLASE common stock, at a ratio between one-for-two (1:2) and one-for-one hundred (1:100). Immediately after the special meeting, our Board approved a one-for-one hundred (1:100) reverse stock split of the outstanding shares of BIOLASE common stock (the “2023 Reverse Stock Split”). On July 26, 2023, BIOLASE filed an amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware to effect the 2023 Reverse Stock Split, which became effective on July 27, 2023.

On August 14, 2023, we received a letter from the Nasdaq Office of General Counsel confirming the decision of the Panel that we currently demonstrate compliance with the requirements for continued listing on The Nasdaq Capital Market.

Due to our accumulated deficit, recurring and negative cash flow from operations for the year ended December 31, 2022 and the quarter ended September 30, 2023, there is substantial doubt about our ability to continue as a going concern.

We incurred losses from operations and used cash in operating activities for the three and nine months ended September 30, 2023 and for the years ended December 31, 2022, 2021, and 2020. Our recurring losses, level of cash used in operations, and potential need for additional capital, along with uncertainties surrounding the Company’s ability to raise additional capital, raise substantial doubt about the Company’s ability to continue as a going concern. Our audited consolidated financial statements for the year ended December 31, 2022 were prepared on a going concern basis in accordance with generally accepted accounting principles in the United States. The going concern basis assumes that we will continue in operation for the next 12 months and will be able to realize our assets and discharge our liabilities and commitments in the normal course of business. Thus, our consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. Our recurring losses, negative cash flow, need for additional capital, and the uncertainties surrounding our ability to raise such capital raise substantial doubt about our

ability to continue as a going concern. For us to continue operations beyond the next 12 months and be able to discharge our liabilities and commitments in the normal course of business, we must sell our products directly to end-users and through distributors, establish profitable operations through increased sales, decrease expenses, generate cash from operations or raise additional funds when needed. Our goal is to improve our financial condition and ultimately improve our financial results by increasing revenues through expanding awareness of the benefits of our dental lasers among dental specialists and general practitioners and reducing expenses. However, if we are unable to do so on a timely basis, we will be required to seek additional capital. In that event, we would seek additional funds through various financing sources, including the sale of our equity and debt securities, however, there can be no guarantees that such funds will be available on commercially reasonable terms, if at all. If we are unable to raise additional capital, increase sales or reduce expenses, we will be unable to continue to fund our operations, develop our products, realize value from our assets, and discharge our liabilities in the normal course of business. If we become unable to continue as a going concern, we could have to liquidate our assets, and potentially realize significantly less than the values at which they are carried on our financial statements, and stockholders could lose all or part of their investment in our common stock.

We have experienced net losses for each of the past three years, and we could experience additional losses and have difficulty achieving profitability in the future.

We had an accumulated deficit of $296.2 million as of December 31, 2022 and an accumulated deficit of $311.5 million as of September 30, 2023. We recorded net losses of $28.6 million, $16.2 million, and $16.8 million for the years ended December 31, 2022, 2021, and 2020, respectively. We recorded net losses of $4.6 million and $15.3 million for the three and nine months ended September 30, 2023 and $8.4 million and $18.8 million for the three and nine months ended September 30, 2022, respectively. In order to achieve profitability, we must increase net revenue through new sales and control our costs. Failure to increase our net revenue and decrease our costs could cause our stock price to decline and could have a material adverse effect on our business, financial condition, and results of operations.

We are vulnerable to continued global economic uncertainty and volatility in financial markets.

Our business is highly sensitive to changes in general economic conditions as a seller of capital equipment to end users in dental professional practices. Financial markets inside the United States and internationally have experienced extreme disruption in recent times, including, among other things, extreme volatility in security prices, severely diminished liquidity and credit availability, and declining valuations of investments. We believe these disruptions are likely to have an ongoing adverse effect on the world economy. A continued economic downturn and financial market disruptions could have a material adverse effect on our business, financial condition, and results of operations. Also, the imposition of economic sanctions on Russia as a result of the conflict in Ukraine could prevent us from performing existing contracts and pursuing new growth opportunities, which could adversely affect our business, financial condition and results of operations. Furthermore, sustained uncertainty about, or worsening of, geopolitical tensions, including further escalation of war between Russia and Ukraine, further escalation in the conflict between the State of Israel and Hamas, as well as further escalation of tensions between the State of Israel and various countries in the Middle East and North Africa, could result in a global economic slowdown and long-term changes to global trade. Any or all of these factors could negatively affect Mobix Labs’ business, results of operations, financial condition and growth.

Our ability to meet our redemption obligations under the existing convertible redeemable preferred stock depends on our earnings and cash flows, and we may not have sufficient funds to redeem such shares of preferred stock.

As of September 30, 2023, 38,131 and 5,000 shares of Series J Preferred Stock and Series H Preferred Stock are outstanding and redeemable by us on September 13, 2024 and May 24, 2025, respectively. No assurances can be given that we will be successful in making the required payments to the holders of the Series J Preferred Stock and Series H Preferred Stock, or that we will be able to comply with the financial or other covenants contained in the Certificates of Designations. If we are unable to make the required cash payments or otherwise comply with the Certificates of Designations due to insufficient funds, dividends will accrue on such preferred stock, the holders of such shares of preferred stock could foreclose against our assets, and/or we could be forced into bankruptcy or liquidation.

ITEM 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

None

ITEM 3. Defaults Upon Senior Securities

None

ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5. Other Information

None

ITEM 6. EXHIBITS

Incorporated by Reference

Exhibit

Description

Filed

Herewith

Form

Period

Ending/Date

of Report

Exhibit

Filing

Date

3.1.1

Restated Certificate of Incorporation, including, (i) Certificate of Designations, Preferences and Rights of 6% Redeemable Cumulative Convertible Preferred Stock of the Registrant; (ii) Certificate of Designations, Preferences and Rights of Series A 6% Redeemable Cumulative Convertible Preferred Stock of the Registrant; (iii) Certificate of Correction Filed to Correct a Certain Error in the Certificate of Designation of the Registrant; and (iv) Certificate of Designations of Series B Junior Participating Cumulative Preferred Stock of the Registrant.

S-1,

Amendment
No. 1

12/23/2005

3.1

12/23/2005

3.1.2

Amendment to Restated Certificate of Incorporation

8-K

05/10/2012

3.1

05/16/2012

3.1.3

Second Amendment to Restated Certificate of Incorporation

8-A/A

11/04/2014

3.1.3

11/04/2014

3.1.4

Third Amendment to Restated Certificate of Incorporation

S-3

07/21/2017

3.4

07/21/2017

3.1.5

Fourth Amendment to Restated Certificate of Incorporation

8-K

05/10/2018

3.1

05/11/2018

3.1.6

Fifth Amendment to Restated Certificate of Incorporation

8-K

05/28/2020

3.1

06/01/2020

3.1.7

Sixth Amendment to Restated Certificate of Incorporation

8-K

04/28/2022

3.1

05/02/2022

3.1.8

Seventh Amendment to Restated Certificate of Incorporation

8-K

07/20/2023

3.1

07/26/2023

3.1.9

Certificate of Designation of Series G Preferred Stock

8-A

03/01/2022

3.1

03/03/2022

3.1.10

Certificate of Elimination of Series G Preferred Stock

8-K

06/08/2022

3.1

06/08/2022

3.1.11

Certificate of Elimination of Series D, Series E and Series F Preferred Stock of the Registrant

8-K

03/01/2022

3.3

03/03/2022

3.1.12

Certificate of Designation of Series H Convertible Redeemable Preferred Stock

8-K

05/24/2023

3.1

05/26/2023

3.1.13

Certificate of Designation of Series I Preferred Stock

8-K

06/05/2023

3.1

06/06/2023

3.1.14

Certificate of Designation of Series J Convertible Redeemable Preferred Stock

8-K

09/13/2023

3.1

09/18/2023

3.2

Eighth Amended and Restated Bylaws of the Registrant adopted on March 1, 2022

8-K

03/01/2022

3.1

03/03/2022

4.1

Warrant Agency Agreement, dated May 26, 2023, by and between BIOLASE, Inc., Computershare Inc., a Delaware corporation, and its affiliate, Computershare Trust Company, N.A., a federal trust company

8-K

05/24/2023

4.1

05/26/2023

4.2

Form of Warrant to Purchase Series H Convertible Preferred Stock

8-K

05/24/2023

4.2

05/26/2023

4.3

Form of Warrant to Purchase Series J Convertible Preferred Stock

8-K

09/13/2023

4.2

09/18/2023

31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended

31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended

32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

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.

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Furnished herewith.

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.


		BIOLASE, INC.
		(Registrant)


November 09, 2023	By:	/s/ *JOHN R. BEAVER*
Date		John R. Beaver
		President and Chief Executive Officer
			(Principal Executive Officer)

November 09, 2023	By:	/s/ *JENNIFER BRIGHT*
Date		Jennifer Bright
		Chief Financial Officer
			(Principal Financial Officer and Principal Accounting Officer)

Dates Referenced Herein and Documents Incorporated by Reference

This ‘10-Q’ Filing	Date	Other Filings

	12/31/25
	6/30/25
	5/24/25
	9/30/24
	9/13/24
	12/31/23
Filed on:	11/9/23	8-K
	11/2/23
For Period end:	9/30/23
	9/18/23	8-K
	9/13/23	8-K, EFFECT, S-1MEF
	8/14/23	8-K, S-1/A
	8/11/23	S-1/A
	7/31/23
	7/27/23	UPLOAD
	7/26/23	8-K
	7/20/23	8-K, DEF 14A, PRE 14A
	7/10/23
	7/5/23
	6/30/23	10-Q
	6/20/23
	6/16/23
	6/8/23	4, 8-K
	6/7/23	PRE 14A
	6/5/23	8-K
	5/26/23	4, 8-K
	5/24/23	8-K, EFFECT, S-1/A
	4/27/23	8-K
	3/31/23	10-Q
	3/28/23	10-K, 8-K, ARS, DEF 14A
	3/8/23
	1/11/23	424B1, 8-K
	1/10/23
	1/9/23	EFFECT
	1/1/23
	12/31/22	10-K, ARS
	12/30/22	8-K
	9/30/22	10-Q
	6/30/22	10-Q, 8-K
	6/27/22	8-K
	6/6/22
	5/26/22
	4/28/22	3, 4, 8-K, DEF 14A, PRE 14A
	3/25/22
	3/3/22	8-A12G, 8-K
	3/1/22	8-K
	2/1/22
	12/31/21	10-K
	12/10/21
	7/22/21
	6/11/21	4, 8-K
	3/31/21	10-K, 10-Q
	12/31/20	10-K
	7/23/20	4, S-1
	7/22/20	4, 8-K
	7/1/20	424B4, EFFECT
	5/22/20	8-K, SC 13D/A
	5/13/20	4, 8-K, DEF 14A, PRE 14A
	2/4/20
	1/22/20
	5/15/19	8-K, DEF 14A
	11/9/18
	9/21/18	4, 8-K, DEF 14A
	5/6/17
	4/27/15	4, 8-K
	10/30/14
	6/6/13	4, 8-K, DEF 14A, PRE 14A
	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

3 Subsequent Filings that Reference this Filing

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 1/24/24  Biolase, Inc.                     S-8         1/24/24    4:119K                                   Donnelley … Solutions/FA
12/26/23  Biolase, Inc.                     S-1                    4:496K                                   Donnelley … Solutions/FA
12/08/23  Biolase, Inc.                     424B5                  1:401K                                   Donnelley … Solutions/FA

14 Previous Filings that this Filing References

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 9/18/23  Biolase, Inc.                     8-K:1,3,5,8 9/13/23   16:887K                                   Donnelley … Solutions/FA
 7/26/23  Biolase, Inc.                     8-K:3,5,8,9 7/20/23   12:201K                                   Donnelley … Solutions/FA
 6/06/23  Biolase, Inc.                     8-K:3,5,8,9 6/05/23   12:225K                                   Donnelley … Solutions/FA
 5/26/23  Biolase, Inc.                     8-K:1,3,5,8 5/24/23   16:890K                                   Donnelley … Solutions/FA
 6/08/22  Biolase, Inc.                     8-K:3,5,7,9 6/08/22   12:10M                                    Donnelley … Solutions/FA
 5/02/22  Biolase, Inc.                     8-K:5,9     4/28/22   11:180K                                   Donnelley … Solutions/FA
 3/03/22  Biolase, Inc.                     8-K:3,5,7,9 3/01/22   13:359K                                   Donnelley … Solutions/FA
 3/03/22  Biolase, Inc.                     8-A12G                 2:46K                                    Donnelley … Solutions/FA
 6/01/20  Biolase, Inc.                     8-K:5,9     5/28/20    2:26K                                    Donnelley … Solutions/FA
 5/11/18  Biolase, Inc.                     8-K:5,9     5/10/18    2:26K                                    Donnelley … Solutions/FA
 7/21/17  Biolase, Inc.                     S-3                    4:281K                                   ActiveDisclosure/FA
11/04/14  Biolase, Inc.                     8-A12B/A               3:38K                                    Donnelley … Solutions/FA
 5/16/12  Biolase, Inc.                     8-K:5,7,9   5/10/12    3:44K                                    Donnelley Fi… Express/FA
12/23/05  Biolase, Inc.                     S-1/A                  6:2.3M                                   Donnelley … Solutions/FA

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Filing Submission 0000950170-23-062187 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Biolase, Inc. – ‘10-Q’ for 9/30/23

On: Thursday, 11/9/23, at 4:52pm ET · For: 9/30/23 · Accession #: 950170-23-62187 · File #: 1-36385

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Dates Referenced Herein and Documents Incorporated by Reference

3 Subsequent Filings that Reference this Filing

14 Previous Filings that this Filing References

Quarterly Report — Form 10-Q

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‘10-Q’ — Quarterly Report

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