10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009

OR

o 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 000-19627

BIOLASE TECHNOLOGY, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	87-0442441
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

4 Cromwell
Irvine, California 92618
(Address of principal executive offices, including zip code)

(949) 361-1200
(Registrant’s telephone number, including area code)

     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. Yes þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definition of “large accelerated filer,” accelerated filer” and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer þ  Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes o No þ

     Number of shares outstanding of the registrant’s common stock, $0.001 par value, as of November 4, 2009: 24,341,020

BIOLASE TECHNOLOGY, INC.

INDEX

		Page
	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):
	Consolidated Balance Sheets as of September 30, 2009 and December 31, 2008		3
	Consolidated Statements of Operations for the three and nine months ended September 30, 2009 and September 30, 2008		4
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2009 and September 30, 2008		5
	Notes to Consolidated Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		26
Item 4.	Controls and Procedures		27
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		27
Item 1A.	Risk Factors		27
Item 6.	Exhibits		29
Signatures			30
Exhibit Index			31
EX-10.1
EX-10.2
EX-10.3
EX-31.1
EX-31.2
EX-32.1
EX-32.2

BIOLASE^®, ZipTip^®, ezlase^®, eztips^®, MD Flow^® and Waterlase^® are registered trademarks of Biolase Technology, Inc., and Diolase^™, Comfort Jet^™, HydroPhotonics^™, LaserPal^™, Comfortpulse^™, MD Gold^™, WCLI^™, World Clinical Laser Institute^™, Waterlase MD^™, Waterlase MD Turbo^™, HydroBeam^™, SensaTouch^{™ ,}, Occulase^™, C100^™, Diolase 10^™, Body Contour^™, Radial Firing Perio Tips^™ and Deep Pocket Therapy with New Attachment^™ are trademarks of BIOLASE Technology, Inc. All other product and company names are registered trademarks or trademarks of their respective owners.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BIOLASE TECHNOLOGY, INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except per share data)

	September 30, 2009			December 31, 2008
ASSETS
Current assets:
Cash and cash equivalents	$	3,879		$	11,235
Accounts receivable, less allowance of $365 and $526 in 2009 and 2008, respectively		3,275			3,758
Inventory, net		9,088			12,410
Prepaid expenses and other current assets		1,016			1,391
Total current assets		17,258			28,794
Property, plant and equipment, net		2,361			3,040
Intangible assets, net		505			613
Goodwill		2,926			2,926
Deferred tax asset		35			29
Other assets		169			306
Total assets	$	23,254		$	35,708
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Line of credit	$	—		$	5,404
Accounts payable		5,284			7,509
Accrued liabilities		5,057			8,255
Deferred revenue, current portion		1,144			2,603
Total current liabilities		11,485			23,771
Deferred tax liabilities		426			376
Deferred revenue, long-term		1,988			1,875
Other liabilities, long-term		216			296
Total liabilities		14,115			26,318
Stockholders’ equity:
Preferred stock, par value $0.001, 1,000 shares authorized, no shares issued and outstanding		—			—
Common stock, par value $0.001, 50,000 shares authorized; 26,304 and 26,208 shares issued and 24,340 and 24,244 shares outstanding in 2009 and 2008, respectively		27			27
Additional paid-in capital		116,941			115,698
Accumulated other comprehensive loss		(194	)		(187	)
Accumulated deficit		(91,236	)		(89,749	)
		25,538			25,789
Treasury stock (cost of 1,964 shares repurchased)		(16,399	)		(16,399	)
Total stockholders’ equity		9,139			9,390
Total liabilities and stockholders’ equity	$	23,254		$	35,708

See accompanying notes to consolidated financial statements.

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BIOLASE TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in thousands, except per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
Products and services revenue	$	11,796		$	14,418		$	31,802		$	50,250
License fees and royalty revenue		289			868			1,194			2,740
Net revenue		12,085			15,286			32,996			52,990
Cost of revenue		6,252			7,755			17,297			25,770
Gross profit		5,833			7,531			15,699			27,220
Operating expenses:
Sales and marketing		2,231			5,615			8,046			16,272
General and administrative		1,699			3,165			6,003			9,640
Engineering and development		999			1,313			3,201			4,045
Legal settlement and fees		—			1,232			—			1,232
Total operating expenses		4,929			11,325			17,250			31,189
Profit (loss) from operations		904			(3,794	)		(1,551	)		(3,969	)
Gain (loss) on foreign currency transactions		(40	)		(637	)		166			204
Interest income		1			26			4			110
Interest expense		(7	)		(35	)		(49	)		(95	)
Non-operating income (loss), net		(46	)		(646	)		121			219
Income (loss) before income tax provision		858			(4,440	)		(1,430	)		(3,750	)
Income tax provision (benefit)		(1	)		50			57			92
Net income (loss)	$	859		$	(4,490	)	$	(1,487	)	$	(3,842	)
Net income (loss) per share:
Basic	$	0.04		$	(0.19	)	$	(0.06	)	$	(0.16	)
Diluted	$	0.04		$	(0.19	)	$	(0.06	)	$	(0.16	)
Shares used in the calculation of net income (loss) per share:
Basic		24,281			24,244			24,257			24,155
Diluted		24,540			24,244			24,257			24,155

See accompanying notes to consolidated financial statements.

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BIOLASE TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)

	Nine Months Ended
	September 30,
	2009			2008
Cash Flows From Operating Activities:
Net loss	$	(1,487	)	$	(3,842	)
Adjustments to reconcile net loss to net cash and cash equivalents (used in) provided by operating activities:
Depreciation and amortization		1,126			1,440
Residual cost of demo equipment sold		12			—
Loss on disposal of assets, net		1			—
Recovery of bad debts		(134	)		(71	)
Provision for inventory excess and obsolescence		946			—
Stock-based compensation		1,103			1,317
Other non-cash compensation		—			2
Deferred income taxes		46			33
Changes in operating assets and liabilities:
Accounts receivable		626			6,526
Inventory		2,376			(4,229	)
Prepaid expenses and other assets		62			570
Accounts payable and accrued liabilities		(5,103	)		1,217
Deferred revenue		(1,357	)		(2,610	)
Net cash and cash equivalents (used in) provided by operating activities		(1,783	)		353
Cash Flows From Investing Activities:
Proceeds from sale of property, plant and equipment		5			—
Additions to property, plant and equipment		(333	)		(811	)
Net cash and cash equivalents used in investing activities		(328	)		(811	)
Cash Flows From Financing Activities:
Borrowings under line of credit		4,293			15,175
Payments under line of credit		(9,697	)		(14,317	)
Proceeds from exercise of stock options and warrants		139			533
Net cash and cash equivalents (used in) provided by financing activities		(5,265	)		1,391
Effect of exchange rate changes		20			(14	)
Increase (decrease) in cash and cash equivalents		(7,356	)		919
Cash and cash equivalents, beginning of year		11,235			14,566
Cash and cash equivalents, end of period	$	3,879		$	15,485
Supplemental cash flow disclosure:
Cash paid during the period for:
Interest	$	49		$	95
Income taxes	$	14		$	170

See accompanying notes to consolidated financial statements.

5

BIOLASE TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 1 — BASIS OF PRESENTATION

The Company

     BIOLASE Technology Inc. or the Company or Biolase, incorporated in Delaware in 1987, is a medical technology company operating in one business segment that designs, manufactures and markets advanced dental, cosmetic and surgical lasers and related products.

Basis of Presentation

     The unaudited consolidated financial statements include the accounts of BIOLASE Technology, Inc. and its consolidated subsidiaries and have been prepared on a basis consistent with the December 31, 2008 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. These unaudited, interim, 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, or GAAP, for complete consolidated financial statements. Certain amounts have been reclassified to conform to current period presentation. We have evaluated subsequent events through November 6, 2009, the date of issuance of our consolidated financial position and results of operations.

Use of Estimates

     The preparation of these consolidated financial statements in conformity with GAAP requires us 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, the realizability of goodwill and indefinite-lived intangible assets, effects of stock-based compensation and the provision or benefit for income taxes. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may differ materially from those estimates.

Fair Value of Financial Instruments

     Our financial instruments, consisting of cash, accounts receivable, accounts payable and other accrued expenses, approximate fair value because of the short maturity of these items.

Liquidity

     We believe we currently possess sufficient resources to meet the cash requirements of our operations for at least the next year, provided that the February 27, 2009 letter agreement with Henry Schein, Inc., or HSIC, is extended past March 31, 2010 as set forth below. Our basis for this is the following:

• Beginning in the fourth quarter of 2008, we implemented substantial cost reduction measures including the reduction of employment and expenses throughout all functional areas of our business. We have reduced our headcount from approximately 234 at September 30, 2008 to approximately 146 as of September 30, 2009.

• On February 27, 2009, we entered into a letter agreement with Henry Schein, Inc., or HSIC, amending the term of the License and Distribution Agreement through March 31, 2010. Included in the letter agreement are minimum purchase requirements of approximately $42.7 million over the initial fourteen-month term starting in February 2009. Additionally, the letter agreement contains guaranteed bi-monthly minimum purchases of our lasers and associated equipment. The letter agreement can be extended for two additional optional twelve month terms and which require escalation purchase minimums of between 7.5 percent and 20 percent over actual or minimum sales, whichever is greater.

• During the first quarter of 2009, we transitioned sales in countries served by our foreign subsidiaries located in Germany, Spain, Australia and New Zealand from direct to HSIC. As part of the letter agreement with HSIC, HSIC has become our distributor in each of these countries as well as in additional foreign countries currently

6

	and in the future. As a result of these developments, we have reduced the operations of our foreign subsidiaries which had been recording significant losses since being established to sell direct in those countries in 2006.
•	We continue to review our inventory levels and plan to reduce the levels to more historical year end amounts. The letter agreement with HSIC will allow us to better forecast our inventory needs and not having significant inventory located at our foreign subsidiaries will help in this objective.

     Although we believe that we will have sufficient resources to meet our obligations and sustain our operations during the next twelve months, there can be no assurance that the resources we believe will be available will prove to be available or sufficient, or that additional resources will be available if necessary to fund our operations. We are substantially dependent on our major distributor and the continued performance of this distributor to make committed purchases of our products and associated consumables under the distribution agreement with HSIC (as amended), and the receipt of cash in connection with those purchases, is essential to our liquidity.

     We believe that during the first seven months of the initial term of the February 27, 2009 letter agreement, HSIC exceeded its bi-monthly minimum purchase commitment, with total sales aggregating approximately $27 million through September 30, 2009. Based upon this level of purchases and considering the general economic slowdown, we believe that HSIC’s inventory has trended above historical levels. There can be no assurance that HSIC will continue to purchase at these increased levels for the remainder of the initial 14-month term, nor can there be any assurance that HSIC will not determine to offset these earlier purchases against the minimum agreement commitment of $42.7 million by the end of the initial term.

     At HSIC’s option, the February 27, 2009 letter agreement with HSIC can be extended for two additional twelve month terms, which require certain purchase minimum escalations between 7.5 percent and 20 percent over actual or minimum sales, whichever is greater. There can be no guarantee that HSIC will elect to extend the February 27, 2009 agreement past March 31, 2010 and preserve our liquidity position. In addition, we presently do not have any debt financing in place with a bank or other financial institution. The absence of such debt financing availability could adversely impact our operations. Our obligations and operating requirements may require us to seek additional funding through public or private equity or debt financing, and we have no commitments for financing of any kind at this time. There can be no assurance that we will be able to obtain requisite financing if necessary to fund existing obligations and operating requirements on acceptable terms or at all.

NOTE 2 — RECENT ACCOUNTING PRONOUNCEMENTS

     In June 2009, the FASB issued ASC 105, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (ASC 105 or the Codification) which establishes the FASB Accounting Standards Codification as the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements. The Codification does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S.GAAP by providing all the authoritative literature related to a particular topic in one place. The Codification was effective for financial statements issued for interim and annual periods ending after September 15, 2009, and as of the effective date, all existing accounting standard documents will be superseded. We have applied the new guidelines and numbering system prescribed by the Codification when referring to GAAP in our fiscal quarter ended September 30, 2009. The adoption of ASC 105 did not have a material impact on our financial position, results of operation or cash flows.

     In October 2009, the FASB issued Accounting Standards Update No. 2009-13 (ASU 2009-13), an update to existing guidance on ASC 605-25, Revenue Recognition, for arrangements with multiple deliverables. This update will allow companies to allocate consideration received for qualified separate deliverables using estimated selling price for both delivered and undelivered items when vendor-specific objective evidence or third-party evidence is unavailable. Additional disclosures discussing the nature of multiple element arrangements, the types of deliverables under the arrangements, the general timing of their delivery, and significant factors and estimates used to determine estimated selling prices will be required. ASU 2009-13 is effective prospectively for interim and annual periods ending after June 15, 2010. We have not yet determined the impact on our condensed consolidated financial statements.

NOTE 3—STOCK-BASED COMPENSATION AND PER SHARE INFORMATION

Stock-Based Compensation

     We have three stock-based compensation plans — the 1990 Stock Option Plan, the 1993 Stock Option Plan and the 2002 Stock Incentive Plan. The 1990 and 1993 Stock Option Plans have been terminated with respect to granting additional stock options. Under these plans, stock options are awarded to certain officers, directors and employees of the Company at the discretion of the Company’s management and/or Board of Directors. Options to employees generally vest on a quarterly basis over three years.

7

     Effective January 1, 2006, we adopted the provisions of ASC 718, Share-Based Payment, using a modified prospective transition method. Compensation cost related to stock options recognized in operating results under ASC 718, Share Based Payment, during the three months ended September 30, 2009 and 2008 was $318,000 and $424,000, respectively. The net impact to earnings for those periods was $(0.01) and $(0.02) per basic and diluted share, respectively. Compensation cost related to stock options recognized in operating results under ASC 718, Share Based Payment, during the nine months ended September 30, 2009 and 2008, was $1.1 million and $1.32 million, respectively. The net impact to earnings for those periods was $(0.05) and $(0.06) per basic and diluted share, respectively. At September 30, 2009, we had $1.1 million of total unrecognized compensation cost, net of estimated forfeitures, related to unvested share-based compensation arrangements granted under our existing plans. We expect that cost to be recognized over a weighted average period of .9 years.

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2009		2008		2009		2008
Cost of revenue	$	34	$	41	$	111	$	126
Sales and marketing		108		120		336		357
General and administrative		136		223		532		712
Engineering and development		40		40		124		122
	$	318	$	424	$	1,103	$	1,317

     The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Our options have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value estimate. For options granted prior and subsequent to January 1, 2006, we did and expect to continue to estimate their fair values using the Black-Scholes option-pricing model. This option pricing model requires us to make several assumptions regarding the key variables used in the model to calculate the fair value of its stock options. The risk-free interest rate used by us is based on the U.S. Treasury yield curve in effect for the expected lives of the options at their dates of grant. Beginning July 1, 2005, we have used a dividend yield of zero as we do not intend to pay dividends on our common stock in the foreseeable future. The most critical assumption used in calculating the fair value of stock options is the expected volatility of our common stock. We believe that the historic volatility of our common stock is a reliable indicator of future volatility, and accordingly, have used a stock volatility factor based on the historical volatility of our common stock over a period of time approximating the estimated lives of our stock options. The expected term is estimated by analyzing our historical share option exercise experience over a five year period, in accordance with the provisions of ASC 718, Share Based Payment. Compensation expense is recognized using the straight-line method for all stock-based awards issued after January 1, 2006 or unvested as of January 1, 2006. Compensation expense is recognized only for those options expected to vest, with forfeitures estimated at the date of grant based on our historical experience and future expectations. ASC 718, Share Based Payment, requires forfeitures to be estimated at the time of the grant and revised as necessary in subsequent periods if actual forfeitures differ from those estimates.

     The stock option fair values were estimated using the Black-Scholes option-pricing model with the following assumptions:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
Expected term (years)		5.00			5.15			4.96			5.06
Volatility		84	%		65	%		84	%		66	%
Annual dividend per share	$	0.00		$	0.00		$	0.00		$	0.00
Risk-free interest rate		2.38	%		3.08	%		2.00	%		3.12	%

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     A summary of option activity under our stock option plans for the nine months ended September 30, 2009 is as follows:

						Weighted
						average
				Weighted		remaining
				average		contractual term		Aggregate
	Shares			exercise price		(years)		intrinsic value
Options outstanding at December 31, 2008		4,500,000		$	5.12
Plus: Options granted		779,000		$	1.13
Less: Options exercised		(96,000	)	$	1.46
Options canceled or expired		(969,000	)	$	3.78
Options outstanding at September 30, 2009		4,214,000		$	4.78		6.35	$	1,235,000
Options exercisable at September 30, 2009		3,041,000		$	5.79		5.32	$	491,000
Options expired during the nine months ended September 30, 2009		429,000		$	4.82

     Cash proceeds along with fair value disclosures related to grants, exercises and vesting options are provided in the following table (in thousands, except per share amounts):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2009		2008		2009		2008
Proceeds from stock options exercised	$	139	$	9	$	139	$	533
Tax benefit related to stock options exercised (1)		N/A		N/A		N/A		N/A
Intrinsic value of stock options exercised (2)	$	82	$	5	$	82	$	351
Weighted-average fair value of options granted during period	$	1.16	$	1.63	$	.76	$	1.68
Total fair value of shares vested during the period	$	295	$	317	$	1,236	$	1,010

(1)	ASC 718, Share Based Payment, requires that the excess tax benefits received related to stock option exercises be presented as financing cash inflows. We currently do not receive a tax benefit related to the exercise of stock options due to our net operating losses.
(2)	The intrinsic value of stock options exercised is the amount by which the market price of the stock on the date of exercise exceeded the market price of the stock on the date of grant.

Net Income (Loss) Per Share — Basic and Diluted

     Basic net income (loss) per share is computed by dividing income (loss) available to common stockholders by the weighted-average number of common shares outstanding for the period. In computing diluted net income (loss) per share, the weighted average number of shares outstanding is adjusted to reflect the effect of potentially dilutive securities.

     Outstanding stock options to purchase 259,000 shares were included in the computation of diluted earnings per share for the three months ended September 30, 2009. For the same period, anti-dilutive outstanding stock options and warrants to purchase 3,245,000 shares were not included in the computation of diluted EPS. For the same 2008 period, anti-dilutive outstanding stock options and warrants to purchase 4,492,000 shares were not included in the computation of diluted earnings per share.

     Outstanding stock options and warrants to purchase 4,295,000 shares were not included in the computation of diluted loss per share for the nine months ended September 30, 2009 as a result of their anti-dilutive effect. For the same 2008 period, anti-dilutive outstanding stock options and warrants to purchase 4,492,000 shares were not included in the computation of diluted earnings per share.

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NOTE 4 — INVENTORY

     Inventory is valued at the lower of cost or market (determined by the first-in, first-out method) and is comprised of the following (in thousands):

	September 30,		December 31,
	2009		2008
Raw materials	$	4,116	$	4,981
Work-in-process		1,604		1,472
Finished goods		3,368		5,957
Inventory, net	$	9,088	$	12,410

     Inventory is net of the provision for excess and obsolete inventory of $1.8 million and $828,000 at September 30, 2009 and December 31, 2008, respectively.

NOTE 5 — PROPERTY, PLANT AND EQUIPMENT

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

	September 30,			December 31,
	2009			2008
Land	$	278		$	268
Building		425			411
Leasehold improvements		914			919
Equipment and computers		5,898			5,674
Furniture and fixtures		1,019			1,027
Construction in progress		88			53
		8,622			8,352
Accumulated depreciation and amortization		(6,261	)		(5,312	)
Property, plant and equipment, net	$	2,361			3,040

     Depreciation and amortization of property, plant and equipment was $318,000 and $1.0 million for the three and nine months ended September 30, 2009, respectively, and $387,000 and $1.2 million for the three and nine months ended September 30, 2008, respectively.

     Leasehold improvements include $536,000 of tenant improvements paid by the landlord in connection with our primary facility lease during 2006.

NOTE 6 — INTANGIBLE ASSETS AND GOODWILL

     In accordance with ASC 350, Intangibles, Goodwill and Other, goodwill and other intangible assets with indefinite lives are not subject to amortization but are tested for impairment annually or whenever events or changes in circumstances indicate that the asset might be impaired. We conducted our annual impairment analysis of our goodwill as of June 30, 2009 and concluded there had not been any impairment. Due to current volatility in our stock price caused by adverse equity market conditions and the general economic environment, we closely monitor our stock price and market capitalization and perform such analysis on a quarterly basis. As of September 30, 2009, we concluded there had not been any impairment.

     Intangible assets with finite lives continue to be subject to amortization, and any impairment is determined in accordance with ASC 360, Accounting for the Impairment or Disposal of Long-Lived Assets. We believe no event has occurred that would trigger an impairment of these intangible assets. We recorded amortization expense of $32,000 and $108,000 for the three and nine months ended September 30, 2009, respectively, and $93,000 and $278,000, respectively, for the same periods in 2008. Other intangible assets consist of an acquired customer list and a non-compete agreement.

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     The following table presents details of the Company’s intangible assets, related accumulated amortization and goodwill (in thousands):

	As of September 30, 2009										As of December 31, 2008
			Accumulated										Accumulated
	Gross		Amortization			Impairment			Net		Gross		Amortization			Impairment			Net
Patents (4-10 years)	$	1,914	$	(1,409	)	$	—		$	505	$	1,914	$	(1,301	)	$	—		$	613
Trademarks (6 years)		69		(69	)		—			—		69		(69	)		—			—
Trade names (Indefinite life)		979		—			(979	)		—		979		—			(979	)		—
Other (4 to 6 years)		593		(593	)		—			—		593		(593	)		—			—
Total	$	3,555	$	(2,071	)	$	(979	)	$	505	$	3,555	$	(1,963	)	$	(979	)	$	613
Goodwill (Indefinite life)	$	2,926							$	2,926	$	2,926							$	2,926

NOTE 7 —ACCRUED LIABILITIES AND DEFERRED REVENUE

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

	September 30,		December 31,
	2009		2008
Payroll and benefits	$	1,806	$	1,844
Warranty		2,210		2,612
Deferred rent credit		112		112
Accrued professional services		320		771
Accrued insurance premium		75		732
Other		534		2,184
Accrued liabilities	$	5,057	$	8,255

     Changes in the product warranty accrual, including expenses incurred under our warranties, for the three and nine months ended September 30, 2009 and 2008 were as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
Initial warranty accrual, beginning balance	$	2,132		$	2,279		$	2,612		$	1,987
Provision for estimated warranty cost		1,072			1,182			2,108			3,635
Warranty expenditures		(994	)		(959	)		(2,510	)		(3,120	)
Initial warranty accrual, ending balance	$	2,210		$	2,502		$	2,210		$	2,502

     Deferred revenue is comprised of the following (in thousands):

	September 30,			December 31,
	2009			2008
License fee from Henry Schein, Inc. — unamortized portion	$	—		$	1,111
Royalty advances from Procter & Gamble		1,875			1,875
Undelivered elements (training, installation and product) and other		356			731
Extended warranty contracts		901			761
Total deferred revenue		3,132			4,478
Less long-term amounts:
Extended warranty contracts		(113	)		—
Royalty advances from Proctor & Gamble		(1,875	)		(1,875	)
Total deferred revenue, long-term		(1,988	)		(1,875	)
Total deferred revenue, current portion	$	1,144		$	2,603

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     On August 8, 2006, we entered into a License and Distribution Agreement with Henry Schein, Inc., or HSIC, a large distributor of healthcare products to office-based practitioners, pursuant to which we granted HSIC the exclusive right to distribute our complete line of dental laser systems, accessories and services in the United States and Canada. Concurrent with the execution of the Agreement, HSIC paid an upfront license fee of $5.0 million. The Agreement has an initial term of three years, following which HSIC has the option to extend the Agreement for an additional three-year period under certain circumstances, including its satisfaction of the minimum purchase requirements during the full three-year period, and for an additional license fee of $5.0 million. We amortized the initial $5.0 million payment to License Fees and Royalty Revenue on a straight-line basis over the three-year term of the Agreement. For the three and nine months ended September 30, 2009 we recognized $278,000 and $1.1 million respectively, of the license fees as compared to $417,000 and $1.3 million respectively, for the three and nine months ended September 30, 2008.

     Under the Agreement, HSIC was obligated to meet certain minimum purchase requirements and was entitled to receive incentive payments if certain purchase targets were achieved. If HSIC had not met the minimum purchase requirements at the midpoint of each of the first two three-year periods, we would have had the option, upon repayment of a portion of the license fee, to (i) shorten the remaining term of the agreement to one year, (ii) grant distribution rights held by HSIC to other persons (or distribute products itself), (iii) reduce certain discounts on products given to HSIC under the agreement and (iv) cease paying future incentive payments. We maintain the right to grant certain intellectual property rights to third parties, but by doing so may incur the obligation to refund a portion of the upfront license fee to HSIC.

     On May 9, 2007, we entered into an addendum with HSIC, effective as of April 1, 2007, which modified the License and Distribution Agreement to add the terms and conditions under which HSIC has the exclusive right to distribute our ezlase diode dental laser system in the United States and Canada. In the Addendum, separate minimum purchase requirements were established for the ezlase system. If HSIC had not met the minimum purchase requirement for any 12-month period ending on March 31, we would have had the option, upon 30 days written notice, to (i) convert ezlase distribution rights to a non-exclusive basis for a minimum period of one year, after which period we would have had the option to withdraw ezlase distribution rights, and (ii) reduce the distributor discount on ezlase products.

     On March 3, 2008, we entered into a second addendum with HSIC that modified the License and Distribution Agreement, as amended by the first addendum. Pursuant to the second addendum, HSIC was obligated to meet certain minimum purchase requirements and was entitled to receive incentive payments if certain purchase targets were achieved. If HSIC did not meet minimum purchase requirements, we would have had the option to (i) shorten the remaining term of the Agreement to one year, (ii) grant distribution rights held by HSIC to other persons (or distribute products ourselves), (iii) reduce certain discounts on products given to HSIC under the Agreement and (iv) cease paying future incentive payments. Additionally, under certain circumstances, if HSIC did not meet the minimum purchase requirements, we would have had the right to purchase back the exclusive distributor rights granted to HSIC under the agreement. We also agreed to actively promote Henry Schein Financial Services as our exclusive leasing and financing partner.

     On December 23, 2008, we entered into a brief letter agreement with HSIC which amended the initial term of the License and Distribution Agreement to December 31, 2010.

     On February 27, 2009, we entered into a letter agreement with HSIC which amended the License and Distribution Agreement, as amended by the first and second addendums and the brief letter agreement. This letter agreement includes certain minimum purchase requirements during the initial fourteen-month term of the agreement. In connection with the initial purchase by HSIC made under the letter agreement, on March 13, 2009, we entered into a security agreement, or Security Agreement, with HSIC, granting to HSIC a security interest in our inventory, equipment, and other assets. Pursuant to the Security Agreement, the security interest granted shall be released upon products delivered to HSIC in respect of such initial purchase. HSIC also has the option to extend the term of the letter agreement for two additional one-year terms based on certain minimum purchase requirements. In addition, HSIC has become our distributor in certain international countries including Germany, Spain, Australia and New Zealand and will have first right of refusal in new international markets that we are interested in entering.

     On September 10, 2009, we entered into an amendment to the License and Distribution Agreement with HSIC, wherein we agreed to provide to HSIC certain customer warranties in respect of the Company’s products.

     On June 29, 2006, we received a one-time payment from The Procter & Gamble Company, or P&G, of $3.0 million for a license to certain of our patents pursuant to a binding letter agreement, subsequently replaced by a definitive agreement effective January 24, 2007, or P&G Agreement, which was recorded as deferred revenue when received. In the event of a

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material uncured breach of the definitive agreement by us, we could be required to refund certain payments made to us under the agreement, including the $3.0 million payment. The license fee from P&G was amortized over a two-year period covering January 2007 through December 2008. During the three and nine months ended September 30, 2008, $375,000 and $1.1 million, respectively, of the license fee was recognized in license fees and royalty revenue. Additionally, P&G is required to make quarterly payments to us in the amount of $250,000, beginning with a payment for the third quarter of 2006 and continuing until the first product under the agreement is shipped by P&G for large-scale commercial distribution in the United States. Seventy-five percent of each $250,000 payment is treated as prepaid royalties and will be credited against royalty payments owed to us, and the remainder is credited to revenue and represents services provided by BIOLASE to P&G. For the three and nine months ended September 30, 2008 $63,000 and $188,000 of the payments received was recognized in license fees and royalty revenue.

     Pursuant to the terms of the P&G Agreement, after two years from the effective date of the P&G Agreement, P&G has the right, upon formal notice to us, to elect to convert its exclusive license of our patents into a non-exclusive license (and effectively allow us to license the patents to other parties), and cease making the $250,000 quarterly payments as described above. Pursuant to the P&G Agreement, P&G has forty-five (45) days following the end of each quarter to make the quarterly payment, after which a finance charge is to be assessed, equal to the prime rate of interest then in effect plus 100 basis points. As of the date of this quarterly filing, we have not received quarterly payments in 2009, nor have we received formal applicable notice from P&G required under the P&G Agreement to convert the license into a non-exclusive license. We are in discussions with P&G to restructure the P&G Agreement, and P&G has indicated to us that it is considering whether to make such non-exclusive election or not as part of the restructuring being contemplated.

NOTE 8—BANK LINE OF CREDIT AND DEBT

     On September 28, 2006, we entered into a Loan and Security Agreement or Loan Agreement with Comerica Bank, or the Lender, which replaced the loan agreement previously held with Bank of the West. Under the Loan Agreement, the Lender agreed to extend a revolving loan or the Revolving Line to us in the maximum principal amount of $10.0 million. Advances under the Revolving Line could not exceed the lesser of $10.0 million or the Borrowing Base (80% of eligible accounts receivable and 35% of eligible inventory), less any amounts outstanding under letters of credit or foreign exchange contract reserves. Notwithstanding the foregoing, advances of up to $6.0 million could be made without regard to the Borrowing Base. On October 5, 2007, we entered into an Amendment to the Loan Agreement which extended the agreement for an additional year. The entire unpaid principal amount plus any accrued but unpaid interest and all other amounts due under the Loan Agreement would have been due and payable in full on September 28, 2009 or the Maturity Date, but could have been extended by us for an additional year upon Lender approval. Our obligations under the Loan Agreement bore interest on the outstanding daily balance thereof at one of the following rates, to be selected by us: (i) LIBOR plus 2.50%, or (ii) prime rate, as announced by the Lender, plus 0.25%. As security for the payment and performance of our obligations under the Loan Agreement, we granted the Lender a first priority security interest in existing and later-acquired Collateral (as defined in the Loan Agreement, and which excludes intellectual property).

     The Loan Agreement required compliance with certain financial covenants, including: (i) minimum effective tangible net worth; (ii) maximum leverage ratio; (iii) minimum cash amount at Lender of $6.0 million; and (iv) minimum liquidity ratio. The Loan Agreement also contained covenants that required Lender’s prior written consent for us, among other things, to: (i) transfer any part of its business or property; (ii) make any changes in our location or name, or replace our CEO or CFO; (iii) consummate mergers or acquisitions; (iv) incur liens; or, (v) pay dividends or repurchase stock. The Loan Agreement contained customary events of default, any one of which would result in the right of the Lender to, among other things, accelerate all obligations under the Loan Agreement, set-off obligations under the Loan Agreement against any balances or deposits of ours held by the bank, or sell the Collateral.

     As of December 31, 2008, $5.4 million was outstanding under the Loan Agreement at an interest rate of 3.50% (the Lender’s announced prime rate as of that date plus 0.25%).

     On January 30, 2009, we delivered a compliance certificate to the Lender which set forth the details of our non-compliance with certain covenants under the Loan Agreement as of December 31, 2008. The Loan Agreement was terminated on February 5, 2009 and all outstanding balances were repaid in full with cash available on hand, and under the terms of the Loan Agreement and related note, we and certain of our subsidiaries satisfied all of our obligations under the Loan Agreement.

     In December 2008, we financed approximately $804,000 of insurance premiums payable in eleven equal monthly installments of approximately $75,000 each, including a finance charge of 5.65%. As of September 30, 2009, we had approximately $75,000 outstanding.

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NOTE 9—COMMITMENTS AND CONTINGENCIES

Litigation

     From time to time, we become involved in various claims and lawsuits of a character normally incidental to our business. In our opinion, there are no legal proceedings pending against us or any of our subsidiaries that are reasonably expected to have a material adverse effect on our financial condition or on our results of operations.

NOTE 10— SEGMENT INFORMATION

     We currently operate in a single business segment. For the three and nine months ended September 30, 2009, sales in the United States accounted for approximately 71% and 74% respectively, of net revenue, and international sales accounted for approximately 29% and 26%, respectively, of net revenue. For the three and nine months ended September 30, 2008, sales in the United States accounted for approximately 78% and 76% respectively, of net revenue, and international sales accounted for approximately 22% and 24%, respectively, of net revenue.

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2009		2008		2009		2008
United States	$	8,540	$	11,854	$	24,364	$	40,321
International		3,545		3,432		8,632		12,669
	$	12,085	$	15,286	$	32,996	$	52,990

     Long-lived assets located outside of the United States at our foreign subsidiaries were $726,000 and $747,000 as of September 30, 2009 and December 31, 2008, respectively.

NOTE 11—CONCENTRATIONS

     Revenue from our Waterlase systems, our principal product, comprised 58% and 55% of total net revenues for the three and nine months ended September 30, 2009, respectively, and 70% and 63% of total net revenues, respectively, for the same periods in 2008. Revenue from our Diode systems comprised 15% and 18% of total revenue for the three and nine months ended September 30, 2009, respectively, and 13% and 19%, for the same periods of 2008.

     Approximately 85% and 90% of our laser system and consumable products net revenue in the three and nine months ended September 30, 2009 was generated through sales to HSIC worldwide. Approximately 82% and 78% of our laser system and consumable products net revenue in the three and nine months ended September 30, 2008 was generated through sales to HSIC worldwide.

     We maintain our cash and cash equivalents accounts with established commercial banks. Through September 30, 2009, such cash deposits periodically exceeded the Federal Deposit Insurance Corporation insured limit of $250,000 per depository.

     Accounts receivable concentrations from HSIC worldwide and one international distributor totaled $1.7 million or 51% and $403,000 or 12% at September 30, 2009 respectively. Accounts receivable concentrations have resulted from sales to HSIC worldwide and one international distributor that totaled $523,000 and $765,000 or 14% and 20%, respectively, at December 31, 2008.

     We currently buy certain key components of our 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 a delay in manufacturing and a possible loss of sales, which would adversely affect consolidated operating results.

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NOTE 12—COMPREHENSIVE INCOME (LOSS)

     Components of comprehensive income (loss) were as follows (in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2009		2008			2009			2008
Net income (loss)	$	859	$	(4,490	)	$	(1,487	)	$	(3,842	)
Other comprehensive income (loss) items:
Foreign currency translation adjustments		84		(81	)		(7	)		(20	)
Comprehensive income (loss)	$	943	$	(4,571	)	$	(1,494	)	$	(3,862	)

NOTE 13—INCOME TAXES

     In June 2006, the FASB issued ASC 740, Accounting for Uncertainty in Income Taxes, which 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 derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We adopted ASC 740, Accounting for Uncertainty in Income Taxes as of January 1, 2007, as required. We have elected to classify interest and penalties as a component of our income tax provision. As a result of the implementation of ASC 740, Accounting for Uncertainty in Income Taxes, we recognized a $156,000 liability for unrecognized tax benefits, which was accounted for as an increase in the January 1, 2007 accumulated deficit balance. For the nine months ended September 30, 2009, we recorded an increase of $5,000 in the liability for unrecognized tax benefits, including related estimates of penalties and interest.

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CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

          This Quarterly Report contains forward-looking statements that involve a number of risks and uncertainties. Forward-looking statements include, but are not limited to, statements pertaining to financial items, plans, strategies or objectives of management for future operations, our financial condition or prospects, and any other statement that is not historical fact, including any statement using terminology such as “may,” “might,” “will,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “estimate,” “predict,” “potential,” “plan,” or the negativities of these terms or other comparable terminology. For all of the foregoing forward-looking statements, we claim the protection of the Private Securities Litigation Reform Act of 1995. These statements are only predictions and actual events or results may differ materially from our expectations for a number of reasons including those set forth under “Risk Factors” in Item 1A of this quarterly report and our Annual Report on Form 10-K for the year ended December 31, 2008. These forward-looking statements represent our judgment as of the date hereof. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

          The following discussion of our results of operations and financial condition should be read together with the unaudited consolidated financial statements and the notes to those statements included elsewhere in this report and our audited consolidated financial statements and the notes to those statements for the year ended December 31, 2008. This discussion may contain forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from the results anticipated in any forward-looking statements as a result of a variety of factors, including those discussed in “Risk Factors” in Item 1A of this quarterly report, in our Annual Report on Form 10-K for the year ended December 31, 2008, and elsewhere in this quarterly report.

Overview

          We are a medical technology company that develops, manufactures and markets lasers and related products focused on technologies for improved applications and procedures in dentistry and medicine. In particular, our principal products provide dental laser systems that allow dentists, periodontists, endodontists, oral surgeons and other specialists to perform a broad range of dental procedures, including cosmetic and complex surgical applications. Our systems are designed to provide clinically superior performance for many types of dental procedures, with less pain and faster recovery times than are generally achieved with drills, scalpels and other dental instruments. We have clearance from the U.S. Food and Drug Administration, or FDA, to market our laser systems in the United States and also have the necessary approvals to sell our laser systems in Canada, the European Union and certain other international markets.

          We offer two categories of laser system products: (i) Waterlase systems and (ii) Diode systems. Our flagship product category, the Waterlase system, uses a patented combination of water and laser to perform most procedures currently performed using dental drills, scalpels and other traditional dental instruments for cutting soft and hard tissue. We also offer our diode laser systems to perform soft tissue and cosmetic procedures, including tooth whitening.

          On August 8, 2006, we entered into a License and Distribution Agreement, or the Agreement, with Henry Schein, Inc., or HSIC, a large distributor of healthcare products to office-based practitioners, pursuant to which we granted HSIC the exclusive right to distribute our complete line of dental laser systems, accessories and services in the United States and Canada. The Agreement has an initial term of three years, following which it will automatically renew for an additional period of three years, provided that HSIC has achieved its minimum purchase requirements. Under the Agreement, HSIC was obligated to meet certain minimum purchase requirements and was entitled to receive incentive payments if certain purchase targets were achieved. If HSIC had not met the minimum purchase requirements at the midpoint of each of the first two three-year periods, we would have had the option, upon repayment of a portion of the license fee, to (i) shorten the remaining term of the agreement to one year, (ii) grant distribution rights held by HSIC to other persons (or distribute products ourselves), (iii) reduce certain discounts on products given to HSIC under the agreement and (iv) cease paying future incentive payments. We maintain the right to grant certain intellectual property rights to third parties, but by doing so may incur the obligation to refund a portion of the upfront license fee to HSIC.

          On May 9, 2007, we entered into an addendum with HSIC, effective as of April 1, 2007, which modified the License and Distribution Agreement to add the terms and conditions under which HSIC has the exclusive right to distribute our ezlase diode dental laser system in the United States and Canada. In the addendum, separate minimum purchase requirements were established for the ezlase system. If HSIC had not met the minimum purchase requirement for any 12-month period ending on

16

March 31, we would have had the option, upon 30 days written notice, to (i) convert ezlase distribution rights to a non-exclusive basis for a minimum period of one year, after which period we would have had the option to withdraw ezlase distribution rights, and (ii) reduce the distributor discount on ezlase products.

          On March 3, 2008, we entered into a second addendum with HSIC that modified the License and Distribution Agreement, as amended by the first addendum. Pursuant to the second addendum, HSIC was obligated to meet certain minimum purchase requirements and was entitled to receive incentive payments if certain purchase targets were achieved. If HSIC did not meet minimum purchase requirements, we would have had the option to (i) shorten the remaining term of the Agreement to one year, (ii) grant distribution rights held by HSIC to other persons (or distribute products ourselves), (iii) reduce certain discounts on products given to HSIC under the Agreement and (iv) cease paying future incentive payments. Additionally, under certain circumstances, if HSIC did not meet the minimum purchase requirements, we would have had the right to purchase back the exclusive distributor rights granted to HSIC under the Agreement. We also agreed to actively promote Henry Schein Financial Services as our exclusive leasing and financing partner.

          On December 23, 2008, we entered into a brief letter agreement with HSIC which amended the initial term of the License and Distribution Agreement to December 31, 2010.

          On February 27, 2009, we entered into a letter agreement with HSIC which amended the License and Distribution Agreement, as amended by the first and second addendums and the brief letter agreement. This letter agreement includes certain minimum purchase requirements during the initial fourteen-month term of the agreement. In connection with the initial purchase by HSIC made under the letter agreement, on March 13, 2009 we entered into a security agreement, or Security Agreement, with HSIC, granting to HSIC a security interest in our inventory, equipment, and other assets. Pursuant to the Security Agreement, the security interest granted shall be released upon products delivered to HSIC in respect of such initial purchase. HSIC also has the option to extend the term of the letter agreement for two additional one-year terms based on certain minimum purchase requirements. In addition, HSIC has become our distributor in certain international countries including Germany, Spain, Australia and New Zealand and will have first right of refusal in new international markets that we are interested in entering.

          On September 10, 2009, we entered into an amendment to the License and Distribution Agreement with HSIC, wherein we agreed to provide to HSIC certain customer warranties in respect of the Company’s products.

          We intend to augment the activities of HSIC in the United States and Canada with the efforts of our direct sales force; however, our future revenue will be largely dependent upon the efforts and success of HSIC in selling our products. Since September 1, 2006, nearly all of our domestic sales were made through HSIC and we expect this to continue for the foreseeable future. We cannot assure you that HSIC will devote sufficient resources to selling our products or, even if sufficient resources are directed to our products, that such efforts will be sufficient to increase net revenue.

Critical Accounting Estimates

     The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires us to make judgments, assumptions and estimates that affect the amounts reported. The following is a summary of those accounting policies that we believe are necessary to understand and evaluate our reported consolidated financial results.

     Revenue Recognition. Effective September 1, 2006, nearly all of our domestic sales are to HSIC; prior to this date, we sold our products directly to customers through our direct sales force. Internationally, we sell products primarily through distributors. We recognize revenue in accordance with ASC 605, Revenue Recognition, which requires that four basic criteria must be met before revenue can be recognized: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred and title and the risks and rewards of ownership have been transferred to our customer, or services have been rendered; (iii) the price is fixed or determinable; and (iv) collectibility is reasonably assured.

     We apply ASC 605-25, Accounting for Revenue Arrangements with Multiple Deliverables, which requires us to evaluate whether the separate deliverables in our arrangements can be unbundled in our revenue recognition. Sales of our laser systems include separate deliverables consisting of the product, disposables used with the laser systems, and training. For these sales, we apply the residual value method, which requires us to allocate to the delivered elements the total arrangement consideration less the fair value of the undelivered elements. Revenue attributable to the undelivered elements, primarily training, are included in deferred revenue when the product is shipped and are recognized when the related service is performed or upon expiration of time offered under the agreement.

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     The key judgment related to our revenue recognition relates to the collectibility of payment from the customer. We evaluate the customer’s credit worthiness prior to the shipment of the product. Based on our assessment of the credit information available to us, we may determine the credit risk is higher than normally acceptable, and we will either decline the purchase or defer the revenue until payment is reasonably assured.

     Although all sales are final, we accept returns of products in certain, limited circumstances and record a provision for sales returns based on historical experience concurrent with the recognition of revenue. The sales returns allowance is recorded as a reduction of accounts receivable and revenue.

     We recognize revenue for royalties under licensing agreements for our patented technology when the product using our technology is sold. We estimate and recognize the amount earned based on historical performance and current knowledge about the business operations of our licensees. Our estimates have been consistent with amounts historically reported by the licensees.

     We may offer sales incentives and promotions on our products. We apply ASC 605-50, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products), in determining the appropriate treatment of the related costs of these programs.

     Accounting for Stock-Based Payments. Effective January 1, 2006, we adopted the provisions of ASC 718, Share-Based Payment, using the modified prospective transition method. Prior to the adoption of ASC 718, we accounted for share-based payments to employees using the intrinsic value method under APB Opinion No. 25, Accounting for Stock Issued to Employees, and the related interpretations. Under these provisions, stock option awards were accounted for using fixed plan accounting whereby we recognized no compensation expense for stock option awards because the exercise price of options granted was equal to the fair value of the common stock at the date of grant. In March 2005, the SEC issued Staff Accounting Bulletin 107, or SAB 107, regarding the SEC Staff’s interpretation of ASC 718, which provides the Staff’s views regarding interactions between ASC 718 and certain SEC rules and regulations and provides interpretations of the valuation of share-based payments for public companies. We have incorporated the provisions of SAB 107 in our adoption of ASC 718.

     Under the modified prospective transition method, the provisions of ASC 718 apply to new awards and to awards outstanding on January 1, 2006 and subsequently modified, repurchased or cancelled. Under the modified prospective transition method, compensation expense recognized in 2006 includes compensation costs for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant-date fair value estimated in accordance with the original provisions of ASC 718, and compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of ASC 718.

     Valuation of Accounts Receivable. We maintain an allowance for uncollectible accounts receivable to estimate the risk of extending credit to customers. We evaluate our allowance for doubtful accounts based upon our knowledge of customers and their compliance with credit terms. The evaluation process includes a review of customers’ accounts on a regular basis which incorporates input from sales, service and finance personnel. The review process evaluates all account balances with amounts outstanding 90 days and other specific amounts for which information obtained indicates that the balance may be uncollectible. The allowance for doubtful accounts is adjusted based on such evaluation, with a corresponding provision included in general and administrative expenses. Account balances are charged off against the allowance when we feel it is probable the receivable will not be recovered. We do not have any off-balance-sheet credit exposure related to our customers.

     Valuation of Inventory. Inventory is valued at the lower of cost, determined using the first-in, first-out method, or market. We periodically evaluate the carrying value of inventory and maintain an allowance for excess and obsolete inventory to adjust the carrying value as necessary to the lower of cost or market. We evaluate quantities on hand, physical condition and technical functionality, as these characteristics may be impacted by anticipated customer demand for current products and new product introductions. Unfavorable changes in estimates of excess and obsolete inventory would result in an increase in cost of revenue and a decrease in gross profit.

     Valuation of Long-Lived Assets. Property, plant and equipment, and certain intangibles with finite lives are amortized over their useful lives. Useful lives are based on our estimate of the period that the assets will generate revenue or otherwise productively support our business goals. We monitor events and changes in circumstances which could indicate that the carrying balances of long-lived assets may exceed the undiscounted expected future cash flows from those assets. If such a condition were to exist, we would recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets.

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     Valuation of Goodwill and Other Intangible Assets. Goodwill and other intangible assets with indefinite lives are not amortized but are tested for impairment annually or whenever events or changes in circumstances indicate that the asset might be impaired. We conducted our annual impairment analysis of our goodwill and trade names as of June 30, 2009 and concluded there had been no impairment in trade names and no impairment in goodwill. We closely monitor our stock price and market capitalization and perform such analysis on a quarterly basis. If our stock price and market capitalization declines, we may need to impair our goodwill and other intangible assets.

     Warranty Cost. Waterlase systems sold domestically are covered by a warranty against defects in material and workmanship for a period of one year while our ezlase system warranty period is up to two years from date of sale by the Distributor to the end-user. Estimated warranty expenses are recorded as an accrued liability, with a corresponding provision to cost of revenue. This estimate is recognized concurrent with the recognition of revenue on the sale to the Distributor. Effective October 1, 2009, Waterlase systems sold internationally are covered by a warranty against defects in material and workmanship for a period of sixteen months while our ezlase system warranty period is up to twenty eight months from date of sale to the Distributor. Estimated warranty expenses are recorded as an accrued liability, with a corresponding provision to cost of revenue. This estimate is recognized concurrent with the recognition of revenue on the sale to the Distributor. Our overall accrual is based on our historical experience and our expectation of future conditions. An increase in warranty claims or in the costs associated with servicing those claims would result in an increase in the accrual and a decrease in gross profit.

     Litigation and Other Contingencies. We regularly evaluate our exposure to threatened or pending litigation and other business contingencies. Because of the uncertainties related to the amount of loss from litigation and other business contingencies, the recording of losses relating to such exposures requires significant judgment about the potential range of outcomes. As additional information about current or future litigation or other contingencies becomes available, we will assess whether such information warrants the recording of expense relating to contingencies. To be recorded as expense, a loss contingency must be both probable and reasonably estimable. If a loss contingency is material but is not both probable and estimable, we will disclose the matter in the notes to the consolidated financial statements.

     Income Taxes. Based upon our operating losses during 2008 and 2007 and the available evidence, management determined that it is more likely than not that the deferred tax assets as of September 30, 2009 will not be realized. In this determination, we considered factors such as our earnings history, future projected earnings and tax planning strategies. If sufficient evidence of our ability to generate sufficient future taxable income tax benefits becomes apparent, we may reduce our valuation allowance, resulting in tax benefits in our statement of operations and in additional paid-in-capital. Management evaluates the potential realization of our deferred tax assets and assesses the need for reducing the valuation allowance periodically.

     Off-Balance Sheet Arrangements. We have no off-balance sheet financing or contractual arrangements.

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Results of Operations

     The following table presents certain data from our consolidated statements of operations expressed as percentages of revenue:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
Consolidated Statements of Operations Data:	2009			2008			2009			2008
Net revenue		100.0	%		100.0	%		100.0	%		100.0	%
Cost of revenue		51.7			50.7			52.4			48.6
Gross profit		48.3			49.3			47.6			51.4
Operating expenses:
Sales and marketing		18.5			36.7			24.4			30.7
General and administrative		14.0			20.7			18.2			18.2
Engineering and development		8.3			8.6			9.7			7.7
Legal settlement and fees					8.1						2.3
Total operating expenses		40.8			74.1			52.3			58.9
Income (loss) from operations		7.5			(24.8	)		(4.7	)		(7.5	)
Non-operating income (loss), net		(0.4	)		(4.3	)		0.4			0.4
Income (loss) before income tax provision		7.1			(29.1	)		(4.3	)		(7.1	)
Income tax provision		0.0			0.3			0.2			0.2
Net income (loss)		7.1	%		(29.4	)%		(4.5	)%		(7.3	)%

     The following table summarizes our net revenue by category (dollars in thousands):

	Three Months Ended September 30,								Nine Months Ended September 30,
	2009				2008				2009				2008
Waterlase systems	$	7,060	58	%	$	10,654	70	%	$	18,008	55	%	$	33,631	63	%
Diode systems		1,767	15	%		1,989	13	%		5,969	18	%		9,876	19	%
Non-laser systems		2,969	25	%		1,775	11	%		7,825	24	%		6,743	13	%
Products and services		11,796	98	%		14,418	94	%		31,802	97	%		50,250	95	%
License fee and royalty		289	2	%		868	6	%		1,194	3	%		2,740	5	%
Net revenue	$	12,085	100	%	$	15,286	100	%	$	32,996	100	%	$	52,990	100	%

Three months ended September 30, 2009 and 2008

     Net Revenue. Net revenue for the three months ended September 30, 2009 was $12.1 million, a decrease of $3.2 million or 21% as compared with net revenue of $15.3 million for the three months ended September 30, 2008.

     Laser system net revenue decreased by approximately 30% in the quarter ended September 30, 2009 compared to the same quarter of 2008. Our Diode family of products decreased $222,000 or 11% in the third quarter of 2009 compared to the same quarter of 2008. Sales of our Waterlase systems decreased $3.6 million or 34% in the quarter ended September 30, 2009 compared to the same period in 2008 due to initial orders of our C-100 product line launched in the third quarter of 2008 and lower realized average selling prices on both domestic and international sales in the third quarter of 2009.

     Non-laser system net revenue, which includes consumable products, as well as services revenues including advanced training programs, installation charges and extended service contracts, increased by approximately $1.2 million or 67% for the three months ended September 30, 2009 as compared to the same period of 2008. Consumable products revenue increased $898,000 or 98% as compared to the same period in 2008 primarily due to sales of our Waterlase MD Turbo ^™ Handpiece Upgrade Kit for existing MD users both domestically and internationally. Services revenues increased $296,000 or 34% as compared to the same period of 2008.

     License fees and royalty revenue decreased $579,000 or 67% in the quarter ended September 30, 2009 compared to the same quarter of 2008. The 2008 period included $375,000 of amortization of the license fee from The Proctor & Gamble Company which was fully amortized as of December 31, 2008.

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     Domestic revenues were $8.5 million, or 71% of net revenue, for the three months ended September 30, 2009 versus $11.9 million, or 78% of net revenue, for the three months ended September 30, 2008. International revenues for the quarter ended September 30, 2009 were $3.5 million, or 29% of net revenue, as compared with $3.4 million, or 22% of net revenue, for the quarter ended September 30, 2008.

     Gross Profit. Gross profit for the three months ended September 30, 2009 decreased by $1.7 million from $7.5 million to $5.8 million, and slightly decreased to 48% of net revenue as compared with 49% of net revenue for the three months ended September 30, 2008. The overall decrease in gross profit quarter over quarter was due to lower revenues overall as well as a lower average selling price and related profit on a greater volume of international sales.

     Operating Expenses. Operating expenses for the three months ended September 30, 2009 decreased by $6.4 million, or 56%, to $4.9 million as compared to $11.3 million for the three months ended September 30, 2008, and decreased as a percentage of net revenue to 41% from 74%. In the quarter ended September 30, 2008, we recorded a $1.2 million patent infringement legal settlement. Additionally, in late 2008 and continuing into 2009, we implemented significant cost reductions to help offset the negative impact of current economic conditions.

          Sales and Marketing Expense. Sales and marketing expenses for the three months ended September 30, 2009 decreased by $3.4 million, or approximately 60%, to $2.2 million, or 18% of net revenue, as compared with $5.6 million, or 37% of net revenue, for the three months ended September 30, 2008. Payroll and related expenses decreased by $558,000 in the quarter ended September 30, 2009 as compared to the same quarter in 2008 primarily as a result of closing our foreign sales operations and restructuring our domestic sales and marketing departments. Convention and seminars expenses decreased by $527,000, travel and entertainment expenses decreased by $428,000, commission expense decreased $355,000 and regional meeting and speaker related expenses decreased by $709,000 in the quarter ended September 30, 2009 compared with the same quarter of 2008. While we expect to continue investing in sales and marketing expenses and programs in order to grow our revenues, we believe it is likely that these expenses, excluding commissions, will decrease in 2009 as compared to 2008.

          General and Administrative Expense. General and administrative expenses for the three months ended September 30, 2009 decreased by $1.5 million, or 46%, to $1.7 million, or 14% of net revenue, as compared with $3.2 million, or 21% of net revenue, for the three months ended September 30, 2008. The decrease in general and administrative expenses resulted primarily from decreased legal and consulting fees of $729,000, decreased payroll related expenses of $365,000 and a decrease in accrued audit fees of $193,000. We believe that our general and administrative expenses are likely to decrease in 2009 as compared to 2008.

          Engineering and Development Expense. Engineering and development expenses for the three months ended September 30, 2009 decreased by $314,000, or 24%, to $1.0 million, or 8% of net revenue, as compared with $1.3 million, or 9% of net revenue, for the three months ended September 30, 2008. The decrease is primarily related to decreased payroll related expenses of $57,000 and a reduction in intangible asset amortization expense of $60,000. We expect to continue to invest in development projects and personnel in 2009, however, we expect the overall expense to decrease in 2009 as compared to 2008.

     Non-Operating Income (Loss)

     Gain on Foreign Currency Transactions. We recognized a $40,000 loss on foreign currency transactions for the three months ended September 30, 2009, compared to a $637,000 loss on foreign currency transactions for the three months ended September 30, 2008 due to the changes in exchange rates between the U.S. dollar and the Euro, the Australian dollar and the New Zealand dollar. As we have now transitioned most of our sales from our foreign subsidiaries to sales through distributors, the amount of inter-company transactions and related balances should be reduced in the future.

     Interest Income. Interest income resulted from interest earned on our cash and investments balances. Interest income for the three months ended September 30, 2009 was $1,000 as compared with $26,000 for the three months ended September 30, 2008. The decrease is the result of lower average cash balances during the 2009 period compared to the same period in 2008.

     Interest Expense. Interest expense consists primarily of interest on the financing of our business insurance premiums and interest on outstanding balances on our line of credit. Interest expense for the quarter ended September 30, 2009 was $7,000

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as compared to $35,000 for the quarter ended September 30, 2008. The decrease in interest expense is a result of having no line of credit balance in the third quarter of 2009 as compared to 2008.

     Income Taxes. An income tax benefit of $1,000 was recognized for the three months ended September 30, 2009 as compared with an income tax provision of $50,000 for the three months ended September 30, 2008. This benefit was a result of a refundable 2008 R&D credit recognized in September 2009. As a result of the implementation of ASC 740, Accounting for Uncertainty in Income Taxes, we recognized a $156,000 liability for unrecognized tax benefits, including related estimates of penalties and interest, which was accounted for as an increase in the January 1, 2007 accumulated deficit balance. For the three months ended September 30, 2009 and 2008, we recorded an increase of $1,000 and $2,000, respectively, in the liability for unrecognized tax benefits, including related estimates of penalties and interest. As of September 30, 2009, we have a valuation allowance against our net deferred tax assets in the amount of $28 million. Based upon our operating losses and the weight of the available evidence, management believes it is more likely than not that we will not realize all of these deferred tax assets.

Nine months ended September 30, 2009 and 2008

     Net Revenue. Net revenue for the nine months ended September 30, 2009 was $33 million, a decrease of $20 million or 38% as compared with net revenue of $53.0 million for the nine months ended September 30, 2008.

     Laser system net revenue decreased by approximately 45% in the nine months ended September 30, 2009 compared to the same period of 2008. Sales of our Waterlase systems decreased $15.6 million or 47% in the nine months ended September 30, 2009 compared to the same period in 2008. Our Diode family of products decreased $3.9 million or 40% in the nine months ended September 30, 2009 compared to the same period of 2008. We feel the continued adverse worldwide economic environment, combined with lower purchases by HSIC, have been primary contributors to the decreased sales year over year.

     Non-laser system net revenue increased by approximately $1.1 million or 16% for the nine months ended September 30, 2009 as compared to the same period of 2008. Consumable products revenue increased $1.2 million or 39% due primarily to the release of the Waterlase MD Turbo ^™ Handpiece Upgrade Kit in March 2009 whereas services revenues decreased $109,000 or 3%.

     License fees and royalty revenue decreased approximately $1.6 million to $1.2 million in the nine months ended September 30, 2009 compared to $2.8 million in the same period of 2008. The 2008 period included $1.1 million of amortization of the license fee from The Proctor & Gamble Company which was fully amortized as of December 31, 2008.

     Domestic revenues were $24.4 million, or 74% of net revenue, for the nine months ended September 30, 2009 versus $40.3 million, or 76% of net revenue, for the nine months ended September 30, 2008. International revenues for the nine months ended September 30, 2009 were $8.6 million, or 26% of net revenue, as compared with $12.7 million, or 24% of net revenue, for the nine months ended September 30, 2008.

     Gross Profit. Gross profit for the nine months ended September 30, 2009 decreased by $11.5 million to $15.7 million, or 48% of net revenue, as compared with gross profit of $27.2 million, or 51% of net revenue, for the nine months ended September 30, 2008. The decrease was due largely to a one-time write down of inventories in the first quarter of 2009 related to the international subsidiary closures, excess inventory created from a sales mix shift toward the new Waterlase MD Turbo ^™ and the ezlase diode laser as well as lower volume, lower average net pricing and promotion costs being spread over fewer units and a decrease in licensing and royalty revenues. These expenses were partially offset by our cost reductions implemented in late 2008.

     Operating Expenses. Operating expenses for the nine months ended September 30, 2009 decreased by $14 million or 45%, to $17.2 million as compared to $31.2 million for the nine months ended September 30, 2008 and decreased as a percentage of net revenue to 52% from 59%. In late 2008 and continuing into 2009, we implemented significant cost reductions to help offset the negative impact of current economic conditions.

          Sales and Marketing Expense. Sales and marketing expenses for the nine months ended September 30, 2009 decreased by $8.2 million, or approximately 50%, to $8.1 million, or 24% of net revenue, as compared with $16.3 million, or 31% of net revenue, for the nine months ended September 30, 2008. Payroll and related expenses decreased by $1.1 million for the nine months ended September 30, 2009 as compared to the same period in 2008 primarily as a result of closing our foreign sales operations and restructuring our domestic sales and marketing departments. Additional major

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factors contributing to the reduction were a decrease in convention and seminars expenses by $1.9 million, decreased travel and entertainment expenses by $1.1 million, a commission expense decrease of $898,000 and a decrease in regional meeting and speaker related expenses by $1.5 million in the nine months ended September 30, 2009 compared with the same period of 2008. While we expect to continue investing in sales and marketing expenses and programs in order to grow our revenues, we believe it is likely that these expenses, excluding commissions, will decrease in 2009 as compared to 2008.

          General and Administrative Expense. General and administrative expenses for the nine months ended September 30, 2009 decreased by $3.6 million, or 38%, to $6.0 million, as compared with $9.6 million for the nine months ended September 30, 2008, but remained constant as a percentage of net revenue at 18% on lower net revenue from period to period. The decrease in general and administrative expenses resulted primarily from decreased legal and consulting fees of $2.0 million, decreased audit fees of $341,000 and decreased payroll related expenses of $874,000. These decreases were partially offset by an increase in severance costs related to the termination of our CEO and reducing our foreign subsidiary operations. We believe that our general and administrative expenses are likely to decrease in 2009 as compared to 2008.

          Engineering and Development Expense. Engineering and development expenses for the nine months ended September 30, 2009 decreased by $844,000, or 21%, to $3.2 million, or 10% of net revenue, as compared with $4.0 million, or 8% of net revenue, for the nine months ended September 30, 2008. The decrease is primarily related to a reduction in consulting and payroll related expenses of $235,000 and a reduction in intangible asset amortization expense of $169,000. We expect to continue to invest in development projects and personnel in 2009, however, we expect the overall expense to decrease in 2009 as compared to 2008.

     Non-Operating Income (Loss)

     Gain on Foreign Currency Transactions. We recognized a $166,000 gain on foreign currency transactions for the nine months ended September 30, 2009, compared to a $204,000 gain on foreign currency transactions for the nine months ended September 30, 2008 due to the changes in exchange rates between the U.S. dollar and the Euro, the Australian dollar and the New Zealand dollar. As we have now transitioned most of our sales from our foreign subsidiaries to sales through distributors, the amount of inter-company transactions and related balances should be reduced in the future.

     Interest Income. Interest income resulted from interest earned on our cash and investments balances. Interest income for the nine months ended September 30, 2009 was $4,000 as compared with $110,000 for the nine months ended September 30, 2008. The decrease is the result of lower average cash balances during the 2009 period compared to the same period in 2008.

     Interest Expense. Interest expense consists primarily of interest on the financing of our business insurance premiums and interest on outstanding balances on our line of credit. Interest expense for the nine months ended September 30, 2009 was $49,000 as compared to $95,000 for the nine months ended September 30, 2008. The decrease in interest expense in 2009 as compared to 2008 is a result of having no line of credit balance since our line of credit was paid off on February 5, 2009.

     Income Taxes. An income tax provision of $57,000 was recognized for the nine months ended September 30, 2009 as compared with $92,000 for the nine months ended September 30, 2008. As a result of the implementation of ASC 740, Accounting for Uncertainty in Income Taxes, we recognized a $156,000 liability for unrecognized tax benefits, including related estimates of penalties and interest, which was accounted for as an increase in the January 1, 2007 accumulated deficit balance. For the nine months ended September 30, 2009 and 2008, we recorded an increase of $5,000 and a decrease of $43,000, respectively, in the liability for unrecognized tax benefits, including related estimates of penalties and interest. As of September 30, 2009, we have a valuation allowance against our net deferred tax assets in the amount of $28 million. Based upon our operating losses and the weight of the available evidence, management believes it is more likely than not that we will not realize all of these deferred tax assets.

Liquidity and Capital Resources

     We believe we currently possess sufficient resources to meet the cash requirements of our operations for at least the next year, provided that the February 27, 2009 letter agreement with Henry Schein, Inc., or HSIC, is extended past March 31, 2010 as set forth below. Our basis for this is the following:

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• Beginning in the fourth quarter of 2008, we implemented substantial cost reduction measures including the reduction of employment and expenses throughout all functional areas of our business. We have reduced our headcount from approximately 234 at September 30, 2008 to approximately 146 as of September 30, 2009.

• On February 27, 2009, we entered into a letter agreement with Henry Schein, Inc., or HSIC amending the term of the License and Distribution Agreement through March 31, 2010. Included in the letter agreement are minimum purchase requirements of approximately $42.7 million over the initial fourteen-month term starting in February 2009. Additionally, the letter agreement contains guaranteed bi-monthly minimum purchases of our lasers and associated equipment. The letter agreement can be extended for two additional optional twelve month terms and which require escalation purchase minimums of between 7.5 percent and 20 percent over actual or minimum sales, whichever is greater.

• During the first quarter of 2009, we transitioned sales in countries served by our foreign subsidiaries located in Germany, Spain, Australia and New Zealand from direct to HSIC. As part of the letter agreement with HSIC, HSIC has become our distributor in each of these countries as well as in additional foreign countries currently and in the future. As a result of these developments, we have reduced the operations of our foreign subsidiaries which had been recording significant losses since being established to sell direct in those countries in 2006.

• We continue to review our inventory levels and plan to reduce the levels to more historical year end amounts. The letter agreement with HSIC will allow us to better forecast our inventory needs and not having significant inventory located at our foreign subsidiaries will help in this objective.

     Although we believe that we will have sufficient resources to meet our obligations and sustain our operations during the next twelve months, there can be no assurance that the resources we believe will be available will prove to be available or sufficient, or that additional resources will be available if necessary to fund our operations. We are substantially dependent on our major distributor and the continued performance of this distributor to make committed purchases of our products and associated consumables under our distribution agreement with HSIC (as amended), and the receipt of cash in connection with those purchases, is essential to our liquidity.

     We believe that during the first seven months of the initial term of the February 27, 2009 letter agreement, HSIC exceeded its bi-monthly minimum purchase commitment with total sales aggregating approximately $27 million through September 30, 2009. Based upon this level of purchases and considering the general economic slowdown, we believe that HSIC’s inventory has trended above historical levels. There can be no assurance that HSIC will continue to purchase at these increased levels for the remainder of the initial 14-month term, nor can there be any assurance that HSIC will not determine to offset these earlier purchases against the minimum agreement commitment of $42.7 million by the end of the initial term.

     At HSIC’s option, the February 27, 2009 letter agreement with HSIC can be extended for two additional twelve month terms, which require certain purchase minimum escalations between 7.5 percent and 20 percent over actual or minimum sales, whichever is greater. There can be no guarantee that HSIC will elect to extend the February 27, 2009 agreement past March 31, 2010 and preserve our liquidity position. In addition, we presently do not have any debt financing in place with a bank or other financial institution. The absence of such debt financing availability could adversely impact our operations. Our obligations and operating requirements may require us to seek additional funding through public or private equity or debt financing, and we have no commitments for financing of any kind at this time. There can be no assurance that we will be able to obtain requisite financing if necessary to fund existing obligations and operating requirements on acceptable terms or at all.

     At September 30, 2009, we had approximately $5.8 million in net working capital, an increase of $800,000 from $5.0 million at December 31, 2008. Our principal sources of liquidity at September 30, 2009 consisted of our cash and cash equivalents balance of $3.9 million.

     On September 28, 2006, we entered into a Loan and Security Agreement, or the Loan Agreement with Comerica Bank or the Lender, which replaced the loan agreement previously held with Bank of the West. Under the Loan Agreement, the Lender agreed to extend a revolving loan, the Revolving Line, to us in the maximum principal amount of $10.0 million. Advances under the Revolving Line could not exceed the lesser of $10.0 million or the Borrowing Base (80% of eligible accounts receivable and 35% of eligible inventory), less any amounts outstanding under letters of credit or foreign exchange contract reserves. Notwithstanding the foregoing, advances of up to $6.0 million could be made without regard to the Borrowing Base. On October 5, 2007, we entered into an amendment to the Loan Agreement which extended the agreement for an additional year. The entire unpaid principal amount plus any accrued but unpaid interest and all other amounts due under the Loan Agreement would have been due and payable in full on September 28, 2009, or the Maturity Date, but could

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have been extended by us for an additional year upon Lender approval. Our obligations under the Loan Agreement bore interest on the outstanding daily balance thereof at one of the following rates, to be selected by us: (i) LIBOR plus 2.50%, or (ii) prime rate, as announced by the Lender, plus 0.25%. As security for the payment and performance of our obligations under the Loan Agreement, we granted the Lender a first priority security interest in existing and later-acquired Collateral (as defined in the Loan Agreement, and which excludes intellectual property). Certain of our subsidiaries had entered into unconditional guaranties, dated as of September 28, 2006, pursuant to which such subsidiaries had guaranteed the payment and performance of our obligations under the Loan Agreement.

     The Loan Agreement required compliance with certain financial covenants, including: (i) minimum effective tangible net worth; (ii) maximum leverage ratio; (iii) minimum cash amount at Lender of $6.0 million; and (iv) minimum liquidity ratio. The Loan Agreement also contained covenants that required Lender’s prior written consent for us, among other things, to: (i) transfer any part of its business or property; (ii) make any changes in our location or name, or replace our CEO or CFO; (iii) consummate mergers or acquisitions; (iv) incur liens; or, (v) pay dividends or repurchase stock. The Loan Agreement contained customary events of default, any one of which would result in the right of the Lender to, among other things, accelerate all obligations under the Loan Agreement, set-off obligations under the Loan Agreement against any balances or deposits of ours held by the bank, or sell the Collateral.

     On January 30, 2009, we delivered a compliance certificate to the Lender which set forth non-compliance with certain covenants under the Loan Agreement as of December 31, 2008. The loan agreement was terminated on February 5, 2009 and all outstanding balances were repaid in full with cash available on hand, and under the terms of the Loan Agreement and related note, we and certain of our subsidiaries satisfied all of our obligations under the Loan Agreement.

     We are currently pursuing other credit facilities that do not contain the cash deposit requirements set forth in the Comerica Loan Agreement; however, we cannot guarantee that we will be able to obtain such a line, or otherwise obtain additional financing to support our working capital needs.

     For the nine months ended September 30, 2009, our operating activities used cash of approximately $1.8 million, compared to cash provided of $375,000 for the nine months ended September 30, 2008. The most significant changes in operating assets and liabilities for the nine months ended September 30, 2009 as reported in our consolidated statements of cash flows were decreases of $626,000 in accounts receivable (before the change in allowance for doubtful accounts), a $2.4 million reduction in inventory and a $5.1 million reduction in accrued liabilities and accounts payable.

     In December 2008, we financed approximately $804,000 of insurance premiums payable in eleven equal monthly installments of approximately $75,000 each, including a finance charge of 5.65%. On January 10, 2006, we entered into a five-year facility lease with initial monthly installments of $39,000 and annual adjustments over the lease term. On September 28, 2009, we entered into a “First Amendment to Lease” which extended the facility lease term, adjusted basic rent and made modification provisions to the security deposit. These amounts are included in the outstanding obligations as of September 30, 2009 listed below.

     The following table presents our expected cash requirements for contractual obligations outstanding as of September 30, 2009 for the years ending as indicated below (in thousands):

	Less Than		1 to 3		3 to 5		More Than
	1 Year		Years		Years		5 years		Total
Operating leases	$	412	$	984	$	1,011	$	307	$	2,714
SurgiLight agreement		50		—		—		—		50
Insurance premium financing		75		—		—		—		75
Total	$	537	$	984	$	1,011	$	307	$	2,839

     In January 2008, Jake St. Philip was appointed our Chief Executive Officer. On March 5, 2009, Mr. St. Philip resigned as our Chief Executive Officer and as a director of our Board of Directors. On March 10, 2009, we entered into a Separation and General Release Agreement, or the Separation Agreement, with Mr. St. Philip. Pursuant to the Separation Agreement, we agreed to pay Mr. St. Philip a severance payment of $350,000 of which half was paid on May 9, 2009 and half will be paid in twelve consecutive equal monthly installments commencing on June 1, 2009. In addition, we agreed to pay COBRA premiums on his behalf for twelve months. The Separation Agreement superseded the employment agreement we had with Mr. St. Philip dated January 2, 2008.

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     On April 30, 2008, we appointed David M. Mulder as Chief Financial Officer. Mr. Mulder has an employment agreement that obligates us to pay him severance benefits under certain conditions, including termination without cause and resignation with good reason. In the event Mr. Mulder is terminated by us without cause or he resigns with good reason, the total severance benefits payable would be approximately $255,000 based on compensation in effect as of April 30, 2008, the date Mr. Mulder was appointed as our then current Chief Financial Officer. On March 5, 2009, Mr. Mulder was appointed Chief Executive Officer and appointed to our Board of Directors. On April 3, 2009, we modified the financial terms of Mr. Mulder’s employment with us, in connection with his appointment to the position of Chief Executive Officer. Under the new terms of Mr. Mulder’s employment, in the event he is terminated by us without cause or he resigns with good reason, we agreed to pay Mr. Mulder his base salary then in effect (or $250,000, his new base salary as modified on April 3, 2009) payable in twenty-four equal semi-monthly installments. In addition, we agreed to pay Mr. Mulder’s COBRA premiums for twelve months.

     On July 14, 2009, we appointed Brett L. Scott as Chief Financial Officer. Mr. Scott has an employment agreement that obligates us to pay him severance benefits under certain conditions, including termination without cause and resignation with good reason. In the event Mr. Scott is terminated by us without cause or he resigns with good reason, the total severance benefits payable would be approximately $100,000 based on compensation in effect as of July 14, 2009. In addition, we agreed to pay Mr. Scott’s COBRA premiums for six months.

     In addition to Mr. Mulder and Mr. Scott, certain other members of management are entitled to severance benefits payable upon termination following a change in control, which would approximate $1.8 million. Also, we have agreements with certain employees to pay bonuses based on targeted performance criteria.

     In addition to the amounts shown in the table above, $108,000 of unrecognized tax benefits have been recorded as liabilities in accordance with ASC 740, Accounting for Uncertainty in Income Taxes, and we are uncertain as to if or when such amounts may be settled. Related to these unrecognized tax benefits, we have also recorded a liability for potential penalties and interest of $23,000 and $20,000, respectively, at September 30, 2009.

     Our capital requirements will depend on many factors, including, among other things, the effects of any acquisitions we may pursue as well as the rate at which our business grows, with corresponding demands for working capital and manufacturing capacity. We could be required or may elect to seek additional funding through public or private equity or debt financing. However, a credit facility, or additional funds through public or private equity or other debt financing, may not be available on terms acceptable to us or at all.

Recent Accounting Pronouncements

     See Note 2 of the Notes to Consolidated Financial Statements (Unaudited) included in this report for a discussion on recent accounting pronouncements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We generate a portion of our net revenue from the sale of products outside the United States. Our sales from our international subsidiaries are denominated in their local currencies, and our sales in other international markets are denominated in U.S. dollars. As we do not engage in hedging transactions to offset foreign currency fluctuations, we are at risk for changes in the value of the dollar relative to the value of the foreign currency. An increase in the relative value of the dollar would lead to less income from sales denominated in foreign currencies unless we increase prices, which may not be possible due to competitive conditions in the respective foreign territories. Conversely, a decrease in the relative value of the dollar would lead to more income from sales denominated in foreign currencies. Additionally, we are obligated to pay expenses relating to international subsidiaries in their respective local currencies. Thus, we are also at risk for changes in the value of the dollar relative to the foreign currency with respect to our obligation to pay expenses relating to our international subsidiaries’ operations. An increase in the value of the dollar relative to the foreign currencies would reduce the expenses associated with the operations of our international subsidiaries’ facilities, whereas a decrease in the relative value of the dollar would increase the cost associated with the operations of our international subsidiaries’ facilities. As we have now transitioned most of our sales from through our foreign subsidiaries to sales through distributors, transactions not denominated in U.S. dollars should be reduced in the future.

     Through February 5, 2009, we had a line of credit which bore interest at rates based on the Prime Rate or LIBOR. At December 31, 2008, $5.4 million was outstanding under the line of credit at a rate of 3.5%. The line of credit was terminated on February 5, 2009 and the balance was repaid in full.

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     Our primary objective in managing our cash balances has been preservation of principal and maintenance of liquidity to meet our operating needs. Most of our excess cash balances are invested in money market accounts in which there is minimal interest rate risk.

ITEM 4. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

     Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2009. Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2009.

Changes in Internal Control over Financial Reporting

     In our Annual Report on Form 10-K for the year ended December 31, 2008, we disclosed management’s assessment that our internal control over financial reporting contained no material weaknesses. No change in internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) occurred in 2009 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.

     From time to time, we become involved in various claims and lawsuits of a character normally incidental to our business. In our opinion, there are no legal proceedings pending against us or any of our subsidiaries that are reasonably expected to have a material adverse effect on our financial condition or on our results of operations.

ITEM 1A. RISK FACTORS.

          Our business, financial condition, and results of operations can be impacted by a number of risk factors, any one of which could cause our actual results to vary materially from recent results or from our anticipated future results. The discussion of our business and operations should be read together with the risk factors below and those contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 which was filed with the SEC and describes the various risks and uncertainties to which we are or may be subject. Any of these risks could materially and adversely affect our business, financial condition and results of operations, which in turn could materially and adversely affect the price of our common stock or other securities. You must not construe the following statements as an exhaustive list of risks we face.

     The risk factors set forth below, captioned in bold and italic typeface, supersede the risk factors set forth under the identical caption contained in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, and otherwise compliment those remaining risk factors previously disclosed in such Annual Report.

The general slowdown of the economy and uncertainties in the global financial markets, our reliance on a primary distributor, and our lack of financing may adversely affect our liquidity, operating results, and financial condition.

     We are substantially dependent on our major distributor. The continued performance of this distributor and its willingness to renew and extend its firm commitment to make purchases of our products and associated consumables under a February 27, 2009 letter agreement amending our distribution agreement, and the receipt of cash in connection with those purchases, is critical to our liquidity at this time and going forward. We presently do not have any debt financing in place with a bank or other financial institution. As part of the February 2009 agreement, the distributor made an immediate initial purchase and agreed to make subsequent bi-monthly minimum purchases through March 31, 2010. Based upon these purchases, and based upon the general economic slowdown, we believe that the distributor’s inventory of our products has trended above historical levels, and this increase could be a factor in the distributor’s decision whether to extend our distribution agreement beyond March 31, 2010. Moreover, the distributor is under no obligation to extend the agreement, even if its inventory levels return to historical levels. If the distributor decided not to extend the agreement beyond March

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2010 for the first of two additional twelve month renewal periods, such a decision, combined with an absence of debt financing availability, could materially and adversely impact our operations.

     In the event our major distributor elects not to extend our distribution agreement beyond March 31, 2010, we would be forced to seek alternative channels for the sales of our products, including but not limited to establishing an alternative major distributor relationship, a series of small distributor relationships, selling directly to customers through a direct sales force, or a combination thereof. To the extent that the former distributor held inventory of our products, the distributor would likely look to significantly reduce such inventory, and could possibly decide to compete aggressively with us in sales to new customers following the end of this distribution relationship, until such time as the former distributor’s inventory of our products was exhausted. There can be no assurances that we would be able to compete effectively and profitably with the former distributor during this period on price and other terms, while the former distributor attempted to reduce, and possibly even seek to rapidly liquidate, its inventory of our products.

     Our obligations and operating requirements may require us to seek additional funding through public or private equity or debt financing, and we have no commitments for financing of any kind at this time. We may not be able to obtain requisite financing if necessary to fund existing obligations and operating requirements on acceptable terms or at all.

     Our business is sensitive to changes in general economic conditions. Financial markets inside the United States and internationally have experienced extreme disruption in recent months, including, among other things, extreme volatility in security prices, severely diminished liquidity and credit availability and declining valuations of investments. These disruptions are likely to have an ongoing adverse effect on the world economy. A continuing economic downturn and financial market disruptions may:

• reduce demand for our products and services, increase order cancellations and result in longer sales cycles and slower adoption of new technologies;

• increase the difficulty of collecting accounts receivable and the risk of excess and obsolete inventories;

• increase price competition in our served markets;

• result in supply interruptions, which could disrupt our ability to produce our products.

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ITEM 6. EXHIBITS

Exhibit No.	Description
10.1	Employment Agreement, dated July 13, 2009, by and between the Registrant and Brett L. Scott.
10.2†	Amendment to License and Distribution Agreement, dated September 10, 2009, by and between the Registrant and Henry Schein, Inc.
10.3	First Amendment to Lease, dated September 24, 2009, by and between the Registrant and The Irvine Company LLC.
31.1	Certification of David M. Mulder pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.
31.2	Certification of Brett L. Scott pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.
32.1	Certification of David M. Mulder pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Brett L. Scott pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

†    Confidential treatment was requested for certain confidential portions of this exhibit pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. In accordance with Rule 24b-2, these confidential portions were omitted from this exhibit and filed separately with the Securites and Exchange Commission.

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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.

Dated: November 6, 2009

BIOLASE TECHNOLOGY, INC., a Delaware corporation
By:	/s/ DAVID M. MULDER
	David M. Mulder
	Chief Executive Officer (Principal Executive Officer)
By:	/s/ BRETT L. SCOTT
	Brett L. Scott
	Chief Financial Officer (Principal Financial and Accounting Officer)

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EXHIBIT INDEX

Exhibit No.	Description
10.1	Employment Agreement, dated July 13, 2009, by and between the Registrant and Brett L. Scott.
10.2†	Amendment to License and Distribution Agreement, dated September 10, 2009, by and between the Registrant and Henry Schein, Inc.
10.3	First Amendment to Lease, dated September 24, 2009, by and between the Registrant and The Irvine Company LLC.
31.1	Certification of David M. Mulder pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.
31.2	Certification of Brett L. Scott pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.
32.1	Certification of David M. Mulder pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Brett L. Scott pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

†    Confidential treatment was requested for certain confidential portions of this exhibit pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. In accordance with Rule 24b-2, these confidential portions were omitted from this exhibit and filed separately with the Securites and Exchange Commission.

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EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

     EMPLOYMENT AGREEMENT (the “Agreement”) made as of the 13th day of July, 2009 by and between Biolase Technology, Inc. (the “Company”) and Brett L. Scott (“Executive”).

     WHEREAS, the Company and Executive wish to enter into a formal employment contract which will govern the terms and conditions applicable to Executive’s employment with the Company and will provide certain severance benefits for Executive in exchange for the Executive’s agreement to abide by the terms and conditions set forth in this Agreement.

     NOW, THEREFORE, the parties agree as follows:

PART ONE — TERMS AND CONDITIONS OF EMPLOYMENT

     1. Duties and Responsibilities.

          A. Executive shall serve as the Chief Financial Officer of the Company and shall report directly to the Company’s Chief Executive Officer and the Company’s Board of Directors (the “Board”). Executive shall perform the responsibilities of a chief financial officer of a public company, including such duties and functions as may be reasonably assigned to Executive from time to time by the Company’s Chief Executive Officer or the Board. Executive shall comply with all proper and reasonable directives and instructions of the Board, any committee of the Board and the Company’s Chief Executive Officer.

          B. Subject to the exceptions set forth in Paragraph 6, Executive agrees to devote his full business time and attention to the Company, to use his best efforts to advance the business and welfare of the Company, to render his services under this Agreement fully, faithfully, diligently, competently and to the best of his ability, and not to engage in any other employment activities while employed by the Company.

     2. Period of Employment. Executive’s employment with the Company shall be governed by the provisions of this Agreement commencing Tuesday, July 14, 2009 (the “Effective Date”) and for the duration of Executive’s employment with the Company. Executive’s employment shall be “at will” and may be terminated by either the Company or Executive in accordance with the provisions of Section 7. The period during which Executive’s employment continues in effect shall be referenced as the “Employment Period.”

     3. Base Salary.

          A. Executive shall be paid a base salary at the annual rate of not less than TWO HUNDRED THOUSAND dollars ($200,000) per annum (hereinafter “Base Salary”) during the Employment Period. The Base Salary may be increased from time to time in the sole and absolute discretion of the Board, and, if it has not already been so increased, will be increased up to TWO HUNDRED TEN THOUSAND dollars ($210,000) per annum when the reduced salary program currently in effect for Company senior executives is eliminated . The Base Salary may be decreased only in the event of a decrease of base compensation of all officers of the Company, and then by no greater percentage as the percentage decrease to the base compensation of all such officers. In the event of any increase or decrease as permitted by this Section 3.A., the Base Salary for all purposes shall be the increased or decreased amount in effect from time to time. Executive’s Base Salary shall be paid at periodic intervals in accordance with the Company’s payroll practices for salaried employees.

          B. The Company shall deduct and withhold from the compensation and benefits payable to Executive, including but not limited to Executive’s Base Salary, any and all applicable federal, state, and local income and employment withholding taxes and any other amounts required to be deducted or withheld by the Company under applicable statutes, regulations, ordinances or orders governing or requiring the withholding or deduction of amounts otherwise payable as compensation or wages to employees. The Company shall also deduct such amounts as may be authorized by Executive from time to time.

     4. Bonus; Stock Option Grant.

          A. For each full calendar year during the Employment Period, Executive may earn an annual Performance Bonus of up to twenty five percent (25%) of Base Salary (the “Performance Bonus Target”) based on achievement of Performance Bonus criteria. Said Performance Bonus criteria shall be determined in good faith by the Board of Directors or a committee thereof. For any partial year at the beginning of the Employment Period, the Performance Bonus Target shall be prorated based on the number of days in the calendar year during which Executive is employed by the Company divided by three hundred sixty-five (365). The bonus shall be paid no later than March 15 of the year following the year for which it is awarded. Executive must be employed by the Company as of December 31 of the year for which the bonus is awarded in order to earn the bonus (but need not be employed after December 31 to receive the bonus when it is paid).

          B. The Company shall grant to Executive, effective as of the Effective Date, a nonqualified stock option to purchase TWO HUNDRED AND TWENTY THOUSAND (220,000) shares of the Company’s common stock at a per share exercise price equal to the fair market value (determined based on the closing selling price per share on the grant date, as such price is reported by the National Association of Securities Dealers on the Nasdaq Stock Market and published in The Wall Street Journal) of the Company’s common stock on the grant date. Except as otherwise provided in Section 8.C., such stock option shall become exercisable for one-third (1/3) of the shares upon Executive’s completion of one year of service measured from the grant date and shall become exercisable for the balance of the shares in a series of eight successive three-month equal installments upon Executive’s completion of each additional three months of service over the twenty-four (24) month period measured from the first anniversary of the grant date. Such stock option shall have a term of ten (10) years, shall be granted under the Company’s equity plan and shall be subject to the terms and conditions of the Company’s equity plan and the notice of grant of stock option and the stock option agreement for such stock option.

     5. Fringe Benefits.

          A. Executive shall, throughout the Employment Period, be eligible to participate in any and all group term life insurance plans, group health plans, accidental death and dismemberment plans and short-term disability programs and other executive perquisites which are made available to the Company’s executives and for which Executive qualifies under the terms of such plans, policies or programs.

          B. Executive shall earn and accrue vacation time during the Employment Period at a rate of four (4) weeks of vacation per year. Executive shall not be permitted to accrue more than six (6) weeks vacation. Once this maximum has been reached, all further accruals will cease. Vacation accruals will recommence after Executive has taken vacation and his accrued hours have dropped below the accrual maximum. Executive will not earn vacation during any unpaid leaves. If a recognized holiday falls during Executive’s vacation period, it will not be considered as a vacation day.

          C. During the Employment Period, Executive shall be authorized to incur necessary and reasonable travel, entertainment and other business expenses in connection with his duties hereunder. The Company shall reimburse Executive for such expenses upon presentation of an itemized account and appropriate supporting documentation.

          D. Executive and the Company shall enter into an Indemnification Agreement in the form attached hereto as Exhibit D, which Indemnification Agreement shall be effective as of the Effective Date.

     6. Restrictive Covenants.

          A. Exclusive Service. During the Employment Period, Executive shall devote Executive’s full business time and energy solely and exclusively to the performance of Executive’s duties, except during periods of illness or vacation periods. During the Employment Period, Executive shall not directly or indirectly provide services to or through any person or entity, except the Company, unless otherwise authorized by the Board in writing. However, Executive may continue to serve during the Employment Period as a non-employee member of the board of

directors of the companies for which he so serves on the effective date of this Agreement (which are listed on Exhibit A hereto) and may join the board of directors of other companies in the future with the Board’s prior written consent. Executive shall have the right to perform such incidental services as are necessary in connection with (i) Executive’s private investments, but only if Executive is not obligated or required to (and shall not in fact) devote any significant managerial efforts, and (ii) Executive’s charitable or community activities, or participation in trade or professional organizations, but only if such incidental services do not materially interfere with the performance of Executive’s services, or violate Section 6.B.

          B. No Competitive Activities. During the Employment Period, Executive shall not directly or indirectly own, manage, operate, join, control or participate in the ownership, management, operation or control of, provide services to, or be employed by or connected in any manner with, any enterprise which is engaged in the Business; provided, however, that such restriction shall not apply to any passive investment representing an interest of less than two percent (2%) of an outstanding class of publicly-traded securities of any corporation or other enterprise which is not, at the time of such investment, engaged in the Business. For purposes of this Section 6, the “Business” shall refer to the design and manufacture of dental lasers, ophthalmologic lasers for Presbyopia, and such other businesses as the Company may expand into while Executive is employed by the Company, its parents, subsidiaries or affiliates.

          C. Confidential Information. As a condition of Executive’s receipt of the benefits provided for in this Agreement, Executive will execute the Company’s Confidential Information and Assignment of Inventions Agreement, a true and correct copy of which is attached to this Agreement as Exhibit B. Executive’s obligations under this Paragraph 6.C. and Exhibit B shall continue in effect after the termination of his employment with the Company, whatever the reason or reasons for such termination, and Executive acknowledges and agrees that the Company shall have the right to communicate with any future or prospective employer of Executive concerning Executive’s continuing obligations under this Paragraph 6.C. and Exhibit B.

          D. Non Solicitation of Employees. Executive agrees that during his Employment Period and for a period of twenty-four (24) months after termination of his employment with the Company, he shall not, directly or indirectly, through any other individual or entity, solicit any employee of the Company, to cease his or her employment with the Company, and Executive will not approach any such employee for any such purpose or knowingly authorize the taking of any such action by any other individual or entity.

          E. Non Solicitation of Customers. Executive agrees that during his employment by the Company, and any of its parents, subsidiaries or affiliates and for a period of twenty-four (24) months after termination of his employment with the Company, Executive shall not, without the prior written approval of the Company, directly or, with knowledge, indirectly, through or on behalf or any other individual or entity, solicit, entice or induce any business from any of the Company’s customers (including actively sought prospective customers) or suppliers/vendors, the identity of whom, or information concerning, rises to the level of a “trade secret” within the meaning of the Uniform Trade Secrets Act (“UTSA”).

          F. Injunctive Relief. Executive acknowledges that monetary damages may not be sufficient to compensate the Company for any economic loss which may be incurred by reason of his breach of the foregoing restrictive covenants. Accordingly, in the event of any such breach, the Company shall, in addition to the termination of this Agreement and any remedies available to the Company under other provisions of this Agreement and/or at law, be entitled to obtain equitable relief in the form of an injunction precluding Executive from continuing such breach.

     7. Termination of Employment.

          A. Executive’s employment may be terminated by either the Company or Executive at any time, for any reason, with or without Cause, upon written notice specifying the Effective Date of Termination, and without additional compensation, except as otherwise provided in Section 8. Except as provided in Sections 7.B. and 7.C., the Effective Date of Termination specified in the written notice may be immediate.

          B. For purposes of this Agreement, termination for “Cause” shall mean the involuntary termination of the Executive’s employment by the Company for any of the following reasons:

               (i) Executive’s conviction by, or entry of a plea of guilty in, a court of competent jurisdiction for any felony;

               (ii) A substantial and continual refusal by Executive to perform his duties and functions hereunder in accordance with the instructions of the Board as embodied in written resolutions of the Board and communicated in writing to Executive (provided that such instructions do not require Executive to take any actions that Executive reasonably believe to be are unlawful after a reasonable inquiry);

               (iii) the willful and material breach of this Agreement by Executive which, if curable, Executive fails to cure within thirty (30) business days following written notice from the Company;

               (iv) Executive’s conviction by, or entry of a plea of guilty a nolo contendere, in a court of competent jurisdiction, for any act of fraud, misappropriation or embezzlement in connection with his employment by the Company;

               (v) Executive is unable to perform the essential functions of his job for ninety (90) or more consecutive days in any 12 month period; provided that such inability to perform is not due to the Executive’s status as disabled under any short or long term disability provisions of the Company’s Employee Benefit Plans; or

               (vi) Executive’s death.

     An involuntary termination of Executive’s employment by the Company in any other circumstances or for any other reason will be a termination “Without Cause.”

          C. For purposes of this Agreement, Executive’s resignation for “Good Reason” shall mean the resignation of employment by Executive following the occurrence of:

               (i) a material diminution in Executive’s Base Salary;

               (ii) a material diminution in Executive’s authority, duties or responsibilities (other than a temporary suspension of authority, duties or responsibilities due to Executive’s illness or disability, or an investigation of misconduct), or the assignment to Executive of any duties materially inconsistent with the Executive’s position, authority, duties or responsibilities without the consent of Executive;

               (iii) a material change in the geographic location of Executive’s regular office location (for purposes of this Section 7.C(iii), a relocation of Executive’s regular office by more than fifty (50) miles shall be deemed to be a material change in the geographic location); or

               (iv) The Company’s material breach of this Agreement.

In order for Executive to resign for Good Reason, Executive must provide advance written notice of such resignation to the Company within sixty (60) days following the initial existence of the action or event giving rise to Good Reason. The notice must specifying an Effective Date of Termination that is not less than thirty (30) days, nor more than forty-five (45) days, after the date of the written notice, and Executive agrees that should the Company remedy the basis for such resignation prior to the Effective Date of Termination specified in the written notice, then Executive may not resign for Good Reason. The Company may relieve Executive of some or all of his duties, responsibilities and authority during any notice period, and such relief shall not serve as a basis for Executive to claim “Good Reason” under Section 7.C.(ii), provided, that the Company reinstates such duties, responsibilities and authority not later the last of such notice period.

          D. The “Effective Date of Termination” shall be: (i) in the case of termination due to death, the date of Executive’s death, or (ii) in the case of any other termination, the date of Executive’s separation from service, within the meaning of Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (the “Code”), and the Treasury regulations thereunder, from the Company and its subsidiaries or affiliates (the “Separation from Service”) specified in the written notice required by this Section.

          E. On the Effective Date of Termination of Executive’s employment for any reason during the Employment Period, Executive shall be paid all Base Salary earned through the end of the Employment Period, any unpaid business expenses, and any unused vacation earned through the Effective Date of Termination. Unless Executive is entitled to severance benefits under Section 8, he shall not be entitled to any compensation or benefits following the Effective Date of Termination, except as required by law or as provided under a retirement or welfare benefit plan of the Company.

          F. Executive shall resign from Executive’s position as the Chief Financial Officer of the Company, and shall resign from all other positions with the Company or any of its subsidiaries, effective as of the Effective Date of Termination.

PART TWO — SEVERANCE BENEFITS

     8. Benefit Entitlement.

          A. Executive shall be entitled to receive the severance benefits specified in Section 8.B. or Section 8.C., as the case may be, in the event that: (i) the Company terminates Executive’s employment Without Cause, or (ii) Executive resigns for Good Reason (providing the notice and allowing the Company to cure as provided in Section 7.C.). Such severance benefits shall be conditioned upon Executive properly executing on or after the Effective Date of Termination, and not revoking or attempting to revoke within the permitted timeframe, a general release of claims against the Company, its Board, its affiliates, and their employees and agents substantially in the form of Exhibit C or, in the event of a change in the law that would limit the effect of the release attached as Exhibit C, a general release that would have the same scope and effect as the release attached as Exhibit C (such release, the “Release”) and the Release becoming irrevocable within fifty-two (52) days following the Effective Date of Termination. Executive shall not be entitled to receive the severance benefits specified in Section 8 in the event Executive fails to timely execute the Release or Executive timely revokes the Release.

     All severance payments made to Executive pursuant to Section 8 shall be subject to all applicable withholding requirements. In no event shall Executive be entitled to severance benefits under both Sections 8.B and 8.C and under no circumstances shall any severance payments or benefits be payable if Executive’s employment is terminated for Cause or Executive resigns for other than Good Reason (as such terms are defined in Sections 7.B. and 7.C., respectively). The severance benefits shall be paid to Executive not later than the last day of Executive’s second taxable year following Executive’s taxable year in which the Effective Date of Termination occurs.

          B. Subject to Section 8.C., in the event Executive’s employment terminates, and the Release becomes irrevocable, under the conditions described in Section 8.A, Executive shall be entitled to severance benefits of:

               (i) Six (6) months of Executive’s annual Base Salary in effect under Section 3.A as of the Effective Date of Termination, payable in twelve (12) equal semi-monthly installments, during the six (6) months commencing on the first day of the calendar month next following sixty (60) days after the Effective Date of Termination, coinciding with the Company’s regular payroll cycle; and

               (ii) Company paid COBRA premiums for Executive (and his eligible dependents) under the Company’s medical and dental benefit plans, as in effect from time to time, for the six (6) month period following the Effective Date of Termination. The benefits under such plans shall be provided through insurance maintained by the Company.

          C. In the event Executive’s employment terminates, and the Release becomes irrevocable, under the conditions described in Section 8.A, and the Effective Date of Termination is during the twelve (12) months following a Change of Control, Executive shall be entitled to the following severance benefits (which shall be in lieu of the severance benefit under Section 8.B.):

               (i) Executive’s nonqualified stock option granted pursuant to Section 4.B. shall become fully vested and exercisable on the first business day that is at least sixty (60) days after the Effective Date of Termination;

               (ii) Six months of Executive’s annual Base Salary in effect under Section 3.A as of the Effective Date of Termination, payable in a lump sum in cash. The Company shall pay such lump sum payment on the first business day that is at least sixty (60) days after the Effective Date of Termination; and

               (iii) Company paid COBRA premiums for Executive (and his eligible dependents) under the Company’s medical and dental benefit plans, as in effect from time to time, for the six (6) month period following the Effective Date of Termination. The benefits under such plans shall be provided through insurance maintained by the Company.

For purposes of the this Agreement, a “Change of Control” shall mean the occurrence of any of the following events following the Effective Date: (i) an acquisition of any voting securities of the Company by any “person” (as the term “person” is used for purposes of Section 13(d) or Section 14(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”)) immediately after which such person has “beneficial ownership” (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of 50% or more of the combined voting power of the Company’s then outstanding voting securities; or (ii) the consummation of: (x) a merger, consolidation, share exchange or reorganization involving the Company, unless the stockholders of the Company, immediately before such merger, consolidation, share exchange or reorganization, own, directly or indirectly immediately following such merger, consolidation, share exchange or reorganization, at least 50% of the combined voting power of the outstanding voting securities of the corporation that is the successor in such merger, consolidation, share exchange or reorganization in substantially the same proportion as their ownership of the voting securities immediately before such merger, consolidation, share exchange or reorganization; (y) a complete liquidation or dissolution of the Company; or (z) the sale or other disposition of all or substantially all of the assets of the Company; or (iii) the majority of members of the Board are replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the Board prior to the date of such appointment or election.

          D. Parachute Payment. If any payment or benefit the Executive would receive pursuant to a Change of Control or otherwise (“Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall be reduced to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount, after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in the Executive’s receipt, on an after-tax basis, of the greater amount of the Payment notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in payments or benefits constituting “parachute payments” is necessary so that the Payment equals the Reduced Amount, reduction shall occur in the following order unless the Executive elects in writing a different order (provided, however, that such election shall be subject to Company approval if made on or after the effective date of the event that triggers the Payment): (1) reduction of cash payments, (2) cancellation of accelerated vesting of equity awards, and (3) reduction of employee benefits. In the event that acceleration of vesting of equity award compensation is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant of the Executive’s equity awards unless the Executive elects in writing a different order for cancellation.

     The accounting firm engaged by the Company for general audit purposes as of the day prior to the effective date of the Change of Control shall perform the foregoing calculations. If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, or is unwilling to perform this function, then the Company shall appoint a nationally recognized accounting firm to make the determinations required hereunder. The Company shall bear all expenses with respect to the determinations by such accounting or law firm required to be made hereunder.

     The accounting firm engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to the Executive and the Company within fifteen (15) calendar days after the date on which the Executive’s right to a Payment is triggered (if requested at that time by the Executive or the Company) or such other time as requested by the Executive or the Company. If the accounting or law firm determines that no Excise Tax is payable with respect to a Payment, either before or after the application of the Reduced Amount, it shall furnish the Executive and the Company with an opinion reasonably acceptable to the Executive that no Excise Tax will be imposed with respect to such Payment. Any good faith determinations of the

accounting or law firm made hereunder shall be final, binding and conclusive upon the Executive and the Company.

          E. The severance benefits provided Executive under this Paragraph 8 are the only severance benefits to which Executive is entitled upon the termination of his employment with the Company, and no other benefits shall be provided to Executive by the Company pursuant to any other severance plan or program of the Company, except as required by applicable law. Executive acknowledges and agrees that but for his execution of this Agreement, he would not be entitled to the severance benefits provided under this Paragraph 8.

          F. Notwithstanding the foregoing, if the Executive is a specified employee, as defined under Section 409A(a)(2)(B)(i) of the Code, on the date of Executive’s Separation from Service, to the extent that the payments or benefits under this Section 8 are subject to Section 409A of the Code and the delayed payment or distribution of all or any portion of such amounts to which Executive is entitled under Section 8 is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, then such payment or portion thereof shall be paid or distributed to Executive during the thirty (30) day period commencing on the earlier of (a) the expiration of the six-month period commencing on the date of Executive’s Separation from Service or (b) the date of Executive’s death.

PART THREE — MISCELLANEOUS PROVISIONS

     9. Successors and Assigns. The provisions of this Agreement shall inure to the benefit of, and shall be binding upon, the Company, its successors and assigns. This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributes, devisees and legatees.

     10. Creditor Status. The benefits to which Executive may become entitled under Part Two of this Agreement shall be paid, when due, from the Company’s general assets, and no trust fund, escrow arrangement or other segregated account shall be established as a funding vehicle for such payments. Executive is not waiving any rights he may have to collect any monies due to Executive under this Agreement in the same manner as any other employee of the Company would have.

     11. Notices.

          A. Any and all notices, demands or other communications required or desired to be given by any party shall be in writing and shall be validly given or made to another party if served either personally or if deposited in the United States mail, certified or registered, postage prepaid, return receipt requested. If such notice, demand or other communication shall be served personally, service shall be conclusively deemed made at the time of such personal service. If such notice, demand or other communication is given by overnight delivery, it shall be conclusively deemed given the day after it was sent addressed to the party to whom such notice, demand or other communication is to be given. If such notice, demand or other communication is given by mail, it shall be conclusively deemed given two (2) days after it was deposited in the United States mail addressed to the party to whom such notice, demand or other communication is to be given. The address for notice for each of the parties shall be as follows:

if to the Company:

Biolase Technology, Inc.
Attn: Chief Executive Officer
4 Cromwell
Irvine, California 92618

  with a copy to:

Biolase Technology, Inc.
Attn: General Counsel
4 Cromwell
Irvine, California 92618

if to Executive:

To the address listed as Executive’s principal residence in the Company’s human resources records and to his principal place of employment with the Company.

          B. Both parties agree that if notice is by mail, then in good faith, the party giving notice will attempt to contact the other by their last known phone number and email address, to ensure notice was received.

          C. Any party may change its address for the purpose of receiving notices, demands and other communications by a written notice given in the described manner to the other party.

     12. Governing Document. Except as otherwise provided or referenced herein, this Agreement constitutes the entire agreement and understanding of the Company and Executive with respect to the terms and conditions of Executive’s employment with the Company and the payment of severance benefits and supersedes all prior and contemporaneous written or verbal agreements and understandings between Executive and the Company relating to such subject matter. This Agreement may only be amended by written instrument signed by Executive and an officer of the Company specifically authorized by the Board for such purpose. Any and all prior agreements, understandings or representations relating to the Executive’s employment with the Company are terminated and cancelled in their entirety and are of no further force or effect.

     13. Governing Law. The provisions of this Agreement will be construed and interpreted under the laws of the State of California applicable to agreements executed and to be wholly performed within the State of California. If any provision of this Agreement as applied to any party or to any circumstance should be adjudged by a court of competent jurisdiction to be void or unenforceable for any reason, the invalidity of that provision shall in no way affect (to the maximum extent permissible by law) the application of such provision under circumstances different from those adjudicated by the court, the application of any other provision of this Agreement, or the enforceability or invalidity of this Agreement as a whole. Should any provision of this Agreement become or be deemed invalid, illegal or unenforceable in any jurisdiction by reason of the scope, extent or duration of its coverage, then such provision shall be deemed amended to the extent necessary to conform to applicable law so as to be valid and enforceable or, if such provision cannot be so amended without materially altering the intention of the parties, then such provision will be stricken and the remainder of this Agreement shall continue in full force and effect.

     14. Arbitration. Any controversy, claim or dispute between the parties directly or indirectly concerning this Agreement, or the breach or subject matter hereof, including, but not limited to, the granting, terms, vesting or exercisability of the Option Shares, shall be finally settled by arbitration held in Orange County, California. The arbitration will be held under the auspices of either the American Arbitration Association (“AAA”) or Judicial Arbitration & Mediation Services, Inc. (“J • A • M • S”), with the designation of the sponsoring organization to be made by the party who did not initiate the claim. The arbitration shall be in accordance with the AAA’s then-current employment arbitration procedures (if AAA is designated) or the then-current J • A • M • S employment arbitration rules (if J • A • M • S is designated). The arbitrator shall be either a retired judge, or an attorney licensed to practice law in the state in which the arbitration is convened (the “Arbitrator”). The Arbitrator shall have jurisdiction to hear and rule on pre-hearing disputes and is authorized to hold pre-hearing conferences by telephone or in person, as the Arbitrator deems necessary. The Arbitrator shall have the authority to entertain a motion to dismiss, demurrer, and/or a motion for summary judgment by any party and shall apply the standards governing such motions under the federal rules of civil procedure applicable in the location of the arbitration. The Arbitrator shall render a written award and opinion which reveals, however briefly, the essential findings and conclusions on which the award is based. The arbitration shall be final and binding upon the parties, except as otherwise provided for by the law applicable to review of arbitration decisions/awards. Either party may bring an action in any court of competent jurisdiction to compel arbitration under this Agreement and/or to enforce an arbitration award. The Company will pay the Arbitrator’s fees and any other fees, costs or expenses unique to arbitration, including the filing fee, the fees and costs of the Arbitrator, and rental of a room to hold the arbitration hearing. However, if Executive is the party initiating the claim, Executive shall be responsible for contributing an amount equal to the filing fee to initiate a claim in the court of general jurisdiction in the state which Executive is (or was last) employed by the Company. The Arbitrator may award reasonable legal fees and/or costs to the prevailing party in any dispute subject to arbitration under this Agreement. Notwithstanding the foregoing either party may seek temporary or preliminary

injunction relief in any court of competent jurisdiction if such relief is unavailable or cannot be timely obtained through Arbitration.

     15. Remedies. All rights and remedies provided pursuant to this Agreement or by law shall be cumulative, and no such right or remedy shall be exclusive of any other. A party may pursue any one or more rights or remedies provided by this Agreement or may seek damages or specific performance in the event of another party’s breach or may pursue any other remedy by law or equity, whether or not stated in this Agreement.

     16. Counterparts. This Agreement may be executed in more than one counterpart, each of which shall be deemed an original, but all of which together shall constitute but one and the same instrument.

     IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the day and year written above.

BIOLASE TECHNOLOGY, INC.
By:	/s/ David M. Mulder
	Name:	David M. Mulder
	Title:	Chief Executive Officer
BRETT L. SCOTT
/s/ Brett L. Scott

EXHIBIT A TO

BRETT L. SCOTT EMPLOYMENT AGREEMENT

DATED AS OF July 13, 2009

LIST OF APPROVED DIRECTORSHIPS

Nanomega Medical Corporation — Board of Directors

Quiescence Medical — Advisory Board Member

Waypoint Leadership — Advisory Board Member

BIOLASE TECHNOLOGY, INC.

PROPRIETARY INFORMATION AGREEMENT

As an employee of Biolase Technology, Inc., its subsidiary or its affiliate (together, the “Company”), and in consideration of the compensation now and hereafter paid to me, I agree to the following:

1) Maintaining Confidential Information

     a) Company Information. I agree at all times during the term of my employment and thereafter, except for the benefit of the Company, to hold in the strictest confidence, and not to use or to disclose to any person, firm or corporation without written authorization of the Board of Directors of the Company, any trade secrets, confidential knowledge, data or other proprietary information relating to products, processes, know-how, designs, formulas, developmental or experimental work, computer programs, data bases, other original works of authorship, customer lists, business plans, financial information or other subject matter pertaining to any Business of the Company or any of its clients, consultants or licensees.

     b) Former Employer Information. I agree that I will not, during my employment with the Company, improperly use or disclose any proprietary information or trade secrets of my former or concurrent employers or companies, if any, and that, to my knowledge, I will not bring onto the premises of the Company any unpublished document or any property belonging to my former or concurrent employers or companies, if any, unless consented to in writing by said employers or companies.

     c) Third Party Information. I recognize that the Company has received and in the future will receive from third parties their confidential or proprietary information subject to a duty on the Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes. I agree that I owe the Company and such third parties, during the term of my employment and thereafter, a duty to hold all such confidential and proprietary information in the strictest confidence and not to disclose it to any person, firm or corporation (except as necessary in carrying out my work for the Company consistent with the Company’s agreement with such third party) or to use it for the Company’s benefit of anyone other than for the Company or such third party (consistent with Company’s agreement with such third party) without the express written authorization of the Board of Directors of Biolase Technology, Inc.

2) Retaining and Assigning Inventions and Original Works

     a) Inventions and Original Works Assigned to the Company. I agree that I will promptly make full written disclosure to the Company, will hold in trust for the sole right and benefit of the Company, and will and hereby do assign to the Company all my right, title, and interest in and to any and all inventions, original works of authorship, developments, improvements or trade secrets which I may solely or jointly conceive or develop or reduce to practice, or cause to be conceived or developed or reduced to practice, during the period of time I am in the employ of the Company related to the Business of the Company. For purposes of this Agreement, the “Business of the Company” is defined as the design and manufacture of dental lasers, ophthalmic lasers for Presbyopia, and such other expansions related to the Business of the Company or entirely new markets the Company may enter during the term of my employment. I recognize, however, that Section 2870 of the California Labor Code (as set forth in Exhibit 1 attached hereto) exempts from assignment under this provision any invention as to which I can prove the following:

     i) It was developed entirely on my own time; and

     ii) No equipment, supplies, facilities or trade secrets of the Company were used in its development; and

     iii) It did not relate, at the time of its conception or its reduction to practice, to the Business of the Company or to the Company’s actual or demonstrably anticipated research and development; and

     iv) It did not result from any work performed by me for the Company.

          I acknowledge that all original works of authorship which are made by me (solely or jointly with others) within the scope of my employments and which are protectable by copyright are “works made for hire,” as that term is defined in the United States Copyright Act (17 USCA, Section 101).

     b) Inventions Assigned to the United States. I agree to assign to the United States government all my right, title, and interest in and to any and all inventions, original works of authorship, developments, improvements or trade secrets whenever such full title is required to be in the United States by a contract between the Company and the United States or any of its agencies.

     c) Obtaining Letters Patent, Copyrights and Mask Work Rights. I agree that my obligation to assist the Company to obtain United States or foreign letters patent, copyrights, or mask work rights covering inventions, works of authorship, and mask works, respectively, assigned hereunder to the Company shall continue beyond the termination of my employment, but the Company shall compensate me at a reasonable rate for time actually spent by me at the Company’s request on such assistance. If the Company is unable because of my mental or physical incapacity or for any other reason to secure my signature to apply for or to pursue any application for any United States or foreign letters patent, copyright, or mask rights covering inventions or other rights assigned to the Company as above, then I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agent and attorney in fact, to act for and in my behalf and stead to execute and file any such applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent, copyrights, and mask work rights with the same legal force and effect as if executed by me. I hereby waive and quitclaim to the Company any and all claims, of any nature whatsoever, which I now or may hereafter have for infringement of any patents, copyrights, or mask work rights resulting from such application assigned hereunder to the Company.

     d) Exception to Assignments. I understand that the provisions of this Agreements requiring assignment to the Company do not apply to any invention which qualifies fully under the provisions of Section 2870 of the California Labor Code, a copy of which is attached hereto as Exhibit 1. I understand that the Company will keep in confidence and will not disclose to third parties without my consent any confidential information disclosed in writing to the Company relating to inventions that qualify fully under the provisions of Section 2870 of the California Labor Code.

3) Returning Company Documents. I agree that to my best efforts, at the time of leaving the employ of the Company, I will deliver to the Company (and will not keep in my possession or deliver to anyone else) any and all devices, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, other documents or property, or reproductions of any aforementioned items belonging to the Company, its successors or assigns, which constitutes a trade secret(s) and/or proprietary information of the Company. In the event of the termination of my employment, I agree to sign and deliver the “Termination Certification” attached hereto as Exhibit 2.

4) Representations. I agree to execute any proper oath or verify any proper document required to carry out the terms of this Agreement. I represent that my performance of all the terms of this Agreement will not breach any agreement to keep in confidence proprietary information acquired by me in confidence or in trust prior to my employment by the Company. I have not entered into, and I agree I will not enter into, any oral or written agreement in conflict herewith.

5) General Provisions

     a) Governing Law. This Agreement will be governed by the laws of the State of California.

     b) Entire Agreement. This Agreement sets forth the entire agreement and understanding between the Company and me relating to the subject matter herein and merges all prior discussions between us. No modification of or amendment to this Agreement, nor any waiver of any rights under this agreement, will be effective unless in writing signed by the party to be charged. Any subsequent change or changes in my duties, salary or compensation will not affect the validity or scope of this Agreement.

     c) Severability. If one or more of the provisions in this Agreement are deemed void by law, then the remaining

provisions will continue in full force and effect.

     d) Successors and Assigns. This Agreement will be binding upon my heirs, executors, administrators and other legal representatives and will be for the benefit of the Company, its successors, its assigns, and any third parties for which the company has developed proprietary technology.

     e) At-Will Employment. I acknowledge that this agreement is not intended and does not constitute a contract between me and the Company limiting the rights of either of us to terminate my employment by the Company at any time for any reason with or without cause.

     f) Notification to New Employer. In the event that I leave the employ of the Company, I hereby grant consent to notification by the Company to my new employer about my rights and obligations under this agreement.

Dated as of July 14, 2009

	Signature
	Name of Employee (typed or printed)
Witness

EXHIBIT 1

TO PROPRIETARY INFORMATION AGREEMENT

CALIFORNIA LABOR CODE SECTION 2870

EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RIGHTS

     “(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either:

1)	Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual demonstrably anticipated research or development of the employee.
2)	Result from any work performed by the employee for the employer.

     (b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.”

EXHIBIT 2

TO PROPRIETARY INFORMATION AGREEMENT

BIOLASE TECHNOLOGY, INC.

TERMINATION CERTIFICATION

This is to certify that based on a reasonably diligent search by me, and to the best of my knowledge, I do not have in my possession, nor have I failed to return, any devices, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, other documents or property, or reproductions of any aforementioned items which is a trade secret and/or proprietary information belonging to Biolase Technology, Inc., its subsidiaries, affiliates, successors or assigns (together, the “Company”).

I further certify that, to the best of my knowledge, I have complied with all the terms of the Company’s Employee Proprietary Information Agreement signed by me.

I further agree that, in compliance with the Employee Proprietary Information Agreement, I will preserve as confidential all trade secrets, confidential knowledge, data or other proprietary information relating to products, processes, know-how, designs, formulas, developmental or experimental work, computer programs, data bases, other original works of authorship, customer lists, business plans, financial information or other subject matter pertaining to any Business of the Company or any of its clients, consultants or licensees which is proprietary and/or confidential information to the Company.

Date:                                        

(Employee’s Signature)

(Type/Print Employee’s Name)

EXHIBIT C TO

BRETT L. SCOTT EMPLOYMENT AGREEMENT

DATED AS OF July 13, 2009

GENERAL RELEASE AND WAIVER OF CLAIMS

     In consideration of the payments and other benefits set forth in the Employment Agreement dated July 13, 2009 (the “Agreement”), to which this form shall be deemed to be attached, Brett L. Scott (“Executive”) hereby agrees to the following general release and waiver of claims (“General Release”).

     In exchange for the consideration provided to Executive by the Agreement that Executive is not otherwise entitled to receive, Executive hereby generally and completely releases Biolase Technology, Inc. (the “Company”) and its directors, officers, employees, shareholders, partners, agents, attorneys, predecessors, successors, parent and subsidiary entities, insurers, affiliates, and assigns from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring prior to my signing this General Release. This general release includes, but is not limited to: (1) all claims arising out of or in any way related to Executive’s employment with the Company or the termination of that employment; (2) all claims related to Executive’s compensation or benefits from the Company, including salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, or any other ownership interests in the Company; (3) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (4) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (5) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under Title VII of the 1964 Civil Rights Act, as amended, the Age Discrimination in Employment Act, the California Fair Employment and Housing Act, the Equal Pay Act of 1963, as amended, the provisions of the California Labor Code, the Americans with Disabilities Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), the Sarbanes-Oxley Act of 2002, and any other state, federal, or local laws and regulations relating to employment and/or employment discrimination. The only exceptions are claims Executive may have for unemployment compensation and worker’s compensation, Base Salary (through the date of termination), outstanding business expenses, unused vacation earned through the date of termination of Executive, claims to accrued and vested benefits under the Company’s employee benefit plans, and claims to the severance benefits which are the consideration for this General Release.

     Executive expressly waives and relinquishes any and all rights and benefits Executive now has or may have in the future under the terms of Section 1542 of the Civil Code of the State of California, which sections reads in full as follows:

A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.

Notwithstanding said Code Section, Executive knowingly and voluntarily waives the provisions of Section 1542 as well as any other statutory or common law provisions of similar effect and acknowledges and agrees that this waiver is an essential part of this Agreement.

     Executive acknowledges that, among other rights, Executive is waiving and releasing any rights Executive may have under ADEA, that this General Release is knowing and voluntary, and that the consideration given for this General Release is in addition to anything of value to which Executive was already entitled as an executive of the Company. Executive further acknowledge that Executive has been advised, as required by the Older Workers

Benefit Protection Act, that: (a) the General Release granted herein does not relate to claims under the ADEA which may arise after this General Release is executed; (b) Executive has the right to consult with an attorney prior to executing this General Release (although Executive may choose voluntarily not to do so); and (c) Executive has twenty-one (21) days from the date of termination of Executive’s employment with the Company in which to consider this General Release (although Executive may choose voluntarily to execute this General Release earlier, in which case he voluntarily waives the remainder of the twenty-one (21) day period); (d) Executive has seven (7) days following the execution of this General Release to revoke his consent to this General Release; and (e) this General Release shall not be effective until the seven (7) day revocation period has expired.

     Executive acknowledges his continuing obligations under the Proprietary Information and Inventions Agreement and the non-solicitation provisions set forth in Section 6 of the Agreement. Nothing contained in this General Release shall be deemed to modify, amend or supersede the obligations set forth in that agreement.

     By signing this General Release, Executive hereby represents that he is not aware of any affirmative conduct or the failure to act on the part of the Company, its officers, directors, and/or employees concerning the Company’s business practices, its reporting obligations, its customers and/or prospective customers, its products, and/or any other any other aspect of the Company’s business, which Executive has any reason to believe rises to the level of unfair, improper and/or unlawful conduct pursuant to any state or federal law, rule, regulation or order, including, but not limited to, any rule, regulation or decision promulgated or enforced by the Securities and Exchange Commission, or which has been promulgated or enforced by any other state or federal office or administrative body pursuant to the Sarbanes-Oxley Act of 2002.

     With the exception of the terms set forth in the Proprietary Information Agreement and the non-solicitation provisions set forth in Section 6 of the Agreement, this General Release constitutes the complete, final and exclusive embodiment of the entire agreement between the Company and Executive with regard to the subject matter hereof. Executive is not relying on any promise or representation by the Company that is not expressly stated herein and the Company is not relying on any promise or representation by Executive that is not expressly stated herein. This General Release may only be modified by a writing signed by both Executive and a duly authorized officer of the Company.

     The Company and Executive agree that for a period of ten (10) years after Executive’s employment with the Company ceases, they will not, in any communication with any person or entity, including any actual or potential customer, client, investor, vendor, or business partner of the Company, or any third party media outlet, make any derogatory or disparaging or critical negative statements — orally, written or otherwise — against the other, or against the Executive’s estate or affiliates, any of the Company’s directors, officers or employees. The parties acknowledge and agree that the obligation on the part of the Company not to make any derogatory statements as set forth in this paragraph shall only apply to the Company’s officers and directors.

     The parties agree that this General Release does not in any way compromise or lessen Executive’s rights to be indemnified by the Company pursuant to that certain Indemnification Agreement dated April 29, 2008, pursuant to the Company’s by-laws or certificate of incorporation, or otherwise be covered under any applicable insurance policies that Executive would otherwise be entitled to receive and/or be covered by.

     The parties agree that in no way does this General Release preclude Executive from enforcing his ownership rights pertaining to any stock or stock options which may have been purchased by Executive or granted to Executive by the Company pursuant to a written stock option grant and/or as memorialized in a written Board Resolution (and as reported periodically in the Company’s proxy statements).

BIOLASE TECHNOLOGY, INC.
 

By:  

Title:

Dated:

Dated:

BRETT L. SCOTT 

INDEMNIFICATION AGREEMENT

     This Indemnification Agreement (this “Agreement”) is entered into as of July 14, 2009 (the “Effective Date”), by and between BIOLASE TECHNOLOGY, INC., a Delaware corporation (the “Company”), and Brett L. Scott (“Indemnitee”).

RECITALS

     A. Indemnitee is either a member of the board of directors of the Company (the “Board of Directors”) or an officer of the Company, or both, and in such capacity or capacities, or otherwise as an Agent (as hereinafter defined) of the Company, is performing a valuable service for the Company.

     B. Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that he or she be indemnified as herein provided.

     C. It is intended that Indemnitee shall be paid promptly by the Company all amounts necessary to effectuate in full the indemnity provided herein.

     NOW, THEREFORE, in consideration of the premises and the covenants in this Agreement, and of Indemnitee continuing to serve the Company as an Agent and intending to be legally bound hereby, the parties hereto agree as follows:

          1. Services by Indemnitee. Indemnitee agrees to serve as an Agent of the Company. Indemnitee may from time to time also perform other services at the request or for the convenience of, or otherwise benefiting, the Company. Indemnitee may at any time and for any reason resign or be removed from such position (subject to any other contractual obligation or other obligation imposed by operation of law), in which event the Company shall have no obligation under this Agreement to continue Indemnitee in any such position.

          2. Indemnification. Subject to the limitations set forth herein and in Section 7 hereof, the Company hereby agrees to indemnify Indemnitee as follows:

          The Company shall, with respect to any Proceeding (as hereinafter defined) associated with Indemnitee’s being an Agent of the Company, indemnify Indemnitee to the fullest extent permitted by applicable law and the Certificate of Incorporation of the Company in effect on the date hereof or as such law or Certificate of Incorporation may from time to time be amended (but, in the case of any such amendment, only to the extent such amendment permits the Company to provide broader indemnification rights than the law or Certificate of Incorporation permitted the Company to provide before such amendment). The right to indemnification conferred herein and in the Certificate of Incorporation shall be presumed to have been relied upon by Indemnitee in serving or continuing to serve the Company as an Agent and shall be enforceable as a contract right. Without in any way diminishing the scope of the indemnification provided by this Section 2, the Company will indemnify Indemnitee to the full extent permitted by law if and wherever Indemnitee is or was a party or is threatened to be made a party to any Proceeding, including any Proceeding brought by or in the right of the Company, by reason of the fact that Indemnitee is or was an Agent or by reason of anything done or not done by Indemnitee in such capacity, against Expenses (as hereinafter defined) and Liabilities (as hereinafter defined) actually and reasonably incurred by Indemnitee or on his or her behalf in connection with the investigation, defense, settlement or appeal of such Proceeding. In addition to, and not as a limitation of, the foregoing, the rights of indemnification of Indemnitee provided under this Agreement shall include those rights set forth in Sections 3 and 9 below. Notwithstanding the foregoing, the Company shall be required to indemnify Indemnitee in connection with a Proceeding commenced by Indemnitee (other than a Proceeding commenced by Indemnitee to enforce Indemnitee’s rights under this Agreement) only if the commencement of such Proceeding was authorized by the Board of Directors.

          3. Advancement of Expenses. All reasonable Expenses incurred by or on behalf of Indemnitee (including

costs of enforcement of this Agreement) shall be advanced from time to time by the Company to Indemnitee within thirty (30) days after the receipt by the Company of a written request for an advance of Expenses, whether prior to or after final disposition of a Proceeding (except to the extent that there has been a Final Adverse Determination (as hereinafter defined) that Indemnitee is not entitled to be indemnified for such Expenses), including, without limitation, any Proceeding brought by or in the right of the Company. The written request for an advancement of any and all Expenses under this paragraph shall contain reasonable detail of the Expenses incurred by Indemnitee. In the event that such written request shall be accompanied by an affidavit of counsel to Indemnitee to the effect that such counsel has reviewed such Expenses and that such Expenses are reasonable in such counsel’s view, then such expenses shall be deemed reasonable in the absence of clear and convincing evidence to the contrary. By execution of this Agreement, Indemnitee shall be deemed to have made whatever undertaking as may be required by law at the time of any advancement of Expenses with respect to repayment to the Company of such Expenses. In the event that the Company shall breach its obligation to advance Expenses under this Section 3, the parties hereto agree that Indemnitee’s remedies available at law would not be adequate and that Indemnitee would be entitled to specific performance.

          4. Surety Bond.

               (a) In order to secure the obligations of the Company to indemnify and advance Expenses to Indemnitee pursuant to this Agreement, the Company shall obtain at the time of any Change in Control (as hereinafter defined) a surety bond (the “Bond”). The Bond shall be in an appropriate amount not less than one million dollars ($1,000,000), shall be issued by a commercial insurance company or other financial institution headquartered in the United States having assets in excess of $10 billion and capital according to its most recent published reports equal to or greater than the then applicable minimum capital standards promulgated by such entity’s primary federal regulator and shall contain terms and conditions reasonably acceptable to Indemnitee. The Bond shall provide that Indemnitee may from time to time file a claim for payment under the Bond, upon written certification by Indemnitee to the issuer of the Bond that (i) Indemnitee has made written request upon the Company for an amount not less than the amount Indemnitee is drawing under the Bond and that the Company has failed or refused to provide Indemnitee with such amount in full within thirty (30) days after receipt of the request, and (ii) Indemnitee believes that he or she is entitled under the terms of this Agreement to the amount that Indemnitee is drawing upon under the Bond. The issuance of the Bond shall not in any way diminish the Company’s obligation to indemnify Indemnitee against Expenses and Liabilities to the full extent required by this Agreement.

               (b) Once the Company has obtained the Bond, the Company shall maintain and renew the Bond or a substitute Bond meeting the criteria of Section 4(a) during the term of this Agreement so that the Bond shall have an initial term of five (5) years, be renewed for successive five-year terms, and always have at least one (1) year of its term remaining.

          5. Presumptions and Effect of Certain Proceedings. Upon making a request for indemnification, Indemnitee shall be presumed to be entitled to indemnification under this Agreement and the Company shall have the burden of proof to overcome that presumption in reaching any contrary determination. The termination of any Proceeding by judgment, order, settlement, arbitration award or conviction, or upon a plea of nolo contendere or its equivalent shall not affect this presumption or, except as determined by a judgment or other final adjudication adverse to Indemnitee, establish a presumption with regard to any factual matter relevant to determining Indemnitee’s rights to indemnification hereunder. If the person or persons so empowered to make a determination pursuant to Section 6 hereof shall have failed to make the requested determination within ninety (90) days after any judgment, order, settlement, dismissal, arbitration award, conviction, acceptance of a plea of nolo contendere or its equivalent, or other disposition or partial disposition of any Proceeding or any other event that could enable the Company to determine Indemnitee’s entitlement to indemnification, the requisite determination that Indemnitee is entitled to indemnification shall be deemed to have been made.

          6. Procedure for Determination of Entitlement to Indemnification.

               (a) Whenever Indemnitee believes that Indemnitee is entitled to indemnification pursuant to this Agreement, Indemnitee shall submit a written request for indemnification to the Company. Any request for indemnification shall include sufficient documentation or information reasonably available to Indemnitee for the determination of entitlement to indemnification. In any event, Indemnitee shall submit Indemnitee’s claim for

indemnification within a reasonable time, not to exceed five (5) years after any judgment, order, settlement, dismissal, arbitration award, conviction, acceptance of a plea of nolo contendere or its equivalent, or final determination, whichever is the later date for which Indemnitee requests indemnification. The Secretary or other appropriate officer shall, promptly upon receipt of Indemnitee’s request for indemnification, advise the Board of Directors in writing that Indemnitee has made such request. Determination of Indemnitee’s entitlement to indemnification shall be made not later than ninety (90) days after the Company’s receipt of Indemnitee’s written request for such indemnification, provided that any request for indemnification for Liabilities, other than amounts paid in settlement, shall have been made after a determination thereof in a Proceeding.

               (b) The Company shall be entitled to select the forum in which Indemnitee’s entitlement to indemnification will be heard; provided, however, that if there is a Change in Control of the Company, Independent Legal Counsel (as hereinafter defined) shall determine whether Indemnitee is entitled to indemnification. The forum shall be any one of the following:

                    (i) a majority vote of Disinterested Directors (as hereinafter defined), even though less than a quorum;

                    (ii) Independent Legal Counsel, whose determination shall be made in a written opinion; or

                    (iii) a panel of three (3) arbitrators, one selected by the Company, another by Indemnitee and the third by the first two arbitrators; or if for any reason three (3) arbitrators are not selected within thirty (30) days after the appointment of the first arbitrator, then selection of additional arbitrators shall be made by the American Arbitration Association. If any arbitrator resigns or is unable to serve in such capacity for any reason, the American Arbitration Association shall select such arbitrator’s replacement. The arbitration shall be conducted pursuant to the commercial arbitration rules of the American Arbitration Association now in effect.

          7. Specific Limitations on Indemnification. Notwithstanding anything in this Agreement to the contrary, the Company shall not be obligated under this Agreement to make any payment to Indemnitee with respect to any Proceeding:

               (a) To the extent that payment is actually made to Indemnitee under any insurance policy, or is made to Indemnitee by the Company or an affiliate otherwise than pursuant to this Agreement. Notwithstanding the availability of such insurance, Indemnitee also may claim indemnification from the Company pursuant to this Agreement by assigning to the Company any claims under such insurance to the extent Indemnitee is paid by the Company;

               (b) Provided there has been no Change in Control, for Liabilities in connection with Proceedings settled without the Company’s consent, which consent, however, shall not be unreasonably withheld;

               (c) For an accounting of profits made from the purchase or sale by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or similar provisions of any state statutory or common law; or

               (d) To the extent it would be otherwise prohibited by law, if so established by a judgment or other final adjudication adverse to Indemnitee.

          8. Fees and Expenses of Independent Legal Counsel or Arbitrators. The Company agrees to pay the reasonable fees and expenses of Independent Legal Counsel or a panel of three arbitrators should such Independent Legal Counsel or such arbitrators be retained to make a determination of Indemnitee’s entitlement to indemnification pursuant to Section 6(b) of this Agreement, and to fully indemnify such Independent Legal Counsel or arbitrators against any and all expenses and losses incurred by any of them arising out of or relating to this Agreement or their engagement pursuant hereto.

          9. Remedies of Indemnitee.

               (a) In the event that (i) a determination pursuant to Section 6 hereof is made that Indemnitee is not entitled

to indemnification, (ii) advances of Expenses are not made pursuant to this Agreement, (iii) payment has not been timely made following a determination of entitlement to indemnification pursuant to this Agreement or (iv) Indemnitee otherwise seeks enforcement of this Agreement, Indemnitee shall be entitled to a final adjudication in the Court of Chancery of the State of Delaware of the remedy sought. Alternatively, unless (x) the determination was made by a panel of arbitrators pursuant to Section 6(b)(iv) hereof, or (y) court approval is required by law for the indemnification sought by Indemnitee, Indemnitee at Indemnitee’s option may seek an award in arbitration to be conducted by a single arbitrator pursuant to the commercial arbitration rules of the American Arbitration Association now in effect, which award is to be made within ninety (90) days following the filing of the demand for arbitration. The Company shall not oppose Indemnitee’s right to seek any such adjudication or arbitration award. In any such proceeding or arbitration, Indemnitee shall be presumed to be entitled to indemnification and advancement of Expenses under this Agreement and the Company shall have the burden of proof to overcome that presumption.

               (b) In the event that a determination that Indemnitee is not entitled to indemnification, in whole or in part, has been made pursuant to Section 6 hereof, the decision in the judicial proceeding or arbitration provided in paragraph (a) of this Section 9 shall be made de novo and Indemnitee shall not be prejudiced by reason of a determination that Indemnitee is not entitled to indemnification.

               (c) If a determination that Indemnitee is entitled to indemnification has been made pursuant to Section 6 hereof, or is deemed to have been made pursuant to Section 5 hereof or otherwise pursuant to the terms of this Agreement, the Company shall be bound by such determination in the absence of a misrepresentation or omission of a material fact by Indemnitee in connection with such determination.

               (d) The Company shall be precluded from asserting that the procedures and presumptions of this Agreement are not valid, binding and enforceable. The Company shall stipulate in any such court or before any such arbitrator that the Company is bound by all of the provisions of this Agreement and is precluded from making any assertion to the contrary.

               (e) Expenses reasonably incurred by Indemnitee in connection with Indemnitee’s request for indemnification under, seeking enforcement of or to recover damages for breach of this Agreement shall be borne by the Company when and as incurred by Indemnitee irrespective of any Final Adverse Determination that Indemnitee is not entitled to indemnification.

          10. Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (a) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (b) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

          11. Maintenance of Insurance. Upon the Company’s purchase of directors’ and officers’ liability insurance policies covering its directors and officers, then, subject only to the provisions within this Section 11, the Company agrees that so long as Indemnitee shall have consented to serve or shall continue to serve as a director or officer of the Company, or both, or as an Agent of the Company, and thereafter so long as Indemnitee shall be subject to any possible Proceeding (such periods being hereinafter sometimes referred to as the “Indemnification Period”), the Company will use all reasonable efforts to maintain in effect for the benefit of Indemnitee one or more valid, binding and enforceable policies of directors’ and officers’ liability insurance from established and reputable insurers, providing, in all respects, coverage both in scope and amount which is no less favorable than that provided by such preexisting policies. Notwithstanding the foregoing, the Company shall not be required to maintain said policies of directors’ and officers’ liability insurance during any time period if during such period such insurance is not reasonably available or if it is determined in good faith by the then directors of the Company either that:

               (a) The premium cost of maintaining such insurance is substantially disproportionate to the amount of coverage provided thereunder; or

               (b) The protection provided by such insurance is so limited by exclusions, deductions or otherwise that there is insufficient benefit to warrant the cost of maintaining such insurance.

Anything in this Agreement to the contrary notwithstanding, to the extent that and for so long as the Company shall choose to continue to maintain any policies of directors’ and officers’ liability insurance during the Indemnification Period, the Company shall maintain similar and equivalent insurance for the benefit of Indemnitee during the Indemnification Period (unless such insurance shall be less favorable to Indemnitee than the Company’s existing policies).

          12. Modification, Waiver, Termination and Cancellation. No supplement, modification, termination, cancellation or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver.

          13. Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.

          14. Notice by Indemnitee and Defense of Claim. Indemnitee shall promptly notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any matter, whether civil, criminal, administrative or investigative, but the omission so to notify the Company will not relieve it from any liability that it may have to Indemnitee if such omission does not prejudice the Company’s rights. If such omission does prejudice the Company’s rights, the Company will be relieved from liability only to the extent of such prejudice. Notwithstanding the foregoing, such omission will not relieve the Company from any liability that it may have to Indemnitee otherwise than under this Agreement. With respect to any Proceeding as to which Indemnitee notifies the Company of the commencement thereof:

               (a) The Company will be entitled to participate therein at its own expense; and

               (b) The Company jointly with any other indemnifying party similarly notified will be entitled to assume the defense thereof, with counsel reasonably satisfactory to Indemnitee; provided, however, that the Company shall not be entitled to assume the defense of any Proceeding if there has been a Change in Control or if Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee with respect to such Proceeding. After notice from the Company to Indemnitee of its election to assume the defense thereof, the Company will not be liable to Indemnitee under this Agreement for any Expenses subsequently incurred by Indemnitee in connection with the defense thereof, other than reasonable costs of investigation or as otherwise provided below. Indemnitee shall have the right to employ Indemnitee’s own counsel in such Proceeding, but the fees and expenses of such counsel incurred after notice from the Company of its assumption of the defense thereof shall be at the expense of Indemnitee unless:

                    (i) the employment of counsel by Indemnitee has been authorized by the Company;

                    (ii) Indemnitee shall have reasonably concluded that counsel engaged by the Company may not adequately represent Indemnitee due to, among other things, actual or potential differing interests; or

                    (iii) the Company shall not in fact have employed counsel to assume the defense in such Proceeding or shall not in fact have assumed such defense and be acting in connection therewith with reasonable diligence; in each of which cases the fees and expenses of such counsel shall be at the expense of the Company.

               (c) The Company shall not settle any Proceeding in any manner that would impose any penalty or limitation on Indemnitee without Indemnitee’s written consent; provided, however, that Indemnitee will not unreasonably withhold his or her consent to any proposed settlement.

          15. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall

be deemed to have been duly given if (a) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, (b) delivered by facsimile with telephone confirmation of receipt or (c) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed:

          (i) If to Indemnitee, to the address or facsimile number set forth on the signature page hereto.

          (ii) If to the Company, to:

                Biolase Technology, Inc.
                4 Cromwell, Irvine, California 92618

                Attn: Corporate Secretary

or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.

          16. Nonexclusivity. The rights of Indemnitee hereunder shall not be deemed exclusive of any other rights to which Indemnitee may be entitled under applicable law, the Company’s Certificate of Incorporation or bylaws, or any agreements, vote of stockholders, resolution of the Board of Directors or otherwise, and to the extent that during the Indemnification Period the rights of the then existing directors and officers are more favorable to such directors or officers than the rights currently provided to Indemnitee thereunder or under this Agreement, Indemnitee shall be entitled to the full benefits of such more favorable rights.

          17. Certain Definitions.

               (a) “Agent” shall mean any person who is or was, or who has consented to serve as, a director, officer, employee, agent, fiduciary, joint venturer, partner, manager or other official of the Company or a subsidiary or an affiliate of the Company, or any other entity (including without limitation, an employee benefit plan) either at the request of, for the convenience of, or otherwise to benefit the Company or a subsidiary of the Company.

               (b) “Change in Control” shall mean the occurrence of any of the following:

                    (i) Both (A) any “person” (as defined below) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing at least twenty percent (20%) of the total voting power represented by the Company’s then outstanding voting securities and (B) the beneficial ownership by such person of securities representing such percentage has not been approved by a majority of the “continuing directors” (as defined below);

                    (ii) Any “person” is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing at least fifty percent (50%) of the total voting power represented by the Company’s then outstanding voting securities;

                    (iii) A change in the composition of the Board of Directors occurs, as a result of which fewer than two-thirds of the incumbent directors are directors who either (A) had been directors of the Company on the “look-back date” (as defined below) (the “Original Directors”) or (B) were elected, or nominated for election, to the Board of Directors with the affirmative votes of at least a majority in the aggregate of the Original Directors who were still in office at the time of the election or nomination and directors whose election or nomination was previously so approved (the “continuing directors”);

                    (iv) The stockholders of the Company approve a merger or consolidation of the Company with any other corporation, if such merger or consolidation would result in the voting securities of the Company outstanding immediately prior thereto representing (either by remaining outstanding or by being converted into voting securities of the surviving entity) fifty percent (50%) or less of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or

                    (v) The stockholders of the Company approve (A) a plan of complete liquidation of the Company or

(B) an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets.

          For purposes of Subsection (i) above, the term “person” shall have the same meaning as when used in Sections 13(d) and 14(d) of the Exchange Act, but shall exclude (x) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or of a parent or subsidiary of the Company or (y) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the common stock of the Company.

          For purposes of Subsection (iii) above, the term “look-back date” shall mean the later of (x) the Effective Date and (y) the date twenty-four (24) months prior to the date of the event that may constitute a “Change in Control.”

     Any other provision of this Section 17(b) notwithstanding, the term “Change in Control” shall not include a transaction, if undertaken at the election of the Company, the result of which is to sell all or substantially all of the assets of the Company to another corporation (the “surviving corporation”); provided that the surviving corporation is owned directly or indirectly by the stockholders of the Company immediately following such transaction in substantially the same proportions as their ownership of the Company’s common stock immediately preceding such transaction; and provided, further, that the surviving corporation expressly assumes this Agreement.

               (c) “Disinterested Director” shall mean a director of the Company who is not or was not a party to or otherwise involved in the Proceeding in respect of which indemnification is being sought by Indemnitee.

               (d) “Expenses” shall include all direct and indirect costs (including, without limitation, attorneys’ fees, retainers, court costs, transcripts, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, all other disbursements or out-of-pocket expenses and reasonable compensation for time spent by Indemnitee for which Indemnitee is otherwise not compensated by the Company or any third party) actually and reasonably incurred in connection with either the investigation, defense, settlement or appeal of a Proceeding or establishing or enforcing a right to indemnification under this Agreement, applicable law or otherwise; provided, however, that “Expenses” shall not include any Liabilities.

               (e) “Final Adverse Determination” shall mean that a determination that Indemnitee is not entitled to indemnification shall have been made pursuant to Section 6 hereof and either (1) a final adjudication in the Court of Chancery of the State of Delaware or decision of an arbitrator pursuant to Section 9(a) hereof shall have denied Indemnitee’s right to indemnification hereunder, or (2) Indemnitee shall have failed to file a complaint in a Delaware court or seek an arbitrator’s award pursuant to Section 9(a) for a period of one hundred twenty (120) days after the determination made pursuant to Section 5 hereof.

               (f) “Independent Legal Counsel” shall mean a law firm or a member of a firm selected by the Company and approved by Indemnitee (which approval shall not be unreasonably withheld) or, if there has been a Change in Control, selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld), that neither is presently nor in the past five (5) years has been retained to represent: (i) the Company or any of its subsidiaries or affiliates, or Indemnitee or any corporation of which Indemnitee was or is a director, officer, employee or agent, or any subsidiary or affiliate of such a corporation, in any material matter, or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Legal Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s right to indemnification under this Agreement.

               (g) “Liabilities” shall mean liabilities of any type whatsoever including, but not limited to, any judgments, fines, ERISA excise taxes and penalties, penalties and amounts paid in settlement (including all interest assessments and other charges paid or payable in connection with or in respect of such judgments, fines, penalties or amounts paid in settlement) of any Proceeding.

               (h) “Proceeding” shall mean any threatened, pending or completed action, claim, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or any other proceeding whether civil, criminal, administrative or investigative, that is associated with Indemnitee’s being an Agent of the Company.

          18. Binding Effect; Duration and Scope of Agreement. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), spouses, heirs and personal and legal representatives. This Agreement shall continue in effect during the Indemnification Period, regardless of whether Indemnitee continues to serve as an Agent.

          19. Severability. If any provision or provisions of this Agreement (or any portion thereof) shall be held to be invalid, illegal or unenforceable for any reason whatsoever:

               (a) the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby; and

               (b) to the fullest extent legally possible, the provisions of this Agreement shall be construed so as to give effect to the intent of any provision held invalid, illegal or unenforceable.

          20. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, as applied to contracts between Delaware residents entered into and to be performed entirely within the State of Delaware, without regard to conflict of laws rules.

          21. Consent to Jurisdiction. The Company and Indemnitee each irrevocably consent to the jurisdiction of the courts of the State of Delaware for all purposes in connection with any action or proceeding that arises out of or relates to this Agreement and agree that any action instituted under this Agreement shall be brought only in the state courts of the State of Delaware.

          22. Entire Agreement. This Agreement represents the entire agreement between the parties hereto, and there are no other agreements, contracts or understandings between the parties hereto with respect to the subject matter of this Agreement, except as specifically referred to herein or as provided in Section 16 hereof.

          23. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement.

[SIGNATURES APPEAR ON NEXT PAGE]

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer and Indemnitee has executed this Agreement as of the date first above written.

BIOLASE TECHNOLOGY, INC., a Delaware corporation
By:
Print Name:	David M. Mulder
Title : Chief Executive Officer
INDEMNITEE Signature: Print Name: Brett L. Scott Address:
Telephone:
Facsimile: E-mail:

EX-10.2

Exhibit 10.2

AMENDMENT TO LICENSE AND DISTRIBUTION AGREEMENT

     This amendment to License and Distribution Agreement (the “Agreement”) between Henry Schein, Inc. (“HSI”) and Biolase Technology, Inc (“Biolase”) is entered into as of September 10, 2009 (the “Amendment”).

     WHEREAS, the parties entered into the Agreement dated August 8, 2006, as subsequently amended (the “Agreement”);

     WHEREAS, the parties have agreed to make certain amendments to the Agreement; and

     NOW, THEREFORE, in consideration of the covenants and conditions contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree that the following amendments, modifications or other changes are made to the Agreement:

1.

In Section 4.2 of the Agreement the phrase “(i) such warranties shall not be for a term of longer than **** from **** ” shall be amended and restated as follows “(i) such warranties shall be for a term of **** from **** ; provided however, such warranties **** from **** .”

2.

The parties hereby agree that to the extent there is any inconsistency in any terms or conditions set forth in the Agreement and this Amendment, the terms and conditions of this Amendment shall control. Additionally, the parties hereby agree that all other terms and conditions of the Agreement shall remain in full force and effect, except as modified by this Amendment. Capitalized terms used herein but not defined herein shall have the meanings set forth in the Agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

**** Certain confidential information contained in this document, marked with four asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

     IN WITNESS WHEREOF, the parties have executed this Amendment as of the date set forth above.

HENRY SCHEIN, INC.
By:	/s/ Brian S. Watson
	Name:	Brian S. Watson
	Title:	Vice President, Strategic and Business Planning
BIOLASE TECHNOLOGY, INC.
By:	/s/ David M. Mulder
	Name:	David M. Mulder
	Title:	Chief Executive Officer

**** Certain confidential information contained in this document, marked with four asterisks, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EX-10.3

Exhibit 10.3

FIRST AMENDMENT TO LEASE

I. PARTIES AND DATE.

     This First Amendment to Lease (the “Amendment”) dated September 24, 2009, is by and between THE IRVINE COMPANY LLC, a Delaware limited liability company (“Landlord”), and BIOLASE TECHNOLOGY, INC., a Delaware corporation (“Tenant”).

II. RECITALS.

     On January 10, 2006, Landlord and Tenant entered into a lease (“Lease”) for space in a building located at 4 Cromwell, Irvine, California (“Premises”).

     Landlord and Tenant each desire to modify the Lease to extend the Lease Term, to adjust the Basic Rent and to make such other modifications as are set forth in “III. MODIFICATIONS” next below.

III. MODIFICATIONS.

     A. Basic Lease Provisions. The Basic Lease Provisions are hereby amended as follows:

1.     Item 5 is hereby deleted in its entirety and substituted therefor shall be the following:

	“5. Lease Term: The Term of this Lease shall expire at midnight on April 30, 2015”
2.	Item 6 is hereby amended by adding the following:
	“Commencing May 1, 2010, the Basic Rent shall be Thirty Six Thousand Six Hundred Ninety-Two Dollars ($38,692.00) per month, based on $.68 per rentable square foot.
	Commencing May 1, 2011, the Basic Rent shall be Thirty Nine Thousand Eight Hundred Thirty Dollars ($39,830.00) per month, based on $.70 per rentable square foot.
	Commencing May 1, 2012, the Basic Rent shall be Forty Thousand Nine Hundred Sixty-Eight Dollars ($40,968.00) per month, based on $.72 per rentable square foot.
	Commencing May 1, 2013, the Basic Rent shall be Forty Two Thousand One Hundred Six Dollars ($42,106.00) per month, based on $.74 per rentable square foot.
	Commencing May 1, 2014, the Basic Rent shall be Forty Three Thousand Eight Hundred Thirteen Dollars ($43,813.00) per month, based on $.77 per rentable square foot.”
3.	Item 9 is hereby deleted in its entirety and substituted therefor shall be the following:
	“9. Security Deposit: $168,561.00”

1

4. Item 12 is hereby amended to delete Tenant’s addresses for notices in their entirety, and substituted therefor shall be the following:

“Tenant:

BIOLASE TECHNOLOGY, INC.
4 Cromwell
Irvine, CA 92618

with a copy of notices to:

BIOLASE TECHNOLOGY, INC.
4 Cromwell
Irvine, CA 92618
Attn: General Counsel”

     B. Right to Extend the Lease. The provisions of Section 3.3 of the Lease entitled “Right to Extend this Lease” shall remain in full force and effect and exercisable by Tenant during the Term of the Lease as extended by this Amendment.

     C. Security Deposit

          (i) Section 4.3 of the Lease is hereby amended to provide that, upon an Event of Default by Tenant (as defined in Section 14.1 of the Lease), Landlord may, in its sole and absolute discretion and notwithstanding any contrary provision of California Civil Code Section 1950.7, additionally retain, use or apply the whole or any part of the Security Deposit to pay amounts estimated by Landlord as the amount due Landlord for prospective rent and for damages pursuant to Section 14.2 (a)(i) of the Lease and/or California Civil Code Section 1951.2.

          (ii) The second paragraph of Section 4.3 of the Lease is hereby deleted in its entirety and shall have no further force or effect. Instead, Landlord shall return the difference between the Security Deposit held by Landlord as of the date of this Amendment and the amount set forth in Section III.A(3) of this Amendment (said difference being the amount of $131,439.00) to Tenant in the form of credits against Basic Rent installments initially coming due under the Lease from and after the date of this Amendment. Additionally, provided that (a) no “Event of Default” has occurred at any time during the Term, and (b) Tenant has not at any time been more than ten (10) days late with respect to any payment of Basic Rent or Operating Expenses due under the Lease more than once in the 12-month period preceding the date of the applicable credit, then a portion of the Security Deposit set forth in Section III.A(3) above shall be returned to Tenant in the form of credits in the amount of Thirty Five Thousand Dollars ($35,000.00) each against the Basic Rent installment due and payable on April 1, 2013 and on April 1, 2014.

     D. Broker’s Commission. Article XVIII of the Lease is amended to provide that the parties recognize the following parties as the brokers who negotiated this Amendment, and agree that Landlord shall be responsible for payment of brokerage commissions to such brokers pursuant to its separate agreements with such brokers: Irvine Realty Company (“Landlord’s Broker”) and CB Richard Ellis, Inc./Newport Beach (“Tenant’s Broker”). It is understood and agreed that Landlord’s Broker represents only Landlord in connection with the execution of this Amendment and that Tenant’s Broker represents only Tenant. The warranty and indemnity provisions of Article XVIII of the Lease, as amended hereby, shall be binding and enforceable in connection with the negotiation of this Amendment.

     E. Acceptance of Premises. Tenant acknowledges that the lease of the Premises pursuant to this Amendment shall be on an “as-is” basis without further obligation on Landlord’s part as to improvements whatsoever.

2

IV. GENERAL.

     A. Effect of Amendments. The Lease shall remain in full force and effect except to the extent that it is modified by this Amendment.

     B. Entire Agreement. This Amendment embodies the entire understanding between Landlord and Tenant with respect to the modifications set forth in “III. MODIFICATIONS” above and can be changed only by a writing signed by Landlord and Tenant.

     C. Counterparts. If this Amendment is executed in counterparts, each is hereby declared to be an original; all, however, shall constitute but one and the same amendment. In any action or proceeding, any photographic, photostatic, or other copy of this Amendment may be introduced into evidence without foundation.

     D. Defined Terms. All words commencing with initial capital letters in this Amendment and defined in the Lease shall have the same meaning in this Amendment as in the Lease, unless they are otherwise defined in this Amendment.

     E. Corporate and Partnership Authority. If Tenant is a corporation or partnership, or is comprised of either or both of them, each individual executing this Amendment for the corporation or partnership represents that he or she is duly authorized to execute and deliver this Amendment on behalf of the corporation or partnership and that this Amendment is binding upon the corporation or partnership in accordance with its terms.

     F. SDN List. Tenant hereby represents and warrants that neither Tenant nor any officer, director, employee, partner, member or other principal of Tenant (collectively, “Tenant Parties”) is listed as a Specially Designated National and Blocked Person (“SDN”) on the list of such persons and entities issued by the U.S. Treasury Office of Foreign Assets Control (OFAC). In the event Tenant or any Tenant Party is or becomes listed as an SDN, Tenant shall be deemed in breach of this Lease and Landlord shall have the right to terminate this Lease immediately upon written notice to Tenant.

V. EXECUTION.

     Landlord and Tenant executed this Amendment on the date as set forth in “I. PARTIES AND DATE.” above.

LANDLORD:		TENANT:
THE IRVINE COMPANY LLC a Delaware limited liability company		BIOLASE TECHNOLOGY, INC., a Delaware corporation
By	/s/ Steven M. Case	By	/s/ David M. Mulder
	Steven M. Case, Executive Vice President	Name:	David M. Mulder
	Office Properties	Title:	Chief Executive Officer
By	/s/ Tracy M. Perrelle	By	/s/ Brett L. Scott
	Tracy M. Perrelle, Vice President	Name:	Brett L. Scott
	Operations, Office Properties	Title:	Chief Financial Officer

3

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO RULE 13A-14 OF
THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

I, David M Mulder, Chief Executive Officer of BIOLASE Technology, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q for the period ended September 30, 2009 of BIOLASE Technology, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the consolidated financial statements, and other consolidated financial information included in this report, fairly present in all material respects the consolidated financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 6, 2009	By:	/s/ DAVID M. MULDER
		David M. Mulder
		Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO RULE 13A-14 OF
THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

I, Brett L. Scott, Chief Financial Officer of BIOLASE Technology, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q for the period ended September 30, 2009 of BIOLASE Technology, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the consolidated financial statements, and other consolidated financial information included in this report, fairly present in all material respects the consolidated financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 6, 2009	By:	/s/ Brett L. Scott
		Brett L. Scott
		Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002*

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, David M. Mulder, Chief Executive Officer of BIOLASE Technology, Inc. (the “Company”), hereby certify that to the best of my knowledge:

(1)	This quarterly report on Form 10-Q for the quarter ended September 30, 2009 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 6, 2009	/s/ DAVID M. MULDER
	David M. Mulder
	Chief Executive Officer

* This certificate accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934. A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002*

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Brett L. Scott, Chief Financial Officer of BIOLASE Technology, Inc. (the “Company”), hereby certify that to the best of my knowledge:

(1)	This quarterly report on Form 10-Q for the quarter ended September 30, 2009 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 6, 2009	/s/ BRETT L. SCOTT
	Brett L. Scott
	Chief Financial Officer

* This certificate accompanies this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934. A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.