10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2019

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) (Zip code)

(949) 361-1200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock at par value $0.001 per share	BIOL	The NASDAQ Stock Market LLC (NASDAQ Capital Market)

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of November 6, 2019, the registrant had 30,947,423 shares of common stock, $0.001 par value per share, outstanding.

BIOLASE, INC.

INDEX

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited):	3
	Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018	3
	Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2019 and September 30, 2018	4
	Consolidated Statements of Stockholders’ (Deficit) Equity for the three and nine months ended September   30, 2019 and September 30, 2018	5
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and September 30, 2018	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 4.	Controls and Procedures	43
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 5	Other Information	44
Item 6.	Exhibits	45
Signatures		48

2

PART I. FINANCIAL INFORMATION

ITEM  1. FINANCIAL STATEMENTS

BIOLASE, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	September 30,			December 31,
	2019			2018
	(unaudited)			(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,091		$	8,044
Restricted cash		312			312
Accounts receivable, less allowance of $2,084 and $850 in 2019 and    2018, respectively		8,474			11,112
Inventory		11,537			12,248
Prepaid expenses and other current assets		875			1,591
Total current assets		23,289			33,307
Property, plant, and equipment, net		1,340			1,975
Goodwill		2,926			2,926
Other assets		718			308
Total assets	$	28,273		$	38,516
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Accounts payable		6,604			5,953
Accrued liabilities		4,950			7,538
Deferred revenue, current portion		2,512			2,476
Total current liabilities		14,066			15,967
Deferred income taxes, net		71			77
Warranty accrual		701			447
Other liabilities		1,145			100
Term loan		13,356			10,836
Total liabilities		29,339			27,427
Commitments and contingencies — Note 11
Stockholders' (deficit) equity:
Preferred stock, par value $0.001 per share; 1,000 shares authorized; 0    shares issued and outstanding as of September 30, 2019 and    December 31, 2018, respectively		—			—
Common stock, par value $0.001 per share; 40,000 shares authorized,    21,954 and 21,072 shares issued and outstanding as of September 30,    2019 and December 31, 2018, respectively		22			21
Additional paid-in-capital		230,712			228,430
Accumulated other comprehensive loss		(840	)		(670	)
Accumulated deficit		(230,960	)		(216,692	)
Total stockholders' (deficit) equity		(1,066	)		11,089
Total liabilities and stockholders' (deficit) equity	$	28,273		$	38,516

See accompanying notes to unaudited consolidated financial statements.

3

BIOLASE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(in thousands, except per share data)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Net revenue	$	8,646		$	10,936		$	27,617		$	33,110
Cost of revenue		5,677			6,995			17,746			21,828
Gross profit		2,969			3,941			9,871			11,282
Operating expenses:
Sales and marketing		3,515			4,489			10,665			13,037
General and administrative		3,210			2,685			8,114			8,691
Engineering and development		1,126			1,277			3,665			3,927
Total operating expenses		7,851			8,451			22,444			25,655
Loss from operations		(4,882	)		(4,510	)		(12,573	)		(14,373	)
Loss on foreign currency transactions		19			73			68			53
Interest expense		551			33			1,559			80
Non-operating loss, net		570			106			1,627			133
Loss before income tax provision		(5,452	)		(4,616	)		(14,200	)		(14,506	)
Income tax provision		26			49			68			91
Net loss		(5,478	)		(4,665	)		(14,268	)		(14,597	)
Other comprehensive income item:
Foreign currency translation adjustment		(128	)		3			(170	)		(31	)
Comprehensive loss	$	(5,606	)	$	(4,662	)	$	(14,438	)	$	(14,628	)
Net loss attributable to common stockholders	$	(5,478	)	$	(4,665	)	$	(14,268	)	$	(14,597	)
Net loss per share:
Basic	$	(0.25	)	$	(0.23	)	$	(0.66	)	$	(0.71	)
Diluted	$	(0.25	)	$	(0.23	)	$	(0.66	)	$	(0.71	)
Shares used in the calculation of net loss per share:
Basic		21,898			20,610			21,545			20,539
Diluted		21,898			20,610			21,545			20,539

See accompanying notes to unaudited consolidated financial statements.

4

BIOLASE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

(Unaudited, in thousands)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Total stockholders' (deficit) equity, beginning balances	$	3,784		$	20,391		$	11,089		$	16,337
Common stock and additional paid-in capital:
Beginning balance		229,994			226,109			228,451			225,619
Issuance of common stock upon exercise of options		—			—			3			2
Stock offering costs		—			—			—			(38	)
Liability award settlement		81			—			236			—
Stock-based compensation expense		659			607			1,835			1,133
Warrants issued in connection with debt instruments		—			—			209			—
Ending balance		230,734			226,716			230,734			226,716
Accumulated other comprehensive loss:
Beginning balance		(712	)		(610	)		(670	)		(576	)
Other comprehensive (loss) income		(128	)		3			(170	)		(31	)
Ending balance		(840	)		(607	)		(840	)		(607	)
Accumulated deficit
Beginning balance		(225,482	)		(205,108	)		(216,692	)		(195,176	)
Net loss		(5,478	)		(4,665	)		(14,268	)		(14,597	)
Ending balance		(230,960	)		(209,773	)		(230,960	)		(209,773	)
Total stockholders' (deficit) equity, ending balances	$	(1,066	)	$	16,336		$	(1,066	)	$	16,336

See accompanying notes to unaudited consolidated financial statements.

5

BIOLASE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

	Nine Months Ended
	September 30,
	2019			2018
Cash Flows from Operating Activities:
Net loss	$	(14,268	)	$	(14,597	)
Adjustments to reconcile net loss to net cash and cash equivalents used in    operating activities:
Depreciation and amortization		754			712
Gain on disposal of assets, net		—			(12	)
Provision for bad debts		1,243			316
Provision for inventory excess and obsolescence		—			59
Amortization of discounts on lines of credit		103			31
Amortization of debt issuance costs		130			43
Stock-based compensation		1,974			1,862
Deferred income taxes		(6	)		1
Earned interest income		2			—
Changes in operating assets and liabilities:
Accounts receivable		1,393			(1,591	)
Inventory		711			(1,184	)
Prepaid expenses and other current assets		1,011			940
Accounts payable and accrued liabilities		(1,157	)		3,200
Deferred revenue		36			(370	)
Net cash and cash equivalents used in operating activities		(8,074	)		(10,590	)
Cash Flows from Investing Activities:
Purchases of property, plant, and equipment		(138	)		(110	)
Proceeds from disposal of property, plant, and equipment		—			36
Net cash and cash equivalents used in investing activities		(138	)		(74	)
Cash Flows from Financing Activities:
Principal payments under capital lease obligation		—			(46	)
Borrowings under line of credit		—			3,323
Payments under line of credit		—			(1,823	)
Borrowings under term loan		2,500			—
Payments of debt issuance costs		(38	)		(87	)
Payments of equity offering costs		(50	)		(138	)
Proceeds from exercise of stock options		4			2
Net cash and cash equivalents provided by financing activities		2,416			1,231
Effect of exchange rate changes		(157	)		(23	)
Decrease in cash, cash equivalents and restricted cash		(5,953	)		(9,456	)
Cash, cash equivalents and restricted cash, beginning of period		8,356			11,896
Cash, cash equivalents and restricted cash, end of period	$	2,403		$	2,440
Supplemental cash flow disclosure:
Cash paid for interest	$	1,315		$	—
Cash paid for income taxes	$	19		$	31
Cash paid for operating leases	$	606		$	—
Non-cash accrual for capital expenditures	$	4		$	3
Non-cash accrual for equity offering costs	$	191		$	—
Non-cash right-of-use assets obtained in exchange for lease obligation	$	824		$	—
Non-cash settlement of performance award liability	$	236		$	—
Warrants issued in connection with debt instruments	$	209		$	—

See accompanying notes to unaudited consolidated financial statements.

6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1—DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

The Company

BIOLASE, Inc. (“BIOLASE” and, together with its consolidated subsidiaries, the “Company”) is a medical device company that develops, manufactures, markets, and sells laser systems in dentistry and medicine. The Company’s products advance the practice of dentistry and medicine for patients and health care professionals. The Company’s 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. The Company’s laser systems are designed to provide clinically superior results for many types of dental procedures compared to those achieved with drills, scalpels, and other conventional instruments. The Company has clearance from the Food and Drug Administration (“FDA”) to market and sell its laser systems in the United States and also have the necessary registration to market and sell its laser systems in Canada, the European Union, and many other countries outside the United States.

Basis of Presentation

The unaudited consolidated financial statements include the accounts of BIOLASE and its wholly-owned subsidiaries and have been prepared on a basis consistent with the December 31, 2018 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.

The consolidated results of operations for the three and nine months ended September 30, 2019 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, 2018, included in BIOLASE’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission (the “SEC”) on March 8, 2019 (the “2018 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 nine months ended September 30, 2019. The Company’s recurring losses, level of cash used in operations, and potential need for additional capital, along with uncertainties surrounding the Company’s ability to raise additional capital, raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

As of March 31, 2019, the Company was not in compliance with certain of its loan covenants relating to the SWK Loan (as defined below). In May 2019, SWK Funding, LLC granted the Company a waiver of such covenants. On May 7, 2019, the Company entered into an amendment of its Credit Agreement with SWK Funding, LLC to increase the total loan commitment in the SWK Loan from $12.5 million to $15.0 million, to revise certain of the financial covenants and to issue additional warrants to purchase the Company’s common stock. On September 30, 2019, the Company entered into a second amendment of its Credit Agreement with SWK Funding, LLC, to provide for a revolving loan facility, secured by a first lien security interest in the Company’s inventory and accounts receivable. On November 6, 2019, the Company entered into a third amendment to its Credit Agreement to further modify its loan covenants. See Notes 9 and 15 for additional information.

7

On October 28, 2019, BIOLASE, Inc. (the “Company”) entered into a loan and security agreement (the “Loan Agreement”) with Pacific Mercantile Bank, as lender (“Lender”), which provides for a revolving line of credit (the “PMB Loan”) in a maximum principal amount not to exceed the lesser of (i) $3 million or (ii) the sum of 90% of the Eligible Accounts (as defined in the Loan Agreement) plus 75% of the Eligible Inventory (as defined in the Loan Agreement, and subject to certain limitations set forth therein); provided that the maximum principal amount of the PMB Loan may be reduced from time to time in the Lender’s good faith business judgment as set forth in the Loan Agreement. Borrowings under the PMB Loan may be used for working capital. The PMB Loan matures on October 28, 2021, unless earlier terminated. See Note 15 for additional information.

On October 29, 2019, the Company successfully consummated an underwritten public offering of BIOLASE common stock and a concurrent private placement of BIOLASE Series E Participating Convertible Preferred Stock, resulting in net proceeds of approximately $7.8 million after deducting underwriter discounts and other fees and expenses. On November 5, 2019, the underwriters exercised their over-allotment option and the Company received approximately $0.6 million in additional proceeds from the sale of 1.1 million additional shares. See Note 15 for additional information.

As of September 30, 2019, the Company had working capital of approximately $9.2 million. The Company’s principal sources of liquidity as of September 30, 2019 consisted of approximately $2.4 million in cash, cash equivalents and restricted cash and $8.5 million of accounts receivable.  

In order for the Company to continue operations beyond the next 12 months and be able to discharge its liabilities and commitments in the normal course of business, it must sell its products directly to end users and through distributors, establish profitable operations through increased sales, decrease expenses, generate cash from operations, or obtain additional funds when needed. The Company intends to improve its financial condition and ultimately improve its financial results by increasing revenues through expansion of its product offerings, continuing to expand and develop its field sales force and distributor relationships both domestically and internationally, forming strategic arrangements within the dental and medical industries, educating dental and medical patients as to the benefits of its advanced medical technologies, and reducing expenses.

Additional capital requirements may depend on many factors, including, among other things, continued losses, 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, or enter into an additional line of credit facility.

Reverse Stock Split

Except as the context otherwise requires, all share numbers and share price amounts (including exercise prices and closing market prices) contained in the unaudited financial statements and notes thereto reflect the one-for-five reverse stock split (“Reverse Stock Split”) effectuated by the Company on May 10, 2018. See Note 4 below for additional information.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of these unaudited 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 unaudited consolidated financial statements include allowances on accounts receivable, inventory, and deferred taxes, as well as estimates for accrued warranty expenses, goodwill and the ability of goodwill to be realized, revenue deferrals, effects of stock-based compensation and warrants, contingent liabilities, and the provision or benefit for income taxes. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may differ materially from those estimates.

8

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 the 2018 Form 10-K. Management believes that there have been no significant changes during the nine months ended September 30, 2019 in the Company’s critical accounting policies from those disclosed in the 2018 Form 10-K.

Fair Value of Financial Instruments

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

The Company’s financial instruments, consisting of cash, cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities, liability for patent litigation settlement, and the SWK Loan as discussed in Note 9, approximate fair value because of the liquid or short-term nature of these items.

Concentration of Credit Risk, Interest Rate Risk and Foreign Currency Exchange Rate

Financial instruments which potentially expose the Company to a concentration of credit risk consist principally of cash and cash equivalents, restricted cash, and trade accounts receivable. The Company maintains its cash and cash equivalents and restricted cash with established commercial banks. At times, balances may exceed federally insured limits. To minimize the risk associated with trade accounts receivable, management performs ongoing credit evaluations of customers’ financial condition and maintains relationships with the Company’s customers that allow management to monitor current changes in business operations so the Company can respond as needed. The Company does not, generally, require customers to provide collateral before it sells them its products. However, the Company has required certain distributors to make prepayments for significant purchases of products.

Substantially all of the Company’s revenue is denominated in U.S. dollars, including sales to international distributors. Only a small portion of its revenue and expenses is denominated in foreign currencies, principally the Euro and Indian Rupee. The Company’s foreign currency expenditures primarily consist of the cost of maintaining offices, consulting services, and employee-related costs. During the nine-month periods ended September 30, 2019 and 2018, the Company did not enter into any hedging contracts. Future fluctuations in the value of the U.S. dollar may affect the price competitiveness of the Company’s products outside the U.S.

Recent Accounting Pronouncements

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

The Company considers the applicability and impact of all ASUs. ASUs not listed below were assessed and determined not to be applicable or are expected to have minimal impact on the Company’s consolidated financial position and results of operations.

9

Adopted Accounting Pronouncements

In February 2016, the FASB established ASU Topic 842 – Leases, by issuing ASU Topic No. 2016-02 (“Topic 842”), which requires lessees to recognize lease on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU Topic 2018-11 – Targeted Improvements. The new standard establishes a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and a lease liability for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations.

The Company adopted Topic 842 in the first quarter of 2019 utilizing the modified retrospective transition method and a cumulative effect adjustment at the beginning of the first quarter of 2019. The Company has elected the package of practical expedients, which allows the Company not to reassess (1) whether any expired or existing contracts as of the adoption date are or contain a lease, (2) lease classification for any expired or existing leases as of the adoption date, and (3) initial direct costs for any existing leases as of the adoption date. The Company did not elect to apply the hindsight practical expedient when determining lease term and assessing impairment of the right-to-use assets. The adoption of Topic 842 resulted in the recognition of right-of use assets of approximately $0.8 million after a $0.2 million adjustment for deferred rent, and lease liabilities for operating leases of approximately $1.0 million, and no cumulative effect adjustment on retained earnings on its unaudited Consolidated Balance Sheets nor material impact to its unaudited Consolidated Statements of Operations and Comprehensive Loss in the period of adoption. Right-of-use assets are included in Other assets, and lease liabilities are included in Accrued liabilities and in Other liabilities in the unaudited consolidated balance sheet for the period ended September 30, 2019. See Note 10 for additional information.

Recently Issued Accounting Standards

In June 2016, the FASB issued a new standard to replace the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company will be required to use a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. The standard will be effective for the Company beginning January 1, 2020. The Company is evaluating the impact of this standard on the Company’s consolidated financial statements, including accounting policies, processes, and systems.

NOTE 3 – REVENUE RECOGNITION

Contracts with Customers

Revenue for sales of products and services is derived from contracts with customers. The products and services promised in customer contracts include delivery of laser systems, imaging systems, and consumables as well as certain ancillary services such as training and extended warranties. Contracts with each customer generally state the terms of the sale, including the description, quantity and price of each product or service. Payment terms are stated in the contract and vary according to the arrangement. Because the customer typically agrees to a stated rate and price in the contract that does not vary over the life of the contract, the Company’s contracts do not contain variable consideration. The Company also establishes a provision for estimated warranty expense.

10

Performance Obligations

At contract inception, the Company assesses the products and services promised in its contracts with customers. The Company then identifies performance obligations to transfer distinct products or services to the customers. In order to identify performance obligations, the Company considers all of the products or services promised in contracts regardless of whether they are explicitly stated or are implied by customary business practices.

Revenue from products and services transferred to customers at a single point in time accounted for 77% and 81% of net revenue for the three and nine months ended September 30, 2019, respectively, and 85% and 85% for the three and nine months ended September 30, 2018, respectively. The majority of the Company’s revenue recognized at a point in time is for the sale of laser systems, imaging systems, and consumables. Revenue from these contracts is recognized when the customer is able to direct the use of and obtain substantially all of the benefits from the product which generally coincides with title transfer during the shipping process.

Revenue from services transferred to customers over time accounted for 23% and 19% of net revenue for the three and nine months ended September 30, 2019, respectively, and 15% and 15% for the three and nine months ended September 30, 2018, respectively. The majority of the Company’s revenue that is recognized over time relates to product training and extended warranties. Deferred revenue attributable to undelivered elements, which primarily consists of product training, totaled approximately $0.6 million and $0.7 million as of September 30, 2019 and December 31, 2018, respectively.

Transaction Price Allocation

The transaction price for a contract is allocated to each distinct performance obligation and recognized as revenue when, or as, each performance obligation is satisfied. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using the best estimate of the standalone selling price of each distinct good or service in a contract. The primary method used to estimate standalone selling price is the observable price when the good or service is sold separately in similar circumstances and to similar customers.

Significant Judgments

Revenue is recorded for extended warranties over time as the customer benefits from the warranty coverage. This revenue will be recognized equally throughout the contract period as the customer receives benefits from the Company's promise to provide such services. Revenue is recorded for product training as the customer attends a training program or upon the expiration of the obligation, which is generally after nine months.

The Company also has contracts that include both the product sales and product training as performance obligations. In those cases, the Company records revenue for product sales at the point in time when the product has been shipped. The customer obtains control of the product when it is shipped, as all shipments are made FOB shipping point, and after the customer selects its shipping method and pays all shipping costs and insurance. The Company has concluded that control is transferred to the customer upon shipment.

Accounts Receivable

Accounts receivable are stated at estimated net realizable value. The allowance for bad debts is based on an analysis of customer accounts and the Company’s historical experience with accounts receivable write-offs. In the third quarter of 2019, the Company increased its allowance for doubtful accounts reserve by approximately $1.1 million relating to our distributor in China.  

11

Contract Liabilities

The Company performs its obligations under a contract with a customer by transferring products and/or services in exchange for consideration from the customer. The Company typically invoices its customers as soon as control of an asset is transferred and a receivable for the Company is established. The Company, however, recognizes a contract liability when a customer prepays for goods and/or services and the Company has not transferred control of the goods and/or services. The opening and closing balances of the Company’s contract liabilities are as follows (in thousands):

	September 30,		December 31,
	2019		2018
Undelivered elements (training, installation, product and    support services)	$	566	$	730
Extended warranty contracts		1,940		1,735
Deferred royalties		6		11
Total deferred revenue		2,512		2,476
Less long-term portion of deferred revenue		—		—
Deferred revenue — current	$	2,512	$	2,476

The balance of contract assets was immaterial as the Company did not have a significant amount of uninvoiced receivables at September 30, 2019 and December 31, 2018.

The amount of revenue recognized during the three-month period ended September 30, 2019 and September 30, 2018 and included in the opening contract liability balance related to undelivered elements was $0.1 million and $0.2 million, respectively. The amount of revenue recognized during the nine-month period ended September 30, 2019 and September 30, 2018 and included in the opening contract liability balance was $0.5 million and $0.8 million, respectively. Revenue recognized during 2018 and 2019 relating to deferred royalties was not material in either period.

Disaggregation of Revenue

The Company disaggregates revenue from contracts with customers into geographical regions and by the timing of when goods and services are transferred. The Company determined that disaggregating revenue into these categories depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by regional economic factors.

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The Company’s revenues related to the following geographic areas were as follows for the periods indicated (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
United States	$	4,949	$	6,953	$	16,962	$	19,810
International		3,697		3,983		10,655		13,300
	$	8,646	$	10,936	$	27,617	$	33,110

Information regarding revenues disaggregated by the timing of when goods and services are transferred is as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Revenue recognized over time	$	1,997	$	1,594	$	5,267	$	4,848
Revenue recognized at a point in time		6,649		9,342		22,350		28,262
Total	$	8,646	$	10,936	$	27,617	$	33,110

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
End-customer	$	3,727	$	7,387	$	11,068	$	21,093
Distributors		4,919		3,549		16,549		12,017
	$	8,646	$	10,936	$	27,617	$	33,110

The Company provides the equipment and any related services directly to the customer. The Company has inventory risk before the equipment is transferred to a customer. The Company purchases and obtains the goods before obtaining a contract with a customer. The Company also has discretion in establishing the price sold to the customer for the equipment.

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The percentages of the Company’s sales by product line were as follows for the periods indicated:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Laser systems		59.8	%		64.5	%		58.1	%		62.5	%
Imaging systems		—	%		3.5	%		2.2	%		4.0	%
Consumables and other		17.1	%		17.4	%		20.6	%		18.9	%
Services		23.1	%		14.6	%		19.1	%		14.6	%
License fees and royalties		—	%		—	%		—	%		—	%
		100.0	%		100.0	%		100.0	%		100.0	%

Shipping and Handling Costs and Revenues

Shipping and freight costs are treated as fulfillment costs. For shipments to end-customers, the customer bears the shipping and freight costs and has control of the product upon shipment. For shipments to distributors, the distributor bears the shipping and freight costs, including insurance, tariffs and other import/export costs.

NOTE 4—STOCKHOLDERS’ (DEFICIT) EQUITY

On October 29, 2019, the Company successfully consummated an underwritten public offering of 7,820,000 shares of BIOLASE common stock and a concurrent private placement of 69,695 shares of BIOLASE Series E Participating Convertible Preferred Stock, and on November 5, 2019, the underwriters of the public offering exercised their over-allotment option to acquire additional shares of BIOLASE common stock. The underwritten public offering and concurrent private placement resulted in net proceeds of $8.4 million after deducting underwriter discounts and other fees and expenses. See Note 15 for additional information.

Reverse Stock Split

At BIOLASE’s annual meeting of stockholders on May 9, 2018 (the “2018 Annual Meeting”), BIOLASE stockholders approved an amendment to BIOLASE’s Restated Certificate of Incorporation, as amended, to effect the Reverse Stock Split and on May 10, 2018, the Company filed an amendment (the “Amendment”) to its Restated Certificate of Incorporation, as amended, with the Secretary of State of the State of Delaware to effect the Reverse Stock Split, effective as of 11:59 p.m. on May 10, 2018. The Amendment also reduced the authorized shares of common stock from 200,000,000 shares to 40,000,000 shares. Prior year share and per share amounts have been adjusted to reflect the impact of the Reverse Stock Split.

Stock-Based Compensation

2002 Stock Incentive Plan

The 2002 Stock Incentive Plan (as amended effective as of May 26, 2004, November 15, 2005, May 16, 2007, May 5, 2011, June 6, 2013, October 30, 2014, April 27, 2015, and May 6, 2016, the “2002 Plan”) was replaced by the 2018 Plan (as defined below) with respect to future equity awards. Persons eligible to receive awards under the 2002 Plan included officers, employees, and directors of the Company, as well as consultants. As of September 30, 2019, a total of approximately 3.1 million shares of the Company’s common stock have been authorized for issuance under the 2002 Plan, of which approximately 1.0 million shares of the Company’s common stock have been issued pursuant to options that were exercised and restricted stock units (“RSUs”) that were settled in common stock and 1.3 million shares of common stock have been reserved for outstanding options and unvested RSUs, and no shares are available for future grants.

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2018 Stock Incentive Plan

At the 2018 Annual Meeting, the Company’s stockholders approved the 2018 Long-Term Incentive Plan (as amended, the “2018 Plan”), which was amended by Amendment No. 1 to the 2018 Plan, approved by the Company’s stockholders at a special meeting on September 21, 2018 and Amendment No. 2 to the 2018 Plan, approved by the Company’s stockholder’s at its annual meeting of stockholders on May 15, 2019. The purposes of the 2018 Plan are (i) to align the interests of the Company’s stockholders and recipients of awards under the 2018 Plan by increasing the proprietary interest of such recipients in the Company’s growth and success; (ii) to advance the interests of the Company by attracting and retaining non-employee directors, officers, other employees, consultants, independent contractors and agents; and (iii) to motivate such persons to act in the long-term best interests of the Company and its stockholders.

Subject to the terms and conditions of the 2018 Plan, the number of shares authorized for grants under the 2018 Plan is 5.0 million. As of September 30, 2019, a total 3.9 million shares of the Company’s common stock have been reserved for outstanding options and unvested RSUs, and 1.1 million shares of common stock remain available for future grants.

The Company recognized stock-based compensation expense of $0.8 million and $0.5 million, for the three months ended September 30, 2019 and2018, respectively, and $1.9 million and $1.9 million for the nine months ended September 30, 2019 and September 30, 2018, respectively, based on the grant-date fair value. As of nine months ended September 30, 2019 the Company had approximately $2.3 million of total unrecognized compensation expense, net of estimated forfeitures, related to unvested share-based compensation arrangements. The Company expects that expense to be recognized over a weighted-average period of 1.69 years.

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Cost of revenue	$	94	$	127	$	229	$	289
Sales and marketing		173		134		411		368
General and administrative		442		258		1,167		932
Engineering and development		61		85		167		273
	$	770	$	604	$	1,974	$	1,862

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

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Expected term	6.1 years			5.9 years			6.1 years			5.9 years
Volatility		85.4	%		81.9	%		85.4	%		81.4	%
Annual dividend per share	$	—		$	—		$	—		$	—
Risk-free interest rate		2.60	%		2.90	%		2.60	%		2.50	%

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A summary of option activity for the nine months ended September 30, 2019 is as follows (in thousands, except per share data):

						Weighted Average
				Weighted		Remaining
				Average		Contractual		Aggregate
	Shares			Exercise Price		Term (Years)		Intrinsic Value(1)
Options outstanding, December 31, 2018		1,623		$	6.54			$	—
Granted at fair market value		70		$	2.08
Exercised		(2	)	$	2.10
Forfeited, cancelled, or expired		(332	)	$	7.27
Options outstanding at September 30, 2019		1,359		$	6.14		5.63	$	—
Options exercisable at September 30, 2019		1,080		$	7.00		5.01	$	—
Vested options expired during the period    ended September 30, 2019		124		$	9.08

(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.

A summary of unvested stock option activity for the nine months ended September 30, 2019 is as follows (in thousands, except per share data):

				Weighted
				Average Grant
	Shares			Date Fair Value
Unvested options at December 31, 2018		522		$	2.11
Granted		70		$	1.51
Vested		(229	)	$	2.55
Forfeited or cancelled		(84	)	$	2.39
Unvested options at September 30, 2019		279		$	1.59

Cash proceeds, along with fair value disclosures related to grants, exercises and vested options are as follows (in thousands, except per share amounts):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Proceeds from stock options exercised	$	—	$	—	$	3	$	2
Tax benefit related to stock options    exercised (1)	N/A		N/A		N/A		N/A
Intrinsic value of stock options exercised (2)	$	—	$	—	$	—	$	—
Weighted-average fair value of options    granted during period	$	—	$	1.02	$	1.53	$	1.38
Total fair value of shares vested during the    period	$	—	$	164	$	683	$	1,008

(1) Excess tax benefits received related to stock option exercises are presented as operating 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.

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Restricted Stock Units

The Company granted approximately 1.9 million and 2.2 million RSUs during the three and nine months ended September 30, 2019, respectively.

A summary of unvested RSU activity for the nine months ended September 30, 2019 is as follows (in thousands, except per share amounts):

				Weighted
				Average Grant
	Shares			Date Fair Value
Unvested RSUs at December 31, 2018		2,163		$	1.84
Granted		1,851		$	2.08
Vested		(841	)	$	1.74
Forfeited or cancelled		(113	)	$	2.37
Unvested RSUs at September 30, 2019		3,060		$	1.87

Warrants

The Company issues warrants to acquire shares of its common stock as approved by the Board. A summary of warrant activity for the nine months ended September 30, 2019 is as follows (in thousands, except exercise price amounts):

			Weighted
			Average
	Shares		Exercise Price
Warrants outstanding, December 31, 2018		1,934	$	6.62
Granted or Issued		149	$	2.22
Exercised		—	$	—
Forfeited, cancelled, or expired		—	$	—
Warrants outstanding at September 30, 2019		2,083	$	6.30
Warrants exercisable at September 30, 2019		2,083	$	6.30
Vested warrants expired during the quarter ended    September 30, 2019		—	$	—

See Note 9 for additional information on the Western Alliance Warrants, the SWK Warrants, and the DPG Warrants (each as defined below).

Net Loss Per Share – Basic and Diluted

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

Outstanding stock options, RSUs and warrants to purchase approximately 5.6 million shares were not included in the calculation of diluted loss per share for the three and nine months ended September 30, 2019, as their effect would have been anti-dilutive. For the same 2018 periods, anti-dilutive outstanding stock options and warrants to purchase 3.2 million shares were not included in the computation of diluted loss per share.

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NOTE 5—INVENTORY

Inventory is valued at the lower of cost or net realizable value and is comprised of the following (in thousands):

	September 30,		December 31,
	2019		2018
Raw materials	$	3,714	$	3,590
Work-in-process		1,164		1,435
Finished goods		6,659		7,223
Inventory	$	11,537	$	12,248

Inventory includes write-downs for excess and obsolete inventory totaling approximately $0.8 million and $1.1 million as of September 30, 2019 and December 31, 2018, respectively.

NOTE 6—PROPERTY, PLANT, AND EQUIPMENT

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

	September 30,			December 31,
	2019			2018
Building	$	203		$	213
Leasehold improvements		2,003			2,004
Equipment and computers		7,421			7,277
Furniture and fixtures		634			634
Construction in progress		21			25
		10,282			10,153
Accumulated depreciation and amortization		(9,100	)		(8,344	)
		1,182			1,809
Land		158			166
Property, plant, and equipment, net	$	1,340		$	1,975

Depreciation and amortization expense related to property, plant, and equipment totaled $0.2 million and $0.8 million for the three and nine months ended September 30, 2019, respectively, and $0.2 million and $0.7 million for the three and nine months ended September 30, 2018, respectively.

NOTE 7—INTANGIBLE ASSETS AND GOODWILL

The Company conducted its annual impairment test of goodwill as of June 30, 2019 and determined that there was no impairment. The Company also tests its intangible assets and goodwill between the annual impairment tests if events occur or circumstances change that would more likely than not reduce the fair value of the Company or its assets below their carrying amounts. For intangible assets subject to amortization, the Company performs its impairment test when indicators, such as reductions in demand or significant economic slowdowns, are present. No events have occurred since June 30, 2019 through the date of these unaudited consolidated financial statements that would trigger further impairment testing of the Company’s intangible assets and goodwill.

As of September 30, 2019 and December 31, 2018, the Company had goodwill of $2.9 million. As of September 30, 2019 and December 31, 2018, all intangible assets have been fully amortized and no amortization expense was recognized during the three and nine months ended September 30, 2019 and 2018.

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NOTE 8—ACCRUED LIABILITIES

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

	September 30,		December 31,
	2019		2018
Payroll and benefits	$	1,726	$	2,400
Patent litigation settlement		—		1,500
Warranty accrual, current portion		954		861
Lease liability		476		—
Accrued professional services		992		1,044
Taxes		255		714
Accrued insurance premium		—		328
Customer deposits		82		21
Other		465		670
Total accrued liabilities	$	4,950	$	7,538

Changes in the initial product warranty accrual and the expenses incurred under the Company’s initial and extended warranties for the three and nine months ended September 30, 2019 and 2018 are included within accrued liabilities on the Consolidated Balance Sheets and were as follows (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Balance, beginning of period	$	1,498		$	1,359		$	1,308		$	1,190
Provision for estimated warranty cost		523			203			1,145			827
Warranty expenditures		(366	)		(182	)		(798	)		(637	)
Balance, September 30		1,655			1,380			1,655			1,380
Less warranty accrual, long-term		701			375			701			375
Total warranty accrual, current portion	$	954		$	1,005		$	954		$	1,005

The Company’s Waterlase laser systems sold worldwide are covered by a warranty against defects in material and workmanship for a period of up to 16 months domestically and up to 28 months internationally, from the date of sale by the Company or a distributor to the end-user. The Company’s Diode systems sold worldwide are covered by a warranty against defects in material and workmanship for a period of up to 28 months from the date of sale by the Company or a distributor to the end-user.

NOTE 9—DEBT

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

	September 30,			December 31,
	2019			2018
Term loan	$	15,000		$	12,500
Discount and debt issuance costs on term loan		(1,644	)		(1,664	)
Total long-term debt, net	$	13,356		$	10,836

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Line of Credit

On March 6, 2018, BIOLASE and two of its wholly-owned subsidiaries (such subsidiaries, together with BIOLASE, the “Borrower”) entered into the Business Financing Agreement (the “Business Financing Agreement”) with Western Alliance Bank (“Western Alliance”).Pursuant to the terms and conditions of the Business Financing Agreement, Western Alliance agreed to provide the Borrower a secured revolving line of credit permitting the Borrower to borrow or receive letters of credit up to the lesser of $6.0 million (the “Domestic Revolver”) (subject to a $6.0 million credit limit relating to domestic eligible accounts receivable (the “Domestic Credit Limit”) and a $3.0 million credit limit relating to export-related (the “EXIM Revolver”) eligible accounts receivable (the “EXIM Credit Limit”)) and the borrowing base, which is defined as the sum of the domestic borrowing base (up to 75% of the Borrower’s eligible domestic accounts receivable less such reserves as Western Alliance may deem proper and necessary) and the export-related borrowing base (up to 85% of the Borrower’s eligible export-related accounts receivable less such reserves as Western Alliance may deem proper and necessary). The Business Financing Agreement was set to expire on March 6, 2020, and the Borrower’s obligations thereunder were secured by a security interest in all of the Borrower’s assets.

The Business Financing Agreement required the Company to maintain compliance with certain financial and non-financial covenants, as defined therein. Western Alliance had the right to declare the amounts outstanding under the Business Financing Agreement immediately due and payable upon a default.

Amounts outstanding under the Business Financing Agreement bore interest at a per annum floating rate equal to the greater of 4.5% or the “Prime Rate” published in the Money Rates section of the Western Edition of The Wall Street Journal (or such other rate of interest publicly announced from time to time by Western Alliance as its “Prime Rate”), plus 1.5% with respect to advances made under the line of credit, plus an additional 5.0% during any period that an event of default occurred and was continuing. The commitment fee under the Business Financing Agreement was 0.25% of the Domestic Credit Limit and 1.75% of the EXIM Credit Limit, payable on March 6, 2018 and each anniversary thereof. 

Pursuant to the Business Financing Agreement, the Company paid the first of two annual commitment fees totaling $67,500, being 0.25% of the aggregate $6.0 million commitment for the Domestic Revolver and 1.75% of the aggregate $3.0 million commitment for the EXIM Revolver. The commitment fees and the legal costs associated with acquiring the credit facilities were capitalized and were amortized on a straight-line basis as interest expense over the term of the Business Financing Agreement.

As additional consideration for the lines of credit, the Company also issued to Western Alliance warrants to purchase shares of its common stock (the “Original Western Alliance Warrants”). The fair value of the Original Western Alliance Warrants was estimated using the Black-Scholes option-pricing model with the following assumptions: expected term of 10 years; volatility of 91.49%; annual dividend per share of $0.00; and risk-free interest rate of 2.88%; and resulted in an estimated fair value of $0.1 million, which was recorded as a liability and resulted in a discount to the credit facilities at issuance. The discount was expensed to interest expense at the time the Business Financing Agreement was terminated, as discussed below.

On August 13, 2018, the Borrower and Western Alliance entered into a Waiver and Business Financing Modification Agreement, pursuant to which Western Alliance waived certain of the Borrower’s covenants under the Business Financing Agreement and provided an advance of $1.5 million, which advance was due by September 27, 2018.

On September 27, 2018, the Borrower and Western Alliance entered into a second Business Financing Modification Agreement which reduced the credit limit under the Business Financing Agreement to $2.5 million and extended the due date of the $1.5 million advance to March 6, 2019. In connection with the agreement, the Original Western Alliance Warrants were terminated, and the Company issued to Western Alliance new warrants (the “Western Alliance Warrants”) to purchase up to 56,338 shares of the Company’s common stock. The Western Alliance Warrants are immediately exercisable and expire on September 27, 2028. These warrants contain down-round features that require the Company to adjust the exercise price proportionately should the Company issue shares at a price less than the $2.13 per share exercise price.

20

On October 22, 2018, the Borrower and Western Alliance entered into a third Business Financing Modification Agreement, pursuant to which Western Alliance waived BIOLASE’s non-compliance with certain financial operating covenants as set forth in the Business Financing Agreement, and the Borrower agreed to certain amended covenants contained in the Business Financing Agreement, including a $300,000 minimum unrestricted cash balance covenant and a waiver of reporting items required to be delivered by BIOLASE to Western Alliance under the Business Financing Agreement.

On November 9, 2018, all outstanding borrowings, accrued interest and fees under the Business Financing Agreement were repaid with a portion of the proceeds under the Credit Agreement (as defined and described below), and the Business Financing Agreement was terminated. The Company recorded approximately $0.1 million of interest expense including unamortized debt issuance costs that were written-off upon extinguishment of the debt. As of September 30, 2019 and December 31, 2018, the Western Alliance Warrants remain outstanding and are classified in equity in the consolidated balance sheets.

Term Loan

On November 9, 2018, the Company entered into a five-year secured Credit Agreement (the “Credit Agreement”) with SWK Funding LLC (“SWK”), pursuant to which the Company has borrowed $12.5 million (the “SWK Loan”). The Company’s obligations under the Credit Agreement are secured by substantially all of the Company’s assets. Under the terms of the Credit Agreement, repayment of the loan is interest-only for the first two years, paid quarterly with the option to extend the interest-only period. Principal repayments will begin in the first quarter of 2021 and will be approximately $0.7 million quarterly until the loan matures in the fourth quarter of 2023. The loan bears interest at London Interbank Bank Offered Rate (“LIBOR”) plus 10% or another index that approximates LIBOR as close as possible if and when LIBOR no longer exists. Approximately $0.9 million of the proceeds from the SWK Loan were used to pay off all amounts owed to Western Alliance under the Business Financing Agreement. The Company plans to use the remaining proceeds to provide additional working capital to fund its growth initiatives, such as broadening its customer base and increasing the utilization of its products to drive recurring higher margin consumables revenue.

The Credit Agreement contains financial and non-financial covenants requiring the Company to, among other things, (i) maintain unencumbered liquid assets of no less than $1.5 million or the sum of aggregate cash flow from operations less capital expenditures, (ii) achieve certain revenue and EBITDA levels during the first two years of the loan, (iii) limit future borrowing, investments and dividends, and (iv) submit monthly and quarterly financial reporting.

In connection with the SWK Loan, the Company paid approximately $1.0 million in debt issuance costs, including a $0.2 million loan origination fee, a $0.4 million finder’s fee, and $0.4 million in legal and other fees. These costs were recognized as a discount on the SWK Loan and are being amortized on a straight-line basis over the loan term which approximates the effective-interest method.

The Company recognized approximately $0.6 and $1.6 million in interest expense relating to the SWK Loan for the three and nine-month periods ended September 30, 2019, respectively. The weighted-average interest rate for the three months ended September 30, 2019 was 12.7%.

21

As of March 31, 2019, the Company was not in compliance with certain covenants in the Credit Agreement. In May 2019, SWK granted the Company a waiver of such covenants through September 30, 2019. On May 7, 2019, the Company and SWK agreed to amend the Credit Agreement (the “First Amendment) to increase the total commitment from $12.5 million to $15.0 million, and to revise the financial covenants to (a) adjust minimum revenue and EBITDA levels, (b) require the Company to have a shelf registration statement declared effective by the SEC before September 30, 2019, with a proposed maximum aggregate offering price of at least $10.0 million if the Company does not reach set minimum revenue levels for the three-month period ended June 30, 2019, and (c) require minimum liquidity of $1.5 million at all times. The First Amendment provides that if aggregate minimum revenue and EBITDA levels are not achieved by September 30, 2019, the minimum liquidity requirement will be increased to $3.0 million, until the Company has obtained additional equity or debt funding of no less than $5.0 million.

In connection with the amendment, the Company paid to SWK loan origination and other fees of approximately $0.1 million payable in cash and approximately $0.2 million in additional SWK Warrants (as defined below) to purchase the Company’s common stock. The Company paid an additional finder’s fee to Deal Partners Group (“DPG”) of approximately $0.1 million in cash and $0.1 million in additional DPG Warrants (as defined below) to purchase the Company’s common stock. The Company accounted for the First Amendment as a modification to existing debt and as a result, recognized the amounts paid to SWK in cash and SWK warrants as additional debt issuance costs. Amounts paid to DPG in cash and warrants relating to the First Amendment were expensed as incurred in the Company’s consolidated statement of operations for the three and nine months ended September 30, 2019.

On August 20, 2019, BIOLASE, entered into a Letter Agreement (the “Letter Agreement”) with SWK, in connection with the Credit Agreement. Pursuant to the Letter Agreement, SWK agreed to waive the effect of the Company’s potential non-compliance with certain unencumbered liquid assets financial operating covenants as set forth in the Credit Agreement, and SWK agreed to forbear from exercising rights and remedies otherwise available to it in the event of such non-compliance through September 30, 2019, or earlier in the event of the consummation of an additional secured financing or an event of default under the Credit Agreement.

On September 30, 2019, the Company agreed to further amend the Credit Agreement (the “Second Amendment”) with SWK, in connection with that certain Credit Agreement, by and among the Company, SWK, and the lender parties thereto.  The Second Amendment provides for a revolving loan facility, secured by first lien security permitted inventory and accounts receivable revolving loan facility, secured by a first lien security interest in the Company’s inventory and accounts receivable, with a maximum principal amount of $5 million. In addition, SWK agreed to waive the effect of the Company’s non-compliance through October 31, 2019, with certain unencumbered liquid assets financial operating covenants as set forth in the Credit Agreement, and SWK agreed to forbear from exercising rights and remedies otherwise available to it in the event of the consummation of an additional equity or subordinated debt financing with gross proceeds of not less than $5 million or an event of a default under the Credit Agreement.

On November 6, 2019, the Company agreed to further amend the Credit Agreement (the “Third Amendment”). Pursuant to the Third Amendment, SWK granted the Company a waiver of the Company’s non-compliance with certain financial covenants in the Credit Agreement. Also pursuant to the Third Amendment, the Company and SWK agreed to (i) revise financial covenants to adjust minimum revenue and EBITDA levels and (ii) remove the automatic increase of the minimum liquidity requirement based on certain aggregate minimum revenue and EBITDA levels as of September 30, 2019 (which was added pursuant to the First Amendment).

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SWK Warrants

In connection with the Credit Agreement, as amended, the Company issued warrants to SWK (the “SWK Warrants”) on November 9, 2018 to purchase up to 372,023 and on May 7, 2019, to purchase up to 115,175 shares of the Company’s common stock. The SWK Warrants are immediately exercisable and expire 7 years after the issuance date. The exercise price of the SWK Warrants issued on November 9, 2018 is $1.34 and the exercise price of the SWK Warrants issued on May 7, 2019 is $2.17, both of which were based on the average closing price of the Company’s common stock for the ten trading days immediately preceding the issuance date. These warrants contain down-round features that require the Company to adjust the exercise price proportionately should the Company issue shares at a price per share less than the exercise price. The fair value of the 372,023 SWK Warrants issued on November 9, 2018 was $0.4 million and estimated using the Black-Scholes option-pricing model with the following assumptions: expected term of 8 years; volatility of 81.79%; annual dividend per share of $0.00; and risk-free interest rate of 3.13%. The fair value of the 115,175 SWK Warrants issued on May 7, 2019 was $0.2 million and estimated using a binomial option pricing model with the following assumptions: expected term of 8 years; volatility of 80.73%; annual dividend per share of $0.00; and a risk-free rate of 2.37%.

In connection with the Third Amendment, the Company consolidated the SWK Warrants issued to SWK on November 9, 2018 and May 7, 2019. The terms of the SWK Warrants remained the same.

DPG Warrants

In connection with the SWK Loan, the Company paid a finder’s fee to DPG of $0.5 million cash and issued warrants (“the DPG warrants) on November 9, 2018 to purchase up to 279,851 shares of common stock and on May 7, 2019 to purchase up to 34,552 shares of the Company’s common stock. The DPG Warrants are exercisable immediately and expire 7 years after the issuance date. The exercise price of the DPG Warrants issued on November 9, 2018 is $1.34 and the exercise price of the DPG warrants issued on May 7, 2019 is $2.17, both of which were based on the average closing price of the Company’s common stock for the ten trading days immediately preceding the issuance date. These warrants contain down-round features that require the Company to adjust the exercise price proportionately should the Company issue shares at a price per share less than the exercise price. The fair value of the 279,851 DPG Warrants issued on November 9, 2018 was $0.3 million was estimated using the Black Scholes option pricing model with the following assumptions: expected term of 8 years; volatility of 81.79%; annual dividend per share of $0.00; and risk-free interest rate of 3.13%. The fair value of the 34,552 DPG Warrants issued on May 7, 2019 was $0.1 million and estimated using a binomial option pricing model with the following assumptions: expected term of 8 years; volatility of 80.73%; annual dividend per share of $0.00; and a risk-free rate of 2.37%.

The value of both of the SWK Warrants issued in 2018 and 2019 and the DPG Warrants issued in 2018, was recognized as a discount on the SWK Loan and is being amortized on a straight-line basis which approximates the effective-interest method, over the loan term of five years. The value of the DPG Warrants issued in 2019 in connection with the First Amendment were expensed in the three-month period ended September 30, 2019.

Additionally, based on the adoption of ASU 2017-11 in the fourth quarter of 2018, these warrants are classified as equity in the consolidated Balance Sheets as of September 30, 2019 and December 31, 2018.

The future minimum principal and interest payments as of September 30, 2019 are as follows (in thousands):

	Principal		Interest (1)
2019 (three months)	$	—	$	484
2020		—		1,931
2021		2,100		1,848
2022		2,800		1,517
2023		10,100		1,063
Total future payments	$	15,000	$	6,843
(1) estimated using LIBOR rates as at September 30, 2019

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NOTE 10— LEASES

The Company enters into operating leases primarily for real estate, office equipment, and fleet vehicles. Lease terms generally range from one to five years, and often include options to renew for one year. On January 1, 2019, the Company adopted Topic 842, using the modified-retrospective approach as discussed in Note 2, and as a result recognized a right-of-use asset of approximately $0.8 million as adjusted for deferred rent at the date of adoption of $0.2 million, and a lease liability of approximately $1.0 million. No cumulative-effect adjustment to retained earnings was required upon adoption of Topic 842. Right-of-use assets are recorded in Other assets and lease liabilities are included in Accrued liabilities or Other liabilities depending on whether they are current or noncurrent. Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate (“IBR”) to determine the present value of the lease payments and on the date of adoption, the Company determined its IBR to be 12.78%. This rate was based on the Company’s financing of the SWK Loan which is a collateralized loan, and was based on prevailing market rates during the fourth quarter of 2018.

Information related to the Company’s right-of-use assets and related liabilities were as follows (in thousands):

	Nine Months Ended
	September 30, 2019
Cash paid for operating lease liabilities	$	606
Right-of-use assets obtained in exchange for new operating lease    obligations		803
Weighted-average remaining lease term	1.4 years
Weighted-average discount rate		12.8	%

The Company allocates lease cost amongst lease and non-lease components. The Company excludes short-term leases (those with lease terms of less than one year at inception) from the measurement of lease liabilities or right-of-use assets.

Maturities of lease liabilities as of September 30, 2019 were as follows (in thousands):

Due in 12 month period ended September 30,
2020	$	484
2021		45
Thereafter		—
	$	529
Less imputed interest		(38	)
Total lease liabilities	$	491
Current operating lease liabilities		476
Non-current lease liabilities		15
Total lease liabilities	$	491

As of September 30, 2019, right-of-use assets were $0.4 million and lease liabilities were $0.6 million. During the three and nine months ended September 30, 2019, the Company did not enter into any new lease arrangements, nor did it have any arrangements that had not commenced.

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Future minimum rental commitments under lease agreements, as of September 30, 2019, with non-cancelable terms greater than one year for each of the periods ending September 30, are as follows (in thousands):

	Period Ended September 30, 2019
2019 (three months)	$	192
2020		314
2021		23
2022 and thereafter		—
Total future minimum lease obligations	$	529

NOTE 11— COMMITMENTS AND CONTINGENCIES

On April 24, 2012, CAO Group, Inc. (“CAO”) filed a lawsuit against BIOLASE in the District of Utah alleging that BIOLASE’s ezlase dental laser infringes on U.S. Patent No. 7,485,116 (the “116 Patent”). On September 9, 2012, CAO amended its complaint, adding claims for (1) business disparagement/injurious falsehood under common law and (2) unfair competition under 15 U.S.C. Section 1125(a). The additional claims stem from a press release that BIOLASE issued on April 30, 2012, which CAO claims contained false statements that are disparaging to CAO and its diode product. The amended complaint sought injunctive relief, treble damages, attorneys’ fees, punitive damages, and interest. Until January 24, 2018, this lawsuit was stayed in connection with United States Patent and Trademark Office proceedings relating to the 116 Patent, which proceedings ultimately culminated in a January 27, 2017 decision by the United States Court of Appeals for the Federal Circuit, affirming the findings of the Patent Trial and Appeal Board, which were generally favorable to the Company. On January 25, 2018, CAO moved for leave to file a second amended complaint to add certain claims, which filing the Company is not opposing.

On January 23, 2018, CAO filed a lawsuit against BIOLASE in the Central District of California alleging that BIOLASE’s diode lasers infringe on U.S. Patent Nos. 8,337,097, 8,834,497, 8,961,040 and 8,967,883. The complaint seeks injunctive relief, treble damages, attorneys’ fees, punitive damages, and interest.

On January 25, 2019 (the “Effective Date”), BIOLASE entered into a settlement agreement (the “Settlement Agreement”) with CAO. Pursuant to the Settlement Agreement, CAO agreed to dismiss with prejudice the lawsuits filed by CAO against the Company in April 2012 and January 2018. In addition, CAO granted to the Company and its affiliates a non-exclusive, non-transferable (except as provided in the Settlement Agreement), royalty-free, fully-paid, worldwide license to the licensed patents for use in the licensed products and agreed not to sue the Company, its affiliates or any of its manufacturers, distributors, suppliers or customers for use of the licensed patents in the licensed products, and the parties agreed to a mutual release of claims. The Company has agreed (i) to pay to CAO, within five days of the Effective Date, $500,000 in cash, (ii) to issue to CAO, within 30 days of the Effective Date, 500,000 restricted shares of common stock of the Company (the “Stock Consideration”), and (iii) to pay to CAO, within 30 days of December 31, 2021, an amount in cash equal to the difference (if positive) between $1,000,000 and the value of the Stock Consideration on December 31, 2021. The Stock Consideration vests and becomes transferrable on December 31, 2021, subject to the terms of a restricted stock agreement to be entered into between the parties. The Company considered this a Type I subsequent event and recognized a $1.5 million contingent loss on patent litigation settlement in its statement of operations for the year ended December 31, 2018. In January 2019, the Company paid CAO $500,000 in cash. On January 31, 2019, the case was dismissed with prejudice. During the three and nine month periods ended September 30, 2019, the Company did not record any gain or loss on patent litigation which represents the change in fair value of the restricted stock to be issued to CAO. As of September 30, 2019, the total accrued liability is $1.0 million and is included in other long-term liabilities in the consolidated balance sheet.

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NOTE 12—SEGMENT INFORMATION

The Company currently operates in a single business segment. Management uses one measurement of profitability and does not segregate its business for internal reporting. For the three and nine months ended September 30, 2019, sales to customers in the United States accounted for approximately 57% and 61% of net revenue, respectively, and international sales accounted for approximately 43% and 39% of net revenue, respectively. No individual country, other than the United States, represented more than 10% of total net revenue during the three and nine months ended September 30, 2019 or 2018.

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
United States	$	4,949	$	6,953	$	16,962	$	19,810
International		3,697		3,983		10,655		13,300
	$	8,646	$	10,936	$	27,617	$	33,110

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

	September 30,		December 31,
	2019		2018
United States	$	1,060	$	1,673
International		280		302
	$	1,340	$	1,975

NOTE 13—CONCENTRATIONS

Revenue from the Company’s products for the three and nine months ended September 30, 2019 and 2018 are as follows (dollars in thousands):

	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2019				2018				2019				2018
Laser systems	$	5,167	59.8	%	$	7,055	64.5	%	$	16,047	58.1	%	$	20,678	62.5	%
Imaging systems		4	—	%		382	3.5	%		619	2.2	%		1,336	4.0	%
Consumables and other		1,478	17.1	%		1,902	17.4	%		5,678	20.6	%		6,239	18.9	%
Services		1,994	23.1	%		1,594	14.6	%		5,264	19.1	%		4,848	14.6	%
License fees and royalties		3	—	%		3	—	%		9	—	%		9	—	%
Net revenue	$	8,646	100.0	%	$	10,936	100.0	%	$	27,617	100.0	%	$	33,110	100.0	%

No individual customer represented more than 10% of the Company’s net revenue for the three and nine months ended September 30, 2019 or 2018.

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.

There were no individual customers that represented more than 10% of the Company’s accounts receivable at September 30, 2019, and one individual customer that represented more than 10% of the Company’s accounts receivable at December 31, 2018.

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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NOTE 14—INCOME TAXES

The Company accounts for income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Management evaluates the need to establish a valuation allowance for deferred tax assets based upon the amount of existing temporary differences, the period in which they are expected to be recovered, and expected levels of taxable income. A valuation allowance to reduce deferred tax assets is established when it is “more likely than not” that some or all of the deferred tax assets will not be realized. Based on the Company’s 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 nine months ended September 30, 2019 and 2018. The Company does not expect any changes to its unrecognized tax benefit for the next 12 months that would materially impact its consolidated financial statements.

During the three and nine months ended September 30, 2019, the Company recorded an income tax provision of $26,000 and $68,000, respectively, resulting in an effective tax rate of 0.02% and 0.3%, respectively. During the three and nine months ended September 30, 2018, the Company recorded an income tax provision of $49,000 and $91,000, respectively, resulting in an effective tax rate of 0.5% and 0.6%, respectively. The income tax provisions for the three and nine months ended September 30, 2019 were calculated using the discrete year-to-date method. The effective tax rate differs from the statutory tax rate of 21% primarily due to the existence of valuation allowances against net deferred tax assets and current liabilities resulting from the estimated state income tax liabilities and foreign tax liability.

NOTE 15—SUBSEQUENT EVENTS

Public Offering and Concurrent Private Placement

On October 29, 2019, BIOLASE sold 7,820,000 shares of its common stock in an underwritten public offering (the “Public Offering”) at a public offering price of $0.5750 per share and received net proceeds of approximately $4.2 million, after deducting underwriting discounts, but before deducting other fees and expenses. The Company granted the underwriters of the Public Offering an over-allotment option to purchase up to an additional 1,173,000 shares of common stock at the public offering price, less the underwriting discount, which the underwriters exercised on November 5, 2019, for which it received approximately $0.6 million, after deducting underwriting discounts.Concurrently with the Public Offering, the company sold to certain existing shareholders an aggregate of 69,565 shares of Series E Participating Convertible Preferred Stock, par value $0.001 per share, at a per share price of $57.50 in a private placement, and received gross proceeds of approximately $4.0 million, before deducting fees and expenses. Each share of Series E Preferred Stock will be convertible into 100 shares of common stock reflecting a conversion price equal to $0.5750 per share, subject to customary anti-dilution adjustments. The shares of Series E Participating Convertible Preferred Stock automatically convert into shares of common stock upon a stockholder vote to approve an amendment of BIOLASE’s charter to increase the number of authorized shares of BIOLASE common stock and satisfy Nasdaq requirements with respect to the issuance of common stock upon conversion of the Series E Participating Convertible Preferred Stock.

On November 5, 2019, the underwriters exercised their over-allotment option and the Company issued an additional 1.1 million shares for gross proceeds of approximately $0.6 million.

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Loan Agreement

On October 28, 2019, BIOLASE entered into the Loan Agreement with Pacific Mercantile Bank, as Lender, which provides for the PMB Loan, a revolving line of credit in a maximum principal amount not to exceed the lesser of (i) $3 million or (ii) the sum of 90% of the Eligible Accounts (as defined in the Loan Agreement) plus 75% of the Eligible Inventory (as defined in the Loan Agreement, and subject to certain limitations set forth therein); provided that the maximum principal amount of the PMB Loan may be reduced from time to time in Lender’s good faith business judgment as set forth in the Loan Agreement. Borrowings under the PMB Loan may be used for working capital. The PMB Loan matures on October 28, 2021, unless earlier terminated.

BIOLASE’s obligations under the Loan Agreement are secured by a security interest in substantially all of BIOLASE’s property. No borrowings may be made under the Loan Agreement unless and until Exim Bank agrees to guarantee the PMB Loan and BIOLASE has entered into a borrower agreement with Exim Bank. Borrowings under the PMB Loan bear interest at a daily rate equal to the prime rate published in The Wall Street Journal, plus 1.5% per annum; provided, that the interest rate in effect on any day shall not be less than 6.0% per annum. Additionally, BIOLASE is required to pay an initial and annual fee of $52,500 to Exim Bank, as well as a termination fee equal to $30,000 in the event the Loan Agreement is terminated on or prior to October 28, 2020.

The Loan Agreement requires BIOLASE to maintain unrestricted cash at Lender plus unused availability under the PMB Loan in an amount equal to at least the Burn Rate (as defined in the Loan Agreement). In addition, the Loan Agreement contains customary affirmative and negative covenants for financings of its type (subject to customary exceptions). Upon the occurrence and during the continuation of an event of default (as described in the Loan Agreement), Lender may exercise any remedies available to it, including accelerating the repayment of the PMB Loan.

SWK Loan Amendment

On November 6, 2019, the Company agreed to further amend the Credit Agreement. Pursuant to the Third Amendment, SWK granted the Company a waiver of the Company’s non-compliance with certain financial covenants in the Credit Agreement. Also pursuant to the Third Amendment, the Company and SWK agreed to (i) revise financial covenants to adjust minimum revenue and EBITDA levels and (ii) remove the automatic increase of the minimum liquidity requirement based on certain aggregate minimum revenue and EBITDA levels as of September 30, 2019 (which was added pursuant to the First Amendment). In connection with the Third Amendment, the Company consolidated the SWK Warrants issued to SWK on November 9, 2018 and May 7, 2019. The terms of the SWK Warrants remained the same.

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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 Quarterly Report on Form 10-Q (this “Form 10-Q”) and our audited consolidated financial statements and related notes included in the Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission (the “SEC”) on March 8, 2019 (the “2018 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 statements, predictions, or expectations regarding market opportunities, our plans to expand our product line and clinical applications, plans to explore potential collaborations, statements regarding the effects of seasonality on revenue, operating expenses, anticipated use of proceeds from debt financing, anticipated cash needs, needs for additional financing, and any other statement that is not historical fact. Forward-looking statements are identified by the use of words such as “may,” “might,” “will,” “intend,” “should,” “could,” “can,” “would,” “continue,” “expect,” “believe,” “anticipate,” “estimate,” “predict,” “outlook,” “potential,” “plan,” “seek,” and similar expressions and variations or the negatives of these terms or other comparable terminology.

The forward-looking statements contained in this Form 10-Q are based on the expectations, estimates, projections, beliefs, and assumptions of our management based on information available to management as of the date on which this Form 10-Q was filed with the SEC, 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;

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

• inconsistencies between future data and our clinical results;

• competition from other companies, including those with greater resources;

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

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

• limitations on our ability to use net operating loss carryforwards;

• problems in manufacturing our products;

• warranty obligations if our products are defective;

• adverse publicity regarding our technology or products;

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

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

• rapidly changing standards and competing technologies;

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

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

• breaches of our information technology systems;

• seasonality;

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

• disruptions to our operations at our primary facility;

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

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

• failure to comply with the reporting obligations of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Section 404 of the Sarbanes-Oxley Act of 2002, as amended or maintain adequate internal control over financial reporting;

• climate change initiatives;

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

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

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

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

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

• risks relating to ownership of our common stock, including low liquidity, low trading volume, high volatility and dilution.

Further information about factors that could materially affect the Company, including our results of operations and financial condition, is contained under “Risk Factors” in Item 1A in the 2018 Form 10-K and in Item 1A to this Form 10-Q. Except as required by law, we undertake no obligation to revise or update any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, new information or changes to future results over time or otherwise.

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Overview

We are a medical device company that develops, manufactures, markets, and sells laser systems in dentistry and medicine. 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 FDA to market and sell our laser systems in the United States and also have the necessary registration to market and sell our laser systems in Canada, the European Union, and many other countries outside the United States. 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. We have approximately 144 issued and 79 pending U.S. and international patents, the majority of which are related to Waterlase technology. From 1998 through September 30, 2019, we sold over 40,000 laser systems in over 80 countries around the world. Contained in this total are approximately 13,200 Waterlase systems, including over 9,000 Waterlase MD, MDX, Express and iPlus systems.

Business and Outlook

Our Waterlase systems precisely cut hard tissue, bone, and soft tissue with minimal or no damage to surrounding tissue and dental structures. Our Diode systems, which include the Epic system, are designed to complement our Waterlase systems, and are used only in soft tissue procedures, pain therapy, hygiene, and cosmetic applications, including teeth whitening. The Diode systems, together with our Waterlase systems, offer practitioners a broad product line with a range of features and price points.

We also manufacture and sell consumable products and accessories for our laser systems. Our Waterlase and Diode systems use disposable laser tips of differing sizes and shapes depending on the procedure being performed. We also market flexible fibers and hand pieces that dental practitioners replace at some point after initially purchasing laser systems. For our Epic systems, we sell teeth whitening gel kits.

Due to the limitations associated with traditional and alternative dental instruments, we believe there is a large market opportunity for all-tissue dental laser systems that provide superior clinical outcomes, reduce the need to use anesthesia, help reduce trauma, pain, and discomfort associated with dental procedures, and increase patient acceptance for treatment protocols.

Our strategy is to increase awareness and demand for (i) our products among dental practitioners by educating dental practitioners and patients about the clinical benefits of our product suite and (ii) our laser systems among patients by educating patients about the clinical benefits of the Waterlase and Diode systems. An important goal of ours is to increase consumables revenue by selling more single-use accessories used by dental practitioners when performing procedures using our dental laser systems. In the short term, we are striving for operating excellence through lean enterprise initiatives, with a specific focus on our sales strategy and cash flow management, coupled with optimizing our engineering capabilities to develop innovative new products.

We also seek to create value through innovation and leveraging existing technologies into adjacent medical applications. We plan to expand our product line and clinical applications by developing enhancements and transformational innovations, including new clinical solutions for dental applications and for other adjacent medical applications. In particular, we believe that our existing technologies can provide significant improvements over existing standards of care in fields including ophthalmology, otolaryngology, orthopedics, podiatry, pain management, aesthetics/dermatology, veterinary, and consumer products. We plan to continue to explore potential collaborations to apply our proprietary laser technologies with expanded FDA-cleared indications to other medical applications in the future.

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Recent Developments

On November 9, 2018, we entered into a five-year secured Credit Agreement (the “Credit Agreement”) with SWK Funding, LLC (“SWK”), pursuant to which the Company has borrowed $12.5 million (the “SWK Loan”). On May 7, 2019, we entered into an amendment to our Credit Agreement (“First Amendment” with SWK Funding LLC to increase the total commitment in the SWK Loan, as defined and described in Part I, Item I, Note 9 – Debt, from $12.5 million to $15.0 million and to revise certain of the financial covenants. Also on May 7, 2019 in connection with such amendment, we issued warrants to purchase up to 115,175 shares of BIOLASE common stock to SWK Funding LLC and warrants to purchase up to 34,552 shares of BIOLASE common stock to Deal Partners Group. See Part I, Item I, Note 9 - Debt for additional information.

On August 20, 2019, we entered into a Letter Agreement (the “Letter Agreement”) with SWK, in connection with the Credit Agreement. Pursuant to the Letter Agreement, SWK agreed to waive the effect of our potential non-compliance with certain unencumbered liquid assets financial operating covenants as set forth in the Credit Agreement, and SWK agreed to forbear from exercising rights and remedies otherwise available to it in the event of such non-compliance through September 30, 2019, or earlier in the event of the consummation of an additional secured financing or an event of default under the Credit Agreement.

On September 30, 2019, we agreed to further amend the Credit Agreement (the “Second Amendment”) with SWK, in connection with that certain Credit Agreement, by and among us, SWK, and the lender parties thereto.  The Second Amendment provides for a revolving loan facility, secured by first lien security permitted inventory and accounts receivable revolving loan facility, secured by a first lien security interest in our inventory and accounts receivable, with a maximum principal amount of $5 million. In addition, SWK agreed to waive the effect of our non-compliance with certain unencumbered liquid assets financial operating covenants as set forth in the Credit Agreement, and SWK agreed to forbear from exercising rights and remedies otherwise available to it in the event of the consummation of an additional equity or subordinated debt financing with gross proceeds of not less than $5 million or an event of a default under the Credit Agreement.

On October 28, 2019, BIOLASE entered into a loan and security agreement (the “Loan Agreement”) with Pacific Mercantile Bank, as lender (“Lender”), which provides for a revolving line of credit (the “PMB Loan”) in a maximum principal amount not to exceed the lesser of (i) $3 million or (ii) the sum of 90% of the Eligible Accounts (as defined in the Loan Agreement) plus 75% of the Eligible Inventory (as defined in the Loan Agreement, and subject to certain limitations set forth therein); provided that the maximum principal amount of the PMB Loan may be reduced from time to time in Lender’s good faith business judgment as set forth in the Loan Agreement. Borrowings under the PMB Loan may be used for working capital. The PMB Loan matures on October 28, 2021, unless earlier terminated. See “Liquidity and Capital Resources” for additional detail.

On October 29, 2019 the Company successfully consummated an underwritten public offering of BIOLASE common stock and a concurrent private placement of BIOLASE Series E Participating Convertible Preferred Stock, resulting in net proceeds of approximately $7.8 million after deducting underwriter discounts and other fees and expenses. On November 5, 2019, the underwriters exercised their over-allotment option and the Company issued an additional 1.1 million shares for gross proceeds of approximately $0.6 million. See Part I, Item I, Note 15 for additional information.

On November 6, 2019, the Company agreed to further amend the Credit Agreement (the “Third Amendment”). Pursuant to the Third Amendment, SWK granted the Company a waiver of the Company’s non-compliance with certain financial covenants in the Credit Agreement. Also pursuant to the Third Amendment, the Company and SWK agreed to (i) revise financial covenants to adjust minimum revenue and EBITDA levels and (ii) remove the automatic increase of the minimum liquidity requirement based on certain aggregate minimum revenue and EBITDA levels as of September 30, 2019 (which was added pursuant to the First Amendment). Also on November 6, 2019 in connection with such amendment, we consolidated the SWK Warrants issued to SWK on November 9, 2018 and May 7, 2019. The terms of the SWK Warrants remained the same.

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Critical Accounting Policies

The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and revenues and expenses reported during the period. Information with respect to our critical accounting policies that we believe could have the most significant effect on our reported results and require subjective or complex judgments by management is contained in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of the 2018 Form 10-K. There have been no significant changes during the nine months ended September 30, 2019 in our critical accounting policies from those disclosed in Item 7 of the 2018 Form 10-K.

Effective May 10, 2018, the Company effectuated a one-for-five reverse stock split (the “Reverse Stock Split”). In connection with the Reverse Stock Split, the number of authorized shares of BIOLASE common stock was reduced from 200,000,000 shares to 40,000,000 shares. All prior period share and per share amounts (including exercises and closing market prices) contained in this discussion have been adjusted to reflect the impact of the Reverse Stock Split.

Results of Operations

The following table sets forth certain data from our unaudited consolidated statements of operations expressed as percentages of net revenue (in thousands):

	Three Months Ended												Nine Months Ended
	September 30,												September 30,
	2019						2018						2019						2018
Net revenue		8,646		100.0		%		10,936		100.0		%		27,617		100.0		%		33,110		100.0		%
Cost of revenue		5,677		65.7		%		6,995		64.0		%		17,746		64.3		%		21,828		65.9		%
Gross profit		2,969		34.3		%		3,941		36.0		%		9,871		35.7		%		11,282		34.1		%
Operating expenses:
Sales and marketing		3,515		40.7		%		4,489		41.0		%		10,665		38.6		%		13,037		39.4		%
General and administrative		3,210		37.1		%		2,685		24.6		%		8,114		29.4		%		8,691		26.2		%
Engineering and development		1,126		13.0		%		1,277		11.7		%		3,665		13.3		%		3,927		11.9		%
Total operating expenses		7,851		90.8		%		8,451		77.3		%		22,444		81.3		%		25,655		77.5		%
Loss from operations		(4,882	)	(56.5	)	%		(4,510	)	(41.3	)	%		(12,573	)	(45.5	)	%		(14,373	)	(43.4	)	%
Non-operating loss		570		6.6		%		106		1.0		%		1,627		5.9		%		133		0.4		%
Loss before income taxes		(5,452	)	(63.1	)	%		(4,616	)	(42.3	)	%		(14,200	)	(51.4	)	%		(14,506	)	(43.8	)	%
Income tax provision		26		0.3		%		49		0.4		%		68		0.2		%		91		0.3		%
Net loss	$	(5,478	)	(63.3	)	%	$	(4,665	)	(42.7	)	%	$	(14,268	)	(51.7	)	%	$	(14,597	)	(44.1	)	%

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. In 2019, the Company revised its non-GAAP financial measures to include the change in allowance for doubtful accounts in an effort to better align its Adjusted EBITDA with our loan covenants and how management evaluates business performance. Prior year non-GAAP disclosures have been revised to conform to the current definition of Adjusted EBITDA.

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Management believes that the presentation of this non-GAAP financial information provides investors with greater transparency and facilitates comparison of operating results across a broad spectrum of companies with varying capital structures, compensation strategies, derivative instruments, and amortization methods, which provides a more complete understanding of our financial performance, competitive position, and prospects for the future. However, the non-GAAP financial measures presented in this Form 10-Q have certain limitations in that they do not reflect all of the costs associated with the operations of our business as determined in accordance with GAAP. Therefore, investors should consider non-GAAP financial measures in addition to, and not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. Further, the non-GAAP financial measures presented by the Company may be different from similarly named non-GAAP financial measures used by other companies.

Adjusted EBITDA

Management uses Adjusted EBITDA 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. Adjusted EBITDA is defined as net loss before interest, taxes, depreciation and amortization, stock-based compensation and allowance for doubtful accounts. Management uses adjusted EBITDA 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. 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 similarly named non-GAAP financial measures used by other companies.

The following table contains a reconciliation of non-GAAP net loss to GAAP net loss attributable to common stockholders (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
GAAP net loss attributable to common stockholders	$	(5,478	)	$	(4,665	)	$	(14,268	)	$	(14,597	)
Deemed dividend on convertible preferred stock		—			—			—			—
GAAP net loss	$	(5,478	)	$	(4,665	)	$	(14,268	)	$	(14,597	)
Adjustments:
Interest expense, net		551			33			1,559			80
Income tax provision		26			49			68			91
Depreciation and amortization		268			202			754			712
Change in allowance for doubtful accounts		1,131			87			1,243			316
Stock-based compensation		770			604			1,974			1,862
Adjusted EBITDA	$	(2,732	)	$	(3,690	)	$	(8,670	)	$	(11,536	)

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Comparison of Results of Operations

Three months ended September 30, 2019 and 2018

Net Revenue: The following table summarizes our unaudited net revenues by category, including each category’s percentage of our total revenue, for the three months ended September 30, 2019 and 2018, as well as the amount of change and percentage of change in each revenue category (dollars in thousands):

	Three Months Ended				Three Months Ended
	September 30,				September 30,				Amount			Percent
	2019				2018				Change			Change
Laser systems	$	5,167	59.8	%	$	7,055	64.5	%	$	(1,888	)		(26.8	)
Imaging systems		4	—	%		382	3.5	%		(378	)		(99.0	)
Consumables and other		1,478	17.1	%		1,902	17.4	%		(424	)		(22.3	)
Services		1,994	23.1	%		1,594	14.6	%		400			25.1
Total products and services		8,643	100.0	%		10,933	100.0	%		(2,290	)		(20.9	)
License fees and royalty		3	—	%		3	—	%		—			—
Net revenue	$	8,646	100.0	%	$	10,936	100.0	%	$	(2,290	)		(20.9	)

Typically, we experience fluctuations in revenue from quarter to quarter due to seasonality. Revenue in the first quarter typically is lower than average, and revenue in the fourth quarter typically is stronger than average, due to the buying patterns of dental practitioners. We believe that this trend exists because a significant number of dentists purchase their capital equipment towards the end of the calendar year in order to maximize their practice earnings while seeking to minimize their taxes. They often use certain tax incentives, such as accelerated depreciation methods for purchasing capital equipment, as part of their year-end tax planning. In addition, revenue in the third quarter may be affected by vacation patterns which can cause revenue to be flat or lower than in the second quarter of the year. Our historical seasonal fluctuations may also be impacted by sales promotions used by large dental distributors that encourage end-of-quarter and end-of-year buying in our industry.

The following table summarizes our unaudited net revenue by geographic location based on the location of customers for the three months ended September 30, 2019 and 2018, as well as the amount of change and percentage of change in each geographic revenue category, (dollars in thousands):

	Three Months Ended				Three Months Ended
	September 30,				September 30,				Amount			Percent
	2019				2018				Change			Change
United States	$	4,949	57.2	%	$	6,953	63.6	%	$	(2,004	)		(28.8	)
International		3,697	42.8	%		3,983	36.4	%		(286	)		(7.2	)
Net revenue	$	8,646	100.0	%	$	10,936	100.0	%	$	(2,290	)		(20.9	)

Total net revenue decreased by $2.3 million or 21% during the three months ended September 30, 2019 as compared to the same period in 2018. In the U.S., net revenue decreased by $2.0 million, or 28.8%, primarily from laser systems sales, which decreased by $1.4 million, or 38.0%, during the three months ended September 30, 2019 compared to the same period in 2018. These decreases were largely due to open sales territories in the third quarter of 2019. Outside the U.S., net revenue declined by $0.3 million, or 7.2%, during the three months ended September 30, 2019 as compared to the same period in 2018, primarily due to the decline in sales of our laser products outside the U.S. of $0.5 million, or 14.0%, during the three months ended September 30, 2019 compared to the same period in 2018. Sales of consumables and other revenue, which consists of consumable products such as disposable tips during the three months ended September 30, 2019 was $3.5 million was consistent with the same period in 2018.

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Cost of Revenue and Gross Profit: The following table summarizes our unaudited cost of revenue and gross profitfor the threemonths ended September 30, 2019 and 2018, as well as the amount of change and percentage of change (dollars in thousands):

	Three Months Ended				Three Months Ended
	September 30,				September 30,				Amount			Percent
	2019				2018				Change			Change
Net revenue	$	8,646	100.0	%	$	10,936	100.0	%	$	(2,290	)		(20.9	)
Cost of revenue		5,677	65.7	%		6,995	64.0	%		(1,318	)		(18.8	)
Gross profit	$	2,969	34.3	%	$	3,941	36.0	%	$	(972	)		(24.7	)

Gross profit as a percentage of revenue typically fluctuates with product and regional mix, selling prices, product costs and revenue levels. The 24.7% decrease in gross profit for the three months ended September 30, 2019, as compared to the three months ended September 30, 2018, reflects the decline in our laser sales and the impact from a change in product mix .

Operating Expenses: The following table summarizes our unaudited operating expenses for the three months ended September 30, 2019 and September 30, 2018, as well as the amount of change and percentage of change (dollars in thousands):

	Three Months Ended				Three Months Ended
	September 30,				September 30,				Amount			Percent
	2019				2018				Change			Change
Sales and marketing	$	3,515	40.7	%	$	4,489	41.0	%	$	(974	)		(21.7	)
General and administrative		3,210	37.1	%		2,685	24.6	%		525			19.6
Engineering and development		1,126	13.0	%		1,277	11.7	%		(151	)		(11.8	)
Total operating expenses	$	7,851	90.8	%	$	8,451	77.3	%	$	(600	)		(7.1	)

The quarter-over-quarter total operating expenses are explained in the following expense categories:

Sales and Marketing Expense. Sales and marketing expenses during the three months ended September 30, 2019 decreased by $1.0 million or 21.7% as compared to the same period in 2018, primarily due to decreases in payroll and consulting related expenses of $0.6 million, stock-based compensation expense of $0.1 million, and marketing materials and advertising of $0.2 million. We expect sales and marketing expenses to decrease as a percentage of revenue through the remainder of 2019.

General and Administrative Expense. General and administrative expenses during the three months ended September 30, 2019 increased by $0.5 million or 19.6% compared to the same period in 2018, primarily due to an increase of $1.0 million in bad debt expense, partially offset by decreases in patent and legal fees of $0.5 million. We expect general and administrative expenses to decrease as a percentage of revenue through the remainder of 2019.

Engineering and Development Expense. Engineering and development expenses during the three months ended September 30, 2019 decreased by $0.2 million or 11.8% compared to the same period in 2018, primarily due to decreases in payroll and consulting-related expenses of $0.2. We expect engineering and development expenses to remain the same as a percentage of revenue through the remainder of 2019.

(Loss) Gain on Foreign Currency Transactions. We realized a $0.1million loss on foreign currency transactions during the three months ended September 30, 2019 compared to a $0.1 million loss on foreign currency transactions during the three months ended September 30, 2018, primarily due to exchange rate fluctuations between the U.S. dollar and Euro, as well as other foreign currencies.

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Interest Expense. Interest expense during the three months ended September 30, 2019 increased by $0.5 million primarily due to the interest and amortization of debt issuance costs relating to the SWK Loan we entered into in the fourth quarter of 2018. We expect interest expense to fluctuate depending on the movement in LIBOR through the remainder of 2019.

Income Tax Provision. We use a discrete year-to-date method in calculating quarterly provision for income taxes. Our provision for income taxes was $26,000 for the three months ended September 30, 2019 as compared to a provision of $49,000 for the same period in the prior year. For additional information regarding income taxes, see Part I, Item I, Note 14 – Income Taxes.

Net Loss. Our net loss totaled approximately $5.5 million for the three months ended September 30, 2019 compared to a net loss of $4.7 million for the three months ended September 30, 2018.

Nine months ended September 30, 2019 and 2018

Net Revenue: The following table summarizes our unaudited net revenues by category, including each category’s percentage of our total revenue, for the nine months ended September 30, 2019 and 2018, as well as the amount of change and percentage of change in each revenue category (dollars in thousands):

	Nine Months Ended					Nine Months Ended
	September 30,					September 30,					Amount			Percent
	2019					2018					Change			Change
Laser systems	$	16,047		57.4	%	$	20,678		62.5	%	$	(4,631	)		(22.4	)	%
Imaging systems		619		3.2	%		1,336		4.0	%		(717	)		(53.7	)	%
Consumables and other		5,678		22.2	%		6,239		18.9	%		(561	)		(9.0	)	%
Services		5,264		17.2	%		4,848		14.6	%		416			8.6		%
Total products and services		27,608		100.0	%		33,101		100.0	%		(5,493	)		(16.6	)	%
License fees and royalty		9	—		%		9	—		%	—			—			%
Net revenue	$	27,617		100.0	%	$	33,110		100.0	%	$	(5,493	)		(16.6	)	%

The following table summarizes our unaudited net revenue by geographic location based on the location of customers for the nine months ended September 30, 2019 and 2018, as well as the amount of change and percentage of change in each geographic revenue category, (dollars in thousands):

	Nine Months Ended				Nine Months Ended
	September 30,				September 30,				Amount			Percent
	2019				2018				Change			Change
United States	$	16,962	61.4	%	$	19,810	59.8	%	$	(2,848	)		(14.4	)	%
International		10,655	38.6	%		13,300	40.2	%		(2,645	)		(19.9	)	%
Net revenue	$	27,617	100.0	%	$	33,110	100.0	%	$	(5,493	)		(16.6	)	%

Total net revenue decreased by $5.5 million or 16.6% during the nine months ended September 30, 2019 as compared to the same period in 2018. In the U.S., net revenue decreased by $2.8 million, or 14.4%, primarily from laser systems sales, which decreased by $2.0 million, or 20.8%, during the nine months ended September 30, 2019 compared to the same period in 2018. These decreases were largely due to open sales territories in the second and third quarters of 2019. Outside the U.S., net revenue declined by $2.6 million, or 19.9%, during the nine months ended September 30, 2019 as compared to the same period in 2018, primarily due to the decline in sales of our laser products outside the U.S. of $2.6 million, or 23.9%, during the nine months ended September 30, 2019 compared to the same period in 2018. Sales of consumables and other revenue, which consists of consumable products such as disposable tips decreased by $0.1 million, or 9.0%, during the nine months ended September 30, 2019 as compared to the same period in 2018.

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Imaging systems revenue decreased by $0.7 million or 54.0% during the nine months ended September 30, 2019 as compared to the same period in 2018, primarily driven by our focus on laser sales.

Cost of Revenue and Gross Profit: The following table summarizes our unaudited cost of revenue and gross profit for the nine months ended September 30, 2019 and 2018, as well as the amount of change and percentage of change (dollars in thousands):

	Nine Months Ended				Nine Months Ended
	September 30,				September 30,				Amount			Percent
	2019				2018				Change			Change
Net revenue	$	27,617	100.0	%	$	33,110	100.0	%	$	(5,493	)		(16.6	)	%
Cost of revenue		17,746	64.3	%		21,828	65.9	%		(4,082	)		(18.7	)	%
Gross profit	$	9,871	35.7	%	$	11,282	34.1	%	$	(1,411	)		(12.5	)	%

Gross profit as a percentage of revenue typically fluctuates with product and regional mix, selling prices, product costs and revenue levels. The 1.6% decrease in gross profit as a percentage of revenue for the nine months ended September 30, 2019, as compared to the nine months ended September 30, 2018, reflects the decline in our laser sales which have a higher margin than our other product offerings.

Operating Expenses: The following table summarizes our unaudited operating expenses for the for the nine months ended September 30, 2019 and 2018, as well as the amount of change and percentage of change (dollars in thousands):

	Nine Months Ended				Nine Months Ended
	September 30,				September 30,				Amount			Percent
	2019				2018				Change			Change
Sales and marketing	$	10,665	38.6	%	$	13,037	38.6	%	$	(2,372	)		(18.2	)	%
General and administrative		8,114	29.4	%		8,691	29.4	%		(577	)		(6.6	)	%
Engineering and development		3,665	13.3	%		3,927	13.3	%		(262	)		(6.7	)	%
Total operating expenses	$	22,444	81.3	%	$	25,655	77.5	%	$	(3,211	)		(12.5	)	%

The period-over-period total operating expenses are explained in the following expense categories:

Sales and Marketing Expense. Sales and marketing expenses during the nine months ended September 30, 2019 decreased by $2.4 million or 18.2% as compared to the same period in 2018, primarily due to a decrease in payroll and consulting related expenses of $1.6 million, convention related expenses of $0.2 million, media materials and advertising of $0.2 million, and sales commissions of $0.2 million. We expect sales and marketing expenses to decrease as a percentage of revenue through the remainder of 2019.

General and Administrative Expense. General and administrative expenses during the nine months ended September 30, 2019 decreased by $0.6 million or 6.6% compared to the same period in 2018, primarily due to a decrease in patent and legal fees of $1.2 million, and payroll and consulting related expenses of $0.4 million, partially offset by an increase in provision for bad debts of $1.0 million. We expect general and administrative expenses to decrease as a percentage of revenue through the remainder of 2019.

Engineering and Development Expense. Engineering and development expenses during the nine months ended September 30, 2019 decreased by $0.3 million or 6.7% compared to the same period in 2018, primarily due to a $0.5 million decrease in payroll and consulting-related expenses, offset by increases in operating supplies and other miscellaneous costs of $0.1 million. We expect engineering and development expenses to decrease as a percentage of revenue through the remainder of 2019.

(Loss) Gain on Foreign Currency Transactions. We realized a $0.2 million loss on foreign currency transactions during the nine months ended September 30, 2019 compared to a $31,000 loss on foreign currency transactions during the nine months ended September 30, 2018, primarily due to exchange rate fluctuations between the U.S. dollar and Euro, as well as other foreign currencies.

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Interest Expense. Interest expense during the nine months ended September 30, 2019 increased by $1.5 million primarily due to the interest and amortization of debt issuance costs relating to the SWK Loan we entered into in the fourth quarter of 2018. We expect interest expense to fluctuate depending on the movement in LIBOR through the remainder of 2019.

Income Tax Provision. We use a discrete year-to-date method in calculating quarterly provision for income taxes. Our provision for income taxes was $68,000 for the nine months ended September 30, 2019 and $91.000, for the nine months ended September 30, 2018. For additional information regarding income taxes, see Part I, Item I, Note 14 – Income Taxes.

Net Loss. Our net loss totaled approximately $14.3 million for the nine months ended September 30, 2019 compared to a net loss of $14.6 million for the nine months ended September 30, 2018.

Liquidity and Capital Resources

At September 30, 2019, we had approximately $2.4 million in cash, cash equivalents and restricted cash. Management defines cash and cash equivalents as highly liquid deposits with original maturities of 90 days or less when purchased. The decrease in our cash, cash equivalents and restricted cash of $5.9 million at September 30, 2019 as compared to December 31, 2018, was primarily due to net cash used in operating activities of $8.1 million. The $8.1 million of net cash used in operating activities was primarily driven by our net loss of $14.3 million for the nine months ended September 30, 2019.

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

	Nine Months Ended
	September 30,
	2019			2018
Net cash flows used in operating activities	$	(8,074	)	$	(10,590	)
Net cash flows used in investing activities		(138	)		(74	)
Net cash flows provided by (used in) financing activities		2,416			1,231
Effect of exchange rate changes		(157	)		(23	)
Net change in cash, cash equivalents and restricted cash	$	(5,953	)	$	(9,456	)

Operating Activities

Net cash used in operating activities consists of our net loss, adjusted for our non-cash charges, plus or minus working capital changes. Cash used in operating activities for the nine months ended September 30, 2019 totaled $8.1 million and was primarily comprised of our net loss of $14.3 million, partially offset by non-cash adjustments for depreciation and amortization expenses of $0.8 million and stock-based compensation expenses of $2.0 million, amortization of debt discount and issuance costs of $0.2 million, and provision for bad debts of $1.2 million. Changes in operating assets and liabilities were $2.0 million primarily due to a decrease in accounts payable and accrued liabilities of $1.0 million related to the timing of our payments and $0.5 million paid as part of the patent litigation settlement with CAO Group, Inc., as described in Part I, Item I, Note 11 – Commitments and Contingencies above, and a decrease in accounts receivable of $1.5 million, partially offset by a decrease in inventory of $0.7 million and a decrease in prepaid expenses and other current assets of $0.8 million.

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Investing Activities

Cash used in investing activities for the nine months ended September 30, 2019 was minimal. We expect cash flows from investing activities to remain consistent through the remainder of 2019.

Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2019 increased by $1.2 million as compared to the same period in 2018, primarily due to the additional commitment on the SWK Loan of $2.5 million that occurred on May 7, 2019, partially offset by payments of debt issuance costs of approximately $38,000 as compared to the same period in 2018 in which the Company had approximately $1.5 million in net borrowings under its credit facility.

Effect of Exchange Rate

The effect of exchange rate on cash for the nine months ended September 30, 2019 was $157,000 and primarily due to fluctuations between the U.S. Dollar and the Euro.

Future Liquidity Needs

As of September 30, 2019, we had working capital of approximately $9.2 million. Our principal sources of liquidity as of September 30, 2019 consisted of approximately $2.4 million in cash, cash equivalents and restricted cash and $8.5 million of net accounts receivable.

On November 9, 2018, BIOLASE entered into a five-year secured Credit Agreement (the “Credit Agreement”) with SWK, pursuant to which BIOLASE has borrowed $12.5 million (the “SWK Loan”). $0.9 million of the proceeds from the SWK Loan were used to pay off all amounts owed to Western Alliance Bank under the Business Financing Agreement as described in Part I, Item I, Note 9 – Debt above, and we used the remaining proceeds to provide additional working capital to fund our growth initiatives, such as broadening our customer base and increasing the utilization of our products to drive recurring higher margin consumables revenue.

As of March 31, 2019, we were not in compliance with certain covenants in the Credit Agreement. In May 2019, SWK granted the Company a waiver of such covenants. On May 7, 2019, we and SWK amended the Credit Agreement (the “First Amendment”) to increase our total commitment under the SWK Loan from $12.5 million to $15.0 million and to revise certain of the financial covenants to (a) adjust minimum revenue and EBITDA levels, (b) require us to have a shelf registration statement declared effective by the SEC before September 30, 2019, with a proposed maximum aggregate offering price of at least $10.0 million, if we do not reach set minimum revenue levels for the three-month period ended September 30, 2019, and (c) require us to maintain minimum liquidity of $1.5 million at all times. The First Amendment provided that if aggregate minimum revenue and EBITDA levels are not achieved by September 30, 2019, the minimum liquidity requirement would be increased to $3.0 million, until we have obtained additional equity or debt funding of no less than $5.0 million.

In connection with the First Amendment, we paid to SWK loan origination and other fees of approximately $0.2 million payable in cash and approximately $0.3 million in warrants to purchase shares of BIOLASE common stock. We also paid an additional finder’s fee to Deal Partners Group, as described in Part I, Item I, Note 9 – Debt above of approximately $0.1 million in cash and $0.1 million in warrants to purchase shares of BIOLASE common stock.

On August 20, 2019, BIOLASE entered into a Letter Agreement (the “Letter Agreement”) with SWK, in connection with the Credit Agreement. Pursuant to the Letter Agreement, SWK agreed to waive the effect of the Company’s potential non-compliance with certain unencumbered liquid assets financial operating covenants as set forth in the Credit Agreement, and SWK agreed to forbear from exercising rights and remedies otherwise available to it in the event of such non-compliance through September 30, 2019, or earlier in the event of the consummation of an additional secured financing or an event of default under the Credit Agreement.

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On September 30, 2019, the Company agreed to further amend the Credit Agreement (the “Second Amendment”). The Second Amendment provides for a revolving loan facility, secured by a first lien security interest in the Company’s inventory and accounts receivable, with a maximum principal amount of $5 million. In addition, SWK agreed to waive the effect of the Company’s non-compliance with certain unencumbered liquid assets financial operating covenants as set forth in the Credit Agreement, and SWK agreed to forbear from exercising rights and remedies otherwise available to it in the event of such non-compliance through October 31, 2019, or earlier in the event of the consummation of an additional equity or subordinated debt financing with gross proceeds of not less than $5 million, or an event of a default under the Credit Agreement.

On October 28, 2019, BIOLASE entered into a loan and security agreement (the “Loan Agreement”) with Pacific Mercantile Bank, as lender (“Lender”), which provides for a revolving line of credit (the “PMB Loan”) in a maximum principal amount not to exceed the lesser of (i) $3 million or (ii) the sum of 90% of the Eligible Accounts (as defined in the Loan Agreement) plus 75% of the Eligible Inventory (as defined in the Loan Agreement, and subject to certain limitations set forth therein); provided that the maximum principal amount of the PMB Loan may be reduced from time to time in Lender’s good faith business judgment as set forth in the Loan Agreement. Borrowings under the PMB Loan may be used for working capital. The PMB Loan matures on October 28, 2021, unless earlier terminated.

BIOLASE’s obligations under the Loan Agreement are secured by a security interest in substantially all of BIOLASE’s property. No borrowings may be made under the Loan Agreement unless and until Exim Bank agrees to guarantee the PMB Loan and BIOLASE has entered into a borrower agreement with Exim Bank. Borrowings under the PMB Loan bear interest at a daily rate equal to the prime rate published in The Wall Street Journal, plus 1.5% per annum; provided, that the interest rate in effect on any day shall not be less than 6.0% per annum. Additionally, BIOLASE is required to pay an initial and annual fee of $52,500 to Exim Bank, as well as a termination fee equal to $30,000 in the event the Loan Agreement is terminated on or prior to October 28, 2020.

The Loan Agreement requires BIOLASE to maintain unrestricted cash at Lender plus unused availability under the PMB Loan in an amount equal to at least the Burn Rate (as defined in the Loan Agreement). In addition, the Loan Agreement contains customary affirmative and negative covenants for financings of its type (subject to customary exceptions). Upon the occurrence and during the continuation of an event of default (as described in the Loan Agreement), Lender may exercise any remedies available to it, including accelerating the repayment of the PMB Loan.

On October 29, 2019, we successfully consummated an underwritten public offering of BIOLASE common stock and a concurrent private placement of BIOLASE Series E Participating Convertible Preferred Stock, and on November 5, 2019, the underwriters of the public offering exercised their over-allotment option to acquire additional shares of BIOLASE common stock. The underwritten public offering and concurrent private placement resulted in net proceeds of approximately $8.4 million after deducting underwriter discounts and other fees and expenses. See Part I, Item I, Note 15 – Subsequent Events for additional information.

On November 6, 2019, the Company agreed to further amend the Credit Agreement (the “Third Amendment”). Pursuant to the Third Amendment, SWK granted the Company a waiver of the Company’s non-compliance with certain financial covenants in the Credit Agreement. Also pursuant to the Third Amendment, the Company and SWK agreed to (i) revise financial covenants to adjust minimum revenue and EBITDA levels and (ii) remove the automatic increase of the minimum liquidity requirement based on certain aggregate minimum revenue and EBITDA levels as of September 30, 2019 (which was added pursuant to the First Amendment).

41

In order for us to continue operations beyond the next 12 months and be able to discharge our liabilities and commitments in the normal course of business, we must increase sales of our products directly to end-users and through distributors, establish profitable operations through the combination of increased sales and decreased expenses, generate cash from operations or obtain additional funds when needed. We intend to improve our financial condition and ultimately improve our financial results by increasing revenues through expansion of our product offerings, continuing to expand and develop our fields sales force and distribution relationships both domestically and internationally, forming strategic arrangements within the dental and medical industries, educating dental and medical patients as to the benefits of our advanced medical technologies, and reducing expenses. Additional capital requirements may depend on many factors, including, among other things, continued losses, 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, or enter into another line of credit facility. We may not be able to successfully consummate any equity or debt financings or enter into any other line of credit facility 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 – Summary of Significant Accounting Policies, which is incorporated herein by this reference.

Additional Information

BIOLASE^®, ZipTip^®, ezlase^®, eztips^®, ComfortPulse^®, Waterlase^®, Waterlase Dentistry^®, Waterlase Express^®, iLase^®, iPlus^®, Epic^®, Epic Pro^®, WCLI^®, World Clinical Laser Institute^®, Waterlase MD^®, Waterlase Dentistry^®, and EZLase^® are registered trademarks of BIOLASE, and Pedolase™ is a trademark of BIOLASE. All other product and company names are registered trademarks or trademarks of their respective owners.

42

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

None.

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

The disclosure contained in Part I, Item 1, Note 11 – Commitments and Contingencies is hereby incorporated herein by reference.

ITEM  1A. RISK FACTORS

Except for the following, there have been no material changes to the risk factors as disclosed in Part I, Item 1A “Risk Factors” in the 2018 Form 10-K.

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

On August 9, 2017, we received a deficiency letter from the Listing Qualifications Department of The Nasdaq Stock Market stating that, for the preceding 30 consecutive business days, the bid price for the Company’s common stock had closed below the minimum $1.00 per share requirement for continued inclusion on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2). While the Company subsequently regained compliance with the minimum bid price requirement by effecting a reverse stock split, the Company’s common stock has recently traded at prices below $1.00 per share and there is no assurance that we will maintain compliance with this or any of the other Nasdaq continued listing requirements in the future.

As of September 30, 2019, we were not in compliance with Nasdaq requirements for stockholders’ equity because our stockholders’ equity on that date was below the $2.5 million required by Nasdaq Listing Rule 5550(b)(1). As of the date of this quarterly report on Form 10-Q, we believe that we have regained compliance with this requirement as a result of the October 29, 2019 public offering and concurrent private placement described elsewhere in this report. However, Nasdaq is continuing to monitor our ongoing compliance with the stockholders’ equity requirement and, if at the time we file our annual report on Form 10-K for the year ending December 31, 2019, we do not evidence compliance, our common stock may be subject to delisting.

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If, in the future, we fail to comply with Nasdaq’s continued listing requirements, our common stock will be subject to delisting. If that were to occur, our common stock would be subject to rules that impose additional sales practice requirements on broker-dealers who sell our securities. The additional burdens imposed upon broker-dealers by these requirements could discourage broker-dealers from effecting transactions in our common stock. This would adversely affect the ability of investors to trade our common stock and would adversely affect the value of our common stock. These factors could contribute to lower prices and larger spreads in the bid and ask prices for our common stock. If we seek to implement a further reverse stock split in order to remain listed on The Nasdaq Capital Market, the announcement or implementation of such a reverse stock split could negatively affect the price of our common stock.

Future sales of shares of our common stock may depress the price of our shares.

The sales of a substantial amount of common stock in the public market in the future, or the perception that such sales may occur, could adversely affect the prevailing market price of our common stock and our ability to raise equity capital in the future. All of the shares of our common stock sold in our October 2019 underwritten public offering are freely tradable without restriction or further registration under the Securities Act of 1933, as amended (the “Securities Act”), unless the shares are purchased by “affiliates” as that term is defined in Rule 144 under the Securities Act. In addition, two of our stockholders held approximately 60% of our outstanding common stock, in the aggregate, as of September 30, 2019. Such stockholders also purchased the Series E Participating Convertible Preferred Stock in our October 2019 private placement. Substantially all of the shares of common stock currently held by those stockholders have been registered for resale under the Securities Act and, subject to certain limitations, including certain lock-up restrictions agreed to by those stockholders, all or a portion of such shares may be offered and sold to the public in the future. In addition, all such shares of common stock plus any shares of common stock issued as a result of the conversion of the Series E Participating Convertible Preferred Stock purchased by those stockholders are eligible for resale under, but subject to the “affiliate” restrictions of, Rule 144. If some or all of the shares held by those stockholders are sold, or if it is perceived that they will be sold, the market price of our common stock could decline.

ITEM 5. OTHER INFORMATION

On November 6, 2019, the Company agreed to further amend the Credit Agreement. Pursuant to the Third Amendment, SWK granted the Company a waiver of the Company’s non-compliance with certain financial covenants in the Credit Agreement. Also pursuant to the Third Amendment, the Company and SWK agreed to (i) revise financial covenants to adjust minimum revenue and EBITDA levels and (ii) remove the automatic increase of the minimum liquidity requirement based on certain aggregate minimum revenue and EBITDA levels as of September 30, 2019 (which was added pursuant to the First Amendment). In connection with the Third Amendment, the Company consolidated the SWK Warrants issued to SWK on November 9, 2018 and May 7, 2019. The terms of the SWK Warrants remained the same.

44

ITEM 6. EXHIBITS

			Incorporated by Reference
Exhibit	Description	Filed Herewith	Form	Period Ending/Date of Report	Exhibit	Filing Date
1.1	Underwriting Agreement, dated as of October 24, 2019, between the Registrant, The Benchmark Company, LLC and Dougherty & Company LLC, as underwriters		8-K	10/29/2019	1.1	10/30/2019
3.1.1	Restated Certificate of Incorporation, including, (i) Certificate of Designations, Preferences and Rights of 6% Redeemable Cumulative Convertible Preferred Stock of the Registrant; (ii) Certificate of Designations, Preferences and Rights of Series A 6% Redeemable Cumulative Convertible Preferred Stock of the Registrant; (iii) Certificate of Correction Filed to Correct a Certain Error in the Certificate of Designation of the Registrant; and (iv) Certificate of Designations of Series B Junior Participating Cumulative Preferred Stock of the Registrant.		S-1, Amendment No. 1	12/23/2005	3.1	12/23/2005
3.1.2	Amendment to Restated Certificate of Incorporation		8-K	05/10/2012	3.1	05/16/2012
3.1.3	Second Amendment to Restated Certificate of Incorporation		8-A/A	11/04/2014	3.1.3	11/04/2014
3.1.4	Third Amendment to Restated Certificate of Incorporation		S-3	07/21/2017	3.4	07/21/2017
3.1.5	Fourth Amendment to Restated Certificate of Incorporation		8-K	05/10/2018	3.1	05/11/2018
3.1.6	Certificate of Elimination of Series B Junior Participating Cumulative Preferred Stock		8-K	11/10/2015	3.1	11/12/2015
3.1.7	Certificate of Designations, Preferences and Rights of Series C Participating Convertible Preferred Stock of the Registrant		8-K	08/08/2016	3.1	08/08/2016
3.1.8	Certificate of Elimination of Series C Participating Convertible Preferred Stock of the Registrant		8-K	04/18/2017	3.1	04/20/2017
3.1.9	Certificate of Designations, Preferences and Rights of Series D Participating Convertible Preferred Stock of the Registrant		8-K	04/18/2017	3.2	04/20/2017

45

			Incorporated by Reference
Exhibit	Description	Filed Herewith	Form	Period Ending/Date of Report	Exhibit	Filing Date
3.1.10	Certificate of Designations, Preferences and Rights of Series E Participating Convertible Preferred Stock of the Registrant		8-K	10/29/2019	3.1	10/30/2019
3.2	Seventh Amended and Restated Bylaws of the Registrant, adopted on October 8, 2018		8-K	10/08/2018	3.1	10/09/2018
4.1	Form of Warrant issued on November 7, 2014 (attached as Exhibit A to the Securities Purchase Agreement, dated November 3, 2014, by and among the Registrant and the investors listed on Schedule I thereto)		8-K	11/03/2014	99.1	11/07/2014
4.2	Form of Warrant issued on August 8, 2016 (attached as Exhibit B to the Securities Purchase Agreement, dated August 1, 2016, by and among the Registrant and the investors listed on Schedule I thereto)		8-K	08/01/2016	99.1	08/02/2016
4.3	Form of Warrant issued April 18, 2017		DEF14A		D	05/19/2017
4.4	Warrant to Purchase Stock issued on March 6, 2018 to Western Alliance Bank		10-K	12/31/2017	4.4	03/14/2018
4.5	Warrant to Purchase Stock issued on September 27, 2018 to Western Alliance Bank		10-Q	09/30/2018	4.1	11/14/2018
4.6	Warrant to Purchase Stock issued on November 9, 2018 to SWK Funding LLC		10-Q	09/30/2018	4.2	11/14/2018
4.7	Warrant to Purchase Stock issued on May 7, 2019 to SWK Funding LLC		10-Q	03/31/2019	4.7	5/10/2019
4.8	Consolidated Amended and Restated Warrant to Purchase Common Stock, dated November 6, 2019, by and between the Registrant and SWK Funding, LLC	X
10.1	Letter Agreement, dated August 20, 2019, by and between the Registrant and SWK Funding LLC		S-1	09/04/2019	10.28	09/05/2019
10.2	Second Amendment to Credit Agreement, dated as of September 30, 2019, by and between the Registrant and SWK Funding LLC		S-1/A	10/04/2019	10.35	10/07/2019
10.3	Securities Purchase Agreement, dated as of October 24, 2019, by and among the Registrant and the investors listed on Schedule I thereto		8-K	10/29/2019	99.1	10/30/2019

46

			Incorporated by Reference
Exhibit	Description	Filed Herewith	Form	Period Ending/Date of Report	Exhibit	Filing Date
10.4	Loan and Security Agreement, dated October 28, 2019, by and between the Registrant and Pacific Mercantile Bank		8-K	10/28/2019	10.1	11/01/2019
10.5	Third Amendment to Credit Agreement dated November 6, 2019, by and between Registrant and SWK Funding, LLC	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 September 30, 2019, 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

* Compensatory contract 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.

		BIOLASE, INC.
		(Registrant)
November 8, 2019	By:	/s/ Todd A. Norbe
Date		Todd A. Norbe
		President and Chief Executive Officer
			(Principal Executive Officer)
November 8, 2019	By:	/s/ JOHN R. BEAVER
Date		John R. Beaver
		Executive Vice President and Chief Financial Officer
			(Principal Financial Officer and
			Principal Accounting Officer)

48

EX-10.5

EXHIBIT 10.5

THIRD AMENDMENT TO

CREDIT AGREEMENT

THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this “Amendment”), dated as of November 6, 2019, is entered into by and among BIOLASE, INC., a Delaware corporation (“Borrower”), each of the undersigned financial institutions (individually each a “Lender” and collectively “Lenders”) and SWK FUNDING LLC, a Delaware limited liability company, in its capacity as administrative agent for the other Lenders (in such capacity, “Agent”).

RECITALS

WHEREAS, Borrower, Agent and Lenders entered into that certain Credit Agreement dated as of November 9, 2018 (as the same may be amended, modified or restated from time to time, being hereinafter referred to as the “Credit Agreement”); and

WHEREAS, Borrower, Agent and Lenders have agreed to amend certain provisions of the Credit Agreement as more fully set forth herein.

AGREEMENT

NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows:

ARTICLE IDefinitions

1.1Capitalized terms used in this Amendment are defined in the Credit Agreement, as amended hereby, unless otherwise stated.

ARTICLE II

Amendments to Credit Agreement

2.1Amendments to Section 7.13.  Effective as of the date hereof, Section 7.13 of the Credit Agreement is hereby amended and restated to read as follows:

7.13Financial Covenants.

7.13.1Consolidated Unencumbered Liquid Assets.

(a)Not permit the Consolidated Unencumbered Liquid Assets as of any date of determination to be less than $1,500,000.

(b)Not permit the Consolidated Unencumbered Liquid Assets as of the last day of any Fiscal Quarter to be less than the greater of (i) $1,500,000, or (ii) Operating Burn for such Fiscal Quarter.

7.13.2Minimum Aggregate Revenue.

Not permit the Aggregate Revenue for the consecutive month period ending on the last Business Day of any Fiscal Quarter set forth in the table below (designated by “Q” in the table below) to be less than the applicable amount set forth in the table below for such period.

Minimum LTM Aggregate Revenueas of the end of:
Twelve (12) month period ending Q3 2019	$40,000,000
Twelve (12) month period ending Q4 2019	$40,000,000
Twelve (12) month period ending Q1 2020	$40,000,000
Twelve (12) month period ending Q2 2020	$41,000,000
Twelve (12) month period ending Q3 2020	$42,000,000
Twelve (12) month period ending Q4 2020	$43,000,000
Twelve (12) month period ending Q1 2021	$44,000,000
Twelve (12) month period ending Q2 2021	$44,000,000
Twelve (12) month period ending Q3 2021	$45,000,000
Twelve (12) month period ending Q4 2021 and each Fiscal Quarter thereafter	$46,000,000

7.13.3Minimum EBITDA.

Not permit the EBITDA of Borrower and its Subsidiaries for the consecutive month period ending on the last Business Day of any Fiscal Quarter set forth in the table below (designated by “Q” in the table below) to be less than the applicable amount set forth in the table below for such period.

Minimum LTM EBITDA as of the end of:
Twelve (12) month period ending Q3 2019	-($12,000,000)
Twelve (12) month period ending Q4 2019	-($10,000,000)
Twelve (12) month period ending Q1 2020	-($8,000,000)
Twelve (12) month period ending Q2 2020	-($7,000,000)
Twelve (12) month period ending Q3 2020	-($6,000,000)
Twelve (12) month period ending Q4 2020	-($5,000,000)
Twelve (12) month period ending Q1 2021	-($3,000,000)
Twelve (12) month period ending Q2 2021	-($2,500,000)
Twelve (12) month period ending Q3 2021	-($2,000,000)
Twelve (12) month period ending Q4 2021 and each Fiscal Quarter thereafter	-($2,000,000)

ARTICLE III

Conditions Precedent

3.1Conditions Precedent.  The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent in a manner satisfactory to Agent, unless specifically waived in writing by Agent in its sole discretion:

(A).Agent shall have received (i) this Amendment duly executed by Borrower and (ii) that certainConsolidated, Amended and Restated Warrantto Purchase Stockexecuted by Borrower in favor of Agent.

(B).The representations and warranties contained herein and in the Credit Agreement and the other Loan Documents, as each is amended hereby, shall be true and correct as of the date hereof, as if made on the date hereof, except for such representations and warranties as are by their express terms limited to a specific date.

(C).Agent shall have received payment, for the benefit of Lenders, of an amendment fee in the amount of $25,000, which shall be deemed fully-earned and non-refundable as of the date hereof.

(D).No Default or Event of Default (other than the Specified Non-Compliance Items) under the Credit Agreement, as amended hereby, shall have occurred and be continuing, unless such Default or Event of Default has been otherwise specifically waived in writing by Agent.

ARTICLE IV

Limited Waiver, Ratifications, Representations and Warranties

4.1Limited Waiver.

(a)Borrower has been, and may continue to be in non-compliance, with the requirement of Section 7.13.1 of the Credit Agreement for certain periods ending on or prior to date hereof, which failures constitute Events of Default under Section 8.1.4 of the Credit Agreement (the “Specified Non-Compliance Items”).  Agent, on behalf of itself and the Lenders, hereby waives the Specified Non-Compliance Items effective as of the date hereof.

(b) Except as specifically set forth above in relation to the Specified Non-Compliance Items, nothing contained in this Amendment or any other communication between Agent, any Lender, Borrower or any other Loan Party shall be a waiver of any past, present or future non-compliance, violation, Default or Event of Default of Borrower under the Credit Agreement or any Loan Document.  Except as specifically set forth above in relation to the Specified Non-Compliance Items, Agent and each Lender hereby expressly reserves any rights, privileges and remedies under the Credit Agreement and each Loan Document that Lender may have with respect to any non-compliance, violation, Default or Event of Default, and any failure by Agent or any Lender to exercise any right, privilege or remedy as a result of the violations set forth above shall not directly or indirectly in any way whatsoever either (i) impair, prejudice or otherwise adversely affect the rights of Agent or any Lender, except as set forth herein, at any time to exercise any right, privilege or remedy in connection with the Credit Agreement or any Loan Document, (ii) amend or alter any provision of the Credit Agreement or any Loan Document or any other contract or instrument or (iii) constitute any course of dealing or other basis for altering any obligation of Borrower or any rights, privilege or remedy of Agent or any Lender under the Credit Agreement or any Loan Document or any other contract or instrument.  Nothing in this Amendment shall be construed to be a consent by Agent or any Lender to any prior, existing or future violations of the Credit Agreement or any Loan Document.

4.2Ratifications.  The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Credit Agreement and the other Loan Documents, and, except as expressly modified and superseded by this Amendment, the terms and provisions of the Credit Agreement and the other Loan Documents are ratified and confirmed and shall continue in full force and effect.  Borrower, Lenders and Agent agree that the Credit Agreement and the other Loan Documents, as amended hereby, shall continue to be legal, valid, binding and enforceable in accordance with their respective terms.  Borrower agrees that this Amendment is not intended to and shall not cause a novation with respect to any or all of the Obligations.

4.3Representations and Warranties.  Borrower hereby represents and warrants to Agent and Lenders that (a) the execution, delivery and performance of this Amendment, any and all other Loan Documents executed and/or delivered in connection herewith have been authorized by all requisite action (as applicable) on the part of Borrower and will not violate the organizational documents of Borrower; (b) Borrower’s directors and/or managers have authorized the execution, delivery and performance of this Amendment any and all other Loan Documents executed and/or delivered in connection herewith; (c) the representations and warranties contained in the Credit Agreement, as amended hereby, and any other Loan Document are true and correct on and as of the date hereof and on and as of the date of execution hereof as though made on and as of each such date (except to the extent such representations and warranties expressly relate to an earlier date); (d) except as it relates to the Specified Non-Compliance Items, no Default or Event of Default under the Credit Agreement, as amended hereby, has occurred and is continuing; (e) Loan Parties are in full compliance in all material respects with all covenants and agreements contained in the Credit Agreement and the other Loan Documents, as amended hereby; and (f) except as disclosed to Agent, no Loan Party has amended its organizational documents since the date of the Credit Agreement.

ARTICLE V

Miscellaneous Provisions

5.1Survival of Representations and Warranties.   All representations and warranties made in the Credit Agreement or any other Loan Document, including, without limitation, any document furnished in connection with this Amendment, shall survive the execution and delivery of this Amendment and the other Loan Documents, and no investigation by Agent or any Lender or any closing shall affect the representations and warranties or the right of Agent and each Lender to rely upon them.

5.2Reference to Credit Agreement.  Each of the Credit Agreement and the other Loan Documents, and any and all other Loan Documents, documents or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Credit Agreement, as amended hereby, are hereby amended so that any reference in the Credit Agreement and such other Loan Documents to the Credit Agreement shall mean a reference to the Credit Agreement, as amended hereby.

5.3Expenses of Agent.  As provided in the Credit Agreement, Borrower agrees to pay on demand all costs and expenses incurred by Agent, or its Affiliates, in connection with the preparation, negotiation, and execution of this Amendment and the other Loan Documents executed pursuant hereto and any and all amendments, modifications, and supplements thereto, including, without limitation, the reasonable fees and costs of legal counsel, and all costs and expenses incurred by Agent and each Lender in connection with the enforcement or preservation of any rights under the Credit Agreement, as amended hereby, or any other Loan Documents, including, without, limitation, the reasonable fees and costs of legal counsel.

5.4Severability.  Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable.

5.5Successors and Assigns.  This Amendment is binding upon and shall inure to the benefit of Agent and each Lender and Borrower and their respective successors and assigns, except that no Loan Party may assign or transfer any of its rights or obligations hereunder without the prior written consent of Agent.

5.6Counterparts.  This Amendment may be executed in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same instrument.  This Amendment may be executed by facsimile or electronic (.pdf) transmission, which facsimile or electronic (.pdf) signatures shall be considered original executed counterparts for purposes of this Section 5.6, and each party to this Amendment agrees that it will be bound by its own facsimile or electronic (.pdf) signature and that it accepts the facsimile or electronic (.pdf) signature of each other party to this Amendment.

5.7Effect of Waiver.  No consent or waiver, express or implied, by Agent to or for any breach of or deviation from any covenant or condition by Borrower shall be deemed a consent to or waiver of any other breach of the same or any other covenant, condition or duty.

5.8Headings.  The headings, captions, and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment.

5.9Applicable Law.  THE TERMS AND PROVISIONS OF SECTIONS 10.17 (GOVERNING LAW) AND 10.18 (FORUM SELECTION; CONSENT TO JURISDICTION) OF THE CREDIT AGREEMENT ARE HEREBY INCORPORATED HEREIN BY REFERENCE, AND SHALL APPLY TO THIS AMENDMENT MUTATIS MUTANDIS AS IF FULLY SET FORTH HEREIN.

5.10Final Agreement.  THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS, EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE EXPRESSION OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE THIS AMENDMENT IS EXECUTED.  THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AMENDED HEREBY, MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.  NO MODIFICATION, RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY PROVISION OF THIS AMENDMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY Borrower AND AGENT.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, this Amendment has been executed and is effective as of the date first written above.

BORROWER:
BIOLASE., INC.,
a Delaware corporation
By:	/s/John R. Beaver
Name:	John R. Beaver
Title:	Chief Financial Officer

AGENT AND LENDER:
SWK FUNDING LLC,
as Agent and a Lender
By:	SWK Holdings Corporation, its sole Manager
	By:	/s/ Winston Black
	Name:	Winston Black
	Title:	Chief Executive Officer and President

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Todd A. Norbe, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the period ended September 30, 2019 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. I have disclosed, based on my 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: November 8, 2019	By:	/s/ Todd a. Norbe
		Todd A. Norbe
		President and Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, John R. Beaver, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the period ended September 30, 2019 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. I have disclosed, based on my 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: November 8, 2019	By:	/s/ JOHN R. BEAVER
		John R. Beaver
		Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal 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 September 30, 2019 (the “Report”), I, Todd A. Norbe, 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: November 8, 2019	By:	/s/ TODD A. NORBE
		Todd A. Norbe
		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 September 30, 2019 (the “Report”), I, John R. Beaver, 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: November 8, 2019	By:	/s/ JOHN R. BEAVER
		John R. Beaver
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

EX-4.8

EXHIBIT 4.8

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES OR BLUE SKY LAWS OF ANY STATE AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES (SUBJECT TO THE PROVISIONS OF ARTICLE 5 BELOW), SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

CONSOLIDATED, AMENDED AND RESTATED
WARRANT TO PURCHASE STOCK

(Dated November 6, 2019)

Issuer:	BIOLASE, Inc., a Delaware corporation (the “Company”)
Warrant No.:	SWK-2
Number of Shares:	487,198 (as may be adjusted pursuant to Article 2)
Warrant Price:	$1.00
Issue Date:	November 9, 2018 and May 7, 2019 (as further described below)
Expiration Date:	November 9, 2026 and May 7, 2027 (as further described below)

THIS WARRANT CERTIFIES THAT, for good and valuable consideration, SWK Funding LLC, a Delaware limited liability company, or its assignees (“Holder”), is entitled to purchase the number of fully paid and non-assessable shares of the Company’s common stock, par value $0.001 per share (“Common Stock”), set forth above (the “Shares”), at the Warrant Price per Share set forth above, as the same may be adjusted from time to time pursuant to Article 2 of this Warrant (the “Warrant Price”), subject to the provisions and upon the terms and conditions set forth in this Warrant. On November 9, 2018, Holder was issued warrants to purchase 372,023 of the Shares (the “Initial Warrants”), and on May 7, 2019, Holder was issued additional warrants to purchase 115,175 of the Shares (the “Additional Warrants”).  The parties hereto agree that each of the Initial Warrants and the Additional Warrants are hereby consolidated into this one certificate and amended and restated in their entirety in the form of this Warrant.  The originally issued certificates for the Initial Warrants and the Additional Warrants shall be of no further force or effect.

ARTICLE 1.

EXERCISE.

1.1Method of Exercise.  This Warrant is exercisable, in whole or in part, at any time and from time to time on or before the November 9, 2026, with respect to the Initial Warrants, and May 7, 2027, with respect to the Additional Warrants.  Holder may exercise this Warrant by delivering the original of this Warrant together with a duly executed Notice of Exercise in substantially the form attached as Appendix 1 to the Company in accordance with Section 5.7 (or such other office or agency of the Company as it may designate by notice in writing to the Holder in accordance with Section 5.7).  Unless Holder is exercising the cashless exercise right set forth in Section 1.2, Holder shall also deliver to the Company a check, wire transfer (to an account

designated by the Company), or other form of payment acceptable to the Company in an amount equal to the aggregate Warrant Price for the Shares being purchased.  Unless otherwise stated in the Notice of Exercise, upon any exercise of this Warrant for less than all of the Shares, such exercised Shares shall first be allocated to the Initial Warrants to the extent of any remaining Initial Warrants, and then to the Additional Warrants.

1.2Cashless Exercise.  In lieu of exercising this Warrant as specified in Section 1.1, Holder may from time to time exercise this Warrant, in whole or in part, by means of a “cashless exercise” in which the Holder shall be entitled to receive a certificate for the number of Shares determined in accordance with the following equation:

X	=	(A - B) x C
		A

where

X	=	the number of Shares purchasable upon a “cashless exercise” of the Warrant pursuant to the provisions of this Section 1.2;
A	=	the Fair Market Value (defined below) per share of Common Stock on the date of the “cashless exercise”;
B	=	the Warrant Price for one Share under this Warrant; and
C	=	the number of Shares as to which this Warrant is being exercised pursuant to the provisions of this Article 1.

If the foregoing calculation results in a negative number or zero, then no Shares shall be issued upon a “cashless exercise” pursuant to this Section 1.2.  If the Holder does not agree with the Fair Market Value per share ultimately determined pursuant to Section 1.3(b) or Section 1.3(c), the Holder may, in its sole discretion (i) rescind the “cashless exercise”, (ii) pay the aggregate Warrant Price in the form of, at the Holder’s option, (1) a check payable to the Company or (2) a wire transfer of funds to an account designated by the Company, or (iii) proceed with the “cashless exercise” at the Fair Market Value per Share so determined.  In the event that, upon the applicable Expiration Date or other termination of this Warrant, the Fair Market Value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 is greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to this Section 1.2 as to all Shares (or such other securities) for which it shall not previously have been exercised and which are then expiring, and the Company shall promptly deliver a certificate representing the Shares (or such other securities) issued upon such exercise to Holder.

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1.3Fair Market Value.  For purposes of this Warrant, the “Fair Market Value” of a Share as of a particular date (the “Determination Date”) shall mean:

(a)If the Common Stock is then publicly listed or quoted on one or more securities exchanges, inter-dealer quotation systems or over-the-counter markets, the fair market value of a Share shall be the closing price per share of Common Stock reported on the principal such exchange, system or market for the business day immediately before Holder delivers this Warrant together with its Notice of Exercise to the Company.

(b)If the Determination Date is the date of a liquidation, dissolution or winding up, or any event deemed to be a liquidation, dissolution or winding up pursuant to the Company’s charter, then the fair market value of a Share shall be equal to all amounts to be payable per share to holders of the Common Stock pursuant to the charter in the event of such liquidation, dissolution or winding up, assuming for the purposes of this clause (b) that all of the shares of Common Stock then issuable upon exercise of all in-the-money options and warrants are outstanding at the Determination Date.

(c)If the Common Stock is not then publicly listed or quoted on one or more securities exchanges, inter-dealer quotation systems or over-the-counter markets, then the Board of Directors of the Company (the “Board”) shall determine the fair market value of a Share in its reasonable good faith judgment; provided, however, if Holder advises the Board in writing that Holder disagrees with such determination, then the Company and Holder shall promptly agree upon a reputable investment banking firm to undertake such valuation.  If the valuation of such investment banking firm results in a fair market value per Share that is more than 15% greater than that determined by the Board, then all fees and expenses of such investment banking firm shall be paid by the Company.  In all other circumstances, such fees and expenses of such investment banking firm shall be paid by Holder.

1.4Delivery of Certificate and New Warrant.  Promptly after Holder exercises this Warrant and, if applicable, the Company receives payment of the aggregate Warrant Price, the Company shall deliver to Holder certificates for the Shares acquired and, if this Warrant has not been fully exercised and has not fully expired, a new warrant of like tenor representing a warrant to purchase the Shares not yet acquired.

1.5Replacement of Warrants.  On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company shall execute and deliver a replacement Warrant.

1.6Sale, Merger, or Consolidation of the Company.  For the purpose of this Warrant, “Acquisition” means any sale or other disposition of all or substantially all of the assets of the Company, or any reorganization, consolidation, or merger of the Company where the holders of the Company’s securities before the transaction beneficially own less than 50% of the outstanding voting securities of the surviving entity after the transaction.  Upon the closing of any

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Acquisition, the successor entity shall assume the obligations of this Warrant, and this Warrant shall be exercisable for the same securities, cash, and property as would be payable for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on the record date for the Acquisition and subsequent closing, and the Warrant Price shall be adjusted accordingly; provided, however, that if pursuant to such Acquisition the entire outstanding Shares issuable upon exercise of the unexercised portion of this Warrant are cancelled and the total consideration payable to the holders of such Shares consists entirely of cash, then, upon payment to the holder of this Warrant of an amount equal to the amount Holder would have received if Holder held Shares issuable upon exercise of the unexercised portion of this Warrant and such Shares were outstanding on the record date for the Acquisition less the aggregate Warrant Price of such Shares, this Warrant shall be cancelled.

ARTICLE 2.

ADJUSTMENTS TO THE SHARES.

2.1Stock Dividends, Splits, Etc.   If the Company, at any time while this Warrant is outstanding: (a) pays a dividend on the Shares payable in Common Stock, (b) subdivides the outstanding Shares into a greater number of Shares, (c) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (d) issues by reclassification of shares of Common Stock any shares of capital stock of the Company, then in each such case (i) the Warrant Price will be adjusted by multiplying the Warrant Price then in effect by a fraction, the numerator of which equals the number of shares of Common Stock outstanding immediately prior to such event (excluding treasury shares, if any), and the denominator of which equals the number of shares of Common Stock outstanding immediately after such event (excluding treasury shares, if any), and (ii) the number of Shares issuable hereunder shall be concurrently adjusted by multiplying such number by the reciprocal of such fraction.  Such adjustments will take effect on the effective date of such dividend, subdivision, combination or issuance by reclassification, as the case may be. The provisions of this Section 2.1 shall similarly apply to successive reclassifications, exchanges, combinations, substitutions, recapitalizations and reorganizations.

2.2Reserved.

2.3Adjustments for Diluting Issuances.  In the event that the Company issues (a “Diluting Issuance”) any Additional Shares of Common Stock (as defined in the Company’s Certificate of Designations, Preferences and Rights of Series C Participating Convertible Preferred Stock (the “Certificate of Designations”), except that Sections 6(c)(ii)(C)(1) and 6(c)(ii)(C)(2) in such definition shall be deleted in their entirety) after the applicable Issue Date set forth above, at a price per Share less than the then Exercise Price, then the Exercise Price shall be adjusted in accordance with the provisions set forth in Section 6(c) of the Certificate of Designations (the “Provisions”).  For purposes of clarity, all references in such Section 6(c) to the “Initial Issue Date” shall mean the applicable Issue Date, and to the “Conversion Price” shall mean the Exercise Price.  The Company agrees that the Provisions, as in effect on the applicable Issue Date, shall be deemed to remain in full force and effect during the term of the Warrant notwithstanding any subsequent amendment, waiver or termination thereof by the Company’s shareholders.  Under no circumstances shall the aggregate Exercise Price payable by Holder upon exercise of the Warrant increase as a result of any adjustment arising from a Diluting Issuance.

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2.4No Impairment.  The Company shall not, by amendment of its Certificate of Incorporation or through a reorganization, transfer of assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under this Warrant by the Company, but shall at all times in good faith assist in carrying out of all the provisions of this Article 2 and in taking all such action as may be necessary or appropriate to protect Holder’s rights under this Article 2 against impairment. If the Company takes any action, a purpose of which is to avoid the observance or performance of any of the terms to be observed or performed under this Warrant by the Company, the Warrant Price shall be adjusted downward and the number of Shares issuable upon the exercise of this Warrant shall be adjusted upward in such a manner that such action is offset and the aggregate Warrant Price of this Warrant is unchanged.

2.5Fractional Shares.  No fractional Shares shall be issuable upon exercise of the Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share.  If a fractional share interest arises upon any exercise of the Warrant, the Company shall eliminate such fractional share interest by paying Holder the amount computed by multiplying the fractional interest by the Fair Market Value of a full Share.  

2.6Certificate as to Adjustments.  Upon any adjustment pursuant to this Article 2, including any adjustments to the Warrant Price or number of Shares that are exercisable under this Warrant, the Company shall promptly notify Holder in writing, and, at the Company’s expense, promptly compute such adjustment, and furnish Holder with a certificate of its officer setting forth such adjustment and the facts upon which such adjustment is based.

ARTICLE 3.

REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.

3.1Representations and Warranties.  The Company represents and warrants to the Holder as follows:

(a)The Company is a corporation validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to carry on its business as now conducted.  

(b)This Warrant constitutes the Company’s valid and legally binding obligation, enforceable in accordance with its terms, except as may be limited by (i) applicable bankruptcy, insolvency, reorganization, or similar laws relating to or affecting the enforcement of creditors’ rights and (ii) laws relating to the availability of specific performance, injunctive relief or other equitable remedies.  All corporate action has been taken on the part of the Company, its officers, directors, and stockholders necessary for the authorization, execution and delivery of this Warrant and the issuance of the Shares upon exercise of this Warrant.

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(d)All Shares which may be issued upon the exercise of this Warrant shall at all times during the term hereof and prior to exercise in full hereof be duly reserved out of the Company’s authorized and unissued capital stock for issuance upon exercise hereof and shall, upon issuance, be duly and validly issued, fully paid and non-assessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws.

3.2No Shareholder Rights; Preemptive Rights.  Except as provided in this Warrant, Holder will not have any rights as a shareholder of the Company until the exercise of this Warrant.  The Shares for which this Warrant is exercisable shall at all times be free from preemptive rights and any other rights (or the Company shall have received a valid waiver from all such holders of any such rights) that would prevent the exercise of this Warrant in full by the Holder.

3.3Valid Issuance.  The Company shall take all steps necessary to ensure that all Shares which may be issued upon the exercise of this Warrant shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable, free of any liens and encumbrances, and issued to the Holder without violation of any applicable law or governmental regulation or any requirements of any domestic securities exchange or similar quotation system upon which the Shares may be listed, except for restrictions on transfer provided for herein or under applicable federal and state securities laws.

3.4Notice of Certain Events.  If Company proposes at any time (a) to declare any dividend or distribution upon its capital stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend; (b) to offer for subscription pro rata to the holders of any class or series of its stock any additional shares of stock of any class or series or other rights; (c) to effect any reclassification or recapitalization of Common Stock; (d) to consummate any Acquisition, or to liquidate, dissolve or wind up the Company; or (e) offer holders of registration rights the opportunity to participate in an underwritten public offering of the company’s securities for cash, then, in connection with each such event, the Company shall give Holder (1) in the case of the matters referred to in  clauses (a) and (b) above at least 20 days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of Common Stock will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in clauses (c) and (d) above; (2) in the case of the matters referred to in (c) and (d) above at least 20 days prior written notice of the date when the same will take place (and specifying the date on which the holders of Common Stock will be entitled to exchange their Common Stock for securities or other property deliverable upon the occurrence of such event); and (3) in the case of the matter referred to in (e) above, the same notice as is given to the holders of such registration rights.

3.5Information Rights.  So long as Holder holds this Warrant and/or any of the Shares, the Company shall deliver to Holder (i) promptly, copies of all notices or other written communications to which Holder would be entitled if it held Shares as to which this Warrant was then exercisable, and (ii) within 45 days after the end of each of the first three quarters of each fiscal year, the Company’s quarterly, unaudited financial statements and within 90 days after the end of each fiscal year, the Company’s annual, audited financial statements; provided, however, that with regard to annual meeting proxy statements and clause (ii) of this Section 3.5, it is understood and agreed that there shall be no such delivery requirement with respect to any such proxy statements or financial statements if such documents are available on EDGAR.

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ARTICLE 4.

REPRESENTATIONS AND WARRANTIES OF THE HOLDER.  

The Holder represents and warrants to the Company as follows:

4.1Purchase for Own Account.  This Warrant and the Shares to be acquired upon exercise of this Warrant by Holder are being acquired for investment for Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution in violation of applicable securities laws.  Holder also represents that it has not been formed for the specific purpose of acquiring this Warrant or the Shares.

4.2Disclosure of Information.  Holder has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to this Warrant and its underlying securities.  Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Holder or to which Holder has access.

4.3Investment Experience.  Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk.  Holder has experience as an investor in securities of companies in the development stage and acknowledges that Holder can bear the economic risk of such Holder’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such persons.

4.4Accredited Investor Status.  Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.

4.5The Act.  Holder understands that this Warrant and the Shares issuable upon exercise hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Holder’s investment intent as expressed herein.  Holder understands that this Warrant and the Shares issued upon any exercise hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available.  

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ARTICLE 5.

MISCELLANEOUS.

5.1Term.  This Warrant is exercisable in whole or in part at any time and from time to time on or before the applicable Expiration Date.  

5.2Legends.This Warrant and the Shares shall be imprinted with a legend in substantially the following form:

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

5.3Cash Dividends and Cash Distributions.  Subject to the other provisions of this Section 5.3, this Warrant shall at all times represent the Holder’s right to receive the same percentage of any cash dividends or cash distributions made by the Company that would have been received by the Holder if Holder had fully exercised this Warrant for the full amount of the unexercised Shares immediately prior to the close of business on the day immediately preceding the record date for such dividend.  To that end, if the Company at any time or from time to time after the date hereof declares, orders, pays or makes a cash dividend or other cash distribution on or with respect to its shares of Common Stock, then, and in each such case, the Company shall reserve for, and hold for the benefit of, the Holder, a dollar amount equal to the amount (without interest) that the Holder would have received if it had fully exercised this Warrant for the full amount of the unexercised Shares immediately prior to the close of business on the day immediately preceding the record date for such dividend or other cash distribution, and the Holder shall be entitled to receive such amount in full upon the exercise of this Warrant.  In lieu of receiving such cash payment, at its sole discretion, the Holder may choose to have the Warrant Price reduced by the amount of the cash, or value of the other securities or other property payable per share.

5.4Compliance with Securities Laws on Transfer.  This Warrant and/or the Shares issuable upon exercise of this Warrant may not be transferred or assigned in whole or in part without compliance with applicable federal and state securities laws by the transferor and the transferee, and in connection with any proposed transfer of this Warrant or the Shares to any Person other than an Affiliate of the Holder, the transferor shall, if reasonably requested by the Company, deliver a legal opinion of counsel to the transferor (at the transferor’s expense).  

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5.5Registration Rights.  In the event that the Company, at any time prior to the Expiration Date for the Additional Warrants, proposes to file on behalf of any stockholder or warrantholder a registration statement under the Act on any form (other than a registration statement on Form S-4 or Form S-8) for shares or warrant shares held by any stockholder or warrantholder, the Company shall provide written notice to the Holder as soon as practicable of such proposed filing, but in no event shall such written notice be given to the Holder later than ten (10) days prior to the date that the Company intends to file such registration statement, and, subject to the receipt by the Company of any information of the Holder reasonably required to be included in the registration statement, the Holder shall have the right, in its discretion, to include the Shares of the Holder in such registration statement at the Company’s expense; provided, however, that the Holder shall have no such right with respect to any Shares that cannot be registered on such registration statement, as a result of the rules and regulations of the Securities and Exchange Commission.  All legal and other fees and expenses incurred by the Holder in connection with such registration shall be borne by the Holder.  The Holder shall not, in connection with any such registration, provide any information to the Company that contains any untrue statement of a material fact or fail to state a material fact required to be stated or necessary to make the statements provided to the Company not misleading, in light of the circumstances in which they were made.

5.6 Transfer Procedure.  Subject to the provisions of Section 5.4 and upon providing the Company with written notice, Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant to any transferee, provided, however, in connection with any such transfer, Holder will give the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable).

5.7Notices.  All notices and other communications from the Company to the Holder, or vice versa, shall be in writing and shall be deemed delivered and effective when given personally or mailed by first-class registered or certified mail or by overnight courier, postage prepaid (or on the first business day after transmission by facsimile), at such address as may have been furnished to the Company or Holder, as the case may be, in writing by the Company or such holder from time to time.  

All notices to Holder shall be addressed as follows until the Company receives notice of a change in address in accordance with this Section 5.7:  

SWK Funding LLC

Attn:  Chief Executive Officer

14755 Preston Road, Suite 105

Dallas, TX 75254

Telephone: 972-687-7250

Facsimile: 972- 687-7255

9

With a copy (which shall not constitute notice) to:

Holland & Knight LLP
200 Crescent Ct., Suite 1600
Dallas, TX 75201
Telephone:  214-964-9500
Facsimile:  214-964-9501
Attention:  Ryan Magee

Notice to the Company shall be addressed as follows until Holder receives notice of a change in address in accordance with this Section 5.7:

BIOLASE, Inc.

Attn:  Chief Executive Officer

4 Cromwell

Irvine, CA 92618

Telephone: 949-361-1200

Facsimile: 949-365-4913

With a copy (which shall not constitute notice) to:

Sidley Austin LLP
1 South Dearborn Street
Chicago, IL 60603
Telephone:  312-853-2217; 312-853-7443
Facsimile:  312-853-7036
Attention:  Michael A. Gordon
Beth E. Peev

5.8Waiver.  This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.  

5.9Attorney’s Fees.  In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.

5.10Counterparts.  This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement.

5.11Governing Law.  This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to its principles regarding conflicts of law.

10

5.12Provisions for the Benefit of the Lenders.  Notwithstanding anything herein to the contrary, nothing contained in this Warrant shall affect, limit or impair the rights and remedies of SWK in its capacity as a lender to the Company or any of the Company’s subsidiaries pursuant to the Credit Agreement among the Company, SWK, as Agent, Sole Lead Arranger and Sole Bookrunner, and the financial parties thereto from to time as lenders, dated as of the date hereof, or any other agreements or instruments entered into in connection therewith.  Without limiting the generality of the foregoing, SWK in exercising its rights as a lender will not have any duty to consider (a) its status as a direct or indirect stockholder of the Company and the Company’s subsidiaries, (b) the direct or indirect ownership of the Shares, or (c) any duty it may have to any other direct or indirect stockholder of the Company and the Company’s subsidiaries, except as may be required under the applicable loan documents.

[SIGNATURES APPEAR ON NEXT PAGE]

11

IN WITNESS WHEREOF, the undersigned have executed this Warrant as of the day and year first above written.

“COMPANY”
BIOLASE, INC.
By:	/s/ John R. Beaver
Name:	John R. Beaver
	(Print)
Title:	Chief Financial Officer

[Signature Page to Warrant]

SWK FUNDING LLC
By: SWK Holdings Corporation,
its sole Manager
By:	/s/ Winston Black
Name:	Winston Black
Title:	Chief Executive Officer

[Signature Page to Warrant]

APPENDIX 1

NOTICE OF EXERCISE

The undersigned, pursuant to the provisions set forth in the attached Warrant (No.), hereby irrevocably elects to purchase (check applicable box):

Shares covered by such Warrant.

The undersigned herewith makes payment of the full purchase price for such Shares at the price per share provided for in such Warrant, which is $.  Such payment takes the form of (check applicable box or boxes):

$ in lawful money of the United States; and/or

the cancellation of such number of Shares as is necessary, in accordance with the formula set forth in Section 1.2, to exercise this Warrant with respect to Shares (using a Fair Market Value of $ per Share for purposes of this calculation) purchasable pursuant to the cashless exercise procedure set forth in Section 1.2.

The undersigned requests that the certificates for such Shares be issued in the name of, and delivered to whose address is

By its execution below and for the benefit of the Company, Holder hereby restates each of the representations and warranties in Article 4 of the Warrant as of the date hereof.

HOLDER:

By:

Name:

Title:

(Date):

Appendix 1-1

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Subsequent Events - Additional Information (Detail) - USD ($)	Nov. 05, 2019	Oct. 29, 2019	Oct. 28, 2019	Sep. 30, 2019	Dec. 31, 2018
Subsequent Event [Line Items]
Preferred stock, shares issued				0	0
Preferred stock, par value				$ 0.001	$ 0.001
Subsequent Event | Loan Agreement | Pacific Mercantile Bank
Subsequent Event [Line Items]
Line of credit facility, maximum borrowing capacity			$ 3,000,000
Maximum borrowing base percentage of eligible accounts			90.00%
Maximum borrowing base percentage of eligible inventory			75.00%
Line of credit facility expiration date			Oct. 28, 2021
Interest rate			1.50%
Subsequent Event | Loan Agreement | Exim Bank
Subsequent Event [Line Items]
Line of credit facility expiration date			Oct. 28, 2020
Initial and annual fee			$ 52,500
Termination fee			$ 30,000
Maximum | Subsequent Event | Loan Agreement | Pacific Mercantile Bank
Subsequent Event [Line Items]
Interest rate			6.00%
Series E Participating Convertible Preferred Stock | Subsequent Event
Subsequent Event [Line Items]
Convertible preferred stock, shares issued upon conversion		100
Convertible preferred stock, conversion price per share		$ 0.5750
Underwritten Public Offering | Subsequent Event
Subsequent Event [Line Items]
Net proceeds from issuance of common stock		$ 4,200,000
Underwritten Public Offering | Common Stock | Subsequent Event
Subsequent Event [Line Items]
Shares issued		7,820,000
Shares issued, price per share		$ 0.5750
Over-Allotment Option | Subsequent Event
Subsequent Event [Line Items]
Shares issued	1,100,000
Gross proceeds from issuance of equity	$ 600,000
Over-Allotment Option | Maximum | Subsequent Event
Subsequent Event [Line Items]
Option to purchase additional common stock granted		1,173,000
Private Placement | Series E Participating Convertible Preferred Stock | Subsequent Event
Subsequent Event [Line Items]
Shares issued, price per share		$ 57.50
Preferred stock, shares issued		69,565
Preferred stock, par value		$ 0.001
Gross proceeds from issuance of convertible preferred stock		$ 4,000,000

XML

Debt - Additional Information (Detail)					3 Months Ended	9 Months Ended
	May 07, 2019 USD ($) Day $ / shares shares	Nov. 09, 2018 USD ($) Day $ / shares shares	Sep. 27, 2018 USD ($) $ / shares shares	Mar. 06, 2018 USD ($) $ / shares	Sep. 30, 2019 USD ($)	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Mar. 31, 2019 USD ($)	Oct. 22, 2018 USD ($)	Aug. 13, 2018 USD ($)
Debt Instrument [Line Items]
Borrowings under lines of credit							$ 3,323,000
Repayments of lines of credit							1,823,000
Debt issuance costs						$ 38,000	$ 87,000
SWK Loan
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity	$ 15,000,000							$ 12,500,000
Line of credit facility term		5 years
Borrowings under lines of credit		$ 12,500,000
Debt instrument, repayment of interest-only on loan period		2 years
Debt instrument, principal repayments beginning term		2021
Repayments of lines of credit		$ 700,000
Debt instrument, maturity term		2023
Debt instrument covenant description						(i) maintain unencumbered liquid assets of no less than $1.5 million or the sum of aggregate cash flow from operations less capital expenditures, (ii) achieve certain revenue and EBITDA levels during the first two years of the loan, (iii) limit future borrowing, investments and dividends, and (iv) submit monthly and quarterly financial reporting.
Debt issuance costs		$ 1,000,000
Loan origination fee		200,000
Finder's fee		400,000
Legal and other fees		$ 400,000
Interest expense					$ 600,000	$ 1,600,000
Weighted-average interest rate					12.70%	12.70%
SWK Loan | LIBOR
Debt Instrument [Line Items]
Line of credit facility bearing floating interest rate per annum		10.00%
Line of credit facility interest rate description						London Interbank Bank Offered Rate (“LIBOR”) plus 10% or another index that approximates LIBOR as close as possible if and when LIBOR no longer exists.
Western Alliance Warrant
Debt Instrument [Line Items]
Warrants issued to purchase shares of common stock | shares			56,338
Warrants expire date			Sep. 27, 2028
Initial exercise price of warrants | $ / shares			$ 2.13
SWK Warrants
Debt Instrument [Line Items]
Warrants expiration period	8 years	8 years
Warrants fair value assumptions, expected volatility rate	80.73%	81.79%
Warrants fair value assumptions annual dividend per share | $ / shares	$ 0.00	$ 0.00
Warrants fair value assumptions, risk-free interest rate	2.37%	3.13%
Warrants, estimated fair value	$ 200,000	$ 400,000
Warrants issued to purchase shares of common stock | shares	115,175	372,023
Initial exercise price of warrants | $ / shares	$ 2.17	$ 1.34
Warrants expiration period	7 years	7 years
Number of trading days of average closing price of common stock | Day	10	10
DPG Warrants
Debt Instrument [Line Items]
Warrants expiration period	8 years	8 years
Warrants fair value assumptions, expected volatility rate	80.73%	81.79%
Warrants fair value assumptions annual dividend per share | $ / shares	$ 0.00	$ 0.00
Warrants fair value assumptions, risk-free interest rate	2.37%	3.13%
Warrants, estimated fair value	$ 100,000	$ 300,000
Warrants issued to purchase shares of common stock | shares	34,552	279,851
Initial exercise price of warrants | $ / shares	$ 2.17	$ 1.34
Finder's fee						$ 500,000
Warrants expiration period	7 years	7 years
Number of trading days of average closing price of common stock | Day	10	10
SWK Warrants and DPG Warrants
Debt Instrument [Line Items]
Warrants effective-interest method amortization period						5 years
Maximum | SWK Loan
Debt Instrument [Line Items]
Debt instrument covenants unencumbered liquid assets		$ 1,500,000
Business Financing Agreement
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity				$ 6,000,000
Line of credit facility expiration date				Mar. 06, 2020
Line of credit facility, interest rate description						Amounts outstanding under the Business Financing Agreement bore interest at a per annum floating rate equal to the greater of 4.5% or the “Prime Rate” published in the Money Rates section of the Western Edition of The Wall Street Journal (or such other rate of interest publicly announced from time to time by Western Alliance as its “Prime Rate”), plus 1.5% with respect to advances made under the line of credit, plus an additional 5.0% during any period that an event of default occurred and was continuing.
Line of credit facility, commitment fee amount				$ 67,500
Line of credit facility, commitment fee description						the Company paid the first of two annual commitment fees totaling $67,500, being 0.25% of the aggregate $6.0 million commitment for the Domestic Revolver and 1.75% of the aggregate $3.0 million commitment for the EXIM Revolver. The commitment fees and the legal costs associated with acquiring the credit facilities were capitalized and were amortized on a straight-line basis as interest expense over the term of the Business Financing Agreement
Business Financing Agreement | Western Alliance
Debt Instrument [Line Items]
Line of credit facility minimum unrestricted cash covenant									$ 300,000
Interest expense including debt issuance costs		100,000
Repayments of lines of credit		$ 900,000
Business Financing Agreement | Western Alliance Warrant
Debt Instrument [Line Items]
Warrants expiration period				10 years
Warrants fair value assumptions, expected volatility rate				91.49%
Warrants fair value assumptions annual dividend per share | $ / shares				$ 0.00
Warrants fair value assumptions, risk-free interest rate				2.88%
Warrants, estimated fair value				$ 100,000
Business Financing Agreement | Domestic Revolving Credit Facility
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity				$ 6,000,000
Maximum borrowing base percentage of eligible accounts receivable				75.00%
Line of credit facility commitment fee percentage				0.25%
Line of credit facility, commitment fee amount				$ 6,000,000
Business Financing Agreement | Export Revolving Credit Facility
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity				$ 3,000,000
Maximum borrowing base percentage of eligible accounts receivable				85.00%
Line of credit facility commitment fee percentage				1.75%
Line of credit facility, commitment fee amount				$ 3,000,000
Business Financing Agreement | Line of Credit
Debt Instrument [Line Items]
Variable interest Rate with respect to advances made				1.50%
Line of credit facility interest rate during period in event of default				5.00%
Business Financing Agreement | Line of Credit | Minimum
Debt Instrument [Line Items]
Line of credit facility bearing floating interest rate per annum				4.50%
Business Financing Modification Agreement | Western Alliance
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity			$ 2,500,000
Line of credit facility expiration date			Mar. 06, 2019
Line of credit facility default covenant advance										$ 1,500,000
Line of credit, outstanding borrowings			$ 1,500,000
Credit Agreement, First Amendment [Member] | SWK Loan
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity	$ 15,000,000
Debt instrument covenant description						(a) adjust minimum revenue and EBITDA levels, (b) require the Company to have a shelf registration statement declared effective by the SEC before September 30, 2019, with a proposed maximum aggregate offering price of at least $10.0 million if the Company does not reach set minimum revenue levels for the three-month period ended June 30, 2019, and (c) require minimum liquidity of $1.5 million at all times. The First Amendment provides that if aggregate minimum revenue and EBITDA levels are not achieved by September 30, 2019, the minimum liquidity requirement will be increased to $3.0 million, until the Company has obtained additional equity or debt funding of no less than $5.0 million.
Minimum level of liquidity financial covenant	1,500,000
Additional equity or debt funding requirement until minimum liquidity is met	5,000,000
Maximum aggregate offering price	10,000,000
Increase in minimum liquidity requirement if aggregate minimum revenue and EBITDA levels are not achieved	3,000,000
Loan origination and other fees to be paid	100,000
Credit Agreement, First Amendment [Member] | SWK Warrants
Debt Instrument [Line Items]
Additional warrants to purchase common stock value	200,000
Credit Agreement, First Amendment [Member] | DPG Warrants
Debt Instrument [Line Items]
Additional warrants to purchase common stock value	100,000
Additional finders fee	$ 100,000
Credit Agreement, Second Amendment [Member] | SWK Loan
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity					$ 5,000,000	$ 5,000,000
Credit Agreement, Second Amendment [Member] | Minimum | SWK Loan
Debt Instrument [Line Items]
Gross proceeds from subordinated debt threshold limit						$ 5,000,000

XML

Components of Accrued Liabilities (Detail) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018	Sep. 30, 2018
Payables And Accruals [Abstract]
Payroll and benefits	$ 1,726	$ 2,400
Patent litigation settlement		1,500
Warranty accrual, current portion	954	861	$ 1,005
Lease liability	476
Accrued professional services	992	1,044
Taxes	255	714
Accrued insurance premium		328
Customer deposits	82	21
Other	465	670
Total accrued liabilities	$ 4,950	$ 7,538

XML

Description of Business and Basis of Presentation - Additional Information (Detail) shares in Millions	Nov. 05, 2019 USD ($) shares	Oct. 29, 2019 USD ($)	Oct. 28, 2019 USD ($)	May 10, 2018	Sep. 30, 2019 USD ($)	May 07, 2019 USD ($)	Mar. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Sep. 30, 2018 USD ($)	Dec. 31, 2017 USD ($)
Basis Of Presentation [Line Items]
Working capital					$ 9,200,000
Cash and cash equivalents, including restricted cash					2,403,000			$ 8,356,000	$ 2,440,000	$ 11,896,000
Accounts receivable					$ 8,474,000			$ 11,112,000
Reverse stock split ratio				0.2
Subsequent Event
Basis Of Presentation [Line Items]
Net proceeds from issuance of shares after deducting underwriter discounts and other fees and expenses	$ 8,400,000	$ 7,800,000
Subsequent Event | Over-Allotment Option
Basis Of Presentation [Line Items]
Proceeds from issuance of equity	$ 600,000
Shares issued | shares	1.1
SWK Loan
Basis Of Presentation [Line Items]
Line of credit facility, maximum borrowing capacity						$ 15,000,000	$ 12,500,000
Pacific Mercantile Bank | Subsequent Event | Loan And Security Agreement
Basis Of Presentation [Line Items]
Line of credit facility, maximum borrowing capacity			$ 3,000,000
Maximum borrowing base percentage of eligible accounts			90.00%
Maximum borrowing base percentage of eligible inventory			75.00%
Line of credit facility expiration date			Oct. 28, 2021

XML

Summary of Disaggregation of Revenues Related to Geographic Areas (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Disaggregation Of Revenue [Line Items]
Net revenue	$ 8,646	$ 10,936	$ 27,617	$ 33,110
United States
Disaggregation Of Revenue [Line Items]
Net revenue	4,949	6,953	16,962	19,810
International
Disaggregation Of Revenue [Line Items]
Net revenue	$ 3,697	$ 3,983	$ 10,655	$ 13,300

XML

Debt

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Debt

NOTE 9—DEBT

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

	September 30,			December 31,
	2019			2018
Term loan	$	15,000		$	12,500
Discount and debt issuance costs on term loan		(1,644	)		(1,664	)
Total long-term debt, net	$	13,356		$	10,836

Line of Credit

On March 6, 2018, BIOLASE and two of its wholly-owned subsidiaries (such subsidiaries, together with BIOLASE, the “Borrower”) entered into the Business Financing Agreement (the “Business Financing Agreement”) with Western Alliance Bank (“Western Alliance”).Pursuant to the terms and conditions of the Business Financing Agreement, Western Alliance agreed to provide the Borrower a secured revolving line of credit permitting the Borrower to borrow or receive letters of credit up to the lesser of $6.0 million (the “Domestic Revolver”) (subject to a $6.0 million credit limit relating to domestic eligible accounts receivable (the “Domestic Credit Limit”) and a $3.0 million credit limit relating to export-related (the “EXIM Revolver”) eligible accounts receivable (the “EXIM Credit Limit”)) and the borrowing base, which is defined as the sum of the domestic borrowing base (up to 75% of the Borrower’s eligible domestic accounts receivable less such reserves as Western Alliance may deem proper and necessary) and the export-related borrowing base (up to 85% of the Borrower’s eligible export-related accounts receivable less such reserves as Western Alliance may deem proper and necessary). The Business Financing Agreement was set to expire on March 6, 2020, and the Borrower’s obligations thereunder were secured by a security interest in all of the Borrower’s assets.

The Business Financing Agreement required the Company to maintain compliance with certain financial and non-financial covenants, as defined therein. Western Alliance had the right to declare the amounts outstanding under the Business Financing Agreement immediately due and payable upon a default.

Amounts outstanding under the Business Financing Agreement bore interest at a per annum floating rate equal to the greater of 4.5% or the “Prime Rate” published in the Money Rates section of the Western Edition of The Wall Street Journal (or such other rate of interest publicly announced from time to time by Western Alliance as its “Prime Rate”), plus 1.5% with respect to advances made under the line of credit, plus an additional 5.0% during any period that an event of default occurred and was continuing. The commitment fee under the Business Financing Agreement was 0.25% of the Domestic Credit Limit and 1.75% of the EXIM Credit Limit, payable on March 6, 2018 and each anniversary thereof. 

Pursuant to the Business Financing Agreement, the Company paid the first of two annual commitment fees totaling $67,500, being 0.25% of the aggregate $6.0 million commitment for the Domestic Revolver and 1.75% of the aggregate $3.0 million commitment for the EXIM Revolver. The commitment fees and the legal costs associated with acquiring the credit facilities were capitalized and were amortized on a straight-line basis as interest expense over the term of the Business Financing Agreement.

As additional consideration for the lines of credit, the Company also issued to Western Alliance warrants to purchase shares of its common stock (the “Original Western Alliance Warrants”). The fair value of the Original Western Alliance Warrants was estimated using the Black-Scholes option-pricing model with the following assumptions: expected term of 10 years; volatility of 91.49%; annual dividend per share of $0.00; and risk-free interest rate of 2.88%; and resulted in an estimated fair value of $0.1 million, which was recorded as a liability and resulted in a discount to the credit facilities at issuance. The discount was expensed to interest expense at the time the Business Financing Agreement was terminated, as discussed below.

On August 13, 2018, the Borrower and Western Alliance entered into a Waiver and Business Financing Modification Agreement, pursuant to which Western Alliance waived certain of the Borrower’s covenants under the Business Financing Agreement and provided an advance of $1.5 million, which advance was due by September 27, 2018.

On September 27, 2018, the Borrower and Western Alliance entered into a second Business Financing Modification Agreement which reduced the credit limit under the Business Financing Agreement to $2.5 million and extended the due date of the $1.5 million advance to March 6, 2019. In connection with the agreement, the Original Western Alliance Warrants were terminated, and the Company issued to Western Alliance new warrants (the “Western Alliance Warrants”) to purchase up to 56,338 shares of the Company’s common stock. The Western Alliance Warrants are immediately exercisable and expire on September 27, 2028. These warrants contain down-round features that require the Company to adjust the exercise price proportionately should the Company issue shares at a price less than the $2.13 per share exercise price.

On October 22, 2018, the Borrower and Western Alliance entered into a third Business Financing Modification Agreement, pursuant to which Western Alliance waived BIOLASE’s non-compliance with certain financial operating covenants as set forth in the Business Financing Agreement, and the Borrower agreed to certain amended covenants contained in the Business Financing Agreement, including a $300,000 minimum unrestricted cash balance covenant and a waiver of reporting items required to be delivered by BIOLASE to Western Alliance under the Business Financing Agreement.

On November 9, 2018, all outstanding borrowings, accrued interest and fees under the Business Financing Agreement were repaid with a portion of the proceeds under the Credit Agreement (as defined and described below), and the Business Financing Agreement was terminated. The Company recorded approximately $0.1 million of interest expense including unamortized debt issuance costs that were written-off upon extinguishment of the debt. As of September 30, 2019 and December 31, 2018, the Western Alliance Warrants remain outstanding and are classified in equity in the consolidated balance sheets.

Term Loan

On November 9, 2018, the Company entered into a five-year secured Credit Agreement (the “Credit Agreement”) with SWK Funding LLC (“SWK”), pursuant to which the Company has borrowed $12.5 million (the “SWK Loan”). The Company’s obligations under the Credit Agreement are secured by substantially all of the Company’s assets. Under the terms of the Credit Agreement, repayment of the loan is interest-only for the first two years, paid quarterly with the option to extend the interest-only period. Principal repayments will begin in the first quarter of 2021 and will be approximately $0.7 million quarterly until the loan matures in the fourth quarter of 2023. The loan bears interest at London Interbank Bank Offered Rate (“LIBOR”) plus 10% or another index that approximates LIBOR as close as possible if and when LIBOR no longer exists. Approximately $0.9 million of the proceeds from the SWK Loan were used to pay off all amounts owed to Western Alliance under the Business Financing Agreement. The Company plans to use the remaining proceeds to provide additional working capital to fund its growth initiatives, such as broadening its customer base and increasing the utilization of its products to drive recurring higher margin consumables revenue.

The Credit Agreement contains financial and non-financial covenants requiring the Company to, among other things, (i) maintain unencumbered liquid assets of no less than $1.5 million or the sum of aggregate cash flow from operations less capital expenditures, (ii) achieve certain revenue and EBITDA levels during the first two years of the loan, (iii) limit future borrowing, investments and dividends, and (iv) submit monthly and quarterly financial reporting.

In connection with the SWK Loan, the Company paid approximately $1.0 million in debt issuance costs, including a $0.2 million loan origination fee, a $0.4 million finder’s fee, and $0.4 million in legal and other fees. These costs were recognized as a discount on the SWK Loan and are being amortized on a straight-line basis over the loan term which approximates the effective-interest method.

The Company recognized approximately $0.6 and $1.6 million in interest expense relating to the SWK Loan for the three and nine-month periods ended September 30, 2019, respectively. The weighted-average interest rate for the three months ended September 30, 2019 was 12.7%.

As of March 31, 2019, the Company was not in compliance with certain covenants in the Credit Agreement. In May 2019, SWK granted the Company a waiver of such covenants through September 30, 2019. On May 7, 2019, the Company and SWK agreed to amend the Credit Agreement (the “First Amendment) to increase the total commitment from $12.5 million to $15.0 million, and to revise the financial covenants to (a) adjust minimum revenue and EBITDA levels, (b) require the Company to have a shelf registration statement declared effective by the SEC before September 30, 2019, with a proposed maximum aggregate offering price of at least $10.0 million if the Company does not reach set minimum revenue levels for the three-month period ended June 30, 2019, and (c) require minimum liquidity of $1.5 million at all times. The First Amendment provides that if aggregate minimum revenue and EBITDA levels are not achieved by September 30, 2019, the minimum liquidity requirement will be increased to $3.0 million, until the Company has obtained additional equity or debt funding of no less than $5.0 million.

In connection with the amendment, the Company paid to SWK loan origination and other fees of approximately $0.1 million payable in cash and approximately $0.2 million in additional SWK Warrants (as defined below) to purchase the Company’s common stock. The Company paid an additional finder’s fee to Deal Partners Group (“DPG”) of approximately $0.1 million in cash and $0.1 million in additional DPG Warrants (as defined below) to purchase the Company’s common stock. The Company accounted for the First Amendment as a modification to existing debt and as a result, recognized the amounts paid to SWK in cash and SWK warrants as additional debt issuance costs. Amounts paid to DPG in cash and warrants relating to the First Amendment were expensed as incurred in the Company’s consolidated statement of operations for the three and nine months ended September 30, 2019.

On August 20, 2019, BIOLASE, entered into a Letter Agreement (the “Letter Agreement”) with SWK, in connection with the Credit Agreement. Pursuant to the Letter Agreement, SWK agreed to waive the effect of the Company’s potential non-compliance with certain unencumbered liquid assets financial operating covenants as set forth in the Credit Agreement, and SWK agreed to forbear from exercising rights and remedies otherwise available to it in the event of such non-compliance through September 30, 2019, or earlier in the event of the consummation of an additional secured financing or an event of default under the Credit Agreement.

On September 30, 2019, the Company agreed to further amend the Credit Agreement (the “Second Amendment”) with SWK, in connection with that certain Credit Agreement, by and among the Company, SWK, and the lender parties thereto.  The Second Amendment provides for a revolving loan facility, secured by first lien security permitted inventory and accounts receivable revolving loan facility, secured by a first lien security interest in the Company’s inventory and accounts receivable, with a maximum principal amount of $5 million. In addition, SWK agreed to waive the effect of the Company’s non-compliance through October 31, 2019, with certain unencumbered liquid assets financial operating covenants as set forth in the Credit Agreement, and SWK agreed to forbear from exercising rights and remedies otherwise available to it in the event of the consummation of an additional equity or subordinated debt financing with gross proceeds of not less than $5 million or an event of a default under the Credit Agreement.

On November 6, 2019, the Company agreed to further amend the Credit Agreement (the “Third Amendment”). Pursuant to the Third Amendment, SWK granted the Company a waiver of the Company’s non-compliance with certain financial covenants in the Credit Agreement. Also pursuant to the Third Amendment, the Company and SWK agreed to (i) revise financial covenants to adjust minimum revenue and EBITDA levels and (ii) remove the automatic increase of the minimum liquidity requirement based on certain aggregate minimum revenue and EBITDA levels as of September 30, 2019 (which was added pursuant to the First Amendment).

SWK Warrants

In connection with the Credit Agreement, as amended, the Company issued warrants to SWK (the “SWK Warrants”) on November 9, 2018 to purchase up to 372,023 and on May 7, 2019, to purchase up to 115,175 shares of the Company’s common stock. The SWK Warrants are immediately exercisable and expire 7 years after the issuance date. The exercise price of the SWK Warrants issued on November 9, 2018 is $1.34 and the exercise price of the SWK Warrants issued on May 7, 2019 is $2.17, both of which were based on the average closing price of the Company’s common stock for the ten trading days immediately preceding the issuance date. These warrants contain down-round features that require the Company to adjust the exercise price proportionately should the Company issue shares at a price per share less than the exercise price. The fair value of the 372,023 SWK Warrants issued on November 9, 2018 was $0.4 million and estimated using the Black-Scholes option-pricing model with the following assumptions: expected term of 8 years; volatility of 81.79%; annual dividend per share of $0.00; and risk-free interest rate of 3.13%. The fair value of the 115,175 SWK Warrants issued on May 7, 2019 was $0.2 million and estimated using a binomial option pricing model with the following assumptions: expected term of 8 years; volatility of 80.73%; annual dividend per share of $0.00; and a risk-free rate of 2.37%.

In connection with the Third Amendment, the Company consolidated the SWK Warrants issued to SWK on November 9, 2018 and May 7, 2019. The terms of the SWK Warrants remained the same.

DPG Warrants

In connection with the SWK Loan, the Company paid a finder’s fee to DPG of $0.5 million cash and issued warrants (“the DPG warrants) on November 9, 2018 to purchase up to 279,851 shares of common stock and on May 7, 2019 to purchase up to 34,552 shares of the Company’s common stock. The DPG Warrants are exercisable immediately and expire 7 years after the issuance date. The exercise price of the DPG Warrants issued on November 9, 2018 is $1.34 and the exercise price of the DPG warrants issued on May 7, 2019 is $2.17, both of which were based on the average closing price of the Company’s common stock for the ten trading days immediately preceding the issuance date. These warrants contain down-round features that require the Company to adjust the exercise price proportionately should the Company issue shares at a price per share less than the exercise price. The fair value of the 279,851 DPG Warrants issued on November 9, 2018 was $0.3 million was estimated using the Black Scholes option pricing model with the following assumptions: expected term of 8 years; volatility of 81.79%; annual dividend per share of $0.00; and risk-free interest rate of 3.13%. The fair value of the 34,552 DPG Warrants issued on May 7, 2019 was $0.1 million and estimated using a binomial option pricing model with the following assumptions: expected term of 8 years; volatility of 80.73%; annual dividend per share of $0.00; and a risk-free rate of 2.37%.

The value of both of the SWK Warrants issued in 2018 and 2019 and the DPG Warrants issued in 2018, was recognized as a discount on the SWK Loan and is being amortized on a straight-line basis which approximates the effective-interest method, over the loan term of five years. The value of the DPG Warrants issued in 2019 in connection with the First Amendment were expensed in the three-month period ended September 30, 2019.

Additionally, based on the adoption of ASU 2017-11 in the fourth quarter of 2018, these warrants are classified as equity in the consolidated Balance Sheets as of September 30, 2019 and December 31, 2018.

The future minimum principal and interest payments as of September 30, 2019 are as follows (in thousands):

	Principal		Interest (1)
2019 (three months)	$	—	$	484
2020		—		1,931
2021		2,100		1,848
2022		2,800		1,517
2023		10,100		1,063
Total future payments	$	15,000	$	6,843
(1) estimated using LIBOR rates as at September 30, 2019

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Inventory

9 Months Ended

Sep. 30, 2019

Inventory Disclosure [Abstract]

Inventory

NOTE 5—INVENTORY

Inventory is valued at the lower of cost or net realizable value and is comprised of the following (in thousands):

	September 30,		December 31,
	2019		2018
Raw materials	$	3,714	$	3,590
Work-in-process		1,164		1,435
Finished goods		6,659		7,223
Inventory	$	11,537	$	12,248

Inventory includes write-downs for excess and obsolete inventory totaling approximately $0.8 million and $1.1 million as of September 30, 2019 and December 31, 2018, respectively.

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Concentrations

9 Months Ended

Sep. 30, 2019

Risks And Uncertainties [Abstract]

Concentrations

NOTE 13—CONCENTRATIONS

Revenue from the Company’s products for the three and nine months ended September 30, 2019 and 2018 are as follows (dollars in thousands):

	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2019				2018				2019				2018
Laser systems	$	5,167	59.8	%	$	7,055	64.5	%	$	16,047	58.1	%	$	20,678	62.5	%
Imaging systems		4	—	%		382	3.5	%		619	2.2	%		1,336	4.0	%
Consumables and other		1,478	17.1	%		1,902	17.4	%		5,678	20.6	%		6,239	18.9	%
Services		1,994	23.1	%		1,594	14.6	%		5,264	19.1	%		4,848	14.6	%
License fees and royalties		3	—	%		3	—	%		9	—	%		9	—	%
Net revenue	$	8,646	100.0	%	$	10,936	100.0	%	$	27,617	100.0	%	$	33,110	100.0	%

No individual customer represented more than 10% of the Company’s net revenue for the three and nine months ended September 30, 2019 or 2018.

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.

There were no individual customers that represented more than 10% of the Company’s accounts receivable at September 30, 2019, and one individual customer that represented more than 10% of the Company’s accounts receivable at December 31, 2018.

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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Accrued Liabilities (Tables)

9 Months Ended

Sep. 30, 2019

Payables And Accruals [Abstract]

Components of Accrued Liabilities

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

	September 30,		December 31,
	2019		2018
Payroll and benefits	$	1,726	$	2,400
Patent litigation settlement		—		1,500
Warranty accrual, current portion		954		861
Lease liability		476		—
Accrued professional services		992		1,044
Taxes		255		714
Accrued insurance premium		—		328
Customer deposits		82		21
Other		465		670
Total accrued liabilities	$	4,950	$	7,538

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 nine months ended September 30, 2019 and 2018 are included within accrued liabilities on the Consolidated Balance Sheets and were as follows (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Balance, beginning of period	$	1,498		$	1,359		$	1,308		$	1,190
Provision for estimated warranty cost		523			203			1,145			827
Warranty expenditures		(366	)		(182	)		(798	)		(637	)
Balance, September 30		1,655			1,380			1,655			1,380
Less warranty accrual, long-term		701			375			701			375
Total warranty accrual, current portion	$	954		$	1,005		$	954		$	1,005

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Revenue Recognition (Tables)

9 Months Ended

Sep. 30, 2019

Revenue Recognition [Abstract]

Summary of Opening and Closing Balances of Contract Liabilities

The Company performs its obligations under a contract with a customer by transferring products and/or services in exchange for consideration from the customer. The Company typically invoices its customers as soon as control of an asset is transferred and a receivable for the Company is established. The Company, however, recognizes a contract liability when a customer prepays for goods and/or services and the Company has not transferred control of the goods and/or services. The opening and closing balances of the Company’s contract liabilities are as follows (in thousands):

	September 30,		December 31,
	2019		2018
Undelivered elements (training, installation, product and    support services)	$	566	$	730
Extended warranty contracts		1,940		1,735
Deferred royalties		6		11
Total deferred revenue		2,512		2,476
Less long-term portion of deferred revenue		—		—
Deferred revenue — current	$	2,512	$	2,476

Summary of Disaggregation of Revenues Related to Geographic Areas

The Company’s revenues related to the following geographic areas were as follows for the periods indicated (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
United States	$	4,949	$	6,953	$	16,962	$	19,810
International		3,697		3,983		10,655		13,300
	$	8,646	$	10,936	$	27,617	$	33,110

Summary of Revenues Disaggregated by Timing of Goods and Services Transferred

Information regarding revenues disaggregated by the timing of when goods and services are transferred is as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Revenue recognized over time	$	1,997	$	1,594	$	5,267	$	4,848
Revenue recognized at a point in time		6,649		9,342		22,350		28,262
Total	$	8,646	$	10,936	$	27,617	$	33,110

Summary of Sales by End Market

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
End-customer	$	3,727	$	7,387	$	11,068	$	21,093
Distributors		4,919		3,549		16,549		12,017
	$	8,646	$	10,936	$	27,617	$	33,110

Summary of Percentages of Sales by Product line

The percentages of the Company’s sales by product line were as follows for the periods indicated:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Laser systems		59.8	%		64.5	%		58.1	%		62.5	%
Imaging systems		—	%		3.5	%		2.2	%		4.0	%
Consumables and other		17.1	%		17.4	%		20.6	%		18.9	%
Services		23.1	%		14.6	%		19.1	%		14.6	%
License fees and royalties		—	%		—	%		—	%		—	%
		100.0	%		100.0	%		100.0	%		100.0	%

Revenue from the Company’s products for the three and nine months ended September 30, 2019 and 2018 are as follows (dollars in thousands):

	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2019				2018				2019				2018
Laser systems	$	5,167	59.8	%	$	7,055	64.5	%	$	16,047	58.1	%	$	20,678	62.5	%
Imaging systems		4	—	%		382	3.5	%		619	2.2	%		1,336	4.0	%
Consumables and other		1,478	17.1	%		1,902	17.4	%		5,678	20.6	%		6,239	18.9	%
Services		1,994	23.1	%		1,594	14.6	%		5,264	19.1	%		4,848	14.6	%
License fees and royalties		3	—	%		3	—	%		9	—	%		9	—	%
Net revenue	$	8,646	100.0	%	$	10,936	100.0	%	$	27,617	100.0	%	$	33,110	100.0	%

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Summary of Net Revenue by Geographic Location (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Segment Reporting Information [Line Items]
Net revenue	$ 8,646	$ 10,936	$ 27,617	$ 33,110
United States
Segment Reporting Information [Line Items]
Net revenue	4,949	6,953	16,962	19,810
International
Segment Reporting Information [Line Items]
Net revenue	$ 3,697	$ 3,983	$ 10,655	$ 13,300

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Leases - Schedule of Maturities of Lease Liabilities (Detail) $ in Thousands	Sep. 30, 2019 USD ($)
Leases [Abstract]
2020	$ 484
2021	45
Total lease payments	529
Less imputed interest	(38)
Total lease liabilities	491
Current operating lease liabilities	476
Non-current lease liabilities	$ 15

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Income Taxes - Additional Information (Detail) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Income Tax Disclosure [Abstract]
Liability for unrecognized tax benefit, including related estimates of penalties and interest	$ 0	$ 0	$ 0	$ 0
Income tax provision (benefit)	$ 26,000	$ 49,000	$ 68,000	$ 91,000
Projected annual effective tax rate	0.02%	0.50%	0.30%	0.60%
Statutory tax rate			21.00%

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Assumptions Used in Estimating Fair Value of Stock Options Granted (Detail)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Share Based Compensation Arrangement By Share Based Payment Award Fair Value Assumptions And Methodology [Abstract]
Expected term	6 years 1 month 6 days	5 years 10 months 24 days	6 years 1 month 6 days	5 years 10 months 24 days
Volatility	85.40%	81.90%	85.40%	81.40%
Risk-free interest rate	2.60%	2.90%	2.60%	2.50%

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Summary of Unvested Restricted Stock Units (Detail) - Restricted Stock Units (RSUs) shares in Thousands	9 Months Ended
	Sep. 30, 2019 $ / shares shares
Shares
Beginning Balance | shares	2,163
Granted | shares	1,851
Vested | shares	(841)
Forfeited or cancelled | shares	(113)
Ending Balance | shares	3,060
Weighted Average Grant Date Fair Value
Unvested RSUs at December 31, 2018 | $ / shares	$ 1.84
Granted | $ / shares	2.08
Vested | $ / shares	1.74
Forfeited or cancelled | $ / shares	2.37
Unvested RSUs at September 30, 2019 | $ / shares	$ 1.87

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Consolidated Statements Of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Cash Flows from Operating Activities:
Net loss	$ (14,268)	$ (14,597)
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:
Depreciation and amortization	754	712
Gain on disposal of assets, net		(12)
Provision for bad debts	1,243	316
Provision for inventory excess and obsolescence		59
Amortization of discounts on lines of credit	103	31
Amortization of debt issuance costs	130	43
Stock-based compensation	1,974	1,862
Deferred income taxes	(6)	1
Earned interest income	2
Changes in operating assets and liabilities:
Accounts receivable	1,393	(1,591)
Inventory	711	(1,184)
Prepaid expenses and other current assets	1,011	940
Accounts payable and accrued liabilities	(1,157)	3,200
Deferred revenue	36	(370)
Net cash and cash equivalents used in operating activities	(8,074)	(10,590)
Cash Flows from Investing Activities:
Purchases of property, plant, and equipment	(138)	(110)
Proceeds from disposal of property, plant, and equipment		36
Net cash and cash equivalents used in investing activities	(138)	(74)
Cash Flows from Financing Activities:
Principal payments under capital lease obligation		(46)
Borrowings under line of credit		3,323
Payments under line of credit		(1,823)
Borrowings under term loan	2,500
Payments of debt issuance costs	(38)	(87)
Payments of equity offering costs	(50)	(138)
Proceeds from exercise of stock options	4	2
Net cash and cash equivalents provided by financing activities	2,416	1,231
Effect of exchange rate changes	(157)	(23)
Decrease in cash, cash equivalents and restricted cash	(5,953)	(9,456)
Cash, cash equivalents and restricted cash, beginning of period	8,356	11,896
Cash, cash equivalents and restricted cash, end of period	2,403	2,440
Supplemental cash flow disclosure:
Cash paid for interest	1,315
Cash paid for income taxes	19	31
Cash paid for operating leases	606
Non-cash accrual for capital expenditures	4	$ 3
Non-cash accrual for equity offering costs	191
Non-cash right-of-use assets obtained in exchange for lease obligation	824
Non-cash settlement of performance award liability	236
Warrants issued in connection with debt instruments	$ 209

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Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 2,091	$ 8,044
Restricted cash	312	312
Accounts receivable, less allowance of $2,084 and $850 in 2019 and 2018, respectively	8,474	11,112
Inventory	11,537	12,248
Prepaid expenses and other current assets	875	1,591
Total current assets	23,289	33,307
Property, plant, and equipment, net	1,340	1,975
Goodwill	2,926	2,926
Other assets	718	308
Total assets	28,273	38,516
Current liabilities:
Accounts payable	6,604	5,953
Accrued liabilities	4,950	7,538
Deferred revenue, current portion	2,512	2,476
Total current liabilities	14,066	15,967
Deferred income taxes, net	71	77
Warranty accrual	701	447
Other liabilities	1,145	100
Term loan	13,356	10,836
Total liabilities	29,339	27,427
Commitments and contingencies — Note 11
Stockholders' (deficit) equity:
Preferred stock, par value $0.001 per share; 1,000 shares authorized; 0 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively
Common stock, par value $0.001 per share; 40,000 shares authorized, 21,954 and 21,072 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively	22	21
Additional paid-in-capital	230,712	228,430
Accumulated other comprehensive loss	(840)	(670)
Accumulated deficit	(230,960)	(216,692)
Total stockholders' (deficit) equity	(1,066)	11,089
Total liabilities and stockholders' (deficit) equity	$ 28,273	$ 38,516

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Property, Plant, and Equipment (Tables)

9 Months Ended

Sep. 30, 2019

Property Plant And Equipment [Abstract]

Summary of Property, Plant, and Equipment

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

	September 30,			December 31,
	2019			2018
Building	$	203		$	213
Leasehold improvements		2,003			2,004
Equipment and computers		7,421			7,277
Furniture and fixtures		634			634
Construction in progress		21			25
		10,282			10,153
Accumulated depreciation and amortization		(9,100	)		(8,344	)
		1,182			1,809
Land		158			166
Property, plant, and equipment, net	$	1,340		$	1,975

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The unaudited consolidated financial statements include the accounts of BIOLASE and its wholly-owned subsidiaries and have been prepared on a basis consistent with the December 31, 2018 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.

The consolidated results of operations for the three and nine months ended September 30, 2019 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, 2018, included in BIOLASE’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission (the “SEC”) on March 8, 2019 (the “2018 Form 10-K”).

Liquidity and Management's 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 nine months ended September 30, 2019. The Company’s recurring losses, level of cash used in operations, and potential need for additional capital, along with uncertainties surrounding the Company’s ability to raise additional capital, raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

As of March 31, 2019, the Company was not in compliance with certain of its loan covenants relating to the SWK Loan (as defined below). In May 2019, SWK Funding, LLC granted the Company a waiver of such covenants. On May 7, 2019, the Company entered into an amendment of its Credit Agreement with SWK Funding, LLC to increase the total loan commitment in the SWK Loan from $12.5 million to $15.0 million, to revise certain of the financial covenants and to issue additional warrants to purchase the Company’s common stock. On September 30, 2019, the Company entered into a second amendment of its Credit Agreement with SWK Funding, LLC, to provide for a revolving loan facility, secured by a first lien security interest in the Company’s inventory and accounts receivable. On November 6, 2019, the Company entered into a third amendment to its Credit Agreement to further modify its loan covenants. See Notes 9 and 15 for additional information.

On October 28, 2019, BIOLASE, Inc. (the “Company”) entered into a loan and security agreement (the “Loan Agreement”) with Pacific Mercantile Bank, as lender (“Lender”), which provides for a revolving line of credit (the “PMB Loan”) in a maximum principal amount not to exceed the lesser of (i) $3 million or (ii) the sum of 90% of the Eligible Accounts (as defined in the Loan Agreement) plus 75% of the Eligible Inventory (as defined in the Loan Agreement, and subject to certain limitations set forth therein); provided that the maximum principal amount of the PMB Loan may be reduced from time to time in the Lender’s good faith business judgment as set forth in the Loan Agreement. Borrowings under the PMB Loan may be used for working capital. The PMB Loan matures on October 28, 2021, unless earlier terminated. See Note 15 for additional information.

On October 29, 2019, the Company successfully consummated an underwritten public offering of BIOLASE common stock and a concurrent private placement of BIOLASE Series E Participating Convertible Preferred Stock, resulting in net proceeds of approximately $7.8 million after deducting underwriter discounts and other fees and expenses. On November 5, 2019, the underwriters exercised their over-allotment option and the Company received approximately $0.6 million in additional proceeds from the sale of 1.1 million additional shares. See Note 15 for additional information.

As of September 30, 2019, the Company had working capital of approximately $9.2 million. The Company’s principal sources of liquidity as of September 30, 2019 consisted of approximately $2.4 million in cash, cash equivalents and restricted cash and $8.5 million of accounts receivable.  

In order for the Company to continue operations beyond the next 12 months and be able to discharge its liabilities and commitments in the normal course of business, it must sell its products directly to end users and through distributors, establish profitable operations through increased sales, decrease expenses, generate cash from operations, or obtain additional funds when needed. The Company intends to improve its financial condition and ultimately improve its financial results by increasing revenues through expansion of its product offerings, continuing to expand and develop its field sales force and distributor relationships both domestically and internationally, forming strategic arrangements within the dental and medical industries, educating dental and medical patients as to the benefits of its advanced medical technologies, and reducing expenses.

Additional capital requirements may depend on many factors, including, among other things, continued losses, 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, or enter into an additional line of credit facility.

Reverse Stock Split

Reverse Stock Split

Except as the context otherwise requires, all share numbers and share price amounts (including exercise prices and closing market prices) contained in the unaudited financial statements and notes thereto reflect the one-for-five reverse stock split (“Reverse Stock Split”) effectuated by the Company on May 10, 2018. See Note 4 below for additional information.

Use of Estimates

Use of Estimates

The preparation of these unaudited 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 unaudited consolidated financial statements include allowances on accounts receivable, inventory, and deferred taxes, as well as estimates for accrued warranty expenses, goodwill and the ability of goodwill to be realized, revenue deferrals, effects of stock-based compensation and warrants, contingent liabilities, and the provision or benefit for income taxes. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may differ materially from those estimates.

Critical Accounting Policies

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 the 2018 Form 10-K. Management believes that there have been no significant changes during the nine months ended September 30, 2019 in the Company’s critical accounting policies from those disclosed in the 2018 Form 10-K.

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 non-performance risk. Under the accounting guidance for fair value hierarchy, there are three levels of measurement inputs. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable, either directly or indirectly. Level 3 inputs are unobservable due to little or no corroborating market data.

The Company’s financial instruments, consisting of cash, cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities, liability for patent litigation settlement, and the SWK Loan as discussed in Note 9, approximate fair value because of the liquid or short-term nature of these items.

Concentration of Credit Risk, Interest Rate Risk and Foreign Currency Exchange Rate

Concentration of Credit Risk, Interest Rate Risk and Foreign Currency Exchange Rate

Financial instruments which potentially expose the Company to a concentration of credit risk consist principally of cash and cash equivalents, restricted cash, and trade accounts receivable. The Company maintains its cash and cash equivalents and restricted cash with established commercial banks. At times, balances may exceed federally insured limits. To minimize the risk associated with trade accounts receivable, management performs ongoing credit evaluations of customers’ financial condition and maintains relationships with the Company’s customers that allow management to monitor current changes in business operations so the Company can respond as needed. The Company does not, generally, require customers to provide collateral before it sells them its products. However, the Company has required certain distributors to make prepayments for significant purchases of products.

Substantially all of the Company’s revenue is denominated in U.S. dollars, including sales to international distributors. Only a small portion of its revenue and expenses is denominated in foreign currencies, principally the Euro and Indian Rupee. The Company’s foreign currency expenditures primarily consist of the cost of maintaining offices, consulting services, and employee-related costs. During the nine-month periods ended September 30, 2019 and 2018, the Company did not enter into any hedging contracts. Future fluctuations in the value of the U.S. dollar may affect the price competitiveness of the Company’s products outside the U.S.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

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

The Company considers the applicability and impact of all ASUs. ASUs not listed below were assessed and determined not to be applicable or are expected to have minimal impact on the Company’s consolidated financial position and results of operations.

Adopted Accounting Pronouncements

In February 2016, the FASB established ASU Topic 842 – Leases, by issuing ASU Topic No. 2016-02 (“Topic 842”), which requires lessees to recognize lease on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU Topic 2018-11 – Targeted Improvements. The new standard establishes a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and a lease liability for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations.

The Company adopted Topic 842 in the first quarter of 2019 utilizing the modified retrospective transition method and a cumulative effect adjustment at the beginning of the first quarter of 2019. The Company has elected the package of practical expedients, which allows the Company not to reassess (1) whether any expired or existing contracts as of the adoption date are or contain a lease, (2) lease classification for any expired or existing leases as of the adoption date, and (3) initial direct costs for any existing leases as of the adoption date. The Company did not elect to apply the hindsight practical expedient when determining lease term and assessing impairment of the right-to-use assets. The adoption of Topic 842 resulted in the recognition of right-of use assets of approximately $0.8 million after a $0.2 million adjustment for deferred rent, and lease liabilities for operating leases of approximately $1.0 million, and no cumulative effect adjustment on retained earnings on its unaudited Consolidated Balance Sheets nor material impact to its unaudited Consolidated Statements of Operations and Comprehensive Loss in the period of adoption. Right-of-use assets are included in Other assets, and lease liabilities are included in Accrued liabilities and in Other liabilities in the unaudited consolidated balance sheet for the period ended September 30, 2019. See Note 10 for additional information.

Recently Issued Accounting Standards

In June 2016, the FASB issued a new standard to replace the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company will be required to use a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. The standard will be effective for the Company beginning January 1, 2020. The Company is evaluating the impact of this standard on the Company’s consolidated financial statements, including accounting policies, processes, and systems.

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 nine months ended September 30, 2019 and 2018. The Company does not expect any changes to its unrecognized tax benefit for the next 12 months that would materially impact its consolidated financial statements.

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Concentrations - Additional Information (Detail) - Product Concentration Risk - Customer	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Concentration Risk [Line Items]
Number of customers which represented more than 10% of the Company's accounts receivable			0		1
Sales Revenue, Net
Concentration Risk [Line Items]
Number of customers which represented more than 10% of the Company's revenue	0	0	0	0
Concentration Risk Percentage	100.00%	100.00%	100.00%	100.00%
Account Receivable
Concentration Risk [Line Items]
Concentration Risk Percentage			10.00%		10.00%
Minimum | Sales Revenue, Net
Concentration Risk [Line Items]
Concentration Risk Percentage	10.00%	10.00%	10.00%	10.00%

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Segment Information - Additional Information (Detail) - Sales Revenue, Net - Customer	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Customer Concentration Risk | United States
Segment Reporting Information [Line Items]
Percentage of sales	57.00%		61.00%
Customer Concentration Risk | International
Segment Reporting Information [Line Items]
Percentage of sales	43.00%		39.00%
Geographic Concentration Risk | International
Segment Reporting Information [Line Items]
Number of customers which represented more than 10% of the Company's revenue	0	0	0	0

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Leases - Information related to Right-of-use Assets and Liabilities (Detail) $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($)
Leases [Abstract]
Cash paid for operating lease liabilities	$ 606
Right-of-use assets obtained in exchange for new operating lease obligations	$ 803
Weighted-average remaining lease term	1 year 4 months 24 days
Weighted-average discount rate	12.80%

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Description of Business and Basis of Presentation

9 Months Ended

Sep. 30, 2019

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”) is a medical device company that develops, manufactures, markets, and sells laser systems in dentistry and medicine. The Company’s products advance the practice of dentistry and medicine for patients and health care professionals. The Company’s 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. The Company’s laser systems are designed to provide clinically superior results for many types of dental procedures compared to those achieved with drills, scalpels, and other conventional instruments. The Company has clearance from the Food and Drug Administration (“FDA”) to market and sell its laser systems in the United States and also have the necessary registration to market and sell its laser systems in Canada, the European Union, and many other countries outside the United States.

Basis of Presentation

The unaudited consolidated financial statements include the accounts of BIOLASE and its wholly-owned subsidiaries and have been prepared on a basis consistent with the December 31, 2018 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.

The consolidated results of operations for the three and nine months ended September 30, 2019 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, 2018, included in BIOLASE’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the Securities and Exchange Commission (the “SEC”) on March 8, 2019 (the “2018 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 nine months ended September 30, 2019. The Company’s recurring losses, level of cash used in operations, and potential need for additional capital, along with uncertainties surrounding the Company’s ability to raise additional capital, raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

As of March 31, 2019, the Company was not in compliance with certain of its loan covenants relating to the SWK Loan (as defined below). In May 2019, SWK Funding, LLC granted the Company a waiver of such covenants. On May 7, 2019, the Company entered into an amendment of its Credit Agreement with SWK Funding, LLC to increase the total loan commitment in the SWK Loan from $12.5 million to $15.0 million, to revise certain of the financial covenants and to issue additional warrants to purchase the Company’s common stock. On September 30, 2019, the Company entered into a second amendment of its Credit Agreement with SWK Funding, LLC, to provide for a revolving loan facility, secured by a first lien security interest in the Company’s inventory and accounts receivable. On November 6, 2019, the Company entered into a third amendment to its Credit Agreement to further modify its loan covenants. See Notes 9 and 15 for additional information.

On October 28, 2019, BIOLASE, Inc. (the “Company”) entered into a loan and security agreement (the “Loan Agreement”) with Pacific Mercantile Bank, as lender (“Lender”), which provides for a revolving line of credit (the “PMB Loan”) in a maximum principal amount not to exceed the lesser of (i) $3 million or (ii) the sum of 90% of the Eligible Accounts (as defined in the Loan Agreement) plus 75% of the Eligible Inventory (as defined in the Loan Agreement, and subject to certain limitations set forth therein); provided that the maximum principal amount of the PMB Loan may be reduced from time to time in the Lender’s good faith business judgment as set forth in the Loan Agreement. Borrowings under the PMB Loan may be used for working capital. The PMB Loan matures on October 28, 2021, unless earlier terminated. See Note 15 for additional information.

On October 29, 2019, the Company successfully consummated an underwritten public offering of BIOLASE common stock and a concurrent private placement of BIOLASE Series E Participating Convertible Preferred Stock, resulting in net proceeds of approximately $7.8 million after deducting underwriter discounts and other fees and expenses. On November 5, 2019, the underwriters exercised their over-allotment option and the Company received approximately $0.6 million in additional proceeds from the sale of 1.1 million additional shares. See Note 15 for additional information.

As of September 30, 2019, the Company had working capital of approximately $9.2 million. The Company’s principal sources of liquidity as of September 30, 2019 consisted of approximately $2.4 million in cash, cash equivalents and restricted cash and $8.5 million of accounts receivable.  

In order for the Company to continue operations beyond the next 12 months and be able to discharge its liabilities and commitments in the normal course of business, it must sell its products directly to end users and through distributors, establish profitable operations through increased sales, decrease expenses, generate cash from operations, or obtain additional funds when needed. The Company intends to improve its financial condition and ultimately improve its financial results by increasing revenues through expansion of its product offerings, continuing to expand and develop its field sales force and distributor relationships both domestically and internationally, forming strategic arrangements within the dental and medical industries, educating dental and medical patients as to the benefits of its advanced medical technologies, and reducing expenses.

Additional capital requirements may depend on many factors, including, among other things, continued losses, 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, or enter into an additional line of credit facility.

Reverse Stock Split

Except as the context otherwise requires, all share numbers and share price amounts (including exercise prices and closing market prices) contained in the unaudited financial statements and notes thereto reflect the one-for-five reverse stock split (“Reverse Stock Split”) effectuated by the Company on May 10, 2018. See Note 4 below for additional information.

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Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Statement Of Financial Position [Abstract]
Allowance for accounts receivable	$ 2,084	$ 850
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	40,000	40,000
Common stock, shares issued	21,954	21,072
Common stock, shares outstanding	21,954	21,072

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Summary of Option Activity (Detail) shares in Thousands	9 Months Ended
	Sep. 30, 2019 $ / shares shares
Shares
Beginning Balance | shares	1,623
Granted at fair market value | shares	70
Exercised | shares	(2)
Forfeited, cancelled, or expired | shares	(332)
Ending Balance | shares	1,359
Options exercisable at September 30, 2019 | shares	1,080
Vested options expired during the period ended September 30, 2019 | shares	124
Weighted Average Exercise Price
Beginning Balance | $ / shares	$ 6.54
Granted at fair market value | $ / shares	2.08
Exercised | $ / shares	2.10
Forfeited, cancelled, or expired | $ / shares	7.27
Ending Balance | $ / shares	6.14
Options exercisable at September 30, 2019 | $ / shares	7.00
Vested options expired during the period ended September 30, 2019 | $ / shares	$ 9.08
Weighted Average Remaining Contractual Term (Years)
Options outstanding	5 years 7 months 17 days
Options exercisable	5 years 3 days

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Summary of Warrant Activity (Detail) - Warrants shares in Thousands	9 Months Ended
	Sep. 30, 2019 $ / shares shares
Shares
Beginning Balance | shares	1,934
Granted or Issued | shares	149
Ending Balance | shares	2,083
Warrants exercisable at September 30, 2019 | shares	2,083
Weighted Average Exercise Price
Beginning Balance | $ / shares	$ 6.62
Granted or Issued | $ / shares	2.22
Ending Balance | $ / shares	6.30
Warrants exercisable at September 30, 2019 | $ / shares	$ 6.30

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Debt - Summary of Principal Outstanding and Unamortized Discount (Detail) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Debt Disclosure [Abstract]
Term loan	$ 15,000	$ 12,500
Discount and debt issuance costs on term loan	(1,644)	(1,664)
Total long-term debt, net	$ 13,356	$ 10,836

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Intangible Assets and Goodwill - Additional Information (Detail) - USD ($)	3 Months Ended		6 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Jun. 30, 2019	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Goodwill And Intangible Assets Disclosure [Abstract]
Intangible assets and goodwill impairment			$ 0
Goodwill	$ 2,926,000			$ 2,926,000		$ 2,926,000
Amortization expense	$ 0	$ 0		$ 0	$ 0

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Summary of Significant Accounting Policies - Additional Information (Detail) - USD ($)		9 Months Ended
	Jan. 02, 2019	Sep. 30, 2019	Jan. 01, 2019
Accounting Policies [Line Items]
Operating lease, right-of-use asset		$ 400,000
Operating lease liabilities		491,000
ASU 2016-02
Accounting Policies [Line Items]
Operating lease, right-of-use asset		800,000	$ 800,000
Operating lease right of use asset after adjustment for deferred rent		200,000
Operating lease liabilities		1,000,000	$ 1,000,000
Cumulative effect adjustment to retained earnings	$ 0	$ 0

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Summary of Revenues Disaggregated by Timing of Goods and Services Transferred (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Disaggregation Of Revenue [Line Items]
Net revenue	$ 8,646	$ 10,936	$ 27,617	$ 33,110
Revenue Recognized Over Time
Disaggregation Of Revenue [Line Items]
Net revenue	1,997	1,594	5,267	4,848
Revenue Recognized at a Point in Time
Disaggregation Of Revenue [Line Items]
Net revenue	$ 6,649	$ 9,342	$ 22,350	$ 28,262

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Segment Information

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Segment Information

NOTE 12—SEGMENT INFORMATION

The Company currently operates in a single business segment. Management uses one measurement of profitability and does not segregate its business for internal reporting. For the three and nine months ended September 30, 2019, sales to customers in the United States accounted for approximately 57% and 61% of net revenue, respectively, and international sales accounted for approximately 43% and 39% of net revenue, respectively. No individual country, other than the United States, represented more than 10% of total net revenue during the three and nine months ended September 30, 2019 or 2018.

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
United States	$	4,949	$	6,953	$	16,962	$	19,810
International		3,697		3,983		10,655		13,300
	$	8,646	$	10,936	$	27,617	$	33,110

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

	September 30,		December 31,
	2019		2018
United States	$	1,060	$	1,673
International		280		302
	$	1,340	$	1,975

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Accrued Liabilities

9 Months Ended

Sep. 30, 2019

Payables And Accruals [Abstract]

Accrued Liabilities

NOTE 8—ACCRUED LIABILITIES

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

	September 30,		December 31,
	2019		2018
Payroll and benefits	$	1,726	$	2,400
Patent litigation settlement		—		1,500
Warranty accrual, current portion		954		861
Lease liability		476		—
Accrued professional services		992		1,044
Taxes		255		714
Accrued insurance premium		—		328
Customer deposits		82		21
Other		465		670
Total accrued liabilities	$	4,950	$	7,538

Changes in the initial product warranty accrual and the expenses incurred under the Company’s initial and extended warranties for the three and nine months ended September 30, 2019 and 2018 are included within accrued liabilities on the Consolidated Balance Sheets and were as follows (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Balance, beginning of period	$	1,498		$	1,359		$	1,308		$	1,190
Provision for estimated warranty cost		523			203			1,145			827
Warranty expenditures		(366	)		(182	)		(798	)		(637	)
Balance, September 30		1,655			1,380			1,655			1,380
Less warranty accrual, long-term		701			375			701			375
Total warranty accrual, current portion	$	954		$	1,005		$	954		$	1,005

The Company’s Waterlase laser systems sold worldwide are covered by a warranty against defects in material and workmanship for a period of up to 16 months domestically and up to 28 months internationally, from the date of sale by the Company or a distributor to the end-user. The Company’s Diode systems sold worldwide are covered by a warranty against defects in material and workmanship for a period of up to 28 months from the date of sale by the Company or a distributor to the end-user.

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Stockholders' (Deficit) Equity

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Stockholders' (Deficit) Equity

NOTE 4—STOCKHOLDERS’ (DEFICIT) EQUITY

On October 29, 2019, the Company successfully consummated an underwritten public offering of 7,820,000 shares of BIOLASE common stock and a concurrent private placement of 69,695 shares of BIOLASE Series E Participating Convertible Preferred Stock, and on November 5, 2019, the underwriters of the public offering exercised their over-allotment option to acquire additional shares of BIOLASE common stock. The underwritten public offering and concurrent private placement resulted in net proceeds of $8.4 million after deducting underwriter discounts and other fees and expenses. See Note 15 for additional information.

Reverse Stock Split

At BIOLASE’s annual meeting of stockholders on May 9, 2018 (the “2018 Annual Meeting”), BIOLASE stockholders approved an amendment to BIOLASE’s Restated Certificate of Incorporation, as amended, to effect the Reverse Stock Split and on May 10, 2018, the Company filed an amendment (the “Amendment”) to its Restated Certificate of Incorporation, as amended, with the Secretary of State of the State of Delaware to effect the Reverse Stock Split, effective as of 11:59 p.m. on May 10, 2018. The Amendment also reduced the authorized shares of common stock from 200,000,000 shares to 40,000,000 shares. Prior year share and per share amounts have been adjusted to reflect the impact of the Reverse Stock Split.

Stock-Based Compensation

2002 Stock Incentive Plan

The 2002 Stock Incentive Plan (as amended effective as of May 26, 2004, November 15, 2005, May 16, 2007, May 5, 2011, June 6, 2013, October 30, 2014, April 27, 2015, and May 6, 2016, the “2002 Plan”) was replaced by the 2018 Plan (as defined below) with respect to future equity awards. Persons eligible to receive awards under the 2002 Plan included officers, employees, and directors of the Company, as well as consultants. As of September 30, 2019, a total of approximately 3.1 million shares of the Company’s common stock have been authorized for issuance under the 2002 Plan, of which approximately 1.0 million shares of the Company’s common stock have been issued pursuant to options that were exercised and restricted stock units (“RSUs”) that were settled in common stock and 1.3 million shares of common stock have been reserved for outstanding options and unvested RSUs, and no shares are available for future grants.

2018 Stock Incentive Plan

At the 2018 Annual Meeting, the Company’s stockholders approved the 2018 Long-Term Incentive Plan (as amended, the “2018 Plan”), which was amended by Amendment No. 1 to the 2018 Plan, approved by the Company’s stockholders at a special meeting on September 21, 2018 and Amendment No. 2 to the 2018 Plan, approved by the Company’s stockholder’s at its annual meeting of stockholders on May 15, 2019. The purposes of the 2018 Plan are (i) to align the interests of the Company’s stockholders and recipients of awards under the 2018 Plan by increasing the proprietary interest of such recipients in the Company’s growth and success; (ii) to advance the interests of the Company by attracting and retaining non-employee directors, officers, other employees, consultants, independent contractors and agents; and (iii) to motivate such persons to act in the long-term best interests of the Company and its stockholders.

Subject to the terms and conditions of the 2018 Plan, the number of shares authorized for grants under the 2018 Plan is 5.0 million. As of September 30, 2019, a total 3.9 million shares of the Company’s common stock have been reserved for outstanding options and unvested RSUs, and 1.1 million shares of common stock remain available for future grants.

The Company recognized stock-based compensation expense of $0.8 million and $0.5 million, for the three months ended September 30, 2019 and2018, respectively, and $1.9 million and $1.9 million for the nine months ended September 30, 2019 and September 30, 2018, respectively, based on the grant-date fair value. As of nine months ended September 30, 2019 the Company had approximately $2.3 million of total unrecognized compensation expense, net of estimated forfeitures, related to unvested share-based compensation arrangements. The Company expects that expense to be recognized over a weighted-average period of 1.69 years.

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Cost of revenue	$	94	$	127	$	229	$	289
Sales and marketing		173		134		411		368
General and administrative		442		258		1,167		932
Engineering and development		61		85		167		273
	$	770	$	604	$	1,974	$	1,862

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

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Expected term	6.1 years			5.9 years			6.1 years			5.9 years
Volatility		85.4	%		81.9	%		85.4	%		81.4	%
Annual dividend per share	$	—		$	—		$	—		$	—
Risk-free interest rate		2.60	%		2.90	%		2.60	%		2.50	%

A summary of option activity for the nine months ended September 30, 2019 is as follows (in thousands, except per share data):

						Weighted Average
				Weighted		Remaining
				Average		Contractual		Aggregate
	Shares			Exercise Price		Term (Years)		Intrinsic Value(1)
Options outstanding, December 31, 2018		1,623		$	6.54			$	—
Granted at fair market value		70		$	2.08
Exercised		(2	)	$	2.10
Forfeited, cancelled, or expired		(332	)	$	7.27
Options outstanding at September 30, 2019		1,359		$	6.14		5.63	$	—
Options exercisable at September 30, 2019		1,080		$	7.00		5.01	$	—
Vested options expired during the period    ended September 30, 2019		124		$	9.08

(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.

A summary of unvested stock option activity for the nine months ended September 30, 2019 is as follows (in thousands, except per share data):

				Weighted
				Average Grant
	Shares			Date Fair Value
Unvested options at December 31, 2018		522		$	2.11
Granted		70		$	1.51
Vested		(229	)	$	2.55
Forfeited or cancelled		(84	)	$	2.39
Unvested options at September 30, 2019		279		$	1.59

Cash proceeds, along with fair value disclosures related to grants, exercises and vested options are as follows (in thousands, except per share amounts):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Proceeds from stock options exercised	$	—	$	—	$	3	$	2
Tax benefit related to stock options    exercised (1)	N/A		N/A		N/A		N/A
Intrinsic value of stock options exercised (2)	$	—	$	—	$	—	$	—
Weighted-average fair value of options    granted during period	$	—	$	1.02	$	1.53	$	1.38
Total fair value of shares vested during the    period	$	—	$	164	$	683	$	1,008

(1) Excess tax benefits received related to stock option exercises are presented as operating 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 granted approximately 1.9 million and 2.2 million RSUs during the three and nine months ended September 30, 2019, respectively.

A summary of unvested RSU activity for the nine months ended September 30, 2019 is as follows (in thousands, except per share amounts):

				Weighted
				Average Grant
	Shares			Date Fair Value
Unvested RSUs at December 31, 2018		2,163		$	1.84
Granted		1,851		$	2.08
Vested		(841	)	$	1.74
Forfeited or cancelled		(113	)	$	2.37
Unvested RSUs at September 30, 2019		3,060		$	1.87

Warrants

The Company issues warrants to acquire shares of its common stock as approved by the Board. A summary of warrant activity for the nine months ended September 30, 2019 is as follows (in thousands, except exercise price amounts):

			Weighted
			Average
	Shares		Exercise Price
Warrants outstanding, December 31, 2018		1,934	$	6.62
Granted or Issued		149	$	2.22
Exercised		—	$	—
Forfeited, cancelled, or expired		—	$	—
Warrants outstanding at September 30, 2019		2,083	$	6.30
Warrants exercisable at September 30, 2019		2,083	$	6.30
Vested warrants expired during the quarter ended    September 30, 2019		—	$	—

See Note 9 for additional information on the Western Alliance Warrants, the SWK Warrants, and the DPG Warrants (each as defined below).

Net Loss Per Share – Basic and Diluted

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

Outstanding stock options, RSUs and warrants to purchase approximately 5.6 million shares were not included in the calculation of diluted loss per share for the three and nine months ended September 30, 2019, as their effect would have been anti-dilutive. For the same 2018 periods, anti-dilutive outstanding stock options and warrants to purchase 3.2 million shares were not included in the computation of diluted loss per share.

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Stockholders' (Deficit) Equity (Tables)

9 Months Ended

Sep. 30, 2019

Equity [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				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Cost of revenue	$	94	$	127	$	229	$	289
Sales and marketing		173		134		411		368
General and administrative		442		258		1,167		932
Engineering and development		61		85		167		273
	$	770	$	604	$	1,974	$	1,862

Assumptions on Estimation of Stock Option Fair Values

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

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Expected term	6.1 years			5.9 years			6.1 years			5.9 years
Volatility		85.4	%		81.9	%		85.4	%		81.4	%
Annual dividend per share	$	—		$	—		$	—		$	—
Risk-free interest rate		2.60	%		2.90	%		2.60	%		2.50	%

Summary of Option Activity

A summary of option activity for the nine months ended September 30, 2019 is as follows (in thousands, except per share data):

						Weighted Average
				Weighted		Remaining
				Average		Contractual		Aggregate
	Shares			Exercise Price		Term (Years)		Intrinsic Value(1)
Options outstanding, December 31, 2018		1,623		$	6.54			$	—
Granted at fair market value		70		$	2.08
Exercised		(2	)	$	2.10
Forfeited, cancelled, or expired		(332	)	$	7.27
Options outstanding at September 30, 2019		1,359		$	6.14		5.63	$	—
Options exercisable at September 30, 2019		1,080		$	7.00		5.01	$	—
Vested options expired during the period    ended September 30, 2019		124		$	9.08

(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.

Summary of Unvested Stock Option Activity

A summary of unvested stock option activity for the nine months ended September 30, 2019 is as follows (in thousands, except per share data):

				Weighted
				Average Grant
	Shares			Date Fair Value
Unvested options at December 31, 2018		522		$	2.11
Granted		70		$	1.51
Vested		(229	)	$	2.55
Forfeited or cancelled		(84	)	$	2.39
Unvested options at September 30, 2019		279		$	1.59

Cash Proceeds, Along With Fair Value Disclosures Related to Grants, Exercises and Vesting Options

Cash proceeds, along with fair value disclosures related to grants, exercises and vested options are as follows (in thousands, except per share amounts):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Proceeds from stock options exercised	$	—	$	—	$	3	$	2
Tax benefit related to stock options    exercised (1)	N/A		N/A		N/A		N/A
Intrinsic value of stock options exercised (2)	$	—	$	—	$	—	$	—
Weighted-average fair value of options    granted during period	$	—	$	1.02	$	1.53	$	1.38
Total fair value of shares vested during the    period	$	—	$	164	$	683	$	1,008

(1) Excess tax benefits received related to stock option exercises are presented as operating 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 Unvested Restricted Stock Units

A summary of unvested RSU activity for the nine months ended September 30, 2019 is as follows (in thousands, except per share amounts):

				Weighted
				Average Grant
	Shares			Date Fair Value
Unvested RSUs at December 31, 2018		2,163		$	1.84
Granted		1,851		$	2.08
Vested		(841	)	$	1.74
Forfeited or cancelled		(113	)	$	2.37
Unvested RSUs at September 30, 2019		3,060		$	1.87

Summary of Warrant Activity

The Company issues warrants to acquire shares of its common stock as approved by the Board. A summary of warrant activity for the nine months ended September 30, 2019 is as follows (in thousands, except exercise price amounts):

			Weighted
			Average
	Shares		Exercise Price
Warrants outstanding, December 31, 2018		1,934	$	6.62
Granted or Issued		149	$	2.22
Exercised		—	$	—
Forfeited, cancelled, or expired		—	$	—
Warrants outstanding at September 30, 2019		2,083	$	6.30
Warrants exercisable at September 30, 2019		2,083	$	6.30
Vested warrants expired during the quarter ended    September 30, 2019		—	$	—

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Income Taxes

9 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 14—INCOME TAXES

The Company accounts for income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Management evaluates the need to establish a valuation allowance for deferred tax assets based upon the amount of existing temporary differences, the period in which they are expected to be recovered, and expected levels of taxable income. A valuation allowance to reduce deferred tax assets is established when it is “more likely than not” that some or all of the deferred tax assets will not be realized. Based on the Company’s 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 nine months ended September 30, 2019 and 2018. The Company does not expect any changes to its unrecognized tax benefit for the next 12 months that would materially impact its consolidated financial statements.

During the three and nine months ended September 30, 2019, the Company recorded an income tax provision of $26,000 and $68,000, respectively, resulting in an effective tax rate of 0.02% and 0.3%, respectively. During the three and nine months ended September 30, 2018, the Company recorded an income tax provision of $49,000 and $91,000, respectively, resulting in an effective tax rate of 0.5% and 0.6%, respectively. The income tax provisions for the three and nine months ended September 30, 2019 were calculated using the discrete year-to-date method. The effective tax rate differs from the statutory tax rate of 21% primarily due to the existence of valuation allowances against net deferred tax assets and current liabilities resulting from the estimated state income tax liabilities and foreign tax liability.

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Debt (Tables)

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Summary of Principal Outstanding and Unamortized Discount

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

	September 30,			December 31,
	2019			2018
Term loan	$	15,000		$	12,500
Discount and debt issuance costs on term loan		(1,644	)		(1,664	)
Total long-term debt, net	$	13,356		$	10,836

Summary of Future Minimum Principal and Interest Payments

The future minimum principal and interest payments as of September 30, 2019 are as follows (in thousands):

	Principal		Interest (1)
2019 (three months)	$	—	$	484
2020		—		1,931
2021		2,100		1,848
2022		2,800		1,517
2023		10,100		1,063
Total future payments	$	15,000	$	6,843
(1) estimated using LIBOR rates as at September 30, 2019

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Consolidated Statements of Stockholders' (Deficit) Equity (Unaudited) - USD ($) $ in Thousands	Total	Common Stock and Additional Paid-in Capital	Accumulated Other Comprehensive Loss	Accumulated Deficit
Beginning balance at Dec. 31, 2017	$ 16,337	$ 225,619	$ (576)	$ (195,176)
Issuance of common stock upon exercise of options		2
Stock offering costs		(38)
Stock-based compensation expense		1,133
Other comprehensive (loss) income			(31)
Net loss	(14,597)			(14,597)
Ending balance at Sep. 30, 2018	16,336	226,716	(607)	(209,773)
Beginning balance at Jun. 30, 2018	20,391	226,109	(610)	(205,108)
Stock-based compensation expense		607
Other comprehensive (loss) income			3
Net loss	(4,665)			(4,665)
Ending balance at Sep. 30, 2018	16,336	226,716	(607)	(209,773)
Beginning balance at Dec. 31, 2018	11,089	228,451	(670)	(216,692)
Issuance of common stock upon exercise of options		3
Liability award settlement		236
Stock-based compensation expense		1,835
Other comprehensive (loss) income			(170)
Net loss	(14,268)			(14,268)
Warrants issued in connection with debt instruments		209
Ending balance at Sep. 30, 2019	(1,066)	230,734	(840)	(230,960)
Beginning balance at Jun. 30, 2019	3,784	229,994	(712)	(225,482)
Liability award settlement		81
Stock-based compensation expense		659
Other comprehensive (loss) income			(128)
Net loss	(5,478)			(5,478)
Ending balance at Sep. 30, 2019	$ (1,066)	$ 230,734	$ (840)	$ (230,960)

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Inventory - Additional Information (Detail) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Inventory Disclosure [Abstract]
Inventory includes write-downs for excess and obsolete inventory	$ 0.8	$ 1.1

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Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2019	Nov. 06, 2019
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Trading Symbol	BIOL
Entity Registrant Name	BIOLASE, INC
Entity Central Index Key	0000811240
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		30,947,423
Entity Current Reporting Status	Yes
Entity File Number	001-36385
Entity Tax Identification Number	87-0442441
Entity Address, Address Line One	4 Cromwell
Entity Address, City or Town	Irvine
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92618
City Area Code	949
Local Phone Number	361-1200
Entity Incorporation, State or Country Code	DE
Entity Interactive Data Current	Yes
Title of 12(b) Security	Common stock at par value $0.001 per share
Security Exchange Name	NASDAQ
Document Quarterly Report	true
Document Transition Report	false

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Revenue Recognition

9 Months Ended

Sep. 30, 2019

Revenue Recognition [Abstract]

Revenue Recognition

NOTE 3 – REVENUE RECOGNITION

Contracts with Customers

Revenue for sales of products and services is derived from contracts with customers. The products and services promised in customer contracts include delivery of laser systems, imaging systems, and consumables as well as certain ancillary services such as training and extended warranties. Contracts with each customer generally state the terms of the sale, including the description, quantity and price of each product or service. Payment terms are stated in the contract and vary according to the arrangement. Because the customer typically agrees to a stated rate and price in the contract that does not vary over the life of the contract, the Company’s contracts do not contain variable consideration. The Company also establishes a provision for estimated warranty expense.

Performance Obligations

At contract inception, the Company assesses the products and services promised in its contracts with customers. The Company then identifies performance obligations to transfer distinct products or services to the customers. In order to identify performance obligations, the Company considers all of the products or services promised in contracts regardless of whether they are explicitly stated or are implied by customary business practices.

Revenue from products and services transferred to customers at a single point in time accounted for 77% and 81% of net revenue for the three and nine months ended September 30, 2019, respectively, and 85% and 85% for the three and nine months ended September 30, 2018, respectively. The majority of the Company’s revenue recognized at a point in time is for the sale of laser systems, imaging systems, and consumables. Revenue from these contracts is recognized when the customer is able to direct the use of and obtain substantially all of the benefits from the product which generally coincides with title transfer during the shipping process.

Revenue from services transferred to customers over time accounted for 23% and 19% of net revenue for the three and nine months ended September 30, 2019, respectively, and 15% and 15% for the three and nine months ended September 30, 2018, respectively. The majority of the Company’s revenue that is recognized over time relates to product training and extended warranties. Deferred revenue attributable to undelivered elements, which primarily consists of product training, totaled approximately $0.6 million and $0.7 million as of September 30, 2019 and December 31, 2018, respectively.

Transaction Price Allocation

The transaction price for a contract is allocated to each distinct performance obligation and recognized as revenue when, or as, each performance obligation is satisfied. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using the best estimate of the standalone selling price of each distinct good or service in a contract. The primary method used to estimate standalone selling price is the observable price when the good or service is sold separately in similar circumstances and to similar customers.

Significant Judgments

Revenue is recorded for extended warranties over time as the customer benefits from the warranty coverage. This revenue will be recognized equally throughout the contract period as the customer receives benefits from the Company's promise to provide such services. Revenue is recorded for product training as the customer attends a training program or upon the expiration of the obligation, which is generally after nine months.

The Company also has contracts that include both the product sales and product training as performance obligations. In those cases, the Company records revenue for product sales at the point in time when the product has been shipped. The customer obtains control of the product when it is shipped, as all shipments are made FOB shipping point, and after the customer selects its shipping method and pays all shipping costs and insurance. The Company has concluded that control is transferred to the customer upon shipment.

Accounts Receivable

Accounts receivable are stated at estimated net realizable value. The allowance for bad debts is based on an analysis of customer accounts and the Company’s historical experience with accounts receivable write-offs. In the third quarter of 2019, the Company increased its allowance for doubtful accounts reserve by approximately $1.1 million relating to our distributor in China.  

Contract Liabilities

The Company performs its obligations under a contract with a customer by transferring products and/or services in exchange for consideration from the customer. The Company typically invoices its customers as soon as control of an asset is transferred and a receivable for the Company is established. The Company, however, recognizes a contract liability when a customer prepays for goods and/or services and the Company has not transferred control of the goods and/or services. The opening and closing balances of the Company’s contract liabilities are as follows (in thousands):

	September 30,		December 31,
	2019		2018
Undelivered elements (training, installation, product and    support services)	$	566	$	730
Extended warranty contracts		1,940		1,735
Deferred royalties		6		11
Total deferred revenue		2,512		2,476
Less long-term portion of deferred revenue		—		—
Deferred revenue — current	$	2,512	$	2,476

The balance of contract assets was immaterial as the Company did not have a significant amount of uninvoiced receivables at September 30, 2019 and December 31, 2018.

The amount of revenue recognized during the three-month period ended September 30, 2019 and September 30, 2018 and included in the opening contract liability balance related to undelivered elements was $0.1 million and $0.2 million, respectively. The amount of revenue recognized during the nine-month period ended September 30, 2019 and September 30, 2018 and included in the opening contract liability balance was $0.5 million and $0.8 million, respectively. Revenue recognized during 2018 and 2019 relating to deferred royalties was not material in either period.

Disaggregation of Revenue

The Company disaggregates revenue from contracts with customers into geographical regions and by the timing of when goods and services are transferred. The Company determined that disaggregating revenue into these categories depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by regional economic factors.

The Company’s revenues related to the following geographic areas were as follows for the periods indicated (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
United States	$	4,949	$	6,953	$	16,962	$	19,810
International		3,697		3,983		10,655		13,300
	$	8,646	$	10,936	$	27,617	$	33,110

Information regarding revenues disaggregated by the timing of when goods and services are transferred is as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Revenue recognized over time	$	1,997	$	1,594	$	5,267	$	4,848
Revenue recognized at a point in time		6,649		9,342		22,350		28,262
Total	$	8,646	$	10,936	$	27,617	$	33,110

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
End-customer	$	3,727	$	7,387	$	11,068	$	21,093
Distributors		4,919		3,549		16,549		12,017
	$	8,646	$	10,936	$	27,617	$	33,110

The Company provides the equipment and any related services directly to the customer. The Company has inventory risk before the equipment is transferred to a customer. The Company purchases and obtains the goods before obtaining a contract with a customer. The Company also has discretion in establishing the price sold to the customer for the equipment.

The percentages of the Company’s sales by product line were as follows for the periods indicated:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Laser systems		59.8	%		64.5	%		58.1	%		62.5	%
Imaging systems		—	%		3.5	%		2.2	%		4.0	%
Consumables and other		17.1	%		17.4	%		20.6	%		18.9	%
Services		23.1	%		14.6	%		19.1	%		14.6	%
License fees and royalties		—	%		—	%		—	%		—	%
		100.0	%		100.0	%		100.0	%		100.0	%

Shipping and Handling Costs and Revenues

Shipping and freight costs are treated as fulfillment costs. For shipments to end-customers, the customer bears the shipping and freight costs and has control of the product upon shipment. For shipments to distributors, the distributor bears the shipping and freight costs, including insurance, tariffs and other import/export costs.

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Classification of Compensation Expense Associated with Share-Based Payments (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Allocated Share-based Compensation Expense	$ 770	$ 604	$ 1,974	$ 1,862
Cost of Revenue
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Allocated Share-based Compensation Expense	94	127	229	289
Sales and Marketing
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Allocated Share-based Compensation Expense	173	134	411	368
General and Administrative
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Allocated Share-based Compensation Expense	442	258	1,167	932
Engineering and Development
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Allocated Share-based Compensation Expense	$ 61	$ 85	$ 167	$ 273

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Cash Proceeds Along with Fair Value Disclosures Related to Grants, Exercises and Vested Options (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Proceeds from stock options exercised		$ 3	$ 2
Weighted-average fair value of options granted during period	$ 1.02	$ 1.53	$ 1.38
Total fair value of shares vested during the period	$ 164	$ 683	$ 1,008

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Summary of Property, Plant and Equipment by Geographic Location (Detail) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Segment Reporting Information [Line Items]
Property, plant, and equipment, net	$ 1,340	$ 1,975
United States
Segment Reporting Information [Line Items]
Property, plant, and equipment, net	1,060	1,673
International
Segment Reporting Information [Line Items]
Property, plant, and equipment, net	$ 280	$ 302

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Leases - Future Minimum Rental Commitments Under Lease Agreements (Detail) $ in Thousands	Sep. 30, 2019 USD ($)
Leases [Abstract]
2019 (three months)	$ 192
2020	314
2021	23
Total future minimum lease obligations	$ 529

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Changes in Initial Product Warranty Accrual and Expenses Under Initial and Extended Warranties (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Movement in Standard Product Warranty Accrual
Balance, beginning of period	$ 1,498	$ 1,359	$ 1,308	$ 1,190
Provision for estimated warranty cost	523	203	1,145	827
Warranty expenditures	(366)	(182)	(798)	(637)
Balance, September 30	1,655	1,380	1,655	1,380
Less warranty accrual, long-term	701	375	701	375	$ 447
Total warranty accrual, current portion	$ 954	$ 1,005	$ 954	$ 1,005	$ 861

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Summary of Property, Plant, and Equipment (Detail) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Property Plant And Equipment [Line Items]
Property, plant, and equipment gross, excluding land	$ 10,282	$ 10,153
Accumulated depreciation and amortization	(9,100)	(8,344)
Property, plant, and equipment net, excluding land	1,182	1,809
Land	158	166
Property, plant, and equipment, net	1,340	1,975
Building
Property Plant And Equipment [Line Items]
Property, plant, and equipment gross, excluding land	203	213
Leasehold Improvements
Property Plant And Equipment [Line Items]
Property, plant, and equipment gross, excluding land	2,003	2,004
Equipment and Computers
Property Plant And Equipment [Line Items]
Property, plant, and equipment gross, excluding land	7,421	7,277
Furniture and Fixtures
Property Plant And Equipment [Line Items]
Property, plant, and equipment gross, excluding land	634	634
Construction in Progress
Property Plant And Equipment [Line Items]
Property, plant, and equipment gross, excluding land	$ 21	$ 25

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Debt - Summary of Future Minimum Principal and Interest Payments (Detail) - USD ($) $ in Thousands		Sep. 30, 2019	Dec. 31, 2018
Debt Disclosure [Abstract]
2021		$ 2,100
2022		2,800
2023		10,100
Total future payments		15,000	$ 12,500
2019 (three months)	[1]	484
2020	[1]	1,931
2021	[1]	1,848
2022	[1]	1,517
2023	[1]	1,063
Total future payments	[1]	$ 6,843

[1] estimated using LIBOR rates as at September 30, 2019

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Leases

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Leases

NOTE 10— LEASES

The Company enters into operating leases primarily for real estate, office equipment, and fleet vehicles. Lease terms generally range from one to five years, and often include options to renew for one year. On January 1, 2019, the Company adopted Topic 842, using the modified-retrospective approach as discussed in Note 2, and as a result recognized a right-of-use asset of approximately $0.8 million as adjusted for deferred rent at the date of adoption of $0.2 million, and a lease liability of approximately $1.0 million. No cumulative-effect adjustment to retained earnings was required upon adoption of Topic 842. Right-of-use assets are recorded in Other assets and lease liabilities are included in Accrued liabilities or Other liabilities depending on whether they are current or noncurrent. Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate (“IBR”) to determine the present value of the lease payments and on the date of adoption, the Company determined its IBR to be 12.78%. This rate was based on the Company’s financing of the SWK Loan which is a collateralized loan, and was based on prevailing market rates during the fourth quarter of 2018.

Information related to the Company’s right-of-use assets and related liabilities were as follows (in thousands):

	Nine Months Ended
	September 30, 2019
Cash paid for operating lease liabilities	$	606
Right-of-use assets obtained in exchange for new operating lease    obligations		803
Weighted-average remaining lease term	1.4 years
Weighted-average discount rate		12.8	%

The Company allocates lease cost amongst lease and non-lease components. The Company excludes short-term leases (those with lease terms of less than one year at inception) from the measurement of lease liabilities or right-of-use assets.

Maturities of lease liabilities as of September 30, 2019 were as follows (in thousands):

Due in 12 month period ended September 30,
2020	$	484
2021		45
Thereafter		—
	$	529
Less imputed interest		(38	)
Total lease liabilities	$	491
Current operating lease liabilities		476
Non-current lease liabilities		15
Total lease liabilities	$	491

As of September 30, 2019, right-of-use assets were $0.4 million and lease liabilities were $0.6 million. During the three and nine months ended September 30, 2019, the Company did not enter into any new lease arrangements, nor did it have any arrangements that had not commenced.

Future minimum rental commitments under lease agreements, as of September 30, 2019, with non-cancelable terms greater than one year for each of the periods ending September 30, are as follows (in thousands):

	Period Ended September 30, 2019
2019 (three months)	$	192
2020		314
2021		23
2022 and thereafter		—
Total future minimum lease obligations	$	529

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Property, Plant, and Equipment

9 Months Ended

Sep. 30, 2019

Property Plant And Equipment [Abstract]

Property, Plant, and Equipment

NOTE 6—PROPERTY, PLANT, AND EQUIPMENT

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

	September 30,			December 31,
	2019			2018
Building	$	203		$	213
Leasehold improvements		2,003			2,004
Equipment and computers		7,421			7,277
Furniture and fixtures		634			634
Construction in progress		21			25
		10,282			10,153
Accumulated depreciation and amortization		(9,100	)		(8,344	)
		1,182			1,809
Land		158			166
Property, plant, and equipment, net	$	1,340		$	1,975

Depreciation and amortization expense related to property, plant, and equipment totaled $0.2 million and $0.8 million for the three and nine months ended September 30, 2019, respectively, and $0.2 million and $0.7 million for the three and nine months ended September 30, 2018, respectively.

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Summary of Percentages of Sales by Product line (Detail) - Product Concentration Risk - Sales Revenue, Net	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Disaggregation Of Revenue [Line Items]
Percentage of sales	100.00%	100.00%	100.00%	100.00%
Laser systems
Disaggregation Of Revenue [Line Items]
Percentage of sales	59.80%	64.50%	58.10%	62.50%
Imaging systems
Disaggregation Of Revenue [Line Items]
Percentage of sales		3.50%	2.20%	4.00%
Consumables and Other
Disaggregation Of Revenue [Line Items]
Percentage of sales	17.10%	17.40%	20.60%	18.90%
Services
Disaggregation Of Revenue [Line Items]
Percentage of sales	23.10%	14.60%	19.10%	14.60%

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Concentrations (Tables)

9 Months Ended

Sep. 30, 2019

Risks And Uncertainties [Abstract]

Summary of Percentages of Sales by Product line

The percentages of the Company’s sales by product line were as follows for the periods indicated:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Laser systems		59.8	%		64.5	%		58.1	%		62.5	%
Imaging systems		—	%		3.5	%		2.2	%		4.0	%
Consumables and other		17.1	%		17.4	%		20.6	%		18.9	%
Services		23.1	%		14.6	%		19.1	%		14.6	%
License fees and royalties		—	%		—	%		—	%		—	%
		100.0	%		100.0	%		100.0	%		100.0	%

Revenue from the Company’s products for the three and nine months ended September 30, 2019 and 2018 are as follows (dollars in thousands):

	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2019				2018				2019				2018
Laser systems	$	5,167	59.8	%	$	7,055	64.5	%	$	16,047	58.1	%	$	20,678	62.5	%
Imaging systems		4	—	%		382	3.5	%		619	2.2	%		1,336	4.0	%
Consumables and other		1,478	17.1	%		1,902	17.4	%		5,678	20.6	%		6,239	18.9	%
Services		1,994	23.1	%		1,594	14.6	%		5,264	19.1	%		4,848	14.6	%
License fees and royalties		3	—	%		3	—	%		9	—	%		9	—	%
Net revenue	$	8,646	100.0	%	$	10,936	100.0	%	$	27,617	100.0	%	$	33,110	100.0	%

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Summary of Opening and Closing Balances of Contract Liabilities (Detail) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Revenue Recognition [Abstract]
Undelivered elements (training, installation, product and support services)	$ 566	$ 730
Extended warranty contracts	1,940	1,735
Deferred royalties	6	11
Total deferred revenue	2,512	2,476
Deferred revenue — current	$ 2,512	$ 2,476

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Leases - Additional Information (Detail) - USD ($)		9 Months Ended
	Jan. 02, 2019	Sep. 30, 2019	Jan. 01, 2019
Lessee Lease Description [Line Items]
Operating lease, options to renew term		1 year
Lessee, Operating Lease, Existence of Option to Extend [true false]		true
Operating lease, right-of-use asset		$ 400,000
Operating lease, liability		491,000
Lessee, operating lease incremental borrowing rate			12.78%
Lease liabilities		$ 600,000
Operating lease, lease not yet commenced, description		The Company did not enter into any new lease arrangements nor did it have any arrangements that had not commenced.
ASU 2016-02
Lessee Lease Description [Line Items]
Operating lease, right-of-use asset		$ 800,000	$ 800,000
Operating Lease Right Of Use Asset Statement Of Financial Position Extensible List			us-gaap:OtherAssetsNoncurrent
Adjustment for deferred rent			$ 200,000
Operating Lease, Liability, Statement of Financial Position [Extensible List]			us-gaap:AccruedLiabilitiesCurrent
Operating lease, liability		1,000,000	$ 1,000,000
Cumulative-effect adjustment to retained earnings	$ 0	$ 0
Minimum
Lessee Lease Description [Line Items]
Lease term		1 year
Maximum
Lessee Lease Description [Line Items]
Lease term		5 years
Lease initial term of contract		1 year

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Accrued Liabilities - Additional Information (Detail) - Maximum	9 Months Ended
	Sep. 30, 2019
Diode Systems
Accrued Liabilities [Line Items]
Product warrant period	28 months
United States | Waterlase Laser Systems
Accrued Liabilities [Line Items]
Product warrant period	16 months
International | Waterlase Laser Systems
Accrued Liabilities [Line Items]
Product warrant period	28 months

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Property, Plant, and Equipment - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Property Plant And Equipment [Abstract]
Depreciation and amortization expenses	$ 0.2	$ 0.2	$ 0.8	$ 0.7

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2019

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

NOTE 11— COMMITMENTS AND CONTINGENCIES

On April 24, 2012, CAO Group, Inc. (“CAO”) filed a lawsuit against BIOLASE in the District of Utah alleging that BIOLASE’s ezlase dental laser infringes on U.S. Patent No. 7,485,116 (the “116 Patent”). On September 9, 2012, CAO amended its complaint, adding claims for (1) business disparagement/injurious falsehood under common law and (2) unfair competition under 15 U.S.C. Section 1125(a). The additional claims stem from a press release that BIOLASE issued on April 30, 2012, which CAO claims contained false statements that are disparaging to CAO and its diode product. The amended complaint sought injunctive relief, treble damages, attorneys’ fees, punitive damages, and interest. Until January 24, 2018, this lawsuit was stayed in connection with United States Patent and Trademark Office proceedings relating to the 116 Patent, which proceedings ultimately culminated in a January 27, 2017 decision by the United States Court of Appeals for the Federal Circuit, affirming the findings of the Patent Trial and Appeal Board, which were generally favorable to the Company. On January 25, 2018, CAO moved for leave to file a second amended complaint to add certain claims, which filing the Company is not opposing.

On January 23, 2018, CAO filed a lawsuit against BIOLASE in the Central District of California alleging that BIOLASE’s diode lasers infringe on U.S. Patent Nos. 8,337,097, 8,834,497, 8,961,040 and 8,967,883. The complaint seeks injunctive relief, treble damages, attorneys’ fees, punitive damages, and interest.

On January 25, 2019 (the “Effective Date”), BIOLASE entered into a settlement agreement (the “Settlement Agreement”) with CAO. Pursuant to the Settlement Agreement, CAO agreed to dismiss with prejudice the lawsuits filed by CAO against the Company in April 2012 and January 2018. In addition, CAO granted to the Company and its affiliates a non-exclusive, non-transferable (except as provided in the Settlement Agreement), royalty-free, fully-paid, worldwide license to the licensed patents for use in the licensed products and agreed not to sue the Company, its affiliates or any of its manufacturers, distributors, suppliers or customers for use of the licensed patents in the licensed products, and the parties agreed to a mutual release of claims. The Company has agreed (i) to pay to CAO, within five days of the Effective Date, $500,000 in cash, (ii) to issue to CAO, within 30 days of the Effective Date, 500,000 restricted shares of common stock of the Company (the “Stock Consideration”), and (iii) to pay to CAO, within 30 days of December 31, 2021, an amount in cash equal to the difference (if positive) between $1,000,000 and the value of the Stock Consideration on December 31, 2021. The Stock Consideration vests and becomes transferrable on December 31, 2021, subject to the terms of a restricted stock agreement to be entered into between the parties. The Company considered this a Type I subsequent event and recognized a $1.5 million contingent loss on patent litigation settlement in its statement of operations for the year ended December 31, 2018. In January 2019, the Company paid CAO $500,000 in cash. On January 31, 2019, the case was dismissed with prejudice. During the three and nine month periods ended September 30, 2019, the Company did not record any gain or loss on patent litigation which represents the change in fair value of the restricted stock to be issued to CAO. As of September 30, 2019, the total accrued liability is $1.0 million and is included in other long-term liabilities in the consolidated balance sheet.

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Intangible Assets and Goodwill

9 Months Ended

Sep. 30, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

Intangible Assets And Goodwill

NOTE 7—INTANGIBLE ASSETS AND GOODWILL

The Company conducted its annual impairment test of goodwill as of June 30, 2019 and determined that there was no impairment. The Company also tests its intangible assets and goodwill between the annual impairment tests if events occur or circumstances change that would more likely than not reduce the fair value of the Company or its assets below their carrying amounts. For intangible assets subject to amortization, the Company performs its impairment test when indicators, such as reductions in demand or significant economic slowdowns, are present. No events have occurred since June 30, 2019 through the date of these unaudited consolidated financial statements that would trigger further impairment testing of the Company’s intangible assets and goodwill.

As of September 30, 2019 and December 31, 2018, the Company had goodwill of $2.9 million. As of September 30, 2019 and December 31, 2018, all intangible assets have been fully amortized and no amortization expense was recognized during the three and nine months ended September 30, 2019 and 2018.

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Segment Information (Tables)

9 Months Ended

Sep. 30, 2019

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				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
United States	$	4,949	$	6,953	$	16,962	$	19,810
International		3,697		3,983		10,655		13,300
	$	8,646	$	10,936	$	27,617	$	33,110

Summary of Property, Plant and Equipment by Geographic Location

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

	September 30,		December 31,
	2019		2018
United States	$	1,060	$	1,673
International		280		302
	$	1,340	$	1,975

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Revenue Recognition - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Disaggregation Of Revenue [Line Items]
Revenue from products and services transferred to customers, percentage	77.00%	85.00%	81.00%	85.00%
Revenue from services transferred to customers over time, percentage	23.00%	15.00%	19.00%	15.00%
Undelivered elements (product training, installation, product and support services)	$ 566		$ 566		$ 730
Revenue recognized from contract liability	100	$ 200	$ 500	$ 800
China
Disaggregation Of Revenue [Line Items]
Increased in allowance for doubtful accounts reserve	$ 1,100

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Summary of Sales by End Market (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Disaggregation Of Revenue [Line Items]
Net revenue	$ 8,646	$ 10,936	$ 27,617	$ 33,110
End-customer
Disaggregation Of Revenue [Line Items]
Net revenue	3,727	7,387	11,068	21,093
Distributors
Disaggregation Of Revenue [Line Items]
Net revenue	$ 4,919	$ 3,549	$ 16,549	$ 12,017

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Leases (Tables)

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Information related to Right-of-use Assets and Liabilities

Information related to the Company’s right-of-use assets and related liabilities were as follows (in thousands):

	Nine Months Ended
	September 30, 2019
Cash paid for operating lease liabilities	$	606
Right-of-use assets obtained in exchange for new operating lease    obligations		803
Weighted-average remaining lease term	1.4 years
Weighted-average discount rate		12.8	%

Schedule of Maturities of Lease Liabilities

Maturities of lease liabilities as of September 30, 2019 were as follows (in thousands):

Due in 12 month period ended September 30,
2020	$	484
2021		45
Thereafter		—
	$	529
Less imputed interest		(38	)
Total lease liabilities	$	491
Current operating lease liabilities		476
Non-current lease liabilities		15
Total lease liabilities	$	491

Future minimum rental commitments under lease agreements with non-cancelable Operating Leases

Future minimum rental commitments under lease agreements, as of September 30, 2019, with non-cancelable terms greater than one year for each of the periods ending September 30, are as follows (in thousands):

	Period Ended September 30, 2019
2019 (three months)	$	192
2020		314
2021		23
2022 and thereafter		—
Total future minimum lease obligations	$	529

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Inventory (Tables)

9 Months Ended

Sep. 30, 2019

Inventory Disclosure [Abstract]

Components of Inventory

Inventory is valued at the lower of cost or net realizable value and is comprised of the following (in thousands):

	September 30,		December 31,
	2019		2018
Raw materials	$	3,714	$	3,590
Work-in-process		1,164		1,435
Finished goods		6,659		7,223
Inventory	$	11,537	$	12,248

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Subsequent Events

9 Months Ended

Sep. 30, 2019

Subsequent Events [Abstract]

Subsequent Events

NOTE 15—SUBSEQUENT EVENTS

Public Offering and Concurrent Private Placement

On October 29, 2019, BIOLASE sold 7,820,000 shares of its common stock in an underwritten public offering (the “Public Offering”) at a public offering price of $0.5750 per share and received net proceeds of approximately $4.2 million, after deducting underwriting discounts, but before deducting other fees and expenses. The Company granted the underwriters of the Public Offering an over-allotment option to purchase up to an additional 1,173,000 shares of common stock at the public offering price, less the underwriting discount, which the underwriters exercised on November 5, 2019, for which it received approximately $0.6 million, after deducting underwriting discounts.Concurrently with the Public Offering, the company sold to certain existing shareholders an aggregate of 69,565 shares of Series E Participating Convertible Preferred Stock, par value $0.001 per share, at a per share price of $57.50 in a private placement, and received gross proceeds of approximately $4.0 million, before deducting fees and expenses. Each share of Series E Preferred Stock will be convertible into 100 shares of common stock reflecting a conversion price equal to $0.5750 per share, subject to customary anti-dilution adjustments. The shares of Series E Participating Convertible Preferred Stock automatically convert into shares of common stock upon a stockholder vote to approve an amendment of BIOLASE’s charter to increase the number of authorized shares of BIOLASE common stock and satisfy Nasdaq requirements with respect to the issuance of common stock upon conversion of the Series E Participating Convertible Preferred Stock.

On November 5, 2019, the underwriters exercised their over-allotment option and the Company issued an additional 1.1 million shares for gross proceeds of approximately $0.6 million.

Loan Agreement

On October 28, 2019, BIOLASE entered into the Loan Agreement with Pacific Mercantile Bank, as Lender, which provides for the PMB Loan, a revolving line of credit in a maximum principal amount not to exceed the lesser of (i) $3 million or (ii) the sum of 90% of the Eligible Accounts (as defined in the Loan Agreement) plus 75% of the Eligible Inventory (as defined in the Loan Agreement, and subject to certain limitations set forth therein); provided that the maximum principal amount of the PMB Loan may be reduced from time to time in Lender’s good faith business judgment as set forth in the Loan Agreement. Borrowings under the PMB Loan may be used for working capital. The PMB Loan matures on October 28, 2021, unless earlier terminated.

BIOLASE’s obligations under the Loan Agreement are secured by a security interest in substantially all of BIOLASE’s property. No borrowings may be made under the Loan Agreement unless and until Exim Bank agrees to guarantee the PMB Loan and BIOLASE has entered into a borrower agreement with Exim Bank. Borrowings under the PMB Loan bear interest at a daily rate equal to the prime rate published in The Wall Street Journal, plus 1.5% per annum; provided, that the interest rate in effect on any day shall not be less than 6.0% per annum. Additionally, BIOLASE is required to pay an initial and annual fee of $52,500 to Exim Bank, as well as a termination fee equal to $30,000 in the event the Loan Agreement is terminated on or prior to October 28, 2020.

The Loan Agreement requires BIOLASE to maintain unrestricted cash at Lender plus unused availability under the PMB Loan in an amount equal to at least the Burn Rate (as defined in the Loan Agreement). In addition, the Loan Agreement contains customary affirmative and negative covenants for financings of its type (subject to customary exceptions). Upon the occurrence and during the continuation of an event of default (as described in the Loan Agreement), Lender may exercise any remedies available to it, including accelerating the repayment of the PMB Loan.

SWK Loan Amendment

On November 6, 2019, the Company agreed to further amend the Credit Agreement. Pursuant to the Third Amendment, SWK granted the Company a waiver of the Company’s non-compliance with certain financial covenants in the Credit Agreement. Also pursuant to the Third Amendment, the Company and SWK agreed to (i) revise financial covenants to adjust minimum revenue and EBITDA levels and (ii) remove the automatic increase of the minimum liquidity requirement based on certain aggregate minimum revenue and EBITDA levels as of September 30, 2019 (which was added pursuant to the First Amendment). In connection with the Third Amendment, the Company consolidated the SWK Warrants issued to SWK on November 9, 2018 and May 7, 2019. The terms of the SWK Warrants remained the same.

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Stockholders' (Deficit) Equity - Additional Information (Detail) - USD ($) $ in Millions			3 Months Ended		9 Months Ended
	Nov. 05, 2019	Oct. 29, 2019	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018	May 10, 2018	May 09, 2018
Stockholders Equity [Line Items]
Preferred stock, shares issued			0		0		0
Description of reverse stock split					At BIOLASE’s annual meeting of stockholders on May 9, 2018 (the “2018 Annual Meeting”), BIOLASE stockholders approved an amendment to BIOLASE’s Restated Certificate of Incorporation, as amended, to effect the Reverse Stock Split and on May 10, 2018, the Company filed an amendment (the “Amendment”) to its Restated Certificate of Incorporation, as amended, with the Secretary of State of the State of Delaware to effect the Reverse Stock Split, effective as of 11:59 p.m. on May 10, 2018. The Amendment also reduced the authorized shares of common stock from 200,000,000 shares to 40,000,000 shares. Prior year share and per share amounts have been adjusted to reflect the impact of the Reverse Stock Split.
Common stock, shares authorized			40,000		40,000		40,000	40,000,000	200,000,000
Compensation expense related to stock options			$ 0.8	$ 0.5	$ 1.9	$ 1.9
Total unrecognized compensation expense			$ 2.3		$ 2.3
Unrecognized share based compensation expense to be recognized over weighted-average period					1 year 8 months 8 days
Outstanding stock options, RSUs and warrants excluded from diluted loss per share			5,600,000	3,200,000	5,600,000	3,200,000
Restricted Stock Units (RSUs)
Stockholders Equity [Line Items]
Granted			1,900,000		2,200,000
2002 Stock Incentive Plan
Stockholders Equity [Line Items]
Common stock authorized for issuance			3,100,000		3,100,000
Common stock issued pursuant to options exercised					1,000,000
Options and restricted stock units outstanding			1,300,000		1,300,000
Options available for future grants			0		0
2018 Long-Term Incentive Plan
Stockholders Equity [Line Items]
Common stock authorized for issuance			5,000,000		5,000,000
Options and restricted stock units outstanding			3,900,000		3,900,000
Options available for future grants			1,100,000		1,100,000
Subsequent Event
Stockholders Equity [Line Items]
Net proceeds from issuance of shares after deducting underwriter discounts and other fees and expenses	$ 8.4	$ 7.8
Subsequent Event | Underwritten Public Offering | Common Stock
Stockholders Equity [Line Items]
Shares issued		7,820,000
Subsequent Event | Private Placement | Series E Participating Convertible Preferred Stock
Stockholders Equity [Line Items]
Preferred stock, shares issued		69,695

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of these unaudited 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 unaudited consolidated financial statements include allowances on accounts receivable, inventory, and deferred taxes, as well as estimates for accrued warranty expenses, goodwill and the ability of goodwill to be realized, revenue deferrals, effects of stock-based compensation and warrants, contingent liabilities, and the provision or benefit for income taxes. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may differ materially from those estimates.

Critical Accounting Policies

Information with respect to the Company’s critical accounting policies, which management believes could have the most significant effect on the Company’s reported results and require subjective or complex judgments by management is contained in the 2018 Form 10-K. Management believes that there have been no significant changes during the nine months ended September 30, 2019 in the Company’s critical accounting policies from those disclosed in the 2018 Form 10-K.

Fair Value of Financial Instruments

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

The Company’s financial instruments, consisting of cash, cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities, liability for patent litigation settlement, and the SWK Loan as discussed in Note 9, approximate fair value because of the liquid or short-term nature of these items.

Concentration of Credit Risk, Interest Rate Risk and Foreign Currency Exchange Rate

Financial instruments which potentially expose the Company to a concentration of credit risk consist principally of cash and cash equivalents, restricted cash, and trade accounts receivable. The Company maintains its cash and cash equivalents and restricted cash with established commercial banks. At times, balances may exceed federally insured limits. To minimize the risk associated with trade accounts receivable, management performs ongoing credit evaluations of customers’ financial condition and maintains relationships with the Company’s customers that allow management to monitor current changes in business operations so the Company can respond as needed. The Company does not, generally, require customers to provide collateral before it sells them its products. However, the Company has required certain distributors to make prepayments for significant purchases of products.

Substantially all of the Company’s revenue is denominated in U.S. dollars, including sales to international distributors. Only a small portion of its revenue and expenses is denominated in foreign currencies, principally the Euro and Indian Rupee. The Company’s foreign currency expenditures primarily consist of the cost of maintaining offices, consulting services, and employee-related costs. During the nine-month periods ended September 30, 2019 and 2018, the Company did not enter into any hedging contracts. Future fluctuations in the value of the U.S. dollar may affect the price competitiveness of the Company’s products outside the U.S.

Recent Accounting Pronouncements

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

The Company considers the applicability and impact of all ASUs. ASUs not listed below were assessed and determined not to be applicable or are expected to have minimal impact on the Company’s consolidated financial position and results of operations.

Adopted Accounting Pronouncements

In February 2016, the FASB established ASU Topic 842 – Leases, by issuing ASU Topic No. 2016-02 (“Topic 842”), which requires lessees to recognize lease on-balance sheet and disclose key information about leasing arrangements. Topic 842 was subsequently amended by ASU Topic 2018-11 – Targeted Improvements. The new standard establishes a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and a lease liability for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations.

The Company adopted Topic 842 in the first quarter of 2019 utilizing the modified retrospective transition method and a cumulative effect adjustment at the beginning of the first quarter of 2019. The Company has elected the package of practical expedients, which allows the Company not to reassess (1) whether any expired or existing contracts as of the adoption date are or contain a lease, (2) lease classification for any expired or existing leases as of the adoption date, and (3) initial direct costs for any existing leases as of the adoption date. The Company did not elect to apply the hindsight practical expedient when determining lease term and assessing impairment of the right-to-use assets. The adoption of Topic 842 resulted in the recognition of right-of use assets of approximately $0.8 million after a $0.2 million adjustment for deferred rent, and lease liabilities for operating leases of approximately $1.0 million, and no cumulative effect adjustment on retained earnings on its unaudited Consolidated Balance Sheets nor material impact to its unaudited Consolidated Statements of Operations and Comprehensive Loss in the period of adoption. Right-of-use assets are included in Other assets, and lease liabilities are included in Accrued liabilities and in Other liabilities in the unaudited consolidated balance sheet for the period ended September 30, 2019. See Note 10 for additional information.

Recently Issued Accounting Standards

In June 2016, the FASB issued a new standard to replace the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company will be required to use a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. The standard will be effective for the Company beginning January 1, 2020. The Company is evaluating the impact of this standard on the Company’s consolidated financial statements, including accounting policies, processes, and systems.

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Summary of Unvested Stock Option Activity (Detail) - $ / shares shares in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Weighted Average Grant Date Fair Value
Granted	$ 1.02	$ 1.53	$ 1.38
Stock Options
Shares
Beginning Balance		522
Granted		70
Vested		(229)
Forfeited or cancelled		(84)
Ending Balance		279
Weighted Average Grant Date Fair Value
Beginning Balance		$ 2.11
Granted		1.51
Vested		2.55
Forfeited or cancelled		2.39
Ending Balance		$ 1.59

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Consolidated Statements Of Operations And Comprehensive Loss (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Income Statement [Abstract]
Net revenue	$ 8,646	$ 10,936	$ 27,617	$ 33,110
Cost of revenue	5,677	6,995	17,746	21,828
Gross profit	2,969	3,941	9,871	11,282
Operating expenses:
Sales and marketing	3,515	4,489	10,665	13,037
General and administrative	3,210	2,685	8,114	8,691
Engineering and development	1,126	1,277	3,665	3,927
Total operating expenses	7,851	8,451	22,444	25,655
Loss from operations	(4,882)	(4,510)	(12,573)	(14,373)
Loss on foreign currency transactions	19	73	68	53
Interest expense	551	33	1,559	80
Non-operating loss, net	570	106	1,627	133
Loss before income tax provision	(5,452)	(4,616)	(14,200)	(14,506)
Income tax provision	26	49	68	91
Net loss	(5,478)	(4,665)	(14,268)	(14,597)
Other comprehensive income item:
Foreign currency translation adjustment	(128)	3	(170)	(31)
Comprehensive loss	(5,606)	(4,662)	(14,438)	(14,628)
Net loss attributable to common stockholders	$ (5,478)	$ (4,665)	$ (14,268)	$ (14,597)
Net loss per share:
Basic	$ (0.25)	$ (0.23)	$ (0.66)	$ (0.71)
Diluted	$ (0.25)	$ (0.23)	$ (0.66)	$ (0.71)
Shares used in the calculation of net loss per share:
Basic	21,898	20,610	21,545	20,539
Diluted	21,898	20,610	21,545	20,539

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Components of Inventory (Detail) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Components of inventory, net of allowances
Raw materials	$ 3,714	$ 3,590
Work-in-process	1,164	1,435
Finished goods	6,659	7,223
Inventory	$ 11,537	$ 12,248

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Concentrations - Summary of Net Revenue from Various Products (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Concentration Risk [Line Items]
Net revenue	$ 8,646	$ 10,936	$ 27,617	$ 33,110
Product Concentration Risk | Sales Revenue, Net
Concentration Risk [Line Items]
Percentage of sales	100.00%	100.00%	100.00%	100.00%
Laser systems
Concentration Risk [Line Items]
Net revenue	$ 5,167	$ 7,055	$ 16,047	$ 20,678
Laser systems | Product Concentration Risk | Sales Revenue, Net
Concentration Risk [Line Items]
Percentage of sales	59.80%	64.50%	58.10%	62.50%
Imaging systems
Concentration Risk [Line Items]
Net revenue	$ 4	$ 382	$ 619	$ 1,336
Imaging systems | Product Concentration Risk | Sales Revenue, Net
Concentration Risk [Line Items]
Percentage of sales		3.50%	2.20%	4.00%
Consumables and other
Concentration Risk [Line Items]
Net revenue	$ 1,478	$ 1,902	$ 5,678	$ 6,239
Consumables and other | Product Concentration Risk | Sales Revenue, Net
Concentration Risk [Line Items]
Percentage of sales	17.10%	17.40%	20.60%	18.90%
Services
Concentration Risk [Line Items]
Net revenue	$ 1,994	$ 1,594	$ 5,264	$ 4,848
Services | Product Concentration Risk | Sales Revenue, Net
Concentration Risk [Line Items]
Percentage of sales	23.10%	14.60%	19.10%	14.60%
License fees and royalties
Concentration Risk [Line Items]
Net revenue	$ 3	$ 3	$ 9	$ 9

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Commitments and Contingencies - Additional Information (Detail) - USD ($)		1 Months Ended	3 Months Ended	9 Months Ended	12 Months Ended
	Jan. 25, 2019	Jan. 31, 2019	Sep. 30, 2019	Sep. 30, 2019	Dec. 31, 2018
Commitment And Contingencies [Line Items]
Accrued liability			$ 4,950,000	$ 4,950,000	$ 7,538,000
Settlement Agreement | Patent Litigation
Commitment And Contingencies [Line Items]
Settlement agreement date	January 25, 2019
Number of days litigation settlement to be paid in cash	5 days
Litigation settlement in cash	$ 500,000
Number of days litigation settlement shares to be issued	30 days
Litigation settlement share issued	500,000
Number of days litigation settlement to be paid in value of stock consideration	30 days
Settlement agreement, terms				The Company has agreed (i) to pay to CAO, within five days of the Effective Date, $500,000 in cash, (ii) to issue to CAO, within 30 days of the Effective Date, 500,000 restricted shares of common stock of the Company (the “Stock Consideration”), and (iii) to pay to CAO, within 30 days of December 31, 2021, an amount in cash equal to the difference (if positive) between $1,000,000 and the value of the Stock Consideration on December 31, 2021.
Litigation settlement amount in cash equal to difference between value of stock consideration	$ 1,000,000
Contingent gain (loss) on patent litigation settlement			0	$ 0	$ (1,500,000)
Payment for litigation settlement in cash		$ 500,000
Accrued liability			$ 1,000,000	$ 1,000,000