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 March 31, 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	(I.R.S. Employer
of incorporation or organization)	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 definitions 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	Smaller reporting company o
		(Do not check if a smaller reporting company)

     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 May 6, 2009: 24,244,201

BIOLASE TECHNOLOGY, INC.

INDEX

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheets as of March 31, 2009 and December 31, 2008		3
Consolidated Statements of Operations for the three months ended March 31, 2009 and March 31, 2008		4
Consolidated Statements of Cash Flows for the three months ended March 31, 2009 and March 31, 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		24
Item 4. Controls and Procedures		25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		25
Item 1A. Risk Factors		26
Item 6. Exhibits		27
Signatures		28
EX-10.1
EX-10.2
EX-10.3
EX-10.5
EX-10.6
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^™ and C100^™ 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)

	March 31, 2009			December 31, 2008
ASSETS
Current assets:
Cash and cash equivalents	$	1,810		$	11,235
Accounts receivable, less allowance of $657 and $526 in 2009 and 2008, respectively		1,728			3,758
Inventory, net		10,493			12,410
Prepaid expenses and other current assets		1,383			1,391
Total current assets		15,414			28,794
Property, plant and equipment, net		2,659			3,040
Intangible assets, net		570			613
Goodwill		2,926			2,926
Deferred tax asset		13			29
Other assets		306			306
Total assets	$	21,888		$	35,708
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Line of credit	$	—		$	5,404
Accounts payable		4,265			7,509
Accrued liabilities		7,958			8,255
Deferred revenue, current portion		2,264			2,603
Total current liabilities		14,487			23,771
Deferred tax liabilities		393			376
Deferred revenue, long-term		1,875			1,875
Other liabilities, long-term		269			296
Total liabilities		17,024			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; 26,208 and 26,208 shares issued and 24,244 and 24,244 shares outstanding in 2009 and 2008, respectively		27			27
Additional paid-in capital		116,166			115,698
Accumulated other comprehensive (loss)		(505	)		(187	)
Accumulated deficit		(94,425	)		(89,749	)
		21,263			25,789
Treasury stock (cost of 1,964 shares repurchased)		(16,399	)		(16,399	)
Total stockholders’ equity		4,864			9,390
Total liabilities and stockholders’ equity	$	21,888		$	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
	March 31,
	2009			2008
Products and services revenue	$	6,119		$	18,037
License fees and royalty revenue		475			1,004
Net revenue		6,594			19,041
Cost of revenue		4,826			9,459
Gross profit		1,768			9,582
Operating expenses:
Sales and marketing		3,045			5,605
General and administrative		2,569			3,077
Engineering and development		1,083			1,461
Total operating expenses		6,697			10,143
Loss from operations		(4,929	)		(561	)
Gain on foreign currency transactions		315			616
Interest income		1			58
Interest expense		(30	)		(24	)
Non-operating income, net		286			650
(Loss) Income before income tax provision		(4,643	)		89
Income tax provision		33			63
Net (loss) income	$	(4,676	)	$	26
Net (loss) income per share:
Basic	$	(0.19	)	$	0.00
Diluted	$	(0.19	)	$	0.00
Shares used in the calculation of net (loss) income per share:
Basic		24,244			24,056
Diluted		24,244			24,295

See accompanying notes to consolidated financial statements.

4

BIOLASE TECHNOLOGY, INC.

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

	Three Months Ended
	March 31,
	2009			2008
Cash Flows From Operating Activities:
Net (loss) income	$	(4,676	)	$	26
Adjustments to reconcile net loss to net cash and cash equivalents (used in) provided by operating activities:
Depreciation and amortization		416			481
Loss on disposal of assets, net		13			—
Provision for bad debts		139			27
Provision for inventory excess and obsolescence		948			—
Stock-based compensation		467			452
Other non-cash compensation		—			2
Deferred income taxes		33			13
Changes in operating assets and liabilities:
Accounts receivable		1,828			1,124
Inventory		970			12
Prepaid expenses and other assets		(724	)		(541	)
Accounts payable and accrued liabilities		(2,806	)		226
Deferred revenue		(337	)		(1,023	)
Net cash and cash equivalents (used in) provided by operating activities		(3,729	)		799
Cash Flows From Investing Activities:
Proceeds from sale of property, plant and equipment		4			—
Additions to property, plant and equipment		(56	)		(158	)
Net cash and cash equivalents (used in) investing activities		(52	)		(158	)
Cash Flows From Financing Activities:
Borrowings under line of credit		4,293			2,929
Payments under line of credit		(9,697	)		(4,509	)
Proceeds from exercise of stock options and warrants		—			315
Net cash and cash equivalents (used in) financing activities		(5,404	)		(1,265	)
Effect of exchange rate changes		(240	)		(61	)
Decrease in cash and cash equivalents		(9,425	)		(685	)
Cash and cash equivalents, beginning of year		11,235			14,566
Cash and cash equivalents, end of period	$	1,810		$	13,881
Supplemental cash flow disclosure:
Cash paid during the period for:
Interest	$	30		$	24
Income taxes	$	7		$	49

See accompanying notes to consolidated financial statements.

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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 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.

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.

Liquidity

     We believe we currently possess sufficient resources to meet the cash requirements of our operations for at least the next year. 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 140 as of March 31, 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 made the decision to begin the transition of sales in countries served by our foreign subsidiaries located in Germany, Spain, Australia and New Zealand from direct to distributor. As part of the letter agreement with HSIC, HSIC will become our distributor in each of these countries as well as in additional foreign countries in the future. As a result of these developments, we have begun the process of reducing the operations of our foreign subsidiaries which have 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 of approximately $7 million. Our new 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.

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     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. 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 December 2007, the FASB issued FAS 141 (revised 2007), Business Combinations, or FAS 141(R), which expands the definition of a business and a business combination, requires the fair value of the purchase price of an acquisition including the issuance of equity securities to be determined on the acquisition date, requires that all assets, liabilities, contingent consideration, contingencies and in-process research and development costs of an acquired business be recorded at fair value at the acquisition date, requires that acquisition costs generally be expensed as incurred, requires that restructuring costs generally be expensed in periods subsequent to the acquisition date, and requires changes in accounting for deferred tax asset valuation allowances and acquired income tax uncertainties after the measurement period to impact income tax expense. FAS 141(R) is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The adoption of FAS 141(R) had no impact on our consolidated financial statements.

     In December 2007, the FASB issued FAS 160, Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51, or FAS 160, which changes the accounting and reporting for minority interests such that minority interests will be recharacterized as noncontrolling interests and will be required to be reported as a component of equity, and requires that purchases or sales of equity interests that do not result in a change in control be accounted for as equity transactions and, upon a loss of control, requires the interest sold, as well as any interest retained, to be recorded at fair value with any gain or loss recognized in earnings. FAS 160 is effective for fiscal years beginning on or after December 15, 2008 and interim periods within those years. The adoption of FAS 160 had no impact on our consolidated financial statements.

     In March 2008, the FASB issued FAS 161, Disclosures about Derivative Instruments and Hedging Activities, or FAS 161. FAS 161 requires additional disclosures related to the use of derivative instruments, the accounting for derivatives and how derivatives impact financial statements. FAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. The adoption of FAS 161 had no impact on our consolidated financial statements.

     In June 2008, the FASB issued Staff Position EITF 03-6-1, Determining Whether Instruments Granted in Share Based Payment Transactions are Participating Securities, or FSP EITF 03-6-1. FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earning allocation in computing earnings per share under the two-class method described in SFAS No. 128 Earnings Per Share. FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning after December 18, 2008, and interim periods within those years. All prior-period earnings per share data presented shall be adjusted retrospectively. The adoption of FSP EITF 03-6-1 had no impact on our consolidated financial statements.

     In April 2008, the FASB issued Staff Position No. 142-3, Determination of the Useful Life of Intangible Assets, or FSP 142-3. FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS 142. FSP 142-3 is effective for fiscal years beginning after December 15, 2008. FSP 142-3 had no impact on our 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

7

the discretion of the Company’s management and/or Board of Directors. Options to employees generally vest on a quarterly basis over three years.

     Effective January 1, 2006, we adopted the provisions of FAS 123 (revised), Share-Based Payment, or FAS 123R, using a modified prospective transition method. Compensation cost related to stock options recognized in operating results under FAS 123R during the three months ended March 31, 2009 and 2008, was $468,000 and $452,000, respectively. The net impact to earnings for the periods ended March 31, 2009 and 2008 was $(.02) and $(.02) per basic and diluted share, respectively. At March 31, 2009, we had $1.6 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 March 31,
	2009		2008
Cost of revenue	$	43	$	43
Sales and marketing		124		120
General and administrative		258		248
Engineering and development		43		41
	$	468	$	452

     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 SEC Staff Accounting Bulletin 107. 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. FAS 123R 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 March 31,
	2009			2008
Expected term (years)		4.94			4.97
Volatility		85	%		66	%
Annual dividend per share	$	0.00		$	0.00
Risk-free interest rate		1.79	%		3.13	%

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     A summary of option activity under our stock option plans for the three months ended March 31, 2009 is as follows:

						Weighted average
				Weighted		remaining
				average		contractual term		Aggregate intrinsic
	Shares			exercise price		(years)		value
Options outstanding at December 31, 2008		4,500,000		$	5.12
Plus: Options granted		463,000		$	0.81
Less:
Options exercised		—		$	0.00
Options canceled or expired		(509,000	)	$	4.00
Options outstanding at March 31, 2009		4,454,000		$	4.80		6.53	$	41,000
Options exercisable at March 31, 2009		2,914,000		$	5.98		5.14	$	20,000
Options expired during the quarter ended March 31, 2009		166,000		$	6.09

     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 March 31,
	2009		2008
Proceeds from stock options exercised	$	—	$	315
Tax benefit related to stock options exercised (1)		N/A		N/A
Intrinsic value of stock options exercised (2)	$	—	$	197
Weighted-average fair value of options granted during period	$	.54	$	1.73
Total fair value of shares vested during the period	$	496	$	336

(1)	FAS 123R 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 (Loss) Income Per Share — Basic and Diluted

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

     Outstanding stock options and warrants to purchase 4,535,000 shares were not included in the computation of diluted loss per share for the three months ended March 31, 2009 as a result of their anti-dilutive effect. Outstanding stock options to purchase 238,000 shares were included in the computation of diluted earnings per share for the three months ended March 31, 2008. For the same 2008 period, anti-dilutive outstanding stock options and warrants to purchase 3,325,000 shares were not included in the computation of diluted earnings per share.

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):

	March 31,		December 31,
	2009		2008
Raw materials	$	4,361	$	4,981
Work-in-process		1,571		1,472
Finished goods		4,561		5,957
Inventory, net	$	10,493	$	12,410

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

NOTE 5 — PROPERTY, PLANT AND EQUIPMENT

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

	March 31,			December 31,
	2009			2008
Land	$	252		$	268
Building		385			411
Leasehold improvements		914			919
Equipment and computers		5,591			5,674
Furniture and fixtures		1,019			1,027
Construction in progress		92			53
		8,253			8,352
Accumulated depreciation and amortization		(5,594	)		(5,312	)
Property, plant and equipment, net	$	2,659		$	3,040

     Depreciation expense was $372,000 and $390,000 for the three months ended March 31, 2009 and 2008, respectively.

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

NOTE 6 — INTANGIBLE ASSETS AND GOODWILL

     In accordance with FAS 142, Goodwill and Other Intangible Assets, 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 and trade names as of June 30, 2008 and concluded there had not been any impairment. Due to the decline in our stock price and market capitalization since June 30, 2008 caused by adverse equity market conditions and the general economic environment, we updated our impairment analysis as of December 31, 2008 and March 31, 2009. We concluded that there had not been any impairment. However, we will closely monitor our stock price and market capitalization and will perform such analysis on a quarterly basis, if needed. If our stock price and market capitalization continue to decline, we may need to impair our goodwill and other intangible assets. In the quarter ended December 31, 2008, we completed our branding strategy and determined that it was likely that the Diolase trade name use would not be significant in the future. Therefore we wrote off the remaining $232,000 related to the trade name. Other than this impairment, subsequent to June 30, 2008, we believe that no triggering events occurred that would have a material effect on the value of the remaining assets.

     Intangible assets with finite lives continue to be subject to amortization, and any impairment is determined in accordance with FAS No. 144, 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 for the three months ended March 31, 2009 and March 31, 2008 of $43,000 and $92,000, respectively. Other intangible assets consist of an acquired customer list and a non-compete agreement.

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

	As of March 31, 2009										As of December 31, 2008
			Accumulated										Accumulated
	Gross		Amortization			Impairment			Net		Gross		Amortization			Impairment			Net
Patents (4-10 years)	$	1,914	$	(1,344	)	$	—		$	570	$	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	$	(2,006	)	$	(979	)	$	570	$	3,555	$	(1,963	)	$	(979	)	$	613
Goodwill (Indefinite life)	$	2,926							$	2,926	$	2,926							$	2,926

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NOTE 7 —ACCRUED LIABILITIES AND DEFERRED REVENUE

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

	March 31, 2009		December 31, 2008
Payroll and benefits	$	1,681	$	1,844
Warranty		2,227		2,612
Deferred rent credit		112		112
Accrued professional services		481		771
Accrued insurance premium		522		732
Other		2,935		2,184
Accrued liabilities	$	7,958	$	8,255

     Changes in the product warranty accrual, including expenses incurred under our warranties, for the three months ended March 31, 2009 and 2008 were as follows (in thousands):

	Three Months Ended
	March 31,
	2009			2008
Initial warranty accrual, beginning balance	$	2,612		$	1,987
Provision for estimated warranty cost		444			1,360
Warranty expenditures		(829	)		(1,105	)
Initial warranty accrual, ending balance	$	2,227		$	2,242

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

	March 31, 2009			December 31, 2008
License fee from Henry Schein, Inc. — unamortized portion	$	694		$	1,111
Royalty advances from Procter & Gamble		1,875			1,875
Undelivered elements (training, installation and product) and other		600			731
Extended warranty contracts		970			761
Total deferred revenue		4,139			4,478
Less long-term amounts:
Royalty advances from Procter & Gamble		(1,875	)		(1,875	)
Total deferred revenue, long term		(1,875	)		(1,875	)
Total deferred revenue, current portion	$	2,264		$	2,603

     On August 8, 2006, we entered into a License and Distribution Agreement, 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. 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 are amortizing the initial $5.0 million payment to License Fees and Royalty Revenues on a straight-line basis over the three-year term of the agreement. For the three months ended March 31, 2009 and 2008, we recognized $417,000 of the license fee in each of the periods.

     Under the Agreement, HSIC is obligated to meet certain minimum purchase requirements and is entitled to receive incentive payments if certain purchase targets are achieved. If HSIC has not met the minimum purchase requirements at the midpoint of each of the first two three-year periods, we will have 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.

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     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 are established for the ezlase system. If HSIC has not met the minimum purchase requirement for any 12-month period ending on March 31, we would have 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 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 are achieved. If HSIC did not meet minimum purchase requirements, we would have 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 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 the Company entered into a security agreement, or Security Agreement, with HSIC, granting to HSIC a security interest in the Company’s 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 will 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 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 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. For the period ended March 31, 2008, $375,000 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. 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 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. Although we have not received the applicable notice required under the P&G Agreement, P&G has indicated to us that it is considering whether to make such election or not.

NOTE 8—BANK LINE OF CREDIT AND DEBT

     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

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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). 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.

     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 March 31, 2009, we had approximately $517,000 outstanding.

NOTE 9—COMMITMENTS AND CONTINGENCIES

Litigation

     National Laser Technology, Inc, or NLT, buys used dental lasers, predominately those originally sold by Biolase, and resells them to other dentists. On August 19, 2008, NLT brought an action against us in federal court in the Southern District of Indiana. NLT alleged that we violated Sections 1 and 2 of the Sherman Act, Section 43(a) of the Lanham Act, Section 17200 et seq. of the California Unfair Competition Act and tortiously interfered with NLT’s business relationships and prospective business advantage. NLT sought a monetary award of three times the unquantified damages that NLT had allegedly sustained because of our alleged Sherman Act violations, unquantified damages for the rest of the claims, punitive damages and preliminary and permanent injunctive relief. On October 6, 2008, we answered the complaint, asserted several affirmative defenses and filed a counterclaim. We alleged that NLT violated Sections 1114 and 1125(a) of the Lanham Act and Section 17200 et seq. of the California Unfair Competition Act. We sought unquantified damages and a permanent injunction. NLT amended its Complaint on December 23, 2008, to add a claim for conspiracy to monopolize in violation of Section 2 of the Sherman Act; we answered the Amended Complaint on January 15, 2009. We amended our counterclaims on February 19, 2009 to add a claim for federal copyright infringement and to seek associated damages. On October 21, 2008, NLT filed a motion for a preliminary injunction seeking to enjoin us from certain actions that NLT alleged violated section 1 and 2 of the Sherman Act. On November 24, 2008, we filed a motion for preliminary injunction seeking to enjoin NLT from selling modified Biolase lasers or using Biolase’s trademarks. Oral argument was scheduled for March 23, 2009. On March 10, 2009, we filed a motion to strike one of NLT’s witnesses from testifying at the preliminary injunction hearing or, in the alternative, continuing the hearing. The preliminary injunction hearing was continued and, on April 16, 2009, the entire lawsuit—including all claims and counterclaims—was dismissed with prejudice pursuant to a settlement agreement that was entered into on March 25, 2009. As part of the settlement agreement, NLT was paid $653,000 by our insurance carrier. We received a one-time payment of $347,000 from our insurance carrier, related to the assumption of NLT’s existing service contracts regarding dental lasers manufactured by us. This amount has been recorded as a liability in deferred

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revenue and will be amortized to service revenue over the term of the service contracts. The settlement agreement contains confidentiality provisions that limit disclosure of the terms of the settlement except as required by law.

     On December 19, 2005, we entered into a Vendor Agreement with National Technology Leasing Corporation, or NTLC, in which NTLC was designated as our “Preferred Leasing/Financing Provider.” In September 2006, we gave notice to NTLC of the termination of the Vendor Agreement, and subsequently entered into a financing and distribution agreement with Henry Schein, Inc. On August 26, 2008, NTLC filed a lawsuit against us, Henry Schein, Inc. and a former employee of NTLC in California Superior Court in Placer County. NTLC alleged that we breached the Vendor Agreement by failing to provide the required notice of termination and asserted a claim for damages without specifying an amount. On October 10, 2008, we answered the complaint and asserted several affirmative defenses. On March 2, 2009, the lawsuit was dismissed with prejudice by NTLC pursuant to a settlement agreement among the parties which resolves all claims in the litigation and provides that we will make two payments to NTLC totaling approximately $20,000 during the first and second quarters of 2009. In the settlement agreement, we denied any wrongdoing. The settlement agreement contains confidentiality provisions that limit disclosure of the terms of the settlement except as required by SEC rule or regulation, under GAAP or pursuant to court order or law. On September 12, 2008, Henry Schein, Inc. sent Biolase a written demand for indemnity for this lawsuit. We denied that we are required to indemnify Schein, and we subsequently entered into a tolling agreement with Schein regarding this indemnification claim on November 18, 2008.

     From time to time, we are involved in other legal proceedings incidental to our business, but at this time we are not party to any other litigation that is material to our business.

NOTE 10— SEGMENT INFORMATION

     We currently operate in a single business segment. For the quarter ended March 31, 2009, sales in the United States accounted for approximately 70% of net revenue, and international sales accounted for approximately 30% of net revenue. For the quarter ended March 31, 2008, sales in the United States accounted for approximately 74% of net revenue, and international sales accounted for approximately 26% of net revenue.

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

	Three Months Ended March 31,
	2009		2008
United States	$	4,640	$	14,016
International		1,954		5,025
	$	6,594	$	19,041

     Long-lived assets located outside of the United States at our foreign subsidiaries were $680,000 and $747,000 million as of March 31, 2009 and December 31, 2008, respectively.

NOTE 11—CONCENTRATIONS

     Revenue from our Waterlase systems, our principal product, comprised 42% and 61% of total net revenues for the three months ended March 31, 2009 and 2008, respectively. Revenue from our Diode systems comprised 16% and 19% of total revenue for the same periods.

     Approximately 85% and 74% of our laser systems and consumable products net revenue in the quarters ended March 31, 2009 and 2008, respectively, was generated through sales to HSIC worldwide. One international distributor accounted for 12% of our laser systems and consumable products net revenues for the quarter ended March 31, 2008.

     We maintain our cash and cash equivalents accounts with established commercial banks. Through March 31, 2009, such cash deposits periodically exceeded the Federal Deposit Insurance Corporation insured limit of $250,000 per depository.

     Accounts receivable concentrations from one international distributor totaled $452,000 or 26% at March 31, 2009. 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.

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     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.

NOTE 12—COMPREHENSIVE LOSS

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

	Three Months Ended
	March 31,
	2009			2008
Net (loss) income	$	(4,676	)	$	26
Other comprehensive (loss) income items:
Foreign currency translation adjustments		(318	)		57
Comprehensive (loss) income	$	(4,994	)	$	83

NOTE 13—INCOME TAXES

     In June 2006, the FASB issued FASB Interpretation Number FIN 48, Accounting for Uncertainty in Income Taxes, An Interpretation of FASB Statement No. 109, or FIN 48. FIN 48 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 FIN 48 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 FIN 48, 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 three months ended March 31, 2009, we recorded an increase of $2,000 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” and elsewhere in this 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 is obligated to meet certain minimum purchase requirements and is entitled to receive incentive payments if certain purchase targets are achieved. If HSIC has not met the minimum purchase requirements at the midpoint of each of the first two three-year periods, we will have 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 are established for the ezlase system. If HSIC has not met the minimum purchase requirement for any 12-month period ending on

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March 31, we would have 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 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 are achieved. If HSIC did not meet minimum purchase requirements, we would have 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 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 the Company entered into a security agreement, or Security Agreement, with HSIC, granting to HSIC a security interest in the Company’s 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 will 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.

     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 through direct sales representatives and through distributors. We recognize revenue in accordance with SEC Staff Accounting Bulletin No. 104, 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 Emerging Issues Task Force, or EITF 00-21, 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 Waterlase systems include separate deliverables consisting of the product, disposables used with the Waterlase system, 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. Sales of our Diode systems include separate deliverables consisting of the product, disposables and training. For these sales, we apply the relative fair value method, which requires us to allocate the total arrangement consideration to the relative fair value of each element. 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.

     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

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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 EITF 01-09, 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 Financial Accounting Standard 123 (revised), Share-Based Payment, or FAS 123R, using the modified prospective transition method. Prior to the adoption of FAS 123R, we accounted for share-based payments to employees using the intrinsic value method under Accounting Principles Board Opinion No. 25, or APB 25, Accounting for Stock Issued to Employees, and the related interpretations. Under the provisions of APB 25, 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 FAS 123R, which provides the Staff’s views regarding interactions between FAS 123R 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 FAS 123R.

     Under the modified prospective transition method, the provisions of FAS 123R 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 FAS 123, 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 FAS 123R.

     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 60 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.

     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

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might be impaired. We conducted our annual impairment analysis of our goodwill and trade names as of June 30, 2008, 2007 and 2006, and concluded there had been no impairment in trade names and no impairment in goodwill. Due to the decline in our stock price and market capitalization during the fourth quarter of 2008 caused by adverse equity market conditions and the general economic environment, we updated our impairment analysis. We concluded that there had not been any impairment. However, we will closely monitor our stock price and market capitalization and will perform such analysis on a quarterly basis, if needed. If our stock price and market capitalization continue to decline, we may need to impair our goodwill and other intangible assets. At December 31, 2008, as a result of our new Waterlase Dentistry branding strategy, we recorded an impairment of trade names in the amount of $232,000. During the period June 30, 2008 through March 31, 2009, we reviewed critical indicators and determined that no other triggering events occurred that would have a material effect on the value of the remaining assets.

     Warranty Cost. Waterlase systems sold 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. 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. The 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 March 31, 2009 will not be realized, excluding the foreign deferred assets. 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 March 31,
	2009			2008
Consolidated Statements of Operations Data:
Net revenue		100.0	%		100.0	%
Cost of revenue		73.2			49.7
Gross profit		26.8			50.3
Operating expenses:
Sales and marketing		46.2			29.4
General and administrative		39.0			16.2
Engineering and development		16.4			7.7
Total operating expenses		101.6			53.3
Loss from operations		(74.8	)		(3.0	)
Non-operating income, net		4.3			3.4
(Loss) income before income taxes		(70.5	)		0.4
Income tax (benefit) provision		0.5			0.3
Net (loss) income		(71.0	)%		0.1	%

     The following table summarizes our net revenues by category for the three months ended March 31, 2009 and 2008 (dollars in thousands):

	Three Months Ended March 31,
	2009				2008
Waterlase systems	$	2,755	42	%	$	11,595	61	%
Diode systems		1,039	16	%		3,649	19	%
Non-laser systems		2,325	35	%		2,793	15	%
Products and services		6,119	93	%		18,037	95	%
License fees and royalty		475	7	%		1,004	5	%
Net revenue	$	6,594	100	%	$	19,041	100	%

Three months ended March 31, 2009 and 2008

     Net Revenue. Net revenue for the three months ended March 31, 2009 was $6.6 million, a decrease of $12.4 million or 65% as compared with net revenue of $19.0 million for the three months ended March 31, 2008.

     Laser system net revenue decreased by approximately 75% in the first quarter ended March 31, 2009 compared to the same quarter of 2008. Sales of our Waterlase systems decreased $8.8 million or 76% in the first quarter of 2009 compared to the same period in 2008. Our Diode systems decreased $2.6 million or 72% in the first quarter of 2009 compared to the first quarter of 2008. We feel the continued adverse worldwide economic environment has been a significant cause for the decreased sales as dentists may be delaying their decisions to purchase higher priced capital equipment. In addition, a portion of the decrease related to demonstration units sold during the first quarter of 2008.

     Non-laser system net revenue, which includes consumable products, as well as services revenues including advanced training programs, installation charges and extended service contracts, decreased by approximately $468,000 or 17% for the three months ended March 31, 2009 as compared to the same period of 2008. Consumable products revenue increased $192,000 or 18% and services revenues decreased $660,000 or 38%.

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     License fees and royalty revenue decreased by approximately 53% from $1.0 million at March 31, 2008 to 475,000 at March 31, 2009. The 2008 period included amortization of the license fee from The Proctor & Gamble Company which was fully amortized as of December 31, 2008.

     Domestic revenues were $4.6 million, or 70% of net revenue, for the three months ended March 31, 2009 versus $14.0 million, or 74% of net revenue, for the three months ended March 31, 2008. International revenues for the quarter ended March 31, 2009 were $2.0 million, or 30% of net revenue, as compared with $5.0 million, or 26% of net revenue, for the quarter ended March 31, 2008.

     Gross Profit. Gross profit for the three months ended March 31, 2009 decreased by $7.8 million to $1.8 million, or 27% of net revenue, as compared with gross profit of $9.6 million, or 50% of net revenue, for the three months ended March 31, 2008. The decrease was due largely to a one-time write down of inventories 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, lower volume, lower average net pricing and promotion costs being spread over fewer units and a decrease in licensing and royalty revenues.

     Operating Expenses. Operating expenses for the three months ended March 31, 2009 decreased by $3.4 million, or 34%, to $6.7 million as compared to $10.1 million for the three months ended March 31, 2008, but increased as a percentage of net revenue to 102% from 53% on lower net revenue from period to period. 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 March 31, 2009 decreased by $2.6 million, or approximately 46%, to $3.0 million, or 46% of net revenue, as compared with $5.6 million, or 29% of net revenue, for the three months ended March 31, 2008. Convention and seminars expenses decreased by $746,000, travel and entertainment expenses decreased by $388,000, commission expense decreased $389,000 and regional meeting and speaker related expenses decreased by $610,000 in the quarter ended March 31, 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 in comparison to comparable periods in 2008.

     General and Administrative Expense. General and administrative expenses for the three months ended March 31, 2009 decreased by $500,000, or 17%, to $2.6 million, or 39% of net revenue, as compared with $3.1 million, or 16% of net revenue, for the three months ended March 31, 2008. The decrease in general and administrative expenses resulted primarily from decreased legal and consulting fees of $741,000, decreased audit fees of $110,000, and decreased payroll related expenses of $158,000. These decreases were partially offset by an increase in severance costs related to the termination of our CEO and reducing our foreign subsidiary operations and an increase in bad debt expense of $112,000. We believe that our general and administrative expenses are likely to decrease in future 2009 periods compared to the respective 2008 periods.

     Engineering and Development Expense. Engineering and development expenses for the three months ended March 31, 2009 decreased by $378,000, or 26%, to $1.1 million, or 16% of net revenue, as compared with $1.5 million, or 8% of net revenue, for the three months ended March 31, 2008. The decrease is primarily related to decreased payroll related expenses of $92,000 and decreased supplies expense of $97,000. We expect to continue to invest in development projects and personnel in 2009, however, we expect the overall expense to decrease in 2009.

     Non-Operating Income (Loss)

     Gain (Loss) on Foreign Currency Transactions. We realized a $315,000 gain on foreign currency transactions for the three months ended March 31, 2009, compared to a $616,000 gain on foreign currency transactions for the three months ended March 31, 2008 due to the changes in exchange rates between the U.S. dollar and the Euro, the Australian dollar and the New Zealand dollar and an increase in foreign currency denominated transactions and balances. In mid-October 2008, we significantly reduced the inter-company payable due from the foreign subsidiaries to us by making an approximately equal capital contribution which did not result in a significant change in global cash positions. However, subsequent to the contribution date, we made the decision to restructure our foreign operations resulting in a temporary increase in inter-company transactions which resulted in the gain recorded in the quarter ended March 31, 2009. As we have now transitioned most of our sales from through our foreign subsidiaries to sales through distributors, the amount of inter-company transactions and related balances should be reduced in the future.

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     Interest Income. Interest income resulted from interest earned on our cash and investments balances. Interest income for the three months ended March 31, 2009 was $1,000 as compared with $58,000 for the three months ended March 31, 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 March 31, 2009 was $30,000 as compared to $24,000 for the quarter ended March 31, 2008.

     Income Taxes. An income tax provision of $33,000 was recognized for the three months ended March 31, 2009, as compared with a provision of $63,000 for the three months ended March 31, 2008. As a result of the implementation of FIN 48, 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 March 31, 2009 and 2008, we recorded an increase of $2,000 and $15,000, respectively, in the liability for unrecognized tax benefits, including related estimates of penalties and interest. As of March 31, 2009, we have a valuation allowance against our net deferred tax assets, excluding foreign operations, in the amount of $29.7 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. 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 140 as of March 31, 2009.

• On February 27, 2009, we entered into a letter agreement with HSIC amending the term of the License and Distribution Agreement through March 31, 2010. Included in this 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 made the decision to begin the transition of sales in countries served by our foreign subsidiaries located in Germany, Spain, Australia and New Zealand from direct to distributor. As part of the letter agreement with HSIC, HSIC will become our distributor in each of these countries as well as in additional foreign countries in the future. As a result of these developments, we have begun the process of reducing the operations of our foreign subsidiaries which have 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 of approximately $7 million. 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. 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.

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     At March 31, 2009, we had approximately $900,000 in net working capital, a decrease of $4.1 million from $5.0 million at December 31, 2008. Our principal sources of liquidity at March 31, 2009 consisted of our cash and cash equivalents balance of $1.8 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 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 three months ended March 31, 2009, our operating activities used cash of approximately $3.7 million, compared to cash provided of $799,000 for the three months ended March 31, 2008. Cash flows from operating activities in the quarter ended March 31, 2009 were negatively impacted by the net loss recorded in the period. The most significant changes in operating assets and liabilities for the three months ended March 31, 2009 as reported in our consolidated statements of cash flows were decreases of $1.8 million in accounts receivable (before the change in allowance for doubtful accounts) and $2.8 million 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. These amounts are included in the outstanding obligations as of March 31, 2009 listed below.

     The following table presents our expected cash requirements for contractual obligations outstanding as of March 31, 2009 for the years ending as indicated below (in thousands):

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	Less Than		1 to 3		3 to 5		More Than
	1 Year		Years		Years		5 years		Total
Operating leases	$	566	$	640	$	—	$	—	$	1,206
SurgiLight agreement		25		25		—		—		50
Insurance premium financing		516		—		—		—		516
Total	$	1,107	$	665	$	—	$	—	$	1,772

     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 will be 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.

     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.

     In addition to Mr. Mulder, certain other members of management are entitled to severance benefits payable upon termination following a change in control, which would approximate $2.1 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 FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, An Interpretation of FASB Statement No. 109 or FIN 48, 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 $20,000 and $20,000, respectively, at March 31, 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

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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.

     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 March 31, 2009. Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of March 31, 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 during the first quarter of 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.

     National Laser Technology, Inc, or NLT, buys used dental lasers, predominately those originally sold by Biolase, and resells them to other dentists. On August 19, 2008, NLT brought an action against us in federal court in the Southern District of Indiana. NLT alleged that we violated Sections 1 and 2 of the Sherman Act, Section 43(a) of the Lanham Act, Section 17200 et seq. of the California Unfair Competition Act and tortiously interfered with NLT’s business relationships and prospective business advantage. NLT sought a monetary award of three times the unquantified damages that NLT has allegedly sustained because of our alleged Sherman Act violations, unquantified damages for the rest of the claims, punitive damages and preliminary and permanent injunctive relief. On October 6, 2008, we answered the complaint, asserted several affirmative defenses and filed a counterclaim. We alleged that NLT violated Sections 1114 and 1125(a) of the Lanham Act and Section 17200 et seq. of the California Unfair Competition Act. We sought unquantified damages and a permanent injunction. NLT amended its Complaint on December 23, 2008, to add a claim for conspiracy to monopolize in violation of Section 2 of the Sherman Act; we answered the Amended Complaint on January 15, 2009. We amended our counterclaims on February 19, 2009 to add a claim for federal copyright infringement and to seek associated damages. On October 21, 2008, NLT filed a motion for a preliminary injunction seeking to enjoin us from certain actions that NLT alleged violated section 1 and 2 of the Sherman Act. On November 24, 2008, we filed a motion for preliminary injunction seeking to enjoin NLT from selling modified Biolase lasers or using Biolase’s trademarks Oral argument was scheduled for March 23, 2009. On March 10, 2009, we filed a motion to strike one of NLT’s witnesses from testifying at the preliminary injunction hearing or, in the alternative, continuing the hearing. The preliminary injunction hearing was continued and, on April 16, 2009, the entire lawsuit—including all claims and counterclaims—was dismissed with prejudice pursuant to a settlement agreement

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that was entered into on March 25, 2009. As part of the settlement agreement, NLT was paid $653,000 by our insurance carrier. We received a one-time payment of $347,000 from our insurance carrier, related to the assumption of NLT’s existing service contracts regarding dental lasers manufactured by us. This amount has been recorded as a liability in deferred revenue and will be amortized to service revenue over the term of the service contracts. The settlement agreement contains confidentiality provisions that limit disclosure of the terms of the settlement except as required by law.

     On December 19, 2005, we entered into a Vendor Agreement with National Technology Leasing Corporation, or NTLC, in which NTLC was designated as our “Preferred Leasing/Financing Provider.” In September 2006, we gave notice to NTLC of the termination of the Vendor Agreement, and subsequently entered into a financing and distribution agreement with Henry Schein, Inc. On August 26, 2008, NTLC filed a lawsuit against us, Henry Schein, Inc. and a former employee of NTLC in California Superior Court in Placer County. NTLC alleges that we breached the Vendor Agreement by failing to provide the required notice of termination and asserts a claim for damages without specifying an amount. On October 10, 2008, we answered the complaint and asserted several affirmative defenses. On March 2, 2009, the lawsuit was dismissed with prejudice by NTLC pursuant to a settlement agreement among the parties which resolves all claims in the litigation and provides that we will make two payments to NTLC totaling approximately $20,000 during the first and second quarters of 2009. In the settlement agreement, we denied any wrongdoing. The settlement agreement contains confidentiality provisions that limit disclosure of the terms of the settlement except as required by SEC rule or regulation, under GAAP or pursuant to court order or law. On September 12, 2008, Henry Schein, Inc. sent Biolase a written demand for indemnity for this lawsuit. We denied that we are required to indemnify Schein, and we subsequently entered into a tolling agreement regarding this indemnification claim on November 18, 2008.

     From time to time, we are involved in other legal proceedings incidental to our business, but at this time we are not party to any other litigation that is material to our business.

ITEM 1A. RISK FACTORS.

Risk Factors

     The discussion of our business and operations should be read together with the risk factors contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 which was filed with the Securities and Exchange Commission, or SEC, and describes the various risks and uncertainties to which we are or may be subject. At March 31, 2009, there have been no material changes to the risk factors in our Annual Report on Form 10-K for the year ended December 31, 2008. You should carefully review these risks, together with those described in our Annual Report on Form 10-K and in other reports we file with the SEC in evaluating our business.

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ITEM 6. EXHIBITS

Exhibit No.	Description
10.1†	Letter Agreement, dated February 27, 2009, by and between Biolase Technology, Inc. and Henry Schein, Inc.
10.2	Letter Agreement, dated March 4, 2009, by and between Biolase Technology, Inc. and David M. Mulder.
10.3	Separation and General Release Agreement, dated March 10, 2009, by and between Biolase Technology, Inc. and Jake P. St. Philip.
10.4	Security Agreement, dated March 13, 2009, by and between Biolase Technology, Inc. and Henry Schein, Inc. (Filed March 19, 2009 with Registrant’s Current Report on Form 8-K and incorporated herein by reference.)
10.5	Settlement Agreement and General Mutual Release, dated March 25, 2009, by and between Biolase Technology, Inc. and National Laser Technology, Inc.
10.6	Letter Agreement, dated April 3, 2009, by and between Biolase Technology, Inc. and David M. Mulder.
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 Frederick M. Capallo 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 Frederick M. Capallo 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 Securities 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: May 8, 2009
	BIOLASE TECHNOLOGY, INC., a Delaware corporation
	By:	/s/ DAVID M. MULDER
		David M. Mulder
		Chief Executive Officer (Principal Executive Officer)
	By:	/s/ FREDERICK M. CAPALLO
		Frederick M. Capallo
		Interim Chief Financial Officer (Principal Financial and Accounting Officer)

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EX-10.1

Exhibit 10.1

[LETTERHEAD OF HENRY SCHEIN, INC.]

February 27, 2009

Mr. David M. Mulder
Chief Financial Officer
Biolase Technology, Inc.
4 Cromwell
Irvine, California 92618

Dear Mr. Mulder:

This letter agreement shall serve to amend that certain License and Distribution Agreement, by and between Henry Schein, Inc. (“HSI”) and Biolase Technology, Inc, (“Biolase”), dated as of August 8, 2006, as amended (the ^“Agreement”).

As of the date set forth above, the parties hereby agree as follows:

1.

As a fundamental condition precedent to HSI entering into this letter agreement, Biolase has informed HSI that it is taking actions to reduce its operating expenses to such a level as to reach profitability, based on **** Biolase sales revenue of $**** on an on-going basis, to be adjusted as minimums increase.

2.

Subject to Section 1 above, HSI agrees to make a firm minimum purchase commitment of Waterlase Turbo MD (a Waterlase MD with an associated turbo handpiece kit) and Ezlase base units and any other laser units (including the **** and ****) offered during the Term and their related future iterations and their auxiliary components and accessories (the “Lasers”) during the period commencing on the date hereof to March 31, 2010 (the “New Initial Term”) and Non-Laser Products (as defined below) in the aggregate amount of $42.7 million (“**** Level”), to be purchased as follows: (i) $**** comprised of Waterlase Turbo MD lasers and Turbo upgrade kits, which such purchase shall occur no later than March 2, 2009, (ii) commencing on March 15, 2009, (26) semi-monthly purchases of any Biolase products during the New Initial Term for purchases of not less than $**** per semi-monthly period (of which $**** will be Lasers and $**** will be non-Laser products, including disposable products, warranty sales, training and replacement parts, etc. collectively “Non-laser Products”), each such purchase to occur on the 15th and the last day of each consecutive month (e.g, March 15, 2009, March 31, 2009, April 15, 2009, April 30, 2009, etc.); and (iii) HSI agrees to make purchases of any Biolase products in the aggregate amount of $**** (the “Initial International Purchase”) with regard to distribution of products in the United Kingdom, Belgium, Luxembourg, Netherlands, Australia, New Zealand, Austria, Spain, and Germany or elsewhere in the world. The Initial International Purchase shall occur no later than March 2, 2009. With respect to all purchases in this Section 2 made in February of 2009, HSI shall pay Biolase all of the purchase price on March 2, 2009 in respect of

**** 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.

	(i) and (iii) above ($**** in the aggregate). Other payments in respect of purchases hereunder shall be due upon receipt, of the applicable products. These purchases may be purchased by HSI through HSI’s divisions or subsidiaries in the United States or Canada or elsewhere in the world. Biolase will make the products available to HSI and, in accordance with the parties’ standard business practice, promptly supply HSI with any products so ordered. HSI and its affiliates, under the Agreement or any related agreements for the sale of Biolase products anywhere in the world, shall have no product purchase obligations other than as set forth herein. Notwithstanding anything contained herein to the contrary, purchases by HSI of **** shall not be part of the purchases set forth in (i) through (iii) above.
3.	With respect to **** Waterlase C-100 ****, Biolase and HSI agree to work together in good faith to reach agreement upon a strategy for **** Waterlase C-100 **** no later than April 15, 2009, with an agreed upon **** no later than ****.
4.	If sales exceed HSI targeted levels of $**** in Lasers of such year, ****% of such excess sales of Lasers will be **** and ****% will be **** Lasers ****; provided, however, that the parties will negotiate in good faith such percentages if ****.
5.	During the New Initial Term, Biolase shall exclusively sell its products through HSI in the Territory, and shall not sell such products directly or through other distributors, and HSI shall have the right to distribute the products through third-party distributors if it so elects, provided that such third-party distributors sell to end-users permitted under the Agreement “Territory” shall be defined as the United States, United Kingdom, Belgium, Luxembourg, Netherlands, Canada, Spain, Germany, Austria, Australia, and New Zealand, Subject to Biolase’s contractual obligations in respect of sales in markets governed by existing distribution agreements in effect as of the date hereof, HSI shall have the right to exclusively sell in other countries throughout the world. Biolase will consider in good faith extending exclusivity in certain specific markets **** based upon HSI’s performance in such markets.
6.	HSI may, at its option, extend this letter agreement for two additional one-year terms, upon written notice given on or before February 1, 2010 or February 1, 2011 (for second renewal) given by Schein to Biolase prior to the expiration of the New Initial Term (or the then expiring additional one-year term, as the case may be); provided that HSI may only be permitted to exercise an option to extend the then current term if it shall agree in writing to purchase from Biolase a minimum aggregate amount of products purchased during such additional term equal to (i) (for the first renewal term) the **** (a) $**** and (b) **** of the amount of products actually sold by Biolase to HSI during the New Initial Term

**** 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.

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	(adjusted pro rata for 12 months); provided, however, that if HSI shall not have **** of Lasers by $**** from the **** as of ****, measured ****, then HSI shall only be required to purchase the **** (A) $**** or (B) **** of the amount of products actually sold by Biolase to HSI during the New Initial Term (adjusted pro rata for 12 months), and (ii) (for the second renewal term) the greater of (x) **** of the commitment for the prior renewal term and (y) **** of the amount of products actually sold by Biolase to HSI during the first renewal term; provided, however, that if HSI shall not have **** of Lasers by $**** from the **** as ****, measured at ****, then HSI shall only be required to purchase the greater of (X) **** of the commitment for the prior renewal term and (Y) **** of the amount of products actually sold by Biolase to HSI during the first renewal term. The New Initial Term, together renewal terms, if any, with shall be the “Term” of the Agreement and all covenants and provisions restricting HSI or its affiliates, anywhere in the world under this Agreement or any related agreement, including in respect of selling competing products, shall have no force or effect upon the termination of this Agreement or expiry of Term. The parties will cooperate to maximize sales of Biolase products after the expiry or termination of the Agreement.
7.	With respect to existing Waterlase MD and Ezlase inventory, subject to applicable law (e.g. export laws), HSI agrees to use commercially reasonable efforts and to work in good faith to **** through new international markets, among other places, with a **** Lasers by a ****, through sales of Lasers in international markets.
8.	The cost of the Waterlase Turbo MD systems to HSI will be $**** in the United States and Canada, and Biolase will **** on the warranty applicable to the Laser products from **** to HSI. The cost of the current Ezlase system to HSI will **** be $**** for the United States and Canada. For the avoidance of doubt, HSI shall determine the end-user customer pricing.
9.	Upon the launch of the new turbo handpiece (expected to be the date hereof), Biolase will upgrade HSI’s existing inventory with new turbo handpieces and related hardware and software and HSI will purchase turbo handpieces as follows: solely with respect to HSI’s existing on-hand inventory, for the payment of $****, Biolase will provide Schein with one turbo handpiece kit and the related turbo handpiece software (turbo handpiece software to be installed by HSI technicians during end-user installation) for each unit of existing inventory. The stand-alone turbo handpiece upgrade kit for sale to the existing installed base upgrade shall be priced to HSI at $**** per upgrade kit. The upgrade kits will be completed in approximately **** days of such launch.

**** 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.

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10. HSI will assume the following functions that Biolase had previously performed under the Agreement:

a.	Support at certain trade shows, as determined by the parties
b.	Notwithstanding the foregoing, Biolase agrees to provide “over the shoulder” demonstrations during the New Initial Term (and during each additional renewal term).
c.	HSI will use all reasonable efforts to secure the services of **** to serve as a “luminary/trainer” in respect of the products.
d.	HSI will provide facilities appropriate for the purpose of providing WCLI seminar programs, and will provide full related support expenses, including but limited to honorariums for luminaries, accommodations for luminaries, travel for luminaries, and food for participants (total estimated costs to be ($****-$****), with an estimated cost of $**** per seminar program)
e.	Both parties shall endeavor to improve sales and to agree upon further marketing efforts to accelerate sales and increase productivity.

11.	In countries in which HSI distributes the Biolase products but does not have exclusivity, Biolase will not offer the products to other distributors, wholesalers or other similar entities on terms and conditions more favorable than those provided to HSI, without also making any such more favorable terms or conditions available to HSI.
12.	HSI will continue to provide Level 1 service and Biolase will continue to provide all the services it currently performs, including Level 2 service.
13.	To secure the $**** payment, Biolase will agree to enter into a security agreement to be provided by HSI following the execution of this letter agreement containing those terms and conditions customary and ordinary for such purpose, and will consent to the filing of the related UCC or UCCs to effect a security interest for the benefit of HSI in Biolase’s inventory, equipment and other tangible assets; provided that HSI shall agree to release such security upon receipt of the products deliverable in respect of such $**** payment.
14.	In any country in which Biolase does not currently sell its products (a “New Territory”), if Biolase determines to sell its products in such New Territory through the distribution channel, HSI shall have the first right to sell such products on terms and conditions to be agreed upon by the parties; provided that if the parties do not so agree in good faith within fifteen (15) days upon notice to HSI, Biolase may utilize another distributor in such New Territory provided that such distributor is not offered terms and conditions more favorable to those offered to HSI.
15.	All amounts herein reference U.S. dollars. This letter agreement amends certain terms and conditions of the Agreement. All other terms and conditions of the Agreement that are not modified by this letter agreement are hereby ratified and

**** 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.

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confirmed in all respects, and shall remain in full force and effect. Should there be any conflict between the teens and conditions contained in this letter agreement and the Agreement, the terms and conditions of this letter agreement shall govern and control.

Please acknowledge your agreement to the foregoing terms and conditions by executing this letter agreement.

Regards,

/s/ Brian S. Watson  

Vice President, Strategic and Business Planning
Henry Schein, Inc. 

/s/ David M. Mulder  

Chief Financial Officer 

Biolase Technology, Inc. 

**** 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.

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EX-10.2

Exhibit 10.2

Biolase Technology, Inc.
4 Cromwell
Irvine, California 92618

March 4, 2009

David M. Mulder
c/o Biolase Technology, Inc.
4 Cromwell
Irvine, California 92618

Re: Amendment to Employment Agreement

Dear Mr. Mulder:

This letter agreement shall serve to amend that certain Employment Agreement, dated April 29, 2008 (the “Employment Agreement”), by and between Biolase Technology, Inc. (the “Company”) and David M. Mulder.

Effective as of March 5, 2009, the parties agree as follows:

1. Section 1.A of the Employment Agreement is hereby deleted in its entirety and replaced with the following:

“Executive shall serve as the Chief Executive Officer of the Company and shall report directly to the Company’s Board of Directors (the “Board”). Executive shall perform the responsibilities of a chief executive officer of a public company, including such duties and functions as may be reasonably assigned to Executive from time to time by the Board, and shall include Executive’s service as the principal financial officer of the Company for purposes of compliance with the Sarbanes-Oxley Act of 2002, until such time as the Board appoints a new principal financial officer. Executive shall comply with all proper and reasonable directives and instructions of the Board and/or committee thereof.”

2. The following new Section 1.C is hereby added to the Employment Agreement:

“C. The Board shall appoint Executive as a member of the Board, effective as of the Effective Date. During the Employment Period (as defined below), Executive shall serve as a member of the Board, subject to election and reelection by the Company’s stockholders in accordance with the Company’s Certificate of Incorporation and Bylaws. Executive shall not be paid a fee for serving as a member of the Board. The Company shall reimburse Executive for reasonable expenses incurred by Executive in connection with his service as a member of the Board in accordance with the Company’s expense reimbursement policies.”

3. Section 7.F of the Employment Agreement is hereby deleted in its entirety and replaced with the following:

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

This letter agreement amends certain terms and conditions of the Employment Agreement. All other terms and conditions of the Employment Agreement that are not modified by this letter agreement are hereby ratified and confirmed in all respects, and shall remain in full force and effect. Should there be any conflict between the terms and conditions contained in this letter agreement and the Employment Agreement, the terms and conditions of this letter agreement shall govern and control.

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Please acknowledge your agreement to the foregoing terms and conditions by countersigning this letter agreement in the space provided below.

Very truly yours,

BIOLASE TECHNOLOGY, INC.
By:	/s/ George V. d’Arbeloff
	Name:  George V. d’Arbeloff
	Chair: Chairman of the Board of Directors
ACKNOWLEDGED AND AGREED:
/s/ David M. Mulder
David M. Mulder

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EX-10.3

Exhibit 10.3

SEPARATION AND GENERAL RELEASE AGREEMENT

          This Separation and General Release Agreement (this “Agreement”) is being entered into as of this 10th day of March, 2009, by and between Biolase Technology, Inc. (the “Company”), and Jake P. St. Philip, an individual (“Employee”) (each of the Company and Employee is sometimes hereinafter referred to individually, as a “Party” and collectively, as the “Parties”).

          WHEREAS, Employee and the Company are parties to that certain Employment Agreement, dated as of January 2, 2008 (the “Employment Agreement”).

          WHEREAS, the Parties wish to provide for severance benefits in lieu of any severance benefits provided under the Employment Agreement on the terms and conditions set forth below.

          WHEREFORE in consideration of the foregoing premises and the terms and conditions set forth below, the Parties agree as follows:

     1. Termination of Employment.

          a. The Company has terminated Employee’s employment, effective as of March 5, 2009 (the “Effective Date”). The Company terminated Employee from his position as the Chief Executive Officer, effective as of the Effective Date. Employee hereby acknowledges receipt of the Company’s notice of termination, and resigns as a member of the Board of Directors of the Company, and from each position as a director, officer and/or employee of the Company or any subsidiary or affiliate of the Company, effective as of the Effective Date.

          b. Employee acknowledges that he has been paid all salary and wages through and including the Effective Date, including without limitation, and any accrued unused vacation benefits, and Employee has been reimbursed for all business expenses. Except as otherwise provided for in this Agreement, the rights and obligations of Employee and the Company under the Employment Agreement terminated on the Effective Date and shall have no further force or effect after the Effective Date.

          c. Provided that within twenty-one days of the date on which Employee receives this Agreement, Employee executes and delivers to the Company the Termination Certification attached hereto as Exhibit A and the Mutual Release and Waiver of Claims (the “Release”) attached hereto as Exhibit B, and further provided that Employee does not revoke the Release in accordance with its terms and conditions, the Company shall provide to Employee, in lieu of any compensation or benefits under the Employment Agreement, the following severance benefits:

          (1) The Company shall pay to Employee $350,000.00, subject to applicable tax withholding, payable (i) one-half on May 9, 2009, and (ii) one-half in twelve (12) consecutive equal monthly installments, commencing on June 1, 2009. The Company shall pay such amount as wages, and report such amount as wages paid on each payment date and shall remit the amount of the required tax withholding to the relevant tax authorities.

          (2) The Company shall pay COBRA premiums for Employee (and his eligible dependents) under the Company’s medical and dental benefit plans, as in effect from time to time, for the twelve (12) month period following the Effective Date. The benefits under such plans shall be provided through insurance maintained by the Company.

          (3) To the extent that it is permissible by law and in compliance with all plan rules, the Company shall pay Employee’s premiums under the Company’s group life insurance, accidental death and dismemberment and disability benefit plans during the twelve (12) month period following the Effective Date. The benefits under such plans shall be provided through insurance maintained by the Company.

          d. Except as provided for in this Agreement, Employee understands and agrees that he is giving up any right or claim to further compensation from the Company. Employee and the Company have no further rights or obligations under the Employment Agreement, except as otherwise specified in this Agreement.

          2. No Admission. Employee and the Company further understand and agree that neither the payment of money nor the execution of this Agreement, including the Release, shall constitute or be construed as an admission of any liability whatsoever by either Party.

          3. Severability. The provisions of this Agreement are severable, and if any part of this Agreement is found to be unenforceable, the other paragraphs (or portions thereof) shall remain fully valid and enforceable.

          4. No Encouragement of Actions/Cooperation with the Company. Employee agrees that he will not assist any person or entity in bringing or pursuing legal action against the Company, its agents, successors, representatives, employees and related and/or affiliated companies, based on events occurring prior to the Effective Date; provided, however, that this Section 4 shall not apply to any legal action arising from or related to this Agreement or to any conduct compelled by or pursuant to applicable law, nor shall it prohibit, in any way, Employee from responding to a subpoena or taking any other action required by law. To the extent Employee is subpoenaed or otherwise requested or required to provide any documents, testimony or other information concerning the Company, he shall notify the Company as soon as practicable, and reasonably cooperate with the Company in opposing any such request or requirement to the extent permitted by applicable law. Employee shall also provide information requested by the Company, and make himself available at reasonable times upon reasonable request to assist the Company in defending or prosecuting any legal action or arbitration to the extent it concerns events occurring during his employment or events as to which he may have knowledge. The Company shall reimburse Employee for any reasonable out of pocket expenses incurred and shall compensate Employee for Employee’s actual time spent, including travel time, providing information or assistance to the Company, under the immediately preceding sentence, at the rate of $250.00 per hour.

          5. No Disparagement. The Company and Employee agree that for a period of ten (10) years after Employee’s employment with the Company ceases, they will not, in any

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communication with any person or entity, including any actual or potential customer, client, investor, vendor, distributor, 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 Employee’s affiliates, or any of the Company’s directors, officers, or agents (in the case of any of Employee’s affiliates, at such time as they are affiliated with Employee or, in the case of any of the Company’s directors, officers or agents, at such time as they are employed by, or acting for, the Company). 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.

          6. Company Property. Employee agrees to search Employee’s home, office and all other storage areas for all property owned by the Company and to return or destroy and/or delete any located Company property and equipment to the Company within fifteen (15) days of Employee’s execution of this Agreement. In the event Employee discovers Company property or equipment in his possession after such time, Employee shall deliver such materials to the Company immediately upon discovery.

          7. Choice of Law and Venue. The Parties acknowledge and agree that this Agreement shall be interpreted in accordance with California law. If any claims or actions arising out of or relating to this Agreement or Employee’s service with the Company are determined by an arbitrator not to be subject to Section 9, they shall be filed in either the Superior Court of the State of California for the County of Orange, or the Federal District Court for the Central District of California.

          8. Sole and Entire Agreement; Obligations of Employee. With the exception of the terms and conditions of the Release, the Proprietary Information Agreement, and the non-solicitation provisions set forth in Section 6 of the Employment Agreement, this Agreement and the exhibits hereto represent the sole and entire agreement among the Parties and supersedes all prior agreements (including, without limitation, the Employment Agreement), negotiations, and discussions between the Parties hereto and/or their respective counsel. The non-solicitation provisions of Section 6 of the Employment Agreement shall remain in full force and effect and shall survive the termination of Employee’s employment with the Company and the termination of the Employment Agreement, and Employee acknowledges and agrees that the Company shall have the right to communicate with any future or prospective employer of Employee concerning Employee’s obligations under this Agreement, the Proprietary Information Agreement, and the non-solicitation provisions of Section 6 of the Employment Agreement. Employee 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 Employee that is not expressly stated herein. Any agreement amending or superseding this Agreement must be in writing, signed by duly authorized representatives of the Parties, specifically reference this Agreement; and state the intent of the Parties to amend or supersede this Agreement. This Agreement may only be modified by a writing signed by both Employee and a duly authorized officer of the Company. In the event the Company fails to provide Employee with the severance benefits set forth in Section 1(c) above, Employee shall have the right to cease performance under this Agreement (but only if the Company does not cure after the expiration of the cure period below and provided that Employee has not otherwise breached this Agreement) by sending two

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separate written notices to the Company, to the Company’s principal headquarters and one to the attention of the Company’s Chief Executive Officer and the other to the Chairman of the Board, and the Company may cure such failure within thirty (30) business days of receipt such notice(s). If the Company fails to cure such failure within the thirty (30) business day time period, the Release shall be deemed unenforceable by the Company.

          9. Arbitration. The Parties hereby agree to submit any claim or dispute arising out of or relating to the terms of this Agreement to private and confidential arbitration by a single neutral arbitrator. Subject to the terms of this Section, the arbitration proceedings shall be governed by the rules of the Judicial Arbitration and Mediation Service (“JAMS”) applicable to employment disputes as they may be in effect from time to time, and shall take place in Orange County, California. The arbitrator shall be appointed by agreement of the Parties hereto or, if no agreement can be reached, by the JAMS pursuant to its rules. 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 decision of the arbitrator shall be rendered in writing and be final and binding on all Parties to this Agreement, and judgment thereon may be entered in any court having jurisdiction. 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 arbitrator’s fees and/or any other fees payable to JAMS shall be shared in accordance with the rules of JAMS; provided, however, that Employee shall not be required to pay any such fees that are unique to arbitration and/or would exceed the cost of filing the same claim(s) in a court of competent jurisdiction, and any shortfall shall be borne by the Company. The Parties shall each bear their own attorneys’ fees, witness expenses, expert fees and other costs, except to the extent they may be awarded otherwise by the arbitrator in accordance with applicable law. This arbitration procedure is intended to be the sole and exclusive method of resolving any claim between the Parties, and each of the Parties hereby waives any right to a jury trial with respect to such claims. The successful or prevailing party in any arbitration or other legal proceeding concerning this Agreement shall be entitled to attorneys’ fees and other costs incurred in that action or proceeding, in addition to any other relief to which such party may be entitled or awarded. Notwithstanding the foregoing provisions of this paragraph, 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.

          10. Headings; Construction of Agreement. The headings in this Agreement are provided solely for the Parties’ convenience, and are not intended to be part of, nor to affect or alter the interpretation or meaning of this Agreement. Both Parties have been represented by, or had the opportunity to be represented by, counsel in connection with this Agreement.

          11. Counterparts. For the convenience of the Parties hereto, this Agreement may be executed in any number of counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute the same agreement.

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          12. Authority to Execute this Agreement. The person or persons executing this Agreement on behalf of a Party warrants and represents that he has the authority to execute this Agreement on behalf of the Party and has the authority to bind that Party to the performance of its obligations hereunder.

          IN WITNESS WHEREOF, the parties have entered into this Separation and General Release Agreement as of the date first set forth above.

“COMPANY”

BIOLASE TECHNOLOGY, INC.
By:	/s/ George d’Arbeloff
	Name:  George d’Arbeloff
	Title:  Chairman of the Board
By:	James R. Largent
	Name:  James R. Largent
	Title:  Chairman of the Compensation Committee of the Board
“EMPLOYEE”
/s/ Jake P. St. Philip
Jake P. St. Philip

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EXHIBIT A

BIOLASE TECHNOLOGY, INC.

TERMINATION CERTIFICATION

This is to certify that based on a reasonably diligent search by me to date, 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”). If I locate any such materials after the date of this certification, I will cause such materials to be delivered to the Company within two (2) business days.

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:                                         

Jake P. St. Philip

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EXHIBIT B

GENERAL RELEASE AND WAIVER OF CLAIMS

          In consideration of the payments and other benefits set forth in the Separation and General Release Agreement, dated as of March 10, 2009, by and between Executive and the Company (the “Agreement”), to which this form shall be deemed to be attached, Jake P. St. Philip (“Executive”) hereby agrees to the following general release and waiver of claims (“General Release”).

          In exchange for the consideration to be paid and provided to Executive by the Agreement, 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 from the beginning of the world to my signing of 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, and unused vacation earned through the date of termination of Executive.

          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

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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 General Release.

          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 that certain Employment Agreement, dated January 2, 2008, by and between the Executive and the Company (the “Employment Agreement”). Nothing contained in this General Release shall be deemed to modify, amend or supersede the obligations set forth in such agreements.

          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, the Agreement, and the non-solicitation provisions set forth in Section 6 of the Employment 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.

8

          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 January 2, 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 (or as reported periodically in the Company’s proxy statements).

BIOLASE TECHNOLOGY, INC.
By:
	Name:	George d’Arbeloff
	Title:	Chairman of the Board
Jake P. St. Philip

9

EX-10.5

Exhibit 10.5

CONFIDENTIAL SETTLEMENT AGREEMENT
AND GENERAL MUTUAL RELEASE

     This Confidential Settlement Agreement and General Mutual Release (“Settlement Agreement” or “Agreement”) is entered into this 19th day of March 2009, by and between: (i) National Laser Technology, Inc. (“NLT” or “Plaintiff”) and (ii) Biolase Technology, Inc. (“Biolase” or “Defendant”). NLT and Biolase may be referred to individually in the Agreement as “Party” and collectively as “Parties.”

RECITALS

A.	NLT filed a Complaint on August 20, 2008, in the United States District Court for the Southern District of Indiana (“Court”), Civil Action No.: 08-CV-1123 (the “Lawsuit”), and an Amended Complaint, filed December 23, 2008, alleging, among other things, that Biolase made false statements to dentists concerning NLT’s sale of used Biolase dental lasers (“Lasers”), and refused to sell laser tips and other parts to dentists if they did business with NLT.
B.	Biolase filed Counterclaims on September 12, 2008, and Amended Counterclaims on February 19, 2009, alleging, among other things, that NLT infringed Biolase’s copyright and trademark rights, made false and misleading statements on its website, and sold and serviced modified Lasers originally manufactured by Biolase without necessary pre-market approvals by the United States Food & Drug Administration (“FDA”).
C.	Biolase denies the allegations set forth in the Complaint and Amended Complaint, and NLT denies the allegations set forth in the Counterclaims and Amended Counterclaims.
D.	NLT filed a motion for a preliminary injunction on October 21, 2008, seeking, among other things, to enjoin Biolase from refusing to sell laser tips and other parts to dentists that do business with NLT, or making threats to that effect.
E.	Biolase filed a cross motion for a preliminary injunction on November 24, 2008, seeking, among other things, to enjoin NLT from infringing Biolase trademarks, making certain statements on its website, and selling modified Biolase Lasers.
F.	The Parties’ respective motions for preliminary injunction have been fully briefed and an evidentiary hearing has been scheduled for March 23, 2009. The Court has not yet ruled on either motion.
G.	NLT and Biolase mutually now wish to resolve, settle, release, and compromise all claims, potential claims, defenses and counterclaims that they may have against each other.

          NOW, THEREFORE, in consideration of the foregoing and the promises and covenants contained in this Agreement, and for other good and valuable consideration, NLT and Biolase intending to be legally bound, hereby agree as follows.

1.0 DEFINITIONS

1.1.	The term “NLT” means National Laser Technology, Inc., the plaintiff in the Lawsuit, and includes its affiliates, parents, subsidiaries, owners, successors, employees, officers, directors, agents, representatives, attorneys and assigns. NLT also means AMD Lasers, LLC and includes its affiliates, parents, subsidiaries, owners, successors, employees, officers, directors, agents, representatives, attorneys and assigns.
1.2.	The term “Biolase” means Biolase Technology, Inc., the defendant in the Lawsuit, and includes its affiliates, parents, subsidiaries, owners, successors, employees, officers, directors, agents, representatives, attorneys and assigns.
1.3.	The term PPS Module means the modification that NLT made to Biolase Waterlase lasers that enabled the dentist to program different variable pulses. NLT did not seek pre-market approval from the FDA for this modification prior to marketing it to its customers.

2.0 PAYMENT

For and in consideration of the mutual promises set forth herein, Biolase will pay, or be responsible to cause its insurance carrier Hartford Fire Insurance Company to pay, to NLT the sum of SIX HUNDRED FIFTY THREE THOUSAND DOLLARS ($653,000) within 9 days of the execution of this Settlement Agreement (the “Payment”).

3.0 NLT’S PROHIBITION ON SALE, SERVICING, OR TRAINING OF BIOLASE LASERS AND UPGRADES

3.1.	NLT agrees that it cannot sell, market or distribute any Biolase Laser or parts that NLT has modified without first obtaining pre-market approval from the FDA, which NLT has not done to date.
3.2.	Accordingly, NLT will never, directly or indirectly, market or sell any Biolase Laser parts except for those Biolase Laser parts that are currently in NLT’s inventory which may be sold to distributors or anyone other than an end-user dentist.

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3.3.	NLT also agrees that, prior to re-selling (directly or indirectly) any Biolase Laser, it must submit the Laser to Biolase for inspection pursuant to Biolase’s Used Laser Resale Policy, as may be amended from time to time in Biolase’s sole and absolute discretion, and pay all of the fees required thereunder for a customer that is trying to sell or purchase a used Laser and wishes Biolase to provide support for the Laser, except that NLT may market and sell the seven (7) Waterlase units and seven (7) Waterlase MDs that it currently has in its possession or has an obligation to purchase without regard to such Policy. Biolase’s current Used Laser Resale Policy is attached hereto as Schedule 1.
3.4.	NLT further agrees that, because it does not have access to the latest Biolase specifications, it will never offer, sell, or market, directly or indirectly, any training on any Biolase laser without prior written permission from Biolase, except that any currently scheduled trainings may proceed as scheduled.
3.5.	NLT further agrees that it will never market or sell any modification or upgrade to any Biolase Laser without first obtaining FDA approval, including but not limited to:

(a)	the Detail Kit, plastic replacement case, Quiet Fan Kit, and PPS Module described in the Supplemental Declaration of Alan Miller (filed in the Lawsuit at Dkt. #59-2); and
(b)	any other upgrade, repair, change or modification.

3.6.	If Biolase decides to recall, reconfigure, or remove from the Lasers any of the PPS Modules sold by NLT, Biolase shall offer to replace the Module for software or a different Laser with the FDA-cleared equivalent functionality free of charge. Biolase shall perform any such recall, removal and replacement at its sole expense, at no expense to NLT, and at no expense to the affected dentist other than as negotiated between Biolase and the dentist.
3.6.1.	Within one (1) business day of the execution of this Agreement, NLT shall provide Biolase with a list of the last known purchaser and location of any PPS Module that it has sold, and within two (2) business days of receipt of the Payment, shall inform such purchaser that Biolase may contact them to replace their Module, using the language in Exhibit B, or as otherwise has been mutually agreed upon by the Parties. NLT represents that it sold no more than 98 PPS Modules in the United States and 7 PPS Modules in Japan. If this representation is inaccurate, NLT agrees to immediately pay Biolase $5,000 for each additional PPS Module.
3.6.2.	At Biolase’s request, NLT shall provide instructions and/or training to Biolase technicians concerning the proper removal of the PPS Module from a Waterlase unit. NLT shall indemnify Biolase for any lawsuits or claims based on the PPS Modules that NLT installed or sold at the time of this Agreement.

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4.0 SERVICE OF BIOLASE LASERS

4.1.	NLT agrees that it cannot service any Biolase Lasers without complying with applicable FDA regulations, which NLT has not done to date.
4.2.	For a period of ten (10) years after execution of this Agreement, NLT agrees not to compete with Biolase by servicing any Biolase Laser or entering into any contract to service any Biolase Laser without the prior written permission of Biolase. Thereafter, NLT agrees that it will not service any Biolase Lasers without first complying with applicable FDA regulations, including 21 C.F.R. Part 820.
4.3.	Further, Biolase shall assume all of NLT’s contracts currently in effect to service any Biolase Laser, and shall provide the same level of service as required by such contracts.

4.3.1.	NLT shall have the right to retain all funds previously paid pursuant to any such contract.
4.3.2.	NLT represents that the total combined remaining months of service pursuant to such contracts do not exceed 215.25 service years as of April 1, 2009, that such contracts are assignable to Biolase, and that the material terms of such contracts are substantially the same as the equivalent Biolase service contracts. If the representation regarding the number of service years is inaccurate, NLT agrees to immediately pay Biolase $2,000 per additional service year.
4.3.3.	NLT shall provide a list of all such contracts to Biolase within one (1) business day after execution of this Agreement, and shall inform the other parties to such service contracts that Biolase has assumed the service contract within two (2) business days of receipt of the Payment, using the language in Exhibit B, or as otherwise has been mutually agreed upon by the Parties. NLT shall be obligated to provide services to its customers pursuant to its service contracts at its sole cost and expense, and at no expense to Biolase, until NLT has informed the parties to such service contracts that Biolase has assumed the contracts.
4.3.4.	NLT shall not be obligated to provide further services to its customers pursuant to its service contracts after NLT has informed the parties to such service contracts that Biolase has assumed the contracts. But NLT is still obligated to cooperate with Biolase by, among other things, providing to Biolase any information concerning the customers related to the services that NLT has provided to its customers. NLT shall indemnify Biolase for any lawsuits or claims based on servicing that was done by NLT.

5.0 USE OF INTELLECTUAL PROPERTY

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5.1.	NLT agrees to not publish or use on its website any photograph of any Biolase product in which Biolase has a copyright interest.
5.2.	NLT agrees not to use the terms “AMD Waterlase,” “AMDLase” or similar marks (e.g., using “Waterlase” or the suffix “Lase”) in the marketing or sale of any product. This paragraph shall not prevent NLT from using the mark “AMD Laser” or “AMD Lasers.”
5.3.	NLT and Biolase agree to abide by Google’s published trademark policy. NLT and Biolase further agrees not to use any of the other party’s trademarks as part of Google AdWords, or any similar program with Google or other search companies.

6.0 NON-DISPARAGEMENT

6.1.	The Parties agree not to make any untrue statements (oral, written, electronic, or otherwise) concerning the other Party or the other Party’s products or employees, directly or indirectly. Each Party shall instruct its employees, officers, and directors to abide by this agreement.
6.2.	Without limitation to the above paragraph, Biolase shall not, unless based on reliable information, affirmatively claim that NLT’s products came from, or were damaged in, fires, hurricanes, or other disasters.
6.3.	Without limitation to the above paragraphs, Biolase shall not tell a dentist that he or she will not be able to obtain Biolase laser tips or other Biolase parts because they purchase a product or service from NLT.

7.0 STATEMENTS ON WEBSITE

7.1. NLT agrees to make the following modifications to its website within two (2) business days of the execution of this Agreement:

7.1.1.

NLT shall add a statement on its website home page that “NLT is not affiliated with Biolase” or equivalent language, and shall add a statement to make clear that any “certification” and “inspection” of used Lasers sold by NLT is a self certification and inspection by NLT. NLT agrees to post these statements using the same sized font that it currently uses on its website for all statements and representations in text.

7.1.2.

NLT shall remove and not re-post any statements to the effect that NLT’s technicians were originally trained at Biolase or that NLT keeps Waterlase products running better than the manufacturer.

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8.0 CONFIDENTIALITY

The Parties to this Settlement Agreement shall maintain as strictly confidential and will continue to maintain the confidentiality of, and not disclose, reveal, publish, disseminate, or discuss directly or indirectly, to or with any other person or entity the terms of this Settlement Agreement provided that a Party or counsel may disclose the terms of this Agreement in the following limited circumstances: (1) pursuant to joint statements about the Settlement Agreement as indicated below in Section 9.0 or that shall otherwise be mutually agreed upon by the parties in writing; (2) to comply with applicable law or court order; (3) to enforce this Agreement; (4) to respond to a lawful demand for information from a government agency conducting an investigation (i.e., a demand made under compulsory process or pursuant to other legal mandate); and/or (5) to obtain legal or tax advice.

9.0 JOINT STATEMENTS

9.1. The parties shall not publicly discuss or disclose this Settlement Agreement or its terms, including but not limited to any dentist, media outlet or website, other than as stated below or as otherwise mutually agreed upon by the parties in writing:

9.1.1.	Upon execution of this Settlement Agreement, NLT and Biolase shall jointly issue and publish on their respective websites the Press Release at Exhibit A, attached hereto. Any other communications with any media organization or posting on any website by either Party shall not deviate from the language contained in Exhibit A, unless required by applicable law.
9.1.2.	Within two (2) business days of the receipt of the Payment, NLT shall send a letter in the form and using the appropriate language indicated in Exhibit B to the last known address of each NLT customer who either (a) had purchased a PPS Module from NLT, or (b) had a service contract on a Biolase Laser as of April 1, 2009. Any other communications with such customers concerning the terms of this Settlement Agreement or the results of the Lawsuit shall not deviate from the language contained in Exhibit B.
9.1.3.	Any communication between Biolase and any dentist, including but not limited to any current or former customer of NLT, concerning (a) the assumption of NLT’s service contracts; (b) the recall, removal or replacement of any PPS Module; or (c) any other terms of this Settlement Agreement or the results of the Lawsuit shall not deviate from the language contained in Exhibit C.

10.0 DISMISSAL OF ACTION

Within three (3) business days of NLT’s (1) receipt of the Payment specified in Section 2.0, and (2) receipt by counsel for NLT of the Stipulation of Dismissal With Prejudice in the form attached hereto as Exhibit D, signed by or on behalf of

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Biolase, NLT agrees to file with the Court the Stipulation of Dismissal With Prejudice signed by both Parties pursuant to Fed. R. Civ. P. 41(a)(1)(ii).

11.0 GENERAL MUTUAL RELEASES

11.1.1.	The mutual releases set forth in this Section shall become effective upon entry of the Court’s order dismissing the Lawsuit with prejudice. These mutual releases do not release either Party from the performance of its obligations under this Agreement.
11.1.2.	Releases By NLT: For valuable consideration, the sufficiency of which is hereby acknowledged, NLT hereby releases and forever discharges Biolase and its employees, officers, directors, agents, representatives, attorneys, insurers, and assigns of and from any and all claims, acts, debts, demands, actions, causes of action, suits, dues, sum and sums of money, accounts, reckonings, bonds, covenants, contracts, controversies, agreements, promises, representations, restitutions, doings, omissions, variances, damages, and liabilities whatsoever of every name and nature, (whether known or unknown) existing as of the date of the execution of this Agreement, including but not limited to any and all claims, counterclaims or causes of action arising out of or relating to the Lawsuit.
11.1.3.	Releases by Biolase: For valuable consideration, the sufficiency of which is hereby acknowledged, Biolase hereby releases and forever discharges NLT and its employees, officers, directors, agents, representatives, attorneys, and assigns of and from any and all claims, acts, debts, demands, actions, causes of action, suits, dues, sum and sums of money, accounts, reckonings, bonds, covenants, contracts, controversies, agreements, promises, representations, restitutions, doings, omissions, variances, damages, and liabilities whatsoever of every name and nature, (whether known or unknown) existing as of the date of the execution of this Agreement, including but not limited to any and all claims, counterclaims or causes of action arising out of or relating to the Lawsuit.
11.1.4.	Waiver of Unknown Claims. The Parties acknowledge that each of the Parties has received independent legal counsel regarding the provisions of California Civil Code Section 1542, which provides:

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.

The Parties acknowledge and understand that the aforementioned releases are releases of all known and unknown claims, and hereby expressly waive and relinquish any rights and benefits which they may have under this code section.

12.0 NO ADMISSION OF LIABILITY

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The Parties acknowledge and agree that this Settlement Agreement is a compromise of disputed claims and that neither this Settlement Agreement nor consideration provided pursuant to this Settlement Agreement, shall be construed to be an admission or concession by any Party to this Agreement with respect to any fact, liability or fault.

13.0 REPRESENTATIONS AND WARRANTIES

Each person whose signature appears hereon represents and warrants that s/he has been duly authorized and has full authority to execute this Agreement on behalf of any entity or person on whose behalf this Settlement Agreement is executed. Each Party that executes this Settlement Agreement represents and warrants that it has not assigned any rights or obligations relevant to the Settlement Agreement.

14.0 ENTIRE AGREEMENT

This Settlement Agreement constitutes and contains the entire agreement and understanding between NLT and Biolase with respect to the subject matter hereof. This Settlement Agreement supersedes and replaces all prior negotiations and all agreements, proposed or otherwise, whether written or oral, concerning the subject matter hereof. This is a fully integrated document. This Agreement can be changed or terminated only upon written consent of both Parties to the Settlement Agreement.

15.0 VALIDITY/SEVERANCE

If any provision of this Settlement Agreement is declared by a court of competent jurisdiction to be illegal, invalid or otherwise unenforceable, then the validity of the remaining parts shall not be affected thereby, and the invalid portion shall be deemed stricken from this Agreement.

16.0 GOVERNING LAW AND FORUM SELECTION

This Settlement Agreement shall be construed, enforced, and governed by the laws of the State of Indiana, without regard to choice of law principles thereof. If permitted by law, the Parties agree to seek to resolve all disputes or controversies that may arise hereunder in the United States District Court for the Southern District of Indiana (subject to any appeals therefrom), and, in the first instance, to adjudicate their claims before Judge Sarah Evans Barker or Magistrate Judge Debra McVicker Lynch. If the United States District Court for the Southern District of Indiana lacks jurisdiction over a dispute or controversy that may arise hereunder, the parties shall file their claims in Indiana state court.

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17.0 COOPERATIVE DRAFTING AND CONSTRUCTION

Each Party to the Settlement Agreement has cooperated in the drafting and preparation of this Agreement. Hence, this Settlement Agreement shall not be construed against any Party on the basis that one of the Parties was the principal draftsman. The headings are for the convenience of the Parties and are not to be used in construing the meaning of any provision of this Agreement.

18.0 EXECUTION IN COUNTERPARTS AND BY FACSIMILE

This Settlement Agreement may be signed in counterparts, and shall be deemed executed when counterparts have been signed by all Parties. True and correct facsimile copies of signed counterparts may be used in place of the originals for any purpose.

19.0 NO WAIVER OF BREACH

No waiver of any breach of any term or provision of this Settlement Agreement shall be construed to be, nor shall be, a waiver of any other breach of this Settlement Agreement. No waiver shall be binding unless in writing and signed by the Party waiving the breach.

20.0 INDEPENDENT LEGAL ADVICE

The Parties each acknowledge that each has been advised by its own independently selected counsel and other advisors in connection with this Settlement Agreement. The parties have entered into this Agreement solely on the basis of that advice and on the basis of their own independent investigation of all of the facts, laws and circumstances material to this Agreement or any provision thereof and not in any manner or to any degree based upon any statement or omission by any other Party and/or its counsel.

21.0 NOTICES

Any notice made by any Party to this Settlement Agreement shall be considered proper and effective only if in writing and mailed by overnight or first class mail addressed as shown below, or delivered in person or by confirmed electronic transmission. NLT and Biolase agree to promptly notify the other Party to this Settlement Agreement of any changes in the names or addresses of persons to be notified.

If to National Laser Technology, Inc.:	National Laser Technology, Inc.
	Attn: Alan Miller
	7405 Westfield Blvd.
	Indianapolis, IN 46240

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	With a copy to:
	Kendall Millard
	BARNES & THORNBURG LLP
	11 South Meridian Street
	Indianapolis, IN 46204
	kmillard@btlaw.com
If to Biolase Technology, Inc.:	Biolase Technology, Inc.
	David Mulder
	Chief Executive Officer
	4 Cromwell
	Irvine, CA 92618
	With a copy to:
	Mark A. Finkelstein
	LATHAM & WATKINS LLP
	650 Town Center Drive, 20th Floor
	Costa Mesa, California 92626
	MARK.FINKELSTEIN@LW.com

Or to such changed address as shall have been designated by written notice to the Parties.

22.0 SUCCESSORS AND ASSIGNS

Each Party that executes this Settlement Agreement also agrees that it will not assign its obligations under this Agreement without the prior written consent of the other Parties to the Settlement Agreement, which consent shall not be unreasonably withheld or delayed. Except as otherwise provided herein, this Settlement Agreement shall be binding on and inure to the benefit of each of the Parties and their respective heirs, personal representatives, executors, successors and assigns.

23.0 NUMBER; GENDER

Whenever required by the context, the singular will include the plural, the neuter gender will include the male gender and female gender, and vice versa.

24.0 ATTORNEYS’ FEES

In any action that arises out of or relates to this Agreement, the prevailing party shall be entitled to its reasonable attorneys’ fees and costs.

BY EXECUTING THIS AGREEMENT, EACH OF THE PARTIES TO THIS SETTLEMENT AGREEMENT, AS WELL AS ITS COUNSEL ACKNOWLEDGES

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THAT IT HAS READ THIS AGREEMENT AND UNDERSTANDS ITS TERMS AND PROVISIONS.

Dated: March 25, 2009	National Laser Technology, Inc.:
	/s/ Alan Miller
	By Alan Miller, CEO
Dated: March 25, 2009	Biolase Technology, Inc.:
	/s/ David Mulder
	By David Mulder, CEO

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EXHIBIT A

JOINT PRESS RELEASE

Contact:

For Release:

IRVINE, CA and INDIANAPOLIS, IN – [     ] — BIOLASE Technology, Inc. (NASDAQ: BLTI) and National Laser Technology, Inc. (NLT) announced today that they have reached a final settlement agreement resolving the claims and counterclaims in the lawsuit between NLT and Biolase pending in the Southern District of Indiana concerning NLT’s sale of used Biolase dental lasers. Both parties’ claims will be dismissed with prejudice.

NLT had brought the suit in August 2008 alleging, among other things, that Biolase made false statements to dentists concerning NLT’s sale of used Biolase lasers and refused to sell laser tips and other parts to dentists if they did business with NLT in violation of antitrust and unfair competition laws. Biolase filed counterclaims alleging that NLT infringed Biolase’s copyrights and trademarks, made false and misleading statements on its website, and modified, sold and serviced used Biolase lasers without premarket approval from the FDA in violation of unfair competition laws.

While each party continues to deny the allegations against it, the parties have agreed to resolve their dispute. The parties are looking forward to selling their respective products.

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EXHIBIT B

LIMITS OF NLT STATEMENTS TO DENTISTS

Statements to NLT’s service contract customers:

     We are writing concerning your service contract with National Laser Technology, Inc. (NLT). Biolase, the manufacturer of the Waterlase and Waterlase MD hard tissue dental units, has assumed the service contract that you currently have with NLT, effective immediately. Biolase will provide service for your laser for the remaining term of your service contract. If you need to renew your service at the end of your term, that should be done through Biolase, as NLT is no longer servicing Biolase lasers.

     Biolase will contact you directly concerning service of your laser. In the meantime, if you have any service issues or questions, please call Biolase’s global head of services at___.

For those who also bought a PPS Module:

     You have also purchased a PPS Module unit to permit your Waterlase unit to utilize variable pulses per second. This Module was developed and sold by NLT and not by Biolase, and the FDA had not granted pre-market approval for this modification prior to its sale. Biolase may therefore request to remove the Module and replace it with software or another unit with the FDA-cleared equivalent functionality. If Biolase exercises this option, this removal and replacement would be handled by Biolase.

For those who bought a PPS Module with no current service contract:

     We are writing concerning the PPS Module that you purchased from National Laser Technology, Inc. (NLT) to permit your Waterlase unit to utilize variable pulses per second. This Module was developed and sold by NLT and not by Biolase, the manufacturer of the Waterlase. The FDA had not granted pre-market approval for this modification prior to its sale.

     Someone from Biolase may contact you directly and request to remove the Module and replace it with software or another unit with the equivalent functionality. If Biolase exercises this option, this removal and replacement would be handled by Biolase. If you have any questions, please call Biolase’s global head of services at ___.

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EXHIBIT C

LIMITS OF BIOLASE STATEMENTS TO DENTISTS

Statements to NLT’s service contract customers:

     We are writing concerning the service contract on your Biolase laser. Biolase has assumed your contract with National Laser Technology, Inc. (NLT), effective immediately, and will provide service for your laser for the remaining term of your service contract. If you need to renew your service at the end of your term, that should be done through Biolase, as NLT is no longer servicing Biolase lasers.

     If you have any service issues or questions, please call Biolase’s global head of services at                                         .

For those who also bought a PPS Module:

     You have also purchased a PPS Module unit to permit your Waterlase unit to utilize variable pulses per second. This Module was developed and sold by NLT and not by Biolase, and the FDA had not granted pre-market approval for this modification prior to its sale. We request that you permit us to remove the Module and replace it with software or another unit with the FDA-cleared equivalent functionality. This removal and replacement would be handled by us.

For those who bought a PPS Module with no current service contract:

     We are writing concerning the PPS Module that you purchased from National Laser Technology, Inc. (NLT) to permit your Waterlase unit to utilize variable pulses per second. This Module was developed and sold by NLT and not by Biolase, the manufacturer of the Waterlase. The FDA had not granted pre-market approval for this modification prior to its sale.

     We request that you permit us to remove the Module and replace it with software or another unit with the FDA-cleared equivalent functionality. This removal and replacement would be handled by us. If you have any questions, please call Biolase’s global head of services                                         .

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EXHIBIT D
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION

NATIONAL LASER TECHNOLOGY, INC.,		)
		)
	Plaintiff/Counter-defendant,	)
		)
	v.	)	Cause No.: 1:08-CV-01123-SEB-DML
		)
BIOLASE TECHNOLOGY, INC.		)
		)
	Defendant/Counter-plaintiff.	)

JOINT STIPULATION OF DISMISSAL WITH PREJUDICE

     Pursuant to Federal Rule of Civil Procedure 41(a)(1), all parties to the above action hereby stipulate that this action and all claims and counter claims should be dismissed with prejudice pursuant to the Settlement Agreement reached by the parties. The Court shall retain jurisdiction to enforce the terms of the Settlement Agreement.

     Dated this ___ day of ___, 2009.

Respectfully submitted,
 

/s/ DRAFT  

Todd G. Vare (#18458-49) 

Kendall Millard (#25430-49)
Hamish S. Cohen (#22931-53)
BARNES & THORNBURG LLP
11 South Meridian Street
Indianapolis, Indiana 46204
Telephone: (317) 236-1313
 

Attorneys for Plaintiff,
National Laser Technology, Inc.
 

/s/ DRAFT  

Mark A. Finkelstein 

LATHAM & WATKINS LLP
650 Town Center Drive, 20^th Floor
Costa Mesa, California 92626 

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Eric J. McCarthy
Brent W. Johnson
LATHAM & WATKINS LLP
555 Eleventh Street, NW, Suite 1000
Washington, D.C. 20004

Alfred C. Pfeiffer, Jr.
LATHAM & WATKINS LLP
505 Montgomery Street, Suite 2000
San Francisco, California 94111-6538

Renee J. Mortimer
HINSHAW & CULBERTSON LLP
322 Indianapolis Boulevard, Suite 201
Schererville, IN 46375

Alan Greene
HINSHAW & CULBERTSON LLP
222 N. LaSalle Street
Suite 3000
Chicago, IL 60601

Counsel for Biolase Technology, Inc.

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EX-10.6

Exhibit 10.6

Biolase Technology, Inc.

4 Cromwell
Irvine, California 92618

April 3, 2009

David M. Mulder
c/o Biolase Technology, Inc.
4 Cromwell
Irvine, California 92618

Re: Amendment No. 2 to Employment Agreement

Dear Mr. Mulder:

This letter agreement shall serve to amend that certain Employment Agreement, dated April 29, 2008, as amended by that certain letter agreement, dated March 4, 2009 (the “Employment Agreement”), by and between Biolase Technology, Inc. (the “Company”) and David M. Mulder (the “Executive”).

Effective as of March 5, 2009, the parties agree as follows:

1. The first sentence of Section 3.A. of the Employment Agreement is hereby deleted in its entirety and replaced with the following:

“Executive shall be paid a base salary at the annual rate of not less than TWO HUNDRED FIFTY THOUSAND dollars ($250,000) per annum (hereinafter “Base Salary”) during the Employment Period.”

2. The first sentence of Section 4.A. of the Employment Agreement is hereby deleted in its entirety and replaced with the following:

“For each full calendar year during the Employment Period, Executive may earn an annual Performance Bonus of up to ONE HUNDRED FIFTY THOUSAND dollars ($150,000) (the “Performance Bonus Target”) based on achievement of Performance Bonus criteria.”

3. The second sentence of Section 5.C. of the Employment Agreement is hereby deleted in its entirety and replaced with the following:

“For purposes of this Section 5.C, “Relocation Expenses” shall mean (i) travel, lodging and meal expenses for Executive and his spouse and children for house hunting trips or relocation to Executive’s new principal residence, (ii) expenses for moving the household goods, personal effects and automobiles of Executive and his spouse and children from Executive’s current principal residence to his new principal residence, (iii) brokerage commission expenses incurred by Executive in connection with the sale of Executive’s current principal residence, and (iv) amounts calculated in accordance with Section 5.F. below, provided the expenses described in clause (i), (ii) or (iii) are directly related to the relocation of Executive’s principal residence in connection with Executive’s commencement of employment with the Company. The total amount of Relocation Expenses reimbursed by the Company shall not exceed FIFTY THOUSAND dollars ($50,000), and such Relocation Expenses shall be reimbursed only if incurred by Executive not later than December 31, 2009.”

4. The following new Section 5.F. is hereby added to the Employment Agreement:

“F. From the Effective Date until December 31, 2009, Executive shall be provided with an apartment for Executive’s personal use in Irvine, California, which apartment shall be reasonably acceptable to the Company and Executive and with a rental rate of not more than $2,100 per month; provided however, $1,050 of rent that is incurred each month by the Company shall be treated as Relocation Expenses pursuant to Section 5.C. above and shall reduce the total amount of Relocation Expenses available to the Executive as provided for in such section.”

This letter agreement amends certain terms and conditions of the Employment Agreement. All other terms and conditions of the Employment Agreement that are not modified by this letter agreement are hereby ratified and confirmed in all respects, and shall remain in full force and effect. Should there be any conflict between the terms and conditions contained in this letter agreement and the Employment Agreement, the terms and conditions of this letter agreement shall govern and control.

Please acknowledge your agreement to the foregoing terms and conditions by countersigning this letter agreement in the space provided below.

Very truly yours,

BIOLASE TECHNOLOGY, INC.
By:	/s/ James R. Largent
	Name:	James R. Largent
	Title:	Chairman, Compensation Committee

2

ACKNOWLEDGED AND AGREED:
 

/s/ David M. Mulder  

David M. Mulder 

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 March 31, 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: May 8, 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, Frederick M. Capallo, Interim Chief Financial Officer of BIOLASE Technology, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q for the period ended March 31, 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: May 8, 2009	By:	/s/ FREDERICK M.CAPALLO
		Frederick M. Capallo
		Interim 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 March 31, 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: May 8, 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.

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, Frederick M. Capallo, Interim 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 March 31, 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: May 8, 2009	/s/ FREDERICK M. CAPALLO
	Frederick M Capallo
	Interim 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.