10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2015

OR

¨ 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 001-36385

BIOLASE, INC.

(Exact name of registrant as specified in its charter)

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

4 Cromwell

Irvine, California 92618

(Address of principal executive offices, including zip code)

(949) 361-1200

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

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

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	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  ¨    No  x

The number of shares of the issuer’s common stock, $0.001 par value per share, outstanding, as of July 31, 2015, was 58,190,671 shares.

BIOLASE, INC.

INDEX

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):	3
	Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014	3
	Consolidated Statements of Operations and Comprehensive Loss for the threeand six months ended June 30, 2015 and June 30, 2014	4
	Consolidated Statements of Cash Flows for the six months ended June 30, 2015 and June 30, 2014	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 6.	Exhibits	34
Signatures		35

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PART I. FINANCIAL INFORMATION

ITEM  1. FINANCIAL STATEMENTS

BIOLASE, INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)

(in thousands, except per share data)

	June 30,			December 31,
	2015			2014
ASSETS
Current assets:
Cash and cash equivalents	$	19,922		$	31,560
Restricted cash equivalent		200			—
Accounts receivable, less allowance of $1,987 in 2015 and    $1,711 in 2014		9,778			9,004
Inventory, net		13,680			12,508
Prepaid expenses and other current assets		1,631			1,726
Total current assets		45,211			54,798
Property, plant, and equipment, net		2,366			1,295
Intangible assets, net		79			114
Goodwill		2,926			2,926
Other assets		761			270
Total assets	$	51,343		$	59,403
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	8,849		$	8,357
Accrued liabilities		5,913			5,188
Customer deposits		96			112
Deferred revenue, current portion		3,050			2,494
Total current liabilities		17,908			16,151
Deferred income taxes		708			677
Deferred revenue, long-term		201			—
Capital lease obligation		238			—
Warranty accrual, long-term		868			519
Other liabilities, long-term		365			—
Total liabilities		20,288			17,347
Commitments, contingencies, and subsequent event (Notes 9 and 13)
Stockholders' equity:
Preferred stock, par value $0.001; 1,000 shares authorized,    no shares issued and outstanding		—			—
Common stock, par value $0.001; 100,000 shares    authorized in 2015 and 2014, respectively;    58,188 and 58,115 shares issued and outstanding in    2015 and 2014, respectively		58			58
Additional paid-in-capital		186,907			185,231
Accumulated other comprehensive loss		(757	)		(557	)
Accumulated deficit		(155,153	)		(142,676	)
Total stockholders' equity		31,055			42,056
Total liabilities and stockholders' equity	$	51,343		$	59,403

See accompanying notes to unaudited consolidated financial statements.

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BIOLASE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)

(in thousands, except per share data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
Products and services revenue	$	11,835		$	10,140		$	22,586		$	21,619
License fees and royalty revenue		34			46			138			85
Net revenue		11,869			10,186			22,724			21,704
Cost of revenue		8,168			6,457			15,813			14,034
Gross profit		3,701			3,729			6,911			7,670
Operating expenses:
Sales and marketing		4,743			3,569			9,497			8,024
General and administrative		3,916			5,310			6,503			8,393
Engineering and development		1,974			978			3,777			1,951
Excise tax		97			64			153			129
Legal settlement		—			—			(731	)		—
Total operating expenses		10,730			9,921			19,199			18,497
Loss from operations		(7,029	)		(6,192	)		(12,288	)		(10,827	)
Gain (loss) on foreign currency transactions		1			(33	)		(129	)		(31	)
Interest income (expense), net		23			(185	)		23			(415	)
Non-operating income (loss), net		24			(218	)		(106	)		(446	)
Loss before income tax provision		(7,005	)		(6,410	)		(12,394	)		(11,273	)
Income tax provision		36			29			83			53
Net loss		(7,041	)		(6,439	)		(12,477	)		(11,326	)
Other comprehensive (loss) income items:
Foreign currency translation adjustment		33			(9	)		(200	)		(8	)
Comprehensive loss	$	(7,008	)	$	(6,448	)	$	(12,677	)	$	(11,334	)
Net loss per share:
Basic	$	(0.12	)	$	(0.17	)	$	(0.21	)	$	(0.31	)
Diluted	$	(0.12	)	$	(0.17	)	$	(0.21	)	$	(0.31	)
Shares used in the calculation of net loss per share:
Basic		58,180			37,629			58,163			37,045
Diluted		58,180			37,629			58,163			37,045

See accompanying notes to unaudited consolidated financial statements.

4

BIOLASE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in thousands)

	Six Months Ended
	June 30,
	2015			2014
Cash Flows from Operating Activities:
Net loss	$	(12,477	)	$	(11,326	)
Adjustments to reconcile net loss to net cash and    cash equivalents used in operating activities:
Depreciation and amortization		324			352
Loss on disposal of property, plant, and equipment, net		—			2
Provision for bad debts		281			754
Provision for inventory excess and obsolescence		—			261
Amortization of discounts on lines of credit		—			200
Amortization of debt issuance costs		—			128
Stock-based compensation		1,635			586
Other non-cash compensation		—			123
Deferred income taxes		31			30
(Earned) incurred interest (income) expense, net		(23	)		15
Changes in operating assets and liabilities:
Restricted cash		(200	)		—
Accounts receivable		(1,031	)		3,774
Inventory		(1,172	)		(733	)
Prepaid expenses and other assets		(385	)		(11	)
Customer deposits		(16	)		(145	)
Accounts payable and accrued liabilities		1,237			3,319
Deferred revenue		757			(231	)
Net cash and cash equivalents used in operating activities		(11,039	)		(2,902	)
Cash Flows from Investing Activities:
Additions to property, plant, and equipment		(433	)		(123	)
Proceeds from disposal of property, plant, and equipment		—			1
Net cash and cash equivalents used in investing activities		(433	)		(122	)
Cash Flows from Financing Activities:
Borrowings under lines of credit		—			15,575
Payments under lines of credit		—			(16,904	)
Payments of debt issue costs		—			(45	)
Proceeds from equity offering, net of expenses		—			4,793
Deposit on capital lease		(42	)		—
Proceeds from exercise of stock options and warrants		44			256
Net cash and cash equivalents provided by financing activities		2			3,675
Effect of exchange rate changes		(168	)		(8	)
Change in cash and cash equivalents		(11,638	)		643
Cash and cash equivalents, beginning of period		31,560			1,440
Cash and cash equivalents, end of period	$	19,922		$	2,083
Supplemental cash flow disclosure - Cash Paid:
Interest paid	$	—		$	101
Income taxes paid	$	44		$	34
Supplemental cash flow disclosure - Non-cash:
Assets acquired under capital lease	$	405		$	—
Accrued capital expenditures and tenant improvement allowance	$	555		$	39

See accompanying notes to unaudited consolidated financial statements.

5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1—DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

The Company

BIOLASE, Inc. (“BIOLASE” and, together with its consolidated subsidiaries, the “Company,” “we,” “our,” or “us”) incorporated in Delaware in 1987, is a medical device company that develops, manufactures, markets, and sells laser systems in dentistry and medicine and also markets, sells, and distributes dental imaging equipment, including cone beam digital x-rays and CAD/CAM intra-oral scanners, in-office, chair-side milling machines, and three-dimensional printers.

Basis of Presentation

The unaudited consolidated financial statements include the accounts of Biolase, Inc. and its wholly-owned subsidiaries and have been prepared on a basis consistent with the December 31, 2014 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 (“GAAP”) for complete consolidated financial statements. Certain amounts have been reclassified to conform to current period presentations.

The consolidated results of operations for the three and six months ended June 30, 2015 are not necessarily indicative of the results for the full year. The accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2014, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission (the “SEC”) on March 6, 2015, as amended on April 29, 2015 (the “2014 Form 10-K”).

Liquidity and Management’s Plans

The Company incurred a loss from operations and a net loss and used cash in operating activities for the three and six months ended June 30, 2015. The Company has also suffered recurring losses from operations during the three years ended December 31, 2014.

As of June 30, 2015, the Company had working capital of approximately $27.3 million. The Company’s principal sources of liquidity at June 30, 2015 consisted of approximately $20.1 million in cash and restricted cash equivalent and $9.8 million of net accounts receivable.    

Additional capital requirements may depend on many factors, including, among other things, the rate at which the Company’s business grows, demands for working capital, manufacturing capacity, and any acquisitions that the Company may pursue. From time to time, the Company could be required, or may otherwise attempt, to raise capital through either equity or debt offerings. The Company cannot provide assurance that it will be able to successfully enter into any such equity or debt financings in the future or that the required capital would be available on acceptable terms, if at all, or that any such financing activity would not be dilutive to its stockholders.

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NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of these consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect amounts reported in the consolidated financial statements and the accompanying notes. Significant estimates in these consolidated financial statements include allowances on accounts receivable, inventory, and deferred taxes, as well as estimates for accrued warranty expenses, indefinite-lived intangible assets, and the ability of goodwill to be realized, revenue deferrals for multiple element arrangements, effects of stock-based compensation and warrants, contingent liabilities, and the provision or benefit for income taxes. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may differ materially from those estimates.

Critical Accounting Policies

Information with respect to the Company’s critical accounting policies which management believes could have the most significant effect on the Company’s reported results and require subjective or complex judgments by management is contained in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the 2014 Form 10-K. Management believes that there have been no significant changes during the three and six months ended June 30, 2015 in the Company’s critical accounting policies from those disclosed in Item 7 of the 2014 Form 10-K, except with regard to restricted cash equivalent as set forth below.

Restricted Cash Equivalent

The restricted cash equivalent represents a revolving 90-day certificate of deposit maintained by the Company as collateral in connection with corporate credit cards. At June 30, 2015, the restricted cash equivalent balance was $200,000.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market (or, if none exists, the most advantageous market) for the specific asset or liability at the measurement date (referred to as the “exit price”). The fair value is based on assumptions that market participants would use, including a consideration of nonperformance risk. Under the accounting guidance for fair value hierarchy there are three levels of measurement inputs. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable, either directly or indirectly, other than Level 1. Level 3 inputs are unobservable due to little or no corroborating market data.

The Company’s financial instruments, consisting of cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities, approximate fair value because of the short maturity of these items. Financial instruments consisting of lines of credit approximate fair value, as the interest rates associated with the lines of credit approximates the market rates for debt securities with similar terms and risk characteristics.

Recent Accounting Pronouncements

Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification.

Recently Issued Accounting Standards

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP.

7

The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently evaluating the impact of the pending adoption of ASU 2014-09 on its consolidated financial statements and has not yet determined the method by which it will adopt the standard during the year ending December 31, 2018.

In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern. The standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued and provides guidance on determining when and how to disclose going concern uncertainties in the financial statements. Certain disclosures will be required if conditions give rise to substantial doubt about an entity’s ability to continue as a going concern. ASU 2014-15 applies to all entities and is effective for annual and interim reporting periods ending after December 15, 2016, with early adoption permitted. The Company does not expect that the adoption of this standard will have a material effect on its financial statements.

In July 2015, the FASB recently issued ASU No. 2015-11, Simplifying the Measurement of Inventory (“ASU 2015-11”), as part of its simplification initiative. The standard requires inventory within the scope of ASU 2015-11 to be measured using the lower of cost and net realizable value.  The changes apply to all types of inventory, except those measured using LIFO or the retail inventory method. ASU 2015-11 applies to all entities and is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2016, with early adoption permitted. The Company does not expect that the adoption of this standard will have a material effect on its financial statements.

NOTE 3—STOCK-BASED AWARDS AND PER SHARE INFORMATION

Stock-Based Compensation

The Company currently has one stock-based compensation plan, the 2002 Stock Incentive Plan (as amended effective as of May 26, 2004, November 15, 2005, May 16, 2007, May 5, 2011, June 6, 2013, October 30, 2014 and April 27, 2015) (the “2002 Plan”), which will expire on May 5, 2019. Persons eligible to receive awards under the 2002 Plan include officers, employees, and directors of the Company, as well as its consultants. As of June 30, 2015, a total of 11,550,000 shares have been authorized for issuance under the 2002 Plan, of which 3,031,000 shares of Biolase common stock have been issued pursuant to options that were exercised, 6,157,000 shares of Biolase common stock have been reserved for options and restricted stock units that are outstanding, and 2,362,000 shares of Biolase common stock remain available for future grants.

Stock-based compensation cost recognized in operating results totaled approximately $935,000 and $276,000 for the three months ended June 30, 2015 and 2014, respectively, and $1.6 million and $586,000 for the six months ended June 30, 2015 and 2014, respectively. The net impact to earnings were $(0.02) and $(0.01) per basic and diluted share for the three months ended June 30, 2015 and 2014, respectively, and $(0.03) and $(0.02) per basic and diluted share for the six months ended June 30, 2015 and 2014, respectively. At June 30, 2015, the Company had approximately $4.5 million of total unrecognized compensation cost, net of estimated forfeitures, related to unvested share-based compensation arrangements. The Company expects that cost to be recognized over a weighted-average period of 2.9 years.

8

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Cost of revenue	$	62	$	41	$	138	$	87
Sales and marketing		194		112		487		237
General and administrative		612		101		848		216
Engineering and development		67		22		162		46
	$	935	$	276	$	1,635	$	586

The stock option fair values, under the 2002 Plan, were estimated using the Black-Scholes option-pricing model with the following assumptions:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Expected term	5.5 years		4.2 years		5.9 years		3.8 years
Volatility	87.70%		96.50%		91.01%		97.91%
Annual dividend per share	$	—	$	—	$	—	$	—
Risk-free interest rate	1.54%		1.69%		1.65%		1.66%

A summary of option activity under the 2002 Plan for the six months ended June 30, 2015 is as follows:

						Weighted Average
				Weighted		Remaining		Aggregate
				Average		Contractual		Intrinsic
	Shares			Exercise Price		Term (Years)		Value(1)
Options outstanding at December 31, 2014		3,391,000		$	3.11		2.97	$	1,063,000
Granted		3,096,000		$	2.35
Exercised		(38,000	)	$	1.15
Forfeited, cancelled, or expired		(329,000	)	$	3.16
Options outstanding at June 30, 2015		6,120,000		$	2.74		5.95	$	113,000
Options exercisable at June 30, 2015		2,862,000		$	3.05		2.64	$	94,000
Vested options expired during the quarter    ended June 30, 2015		113,000		$	3.09

(1) The intrinsic value calculation does not include negative values. This can occur when the fair market value on the reporting date is less than the exercise price of the grant.

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Cash proceeds along with fair value disclosures related to grants, exercises, and vested options under the 2002 Plan are provided in the following table (in thousands, except per share amounts):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Proceeds from stock options exercised	$	—	$	8	$	44	$	255
Tax benefit related to stock options    exercised (1)	N/A		N/A		N/A		N/A
Intrinsic value of stock options exercised (2)	$	—	$	12	$	52	$	95
Weighted-average fair value of options granted    during period	$	1.42	$	1.32	$	1.70	$	1.73
Total fair value of shares vested during    the period	$	440	$	302	$	733	$	648

(1) Excess tax benefits received related to stock option exercises are presented as financing cash inflows. The Company currently does not receive a tax benefit related to the exercise of stock options due to the Company’s 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.

Restricted Stock Units

The Company issues restricted stock units (“RSUs”) to acquire shares of Biolase common stock as approved by Biolase’s board of directors (the “Board”). For the three and six months ended June 30, 2015 and 2014, the Board did not grant any RSUs. As of June 30, 2015, 37,000 shares of Biolase common stock have been reserved for RSUs that are outstanding.

Effective July 13, 2015, the Compensation Committee of the Board awarded 870,000 stock-settled restricted stock units of Biolase common stock to its President and Chief Executive Officer in connection with his employment agreement with the Company.

Warrants

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

A summary of warrant activity for the six months ended June 30, 2015 is as follows:

			Weighted
			Average
	Shares		Exercise Price
Warrants outstanding at December 31, 2014		888,000	$	6.04
Granted		—
Exercised		—
Forfeited, cancelled, or expired		—
Warrants outstanding at June 30, 2015		888,000	$	6.04
Warrants exercisable at June 30, 2015		753,000	$	6.40
Vested warrants expired during the quarter    ended June 30, 2015		—	N/A

No warrants were exercised during the three and six months ended June 30, 2015 and 2014.

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Other Stock-Based Awards

Effective March 9, 2015, the Compensation Committee of the Board granted non-qualified stock options to purchase up to 871,710 shares of Biolase common stock to its Chief Financial Officer in connection with his employment agreement with Biolase. These options were granted at an exercise price of $1.99 per share, the closing price of Biolase common stock on the grant date. These options expire ten years from the grant date and vest in two tranches as follows: (i) as to options to purchase 523,026 shares (the “First Tranche”), options to purchase 130,757 shares vest and become exercisable on March 9, 2016, and options to purchase 10,896 shares vest and become exercisable each month following March 9, 2016 for a period of 35 consecutive months, and options to purchase 10,909 shares vest and become exercisable on March 9, 2019, and (ii) as to options to purchase 348,684 shares (the “Second Tranche”), 248,684 of such shares vest and become exercisable on March 9, 2025.In June 2015, the Compensation Committee accelerated the vesting of 100,000 of the Second Tranche options that had previously been scheduled to vest on March 9, 2025, such that such options vested and became exercisable as of June 23, 2015. The fair value of the First Tranche of $1.48 per share was estimated using the Black-Scholes option-pricing model with assumptions of 6.1 years for expected term, 88.79% volatility and 1.83% risk-free interest rate. The fair value of the Second Tranche of $1.70 per share was estimated using the Black-Scholes option-pricing model with assumptions of 10.0 years for expected term, 87.87% volatility and 2.19% risk-free interest rate.

Effective July 13, 2015, the Compensation Committee of the Board granted non-qualified stock options to purchase up to 870,000 shares of Biolase common stock to its President and Chief Executive Officer in connection with his employment agreement with Biolase. These options were granted at an exercise price of $1.65 per share, the closing price of Biolase common stock on the grant date. These options expire ten years from the grant date and vest over four years, with options to purchase 217,500 shares vesting and becoming exercisable on July 13, 2016 and options to purchase 18,125 shares vesting and becoming exercisable each month following July 13, 2016 for a period of 36 consecutive months.    

Net Loss Per Share – Basic and Diluted

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

Outstanding stock options and warrants to purchase 16,251,000 shares (including 9,206,000 shares underlying warrants issued in connection with the private placement completed by the Company on November 7, 2014) were not included in the computation of diluted loss per share for the three and six months ended June 30, 2015 as a result of their anti-dilutive effect. For the same 2014 period, anti-dilutive outstanding stock options and warrants to purchase 4,942,000 shares were not included in the computation of diluted loss per share.

Stock Dividend

In February 2014, the Board declared a one-half percent stock dividend payable March 28, 2014, to stockholders of record on March 14, 2014. During 2015, the Board has not declared any stock dividends. There is no assurance, with respect to the amount or frequency, that any stock dividend will be declared in the future.  

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):

	June 30,		December 31,
	2015		2014
Raw materials	$	3,564	$	2,857
Work-in-process		1,529		1,348
Finished goods		8,587		8,303
Inventory, net	$	13,680	$	12,508

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Inventory is net of a provision for excess and obsolete inventory totaling $1.9 million and $2.4 million as of June 30, 2015 and December 31, 2014, respectively.

NOTE 5—PROPERTY, PLANT, AND EQUIPMENT

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

	June 30,			December 31,
	2015			2014
Building	$	206		$	226
Leasehold improvements		1,201			1,197
Equipment and computers		5,369			4,948
Furniture and fixtures		425			413
Construction in progress		953			4
		8,154			6,788
Accumulated depreciation		(5,948	)		(5,669	)
		2,206			1,119
Land		160			176
Property, plant, and equipment, net	$	2,366		$	1,295

The cost of fixed assets acquired under the capital lease of $405,000 is included in the above as part of construction in progress.  For additional information on the capital lease, see Note 9 – Commitments and Contingencies. Depreciation expense related to property, plant, and equipment totaled $149,000 and $289,000 for the three and six months ended June 30, 2015, respectively, and $160,000 and $317,000 for the three and six months ended June 30, 2014, respectively.

NOTE 6—INTANGIBLE ASSETS AND GOODWILL

The Company conducted its annual impairment test of goodwill as of June 30, 2015 and determined that there was no impairment. The Company also tests its intangible assets and goodwill if events occur or circumstances change that would more likely than not reduce the fair value of the Company or its assets below their carrying amounts. For intangible assets subject to amortization, the Company performs its impairment test when indicators, such as reductions in demand for its products or significant economic slowdowns, are present. No events have occurred since June 30, 2015 that would trigger further impairment testing of the Company’s intangible assets and goodwill.

Amortization expense for the three and six months ended June 30, 2015 totaled $17,000 and $35,000, respectively, and $17,000 and $35,000, respectively, for the same periods in 2014. Other intangible assets primarily include acquired customer lists and non-compete agreements.

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

	As of June 30, 2015									As of December 31, 2014
			Accumulated									Accumulated
	Gross		Amortization			Impairment		Net		Gross		Amortization			Impairment		Net
Patents (4-10 years)	$	1,914	$	(1,914	)	$	—	$	—	$	1,914	$	(1,907	)	$	—	$	7
Trademarks (6 years)		69		(69	)		—		—		69		(69	)		—		—
Other (4 to 6 years)		817		(738	)		—		79		817		(710	)		—		107
Total	$	2,800	$	(2,721	)	$	—	$	79	$	2,800	$	(2,686	)	$	—	$	114
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):

	June 30,		December 31,
	2015		2014
Payroll and benefits	$	2,384	$	1,905
Warranty accrual, current portion		1,129		930
Taxes		339		139
Accrued professional services		1,672		1,581
Accrued capital lease payments		157		—
Accrued insurance premium		53		450
Other		179		183
Total accrued liabilities	$	5,913	$	5,188

Changes in the initial product warranty accrual, and the expenses incurred under the Company’s initial and extended warranties, for the three and six months ended June 30, 2015 and 2014 were as follows (in thousands):

	Three Months Ended						Six MonthsEnded
	June 30,						June 30,
	2015			2014			2015			2014
Initial warranty accrual, beginning balance	$	1,667		$	1,025		$	1,449		$	1,096
Provision for estimated warranty cost		545			461			996			609
Warranty expenditures		(215	)		(231	)		(448	)		(450	)
		1,997			1,255			1,997			1,255
Less warranty accrual, long-term		868			247			868			247
Total warranty accrual, current portion	$	1,129		$	1,008		$	1,129		$	1,008

In June 2014, the Company extended the warranty for WaterLase systems from one year to two years for systems purchased after January 1, 2014.

Current portion of deferred revenue is comprised of the following (in thousands):

	June 30,		December 31,
	2015		2014
Undelivered elements (training, installation, and    product and support services)	$	1,636	$	952
Extended warranty contracts		1,414		1,542
Deferred revenue, current portion	$	3,050	$	2,494

In connection with the Company’s initiatives to measure and improve customer satisfaction and concurrent with the launch of WaterLase iPlus 2.0 in February 2015, the Company introduced its exclusive Practice Growth Guarantee, which is a program that essentially guarantees growth in the Company’s clients’ dental practices through training on a select number of clinical procedures and with billing and marketing support for dentists included. Consistent with the Company’s standard terms and conditions applicable to all of its products, the Practice Growth Guarantee does not give the customer the right to return purchased laser systems or receive a refund of any amount of the purchase price. However, the Practice Growth Guarantee does provide for additional training opportunities and certain billing and marketing support activities to the customer. The Company has estimated additional deferred revenue related to the Practice Growth Guarantee for all WaterLase iPlus 2.0 system sales during the six months ended June 30, 2015 to be approximately $94,000.

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NOTE 8—LINES OF CREDIT AND OTHER BORROWINGS

Lines of Credit

The Company entered into two revolving credit facility agreements with Comerica Bank (the “Credit Agreements”) on May 24, 2012. The revolving lines of credit provided for borrowings against certain domestic accounts receivable and inventory (the “Domestic Revolver”) and certain export related accounts receivable and inventory (the “Ex-Im Revolver”).

On July 28, 2014, the Company repaid all amounts outstanding under the Credit Agreements, including principal, accrued interest, and fees which totaled, in the aggregate, approximately $2.9 million, and the Credit Agreements were terminated.

The Credit Agreements required the Company to maintain compliance with certain monthly financial and non-financial covenants, as defined therein. Any noncompliance with these covenants could have resulted in default interest rates and penalties, and Comerica Bank could have declared the amounts outstanding immediately due and payable. On March 4, 2014, the Company received a waiver of noncompliance with certain financial and nonfinancial covenants as of January 31, 2014 and December 31, 2013. In connection with this waiver, the Company incurred a fee of $10,000, and Comerica Bank reduced the total aggregate available borrowings on the lines of credit to $5.0 million. The Company was not in compliance with a financial covenant as of February 28, 2014 and, as such, entered into a forbearance agreement (the “Forbearance Agreement”) with Comerica Bank on April 10, 2014.  The Company paid a fee of $10,000 in connection with the Forbearance Agreement, pursuant to which Comerica Bank reduced the total aggregate available borrowings to $4.0 million.

The Company was not in compliance with a financial covenant at March 31, 2014 and did not repay the lines of credit in full on the original maturity date of May 1, 2014. As a result, on May 5, 2014, the Company and Comerica Bank agreed to Amendment No. 1 to the Forbearance Agreement (“Amendment No. 1”), which extended the end of the forbearance period from May 1, 2014 to June 1, 2014. In connection with Amendment No. 1, the maturity date of the revolving lines of credit was extended to June 1, 2014, and the Company paid an administrative fee of $10,000. On June 3, 2014, the Company and Comerica Bank agreed to Amendment No. 2 to Forbearance Agreement (“Amendment No. 2”), which extended the maturity date of the revolving lines of credit to August 1, 2014. In connection with Amendment No. 2, Comerica Bank increased the interest rates on the lines of credit by 0.50%, and the Company paid an administrative fee of $15,000. The Company was not in compliance with certain financial covenants as of May 31, 2014 and, as a result, agreed to Amendment No. 3 to Forbearance Agreement with Comerica Bank whereby the forbearance period was continued to August 1, 2014, and the Company paid an administrative fee of $10,000.   

The outstanding principal balances of the Credit Agreements, as amended June 3, 2014, bore interest at annual percentage rates equal to the daily prime rate, plus 2.50% for the Domestic Revolver and 2.00% for the Ex-Im Revolver. The daily prime rate was subject to a floor of the daily adjusting LIBOR rate plus 2.50% per annum, or if LIBOR was undeterminable, 2.50% per annum. The Company was also required to pay an unused commitment fee of 0.25% based on a portion of the undrawn lines of credit, payable quarterly in arrears. During the three and six months ended June 30, 2014, the Company incurred $185,000 and $414,000, respectively, of interest expense associated with the credit facilities, including $71,000 and $128,000, respectively, of amortization of deferred debt issuance costs and $80,000 and $200,000, respectively, of amortization of the discount on lines of credit. There was no interest expense payable at December 31, 2014.

Lockbox arrangements under the revolving bank facilities provided that substantially all of the income generated was deposited directly into lockbox accounts and then swept into cash management accounts for the benefit of Comerica Bank. Cash was disbursed from Comerica Bank to the Company only after payment of the applicable debt service and principal. At December 31, 2014, there were no restricted cash amounts. The Company’s obligations were generally secured by substantially all of the Company’s assets then owned or thereafter acquired.

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During the three and six months ended June 30, 2014, the Company incurred $35,000 and $45,000, respectively, of Comerica Bank commitment fees and legal costs associated with the various waivers and amendments. Commitment fees and legal costs associated with acquiring and maintaining the credit facilities were capitalized and amortized on a straight-line basis as interest expense over the remaining term of the Credit Agreements.

Other Borrowings

The Company financed a portion of its annual insurance premiums which it pays in installments over nine months. As of June 30, 2015, no amounts were outstanding under this arrangement. As of June 30, 2014, $74,000 was outstanding under this arrangement at an annual interest rate of 2.85% and was included in accrued liabilities in the accompanying consolidated financial statements. The Company incurred interest expense associated with the financed insurance premiums of approximately $1,000 and $2,000 during the three and six months ended June 30, 2014, respectively.

NOTE 9—COMMITMENTS AND CONTINGENCIES

Leases

The Company leases its corporate headquarters and manufacturing facility in Irvine, California and also leases certain other facilities, office equipment, and automobiles under various operating or capital lease arrangements. In February 2015, the Company entered into a 30-month capital lease agreement for information technology equipment. Future minimum lease payments under the capital lease, together with the present value of the net minimum lease payments, for the years ending December 31, 2015, 2016 and 2017 are $86,000, $171,000, and $159,000, respectively. The amount necessary to reduce net minimum lease payments to present value calculated at the Company's incremental borrowing rate of 4.29% at the inception of the lease totaled $23,000. The present value of net minimum lease payments are reflected on the Consolidated Balance Sheets as current and noncurrent obligations of $157,000 within accrued liabilities and $238,000 within capital lease obligation, respectively.

In March 2015, the corporate headquarters and manufacturing facility lease was amended to extend the term through April 30, 2020, modify provisions for tenant improvement allowance of up to $398,000, and adjust the basic rent terms. Future minimum rental commitments under operating lease agreements with non-cancelable terms greater than one year for the years ending December 31, 2015, 2016, 2017, and 2018 and thereafter totaled $354,000, $694,000, $652,000, and $1.5 million, respectively.

Employee arrangements and other compensation

Certain members of management are entitled to severance benefits payable upon termination following a change in control, which would approximate $1.1 million, in the aggregate, at June 30, 2015. The Company also has agreements with certain employees to pay bonuses based on targeted performance criteria. As of June 30, 2015, approximately $334,000 was accrued for performance bonuses, which is included in accrued liabilities in the consolidated balance sheets.

Purchase commitments

The Company generally purchases components and subassemblies for its products from a limited group of third party suppliers through purchase orders. As of June 30, 2015, the Company had $12.6 million of purchase commitments for which the Company has not received certain goods or services that are expected to be purchased within one year. These purchase commitments were made to secure better pricing and to ensure the Company will have the necessary parts to meet anticipated near-term demand.

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Litigation

The Company discloses material loss contingencies deemed to be reasonably possible and accrues for loss contingencies when, in consultation with its legal advisors, management concludes that a loss is probable and reasonably estimable. The ability to predict the ultimate outcome of such matters involves judgments, estimates, and inherent uncertainties. The actual outcome of such matters could differ materially from management’s estimates.

Class Action Lawsuits

On August 23, 2013, a purported class action lawsuit entitled Brady Adams v. Biolase, Inc., et al., Case No. 13-CV-1300 JST (FFMx) was filed in the United States District Court for the Central District of California against BIOLASE, its then Chief Executive Officer, Federico Pignatelli, and its then Chief Financial Officer, Frederick D. Furry. On August 26, 2013, a purported class action lawsuit entitled Ralph Divizio v. Biolase, Inc., et al., Case No. 13-CV-1317 DMG (MRWx) was filed in the same court against BIOLASE, Messrs. Pignatelli and Furry, and its then President and Chief Operating Officer, Alexander K. Arrow. Each of the lawsuits alleges violations of the federal securities laws and asserts causes of action against the defendants under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In accordance with the Private Securities Litigation Reform Act of 1995, on December 10, 2013, the court entered an order consolidating the lawsuits, appointing a lead plaintiff and approving the lead plaintiff’s selection of lead counsel. On February 24, 2014, the lead plaintiff filed a consolidated complaint against the Company and Messrs. Pignatelli, Furry, and Arrow, alleging violations of the federal securities laws and asserting causes of action against the defendants under Sections 10(b) and 20(a) of the Exchange Act.

On November 19, 2013, the Board received a letter from attorneys for purported shareholder David T. Long, demanding that the Board investigate, institute litigation, and take measures to redress and prevent alleged wrongdoing concerning the dissemination of certain allegedly false and misleading public disclosures made by the Company between January 2013 and August 2013.

On June 5, 2015, the United States District Court for the Central District of California approved, on a preliminary basis, the settlement of the consolidated securities class action lawsuit. The hearing on the final approval of the settlement is scheduled for October 9, 2015. Although there can be no assurance that such agreement will be finalized and receive final approval from the court, as of the date of these financial statements, management does not expect the Company to incur additional expenses related to this matter due to certain insurance coverage in place.

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Intellectual Property Litigation

On April 24, 2012, CAO Group, Inc. (“CAO”) filed a lawsuit against the Company in the District of Utah for patent infringement of U.S. Patent No. 7,485,116 (the “116 Patent”) regarding the Company’s ezlase dental laser. On September 9, 2012, CAO filed its First Amended Complaint, which added claims for (1) business disparagement/injurious falsehood under common law and (2) unfair competition under 15 U.S.C. Section 1125(a). The additional claims stem from a press release that the Company issued on April 30, 2012, which CAO claims contained false statements that are disparaging to CAO and its diode product. The First Amended Complaint seeks injunctive relief, treble damages, attorneys’ fees, punitive damages, and interest. On November 13, 2012, the Court stayed the lawsuit for 120 days to allow the United States Patent and Trademark Office (the “USPTO”) to consider the Company’s request for reexamination of the patent-in-suit. The USPTO granted the request to reexamine the asserted claims of the patent-in-suit and, on February 28, 2013, the Court stayed the lawsuit until the termination of the reexamination proceedings. On April 23, 2013, the USPTO issued an office action rejecting all of the asserted claims over the prior art, and CAO responded to the office action. On August 28, 2013, the USPTO issued an Action Closing Procedure, rejecting all of CAO’s patent claims. CAO responded to the USPTO’s ruling and on December 10, 2013, the USPTO issued a Right of Appeal Notice, finally rejecting some claims of the 116 Patent while finding that other claims appeared to be patentable. The Company appealed the USPTO’s findings on January 9, 2014 and on January 27, 2014, the USPTO declined to reconsider the finding of certain claims as patentable and instructed the parties to proceed to appeal to the Patent Trial and Appeal Board. On March 17, 2014, the Company filed its brief in support of its appeal of the USPTO’s decision not to reject certain claims of the 116 Patent. On March 24, 2014, CAO filed its brief in support of its appeal of the USPTO’s decision to reject certain claims of the 116 patent. On April 18, 2014, the Company filed a respondent brief in opposition to the CAO’s appeal arguments. On May 30, 2014, both parties filed rebuttal briefs in support of their appeals.  On June 30, 2014, the Company requested an oral hearing before the Board.  On July 1, 2014, the Board noted that request and docketed the case for consideration. A hearing on reconsideration was held in November 2014.  The Patent Trial and Appeal Board issued its Decision on Appeal on July 1, 2015.  The Decision on Appeal rejected 38 of 42 patent claims.  Accordingly, CAO filed a Request for Rehearing on July 31, 2015.

The Company filed a patent infringement lawsuit against Fotona Proizvodnja Optoelektronskih Naprav D.D. and Fotona LLC (collectively, “Fotona”) in Düsseldorf District Court (the “Düsseldorf Court”) on April 12, 2012 alleging infringement with respect to the Fotona Fidelis dental laser system. Fotona denies liability and seeks the reimbursement of statutory fees from the Company. Together with its response brief, Fotona also filed a nullity action against the patent in dispute, patent number EP 1 560 470. The nullity action is pending at the German Federal Patent Court (the “Patent Court”), Docket No. 1 Ni 58/13 (EP). On September 2, 2013, the Company filed its counterplea in the infringement proceedings and phrased its arguments defending the validity of the patent. These arguments were also the subject of the defense brief to the Patent Court in the parallel nullity action proceedings. On September 9, 2013, the Company filed its response to the Patent Court. Fotona filed a rejoinder on February 3, 2014, including its counterplea on nullity.

On April 29, 2014, the Düsseldorf Court rendered a first instance decision whereby Fotona must cease and desist from selling its Fidelis and Lightwalker dental laser systems, render accounts on past sales, recall respective products, and pay damages on infringement. Additionally, the Company was awarded statutory fees, court costs, and attorney fees. Preliminary enforcement against Fotona is possible if the Company posts a bond totaling €500,000, which is designed to cover a portion of the potential damages, before a final instance decision is available. In Germany, damages can be calculated based on the profits made by the infringer after the formal announcement of the granting of a patent, in this case beginning January 1, 2009, without considering direct labor or any other operational costs. However, Fotona has yet to provide the details of its profits in order to allow the Company to calculate the damages. In the two additional first instance cases following the extension of the initial lawsuit against Fotona, the Düsseldorf Court also required the Company to provide a statutory bond totaling €146,000. Such bonds are traditionally imposed on foreign plaintiffs to cover all statutory, court, and attorney’s fees. Fotona submitted its responses to the action and filed respective invalidation actions against the rights of the Company.  

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Subsequent to the foregoing responses, on March 24, 2015 the parties reached an agreement to settle the foregoing litigation and to dismiss the litigation with prejudice.  As part of the settlement, Fotona agreed to pay the Company a total of $1.4 million, with $550,000 payable within 10 days of March 24, 2015 and the remaining, $825,000 payable in three increments of $275,000 each to be paid no later than the first, second, and third anniversary of the effective date of the agreement. Pursuant to the settlement agreement, the Company (i) granted Fotona a three-year, non-exclusive, paid-up license in the United States market and a five-year, non-exclusive, paid-up license in markets outside of the United States and (ii) agreed to grant Fotona a non-exclusive, royalty-based license following the expiration of the paid-up licenses.  The Company calculated the present value of the settlement amount to be $1.2 million and allocated such amount to each significant element of the settlement on a relative fair value basis. $731,000 and $68,000 was allocated towards the recovery of the Company’s legal expenses and as settlement for the dismissal of the patent infringement lawsuit and are reflected as legal settlement and license fees and royalty revenue, respectively, on the Consolidated Statements of Operations and Comprehensive Loss. The remaining amount of $379,000 was allocated towards the three-year, non-exclusive, paid-up license in the United States market and the five-year, non-exclusive, paid-up license in markets outside of the United States which was reflected within other assets and long-term deferred revenue on the Consolidated Balance Sheets.  The deferred revenue is being recognized as license revenue over the terms of the paid-up licenses.

Other Matters

In the normal course of business, the Company may be subject to other legal proceedings, lawsuits, and other claims. Although the ultimate aggregate amount of probable monetary liability or financial impact with respect to these matters is subject to many uncertainties and is therefore not predictable with assurance, the Company’s management believes that any monetary liability or financial impact to the Company from these other matters, individually and in the aggregate, would not be material to the Company’s financial condition, results of operations, or cash flows. However, there can be no assurance with respect to such result, and monetary liability or financial impact to the Company from these other matters could differ materially from those projected.

NOTE 10—SEGMENT INFORMATION

The Company currently operates in a single reportable segment. For the three and six months ended June 30, 2015, sales in the United States accounted for approximately 62% and 59% of net revenue, respectively, and international sales accounted for approximately 38% and 41% of net revenue, respectively. For the three and six months ended June 30, 2014, sales in the United States accounted for approximately 62% and 60% of net revenue, respectively, and international sales accounted for approximately 38% and 40% of net revenue, respectively.

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
United States	$	7,386	$	6,328	$	13,316	$	13,037
International		4,483		3,858		9,408		8,667
	$	11,869	$	10,186	$	22,724	$	21,704

No individual country, other than the United States, represented more than 10% of total net revenue.

Long-lived assets located outside of the United States at our foreign subsidiaries totaled $338,000 and $374,000 as of June 30, 2015 and December 31, 2014, respectively.

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NOTE 11—CONCENTRATIONS

Revenue from the Company’s products for the three and six months ended June 30, 2015 and 2014 are as follows:

	Three Months Ended						Six Months Ended
	June 30						June 30
	2015			2014			2015			2014
Laser systems		65.6	%		62.9	%		65.1	%		61.6	%
Imaging systems		4.5	%		6.8	%		3.8	%		8.7	%
Consumables and other		15.9	%		14.3	%		16.7	%		14.1	%
Services		13.7	%		15.5	%		13.8	%		15.2	%
License fees and royalties		0.3	%		0.5	%		0.6	%		0.4	%
Total revenue		100.0	%		100.0	%		100.0	%		100.0	%

No individual customer represented more than 10% of the Company’s revenue for the three and six months ended June 30, 2015 or 2014.

The Company maintains its cash and cash equivalent accounts with established commercial banks. Such cash deposits periodically exceed the Federal Deposit Insurance Corporation insured limit.

No individual customer represented more than 10% of the Company’s accounts receivable at June 30, 2015 or December 31, 2014.

The Company currently purchases certain key components of its products from single suppliers. Although there are a limited number of manufacturers of these key components, management believes that other suppliers could provide similar key components on comparable terms. A change in suppliers, however, could cause delays in manufacturing and a possible loss of sales, which could adversely affect the Company’s business, results of operations, and financial condition.

NOTE 12—INCOME TAXES

The Company accounts for income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Management evaluates the need to establish a valuation allowance for deferred tax assets based upon the amount of existing temporary differences, the period in which they are expected to be recovered, and expected levels of taxable income. A valuation allowance to reduce deferred tax assets is established when it is “more likely than not” that some or all of the deferred tax assets will not be realized. Based on the Company’s net losses in prior years, management has determined that a full valuation allowance against the Company’s net deferred tax assets is appropriate.

Accounting for uncertainty in income taxes prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return and provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company has elected to classify interest and penalties as a component of its income tax provision. With respect to the liability for unrecognized tax benefits, including related estimates of penalties and interest, the Company did not record a liability for unrecognized tax benefits for the three and six months ended June 30, 2015 and 2014, respectively. The Company does not expect any changes to its unrecognized tax benefit for the next twelve months that would materially impact its consolidated financial statements.

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During the three and six months ended June 30, 2015, the Company recorded an income tax provision of $36,000 and $83,000, respectively,resulting in an effective tax rate of (0.5)% and (0.7)%, respectively.During the three and six months ended June 30, 2014, the Company recorded an income tax provision of $29,000 and $53,000, respectively, resulting in an effective tax rate of (0.5)% and (0.5)%, respectively. The income tax provisions for the three and six months ended June 30, 2015 and 2014 were calculated using the discrete year-to-date method. The effective tax rate differs from the statutory tax rate of 34% primarily due to the existence of valuation allowances against net deferred tax assets and current liabilities resulting from the estimated state income tax liabilities and federal alternative minimum tax liability.

NOTE 13—SUBSEQUENT EVENT

Stock-Based Compensation

Effective July 13, 2015, the Compensation Committee of the Board awarded 870,000 stock-settled restricted stock units and granted non-qualified stock options to purchase up to 870,000 shares of Biolase common stock to its President and Chief Executive Officer in connection with his employment agreement with Biolase.

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

The following information should be read in conjunction with the unaudited consolidated financial statements and related notes of Biolase, Inc. (“Biolase”) and its consolidated subsidiaries (together with Biolase, the “Company”, “we”, “our”, or “us”)included elsewhere in this Form 10-Q and our audited consolidated financial statements and related notes included in the Annual Report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission (the “SEC”) on March 6, 2015, as amended on April 29, 2015 (the “2014 Form 10-K”).  In addition to historical information, this discussion and analysis contains “forward-looking statements” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements include any statements, predictions, or expectations regarding our earnings, revenue, sales and operations, operating expenses, anticipated cash needs, capital requirements and capital expenditures, depreciation and amortization, needs for additional financing, use of working capital, effects of foreign currency exchange rates, plans for future products and services and for enhancements of existing products and services, anticipated growth strategies, ability to attract customers, sources of net revenue, anticipated trends and challenges in our business and the markets in which we operate, the adequacy of our facilities, the impact of economic and industry conditions on our customers and our business, customer demand, our competitive position, the outcome of any litigation against us, the perceived benefits of any technology acquisitions, critical accounting policies, the impact of recent accounting pronouncements, recording tax benefits or other financial items in the future, plans, strategies, expectations or objectives of management for future operations, our financial condition or prospects, and any other statement that is not historical fact. Forward-looking statements are identified by the use of words such as “may,” “might,” “will,” “intend,” “should,” “could,” “can,” “would,” “continue,” “expect,” “believe,” “anticipate,” “estimate,” “predict,” “potential,” “plan,” “seek” and similar expressions and variations or the negativities of these terms or other comparable terminology.

The forward-looking statements contained in this Item 2 are based on the expectations, estimates, projections, beliefs, and assumptions of our management based on information available to management as of the date on which this Form 10-Q was filed with the SEC or as of the date on which the information incorporated by reference was filed with the SEC, as applicable, all of which are subject to change. Forward-looking statements are subject to risks, uncertainties, and other factors that are difficult to predict and could cause actual results to differ materially from those stated or implied by our forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to:

· global economic uncertainty and volatility in financial markets;

· inability to raise additional capital on terms acceptable to us;

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

· our inability to overcome the hesitation of dentists and patients to adopt laser technologies;

· failure in our efforts to train dental practitioners;

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

· failure of our intellectual property rights to adequately protect our technologies;

· potential third-party claims that our products infringe their intellectual property rights;

· warranty obligations if our products are defective;

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

· failure of our suppliers to supply us with a sufficient amount or adequate quality of materials;

· a change in suppliers, including our inability to purchase certain key components of our products from suppliers other than our current ones;

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· our inability to effectively manage and implement our growth strategies; and

· failure of our efforts to emphasize the importance of our imaging products to translate into increased sales of the same.

Further information about factors that could materially affect the Company, including our results of operations and financial condition, is contained under “Risk Factors” in Item 1A in the 2014 Form 10-K. Except as required by law, we undertake no obligation to revise or update any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, new information or changes to future results over time or otherwise.

Overview

We are a medical device company that develops, manufactures, markets, and sells laser systems in dentistry and medicine and also markets, sells, and distributes dental imaging equipment, including cone beam digital x-rays and CAD/CAM intra-oral scanners, in-office, chair-side milling machines and three-dimensional printers. Our products advance the practice of dentistry and medicine for patients and health care professionals. Our proprietary dental laser systems allow dentists, periodontists, endodontists, oral surgeons, and other dental specialists to perform a broad range of minimally invasive dental procedures, including cosmetic, restorative, and complex surgical applications. Our laser systems are designed to provide clinically superior results for many types of dental procedures compared to those achieved with drills, scalpels, and other conventional instruments. We have clearance from the U.S. Food and Drug Administration (the “FDA”) to market and sell our laser systems in the United States and also have the necessary registrations to market and sell our laser systems in Canada, the European Union, and many other countries outside the U.S. Additionally, our in-licensed imaging equipment and related products improve diagnoses, applications, and procedures in dentistry and medicine.

We offer two categories of laser system products: WaterLase (all-tissue) systems and Diode (soft-tissue) systems. Our flagship brand, the WaterLase, uses a patented combination of water and laser energy to perform most procedures currently performed using drills, scalpels, and other traditional dental instruments for cutting soft and hard tissue. We also offer our Diode laser systems to perform soft tissue, pain therapy, and cosmetic procedures, including teeth whitening. As of June 30, 2015, we had approximately 185 issued and 115 pending U.S. and international patents, the majority of which are related to WaterLase technology. From 1998 through June 30, 2015, we sold over 29,000 laser systems in over 80 countries around the world. Contained in this total are over 10,900 WaterLase systems, including approximately 6,900 WaterLase MD and iPlus systems.

Recent Developments

Significant Leadership Changes

Consistent with our goal to refocus our energies on strengthening leadership, worldwide competitiveness and attention to our professional customers and their patients, we announced the appointment of a new Chief Financial Officer in March 2015 and a new President and Chief Executive Officer in July 2015. Collectively, they bring with them to Biolase decades of experience and expertise in the medical device, dental and healthcare fields.

New Product Offerings

In February 2015, we launched the WaterLase iPlus 2.0, our next generation minimally invasive all-tissue flagship laser, along with our exclusive Practice Growth Guarantee, the latter essentially guarantees growth in our clients’ dental practices through focused training on a select number of clinical procedures and with billing and marketing support for dentists included. The WaterLase iPlus 2.0 includes innovations and improvements designed to enhance patients’ and dentists’ experiences and generate practice growth for dental practitioners through routine use. During the second quarter of 2015, the Practice Growth Guarantee program was fully implemented in the United States. By partnering with our WaterLase iPlus 2.0 customers via the Practice Growth Guarantee program, we are actively and routinely soliciting feedback, providing them and us highly valuable information.

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The WaterLase iPlus 2.0 also marks the debut of the SureFire YSGG Delivery System, which ensures greater uptime through enhanced precision, performance and reliability.  Building on the gold standard for comfortable laser delivery systems, SureFire has redesigned optics that efficiently deliver precise laser energy with a replaceable, disposable shield for better dependability.  Still the most flexible, tension-free delivery system available, SureFire offers improved clinical access and comfort with its minimally-invasive flagship dental laser system and exclusive contra-angle hand-piece.The significance of these improvements has been confirmed by positive feedback from new and existing customers alike, who have indicated that Surefire meets or exceeds their expectations for reliability.

In December 2014, we introduced the EPIC X diode laser, an enhanced soft-tissue laser system featuring upgrades and improvements from our EPIC 10, which was released in 2012. EPIC X includes enhancements to nearly every system component to optimize treatment speed and efficiency, including pre-initiated diode tips, allowing dentists to significantly reduce procedure time. In the second quarter of 2015, we saw an increase in demand for EPIC X, solidifying our leadership position in this category.  Dentists, hygienists, office staff, and patients are experiencing the clinical benefits provided by the EPIC X.

Critical Accounting Policies

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and revenues and expenses reported during the period. Information with respect to our critical accounting policies that we believe could have the most significant effect on our reported results and require subjective or complex judgments by management is contained in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the 2014 Form 10-K. We believe that there have been no significant changes during the six months ended June 30, 2015 in our critical accounting policies from those disclosed in Item 7 of the 2014 Form 10-K, except as disclosed in Note 2 of this Form 10-Q.

Results of Operations

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
Products and services revenue		99.7	%		99.5	%		99.4	%		99.6	%
License fees and royalty revenue		0.3	%		0.5	%		0.6	%		0.4	%
Net revenue		100.0	%		100.0	%		100.0	%		100.0	%
Cost of revenue		68.8	%		63.4	%		69.6	%		64.7	%
Gross profit		31.2	%		36.6	%		30.4	%		35.3	%
Operating expenses:
Sales and marketing		40.0	%		35.0	%		41.8	%		37.0	%
General and administrative		33.0	%		52.1	%		28.6	%		38.7	%
Engineering and development		16.6	%		9.6	%		16.6	%		9.0	%
Excise tax		0.8	%		0.6	%		0.7	%		0.6	%
Legal settlement		—	%		—	%		(3.2	%)		—	%
Total operating expenses		90.4	%		97.3	%		84.5	%		85.3	%
Loss from operations		(59.2	%)		(60.7	%)		(54.1	%)		(50.0	%)
Non-operating income (loss), net		0.2	%		(2.1	%)		(0.4	%)		(2.1	%)
Loss before income tax provision		(59.0	%)		(62.8	%)		(54.5	%)		(52.1	%)
Income tax provision		0.3	%		0.3	%		0.4	%		0.2	%
Net loss		(59.3	%)		(63.1	%)		(54.9	%)		(52.3	%)

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Non-GAAP Disclosure

In addition to the financial information prepared in conformity with GAAP, we provide certain historical non-GAAP financial information. Management believes that these non-GAAP financial measures assist investors in making comparisons of period-to-period operating results and that, in some respects, these non-GAAP financial measures are more indicative of the Company’s ongoing core operating performance than their GAAP equivalents.

Management also believes that the presentation of this non-GAAP financial information provides investors with greater transparency and facilitates comparison of operating results across a broad spectrum of companies with varying capital structures, compensation strategies, derivative instruments, and amortization methods, which provide a more complete understanding of our financial performance, competitive position, and prospects for the future. However, the non-GAAP financial measures presented herein have certain limitations in that they do not reflect all of the costs associated with the operations of our business as determined in accordance with GAAP. Therefore, investors should consider non-GAAP financial measures in addition to, and not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. Further, the non-GAAP financial measures presented by the Company may be different from the non-GAAP financial measures used by other companies.

Non-GAAP Net Loss

Management uses non-GAAP net loss (defined as net loss before interest, taxes, depreciation and amortization, stock-based compensation, other equity instruments, and other non-cash compensation) in its evaluation of the Company’s core results of operations and trends between fiscal periods and believes that these measures are important components of its internal performance measurement process. Management believes that this non-GAAP financial information reflects an additional way of viewing aspects of our business that, when viewed with our GAAP results, provides a more complete understanding of factors and trends affecting our business. The following table contains a reconciliation of non-GAAP net loss to GAAP net loss (in thousands).

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014
GAAP net loss, as reported	$	(7,041	)	$	(6,439	)	$	(12,477	)	$	(11,326	)
Adjustments:
Interest (income) expense, net		(23	)		185			(23	)		415
Income tax provision		36			29			83			53
Depreciation and amortization		166			177			324			352
Stock-based compensation, other equity    instruments, and other non-cash compensation		935			338			1,635			709
Non-GAAP net loss	$	(5,927	)	$	(5,710	)	$	(10,458	)	$	(9,797	)

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Comparison of Results of Operations

Three months ended June 30, 2015 and 2014

Net Revenue: The following table summarizes our net revenues by category, including each category’s percentage of our total revenue, for the three months ended June 30, 2015 (“Second Quarter 2015”) and 2014 (“Second Quarter 2014”), as well as the amount of change and percentage of change in each revenue category (dollars in thousands):

	Three Months Ended				Three Months Ended
	June 30,				June 30,				Amount			Percent
	2015				2014				Change			Change
Laser systems	$	7,786	65.6	%	$	6,408	62.9	%	$	1,378			21.5	%
Imaging systems		533	4.5	%		692	6.8	%		(159	)		(23.0	%)
Consumables and other		1,890	15.9	%		1,460	14.3	%		430			29.5	%
Services		1,626	13.7	%		1,580	15.5	%		46			2.9	%
Total products and services		11,835	99.7	%		10,140	99.5	%		1,695			16.7	%
License fees and royalty		34	0.3	%		46	0.5	%		(12	)		(26.1	%)
Net revenue	$	11,869	100.0	%	$	10,186	100.0	%	$	1,683			16.5	%

Net revenue by geographic location based on the location of customers, including each category’s percentage of our total revenue, for the three months ended June 30, 2015 and 2014, as well as the amount of change and percentage of change in each geographic revenue category, was as follows (dollars in thousands):

	Three Months Ended				Three Months Ended
	June 30,				June 30,				Amount		Percent
	2015				2014				Change		Change
United States	$	7,386	62.2	%	$	6,328	62.1	%	$	1,058		16.7	%
International		4,483	37.8	%		3,858	37.9	%		625		16.2	%
Net revenue	$	11,869	100.0	%	$	10,186	100.0	%	$	1,683		16.5	%

The overall increase in quarter-over-quarter net revenue resulted from increases in domestic and international laser systems, consumables and other revenue and services revenue, partially offset by decreases in domestic imaging systems and license fees and royalty revenue. Laser systems revenue increased by approximately $1.4 million, or 21.5% in Second Quarter 2015 compared to Second Quarter 2014.

Consistent with our goal to refocus our energies on strengthening leadership, worldwide competitiveness and attention to our professional customers and their patients, in Second Quarter 2015, we continued our efforts to reverse the declining sales of WaterLase that has occurred over the last two years.  Revenue generated from sales of our flagship WaterLase laser systems increased by 42.3% worldwide when compared to Second Quarter 2014, including increases of 47.0% and 35.2% for domestic and international sales, respectively. Quarter-over-quarter revenue from our domestic sales of diode laser systems increased by 16.8%.

Imaging systems revenue decreased by approximately $159,000, or 23.0%, in Second Quarter 2015 compared to Second Quarter 2014. The decrease in net revenue from imaging systems is attributable to our shifted focus to our flagship WaterLase laser systems.

Consumables and other net revenue, which includes consumable products such as disposable tips and shipping revenue, increased by approximately $430,000, or 29.5%, in Second Quarter 2015 compared to Second Quarter 2014. This increase in consumables and other net revenue was primarily a result of continuing auxiliary sales to our growing laser customer base.

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Services net revenue, which consists of extended warranty service contracts, advanced training programs, and other services, increased by approximately $46,000, or 2.9%, for Second Quarter 2015, as compared to Second Quarter 2014. The slight increase is primarily due to increased sales of laser systems, leading to increased demand for our online training courses and the recognition of deferred revenue associated with the Practice Growth Guarantee program.

License fees and royalty revenue decreased by approximately $12,000, or 26.1%, to $34,000 in Second Quarter 2015 compared to $46,000 for Second Quarter 2014. License fees and royalty revenue are attributable to intellectual property related to our laser technologies and past-due royalty revenue recovered in connection with our patent infringement lawsuit settlement. For a detailed discussion of the intellectual property litigation and related settlement, see Note 9 – Commitments and Contingencies.

Cost of Revenue and Gross Profit: The following table summarizes our cost of revenue and gross profit for the three months ended June 30, 2015 and 2014, as well as the amount of change and percentage of change (dollars in thousands):

	Three Months Ended				Three Months Ended
	June 30,				June 30,				Amount			Percent
	2015				2014				Change			Change
Net revenue	$	11,869	100.0	%	$	10,186	100.0	%	$	1,683			16.5	%
Cost of revenue		8,168	68.8	%		6,457	63.4	%		1,711			26.5	%
Gross profit	$	3,701	31.2	%	$	3,729	36.6	%	$	(28	)		(0.8	%)

Gross profit as a percentage of revenue typically fluctuates with product and regional mix, selling prices, material costs and revenue levels. The decrease in gross profit as a percentage of revenue for Second Quarter 2015, as compared to Second Quarter 2014, was mainly attributable to increased promotions related to the launch of EPIC X and WaterLase iPlus 2.0.

Operating Expenses: The following table summarizes our operating expenses as a percentage of net revenue for the three months ended June 30, 2015 and 2014, as well as the amount of change and percentage of change (dollars in thousands):

	Three Months Ended				Three Months Ended
	June 30,				June 30,				Amount			Percent
	2015				2014				Change			Change
Sales and marketing	$	4,743	40.0	%	$	3,569	35.0	%	$	1,174			32.9	%
General and administrative		3,916	33.0	%		5,310	52.1	%		(1,394	)		(26.3	%)
Engineering and development		1,974	16.6	%		978	9.6	%		996			101.8	%
Excise tax		97	0.8	%		64	0.6	%		33			51.6	%
Total operating expenses	$	10,730	90.4	%	$	9,921	97.3	%	$	809			8.2	%

The quarter-over-quarter change in operating expense is explained in the following expense categories:

Sales and Marketing Expense. The increase to sales and marketing expense was primarily a result of increased media and advertising expenses of $240,000, increased payroll and consulting-related expenses of $728,000, increased supplies of $136,000, and increased commissions of $69,000, partially offset by decreased convention related expenses of $107,000. The increase to media and advertising expenses are the result of our efforts to enhance customer acquisition, customer retention, and global brand awareness. The increase to payroll and consulting-related expenses (i) is attributable to the increased headcount in our sales and marketing team domestically and internationally as we continued to expand into new and existing markets and (ii) includes an increase of $81,000 in stock-based compensation primarily attributable to grants to existing and new employees. The increase to supplies expense includes expenses necessary to support our daily operations, including our online store.

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General and Administrative Expense. The decrease to general and administrative expense was primarily due to decreased legal expenses and professional fees of $2.5 million, partially offset by increased investor relations expenses of $142,000 andincreased payroll and consulting-related expenses of $833,000. The decrease in legal expenses and professional fees resulted from the atypical defense of the director dispute and resulting shareholder litigation incurred during Second Quarter 2014. The increase in payroll and consulting-related expensesresulted from a higher headcount incertain functions to support growth in our business, including an increase of $511,000 in stock-based compensation primarily attributable to grants to directors and employees.

Engineering and Development Expense. The increase to engineering and development expense was primarily due to increased payroll, consulting and temporary labor expenses of $437,000, and increased operating supplies cost of $420,000, resulting from our focused efforts to accelerate innovation of both our existing products and technologies as well as to develop new products and technologies, which we believe will further strengthen our worldwide leadership position. Our engineering and development expenses fluctuate as our specific programs supporting product development transition from one development phase to the next. Depending on the stage of completion and level of effort related to each development phase we undertake, we may experience variations in our engineering and development expense. We expense engineering and development expenses as they are incurred.

Excise Tax Expense. The Patient Protection and Affordable Care Act imposes a 2.3% medical device excise tax on certain product sales to customers located in the U.S. We incurred excise tax expenses of $97,000, or 0.8% of net revenue, for Second Quarter 2015 as compared to $64,000, or 0.6% of net revenue, for Second Quarter 2014. The increase of $33,000, or 51.6%, in excise tax expense was primarily due to increased laser systems revenue in the United States of approximately $1.2 million in Second Quarter 2015 when compared to Second Quarter 2014.

Gain (loss) on Foreign Currency Transactions. We realized a $1,000 gain on foreign currency transactions for Second Quarter 2015, compared to a $33,000 loss on foreign currency transactions for Second Quarter 2014 due to exchange rate fluctuations between the U.S. dollar and other currencies, primarily the Euro.

Interest Income (Expense), Net. Interest income for Second Quarter 2015 represents interest recognized from the discounted present value of the settlement in connection with the Fotona intellectual property litigation. Interest expense for Second Quarter 2015 consists of interest incurred on our capital lease obligations in connection with the lease of information technology equipment. Interest expense for Second Quarter 2014 consisted primarily of interest on our revolving credit facilities and amortization of debt issuance costs and debt discount. Interest income (expense), net totaled approximately $23,000, or 0.2% of net revenue, for Second Quarter 2015, as compared to $185,000 of interest expense for Second Quarter 2014. The decrease was primarily a result of the Company paying in full all amounts due under the revolving lines of credit with Comerica Bank in July 2014.

Income Tax Provision. We use a discrete year-to-date method in calculating quarterly provision for income taxes.Our provision for income taxes was $36,000 for Second Quarter 2015, compared to a provision of $29,000 for Second Quarter 2014. The increase of $7,000, or 24.1%, in income tax provision was primarily due to increased international sales revenue, which accounted for $4.5 million of net revenue in Second Quarter 2015 and $3.9 million of net revenue in Second Quarter 2014. For additional information regarding income taxes, see Note 12 – Income Taxes.

Net Loss. Our net loss totaled approximately $7.0 million for Second Quarter 2015 compared to a net loss of $6.4 million for Second Quarter 2014. The increase in net loss of approximately $602,000, or 9.3%, was primarily due to an increase in total operating expenses of $809,000, partially offset by an increase to total non-operating income (loss), net of $242,000.

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Six months ended June 30, 2015 and 2014

Net Revenue: The following table summarizes our net revenues by category, including each category’s percentage of our total revenue, for the six months ended June 30, 2015 and 2014, as well as the amount of change and percentage of change in each revenue category (dollars in thousands):

	Six Months Ended				Six Months Ended
	June 30,				June 30,				Amount			Percent
	2015				2014				Change			Change
Laser systems	$	14,794	65.1	%	$	13,363	61.6	%	$	1,431			10.7		%
Imaging systems		874	3.8	%		1,888	8.7	%		(1,014	)		(53.7	)	%
Consumables and other		3,792	16.7	%		3,063	14.1	%		729			23.8		%
Services		3,126	13.8	%		3,305	15.2	%		(179	)		(5.4	)	%
Total products and services		22,586	99.4	%		21,619	99.6	%		967			4.5		%
License fees and royalty		138	0.6	%		85	0.4	%		53			62.4		%
Net revenue	$	22,724	100.0	%	$	21,704	100.0	%	$	1,020			4.7		%

Net revenue by geographic location based on the location of customers, including each category’s percentage of our total revenue, for the six months ended June 30, 2015 and 2014, as well as the amount of change and percentage of change in each geographic revenue category, was as follows (dollars in thousands):  

	Six Months Ended				Six Months Ended
	June 30,				June 30,				Amount		Percent
	2015				2014				Change		Change
United States	$	13,316	58.6	%	$	13,037	60.1	%	$	279		2.1	%
International		9,408	41.4	%		8,667	39.9	%		741		8.5	%
Net revenue	$	22,724	100.0	%	$	21,704	100.0	%	$	1,020		4.7	%

The overall increase in period-over-period net revenue resulted from increases in domestic and international laser system revenue, consumables and other revenue and license fees and royalty revenue, partially offset by decreases in domestic imaging systems revenue and services revenue. Laser systems revenue increased by approximately $1.4 million, or 10.7%, while net revenue from imaging systems decreased by approximately $1.0 million or 53.7%. The period-over-period increase in net revenue also resulted from increases in consumables and license fees revenue and royalty revenue, partially offset by a decrease in services revenue.

As we continued to focus our energies on enhancing leadership and worldwide competitiveness while providing the best products and services to our professional customers and their patients, we have reversed the trend of declining WaterLase sales. For the six months ended June 30, 2015, revenue generated from sales of our flagship WaterLase laser systems increased by 19.9% worldwide when compared to the same period in 2014, including increases of 19.7% and 20.0% for domestic and international sales, respectively. Period-over-period revenue from our domestic sales of diode laser systems increased by 19.7%.

Consumables and other net revenue, which includes consumable products such as disposable tips and shipping revenue, increased by approximately $729,000, or 23.8%, period-over-period. This increase in consumables and other net revenue was primarily a result of continuing auxiliary sales to our growing laser customer base.

Services net revenue, which consists of extended warranty service contracts, advanced training programs, and other services, decreased by approximately $179,000, or 5.4%, period-over-period. The decrease was primarily due to the extension of our warranty for WaterLase systems from one year to two years for systems purchased after January 1, 2014, which was first implemented in June 2014.

License fees and royalty revenue increased by approximately $53,000, or 62.4%, period-over-period. License fees and royalty revenue are attributable to intellectual property related to our laser technologies and past-due royalty revenue recovered in connection with our patent infringement lawsuit settlement. For a detailed discussion of the intellectual property litigation and related settlement, see Note 9 – Commitments and Contingencies.

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Cost of Revenue and Gross Profit: The following table summarizes our cost of revenue and gross profit for the six months ended June 30, 2015 and 2014, as well as the amount of change and percentage of change (dollars in thousands):

	Six Months Ended				Six Months Ended
	June 30,				June 30,				Amount			Percent
	2015				2014				Change			Change
Net revenue	$	22,724	100.0	%	$	21,704	100.0	%	$	1,020			4.7		%
Cost of revenue		15,813	69.6	%		14,034	64.7	%		1,779			12.7		%
Gross profit	$	6,911	30.4	%	$	7,670	35.3	%	$	(759	)		(9.9	)	%

Gross profit as a percentage of revenue typically fluctuates with product and regional mix, selling prices, material costs and revenue levels. The decrease in gross profit as a percentage of revenue for the first half of 2015, as compared to the first half of 2014, was mainly attributable to increased promotions related to the launch of EPIC X and WaterLase iPlus 2.0.

Operating Expenses: The following table summarizes our operating expenses as a percentage of net revenue for the six months ended June 30, 2015 and 2014, as well as the amount of change and percentage of change (dollars in thousands):

	Six Months Ended					Six Months Ended
	June 30,					June 30,				Amount			Percent
	2015					2014				Change			Change
Sales and marketing	$	9,497		41.8	%	$	8,024	37.0	%	$	1,473			18.4		%
General and administrative		6,503		28.6	%		8,393	38.7	%		(1,890	)		(22.5	)	%
Engineering and development		3,777		16.6	%		1,951	9.0	%		1,826			93.6		%
Excise tax		153		0.7	%		129	0.6	%		24			18.6		%
Legal settlement		(731	)	(3.2	%)		—	—	%		(731	)	N/A
Total operating expenses	$	19,199		84.5	%	$	18,497	85.3	%	$	702			3.8		%

The period-over-period change in operating expense is explained in the following expense categories:

Sales and Marketing Expense. The increase to sales and marketing expense was primarily a result of increased media and advertising expenses of $477,000, increased payroll and consulting-related expenses of $1.5 million and increased supplies expense of $131,000, partially offset by decreased convention related expenses of $481,000 and decreased commissions expense of $73,000. The increase to media and advertising expenses are the result of our efforts to enhance customer acquisition, customer retention and global brand awareness. The increase to payroll and consulting-related expenses (i) is attributable to the increased headcount in our sales and marketing team both domestically and internationally, as we continued to expand into new and existing markets and (ii) includes an increase of $250,000 in stock-based compensation primarily attributable to grants to existing and new employees. The increase to supplies expense includes expenses necessary to support our daily operations, including our online store.

General and Administrative Expense. The decrease to general and administrative expense was primarily due to decreased legal expenses and professional fees of $3.1 million, partially offset by increased payroll and consulting-related expenses of $1.2 million. The decrease in legal expenses and professional fees resulted from the atypical defense of the director dispute and resulting shareholder litigation incurred during the first half of 2014. The increase in payroll and consulting-related expenses resulted from a higher headcount in certain functions to support growth in our business, including an increase of $632,000 in stock-based compensation primarily attributable to grants to directors and employees.

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Engineering and Development Expense. The increase to engineering and development expense was primarily due to increased payroll, consulting and temporary labor expenses of $963,000 and increased operating supplies cost of $644,000, resulting from our focused efforts to accelerate innovation of both our existing products and technologies as well as to develop new products and technologies, which we believe will further strengthen our worldwide leadership position. The increase in payroll, consulting and temporary labor expensesresulted from a higher headcount and includes an increase of $116,000 in stock-based compensation primarily attributable to grants to existing and new employees. Our engineering and development expenses fluctuate as our specific programs supporting product development transitions from one development phase to the next. Depending on the stage of completion and level of effort related to each development phase undertaken, we may reflect variations in our engineering and development expense. We expense engineering and development expenses as they are incurred.

Excise Tax Expense. The Patient Protection and Affordable Care Act imposes a 2.3% medical device excise tax on certain product sales to customers located in the U.S. We incurred excise tax expenses of $153,000, or 0.7% of net revenue, for the six months ended June 30, 2015 as compared to $129,000, or 0.6% of net revenue, for the six months ended June 30, 2014. The increase of $24,000, or 18.6%, in excise tax expense was primarily due to increased period-over-period laser systems revenue in the United States of approximately $1.2 million.

Legal Settlement. In April 2012, we filed a patent infringement lawsuit against Fotona Proizvodnja Optoelektronskih Naprav D.D. and Fotona LLC (collectively, “Fotona”) in Düsseldorf District Court alleging infringement with respect to the Fotona Fidelis dental laser system. On March 24, 2015, we entered into a settlement agreement with Fotona.  We allocated $731,000 of the settlement amount toward the recovery of our legal expenses related to litigation. For a more detailed discussion of the intellectual property litigation, see Note 9 – Commitments and Contingencies.

(Loss) Gain on Foreign Currency Transactions. We realized a $129,000 loss on foreign currency transactions for the six months ended June 30, 2015, compared to a $31,000 loss on foreign currency transactions for the six months ended June 30, 2014 due to exchange rate fluctuations between the U.S. dollar and other currencies, primarily the Euro.

Interest Income (Expense), Net. Interest income during 2015 represents interest recognized from the discounted present value of the settlement in connection with the Fotona intellectual property litigation. Interest expense in 2015 consists of interest incurred on our capital lease obligations in connection with the lease of information technology equipment. Interest expense for 2014 consisted primarily of interest on our revolving credit facilities and amortization of debt issuance costs and debt discount. Interest income (expense), net totaled approximately $23,000, or 0.1% of net revenue for the first half of 2015, as compared to an interest expense of $415,000 for the first half of 2014. The decrease was primarily a result of the Company paying in full all amounts due under the revolving lines of credit with Comerica Bank in July 2014.

Income Tax Provision. Our provision for income taxes was $83,000 for the six months ended June 30, 2015, compared to a provision of $53,000 for the six months ended June 30, 2014. The increase of $30,000, or 56.6%, in income tax provision was primarily due to increased international sales revenue, which accounted for $9.4 million of net revenue in 2015 and $8.7 million of net revenue in 2014.

Net Loss. Our net loss for the six months ended June 30, 2015 totaled approximately $12.5 million compared to a net loss of $11.3 million for the six months ended June 30, 2014. The period-over-period increase in net loss of approximately $1.2 million, or 10.2%, was primarily due to a decrease in gross profit of $759,000 and an increase in total operating expenses of $702,000, partially offset by a decrease in total non-operating income (loss), net of $340,000.

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Liquidity and Capital Resources

At June 30, 2015, we had approximately $20.1 million in cash and restricted cash equivalent. Management defines cash and cash equivalents as highly liquid deposits with original maturities of 90 days or less when purchased. The decrease in our cash and cash equivalents by $11.6 million at June 30, 2015 as compared to December 31, 2014, was primarily driven by cash used in operating activities of $11.0 million, cash used in investing activities of $433,000 and effect of exchange rate changes of $168,000, partially offset by cash provided by financing activities of $2,000. The Company’s decrease in cash and cash equivalents totaling $11.6 million during the six months ended June 30, 2015 consisted of a decrease of $7.8 million during the quarter ended March 31, 2015 and a decrease of $3.8 million during the second quarter of 2015. The decrease in cash during the most recent quarter ended June 30, 2015 was less than half of the decrease during the previous quarter, reflecting management’s cost-cutting initiatives and cash management.

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

	Six Months Ended
	June 30,
	2015			2014
Net cash flows used in operating activities	$	(11,039	)	$	(2,902	)
Net cash flows used in investing activities		(433	)		(122	)
Net cash flows provided by financing activities		2			3,675
Effect of exchange rate changes		(168	)		(8	)
Net change in cash and cash equivalents	$	(11,638	)	$	643

Operating Activities

Net cash used in operating activities consists of our net loss, adjusted for our non-cash charges, plus or minus working capital changes. Cash used in operating activities for the six months ended June 30, 2015, totaled $11.0 million and was primarily comprised of our net loss of $12.5 million, partially offset by non-cash adjustments for stock-based compensation expense of $1.6 million, provision for bad debts of $281,000, deferred income taxes of $31,000, net interest income of $23,000 and depreciation and amortization expenses of $324,000. The $810,000 net decrease in our operating assets and liabilities was primarily due to a buildup of inventories of $1.2 million, an increase in accounts receivable of $1.0 million related to the timing of our collections, an increase in restricted cash of $200,000, an increase in prepaid expenses and other assets of $385,000 related a legal settlement with a competitor during the first quarter of 2015, and a decrease in customer deposits of $16,000, partially offset by an increase in accounts payable and accrued liabilities of $1.2 million related to the timing of our payments and an increase in deferred revenue of $757,000 related to our Practice Growth Guaranteed program and a legal settlement with a competitor in the first quarter of 2015.

Investing Activities

Cash used in investing activities for the six months ended June 30, 2015 consisted primarily of $433,000 of capital expenditures. The period-over-period increase is primarily due to increased capital expenditures in 2015 for operating equipment and information technology equipment. For fiscal 2015, we expect capital expenditures to total approximately $1.3 million and we expect depreciation and amortization to total approximately $700,000.

Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2015 of $2,000 resulted from net proceeds received from stock options exercised of $44,000, partially offset by our deposit on capital lease of $42,000. In February 2014, we entered into a private placement with investors providing net proceeds of approximately $4.8 million. We did not enter into any private placements in 2015.

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Effect of Exchange Rate

The $168,000 decrease in effect of exchange rate on cash was primarily due to a recognized $129,000 loss on foreign currency transactions due to a stronger U.S. dollar in 2015 than it was in 2014.

Future Liquidity Needs

As of June 30, 2015, we had working capital of approximately $27.3 million. Our principal sources of liquidity at June 30, 2015 consisted of approximately $20.1 million in cash and restricted cash equivalent and $9.8 million of net accounts receivable.

In order for us to continue operations and be able to discharge our liabilities and commitments in the normal course of business, we must increase sales of our products directly to end-users and through distributors, establish profitable operations through the combination of increased sales and decreased expenses, and generate cash from operations or obtain additional funds when needed. We cannot guarantee that we will be able to increase sales, reduce expenses, or obtain additional funds if needed. If we are unable to increase sales, reduce expenses, or raise sufficient additional capital, we may be unable to continue to fund our operations, develop our products, or realize value from our assets and discharge our liabilities in the normal course of business.

Additional capital requirements may depend on many factors, including, among other things, the rate at which our business grows, demands for working capital, manufacturing capacity, and any acquisitions that we may pursue. From time to time, we could be required, or may otherwise attempt, to raise capital through either equity or debt offerings. We cannot provide assurance that we will enter into any such equity or debt financings in the future or that the required capital would be available on acceptable terms, if at all, or that any such financing activity would not be dilutive to our stockholders.

Recent Accounting Pronouncements

For a description of recently issued and adopted accounting pronouncements, including the respective dates of adoption and expected effects on our results of operations and financial condition, please refer to Part I, Item 1, Note 2 of the Notes to the Unaudited Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, which is incorporated herein by this reference.

Additional Information

BIOLASE®, ZipTip®, ezlase®, eztips®, MD Flow®, Comfortpulse®, WaterLase®, iLase®, iPlus®, WCLI®, World Clinical Laser Institute®, WaterLase MD®, WaterLase Dentistry®, Galaxy BioMill®, Occulase iPlus®, Epic Diode Laser®, Waterlase MD®, Geyser®, Epic Laser®, Dermalase®, Occulase®, and Diolase® are registered trademarks of BIOLASE, Inc., and Diolase™, HydroPhotonics™, LaserPal™, HydroBeam™, Occulase MD™, Epic™, Deltalaser™, Delta™, Biolase DaVinci Imaging™, Oculase™, Practice Growth Guarantee™ and Practice Growth. Guaranteed™ are trademarks of BIOLASE, Inc.  All other product and company names are registered trademarks or trademarks of their respective owners.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in the information provided in the section entitled “Quantitative and Qualitative Disclosures about Market Risk” in the 2014 Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, our principal executive officer and principal financial officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective such that the information relating to the Company, including our consolidated subsidiaries, required to be disclosed in our SEC reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to the Company’s management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our most recently completed fiscal quarter. Based on that evaluation, our principal executive officer and principal financial officer concluded that there has not been any change in our internal control over financial reporting during the quarter 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

For a description of our legal proceedings, please refer to Part I, Item 1, Note 9 to the Notes to the Unaudited Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, which is incorporated herein by reference in response to this Item.

ITEM  1A. RISK FACTORS

There have been no material changes to the risk factors as disclosed in Part I, Item 1A “Risk Factors” in the 2014 Form 10-K.

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ITEM 6. EXHIBITS

			Incorporated by Reference
Exhibit	Description	Filed Herewith	Form	Period Ending/Date of Report	Exhibit	Filing Date
3.1.1	Restated Certificate of Incorporation, including, (i) Certificate of Designations, Preferences and Rights of 6% Redeemable Cumulative Convertible Preferred Stock of the Registrant; (ii) Certificate of Designations, Preferences and Rights of Series A 6% Redeemable Cumulative Convertible Preferred Stock of the Registrant; (iii) Certificate of Correction Filed to Correct a Certain Error in the Certificate of Designation of the Registrant; and (iv) Certificate of Designations of Series B Junior Participating Cumulative Preferred Stock of the Registrant.		S-1, Amendment No. 1		3.1	12/23/2005
3.1.2	Amendment to Restated Certificate of Incorporation, effective as of May 14, 2012		8-K	05/10/2012	3.1	05/16/2012
3.1.3	Second Amendment to Restated Certificate of Incorporation, effective as of October 30, 2014		8-A/A		3.1.3	11/04/2014
3.2.1	Sixth Amended and Restated Bylaws of Biolase, Inc., adopted on June 26, 2014		8-K	06/26/2014	3.1	06/30/2014
10.1	Inducement Restricted Stock Unit Award Agreement, dated July 14, 2015, by and between Harold C. Flynn, Jr. and Biolase, Inc.		8-K	07/12/2015	10.2	07/15/2015
10.2	Employment Agreement, dated as of May 14, 2015, by and between Harold C. Flynn, Jr. and Biolase, Inc.	X
10.3	Transition Letter Agreement, dated May 14, 2015, by and between Jeffrey M. Nugent and Biolase, Inc.	X
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended	X
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended	X
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	+
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	+
101	The following unaudited financial information from the Company’s Quarterly Report on Form 10-Q, for the period ended June 30, 2015, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations and Comprehensive Loss, (iii) Consolidated Statements of Cash Flows, (iv) Notes to Consolidated Financial Statements	X

*  Management compensatory plan or arrangement

+  Furnished herewith

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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.

Date: August 7, 2015

BIOLASE, INC.,
(Registrant)
By:	/s/ HAROLD C. FLYNN, JR.
	Harold C. Flynn, Jr.
	President and Chief Executive Officer
	(Principal Executive Officer)
By:	/s/ DAVID C. DREYER
	David C. Dreyer
	Senior Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

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EX-10.2

Exhibit 10.2

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT (the “Agreement”) made as of the 14th day of May, 2015 by and between Biolase, Inc. (the “Company”) and Harold C. Flynn, Jr. (“Executive”).

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

NOW, THEREFORE, the parties agree as follows:

PART ONE — TERMS AND CONDITIONS OF EMPLOYMENT

1. Duties and Responsibilities.

A. Executive shall serve as the President and 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 President and 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. Executive shall comply with all proper and reasonable directives and instructions of the Board or any committee of the Board.

B. Subject to the exceptions set forth in Section 6, Executive agrees to devote his full business time and attention to the Company, to use his best efforts to advance the business and welfare of the Company, to render his services under this Agreement fully, faithfully, diligently, competently and to the best of his ability, subject to the direction of the Board.

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.  During the Employment Period, 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.

2. Period of Employment. Executive’s employment with the Company shall be governed by the provisions of this Agreement and shall commence on or before July 13, 2015 (the “ Effective Date ”). Executive’s employment shall be “at will” and shall not be for a specified term and may be terminated by either the Company or Executive in accordance with the provisions of Section 7. The period during which Executive’s employment continues in effect shall be referenced as the “Employment Period.”

3. Base Salary.

A. Executive shall be paid a base salary at the annual rate of not less than FOUR HUNDRED AND TWENTY FIVE THOUSAND dollars ($425,000.00) per annum (hereinafter “Base Salary”) during the Employment Period.  Executive shall be eligible for an increase in Base Salary at the same time as increases are considered for other senior executives of the Company.  The Base Salary may be increased in the sole and absolute discretion of the Board but may not be decreased during the Employment Period. In the event of any increase as permitted by this Section 3.A., the Base Salary for all purposes under this Agreement shall be the increased amount in effect from time to time. Executive’s Base Salary shall be paid at periodic intervals in accordance with the Company’s payroll practices for salaried employees.

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

4. Performance Bonus; Stock Option Grant; Restricted Stock Unit Award.

A. For each full calendar year during the Employment Period, Executive shall be eligible to earn an annual performance bonus of up to sixty percent (60.0%) of Executive’s Base Salary (the “Performance Bonus”) based on achievement of Performance Bonus criteria as established by the Compensation Committee of the Board (the “Compensation Committee”) and communicated to Executive.  For the partial 2015 year, Executive shall be eligible for a Performance Bonus of up to $150,000.00, with a minimum non-discretionary Performance Bonus of $100,000.00.  Subject to Executive’s continuous employment with the Company through December 31 of the year in which the Performance Bonus is earned, the Performance Bonus shall be paid no later than March 15 of the year following the year for which it is earned.

B. The Company shall grant to Executive, effective as of the Effective Date, a nonqualified stock option to purchase 870,000 shares of the Company’s common stock at a per share exercise price equal to the fair market value (determined based on the closing selling price per share on the grant date, as such price is reported by the National Association of Securities Dealers on the Nasdaq Stock Market and published in The Wall Street Journal) of the Company’s common stock on the grant date and subject to the vesting criteria established by the Compensation Committee and provided to Executive.  The stock option shall be governed by a stock option agreement and shall also be subject to the terms and conditions of this Agreement.

C. The Company shall grant to Executive, effective as of the Effective Date, 870,000 stock-settled restricted stock units. Such restricted stock units shall vest in accordance with the vesting criteria established by the Compensation Committee and provided to Executive.  Such restricted stock units shall be governed by a restricted stock unit agreement and shall also be subject to the terms and conditions of this Agreement.

5. Fringe Benefits.

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

B. Executive shall be entitled to paid vacation time consistent with the applicable policies of Company as in effect from time to time, but in any event no less than four weeks of such vacation per year.

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

D. Executive and the Company shall enter into the Company’s standard Indemnification Agreement, which Indemnification Agreement shall be effective as of the Effective Date.

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6.Restrictive Covenants.

A. Service to the Company. During the Employment Period, Executive shall devote his full business time and attention to the performance of Executive’s duties, except during periods of illness or vacation periods. Executive may continue to serve during the Employment Period as a non-employee member of the board of directors of the companies for which he so serves on the Effective Date and may join the board of directors of other companies in the future with the Board’s prior written consent.  Executive shall have the right to perform such services as are necessary in connection with (i) Executive’s private investments and (ii) Executive’s charitable or community activities, or participation in trade or professional organizations, but only if such incidental services do not materially interfere with the performance of Executive’s services, or violate Section 6.B.

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

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

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

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

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

7. Termination of Employment.

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

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

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

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

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

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

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

(vi) Executive’s death.

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

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

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

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

(iii) a change in the geographic location of Executive’s regular office location as of the Effective Date that is greater than a fifty (50) mile radius from the Company’s headquarters; or

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

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

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

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

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

PART TWO — SEVERANCE BENEFITS

8. Benefit Entitlement.

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

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

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

(i) Twelve (12) months of Executive’s annual Base Salary in effect under Section 3.A as of the Effective Date of Termination, payable in twenty-six (26) equal installments, during the twelve (12) months commencing on the first payroll date that follows the sixty (60) day anniversary of the Effective Date of Termination, coinciding with the Company’s regular payroll cycle;

(ii) Subject to Executive’s timely election of COBRA continuation coverage, Company-paid COBRA premiums for Executive (and his eligible dependents) under the Company’s medical and dental benefit plans in which Executive participated in as of the Effective Date of Termination, for the twelve (12) month period following the Effective Date of Termination.

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

(i) Executive’s nonqualified stock option granted to Executive pursuant to Section 4.B. and any future stock options granted to Executive, shall become fully vested and exercisable on the first business day that is at least sixty (60) days after the Effective Date of Termination, and one-half of Executive’s non-vested and non-cancelled portions of the restricted stock unit award granted pursuant to Section 4.C. and any future restricted stock unit awards shall vest; and

(ii) Executive shall be paid the Performance Bonus in an amount equal to the target percentage of base salary then in effect, payable ninety (90) days following the Effective Date of Termination.

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

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

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

The accounting firm engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to the Executive and the Company within fifteen (15) calendar days after the date on which the Executive’s right to a Payment is triggered (if requested at that time by the Executive or the Company) or such other time as requested by the Executive or the Company.  Any good faith determinations of the accounting or law firm made hereunder shall be final, binding and conclusive upon the Executive and the Company.

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

F. This Agreement is intended to comply with the requirements of Section 409A of the Code, and shall be interpreted and construed consistently with such intent.  The payments to Executive pursuant to this Agreement are also intended to be exempt from Section 409A of the Code to the maximum extent possible, under either the separation pay exemption pursuant to Treasury regulation §1.409A-1(b)(9)(iii) or as short-term deferrals pursuant to Treasury regulation §1.409A-1(b)(4), and for such purposes, each payment to Executive under this Agreement shall be considered a separate payment.    In the event the terms of this Agreement would subject Executive to taxes or penalties under Section 409A of the Code (“409A Penalties”), the Company and Executive shall cooperate diligently to amend the terms of the Agreement to avoid such 409A Penalties, to the extent possible; provided that in no event shall the Company be responsible for any 409A Penalties that arise in connection with any amounts payable under this Agreement.  Notwithstanding any other provision in this Agreement, to the extent any  payments hereunder constitutes nonqualified deferred compensation, within the meaning of Section 409A, then (A) each such payment which is conditioned upon Executive’s execution of a release and which is to be paid or provided during a designated period that begins in one taxable year and ends in a second taxable year, shall be paid or provided in the later of the two taxable years and (B) if the Executive is a specified employee (within the meaning of Section 409A of the Code) as of the date of Executive’s separation from service, each such payment that is payable upon the Executive’s separation from service and would have been paid prior to the six-month anniversary of  Executive’s separation from service, shall be delayed until the thirty (30) day period commencing on the earlier to occur of (i) the first day of the seventh month following the Executive’s separation from service or (ii) the date of Executive’s death.  

PART THREE — MISCELLANEOUS PROVISIONS

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

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

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11.Notices.

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

To the Company:

Biolase, Inc.

Attn: Chairman of the Board of Directors

4 Cromwell

Irvine, California 92618

To Executive:

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

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

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

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

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

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

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

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

[CONTINUED ON NEXT PAGE]

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

BIOLASE, INC.
By:	/s/ Paul Clark
Title:	Chairman
HAROLD C. FLYNN, JR.
/s/ Harold C. Flynn, Jr.

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EXHIBIT A TO

HAROLD C. FLYNN, JR. EMPLOYMENT AGREEMENT

DATED AS OF MAY 14, 2015

BIOLASE, INC.

PROPRIETARY INFORMATION AGREEMENT

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

1) Maintaining Confidential Information

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

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

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

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2) Retaining and Assigning Inventions and Original Works

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

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

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

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

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

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

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

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

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

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

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

5) General Provisions

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

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

c) Severability. If one or more of the provisions in this Agreement are deemed void by law, then the remaining provisions will continue in full force and effect.

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

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

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

Dated as of ______ ___, 2015

	Signature
	Name of Employee (typed or printed)
Witness

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EXHIBIT 1

TO PROPRIETARY INFORMATION AGREEMENT

CALIFORNIA LABOR CODE SECTION 2870

EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RIGHTS

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

1) Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual demonstrably anticipated research or development of the employee.

2) Result from any work performed by the employee for the employer.

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

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EXHIBIT 2

TO PROPRIETARY INFORMATION AGREEMENT

BIOLASE, INC.

TERMINATION CERTIFICATION

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

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

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

Date:

(Employee’s Signature) 

(Type/Print Employee’s Name) 

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EXHIBIT B TO

HAROLD C. FLYNN, JR. EMPLOYMENT AGREEMENT

DATED AS OF MAY 14, 2015

GENERAL RELEASE AND WAIVER OF CLAIMS

In consideration of the payments and other benefits set forth in the Employment Agreement dated May 14, 2015 (the “Agreement”), to which this form shall be deemed to be attached, Harold C. Flynn, Jr. (“Executive”) hereby agrees to the following general release and waiver of claims (“General Release”).

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

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

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

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

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Executive acknowledges that, among other rights, Executive is waiving and releasing any rights Executive may have under ADEA, that this General Release is knowing and voluntary, and that the consideration given for this General Release is in addition to anything of value to which Executive was already entitled as an executive of the Company. Executive further acknowledge that Executive has been advised, as required by the Older Workers Benefit Protection Act, that: (a) the General Release granted herein does not relate to claims under the ADEA which may arise after this General Release is executed; (b) Executive has the right to consult with an attorney prior to executing this General Release (although Executive may choose voluntarily not to do so); and (c) Executive has twenty-one (21) days from the date of termination of Executive’s employment with the Company in which to consider this General Release (although Executive may choose voluntarily to execute this General Release earlier, in which case he voluntarily waives the remainder of the twenty-one (21) day period); (d) Executive has seven (7) days following the execution of this General Release to revoke his consent to this General Release; and (e) this General Release shall not be effective until the seven (7) day revocation period has expired.

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

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

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

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

The parties agree that this General Release does not in any way compromise or lessen Executive’s rights to be indemnified by the Company pursuant to that certain Indemnification Agreement dated ___________ __, 2015, 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.

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

BIOLASE, INC.

By:

Title:

Dated: 

Dated: 

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EX-10.3

Exhibit 10.3

Biolase, Inc.

4 Cromwell

Irvine, California 92618

May 14, 2015

Jeffrey M. Nugent

c/o Biolase, Inc.

4 Cromwell

Irvine, California  92618

Re: Transition Arrangement

Dear Jeff:

The purpose of this letter is to confirm the circumstances of your employment as President and Chief Executive Office of Biolase, Inc. (the “Company”), as we have discussed recently.  Our intent is to facilitate the Company’s transition to a new President and Chief Executive Officer and to provide you with a monetary payment (the “Transition Payment”), in exchange for your efforts to stabilize the Company’s Waterlase product line sales and improve overall product quality, as well as for your help and assistance in this transition.

We plan to continue your employment as President and Chief Executive Officer at your current base salary and benefits, through and including the day before the start date of the new President and Chief Executive Officer (the “Final Transition Date”), which is expected to be on or before July 13, 2015. During that period of time, we expect that you will devote your full business time and best efforts to the Company, although you may be transitioning your duties and responsibilities to others, as advised by the Chairman of the Board of Directors.  Although our plan is to continue your employment through the Final Transition Date, your employment status until that time will remain “at will,” which means that either you or the Company may end your employment at any time for any reason.

Provided that you remain employed by the Company on the Final Transition Date, and you have performed your transitional duties to the Board’s reasonable satisfaction, and provided on the Final Transition Date you cease to act in any capacity (including as an officer or director) for the Company, the Company agrees to (i) provide you with a Transition Payment equal to $150,000.00, payable in six (6) equal consecutive monthly installments in accordance with the Company’s normal payroll cycle and less all normal payroll deductions, (ii) continue the time-based vesting of your stock option grant and the time-based vesting of your restricted stock unit award, with such awards to become exercisable or settled, as applicable, in accordance with the original vesting dates set forth in the underlying award agreements, (iii) extend the period to exercise your vested stock options until the expiration date of such options, and (iv) subject to your timely election of COBRA continuation coverage, reimburse you for COBRA premiums for you (and your eligible dependents) under the Company’s medical and dental benefit plans in which you participated in as of the Final Transition Date, for up to the full the eighteen (18) month period following the Final Transition Date.  The foregoing benefits shall be subject to your execution and non-revocation of the attached Separation Agreement with Release of All Claims within the time-period specified in such agreement.  

If your employment ends for any reason before the Final Transition Date (unless by mutual agreement between you and the Company), you will not be eligible for the Transition Payment or the other benefits described in this letter.  

Please sign below to indicate your acceptance of this agreement.

We thank you, Jeff, for your hard work, dedication, and contribution to the Company, and we look forward to a mutually beneficial transition.

Very truly yours,

/s/ Paul N. Clark

Paul N. Clark

Chairman

ACCEPTED AND AGREED:

/s/ Jeffrey M. Nugent	Dated: May 14, 2015
Jeffrey M. Nugent

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EXHIBIT A

SEPARATION AGREEMENT WITH GENERAL RELEASE OF ALL CLAIMS

This Separation Agreement With General Release of All Claims (“Agreement”) is entered into by and between Jeffrey M. Nugent (“Mr. Nugent”), and Biolase, Inc., a Delaware corporation (the “Company”), and is intended by the parties hereto to settle fully and finally any claims that Mr. Nugent may have against the Company and all obligations of the Company to Mr. Nugent, except as set forth in and incorporated into this Agreement.

a. Employment Separation.  Mr. Nugent’s employment with the Company ended effective July ___, 2015 (the “Separation Date”).  From and after the Separation Date, Mr. Nugent shall no longer be employed by, or act in any capacity (including as a director) for, the Company, and Mr. Nugent’s membership on all Company boards and committees ceased as of the Separation Date.

b. Termination Pay.  Mr. Nugent acknowledges that he has been paid his base salary and accrued but unused vacation through the Separation Date  (“Termination Pay”).  Mr. Nugent shall submit expense reimbursement requests with suitable documentation within thirty (30) days following the Separation Date, and the Company shall promptly process such requests in accordance with its expense reimbursement policies.

c. Payments; Extension of Vesting and Exercise Periods; COBRA Premiums.  In  consideration for the promises contained herein and subject to Mr. Nugent’s continued compliance with the terms and conditions of this Agreement and his execution and non-revocation of this Agreement within the timeframe specified herein, Mr. Nugent shall receive the following benefits:  

i. Compensation equal to $150,000.00, less all applicable withholding and deductions. The foregoing compensation shall be payable in equal monthly installments commencing on the first day of the month following the non-revocation and expiration of the seven (7) day revocation period identified below, and ending on the five (5) month anniversary of such date, and shall be paid in accordance with the Company’s standard payroll practices and procedures.

ii. The period to exercise Mr. Nugent’s vested stock options shall be extended until the expiration date of such options (as specified in the underlying award agreement), and Mr. Nugent’s outstanding time-based stock option  and restricted stock unit awards shall continue to become vested, or settled, as applicable, in accordance with the original vesting dates set forth in the underlying award agreements.

iii. Subject to Mr. Nugent’s timely election of COBRA continuation coverage, the Company shall pay COBRA premiums for Mr. Nugent (and his eligible dependents) under the Company’s medical and dental benefit plans in which Mr. Nugent participated in as of the Separation Date, for the eighteen (18) month period following the Separation Date.

d. Vested Retirement Benefits.  Nothing in this Agreement shall limit, expand upon, or alter in any way any vested retirement benefits that Mr. Nugent has or is entitled to receive under any Company sponsored 401(k) or other retirement plan to which Mr. Nugent may have been entitled to participate by virtue of his employment.  Mr. Nugent’s rights and obligations shall continue to be governed by the terms of such plans, as they presently exist or as they may permissibly be amended, and shall be based upon his Separation Date.

e. No Other Payments.  Other than whatever is specifically provided for in this Agreement, Mr. Nugent acknowledges that there are no other sums or benefits of any nature whatsoever due and owing to him, other than whatever ongoing or future payments are provided for in this Agreement.  In consideration for this Agreement, Mr. Nugent specifically waives any claim that he may have to any past, present, or future compensation of any nature whatsoever arising out of his prior employment with the Company.

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f. Confirmation Of Payment Of Wages.   Mr. Nugent acknowledges that he has been paid all wages due and owing to him from the Company, including all minimum wages, overtime compensation, commissions, bonuses, waiting-time penalties, and liquidated damages.  Accordingly, Mr. Nugent understands that the release provisions below release and discharge the Company from any and all claims that he may have against the Company for unpaid wages and other compensation including, but not limited to, any claims for unpaid wages, salary, bonuses, commissions, stock, stock options, vacation pay, holiday pay, sick or disability pay, fringe benefits, expense reimbursements, severance pay, or any other form of compensation.

g. Biolase Proprietary Information. As a material inducement to Biolase to enter into this Agreement, Mr. Nugent covenants and represents that (i) he has complied with the terms and conditions of the Biolase Proprietary Information Agreement at all times during his employment with Biolase; and (ii) he will continue to comply with such terms for the periods specified therein.  The terms of the Biolase Proprietary Agreement are incorporated into this Agreement by reference and made a part hereof.

h. Continuing Obligations of Mr. Nugent.   To the extent that Mr. Nugent has come into contact with confidential or trade secret information concerning the Company and its operations or concerning the Company’s customers, prospective customers, or projects, Mr. Nugent will continue to protect the confidentiality of such information.  In addition, Mr. Nugent represents and warrants that, he has returned to the Company and has not copied or duplicated in any manner whatsoever, all tangible and intangible property (including, without limitation, all computer hardware, whether portable or stationary, and software), books, records, documents and reports owned by, or pertaining to the business of, the Company or any of the Company’s existing or prospective clients that was in Mr. Nugent’s possession or under Mr. Nugent’s direct or indirect control as of the Separation Date.  If Mr. Nugent shall come into possession of any property (tangible or intangible), books, records, documents or reports of the type described above after the Separation Date, Mr. Nugent will promptly return them to the Company.

i. Complete Release.  Mr. Nugent, on behalf of himself, his heirs and assigns, fully and forever releases and discharges the Company and, as the case may be, each of its respective employees, shareholders, officers, directors, agents, attorneys, predecessors, successors, assigns, and affiliated corporations or organizations, whether previously or hereafter affiliated in any manner (collectively, the “Released Company Parties”), to the fullest extent permitted by law, from any and all claims, demands, causes of action, charges of discrimination, obligations, damages, attorneys’ fees, costs and liabilities of any nature whatsoever, including all claims of race, sex, national origin, religion, handicap and age discrimination under any federal or state statute, whether or not now known, suspected or claimed, which Mr. Nugent ever had, now has, or may claim to have as of the date of this Agreement against the Released Company Parties.  

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j. General Nature of Release.  The Release set forth above is a general release of all claims, demands, causes of action, obligations, damages, and liabilities of any nature whatsoever that are described in the Release and is intended to encompass all known and unknown, foreseen and unforeseen claims which Mr. Nugent may have against the Released Company Parties, except that Mr. Nugent does not release any claims that may not be released herein as a matter of law, including but not limited to claims for indemnity under Labor Code Section 2802, claims that may be adjudicated before the California Workers’ Compensation Appeals Board, claims for vested benefits or any claims for enforcement of any other provision of this Agreement.  This Release specifically includes, without limiting the generality of the foregoing, any claims against any Released Company Party occurring before the effective date of this Agreement and arising out of or related to alleged violations of any federal or state employment discrimination laws, including, but not limited to, the California Fair Employment and Housing Act; the Age Discrimination In Employment Act; the Older Workers Benefit Protection Act; Title VII of the Civil Rights Act of 1964; the Americans With Disabilities Act; the National Labor Relations Act; the Equal Pay Act; the Employee Retirement Income Security Act of 1974; as well as claims arising out of or related to violations of the provisions of the California Government Code; the California Business & Professions Code, including Business & Professions Code Section 17200 et seq.; state and federal wage and hour laws; breach of contract; fraud; misrepresentation; common counts; unfair competition; unfair business practices; negligence; defamation; infliction of emotional distress; invasion of privacy; assault; battery; false imprisonment; wrongful termination; and any other state or federal law, rule, or regulation.  Mr. Nugent acknowledges that his separation and the consideration offered hereunder were based on an individual determination and were not offered in conjunction with any group termination or group severance program and waives any claim to the contrary, and further acknowledges that he does not presently believe he has suffered any work-related injury or illness.  

k. Release of Unknown Claims.  It is the intention of Mr. Nugent to release both known and unknown claims of any nature whatsoever.  This includes, without limitation, claims, which Mr. Nugent does not know or suspect to exist in his favor at the time of executing this release, even though such claims, if known by him would have materially affected his settlement with the Company.  Accordingly, Mr. Nugent expressly waives all rights under Section 1542 of the Civil Code of the State of California, which reads as follows:

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

l. Non-Disparagement; Neutral Reference.  Mr. Nugent agrees during the term of this Agreement and for a period of ten (10) years thereafter, he shall not, in any communication with any person or entity, including any actual or potential customer, client, investor, vendor, or business partner of the Company, or any third party media outlet, make any derogatory or disparaging or critical negative statements – orally, written or otherwise – against the Company, or any of its directors, officers, agents, employees, contractors, or affiliated persons or entities.  Mr. Nugent also agrees that unless compelled by valid legal process he will not give or offer to provide any statements, testimony or the like in connection with any claim, action, or demand (being contemplated or) brought against the Company which concerns the Company, his employment or the cessation of his employment with the Company, the Company’s business practices, its customers and/or prospective customers, its products, and/or any other aspect of the Company’s business, its directors, officers, agents, employees, contractors, or affiliated persons or entities.  Further, Mr. Nugent agrees that if he agrees that should he be called as a witness or to provide testimony in any case, action, and/or proceeding concerning the Company, he and/or his counsel will contact either the President and Chief Executive Officer or the Secretary of the Company immediately, but in no event later than ten (10) days before he is to be deposed or to testify as a witness, so that the Company can take whatever precautionary measures it deems necessary to protect from disclosure any of its proprietary and/or confidential information and/or documents.

m. No Other Actions.  Mr. Nugent represents and covenants that he has not filed or lodged any complaints or charges against any of the Released Company Parties with any local, state, or federal agency or court.  

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n. Risk of Different Facts.  The parties to this Agreement acknowledge that they may hereafter discover facts different from or in addition to those they now know or believe to be true, and they expressly agree to assume the risk of the possible discovery of additional or different facts, and agree that this Agreement shall be and remain effective in all respects regardless of such additional or different facts.

o. No Future Actions.  Mr. Nugent covenants and agrees never to commence, aid in any way, prosecute or cause to be commenced or prosecuted any action or other proceeding based upon any claims, demands, causes of action, obligations, damages or liabilities which are the subject of this Agreement; provided however, that Mr. Nugent does not relinquish any protected rights he may have to file a charge, testify, assist or participate in any manner in an investigation, hearing or proceeding conducted by the Equal Employment Opportunity Commission, the Office of Federal Contract Compliance, or any similar state human rights agency.  However, Mr. Nugent may not recover additional compensation or damages as a result of such participation.

p. Twenty-One Day Consideration Period.  This Agreement was originally given to Mr. Nugent on the Separation Date.  Mr. Nugent shall have twenty-one (21) days to consider this Agreement; provided however, that if Mr. Nugent chooses to sign this Agreement before the end of this twenty-one (21)-day period, Mr. Nugent acknowledges that he does so knowingly and voluntarily and waives any claim that to the effect that he was not given the full twenty-one (21) days to consider whether to sign this Agreement or did not use the entire period of time available to consider this Agreement or to consult with an attorney.

q. Seven Day Revocation Period.  Following execution of this Agreement, Mr. Nugent shall have seven (7) days to revoke this Agreement.  To be effective, the revocation must be in writing and signed by Mr. Nugent and must be delivered to and received by the Company, before 5 p.m. of the 7th day.  This Agreement shall become effective on the eighth (8th) day following the execution of this Agreement.  Any revocation shall be in writing and shall be effective upon timely receipt by the Company by: Corporate Secretary, Biolase, Inc., 4 Cromwell, Irvine, California, 92618.

r. Non-Assignment of Claim.  Mr. Nugent warrants that he has made no assignment and will make no assignment of any claim, chose in action, right of action, or any right of any kind whatsoever, embodied in this Agreement and referred to herein, and that no other person or entity of any kind (other than as expressly mentioned above) had or has any interest in any of the demands, obligations, actions, causes of action, debts, liabilities, rights, contracts, damages, attorneys’ fees, costs, expenses, losses or claims referred to herein.

s. Successors and Assigns.  This Agreement, and all the terms and provisions hereof, shall be binding upon and shall inure to the benefit of the parties and their respective heirs, legal representatives, successors and assigns.

t. Assistance of Counsel.  Mr. Nugent acknowledges that he has been advised to consult with counsel of his choosing before entering into this Agreement.  The parties specifically represent that they either have consulted to their satisfaction with their attorneys, or have elected on their own accord not to seek legal counsel, prior to executing this Agreement concerning the terms and conditions of this Agreement.

u. Interpretation.  Should any portion, word, clause, phrase, sentence or paragraph of this Agreement be declared void or unenforceable, such portion shall be considered independent and severable from the remainder, the validity of which shall remain unaffected.  Whenever required by the context, as used in this Agreement the singular number shall include the plural, and the masculine gender shall include the feminine and neuter.

v. Entire Agreement.  This Agreement constitutes the entire agreement between the parties who have executed it and supersedes any and all other agreements, understandings, negotiations, or discussions, either oral or in writing, express or implied, between the parties to this Agreement.  The parties hereto acknowledge that no representations, inducements, promises, agreements, or warranties, oral or otherwise, have been made by them, or anyone acting on their behalf, which are not embodied in this Agreement, that they have not executed this Agreement in reliance on any such representations, inducements, promise, agreement or warranty, and that no representation, inducement, promise, agreement or warranty not contained in this Agreement, including, but not limited to, any purported supplements, modifications, waivers or terminations of this Agreement shall be valid or binding, unless executed in writing by all of the parties to this Agreement.

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w. Governing Law.  This Agreement shall be enforced and governed under the laws of the State of California without reference to its choice of law provisions.

x. Knowing and Voluntary Agreement.  This Agreement in all respects has been voluntarily and knowingly executed by the parties hereto.

y. Counterparts.  This Agreement may be executed in counterparts, and when each party has signed and delivered at least one such counterpart, each counterpart shall be deemed an original, and, when taken together with other signed counterparts, shall constitute one agreement, which shall be binding upon and effective as to all parties.

z. No Waiver.  Failure to insist on compliance of any term, covenant or condition contained in this Agreement shall not be deemed a waiver of that term, covenant, or condition, nor shall any waiver or relinquishment of any right or power contained in this Agreement at any one time or more times be deemed a waiver or relinquishment of any right or power at any other time or times.

aa. Arbitration.  Any disputes concerning this Agreement or otherwise arising out of this Agreement or Mr. Nugent’s employment or termination that the parties are unable to resolve among them shall be submitted to final and binding arbitration in Orange County, California at and under the rules of the Judicial Arbitration and Mediation Service (“JAMS”); provided that nothing in this provision shall prevent the Company from seeking injunctive relief in any Court of competent jurisdiction.

bb. Section 409A.  The payments to Mr. Nugent pursuant to this Agreement are intended to be exempt from Section 409A of the Internal Revenue Code of 1986, as amended, to the maximum extent possible, under either the separation pay exemption pursuant to Treasury regulation §1.409A-1(b)(9)(iii) or as short-term deferrals pursuant to Treasury regulation §1.409A-1(b)(4), and for such purposes, each installment paid to Mr. Nugent under this Agreement shall be considered a separate payment. In the event the terms of this Agreement would subject Mr. Nugent to taxes or penalties under Section 409A of the Code (“409A Penalties”), the Company and Mr. Nugent shall cooperate diligently to amend the terms of the Agreement to avoid such 409A Penalties, to the extent possible; provided that in no event shall the Company be responsible for any 409A Penalties that arise in connection with any amounts payable under this Agreement.

IN WITNESS WHEREOF, the undersigned have executed this Separation Agreement and General Release of All Claims on the date(s) set forth hereinafter.

Dated: , 2015	By:
		JEFFREY M. NUGENT
	BIOLASE, INC.
Dated: , 2015	By:
		Paul N. Clark
		Chairman

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EX-31.1

Exhibit 31.1

CERTIFICATION

I, Harold C. Flynn, Jr., certify that:

1. I have reviewed this quarterly report on Form 10-Q for the period ended June 30, 2015 of BIOLASE, 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 financial statements, and other financial information included in this report, fairly present in all material respects the 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; and

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; and

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.

Date: August 7, 2015	By:	/s/ HAROLD C. FLYNN, JR.
		Harold C. Flynn, Jr.
		President and Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, David C. Dreyer, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the period ended June 30, 2015 of BIOLASE, 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 financial statements, and other financial information included in this report, fairly present in all material respects the 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; and

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; and

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.

Date: August 7, 2015	By:	/s/ DAVID C. DREYER
		David C. Dreyer
		Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. § 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of BIOLASE, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2015 (the “Report”), I, Harold C. Flynn, Jr., President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(i) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 7, 2015	/s/ HAROLD C. FLYNN, JR.
	Harold C. Flynn, Jr.
	President and Chief Executive Officer (Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. § 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of BIOLASE, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2015 (the “Report”), I, David C. Dreyer, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(i) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 7, 2015	/s/ DAVID C. DREYER
	David C. Dreyer
	Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

XML

Intangible Assets and Goodwill - Additional Information (Detail) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Goodwill And Intangible Assets Disclosure [Abstract]
Intangible assets and goodwill impairment			$ 0
Amortization expense	$ 17,000	$ 17,000	$ 35,000	$ 35,000

XML

Summary of Net Revenue by Geographic Location (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Segment Reporting Information [Line Items]
Net revenue	$ 11,869	$ 10,186	$ 22,724	$ 21,704
UNITED STATES
Segment Reporting Information [Line Items]
Net revenue	7,386	6,328	13,316	13,037
International
Segment Reporting Information [Line Items]
Net revenue	$ 4,483	$ 3,858	$ 9,408	$ 8,667

XML

Commitments and Contingencies - Additional Information (Detail)	1 Months Ended	3 Months Ended	6 Months Ended
	Feb. 28, 2015	Jun. 30, 2014 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2015 EUR (€)	Apr. 29, 2014 USD ($)	Apr. 29, 2014 EUR (€)
Commitment And Contingencies [Line Items]
Capital lease agreement term for information technology equipment	30 months
Future minimum lease payments under capital lease, net minimum lease payment for the year ended December 31, 2015			$ 86,000
Future minimum lease payments under capital lease, net minimum lease payment for the year ended December 31, 2016			171,000
Future minimum lease payments under capital lease, net minimum lease payment for the year ended December 31, 2017			$ 159,000
Future minimum lease payments borrowing rate			4.29%
Present Value Of Net Minimum Lease Payments At Inception Of Lease			$ 23,000
Capital Lease Obligations, Current			157,000
Capital lease obligation			$ 238,000
Extended lease term			Apr. 30, 2020
Provisions for tenant improvement allowance, maximum			$ 398,000
Future minimum lease obligations, for the year ended December 31, 2015			354,000
Future minimum lease obligations, for the year ended December 31, 2016			694,000
Future minimum lease obligations, for the year ended December 31, 2017			652,000
Future minimum lease obligations, for the year ended December 31, 2018 and thereafter			1,500,000
Purchase commitments pending			12,600,000
Litigation Settlement Amount Receivable Non-Current			825,000
Receivable For Legal Settlements On First Anniversary			275,000
Receivable For Legal Settlements On Second Anniversary			275,000
Receivable For Legal Settlements On Third Anniversary			275,000
Litigation Settlement Amount Receivable Current			550,000
Litigation Settlement Receivable			1,400,000
Litigation Expense Recovered		$ 0	731,000
Settlement Expense For Dismissal of Patent Infringement Lawsuit Recovered			68,000
Legal settlement at present value			$ 1,200,000
Foregoing litigation settlement, description			As part of the settlement, Fotona agreed to pay the Company a total of $1.4 million, with $550,000 payable within 10 days of March 24, 2015 and the remaining, $825,000 payable in three increments of $275,000 each to be paid no later than the first, second, and third anniversary of the effective date of the agreement.
Surety Bond
Commitment And Contingencies [Line Items]
Amount of injunction bond to be posted | €						€ 500,000
Statutory Bond
Commitment And Contingencies [Line Items]
Amount of injunction bond to be posted | €				€ 146,000
Licensing Agreements United States
Commitment And Contingencies [Line Items]
License period			3 years
Licensing Agreements Outside of United States
Commitment And Contingencies [Line Items]
License period			5 years
Settled Litigation
Commitment And Contingencies [Line Items]
Deferred revenue					$ 379,000
Employee Arrangements and Other Compensation
Commitment And Contingencies [Line Items]
Change in control, if occurs, may require severance benefits payable			$ 1,100,000
Accrued for performance bonuses			$ 334,000

XML

Cash Proceeds Along with Fair Value Disclosures Related to Grants, Exercises, and Vested Options (Detail) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Proceeds from stock options exercised			$ 8	$ 44	$ 255
Tax benefit related to stock options exercised	[1]
Intrinsic value of stock options exercised	[2]		$ 12	$ 52	$ 95
Weighted-average fair value of options granted		$ 1.42	$ 1.32	$ 1.70	$ 1.73
Total fair value of shares vested during the period		$ 440	$ 302	$ 733	$ 648

[1] Excess tax benefits received related to stock option exercises are presented as financing cash inflows. The Company currently does not receive a tax benefit related to the exercise of stock options due to the Company’s 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.

XML

Segment Information (Tables)

6 Months Ended

Jun. 30, 2015

Segment Reporting [Abstract]

Summary of Net Revenue by Geographic Location

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
United States	$	7,386	$	6,328	$	13,316	$	13,037
International		4,483		3,858		9,408		8,667
	$	11,869	$	10,186	$	22,724	$	21,704

XML

Concentrations - Additional Information (Detail) - Customer	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Sales Revenue, Net
Concentration Risk [Line Items]
Number of customers which represented more than 10% of the Company's revenue	0	0	0	0
Account Receivable
Concentration Risk [Line Items]
Number of customers which represented more than 10% of the Company's accounts receivable			0		0

XML

Changes in Initial Product Warranty Accrual and Expenses Under Initial and Extended Warranties (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Movement in Standard Product Warranty Accrual
Initial warranty accrual, beginning balance	$ 1,667	$ 1,025	$ 1,449	$ 1,096
Provision for estimated warranty cost	545	461	996	609
Warranty expenditures	(215)	(231)	(448)	(450)
Initial warranty accrual, ending balance	1,997	1,255	1,997	1,255
Less warranty accrual, long-term	868	247	868	247	$ 519
Total warranty accrual, current portion	$ 1,129	$ 1,008	$ 1,129	$ 1,008	$ 930

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Summary of Property, Plant, and Equipment (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Property Plant And Equipment [Line Items]
Property, plant, and equipment gross, excluding land	$ 8,154	$ 6,788
Accumulated depreciation	(5,948)	(5,669)
Property, plant, and equipment net, excluding land	2,206	1,119
Land	160	176
Property, plant, and equipment, net	2,366	1,295
Building
Property Plant And Equipment [Line Items]
Property, plant and equipment, gross	206	226
Leasehold Improvements
Property Plant And Equipment [Line Items]
Property, plant and equipment, gross	1,201	1,197
Equipment and Computers
Property Plant And Equipment [Line Items]
Property, plant and equipment, gross	5,369	4,948
Furniture and Fixtures
Property Plant And Equipment [Line Items]
Property, plant and equipment, gross	425	413
Construction in Progress
Property Plant And Equipment [Line Items]
Property, plant and equipment, gross	$ 953	$ 4

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Subsequent Event - Additional Information (Detail) - shares		6 Months Ended
	Jul. 13, 2015	Jun. 30, 2015
Subsequent Event [Line Items]
Stock options granted		3,096,000
Subsequent Event | Restricted Stock Units (RSUs) | President and Chief Executive Officer
Subsequent Event [Line Items]
Number of shares awarded	870,000
Subsequent Event | Non Qualified Stock Options | President and Chief Executive Officer
Subsequent Event [Line Items]
Stock options granted	870,000

XML

Segment Information - Additional Information (Detail)	3 Months Ended		6 Months Ended
	Jun. 30, 2015 USD ($) Customer	Jun. 30, 2014 Customer	Jun. 30, 2015 USD ($) Customer	Jun. 30, 2014 Customer	Dec. 31, 2014 USD ($)
International
Segment Reporting Information [Line Items]
Long-lived assets outside of the United States | $	$ 338,000		$ 338,000		$ 374,000
Sales Revenue, Net
Segment Reporting Information [Line Items]
Number of customers which represented more than 10% of the Company's revenue	0	0	0	0
Sales Revenue, Net | International
Segment Reporting Information [Line Items]
Number of customers which represented more than 10% of the Company's revenue			0	0
Customer Concentration Risk | Sales Revenue, Net | UNITED STATES
Segment Reporting Information [Line Items]
Concentration Risk Percentage	62.00%	62.00%	59.00%	60.00%
Customer Concentration Risk | Sales Revenue, Net | International
Segment Reporting Information [Line Items]
Concentration Risk Percentage	38.00%	38.00%	41.00%	40.00%

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Inventory

6 Months Ended

Jun. 30, 2015

Inventory Disclosure [Abstract]

Inventory

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):

	June 30,		December 31,
	2015		2014
Raw materials	$	3,564	$	2,857
Work-in-process		1,529		1,348
Finished goods		8,587		8,303
Inventory, net	$	13,680	$	12,508

Inventory is net of a provision for excess and obsolete inventory totaling $1.9 million and $2.4 million as of June 30, 2015 and December 31, 2014, respectively.

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Accrued Liabilities and Deferred Revenue - Additional Information (Detail) - USD ($)	6 Months Ended		12 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2013
Payables And Accruals [Abstract]
WaterLase systems warranty period		2 years	1 year
Deferred revenue recognized	$ 94,000

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Stock-Based Awards and Per Share Information - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands				1 Months Ended		3 Months Ended		6 Months Ended
	Jul. 13, 2015	Mar. 09, 2015	Nov. 07, 2014	Jun. 30, 2015	Feb. 28, 2014	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Dec. 31, 2014
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock issued pursuant to options exercised								38,000
Compensation cost related to stock options						$ 935	$ 276	$ 1,635	$ 586
Net impact of share based compensation expense to earnings per basic share						$ (0.02)	$ (0.01)	$ (0.03)	$ (0.02)
Net impact of share based compensation expense to earnings per diluted share						$ (0.02)	$ (0.01)	$ (0.03)	$ (0.02)
Total unrecognized compensation cost				$ 4,500		$ 4,500		$ 4,500
Unrecognized share based compensation cost to be recognized over weighted-average period						2 years 10 months 24 days
Granted								3,096,000
Expected term						5 years 6 months	4 years 2 months 12 days	5 years 10 months 24 days	3 years 9 months 18 days
Volatility						87.70%	96.50%	91.01%	97.91%
Risk-free interest rate						1.54%	1.69%	1.65%	1.66%
Outstanding stock options and warrants excluded from diluted loss per share						16,251,000	4,942,000	16,251,000	4,942,000
Annual Stock Dividend Payable Rate					0.50%
Dividends Payable, Date of Record					Mar. 14, 2014
Percentage of stock dividend declared								0.00%
Private Placement
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Outstanding warrants included in connection with November 2014			9,206,000
CFO Grant Award Tranche One
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Granted		523,026
Share based compensation arrangement by share Based payment award fair value price		$ 1.48
Expected term		6 years 1 month 6 days
Volatility		88.79%
Risk-free interest rate		1.83%
CFO Grant Award Tranche Two
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Granted		348,684
Share based compensation arrangement by share Based payment award fair value price		$ 1.70
Expected term		10 years
Volatility		87.87%
Risk-free interest rate		2.19%
Warrants
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock units outstanding				888,000		888,000		888,000		888,000
Warrants exercised						0	0	0	0
Subsequent Event
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares vested and exercised consecutive term	36 months
Shares vested and exercisable date	Jul. 13, 2016
Restricted Stock Units (RSUs)
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Restricted stock units outstanding				37,000		37,000		37,000
Restricted Stock Units (RSUs) | Subsequent Event | President and Chief Executive Officer
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of shares awarded	870,000
Non Qualified Stock Options | Chief Financial Officer
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Granted		871,710
Exercise Price of Stock Options		$ 1.99
Options expiration period		10 years
Non Qualified Stock Options | Subsequent Event | President and Chief Executive Officer
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Granted	870,000
Exercise Price of Stock Options	$ 1.65
Options expiration period	10 years
Options vesting period	4 years
One Year Anniversary | CFO Grant Award Tranche One
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Option shares vested and exercised		130,757
Shares vested and exercised consecutive term		35 months
Shares vested and exercisable date		Mar. 09, 2016
One Year Anniversary | Subsequent Event
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Option shares vested and exercised	217,500
One Month Anniversary | CFO Grant Award Tranche One
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Option shares vested and exercised		10,896
One Month Anniversary | Subsequent Event
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Option shares vested and exercised	18,125
Thirty Six Month Anniversary | CFO Grant Award Tranche One
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Option shares vested and exercised		10,909
Shares vested and exercisable date		Mar. 09, 2019
Ten Year Anniversary | CFO Grant Award Tranche Two
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Option shares vested and exercised		248,684
Shares vested and exercisable date		Mar. 09, 2025		Jun. 23, 2015
Share-based Compensation Arrangement by Share-based Payment Award, Accelerated Vesting, Number				100,000
2002 Stock Incentive Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Plan expiration date								May 05, 2019
Common stock authorized for issuance under the 2002 Plan				11,550,000		11,550,000		11,550,000
Common stock issued pursuant to options exercised								3,031,000
Options and restricted stock units outstanding				6,157,000		6,157,000		6,157,000
Options available for future grants				2,362,000		2,362,000		2,362,000

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Summary of Significant Accounting Policies - Additional Information (Detail) - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Accounting Policies [Abstract]
Restricted cash equivalent	$ 200,000	$ 0

XML

Components of Current Portion of Deferred Revenue (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Current portion of deferred revenue
Undelivered elements (training, installation, and product and support services)	$ 1,636	$ 952
Extended warranty contracts	1,414	1,542
Deferred revenue, current portion	$ 3,050	$ 2,494

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Classification of Compensation Expense Associated with Share-Based Payments (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Allocated Share-based Compensation Expense	$ 935	$ 276	$ 1,635	$ 586
Cost Of Revenue
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Allocated Share-based Compensation Expense	62	41	138	87
Sales and Marketing
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Allocated Share-based Compensation Expense	194	112	487	237
General and Administrative Expense
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Allocated Share-based Compensation Expense	612	101	848	216
Engineering And Development
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Allocated Share-based Compensation Expense	$ 67	$ 22	$ 162	$ 46

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Assumptions Used in Estimating Fair Value of Stock Options Granted (Detail)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Share Based Compensation Arrangement By Share Based Payment Award Fair Value Assumptions And Methodology [Abstract]
Expected term	5 years 6 months	4 years 2 months 12 days	5 years 10 months 24 days	3 years 9 months 18 days
Volatility	87.70%	96.50%	91.01%	97.91%
Risk-free interest rate	1.54%	1.69%	1.65%	1.66%

XML

Stock-Based Awards and Per Share Information

6 Months Ended

Jun. 30, 2015

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Awards and Per Share Information

NOTE 3—STOCK-BASED AWARDS AND PER SHARE INFORMATION

Stock-Based Compensation

The Company currently has one stock-based compensation plan, the 2002 Stock Incentive Plan (as amended effective as of May 26, 2004, November 15, 2005, May 16, 2007, May 5, 2011, June 6, 2013, October 30, 2014 and April 27, 2015) (the “2002 Plan”), which will expire on May 5, 2019. Persons eligible to receive awards under the 2002 Plan include officers, employees, and directors of the Company, as well as its consultants. As of June 30, 2015, a total of 11,550,000 shares have been authorized for issuance under the 2002 Plan, of which 3,031,000 shares of Biolase common stock have been issued pursuant to options that were exercised, 6,157,000 shares of Biolase common stock have been reserved for options and restricted stock units that are outstanding, and 2,362,000 shares of Biolase common stock remain available for future grants.

Stock-based compensation cost recognized in operating results totaled approximately $935,000 and $276,000 for the three months ended June 30, 2015 and 2014, respectively, and $1.6 million and $586,000 for the six months ended June 30, 2015 and 2014, respectively. The net impact to earnings were $(0.02) and $(0.01) per basic and diluted share for the three months ended June 30, 2015 and 2014, respectively, and $(0.03) and $(0.02) per basic and diluted share for the six months ended June 30, 2015 and 2014, respectively. At June 30, 2015, the Company had approximately $4.5 million of total unrecognized compensation cost, net of estimated forfeitures, related to unvested share-based compensation arrangements. The Company expects that cost to be recognized over a weighted-average period of 2.9 years.

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Cost of revenue	$	62	$	41	$	138	$	87
Sales and marketing		194		112		487		237
General and administrative		612		101		848		216
Engineering and development		67		22		162		46
	$	935	$	276	$	1,635	$	586

The stock option fair values, under the 2002 Plan, were estimated using the Black-Scholes option-pricing model with the following assumptions:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Expected term	5.5 years		4.2 years		5.9 years		3.8 years
Volatility	87.70%		96.50%		91.01%		97.91%
Annual dividend per share	$	—	$	—	$	—	$	—
Risk-free interest rate	1.54%		1.69%		1.65%		1.66%

A summary of option activity under the 2002 Plan for the six months ended June 30, 2015 is as follows:

						Weighted Average
				Weighted		Remaining		Aggregate
				Average		Contractual		Intrinsic
	Shares			Exercise Price		Term (Years)		Value(1)
Options outstanding at December 31, 2014		3,391,000		$	3.11		2.97	$	1,063,000
Granted		3,096,000		$	2.35
Exercised		(38,000	)	$	1.15
Forfeited, cancelled, or expired		(329,000	)	$	3.16
Options outstanding at June 30, 2015		6,120,000		$	2.74		5.95	$	113,000
Options exercisable at June 30, 2015		2,862,000		$	3.05		2.64	$	94,000
Vested options expired during the quarter    ended June 30, 2015		113,000		$	3.09

(1) The intrinsic value calculation does not include negative values. This can occur when the fair market value on the reporting date is less than the exercise price of the grant.

Cash proceeds along with fair value disclosures related to grants, exercises, and vested options under the 2002 Plan are provided in the following table (in thousands, except per share amounts):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Proceeds from stock options exercised	$	—	$	8	$	44	$	255
Tax benefit related to stock options    exercised (1)	N/A		N/A		N/A		N/A
Intrinsic value of stock options exercised (2)	$	—	$	12	$	52	$	95
Weighted-average fair value of options granted    during period	$	1.42	$	1.32	$	1.70	$	1.73
Total fair value of shares vested during    the period	$	440	$	302	$	733	$	648

(1) Excess tax benefits received related to stock option exercises are presented as financing cash inflows. The Company currently does not receive a tax benefit related to the exercise of stock options due to the Company’s 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.

Restricted Stock Units

The Company issues restricted stock units (“RSUs”) to acquire shares of Biolase common stock as approved by Biolase’s board of directors (the “Board”). For the three and six months ended June 30, 2015 and 2014, the Board did not grant any RSUs. As of June 30, 2015, 37,000 shares of Biolase common stock have been reserved for RSUs that are outstanding.

Effective July 13, 2015, the Compensation Committee of the Board awarded 870,000 stock-settled restricted stock units of Biolase common stock to its President and Chief Executive Officer in connection with his employment agreement with the Company.

Warrants

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

A summary of warrant activity for the six months ended June 30, 2015 is as follows:

			Weighted
			Average
	Shares		Exercise Price
Warrants outstanding at December 31, 2014		888,000	$	6.04
Granted		—
Exercised		—
Forfeited, cancelled, or expired		—
Warrants outstanding at June 30, 2015		888,000	$	6.04
Warrants exercisable at June 30, 2015		753,000	$	6.40
Vested warrants expired during the quarter    ended June 30, 2015		—	N/A

No warrants were exercised during the three and six months ended June 30, 2015 and 2014.

Other Stock-Based Awards

Effective March 9, 2015, the Compensation Committee of the Board granted non-qualified stock options to purchase up to 871,710 shares of Biolase common stock to its Chief Financial Officer in connection with his employment agreement with Biolase. These options were granted at an exercise price of $1.99 per share, the closing price of Biolase common stock on the grant date. These options expire ten years from the grant date and vest in two tranches as follows: (i) as to options to purchase 523,026 shares (the “First Tranche”), options to purchase 130,757 shares vest and become exercisable on March 9, 2016, and options to purchase 10,896 shares vest and become exercisable each month following March 9, 2016 for a period of 35 consecutive months, and options to purchase 10,909 shares vest and become exercisable on March 9, 2019, and (ii) as to options to purchase 348,684 shares (the “Second Tranche”), 248,684 of such shares vest and become exercisable on March 9, 2025.In June 2015, the Compensation Committee accelerated the vesting of 100,000 of the Second Tranche options that had previously been scheduled to vest on March 9, 2025, such that such options vested and became exercisable as of June 23, 2015. The fair value of the First Tranche of $1.48 per share was estimated using the Black-Scholes option-pricing model with assumptions of 6.1 years for expected term, 88.79% volatility and 1.83% risk-free interest rate. The fair value of the Second Tranche of $1.70 per share was estimated using the Black-Scholes option-pricing model with assumptions of 10.0 years for expected term, 87.87% volatility and 2.19% risk-free interest rate.

Effective July 13, 2015, the Compensation Committee of the Board granted non-qualified stock options to purchase up to 870,000 shares of Biolase common stock to its President and Chief Executive Officer in connection with his employment agreement with Biolase. These options were granted at an exercise price of $1.65 per share, the closing price of Biolase common stock on the grant date. These options expire ten years from the grant date and vest over four years, with options to purchase 217,500 shares vesting and becoming exercisable on July 13, 2016 and options to purchase 18,125 shares vesting and becoming exercisable each month following July 13, 2016 for a period of 36 consecutive months.    

Net Loss Per Share – Basic and Diluted

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

Outstanding stock options and warrants to purchase 16,251,000 shares (including 9,206,000 shares underlying warrants issued in connection with the private placement completed by the Company on November 7, 2014) were not included in the computation of diluted loss per share for the three and six months ended June 30, 2015 as a result of their anti-dilutive effect. For the same 2014 period, anti-dilutive outstanding stock options and warrants to purchase 4,942,000 shares were not included in the computation of diluted loss per share.

Stock Dividend

In February 2014, the Board declared a one-half percent stock dividend payable March 28, 2014, to stockholders of record on March 14, 2014. During 2015, the Board has not declared any stock dividends. There is no assurance, with respect to the amount or frequency, that any stock dividend will be declared in the future.  

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Summary of Option Activity (Detail) - USD ($)		6 Months Ended	12 Months Ended
		Jun. 30, 2015	Dec. 31, 2014
Number of Shares
Beginning Balance		3,391,000
Granted		3,096,000
Exercised		(38,000)
Forfeited, cancelled, or expired		(329,000)
Ending Balance		6,120,000	3,391,000
Options exercisable, June 30, 2015		2,862,000
ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsExpirationsInPeriod		113,000
Weighted Average Exercise Price
Beginning Balance		$ 3.11
Granted		2.35
Exercised		1.15
Forfeited, cancelled, or expired		3.16
Ending Balance		2.74	$ 3.11
Options exercisable, June 30, 2015		3.05
ShareBasedCompensationArrangementsByShareBasedPaymentAwardOptionsExpirationsInPeriodWeightedAverageExercisePrice		$ 3.09
Weighted Average Remaining Contractual Term (In Years)
Options outstanding		5 years 11 months 12 days	2 years 11 months 19 days
Options exercisable		2 years 7 months 21 days
Aggregate Intrinsic Value
Options outstanding	[1]	$ 1,063,000
Options outstanding	[1]	113,000	$ 1,063,000
Options exercisable	[1]	$ 94,000

[1] The intrinsic value calculation does not include negative values. This can occur when the fair market value on the reporting date is less than the exercise price of the grant.

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Intangible Assets and Related Accumulated Amortization (Detail) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2015	Dec. 31, 2014
Intangible Assets And Goodwill [Line Items]
Intangible assets, gross	$ 2,800	$ 2,800
Intangible assets, accumulated amortization	(2,721)	(2,686)
Intangible assets, net	79	114
Goodwill gross	2,926	2,926
Goodwill	2,926	2,926
Patents
Intangible Assets And Goodwill [Line Items]
Intangible assets, gross	1,914	1,914
Intangible assets, accumulated amortization	$ (1,914)	(1,907)
Intangible assets, net		7
Patents | Minimum
Intangible Assets And Goodwill [Line Items]
Useful life	4 years
Patents | Maximum
Intangible Assets And Goodwill [Line Items]
Useful life	10 years
Trademarks
Intangible Assets And Goodwill [Line Items]
Useful life	6 years
Intangible assets, gross	$ 69	69
Intangible assets, accumulated amortization	(69)	(69)
Other Intangible Assets
Intangible Assets And Goodwill [Line Items]
Intangible assets, gross	817	817
Intangible assets, accumulated amortization	(738)	(710)
Intangible assets, net	$ 79	$ 107
Other Intangible Assets | Minimum
Intangible Assets And Goodwill [Line Items]
Useful life	4 years
Other Intangible Assets | Maximum
Intangible Assets And Goodwill [Line Items]
Useful life	6 years

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Consolidated Balance Sheets (Unaudited) - USD ($)	Jun. 30, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 19,922,000	$ 31,560,000
Restricted cash equivalent	200,000	0
Accounts receivable, less allowance of $1,987 in 2015 and $1,711 in 2014	9,778,000	9,004,000
Inventory, net	13,680,000	12,508,000
Prepaid expenses and other current assets	1,631,000	1,726,000
Total current assets	45,211,000	54,798,000
Property, plant, and equipment, net	2,366,000	1,295,000
Intangible assets, net	79,000	114,000
Goodwill	2,926,000	2,926,000
Other assets	761,000	270,000
Total assets	51,343,000	59,403,000
Current liabilities:
Accounts payable	8,849,000	8,357,000
Accrued liabilities	5,913,000	5,188,000
Customer deposits	96,000	112,000
Deferred revenue, current portion	3,050,000	2,494,000
Total current liabilities	17,908,000	16,151,000
Deferred income taxes	708,000	677,000
Deferred revenue, long-term	201,000
Capital lease obligation	238,000
Warranty accrual, long-term	868,000	519,000
Other liabilities, long-term	365,000
Total liabilities	$ 20,288,000	$ 17,347,000
Commitments, contingencies, and subsequent event (Notes 9 and 13)
Stockholders' equity:
Preferred stock, par value $0.001; 1,000 shares authorized, no shares issued and outstanding
Common stock, par value $0.001; 100,000 shares authorized in 2015 and 2014, respectively; 58,188 and 58,115 shares issued and outstanding in 2015 and 2014, respectively	$ 58,000	$ 58,000
Additional paid-in-capital	186,907,000	185,231,000
Accumulated other comprehensive loss	(757,000)	(557,000)
Accumulated deficit	(155,153,000)	(142,676,000)
Total stockholders' equity	31,055,000	42,056,000
Total liabilities and stockholders' equity	$ 51,343,000	$ 59,403,000

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Lines of Credit and Other Borrowings - Additional Information (Detail)								3 Months Ended	6 Months Ended		12 Months Ended
	Jul. 28, 2014 USD ($)	Jun. 30, 2014 USD ($) Agreement	Jun. 03, 2014 USD ($)	May. 31, 2014 USD ($)	May. 05, 2014 USD ($)	Apr. 10, 2014 USD ($)	Mar. 04, 2014 USD ($)	Jun. 30, 2014 USD ($)	Jun. 30, 2015 USD ($)	Jun. 30, 2014 USD ($)	Dec. 31, 2014 USD ($)
Line Of Credit Facility [Line Items]
Repayments under Credit Agreements										$ 16,904,000
Unused capacity commitment fee percentage									0.25%
Interest expense incurred for lines of credit and loan and security agreement								$ 185,000		414,000
Accrued interest payable											$ 0
Amortization of discounts on lines of credit								80,000		200,000
Amortization of debt issuance costs								71,000		128,000
Restricted cash equivalent									$ 200,000		$ 0
Aggregate agreements amendment fee.								35,000		45,000
Financed insurance premium		$ 74,000						$ 74,000	$ 0	$ 74,000
Borrowings payment term									The Company financed a portion of its annual insurance premiums which it pays in installments over nine months.
Financial insurance premiums interest rate		2.85%						2.85%		2.85%
Interest expense incurred for financed insurance premiums								$ 1,000		$ 2,000
Credit Agreements
Line Of Credit Facility [Line Items]
Number revolving credit facility agreements | Agreement		2
Repayments under Credit Agreements	$ 2,900,000
Line of credit facility, expiration date											May 01, 2014
Forbearance Agreement
Line Of Credit Facility [Line Items]
Credit agreements amendment fee						$ 10,000	$ 10,000
Lines of credit maximum borrowing capacity						$ 4,000,000	$ 5,000,000
Amendment No. 1
Line Of Credit Facility [Line Items]
Line of credit facility, expiration date					Jun. 01, 2014
Revolving lines of credit fee paid					$ 10,000
Amendment No. 2
Line Of Credit Facility [Line Items]
Line of credit facility, expiration date			Aug. 01, 2014
Revolving lines of credit fee paid			$ 15,000
Increase decrease in interest rate of lines of credit facility			0.50%
Prime floor, daily prime plus LIBOR		2.50%						2.50%	2.50%	2.50%
Amendment No. 2 | Domestic Revolver Credit Facility | Prime Rate
Line Of Credit Facility [Line Items]
Interest on principal balance rate plus									2.50%
Amendment No. 2 | Ex-Im Revolver | Prime Rate | Minimum
Line Of Credit Facility [Line Items]
Interest on principal balance rate plus									2.00%
Amendment No. 3
Line Of Credit Facility [Line Items]
Line of credit facility, expiration date				Aug. 01, 2014
Revolving lines of credit fee paid				$ 10,000

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Description of Business and Basis of Presentation

6 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

Description of Business and Basis of Presentation

NOTE 1—DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

The Company

BIOLASE, Inc. (“BIOLASE” and, together with its consolidated subsidiaries, the “Company,” “we,” “our,” or “us”) incorporated in Delaware in 1987, is a medical device company that develops, manufactures, markets, and sells laser systems in dentistry and medicine and also markets, sells, and distributes dental imaging equipment, including cone beam digital x-rays and CAD/CAM intra-oral scanners, in-office, chair-side milling machines, and three-dimensional printers.

Basis of Presentation

The unaudited consolidated financial statements include the accounts of Biolase, Inc. and its wholly-owned subsidiaries and have been prepared on a basis consistent with the December 31, 2014 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 (“GAAP”) for complete consolidated financial statements. Certain amounts have been reclassified to conform to current period presentations.

The consolidated results of operations for the three and six months ended June 30, 2015 are not necessarily indicative of the results for the full year. The accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2014, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission (the “SEC”) on March 6, 2015, as amended on April 29, 2015 (the “2014 Form 10-K”).

Liquidity and Management’s Plans

The Company incurred a loss from operations and a net loss and used cash in operating activities for the three and six months ended June 30, 2015. The Company has also suffered recurring losses from operations during the three years ended December 31, 2014.

As of June 30, 2015, the Company had working capital of approximately $27.3 million. The Company’s principal sources of liquidity at June 30, 2015 consisted of approximately $20.1 million in cash and restricted cash equivalent and $9.8 million of net accounts receivable.    

Additional capital requirements may depend on many factors, including, among other things, the rate at which the Company’s business grows, demands for working capital, manufacturing capacity, and any acquisitions that the Company may pursue. From time to time, the Company could be required, or may otherwise attempt, to raise capital through either equity or debt offerings. The Company cannot provide assurance that it will be able to successfully enter into any such equity or debt financings in the future or that the required capital would be available on acceptable terms, if at all, or that any such financing activity would not be dilutive to its stockholders.

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Components of Inventory (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Components of inventory, net of allowances
Raw materials	$ 3,564	$ 2,857
Work-in-process	1,529	1,348
Finished goods	8,587	8,303
Inventory, net	$ 13,680	$ 12,508

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Property, Plant, and Equipment (Tables)

6 Months Ended

Jun. 30, 2015

Property Plant And Equipment [Abstract]

Summary of Property, Plant, and Equipment

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

	June 30,			December 31,
	2015			2014
Building	$	206		$	226
Leasehold improvements		1,201			1,197
Equipment and computers		5,369			4,948
Furniture and fixtures		425			413
Construction in progress		953			4
		8,154			6,788
Accumulated depreciation		(5,948	)		(5,669	)
		2,206			1,119
Land		160			176
Property, plant, and equipment, net	$	2,366		$	1,295

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Inventory - Additional Information (Detail) - USD ($) $ in Millions	Jun. 30, 2015	Dec. 31, 2014
Inventory Disclosure [Abstract]
Provision for excess and obsolete inventory	$ 1.9	$ 2.4

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Accrued Liabilities and Deferred Revenue (Tables)

6 Months Ended

Jun. 30, 2015

Payables And Accruals [Abstract]

Components of Accrued Liabilities

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

	June 30,		December 31,
	2015		2014
Payroll and benefits	$	2,384	$	1,905
Warranty accrual, current portion		1,129		930
Taxes		339		139
Accrued professional services		1,672		1,581
Accrued capital lease payments		157		—
Accrued insurance premium		53		450
Other		179		183
Total accrued liabilities	$	5,913	$	5,188

Changes in Initial Product Warranty Accrual and Expenses Under Initial and Extended Warranties

Changes in the initial product warranty accrual, and the expenses incurred under the Company’s initial and extended warranties, for the three and six months ended June 30, 2015 and 2014 were as follows (in thousands):

	Three Months Ended						Six MonthsEnded
	June 30,						June 30,
	2015			2014			2015			2014
Initial warranty accrual, beginning balance	$	1,667		$	1,025		$	1,449		$	1,096
Provision for estimated warranty cost		545			461			996			609
Warranty expenditures		(215	)		(231	)		(448	)		(450	)
		1,997			1,255			1,997			1,255
Less warranty accrual, long-term		868			247			868			247
Total warranty accrual, current portion	$	1,129		$	1,008		$	1,129		$	1,008

Components of Current Portion of Deferred Revenue

Current portion of deferred revenue is comprised of the following (in thousands):

	June 30,		December 31,
	2015		2014
Undelivered elements (training, installation, and    product and support services)	$	1,636	$	952
Extended warranty contracts		1,414		1,542
Deferred revenue, current portion	$	3,050	$	2,494

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of these consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect amounts reported in the consolidated financial statements and the accompanying notes. Significant estimates in these consolidated financial statements include allowances on accounts receivable, inventory, and deferred taxes, as well as estimates for accrued warranty expenses, indefinite-lived intangible assets, and the ability of goodwill to be realized, revenue deferrals for multiple element arrangements, effects of stock-based compensation and warrants, contingent liabilities, and the provision or benefit for income taxes. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may differ materially from those estimates.

Critical Accounting Policies

Information with respect to the Company’s critical accounting policies which management believes could have the most significant effect on the Company’s reported results and require subjective or complex judgments by management is contained in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the 2014 Form 10-K. Management believes that there have been no significant changes during the three and six months ended June 30, 2015 in the Company’s critical accounting policies from those disclosed in Item 7 of the 2014 Form 10-K, except with regard to restricted cash equivalent as set forth below.

Restricted Cash Equivalent

The restricted cash equivalent represents a revolving 90-day certificate of deposit maintained by the Company as collateral in connection with corporate credit cards. At June 30, 2015, the restricted cash equivalent balance was $200,000.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market (or, if none exists, the most advantageous market) for the specific asset or liability at the measurement date (referred to as the “exit price”). The fair value is based on assumptions that market participants would use, including a consideration of nonperformance risk. Under the accounting guidance for fair value hierarchy there are three levels of measurement inputs. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable, either directly or indirectly, other than Level 1. Level 3 inputs are unobservable due to little or no corroborating market data.

The Company’s financial instruments, consisting of cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities, approximate fair value because of the short maturity of these items. Financial instruments consisting of lines of credit approximate fair value, as the interest rates associated with the lines of credit approximates the market rates for debt securities with similar terms and risk characteristics.

Recent Accounting Pronouncements

Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification.

Recently Issued Accounting Standards

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP.

The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently evaluating the impact of the pending adoption of ASU 2014-09 on its consolidated financial statements and has not yet determined the method by which it will adopt the standard during the year ending December 31, 2018.

In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern. The standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued and provides guidance on determining when and how to disclose going concern uncertainties in the financial statements. Certain disclosures will be required if conditions give rise to substantial doubt about an entity’s ability to continue as a going concern. ASU 2014-15 applies to all entities and is effective for annual and interim reporting periods ending after December 15, 2016, with early adoption permitted. The Company does not expect that the adoption of this standard will have a material effect on its financial statements.

In July 2015, the FASB recently issued ASU No. 2015-11, Simplifying the Measurement of Inventory (“ASU 2015-11”), as part of its simplification initiative. The standard requires inventory within the scope of ASU 2015-11 to be measured using the lower of cost and net realizable value.  The changes apply to all types of inventory, except those measured using LIFO or the retail inventory method. ASU 2015-11 applies to all entities and is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2016, with early adoption permitted. The Company does not expect that the adoption of this standard will have a material effect on its financial statements.

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Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Statement Of Financial Position [Abstract]
Allowance for accounts receivable	$ 1,987	$ 1,711
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	1,000	1,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	58,188,000	58,115,000
Common stock, shares outstanding	58,188,000	58,115,000

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Income Taxes

6 Months Ended

Jun. 30, 2015

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 12—INCOME TAXES

The Company accounts for income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Management evaluates the need to establish a valuation allowance for deferred tax assets based upon the amount of existing temporary differences, the period in which they are expected to be recovered, and expected levels of taxable income. A valuation allowance to reduce deferred tax assets is established when it is “more likely than not” that some or all of the deferred tax assets will not be realized. Based on the Company’s net losses in prior years, management has determined that a full valuation allowance against the Company’s net deferred tax assets is appropriate.

Accounting for uncertainty in income taxes prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return and provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company has elected to classify interest and penalties as a component of its income tax provision. With respect to the liability for unrecognized tax benefits, including related estimates of penalties and interest, the Company did not record a liability for unrecognized tax benefits for the three and six months ended June 30, 2015 and 2014, respectively. The Company does not expect any changes to its unrecognized tax benefit for the next twelve months that would materially impact its consolidated financial statements.

During the three and six months ended June 30, 2015, the Company recorded an income tax provision of $36,000 and $83,000, respectively, resulting in an effective tax rate of (0.5)% and (0.7)%, respectively. During the three and six months ended June 30, 2014, the Company recorded an income tax provision of $29,000 and $53,000, respectively, resulting in an effective tax rate of (0.5)% and (0.5)%, respectively. The income tax provisions for the three and six months ended June 30, 2015 and 2014 were calculated using the discrete year-to-date method. The effective tax rate differs from the statutory tax rate of 34% primarily due to the existence of valuation allowances against net deferred tax assets and current liabilities resulting from the estimated state income tax liabilities and federal alternative minimum tax liability.

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Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2015	Jul. 31, 2015
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2
Trading Symbol	BIOL
Entity Registrant Name	BIOLASE, INC
Entity Central Index Key	0000811240
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		58,190,671

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Subsequent Event

6 Months Ended

Jun. 30, 2015

Disclosure Subsequent Events Additional Information [Abstract]

Subsequent Event

NOTE 13—SUBSEQUENT EVENT

Stock-Based Compensation

Effective July 13, 2015, the Compensation Committee of the Board awarded 870,000 stock-settled restricted stock units and granted non-qualified stock options to purchase up to 870,000 shares of Biolase common stock to its President and Chief Executive Officer in connection with his employment agreement with Biolase.

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Consolidated Statements Of Operations And Comprehensive Loss (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Statement Consolidated Statements Of Operations And Comprehensive Loss [Abstract]
Products and services revenue	$ 11,835	$ 10,140	$ 22,586	$ 21,619
License fees and royalty revenue	34	46	138	85
Net revenue	11,869	10,186	22,724	21,704
Cost of revenue	8,168	6,457	15,813	14,034
Gross profit	3,701	3,729	6,911	7,670
Operating expenses:
Sales and marketing	4,743	3,569	9,497	8,024
General and administrative	3,916	5,310	6,503	8,393
Engineering and development	1,974	978	3,777	1,951
Excise tax	97	64	153	129
Legal settlement		0	(731)
Total operating expenses	10,730	9,921	19,199	18,497
Loss from operations	(7,029)	(6,192)	(12,288)	(10,827)
Gain (loss) on foreign currency transactions	1	(33)	(129)	(31)
Interest income (expense), net	23	(185)	23	(415)
Non-operating income (loss), net	24	(218)	(106)	(446)
Loss before income tax provision	(7,005)	(6,410)	(12,394)	(11,273)
Income tax provision	36	29	83	53
Net loss	(7,041)	(6,439)	(12,477)	(11,326)
Other comprehensive (loss) income items:
Foreign currency translation adjustment	33	(9)	(200)	(8)
Comprehensive loss	$ (7,008)	$ (6,448)	$ (12,677)	$ (11,334)
Net loss per share:
Basic	$ (0.12)	$ (0.17)	$ (0.21)	$ (0.31)
Diluted	$ (0.12)	$ (0.17)	$ (0.21)	$ (0.31)
Shares used in the calculation of net loss per share:
Basic	58,180	37,629	58,163	37,045
Diluted	58,180	37,629	58,163	37,045

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Accrued Liabilities and Deferred Revenue

6 Months Ended

Jun. 30, 2015

Payables And Accruals [Abstract]

Accrued Liabilities and Deferred Revenue

NOTE 7—ACCRUED LIABILITIES AND DEFERRED REVENUE

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

	June 30,		December 31,
	2015		2014
Payroll and benefits	$	2,384	$	1,905
Warranty accrual, current portion		1,129		930
Taxes		339		139
Accrued professional services		1,672		1,581
Accrued capital lease payments		157		—
Accrued insurance premium		53		450
Other		179		183
Total accrued liabilities	$	5,913	$	5,188

Changes in the initial product warranty accrual, and the expenses incurred under the Company’s initial and extended warranties, for the three and six months ended June 30, 2015 and 2014 were as follows (in thousands):

	Three Months Ended						Six MonthsEnded
	June 30,						June 30,
	2015			2014			2015			2014
Initial warranty accrual, beginning balance	$	1,667		$	1,025		$	1,449		$	1,096
Provision for estimated warranty cost		545			461			996			609
Warranty expenditures		(215	)		(231	)		(448	)		(450	)
		1,997			1,255			1,997			1,255
Less warranty accrual, long-term		868			247			868			247
Total warranty accrual, current portion	$	1,129		$	1,008		$	1,129		$	1,008

In June 2014, the Company extended the warranty for WaterLase systems from one year to two years for systems purchased after January 1, 2014.

Current portion of deferred revenue is comprised of the following (in thousands):

	June 30,		December 31,
	2015		2014
Undelivered elements (training, installation, and    product and support services)	$	1,636	$	952
Extended warranty contracts		1,414		1,542
Deferred revenue, current portion	$	3,050	$	2,494

In connection with the Company’s initiatives to measure and improve customer satisfaction and concurrent with the launch of WaterLase iPlus 2.0 in February 2015, the Company introduced its exclusive Practice Growth Guarantee, which is a program that essentially guarantees growth in the Company’s clients’ dental practices through training on a select number of clinical procedures and with billing and marketing support for dentists included. Consistent with the Company’s standard terms and conditions applicable to all of its products, the Practice Growth Guarantee does not give the customer the right to return purchased laser systems or receive a refund of any amount of the purchase price. However, the Practice Growth Guarantee does provide for additional training opportunities and certain billing and marketing support activities to the customer. The Company has estimated additional deferred revenue related to the Practice Growth Guarantee for all WaterLase iPlus 2.0 system sales during the six months ended June 30, 2015 to be approximately $94,000.

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Intangible Assets and Goodwill

6 Months Ended

Jun. 30, 2015

Goodwill And Intangible Assets Disclosure [Abstract]

Intangible Assets And Goodwill

NOTE 6—INTANGIBLE ASSETS AND GOODWILL

The Company conducted its annual impairment test of goodwill as of June 30, 2015 and determined that there was no impairment. The Company also tests its intangible assets and goodwill if events occur or circumstances change that would more likely than not reduce the fair value of the Company or its assets below their carrying amounts. For intangible assets subject to amortization, the Company performs its impairment test when indicators, such as reductions in demand for its products or significant economic slowdowns, are present. No events have occurred since June 30, 2015 that would trigger further impairment testing of the Company’s intangible assets and goodwill.

Amortization expense for the three and six months ended June 30, 2015 totaled $17,000 and $35,000, respectively, and $17,000 and $35,000, respectively, for the same periods in 2014. Other intangible assets primarily include acquired customer lists and non-compete agreements.

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

	As of June 30, 2015									As of December 31, 2014
			Accumulated									Accumulated
	Gross		Amortization			Impairment		Net		Gross		Amortization			Impairment		Net
Patents (4-10 years)	$	1,914	$	(1,914	)	$	—	$	—	$	1,914	$	(1,907	)	$	—	$	7
Trademarks (6 years)		69		(69	)		—		—		69		(69	)		—		—
Other (4 to 6 years)		817		(738	)		—		79		817		(710	)		—		107
Total	$	2,800	$	(2,721	)	$	—	$	79	$	2,800	$	(2,686	)	$	—	$	114
Goodwill (Indefinite life)	$	2,926						$	2,926	$	2,926						$	2,926

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Intangible Assets and Goodwill (Tables)

6 Months Ended

Jun. 30, 2015

Goodwill And Intangible Assets Disclosure [Abstract]

Summary of Intangible Assets, Related Accumulated Amortization and Goodwill

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

	As of June 30, 2015									As of December 31, 2014
			Accumulated									Accumulated
	Gross		Amortization			Impairment		Net		Gross		Amortization			Impairment		Net
Patents (4-10 years)	$	1,914	$	(1,914	)	$	—	$	—	$	1,914	$	(1,907	)	$	—	$	7
Trademarks (6 years)		69		(69	)		—		—		69		(69	)		—		—
Other (4 to 6 years)		817		(738	)		—		79		817		(710	)		—		107
Total	$	2,800	$	(2,721	)	$	—	$	79	$	2,800	$	(2,686	)	$	—	$	114
Goodwill (Indefinite life)	$	2,926						$	2,926	$	2,926						$	2,926

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Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2015

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The unaudited consolidated financial statements include the accounts of Biolase, Inc. and its wholly-owned subsidiaries and have been prepared on a basis consistent with the December 31, 2014 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 (“GAAP”) for complete consolidated financial statements. Certain amounts have been reclassified to conform to current period presentations.

The consolidated results of operations for the three and six months ended June 30, 2015 are not necessarily indicative of the results for the full year. The accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2014, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 filed with the Securities and Exchange Commission (the “SEC”) on March 6, 2015, as amended on April 29, 2015 (the “2014 Form 10-K”).

Liquidity and Management Plans

Liquidity and Management’s Plans

The Company incurred a loss from operations and a net loss and used cash in operating activities for the three and six months ended June 30, 2015. The Company has also suffered recurring losses from operations during the three years ended December 31, 2014.

As of June 30, 2015, the Company had working capital of approximately $27.3 million. The Company’s principal sources of liquidity at June 30, 2015 consisted of approximately $20.1 million in cash and restricted cash equivalent and $9.8 million of net accounts receivable.    

Additional capital requirements may depend on many factors, including, among other things, the rate at which the Company’s business grows, demands for working capital, manufacturing capacity, and any acquisitions that the Company may pursue. From time to time, the Company could be required, or may otherwise attempt, to raise capital through either equity or debt offerings. The Company cannot provide assurance that it will be able to successfully enter into any such equity or debt financings in the future or that the required capital would be available on acceptable terms, if at all, or that any such financing activity would not be dilutive to its stockholders.

Use of Estimates

Use of Estimates

The preparation of these consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect amounts reported in the consolidated financial statements and the accompanying notes. Significant estimates in these consolidated financial statements include allowances on accounts receivable, inventory, and deferred taxes, as well as estimates for accrued warranty expenses, indefinite-lived intangible assets, and the ability of goodwill to be realized, revenue deferrals for multiple element arrangements, effects of stock-based compensation and warrants, contingent liabilities, and the provision or benefit for income taxes. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may differ materially from those estimates.

Critical Accounting Policy

Critical Accounting Policies

Information with respect to the Company’s critical accounting policies which management believes could have the most significant effect on the Company’s reported results and require subjective or complex judgments by management is contained in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of the 2014 Form 10-K. Management believes that there have been no significant changes during the three and six months ended June 30, 2015 in the Company’s critical accounting policies from those disclosed in Item 7 of the 2014 Form 10-K, except with regard to restricted cash equivalent as set forth below.

Restricted Cash Equivalent

The restricted cash equivalent represents a revolving 90-day certificate of deposit maintained by the Company as collateral in connection with corporate credit cards. At June 30, 2015, the restricted cash equivalent balance was $200,000.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market (or, if none exists, the most advantageous market) for the specific asset or liability at the measurement date (referred to as the “exit price”). The fair value is based on assumptions that market participants would use, including a consideration of nonperformance risk. Under the accounting guidance for fair value hierarchy there are three levels of measurement inputs. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable, either directly or indirectly, other than Level 1. Level 3 inputs are unobservable due to little or no corroborating market data.

The Company’s financial instruments, consisting of cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities, approximate fair value because of the short maturity of these items. Financial instruments consisting of lines of credit approximate fair value, as the interest rates associated with the lines of credit approximates the market rates for debt securities with similar terms and risk characteristics.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification.

Recently Issued Accounting Standards

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP.

The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently evaluating the impact of the pending adoption of ASU 2014-09 on its consolidated financial statements and has not yet determined the method by which it will adopt the standard during the year ending December 31, 2018.

In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern. The standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued and provides guidance on determining when and how to disclose going concern uncertainties in the financial statements. Certain disclosures will be required if conditions give rise to substantial doubt about an entity’s ability to continue as a going concern. ASU 2014-15 applies to all entities and is effective for annual and interim reporting periods ending after December 15, 2016, with early adoption permitted. The Company does not expect that the adoption of this standard will have a material effect on its financial statements.

In July 2015, the FASB recently issued ASU No. 2015-11, Simplifying the Measurement of Inventory (“ASU 2015-11”), as part of its simplification initiative. The standard requires inventory within the scope of ASU 2015-11 to be measured using the lower of cost and net realizable value.  The changes apply to all types of inventory, except those measured using LIFO or the retail inventory method. ASU 2015-11 applies to all entities and is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2016, with early adoption permitted. The Company does not expect that the adoption of this standard will have a material effect on its financial statements.

Commitments And Contingencies Disclosure [Abstract]

Litigation

The Company discloses material loss contingencies deemed to be reasonably possible and accrues for loss contingencies when, in consultation with its legal advisors, management concludes that a loss is probable and reasonably estimable. The ability to predict the ultimate outcome of such matters involves judgments, estimates, and inherent uncertainties. The actual outcome of such matters could differ materially from management’s estimates.

Income Tax Disclosure [Abstract]

Income Tax Uncertainties

Accounting for uncertainty in income taxes prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return and provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company has elected to classify interest and penalties as a component of its income tax provision. With respect to the liability for unrecognized tax benefits, including related estimates of penalties and interest, the Company did not record a liability for unrecognized tax benefits for the three and six months ended June 30, 2015 and 2014, respectively. The Company does not expect any changes to its unrecognized tax benefit for the next twelve months that would materially impact its consolidated financial statements.

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Segment Information

6 Months Ended

Jun. 30, 2015

Segment Reporting [Abstract]

Segment Information

NOTE 10—SEGMENT INFORMATION

The Company currently operates in a single reportable segment. For the three and six months ended June 30, 2015, sales in the United States accounted for approximately 62% and 59% of net revenue, respectively, and international sales accounted for approximately 38% and 41% of net revenue, respectively. For the three and six months ended June 30, 2014, sales in the United States accounted for approximately 62% and 60% of net revenue, respectively, and international sales accounted for approximately 38% and 40% of net revenue, respectively.

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
United States	$	7,386	$	6,328	$	13,316	$	13,037
International		4,483		3,858		9,408		8,667
	$	11,869	$	10,186	$	22,724	$	21,704

No individual country, other than the United States, represented more than 10% of total net revenue.

Long-lived assets located outside of the United States at our foreign subsidiaries totaled $338,000 and $374,000 as of June 30, 2015 and December 31, 2014, respectively.

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Lines Of Credit and Other Borrowings

6 Months Ended

Jun. 30, 2015

Debt Disclosure [Abstract]

Lines of Credit and Other Borrowings

NOTE 8—LINES OF CREDIT AND OTHER BORROWINGS

Lines of Credit

The Company entered into two revolving credit facility agreements with Comerica Bank (the “Credit Agreements”) on May 24, 2012. The revolving lines of credit provided for borrowings against certain domestic accounts receivable and inventory (the “Domestic Revolver”) and certain export related accounts receivable and inventory (the “Ex-Im Revolver”).

On July 28, 2014, the Company repaid all amounts outstanding under the Credit Agreements, including principal, accrued interest, and fees which totaled, in the aggregate, approximately $2.9 million, and the Credit Agreements were terminated.

The Credit Agreements required the Company to maintain compliance with certain monthly financial and non-financial covenants, as defined therein. Any noncompliance with these covenants could have resulted in default interest rates and penalties, and Comerica Bank could have declared the amounts outstanding immediately due and payable. On March 4, 2014, the Company received a waiver of noncompliance with certain financial and nonfinancial covenants as of January 31, 2014 and December 31, 2013. In connection with this waiver, the Company incurred a fee of $10,000, and Comerica Bank reduced the total aggregate available borrowings on the lines of credit to $5.0 million. The Company was not in compliance with a financial covenant as of February 28, 2014 and, as such, entered into a forbearance agreement (the “Forbearance Agreement”) with Comerica Bank on April 10, 2014.  The Company paid a fee of $10,000 in connection with the Forbearance Agreement, pursuant to which Comerica Bank reduced the total aggregate available borrowings to $4.0 million.

The Company was not in compliance with a financial covenant at March 31, 2014 and did not repay the lines of credit in full on the original maturity date of May 1, 2014. As a result, on May 5, 2014, the Company and Comerica Bank agreed to Amendment No. 1 to the Forbearance Agreement (“Amendment No. 1”), which extended the end of the forbearance period from May 1, 2014 to June 1, 2014. In connection with Amendment No. 1, the maturity date of the revolving lines of credit was extended to June 1, 2014, and the Company paid an administrative fee of $10,000. On June 3, 2014, the Company and Comerica Bank agreed to Amendment No. 2 to Forbearance Agreement (“Amendment No. 2”), which extended the maturity date of the revolving lines of credit to August 1, 2014. In connection with Amendment No. 2, Comerica Bank increased the interest rates on the lines of credit by 0.50%, and the Company paid an administrative fee of $15,000. The Company was not in compliance with certain financial covenants as of May 31, 2014 and, as a result, agreed to Amendment No. 3 to Forbearance Agreement with Comerica Bank whereby the forbearance period was continued to August 1, 2014, and the Company paid an administrative fee of $10,000.   

The outstanding principal balances of the Credit Agreements, as amended June 3, 2014, bore interest at annual percentage rates equal to the daily prime rate, plus 2.50% for the Domestic Revolver and 2.00% for the Ex-Im Revolver. The daily prime rate was subject to a floor of the daily adjusting LIBOR rate plus 2.50% per annum, or if LIBOR was undeterminable, 2.50% per annum. The Company was also required to pay an unused commitment fee of 0.25% based on a portion of the undrawn lines of credit, payable quarterly in arrears. During the three and six months ended June 30, 2014, the Company incurred $185,000 and $414,000, respectively, of interest expense associated with the credit facilities, including $71,000 and $128,000, respectively, of amortization of deferred debt issuance costs and $80,000 and $200,000, respectively, of amortization of the discount on lines of credit. There was no interest expense payable at December 31, 2014.

Lockbox arrangements under the revolving bank facilities provided that substantially all of the income generated was deposited directly into lockbox accounts and then swept into cash management accounts for the benefit of Comerica Bank. Cash was disbursed from Comerica Bank to the Company only after payment of the applicable debt service and principal. At December 31, 2014, there were no restricted cash amounts. The Company’s obligations were generally secured by substantially all of the Company’s assets then owned or thereafter acquired.

During the three and six months ended June 30, 2014, the Company incurred $35,000 and $45,000, respectively, of Comerica Bank commitment fees and legal costs associated with the various waivers and amendments. Commitment fees and legal costs associated with acquiring and maintaining the credit facilities were capitalized and amortized on a straight-line basis as interest expense over the remaining term of the Credit Agreements.

Other Borrowings

The Company financed a portion of its annual insurance premiums which it pays in installments over nine months. As of June 30, 2015, no amounts were outstanding under this arrangement. As of June 30, 2014, $74,000 was outstanding under this arrangement at an annual interest rate of 2.85% and was included in accrued liabilities in the accompanying consolidated financial statements. The Company incurred interest expense associated with the financed insurance premiums of approximately $1,000 and $2,000 during the three and six months ended June 30, 2014, respectively.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2015

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

NOTE 9—COMMITMENTS AND CONTINGENCIES

Leases

The Company leases its corporate headquarters and manufacturing facility in Irvine, California and also leases certain other facilities, office equipment, and automobiles under various operating or capital lease arrangements. In February 2015, the Company entered into a 30-month capital lease agreement for information technology equipment. Future minimum lease payments under the capital lease, together with the present value of the net minimum lease payments, for the years ending December 31, 2015, 2016 and 2017 are $86,000, $171,000, and $159,000, respectively. The amount necessary to reduce net minimum lease payments to present value calculated at the Company's incremental borrowing rate of 4.29% at the inception of the lease totaled $23,000. The present value of net minimum lease payments are reflected on the Consolidated Balance Sheets as current and noncurrent obligations of $157,000 within accrued liabilities and $238,000 within capital lease obligation, respectively.

In March 2015, the corporate headquarters and manufacturing facility lease was amended to extend the term through April 30, 2020, modify provisions for tenant improvement allowance of up to $398,000, and adjust the basic rent terms. Future minimum rental commitments under operating lease agreements with non-cancelable terms greater than one year for the years ending December 31, 2015, 2016, 2017, and 2018 and thereafter totaled $354,000, $694,000, $652,000, and $1.5 million, respectively.

Employee arrangements and other compensation

Certain members of management are entitled to severance benefits payable upon termination following a change in control, which would approximate $1.1 million, in the aggregate, at June 30, 2015. The Company also has agreements with certain employees to pay bonuses based on targeted performance criteria. As of June 30, 2015, approximately $334,000 was accrued for performance bonuses, which is included in accrued liabilities in the consolidated balance sheets.

Purchase commitments

The Company generally purchases components and subassemblies for its products from a limited group of third party suppliers through purchase orders. As of June 30, 2015, the Company had $12.6 million of purchase commitments for which the Company has not received certain goods or services that are expected to be purchased within one year. These purchase commitments were made to secure better pricing and to ensure the Company will have the necessary parts to meet anticipated near-term demand.

Litigation

The Company discloses material loss contingencies deemed to be reasonably possible and accrues for loss contingencies when, in consultation with its legal advisors, management concludes that a loss is probable and reasonably estimable. The ability to predict the ultimate outcome of such matters involves judgments, estimates, and inherent uncertainties. The actual outcome of such matters could differ materially from management’s estimates.

Class Action Lawsuits

On August 23, 2013, a purported class action lawsuit entitled Brady Adams v. Biolase, Inc., et al., Case No. 13-CV-1300 JST (FFMx) was filed in the United States District Court for the Central District of California against BIOLASE, its then Chief Executive Officer, Federico Pignatelli, and its then Chief Financial Officer, Frederick D. Furry. On August 26, 2013, a purported class action lawsuit entitled Ralph Divizio v. Biolase, Inc., et al., Case No. 13-CV-1317 DMG (MRWx) was filed in the same court against BIOLASE, Messrs. Pignatelli and Furry, and its then President and Chief Operating Officer, Alexander K. Arrow. Each of the lawsuits alleges violations of the federal securities laws and asserts causes of action against the defendants under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In accordance with the Private Securities Litigation Reform Act of 1995, on December 10, 2013, the court entered an order consolidating the lawsuits, appointing a lead plaintiff and approving the lead plaintiff’s selection of lead counsel. On February 24, 2014, the lead plaintiff filed a consolidated complaint against the Company and Messrs. Pignatelli, Furry, and Arrow, alleging violations of the federal securities laws and asserting causes of action against the defendants under Sections 10(b) and 20(a) of the Exchange Act.

On November 19, 2013, the Board received a letter from attorneys for purported shareholder David T. Long, demanding that the Board investigate, institute litigation, and take measures to redress and prevent alleged wrongdoing concerning the dissemination of certain allegedly false and misleading public disclosures made by the Company between January 2013 and August 2013.

On June 5, 2015, the United States District Court for the Central District of California approved, on a preliminary basis, the settlement of the consolidated securities class action lawsuit. The hearing on the final approval of the settlement is scheduled for October 9, 2015. Although there can be no assurance that such agreement will be finalized and receive final approval from the court, as of the date of these financial statements, management does not expect the Company to incur additional expenses related to this matter due to certain insurance coverage in place.

Intellectual Property Litigation

On April 24, 2012, CAO Group, Inc. (“CAO”) filed a lawsuit against the Company in the District of Utah for patent infringement of U.S. Patent No. 7,485,116 (the “116 Patent”) regarding the Company’s ezlase dental laser. On September 9, 2012, CAO filed its First Amended Complaint, which added claims for (1) business disparagement/injurious falsehood under common law and (2) unfair competition under 15 U.S.C. Section 1125(a). The additional claims stem from a press release that the Company issued on April 30, 2012, which CAO claims contained false statements that are disparaging to CAO and its diode product. The First Amended Complaint seeks injunctive relief, treble damages, attorneys’ fees, punitive damages, and interest. On November 13, 2012, the Court stayed the lawsuit for 120 days to allow the United States Patent and Trademark Office (the “USPTO”) to consider the Company’s request for reexamination of the patent-in-suit. The USPTO granted the request to reexamine the asserted claims of the patent-in-suit and, on February 28, 2013, the Court stayed the lawsuit until the termination of the reexamination proceedings. On April 23, 2013, the USPTO issued an office action rejecting all of the asserted claims over the prior art, and CAO responded to the office action. On August 28, 2013, the USPTO issued an Action Closing Procedure, rejecting all of CAO’s patent claims. CAO responded to the USPTO’s ruling and on December 10, 2013, the USPTO issued a Right of Appeal Notice, finally rejecting some claims of the 116 Patent while finding that other claims appeared to be patentable. The Company appealed the USPTO’s findings on January 9, 2014 and on January 27, 2014, the USPTO declined to reconsider the finding of certain claims as patentable and instructed the parties to proceed to appeal to the Patent Trial and Appeal Board. On March 17, 2014, the Company filed its brief in support of its appeal of the USPTO’s decision not to reject certain claims of the 116 Patent. On March 24, 2014, CAO filed its brief in support of its appeal of the USPTO’s decision to reject certain claims of the 116 patent. On April 18, 2014, the Company filed a respondent brief in opposition to the CAO’s appeal arguments. On May 30, 2014, both parties filed rebuttal briefs in support of their appeals.  On June 30, 2014, the Company requested an oral hearing before the Board.  On July 1, 2014, the Board noted that request and docketed the case for consideration. A hearing on reconsideration was held in November 2014.  The Patent Trial and Appeal Board issued its Decision on Appeal on July 1, 2015.  The Decision on Appeal rejected 38 of 42 patent claims.  Accordingly, CAO filed a Request for Rehearing on July 31, 2015.

The Company filed a patent infringement lawsuit against Fotona Proizvodnja Optoelektronskih Naprav D.D. and Fotona LLC (collectively, “Fotona”) in Düsseldorf District Court (the “Düsseldorf Court”) on April 12, 2012 alleging infringement with respect to the Fotona Fidelis dental laser system. Fotona denies liability and seeks the reimbursement of statutory fees from the Company. Together with its response brief, Fotona also filed a nullity action against the patent in dispute, patent number EP 1 560 470. The nullity action is pending at the German Federal Patent Court (the “Patent Court”), Docket No. 1 Ni 58/13 (EP). On September 2, 2013, the Company filed its counterplea in the infringement proceedings and phrased its arguments defending the validity of the patent. These arguments were also the subject of the defense brief to the Patent Court in the parallel nullity action proceedings. On September 9, 2013, the Company filed its response to the Patent Court. Fotona filed a rejoinder on February 3, 2014, including its counterplea on nullity.

On April 29, 2014, the Düsseldorf Court rendered a first instance decision whereby Fotona must cease and desist from selling its Fidelis and Lightwalker dental laser systems, render accounts on past sales, recall respective products, and pay damages on infringement. Additionally, the Company was awarded statutory fees, court costs, and attorney fees. Preliminary enforcement against Fotona is possible if the Company posts a bond totaling €500,000, which is designed to cover a portion of the potential damages, before a final instance decision is available. In Germany, damages can be calculated based on the profits made by the infringer after the formal announcement of the granting of a patent, in this case beginning January 1, 2009, without considering direct labor or any other operational costs. However, Fotona has yet to provide the details of its profits in order to allow the Company to calculate the damages. In the two additional first instance cases following the extension of the initial lawsuit against Fotona, the Düsseldorf Court also required the Company to provide a statutory bond totaling €146,000. Such bonds are traditionally imposed on foreign plaintiffs to cover all statutory, court, and attorney’s fees. Fotona submitted its responses to the action and filed respective invalidation actions against the rights of the Company.  

Subsequent to the foregoing responses, on March 24, 2015 the parties reached an agreement to settle the foregoing litigation and to dismiss the litigation with prejudice.  As part of the settlement, Fotona agreed to pay the Company a total of $1.4 million, with $550,000 payable within 10 days of March 24, 2015 and the remaining, $825,000 payable in three increments of $275,000 each to be paid no later than the first, second, and third anniversary of the effective date of the agreement. Pursuant to the settlement agreement, the Company (i) granted Fotona a three-year, non-exclusive, paid-up license in the United States market and a five-year, non-exclusive, paid-up license in markets outside of the United States and (ii) agreed to grant Fotona a non-exclusive, royalty-based license following the expiration of the paid-up licenses.  The Company calculated the present value of the settlement amount to be $1.2 million and allocated such amount to each significant element of the settlement on a relative fair value basis. $731,000 and $68,000 was allocated towards the recovery of the Company’s legal expenses and as settlement for the dismissal of the patent infringement lawsuit and are reflected as legal settlement and license fees and royalty revenue, respectively, on the Consolidated Statements of Operations and Comprehensive Loss. The remaining amount of $379,000 was allocated towards the three-year, non-exclusive, paid-up license in the United States market and the five-year, non-exclusive, paid-up license in markets outside of the United States which was reflected within other assets and long-term deferred revenue on the Consolidated Balance Sheets.  The deferred revenue is being recognized as license revenue over the terms of the paid-up licenses.

Other Matters

In the normal course of business, the Company may be subject to other legal proceedings, lawsuits, and other claims. Although the ultimate aggregate amount of probable monetary liability or financial impact with respect to these matters is subject to many uncertainties and is therefore not predictable with assurance, the Company’s management believes that any monetary liability or financial impact to the Company from these other matters, individually and in the aggregate, would not be material to the Company’s financial condition, results of operations, or cash flows. However, there can be no assurance with respect to such result, and monetary liability or financial impact to the Company from these other matters could differ materially from those projected.

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Concentrations

6 Months Ended

Jun. 30, 2015

Risks And Uncertainties [Abstract]

Concentrations

NOTE 11—CONCENTRATIONS

Revenue from the Company’s products for the three and six months ended June 30, 2015 and 2014 are as follows:

	Three Months Ended						Six Months Ended
	June 30						June 30
	2015			2014			2015			2014
Laser systems		65.6	%		62.9	%		65.1	%		61.6	%
Imaging systems		4.5	%		6.8	%		3.8	%		8.7	%
Consumables and other		15.9	%		14.3	%		16.7	%		14.1	%
Services		13.7	%		15.5	%		13.8	%		15.2	%
License fees and royalties		0.3	%		0.5	%		0.6	%		0.4	%
Total revenue		100.0	%		100.0	%		100.0	%		100.0	%

No individual customer represented more than 10% of the Company’s revenue for the three and six months ended June 30, 2015 or 2014.

The Company maintains its cash and cash equivalent accounts with established commercial banks. Such cash deposits periodically exceed the Federal Deposit Insurance Corporation insured limit.

No individual customer represented more than 10% of the Company’s accounts receivable at June 30, 2015 or December 31, 2014.

The Company currently purchases certain key components of its products from single suppliers. Although there are a limited number of manufacturers of these key components, management believes that other suppliers could provide similar key components on comparable terms. A change in suppliers, however, could cause delays in manufacturing and a possible loss of sales, which could adversely affect the Company’s business, results of operations, and financial condition.

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Summary of Warrant Activity (Detail) - Warrants - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Shares
Beginning Balance			888,000
Exercised	0	0	0	0
Ending Balance	888,000		888,000
Warrants exercisable, June 30, 2015	753,000		753,000
Weighted Average Exercise Price
Beginning Balance			$ 6.04
Ending Balance	$ 6.04		6.04
Warrants exercisable at June 30, 2015	$ 6.40		$ 6.40

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Income Taxes - Additional Information (Detail) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Income Tax Disclosure [Abstract]
Liability for unrecognized tax benefit, including related estimates of penalties and interest	$ 0	$ 0	$ 0	$ 0
Income tax provision (benefit)	$ 36,000	$ 29,000	$ 83,000	$ 53,000
Projected annual effective tax rate	(0.50%)	(0.50%)	(0.70%)	(0.50%)
Statutory tax rate	34.00%	34.00%	34.00%	34.00%

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Inventory (Tables)

6 Months Ended

Jun. 30, 2015

Inventory Disclosure [Abstract]

Components of 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):

	June 30,		December 31,
	2015		2014
Raw materials	$	3,564	$	2,857
Work-in-process		1,529		1,348
Finished goods		8,587		8,303
Inventory, net	$	13,680	$	12,508

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Concentrations (Tables)

6 Months Ended

Jun. 30, 2015

Risks And Uncertainties [Abstract]

Summary of Net Revenue from Various Products

Revenue from the Company’s products for the three and six months ended June 30, 2015 and 2014 are as follows:

	Three Months Ended						Six Months Ended
	June 30						June 30
	2015			2014			2015			2014
Laser systems		65.6	%		62.9	%		65.1	%		61.6	%
Imaging systems		4.5	%		6.8	%		3.8	%		8.7	%
Consumables and other		15.9	%		14.3	%		16.7	%		14.1	%
Services		13.7	%		15.5	%		13.8	%		15.2	%
License fees and royalties		0.3	%		0.5	%		0.6	%		0.4	%
Total revenue		100.0	%		100.0	%		100.0	%		100.0	%

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Concentrations - Summary of Net Revenue from Various Products (Detail) - Product Concentration Risk - Sales Revenue, Net	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Concentration Risk [Line Items]
Concentration Risk Percentage	100.00%	100.00%	100.00%	100.00%
Laser systems
Concentration Risk [Line Items]
Concentration Risk Percentage	65.60%	62.90%	65.10%	61.60%
Imaging systems
Concentration Risk [Line Items]
Concentration Risk Percentage	4.50%	6.80%	3.80%	8.70%
Consumables and other
Concentration Risk [Line Items]
Concentration Risk Percentage	15.90%	14.30%	16.70%	14.10%
Services
Concentration Risk [Line Items]
Concentration Risk Percentage	13.70%	15.50%	13.80%	15.20%
License fees and royalties
Concentration Risk [Line Items]
Concentration Risk Percentage	0.30%	0.50%	0.60%	0.40%

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Components of Accrued Liabilities (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014	Jun. 30, 2014
Components of accrued liabilities
Payroll and benefits	$ 2,384	$ 1,905
Warranty accrual, current portion	1,129	930	$ 1,008
Taxes	339	139
Accrued professional services	1,672	1,581
Accrued capital lease payments	157
Accrued insurance premium	53	450
Other	179	183
Total accrued liabilities	$ 5,913	$ 5,188

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Consolidated Statements Of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Cash Flows from Operating Activities:
Net loss	$ (12,477,000)	$ (11,326,000)
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:
Depreciation and amortization	324,000	352,000
Loss on disposal of property, plant, and equipment, net		2,000
Provision for bad debts	281,000	754,000
Provision for inventory excess and obsolescence		261,000
Amortization of discounts on lines of credit		200,000
Amortization of debt issuance costs		128,000
Stock-based compensation	1,635,000	586,000
Other non-cash compensation		123,000
Deferred income taxes	31,000	30,000
(Earned) incurred interest (income) expense, net	(23,000)	15,000
Changes in operating assets and liabilities:
Restricted cash	(200,000)
Accounts receivable	(1,031,000)	3,774,000
Inventory	(1,172,000)	(733,000)
Prepaid expenses and other assets	(385,000)	(11,000)
Customer deposits	(16,000)	(145,000)
Accounts payable and accrued liabilities	1,237,000	3,319,000
Deferred revenue	757,000	(231,000)
Net cash and cash equivalents used in operating activities	(11,039,000)	(2,902,000)
Cash Flows from Investing Activities:
Additions to property, plant, and equipment	(433,000)	(123,000)
Proceeds from disposal of property, plant, and equipment		1,000
Net cash and cash equivalents used in investing activities	(433,000)	(122,000)
Cash Flows from Financing Activities:
Borrowings under lines of credit		15,575,000
Payments under lines of credit		(16,904,000)
Payments of debt issue costs		(45,000)
Proceeds from equity offering, net of expenses		4,793,000
Deposit on capital lease	(42,000)
Proceeds from exercise of stock options and warrants	44,000	256,000
Net cash and cash equivalents provided by financing activities	2,000	3,675,000
Effect of exchange rate changes	(168,000)	(8,000)
Change in cash and cash equivalents	(11,638,000)	643,000
Cash and cash equivalents, beginning of period	31,560,000	1,440,000
Cash and cash equivalents, end of period	19,922,000	2,083,000
Supplemental cash flow disclosure - Cash Paid:
Interest paid		101,000
Income taxes paid	44,000	34,000
Supplemental cash flow disclosure - Non-cash:
Assets acquired under capital lease	405,000
Accrued capital expenditures and tenant improvement allowance	$ 555,000	$ 39,000

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Property, Plant, and Equipment

6 Months Ended

Jun. 30, 2015

Property Plant And Equipment [Abstract]

Property, Plant, and Equipment

NOTE 5—PROPERTY, PLANT, AND EQUIPMENT

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

	June 30,			December 31,
	2015			2014
Building	$	206		$	226
Leasehold improvements		1,201			1,197
Equipment and computers		5,369			4,948
Furniture and fixtures		425			413
Construction in progress		953			4
		8,154			6,788
Accumulated depreciation		(5,948	)		(5,669	)
		2,206			1,119
Land		160			176
Property, plant, and equipment, net	$	2,366		$	1,295

The cost of fixed assets acquired under the capital lease of $405,000 is included in the above as part of construction in progress.  For additional information on the capital lease, see Note 9 – Commitments and Contingencies. Depreciation expense related to property, plant, and equipment totaled $149,000 and $289,000 for the three and six months ended June 30, 2015, respectively, and $160,000 and $317,000 for the three and six months ended June 30, 2014, respectively.

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Description of Business and Basis of Presentation - Additional Information (Detail) - USD ($) $ in Thousands	Jun. 30, 2015	Dec. 31, 2014
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Working capital	$ 27,300
Cash and restricted cash equivalents	20,100
Net accounts receivable	$ 9,778	$ 9,004

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Property, Plant, and Equipment - Additional Information (Detail) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Property Plant And Equipment [Abstract]
Fixed assets acquired under capital lease			$ 405,000
Depreciation expense	$ 149,000	$ 160,000	$ 289,000	$ 317,000

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Stock-Based Awards and Per Share Information (Tables)

6 Months Ended

Jun. 30, 2015

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Summary of Income Statement Classification of Compensation Expense

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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Cost of revenue	$	62	$	41	$	138	$	87
Sales and marketing		194		112		487		237
General and administrative		612		101		848		216
Engineering and development		67		22		162		46
	$	935	$	276	$	1,635	$	586

Assumptions on Estimation of Stock Option Fair Values

The stock option fair values, under the 2002 Plan, were estimated using the Black-Scholes option-pricing model with the following assumptions:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Expected term	5.5 years		4.2 years		5.9 years		3.8 years
Volatility	87.70%		96.50%		91.01%		97.91%
Annual dividend per share	$	—	$	—	$	—	$	—
Risk-free interest rate	1.54%		1.69%		1.65%		1.66%

Summary of Option Activity

A summary of option activity under the 2002 Plan for the six months ended June 30, 2015 is as follows:

						Weighted Average
				Weighted		Remaining		Aggregate
				Average		Contractual		Intrinsic
	Shares			Exercise Price		Term (Years)		Value(1)
Options outstanding at December 31, 2014		3,391,000		$	3.11		2.97	$	1,063,000
Granted		3,096,000		$	2.35
Exercised		(38,000	)	$	1.15
Forfeited, cancelled, or expired		(329,000	)	$	3.16
Options outstanding at June 30, 2015		6,120,000		$	2.74		5.95	$	113,000
Options exercisable at June 30, 2015		2,862,000		$	3.05		2.64	$	94,000
Vested options expired during the quarter    ended June 30, 2015		113,000		$	3.09

(1) The intrinsic value calculation does not include negative values. This can occur when the fair market value on the reporting date is less than the exercise price of the grant.

Cash Proceeds Along with Fair Value Disclosures Related to Grants, Exercises, and Vested Options

Cash proceeds along with fair value disclosures related to grants, exercises, and vested options under the 2002 Plan are provided in the following table (in thousands, except per share amounts):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Proceeds from stock options exercised	$	—	$	8	$	44	$	255
Tax benefit related to stock options    exercised (1)	N/A		N/A		N/A		N/A
Intrinsic value of stock options exercised (2)	$	—	$	12	$	52	$	95
Weighted-average fair value of options granted    during period	$	1.42	$	1.32	$	1.70	$	1.73
Total fair value of shares vested during    the period	$	440	$	302	$	733	$	648

(1) Excess tax benefits received related to stock option exercises are presented as financing cash inflows. The Company currently does not receive a tax benefit related to the exercise of stock options due to the Company’s 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.

Summary of Warrant Activity

A summary of warrant activity for the six months ended June 30, 2015 is as follows:

			Weighted
			Average
	Shares		Exercise Price
Warrants outstanding at December 31, 2014		888,000	$	6.04
Granted		—
Exercised		—
Forfeited, cancelled, or expired		—
Warrants outstanding at June 30, 2015		888,000	$	6.04
Warrants exercisable at June 30, 2015		753,000	$	6.40
Vested warrants expired during the quarter    ended June 30, 2015		—	N/A