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

March 31, 2020

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)

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  ☒

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)

As of May 4, 2020, the registrant had 31,743,102 shares of common stock, $0.001 par value per share, outstanding.

BIOLASE, INC.

INDEX

		Page
PART I.	FINANCIAL INFORMATION	3
Item 1.	Financial Statements (Unaudited):	3
	Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019	3
	Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2020 and March 31, 2019	4
	Consolidated Statements of Stockholders’ (Deficit) Equity as of March 31, 2020 and March 31, 2019	5
	Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and March 31, 2019	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	41
PART II	OTHER INFORMATION	42
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 5	Other Information	43
Item 6.	Exhibits	44
Signatures		47

2

PART I. FINANCIAL INFORMATION

ITEM  1. FINANCIAL STATEMENTS

BIOLASE, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

	March 31,			December 31,
	2020			2019
	(unaudited)			(audited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,511		$	5,789
Restricted cash		312			312
Accounts receivable, less allowance of $3,560 and $2,531 in 2020 and    2019, respectively		4,749			8,760
Inventory		12,192			10,995
Prepaid expenses and other current assets		1,205			1,163
Total current assets		19,969			27,019
Property, plant, and equipment, net		1,017			1,193
Goodwill		2,926			2,926
Right of use asset		135			276
Other assets		484			433
Total assets	$	24,531		$	31,847
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Accounts payable	$	4,056		$	5,332
Accrued liabilities		4,079			4,744
Deferred revenue, current portion		1,982			2,237
Term loan (net of discount)		13,562			13,466
Total current liabilities		23,679			25,779
Deferred revenue		390			358
Warranty accrual		246			245
Other liabilities		1,107			1,123
Total liabilities		25,422			27,505
Commitments and contingencies — Note 11
Redeemable preferred stock:
Preferred stock, par value $0.001 per share; 1,000 shares authorized, 70    and 70 shares issued and outstanding as of March 31, 2020 and    December 31, 2019, respectively		3,965			3,965
Total redeemable preferred stock		3,965			3,965
Stockholders' equity:
Common stock, par value $0.001 per share; 40,000 shares authorized,    31,582 and 31,439 shares issued and 31,537 and 31,439 outstanding as    of March 31, 2020 and December 31, 2019, respectively		32			31
Additional paid-in-capital		236,384			235,594
Accumulated other comprehensive loss		(719	)		(701	)
Accumulated deficit		(240,553	)		(234,547	)
Total stockholders' (deficit) equity		(4,856	)		377
Total liabilities, redeemable preferred stock and stockholders' (deficit)    equity	$	24,531		$	31,847

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
	March 31,
	2020			2019
Net revenue	$	4,783		$	10,326
Cost of revenue		3,430			6,804
Gross profit		1,353			3,522
Operating expenses:
Sales and marketing		2,704			3,879
General and administrative		3,010			2,393
Engineering and development		991			1,424
Change in fair value of patent litigation settlement liability		—			190
Total operating expenses		6,705			7,886
Loss from operations		(5,352	)		(4,364	)
Loss on foreign currency transactions		84			43
Interest expense		589			478
Non-operating loss (income), net		673			521
Loss before income tax provision		(6,025	)		(4,885	)
Income tax provision		(19	)		15
Net loss		(6,006	)		(4,900	)
Other comprehensive income item:
Foreign currency translation adjustment		(18	)		(55	)
Comprehensive loss	$	(6,024	)	$	(4,955	)
Net loss per share:
Basic	$	(0.19	)	$	(0.23	)
Diluted	$	(0.19	)	$	(0.23	)
Shares used in the calculation of net loss per share:
Basic		31,509			21,134
Diluted		31,509			21,134

See accompanying notes to unaudited consolidated financial statements.

4

BIOLASE, INC.

CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK AND

STOCKHOLDERS' (DEFICIT) EQUITY

(Unaudited, in thousands)

	Three Months Ended
	March 31,
	2020			2019
Total redeemable preferred stock, beginning balance	$	3,965		$	—
Issuance of Redeemable preferred stock		—			—
Total redeemable preferred stock, ending balance	$	3,965		$	—
Common stock and additional paid-in capital:
Beginning balance		235,625			228,451
Issuance of common stock upon exercise of options		—			3
Settlement of liability awards		151			202
Stock offering costs		—			—
Stock-based compensation expense		640			634
Ending balance		236,416			229,290
Accumulated other comprehensive loss:
Beginning balance		(701	)		(670	)
Other comprehensive loss		(18	)		(55	)
Ending balance		(719	)		(725	)
Accumulated deficit
Beginning balance		(234,547	)		(216,692	)
Net loss		(6,006	)		(4,900	)
Ending balance		(240,553	)		(221,592	)
Total stockholders' (deficit) equity, ending balance	$	(4,856	)	$	6,973

See accompanying notes to unaudited consolidated financial statements.

5

BIOLASE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

	Three Months Ended
	March 31,
	2020			2019
Cash Flows from Operating Activities:
Net loss	$	(6,006	)	$	(4,900	)
Adjustments to reconcile net loss to net cash and cash equivalents used in    operating activities:
Depreciation and amortization		177			258
Provision for bad debts		987			19
Amortization of discounts on lines of credit		46			38
Amortization of debt issuance costs		50			49
Stock-based compensation		719			757
Deferred income taxes		(32	)		(5	)
Earned interest income, net		—			(1	)
Change in fair value of patent litigation settlement liability		—			190
Changes in operating assets and liabilities:
Accounts receivable		3,024			(650	)
Inventory		(1,197	)		225
Prepaid expenses and other current assets		(142	)		463
Accounts payable and accrued liabilities		(1,541	)		(1,514	)
Deferred revenue		(219	)		37
Net cash and cash equivalents used in operating activities		(4,134	)		(5,034	)
Cash Flows from Investing Activities:
Purchases of property, plant, and equipment		(9	)		(8	)
Net cash and cash equivalents used in investing activities		(9	)		(8	)
Cash Flows from Financing Activities:
Payments of equity offering costs		(117	)		—
Proceeds from exercise of stock options		—			3
Net cash and cash equivalents  (used in) provided by financing activities		(117	)		3
Effect of exchange rate changes		(18	)		(49	)
Decrease in cash, cash equivalents and restricted cash		(4,278	)		(5,088	)
Cash, cash equivalents and restricted cash, beginning of period		6,101			8,356
Cash, cash equivalents and restricted cash, end of period	$	1,823		$	3,268
Supplemental cash flow disclosure:
Cash paid for interest	$	485		$	430
Cash paid for income taxes	$	28		$	31
Cash paid for operating leases	$	192		$	189
Non-cash accrual for capital expenditures	$	7		$	24
Non-cash right-of-use assets obtained in exchange for lease obligation	$	—		$	824

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, 2019 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 months ended March 31, 2020 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, 2019, included in BIOLASE’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2020 (the “2019 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 months ended March 31, 2020. The Company’s recurring losses, level of cash used in operations, and 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.

Fourth Amendment to the SWK Loan

As of December 31, 2019, the Company was not in compliance with certain of its loan covenants under the Term Loan (as defined below). On March 25, 2020 the Company and SWK Funding, LLC entered into a Fourth Amendment to the Credit Agreement and granted the Company a waiver of such covenants through March 31, 2020. The Fourth Amendment included revisions to the financial covenants and to the warrant price for the SWK warrants. See Note 9 for additional information.

Due to the uncertainty surrounding the Company’s continued inability to meet debt covenants in addition to the uncertainties surrounding the impact of COVID-19 on the Company’s business, the Company is not forecasting compliance with its debt covenants in the next twelve months and has classified the Term Loan with SWK Funding, LLC (the “Term Loan”) as a short-term liability.

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As of March 31, 2020, the Company had negative working capital of approximately $3.7 million. The Company’s principal sources of liquidity as of March 31, 2020 consisted of approximately $1.8 million in cash, cash equivalents and restricted cash and $4.7 million of accounts receivable, net.

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, the Company must increase sales of its products, control or potentially reduce expenses and establish profitable operations in order to generate cash from operations or obtain additional funds when needed.

Additional capital requirements may depend on many factors, including, among other things, the rate at which the Company’s business grows, the extent of the Company’s revenue from ventilator sales, the COVID-19 pandemic and the actions taken to contain it, demands for working capital, manufacturing capacity, and any acquisitions that the Company may pursue. From time to time, the Company could be required, or may otherwise attempt, to raise capital through either equity or debt offerings. The Company cannot provide assurance that it will be able to successfully enter into any such equity or debt financings in the future or that the required capital would be available on acceptable terms, if at all, or that any such financing activity would not be dilutive to its stockholders.

COVID-19 Risk and Uncertainties and CARES Act

Additionally, on January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally and on March 13, 2020, the United States declared a national emergency with respect to the coronavirus outbreak. This outbreak has severely impacted global economic activity, tax and many countries and many states in the United States have reacted to the outbreak by instituting quarantines, mandating business and school closures and restricting travel. These mandated business closures have included dental office closures in Europe and the United States for all but emergency procedures. Our salespeople have been unable to call on dental customers during these closures. In addition, most dental shows and workshops scheduled in the first and second quarters of 2020 have been canceled. There is no assurance that sales will return to normal levels during the second quarter of 2020 or at any time thereafter.  However, the full impact of the COVID-19 outbreak continues to evolve and it is uncertain as to the full magnitude that the pandemic will have on the Company’s financial condition, liquidity, and future results of operations. Management is actively monitoring the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce and have taken actions to mitigate the impact including among other things, temporary reductions in pay, furloughs of certain positions along with deferrals in payment for cash preservation. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2020.

On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.” The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property.

We continue to examine the impact that the CARES Act may have on our business. Currently, we are unable to determine the impact that the CARES Act will have on our financial condition, results of operations, or liquidity.

Paycheck Protection Program Loan (“PPP Loan”)

On April 14, 2020, Biolase, Inc., was granted a loan from Pacific Mercantile Bank in the aggregate amount of $2,980,000.00, pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020.

8

The PPP Loan, which was in the form of a Note dated April 13, 2020 issued by the Company, matures on April 13, 2022 and bears interest at a rate of 1.0% per annum, payable monthly commencing on November 1, 2020. The Note may be prepaid by the Company at any time prior to maturity with no prepayment penalties. Funds from the PPP Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020. The Company intends to use the entire PPP Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the PPP Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.

The application for these funds requires the Company to, in good faith, certify that the current economic uncertainty made the loan request necessary to support the ongoing operations of the Company. This certification further requires the Company to take into account our current business activity and our ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. The receipt of these funds, and the forgiveness of the loan attendant to these funds, is dependent on the Company having initially qualified for the loan and qualifying for the forgiveness of such loan based on our future adherence to the forgiveness criteria.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

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

Critical Accounting Policies

Information with respect to the Company’s critical accounting policies, which management believes could have the most significant effect on the Company’s reported results and require subjective or complex judgments by management is contained in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of the 2019 Form 10-K. Management believes that there have been no significant changes during the three months ended March 31, 2020 in the Company’s critical accounting policies from those disclosed in Item 7 of the 2019 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.

9

The Company’s financial instruments, consisting of cash, cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities, and the SWK Loan as discussed in Note 9, approximate fair value because of the 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 three-month periods ended March 31, 2020 and 2019, 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.

Recently Issued Accounting Standards

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform. This ASU was issued because the London Interbank Offered Rate (LIBOR) is a benchmark interest rate referenced in a variety of agreements that are used by all types of entities. At the end of 2021, banks will no longer be required to report information that is used to determine LIBOR. As a result, LIBOR could be discontinued. Other interest rates used globally could also be discontinued for similar reasons. ASU 2020-04 provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. Companies can apply the ASU immediately. However, the guidance will only be available for a limited time (generally through December 31, 2022). The Company is currently evaluating alternative benchmark rates to replace LIBOR and is still in the process of evaluating the impact that adopting this new accounting standard will have on its consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The standard’s main goal is to improve financial reporting by requiring earlier recognition of credit losses on financing receivables and other financial assets in scope and to replace the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company will be required to use a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. The standard will be effective for the Company beginning January 1, 2023, with early adoption permitted beginning January 1, 2019. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements.

10

NOTE 3 – REVENUE RECOGNITION

Contracts with Customers

Revenue for sales of products and services is derived from contracts with customers. The products and services promised in customer contracts include delivery of laser systems, imaging systems, and consumables as well as certain ancillary services such as training and extended warranties. Contracts with each customer generally state the terms of the sale, including the description, quantity and price of each product or service. Payment terms are stated in the contract and vary according to the arrangement. Because the customer typically agrees to a stated rate and price in the contract that does not vary over the life of the contract, the Company’s contracts do not contain variable consideration. The Company establishes a provision for estimated warranty 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 74% and 84% of net revenue for the three months ended March 31, 2020 and March 31, 2019, respectively. The majority of the Company’s revenue recognized at a point in time is for the sale 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 26% and 16% of net revenue for the three months ended March 31, 2020 and March 31, 2019, 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 $0.5 million and $0.6 million as of March 31, 2020 and December 31, 2019, 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.

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Accounts Receivable

Accounts receivable are stated at estimated net realizable value. The allowance for doubtful accounts is based on an analysis of customer accounts and the Company’s historical experience with accounts receivable write-offs.

Contract Liabilities

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

	March 31,		December 31,
	2020		2019
Undelivered elements (training, installation, product    and support services)	$	476	$	559
Extended warranty contracts		1,896		2,063
Total deferred revenue		2,372		2,622
Less long-term portion of deferred revenue		390		385
Total deferred revenue — long -term		390		385
Deferred revenue — current	$	1,982	$	2,237

The balance of contract assets was immaterial as the Company did not have a significant amount of uninvoiced receivables at March 31, 2020 and December 31, 2019.

The amount of revenue recognized during the three months ended March 31, 2020 that was included in the opening contract liability balance related to undelivered elements was $0.1 million and related to extended warranty contracts was $1.0 million.

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
	March 31,
	2020		2019
United States	$	3,129	$	6,116
International		1,654		4,210
	$	4,783	$	10,326

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

	Three Months Ended
	March 31,
	2020		2019
Revenue recognized over time	$	1,260	$	1,698
Revenue recognized at a point in time		3,523		8,628
Total	$	4,783	$	10,326

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

	Three Months Ended
	March 31,
	2020		2019
End-customer	$	2,340	$	6,346
Distributors		2,443		3,980
	$	4,783	$	10,326

The Company acts as the principal in all its imaging equipment distribution sales. The Company takes possession and control of the equipment before they are sold and transferred to the customer. 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 revenue and percentages of revenue of the Company’s sales by product line were as follows for the periods indicated:

	Three Months Ended
	March 31,
	2020				2019
Laser systems	$	2,051	42.9	%	$	5,964	57.8	%
Imaging systems		—	—	%		552	5.3	%
Consumables and other		1,472	30.8	%		2,112	20.5	%
Services		1,260	26.3	%		1,695	16.4	%
License fees and royalties		—	—	%		3	—	%
Total revenue	$	4,783	100.0	%	$	10,326	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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NOTE 4—REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’(DEFICIT) EQUITY

Redeemable Preferred Stock

The board of directors of Biolase (the “Board”), without further stockholder authorization, may from time to time authorize the issuance of up to 1,000,000 shares of the Company’s preferred stock. Of the 1,000,000 shares of preferred stock, 500,000 shares are designated as Series B Junior Participating Cumulative Preferred Stock. In 2019, the Company sold Series E Convertible Preferred Shares in a private offering and as of March 31, 2020 and December 31, 2019, 69,565 of these shares were issued and outstanding.

The shares of Series E Preferred Stock automatically convert into shares of Common Stock upon receipt of the Requisite Stockholder Approval (as defined in the Certificate of Designations, Preferences and Rights of Series E Participating Convertible Preferred Stock. The shares of Series E Preferred Stock have no other conversion rights.

The Purchase Agreement contains customary representations, warranties and covenants by the Company, customary indemnification obligations of the Company and the Investors, including for liabilities under the Securities Act, and other obligations of the parties. The representations, warranties and covenants contained in the Purchase Agreement were made only for purposes of such agreement and as of specific dates, were solely for the benefit of the parties to such agreement and may be subject to limitations agreed upon by the contracting parties.

The shares of Series E Preferred Stock were offered in reliance upon exemptions from registration under the Securities Act afforded by Regulation D and corresponding provisions of state securities laws. The Company has agreed to use commercially reasonable efforts to file, within 30 days following receipt of the Requisite Stockholder Approval, a registration statement with the U.S. Securities and Exchange Commission to register the resale of the shares of Common Stock underlying the Series E Preferred Stock.

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 March 31, 2020, 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 1.2 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, as approved by the Company’s 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 March 31, 2020, a total 2.3 million shares of the Company’s common stock have been reserved for outstanding options and unvested RSUs, and 0.8 million shares of the Company’s common stock remain available for future grants.

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The Company recognized stock-based compensation expense of $0.7 million and $0.8 million, for the three months ended March 31, 2020 and 2019, respectively, based on the grant-date fair value.The net impact of stock-based compensation expense to earnings was $(0.02), and $(0.04) per basic and diluted share for the three months ended March 31, 2020 and 2019, respectively. At March 31, 2020, the Company had approximately $1.1 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 1.5 years.

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

	Three Months Ended
	March 31,
	2020		2019
Cost of revenue	$	51	$	82
Sales and marketing		210		160
General and administrative		425		441
Engineering and development		33		74
	$	719	$	757

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

	Three Months Ended
	March 31,
	2020			2019
Expected term	5.9 years			6.1 years
Volatility		82.2	%		86.2	%
Annual dividend per share	$	—		$	—
Risk-free interest rate		1.25	%		2.64	%

A summary of option activity for the three months ended March 31, 2020 is as follows (in thousands, except per share data):

				Weighted		Weighted Average Remaining
				Average		Contractual		Aggregate
	Shares			Exercise Price		Term (Years)		Intrinsic Value(1)
Options outstanding, December 31, 2019		1,287		$	5.77			$	—
Granted at fair market value		20		$	0.77
Exercised		—		$	—
Forfeited, cancelled, or expired		(32	)	$	8.87
Options outstanding at March 31, 2020		1,275		$	5.61		5.68	$	—
Options exercisable at March 31, 2020		1,061		$	6.35		5.11	$	—
Vested options expired during the quarter    ended March 31, 2020		17		$	13.2

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

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A summary of unvested stock option activity for the three months ended March 31, 2020 is as follows (in thousands, except per share data): 

				Weighted
				Average Grant
	Shares			Date Fair Value
Unvested options at December 31, 2019		254		$	1.44
Granted		20		$	0.54
Vested		(47	)	$	1.63
Forfeited or cancelled		(14	)	$	2.61
Unvested options at March 31, 2020		213		$	1.25

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
	March 31,
	2020		2019
Proceeds from stock options exercised	$	—	$	3
Tax benefit related to stock options exercised (1)	N/A		N/A
Intrinsic value of stock options exercised (2)	$	—	$	—
Weighted-average fair value of options granted during period	$	0.54	$	1.53
Total fair value of shares vested during the period	$	67	$	342

(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 strike price of the stock on the date of grant.

Restricted Stock Units

There were no material grants made during the three months ended March 31, 2020, and the Company canceled approximately 840,000 grants with performance based vesting due to non achievement of the performance targets.

A summary of unvested RSU activity for the three months ended March 31, 2020 is as follows (in thousands, except per share amounts):

				Weighted
				Average Grant
	Shares			Date Fair Value
Unvested RSUs at December 31, 2019		3,564		$	1.68
Granted		20		$	0.38
Vested		(416	)	$	0.67
Forfeited or cancelled		(840	)	$	1.96
Unvested RSUs at March 31, 2020		2,328			1.63

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Warrants

The Company issues warrants to acquire shares of the Company’s common stock as approved by the Board. A summary of warrant activity for the three months ended March 31, 2020 is as follows (in thousands, except exercise price amounts):

			Weighted
			Average
	Shares		Exercise Price
Warrants outstanding, December 31, 2019		2,083	$	6.12
Granted or Issued		—	$	—
Exercised		—	$	—
Forfeited, cancelled, or expired		—	$	—
Warrants outstanding at March 31, 2020		2,083	$	5.96
Warrants exercisable at March 31, 2020		2,083	$	5.96
Vested warrants expired during the quarter    ended March 31, 2020		—	$	—

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 3.4 million shares were not included in the calculation of diluted loss per share for the three months ended March 31, 2020, as their effect would have been anti-dilutive. For the same 2019 periods, anti-dilutive outstanding stock options and warrants to purchase 5.7 million shares were not included in the computation of diluted loss per share.

NOTE 5—INVENTORY

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

	March 31,		December 31,
	2020		2019
Raw materials	$	4,465	$	3,689
Work-in-process		1,475		1,064
Finished goods		6,252		6,242
Inventory	$	12,192	$	10,995

Inventory has been reduced by estimates for excess and obsolete amounts totaling $1.3 million and $1.3 million as of March 31, 2020 and December 31, 2019, respectively.

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NOTE 6—PROPERTY, PLANT, AND EQUIPMENT

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

	March 31,			December 31,
	2020			2019
Building	$	205		$	209
Leasehold improvements		2,004			2,004
Equipment and computers		7,477			7,479
Furniture and fixtures		634			634
Construction in progress		34			27
Total		10,354			10,353
Accumulated depreciation and amortization		(9,496	)		(9,322	)
Property, plant, and equipment, net before land		858			1,031
Land		159			162
Property, plant, and equipment, net	$	1,017		$	1,193

Depreciation and amortization expense related to property, plant, and equipment totaled $0.2 million and $0.3 million for the three months ended March 31, 2020 and March 31, 2019, 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. Due to the uncertainty surrounding the impact of COVID-19 on the Company’s business, the Company performed an assessment at March 31, 2020 which resulted in no impairment required.  Beyond the impact of COVID-19, 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 March 31, 2020 and December 31, 2019, the Company had goodwill (indefinite life) of $2.9 million. As of March 31, 2020 and December 31, 2019, all intangible assets have been fully amortized and no amortization expense was recognized during the three months ended March 31, 2020 and 2019.

NOTE 8—ACCRUED LIABILITIES

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

	March 31,		December 31,
	2020		2019
Payroll and benefits	$	1,465	$	1,726
Warranty accrual, current portion		911		865
Lease liability		140		323
Accrued professional services		443		330
Taxes		31		242
Accrued insurance premium		374		546
Other		715		712
Total accrued liabilities	$	4,079	$	4,744

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Changes in the initial product warranty accrual and the expenses incurred under the Company’s initial and extended warranties for the three months ended March 31, 2020 and 2019 are included within accrued liabilities on the Consolidated Balance Sheets and were as follows (in thousands):

	Three Months Ended
	March 31,
	2020			2019
Balance, January 1	$	1,110		$	1,308
Provision for estimated warranty cost		203			239
Warranty expenditures		(156	)		(163	)
Balance, March 31		1,157			1,384
Less warranty accrual, long-term		246			577
Total warranty accrual, current portion	$	911		$	807

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):

	March 31,			December 31,
	2020			2019
Term loan	$	15,000		$	15,000
Discount and debt issuance costs on term loan		(1,438	)		(1,534	)
Total	$	13,562		$	13,466

Lines of Credit

Pacific Mercantile Bank

On October 28, 2019, the Company entered into a loan and security agreement (the “Loan Agreement”) with Pacific Mercantile Bank, as lender (the “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.

The Company’s obligations under the Loan Agreement are secured by a security interest in substantially all of the Company’s property. No borrowings may be made under the Loan Agreement unless and until Exim Bank agrees to guarantee the PMB Loan and the Company 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, the Company was required to pay an initial fee and is required to pay an annual fee of $52,500 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.

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The Loan Agreement requires the Company to maintain unrestricted cash at the Lender plus unused availability under the PMB Loan in an amount equal to at least the Burn Rate. “Burn Rate” means the Company’s net profit/net loss plus depreciation plus amortization plus stock-based compensation, measured on a trailing three month basis. In addition, the Loan Agreement contains customary affirmative and negative covenants for financings of its type (subject to customary exceptions).

As of March 31, 2020 and December 31, 2019, the Company had no borrowings outstanding and unused availability under this credit facility of  $3.0 million and $2.7 million, respectively. The Company was in compliance with all debt covenants at March 31, 2020.

In April 2020, the Company drew $3.0 million under the PMB Loan. Additional information is discussed in Note 15 – Subsequent Events.

Term Loan

On November 9, 2018, the Company entered into a five-year secured Credit Agreement (“Credit Agreement”) with SWK Funding LLC (“SWK”), pursuant to which the Company has borrowed $12.5 million (“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 the 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 Bank under the business financing agreement entered into in 2018.

The Credit Agreement contains financial and non-financial covenants requiring the Company to, among other things, (i) maintain unencumbered liquid assets of (A) no less than $1.5 million or (B) 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.

As of March 31, 2019, the Company was not in compliance with certain covenants in the Credit Agreement and in May 2019, SWK granted the Company a waiver of such covenants. 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 Securities and Exchange Commission before September 30, 2019, with a proposed maximum aggregate offering price of at least $10.0 million if the Company did not reach set minimum revenue levels for the three-month period ended September 30, 2019, and (c) require minimum liquidity of $1.5 million at all times. The First Amendment provided that if aggregate minimum revenue and EBITDA levels were not achieved by September 30, 2019, the minimum liquidity requirement would be increased to $3.0 million, until the Company has obtained additional equity or debt funding of no less than $5.0 million. In 2019, the Company obtained additional equity financing greater than $5.0 million. The Company borrowed the additional $2.5 million during the year ended December 31, 2019.

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 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 warrants as additional debt issuance costs.

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On September 30, 2019, BIOLASE, Inc entered into the Second Amendment to 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 amended the Credit Agreement to provide for a 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 and with such other material terms and conditions acceptable to SWK in its commercially reasonable discretion. 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 that an additional equity or subordinated debt financing is consummated with gross proceeds of not less than $5 million, or in the event of a default under the Credit Agreement.

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 price was adjusted to $1.00 and the impact of this was de minimis.

As of December 31, 2019, the Company was not in compliance with the covenants under the Credit Agreement, as amended, and on March 25, 2020, the Company agreed to further amend the Credit Agreement (“Fourth Amendment”). Pursuant to the Fourth Amendment to the Credit Agreement, SWK granted the Company a waiver of the Company’s non-compliance with certain financial covenants contained in the Credit Agreement through March 31, 2020. Also pursuant to the Fourth Amendment, the Company and SWK agreed to (i) revise financial covenants to adjust minimum revenue and EBITDA levels and (ii) revise the financial covenant with respect to required unencumbered liquid assets.

The Company does not anticipate it will regain compliance with the financial covenants under the Credit Agreement by June 30, 2020 due to the uncertainty surrounding the impact of COVID-19 on its business. Therefore the Term Loan is classified as a current liability in the unaudited consolidated balance sheets.

The Company recognized approximately $0.6 million and $0.5 million in interest expense for the three months ending March 31, 2020 and 2019, respectively.  The weighted-average interest rate as of March 31, 2020 was 12.25%.  

Western Alliance Warrants

On March 6, 2018, the Company issued to Western Alliance warrants (the “Original Western Alliance Warrants”) to purchase up to the number of shares of common stock equal to $120,000 divided by the applicable exercise price at the time such warrants are exercised. The Original Western Alliance Warrants are fully vested and exercisable. The Original Western Alliance Warrants may be exercised with a cash payment from Western Alliance, or, in lieu of a cash payment, Western Alliance may convert the warrants into a number of shares, in whole or in part. The initial exercise price of the warrants was $2.35 per share. On September 27, 2018, the Company entered into the Second Modification Agreement to amend the Original Business Financing Agreement. In connection with the Second Modification Agreement, the Original Western Alliance Warrants were terminated, and the Company issued new warrants (the “Western Alliance Warrants”) to purchase up to the number of shares of common stock equal to $120,000 divided by the exercise price of $2.13, which was the closing price of the Company’s common stock on September 27, 2018. 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 per share less than the exercise price. 

21

SWK Warrants

In connection with the Credit Agreement, the Company issued warrants to SWK (the “SWK Warrants”) on November 9, 2018, to purchase up to 372,023 shares of the Company’s common stock. The SWK Warrants are immediately exercisable and expire on November 9, 2026. The exercise price of the SWK Warrants is $1.34, which was the average closing price of the Company’s common stock for the ten trading days immediately preceding November 9, 2018. 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 SWK Warrants 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%; and resulted in an estimated fair value of $0.4 million.  

In November 2019, these warrants were consolidated and the strike price was adjusted to $1.00, and in March 2020, the strike price was adjusted a second time to $0.49.  The impact of both reprice events was de minimis to the unaudited consolidated financial statements.

DPG Warrants

In connection with the SWK Loan, the Company paid a finder’s fee to Deal Partners Group of $0.4 million cash and issued warrants to purchase up to 279,851 shares of common stock (the “DPG Warrants”). The DPG Warrants were issued on November 14, 2018, were exercisable immediately, and expire on November 9, 2026. The exercise price of the DPG Warrants is $1.34 which was the average closing price of the Company’s common stock for the ten trading days immediately preceding November 9, 2018. 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 DPG Warrants of $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%. In November 2019, the exercise price of the DPG Warrants issued on November 9, 2018 was adjusted from $1.34 per share to $0.8767 per share and the exercise price of the DPG Warrants issued on May, 2019 was adjusted from $2.17 per share to $1.4197 per share. The impact of the reprice was de minimis to the unaudited consolidated financial statements.

The value of both the SWK Warrants and the DPG Warrants was recognized as a discount on the SWK Loan and are being amortized on a straight-line basis which approximates the effective-interest method, over the loan term of five years. 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 sheet as of March 31, 2020.

The future minimum principal and interest payments as of March 31, 2020 are as follows (in thousands):

	Principal		Interest (1)
2020		—		1,388
2021		2,100		1,793
2022		2,800		1,472
2023		10,100		2,455
Total future payments	$	15,000	$	7,108
(1) estimated using LIBOR rates as at March 31, 2020

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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 Prepaid and 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):

	Three Months Ended,
	March 31, 2020
Cash paid for operating lease liabilities	$	192
Right-of-use assets obtained in exchange for new operating    lease obligations		—
Weighted-average remaining lease term		—
Weighted-average discount rate		0.0	%

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 March 31, 2020 for leases that have commenced were as follows (in thousands):

Due in 12 month period ended March 31,
2020	$	138
2021		7
Thereafter		—
	$	145
Less imputed interest		(5	)
Total lease liabilities	$	140
Current operating lease liabilities		140
Non-current lease liabilities		—
Total lease liabilities	$	140

As of March 31, 2020, right-of-use assets were $0.1 million and lease liabilities were $0.1 million. During the three months ended March 31, 2020, the Company entered into two new real property leases which will commence in July 1, 2020.  The Company expects to recognize a right-of-use asset and an offsetting lease liability in the amount of $1.8 million in the unaudited consolidated balance sheet upon lease commencement.

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Future minimum rental commitments under lease agreements, as of March 31, 2020, with non-cancelable terms greater than one year for each of the years ending December 31 are as follows (in thousands):

	Year Ended
	December 31,
2020 (nine months)	$	217
2021		448
2022		481
2023		492
2024		503
2025 and thereafter		462
Total future minimum lease obligations	$	2,603

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 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-month period ended March 31, 2019, the Company recorded an additional loss on patent litigation of $0.2 million which represented the change in fair value of the restricted stock to be issued to CAO at March 31, 2019. Subsequent to March 31,2019, the Company reversed the additional loss commensurate with the fluctuations in the Company’s share price. As of March 31, 2020 and December 31, 2019, the accrued liability relating to this agreement was $1.0 million.

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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 months ended March 31, 2020, sales to customers in the United States accounted for approximately 65% of net revenue and international sales accounted for approximately 35% of net revenue, respectively. No individual country, other than the United States, represented more than 10% of total net revenue during the three months ended March 31, 2020 or 2019.

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

	Three Months Ended
	March 31,
	2020		2019
United States	$	3,129	$	6,116
International		1,654		4,210
	$	4,783	$	10,326

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

	March 31,		December 31,
	2020		2019
United States	$	742	$	908
International		275		285
	$	1,017	$	1,193

NOTE 13—CONCENTRATIONS

Revenue from the Company’s products for the three months ended March 31, 2020 and 2019 are as follows (dollars in thousands):

	Three Months Ended
	March 31,
	2020				2019
Laser systems	$	2,051	42.9	%	$	5,964	57.8	%
Imaging systems		—	—	%		552	5.3	%
Consumables and other		1,472	30.8	%		2,112	20.5	%
Services		1,260	26.3	%		1,695	16.4	%
License fees and royalties		—	—	%		3	—	%
Total revenue	$	4,783	100.0	%	$	10,326	100.0	%

No individual customer represented more than 10% of the Company’s revenue for the three months ended March 31, 2020 or 2019.

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.

One individual customer represented more than 10% of the Company’s accounts receivable at March 31, 2020 and December 31, 2019.

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 months ended March 31, 2020 and 2019. 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 months ended March 31, 2020 and March 31, 2019, the Company recorded an income tax benefit of $19,000 and a provision of $15,000, respectively, resulting in an effective tax rate of 0.2% and 0.3%, respectively. The income tax provisions for the three months ended March 31, 2020 and 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 EVENT

Paycheck Protection Program Loan

On April 14, 2020, Biolase, Inc., was granted a loan from Pacific Mercantile Bank in the aggregate amount of $2,980,000, pursuant to the Paycheck Protection Program under Division A, Title I of the CARES Act, which was enacted March 27, 2020.

The PPP Loan, which was in the form of a Note dated April 13, 2020 issued by the Company, matures on April 13, 2022 and bears interest at a rate of 1.0% per annum, payable monthly commencing on November 1, 2020. The Note may be prepaid by the Company at any time prior to maturity with no prepayment penalties. Funds from the PPP Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020. The Company intends to use the entire Loan amount for qualifying expenses. Under the terms of the PPP, amounts spent on authorized purchases over eight weeks after receiving the loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.

The application for these funds requires the Company to, in good faith, certify that the current economic uncertainty made the loan request necessary to support the ongoing operations of the Company. This certification further requires the Company to take into account our current business activity and our ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. The receipt of these funds, and the forgiveness of the loan attendant to these funds, is dependent on the Company having initially qualified for the loan and qualifying for the forgiveness of such loan based on our future adherence to the forgiveness criteria.

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Revolving Credit Facility

In April 2020, the Company borrowed $3.0 million under the PMB Loan.

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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, 2019 filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2020 (the “2019 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, future products and services and enhancements of existing products and services, potential collaborations, our use of proceeds from the PPP Loan (as defined below), seasonality and the reasons therefor, operating and other expenses, anticipated cash needs, our strategy and any other statement that is not historical fact. Forward-looking statements are identified by the use of words such as “may,” “might,” “will,” “intend,” “should,” “could,” “can,” “would,” “continue,” “expect,” “believe,” “anticipate,” “estimate,” “predict,” “outlook,” “potential,” “plan,” “seek,” 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:

• losses that we have experienced and doubt about our ability to continue as a going concern as of March 31, 2020;

• the coronavirus outbreak, the effects of the COVID-19 pandemic and the actions taken to contain it;

• uncertainty around forgiveness of the PPP Loan;

• 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;

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• warranty obligations if our products are defective;

• adverse publicity regarding our technology or products;

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

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

• rapidly changing standards and competing technologies;

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

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

• breaches of our information technology systems;

• seasonality;

• litigation, including the failure of our insurance policies to cover certain expenses relating to litigation;

• 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;

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

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

• 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;

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

• our failure to comply with continued listing requirements of the Nasdaq Capital Market; 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 2019 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.

Overview

We are a leading provider of advanced laser systems for the dental industry. We develop, manufacture, market, and sell laser systems that provide significant benefits for dental practitioners and their patients. Our proprietary systems allow dentists, periodontists, endodontists, oral surgeons, and other dental specialists to perform a broad range of minimally invasive dental procedures, including cosmetic, restorative, and complex surgical applications. Our laser systems are designed to provide clinically superior results for many types of dental procedures compared to those achieved with drills, scalpels, and other conventional instruments. Potential patient benefits include less pain, fewer shots, faster healing, decreased fear and anxiety, and fewer appointments. Potential practitioner benefits include improved patient care and the ability to perform a higher volume and wider variety of procedures and generate more patient referrals.

We offer two categories of laser system products: Waterlase (all-tissue) systems and diode (soft-tissue) systems. Our flagship brand, the Waterlase, uses a patented combination of water and laser energy and is FDA cleared for over 80 clinical indications to perform most procedures currently performed using drills, scalpels, and other traditional dental instruments for cutting soft and hard tissue. For example, Waterlase safely debrides implants without damaging or significantly affecting surface temperature and is the only effective, safe solution to preserving sick implants. In addition, Waterlase disinfects root canals more efficiently than some traditional chemical methods. We also offer our diode laser systems to perform soft tissue, pain therapy, and cosmetic procedures, including teeth whitening. As of March 31, 2020 we have approximately 261 issued and 52 pending United States and international patents, the majority of which are related to Waterlase technology. From 1998 through March 31, 2020, we sold over 41,200 laser systems in over 80 countries around the world. Contained in this total are approximately 13,400 Waterlase systems, including over 8,900 Waterlase MD, MDX, Express and iPlus systems.

Consistent with our goal to focus our energies on strengthening our leadership, and worldwide competitiveness and increasing the amount of attention we pay to our professional customers and their patients, we have made strategic personnel additions to our senior management team.

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.

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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.

Recent Developments

Impact of Coronavirus (COVID-19) on Our Operations

In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China. The novel coronavirus has since spread to over 100 countries, including every state in the United States. On March 11, 2020, the World Health Organization declared COVID-19, the disease caused by the novel coronavirus, a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to the coronavirus outbreak. This outbreak has severely impacted global economic activity, and many countries and many states in the United States have reacted to the outbreak by instituting quarantines, mandating business and school closures and restricting travel. These mandated business closures have included dental office closures worldwide for all but emergency procedures, for the most part. The ability of our salespeople to call on dental customers during these closures has been greatly limited. In addition, most dental shows and workshops scheduled in the first and second quarters of 2020 have been canceled. Asa result of reduced sales due to the COVID-19 pandemic and actions taken to contain it, cash generated from our operations during the first quarter of 2020 were negatively impacted. The full impact of the COVID-19 outbreak continues to evolve and the full magnitude that the pandemic may have on our financial condition, liquidity, and future results of operations remains uncertain.  There is no assurance that sales will return to normal levels during the second quarter of 2020 or at any time thereafter.

Paycheck Protection Program Loan

On April 14, 2020, BIOLASE was granted a loan from Pacific Mercantile Bank (the “PPP Loan”) in the aggregate amount of $2,980,000, pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the Coronavirus Aid Relief and Economic Securities (CARES) Act, which was enacted March 27, 2020.

The PPP Loan, which was in the form of a Note dated April 13, 2020 issued by the Company, matures on April 13, 2022 and bears interest at a rate of 1.0% per annum, payable monthly commencing on November 1, 2020. The Note may be prepaid by the Company at any time prior to maturity with no prepayment penalties. Funds from the PPP Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020. The Company intends to use the entire PPP Loan amount for qualifying expenses. Under the terms of the PPP, amounts spent on authorized purchases over eight weeks after receiving the loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.

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SWK Fourth Amendment

As of December 31, 2019, the Company was not in compliance with its debt covenants under its credit agreement (as amended) with SWK Funding, LLC. In March 2020, the Company entered into a Fourth Amendment to its Credit Agreement with SWK. Under this Amendment, the financial covenant is amended to require consolidated unencumbered liquid assets of no less than $3.0 million as of any date of determination. The amendment also adjusted the Minimum Aggregate Revenue requirements.  

Revolving Credit Facility

In April 2020, the Company borrowed $3.0 million in connection with its credit facility with Pacific Mercantile Bank (the “PMB Loan”).

Portable Ventilator Partnership

In April, 2020, the Company entered into a partnership with an intensive care equipment manufacturer to supply ICU-grade portable ventilators through BIOLASE’s FDA-registered manufacturing facility.  

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 2019 Form 10-K. There have been no significant changes during the three months ended March 31, 2020 in our critical accounting policies from those disclosed in Item 7 of the 2019 Form 10-K.

Results of Operations

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

	Three Months Ended						Three Months Ended
	March 31,						March 31,
	2020						2019
Products and services	$	4,783		100.0		%	$	10,326		100.0		%
Cost of revenue		3,430		71.7		%		6,804		65.9		%
Gross profit		1,353		28.3		%		3,522		34.1		%
Operating expenses:
Sales and marketing		2,704		56.5		%		3,879		37.6		%
General and administrative		3,010		62.9		%		2,393		23.2		%
Engineering and development		991		20.7		%		1,424		13.8		%
Change in fair value of patent litigation    settlement liability		—		0.0		%		190		1.8		%
Total operating expenses		6,705		140.2		%		7,886		76.4		%
Loss from operations		(5,352	)	(111.9	)	%		(4,364	)	(42.3	)	%
Non-operating loss, net		673		14.1		%		521		5.0		%
Loss before income taxes		(6,025	)	(126.0	)	%		(4,885	)	(47.3	)	%
Income tax provision		(19	)	(0.4	)	%		15		0.1		%
Net loss	$	(6,006	)	(125.6	)	%	$	(4,900	)	(47.4	)	%

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Non-GAAP Disclosure

In addition to the financial information prepared in conformity with GAAP, we provide certain historical non-GAAP financial information. Management believes that these non-GAAP financial measures assist investors in making comparisons of period-to-period operating results and that, in some respects, are indicative of our ongoing core performance. In 2019, we revised our non-GAAP financial measures to include the change in allowance for doubtful accounts in an effort to better align 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.

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

Non-GAAP Net Loss

Adjusted EBITDA

Management uses Adjusted EBITDA in its evaluation of our core results of operations and trends between fiscal periods and believes that these measures are important components of its internal performance measurement process. Adjusted EBITDA is defined as net loss before interest, taxes, depreciation and amortization, stock-based compensation, allowance for doubtful accounts and the change in fair value of our patent litigation settlement liability. Management uses adjusted EBITDA in its evaluation of our core results of operations and trends between fiscal periods and believes that these measures are important components of its internal performance measurement process. Therefore, investors should consider non-GAAP financial measures in addition to, and not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. Further, the non-GAAP financial measures presented by us may be different from similarly named non-GAAP financial measures used by other companies.

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

	Three Months Ended
	March 31,
	2020			2019
GAAP net loss attributable to common stockholders	$	(6,006	)	$	(4,900	)
Deemed dividend on convertible preferred stock		—			—
GAAP net loss	$	(6,006	)	$	(4,900	)
Adjustments:
Interest expense, net		589			478
Income tax (benefit) provision		(19	)		15
Depreciation and amortization		177			258
Change in fair value of patent litigation settlement    liability		—			190
Change in allowance for doubtful accounts		987			—
Stock-based and other non-cash compensation		719			757
Adjusted EBITDA	$	(3,553	)	$	(3,202	)

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Comparison of Results of Operations

Three months ended March 31, 2020 and 2019

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 March 31, 2020 and March 31, 2019, as well as the amount of change and percentage of change in each revenue category (dollars in thousands):

	Three Months Ended					Three Months Ended
	March 31,					March 31,
	2020					2019
Laser systems	$	2,051		42.9	%	$	5,964		57.8	%
Imaging systems		—		—	%		552		5.3	%
Consumables and other		1,472		30.8	%		2,112		20.5	%
Services		1,260		26.3	%		1,695		16.4	%
Total products and services		4,783		100.0	%		10,323		100.0	%
License fees and royalty		—	—		%		3	—		%
Net revenue	$	4,783		100.0	%	$	10,326		100.0	%

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

The following table summarizes our unaudited net revenue by geographic location based on the location of customers for the three months ended March 31, 2020 and March 31, 2019, 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
	March 31,				March 31,				Amount			Percent
	2020				2019				Change			Change
United States	$	3,129	65.4	%	$	6,116	59.2	%	$	(2,987	)		(48.8	)	%
International		1,654	34.6	%		4,210	40.8	%		(2,556	)		(60.7	)	%
Net revenue	$	4,783	100.0	%	$	10,326	100.0	%	$	(5,543	)		(53.7	)	%

Total net revenue decreased by $5.5 million or 53.7% during the three months ended March 31, 2020 as compared to the same period in 2019 primarily due to the impact of the global COVID-19 pandemic. In the U.S., net revenue decreased by $3.0 million, or 49% for the three months ended March 31, 2020 compared to the same period in 2019. Outside the U.S., net revenue declined by $2.5 million, or 61% during the three months ended March 31, 2020 as compared to the same period in 2019. Because a majority of our sales are typically made in the last month of a quarter, our sales were particularly adversely affected by the stay-at-home orders issued in early to mid-March.

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Cost of Revenue and Gross Profit: The following table summarizes our unaudited cost of revenue and gross profit for the threemonths ended March 31, 2020 and March 31, 2019, as well as the amount of change and percentage of change (dollars in thousands):

	Three Months Ended				Three Months Ended
	March 31,				March 31,				Amount			Percent
	2020				2019				Change			Change
Net revenue	$	4,783	100.0	%	$	10,326	100.0	%	$	(5,543	)		(53.7	)	%
Cost of revenue		3,430	71.7	%		6,804	65.9	%		(3,374	)		(49.6	)	%
Gross profit	$	1,353	28.3	%	$	3,522	34.1	%	$	(2,169	)		(61.6	)	%

Gross profit as a percentage of revenue typically fluctuates with product and regional mix, selling prices, product costs and revenue levels. The 62% decrease in gross profit as a percentage of revenue for the three months ended March 31, 2020, as compared to the three months ended March 31, 2019, reflects the impact of the decrease in revenues from the COVID-19 pandemic and our fixed manufacturing costs.

Operating Expenses: The following table summarizes our unaudited operating expenses for the for the three months ended March 31, 2020 and March 31, 2019, as well as the amount of change and percentage of change (dollars in thousands):

	Three Months Ended				Three Months Ended
	March 31,				March 31,				Amount			Percent
	2020				2019				Change			Change
Sales and marketing	$	2,704	56.5	%	$	3,879	38.7	%	$	(1,175	)		(30.3	)	%
General and administrative		3,010	62.9	%		2,393	23.9	%		617			25.8		%
Engineering and development		991	20.7	%		1,424	14.2	%		(433	)		(30.4	)	%
Change in fair value of patent    litigation settlement liability		—	—	%		190	1.9	%		(190	)		(100.0	)	%
Total operating expenses	$	6,705	140.2	%	$	7,886	78.7	%	$	(1,181	)		(15.0	)	%

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 March 31, 2020 decreased by $1.2 million or 30% as compared to the same period in 2019. This decrease is primarily due to decreases of $0.4 million in sales commissions, $0.2 million in travel and travel related expenses, $0.2 million in   trade show, and $0.1 million in advertising costs and $0.1 million in payroll and benefit costs which are primarily due to the impact of the COVID-19 pandemic on our business operations. Additionally, given the recent dental office closures, we expect our second quarter sales and marketing expense to be lower for the year ended December 31, 2020.

General and Administrative Expense. General and administrative expenses during the three months ended March 31, 2020 increased by $0.6 million or 26% compared to the same period in 2019, primarily due to an increase in our provision for bad debt of $0.9 million due to uncertainties surrounding our ability to collect on certain of our accounts receivable in light of the COVID-19 pandemic.  The increase was offset primarily by a $0.1 million decrease in bank fees and a $0.2 million decrease in payroll and benefits and compensation expense.

Engineering and Development Expense. Engineering and development expenses during the three months ended March 31, 2020 decreased by $0.4 million or 30% compared to the same period in 2019, primarily due to a $0.4 million decrease in payroll and consulting-related expenses driven by a reduction in engineering projects for 2020 as compared to 2019. We expect to continue our investment in engineering and development activity in the remainder of 2020. However, our primary focus will be on our sales and marketing efforts.

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Change in fair value of patent litigation settlement liability.During the three months ended March 31, 2019, we recognized a $0.2 million loss on patent litigation settlement with CAO Group, Inc., as described in Part I, Item I, Note 11 – Commitments and Contingencies above, due to the change in fair value of the restricted stock which is pending issuance.  We did not recognize a change in valuation for the threemonths ended March 31, 2020 as our stock price remained below $1.00 per share.

Gain (Loss) on Foreign Currency Transactions. We realized a $84,000 loss on foreign currency transactions during the three months ended March 31, 2020 compared to a $43,000 loss on foreign currency transactions during the three months ended March 31, 2019, primarily due to exchange rate fluctuations between the U.S. dollar and Euro, as well as other foreign currencies.

Interest Expense, Net. Interest expense during the three months ended March 31, 20, 2020 increased by $0.1 million primarily due to the additional interest from incremental borrowing of $2.5 million on the SWK Loan in the second quarter of 2019. We expect interest expense to fluctuate depending on the movement in LIBOR through the remainder of 2020 and the outstanding balance of our PMB Loan.

Income Tax Provision. We use a discrete year-to-date method in calculating quarterly provision for income taxes. Our provision for income taxes was a benefit of $19,000 for the three months ended March 31, 2020 as compared to a provision of $15,000 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 $6.0 million for the three months ended March 31, 2020 compared to a net loss of $4.9 million for the three months ended March 31, 2019.

Liquidity and Capital Resources

At March 31, 2020, we had approximately $1.8 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 $4.3 million at March 31, 2020 as compared to December 31, 2019 was primarily due to net cash used in operating activities of $4.1 million. The $4.1 million of net cash used in operating activities was primarily driven by our net loss of $6.0 million for the three months ended March 31, 2020.

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

	Three Months Ended
	March 31,
	2020			2019
Net cash flows used in operating activities	$	(4,134	)	$	(5,034	)
Net cash flows used in investing activities		(9	)		(8	)
Net cash flows (used in) provided by financing    activities		(117	)		3
Effect of exchange rate changes		(18	)		(49	)
Net change in cash, cash equivalents and restricted    cash	$	(4,278	)	$	(5,088	)

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 three months ended March 31, 2020 totaled $4.1 million and was primarily comprised of our net loss of $6.0 million, partially offset by non-cash adjustments for depreciation and amortization expenses of $0.3 million and stock-based compensation expenses of $0.7 million and our provision for bad debt of $0.9 million. The $1.4 million net increase in our operating assets and liabilities was primarily due to a $3.0 million decrease in accounts receivable primarily due to the impact of the COVID-19 pandemic on our revenues offset by an increase of  $1.2 million in inventory and a decrease in accounts payable of $1.5 million.

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Investing Activities

Cash used in investing activities for the three months ended March 31, 2020 were minimal. We expect cash flows from investing activities to remain consistent through the remainder of 2020.

Financing Activities

Net cash (used in) provided by financing activities for the three months ended March 31, 2020 decreased by approximately $0.1 million primarily due to the payment of the common stock offering costs remaining from 2019.

Effect of Exchange Rate

The effect of exchange rate changes on cash for the three months ended March 31, 2020 was $18,000 and primarily due to fluctuations between the U.S. Dollar and the Euro.

Future Liquidity Needs

As of March 31, 2020, we had negative working capital of approximately $3.7 million primarily due to the reclassification of our Term Loan from a long-term liability to short-term. . Our principal sources of liquidity as of March 31, 2020 consisted of approximately $1.8 million in cash, cash equivalents and restricted cash and $4.7 million of net accounts receivable and any availability under our credit facility with Pacific Mercantile Bank.

We have reported recurring losses from operations and have not generated cash from operations for the three years ended December 31, 2019 and the three months ended March 31, 2020. Our level of cash used in operations, the need for additional capital, and the uncertainties surrounding our ability to raise additional capital, raise substantial doubt about our ability to continue as a going concern.  Asa result of reduced sales due to the COVID-19 pandemic and actions taken to contain it, cash generated from our operations during the first half of 2020 will be less than we anticipated. There is no assurance that sales will return to normal levels during the second quarter of 2020 or at any time thereafter. 

Furthermore, 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 sell our 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. 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 field sales force and distributor relationships both domestically and internationally, forming strategic arrangements within the dental and medical industries, educating dental and medical patients as to the benefits of our advanced medical technologies, and reducing expenses.

Term Loan

On November 9, 2018, we entered into a five-year secured Credit Agreement (“Credit Agreement”) with SWK Funding LLC (“SWK”), pursuant to which we borrowed $12.5 million (“SWK Loan”). Our obligations under the Credit Agreement are secured by substantially all of our 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 second 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 Bank. In connection with the Credit Agreement, we issued warrants to SWK (the “SWK Warrants”) on November 9, 2018 to purchase up to 372,023 shares of BIOLASE common stock and on May 7, 2019, to purchase up to 115,175 shares of BIOLASE common stock. The SWK Warrants were immediately exercisable and expire 7 years after the applicable 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 BIOLASE common stock for the ten trading days immediately preceding the applicable issuance date.

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The Credit Agreement contains financial and non-financial covenants requiring us to, among other things, (i) maintain unencumbered liquid assets of no less than $1.5 million or (B) 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.

As of March 31, 2019, we were not in compliance with certain covenants in the Credit Agreement, as described in Note 9 to the consolidated financial statements included in Item 1 of this 10-Q, and in May 2019, SWK granted us a waiver of such covenants. On May 7, 2019, we 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 (i) adjust minimum revenue and EBITDA levels, (ii) require the us to have a shelf registration statement declared effective by the Securities and Exchange Commission before September 30, 2019, with a proposed maximum aggregate offering price of at least $10.0 million if we did not reach set minimum revenue levels for the three-month period ended September 30, 2019, and (iii) 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 we have obtained additional equity or debt funding of no less than $5.0 million. In connection with the amendment, we 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 to purchase BIOLASE common stock. In 2019, we borrowed the additional $2.5 million.

On September 30, 2019, we entered into the Second Amendment to 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 amends the Credit Agreement to provide for a 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 $5.0 million and with such other material terms and conditions acceptable to SWK in its commercially reasonable discretion. 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 such non-compliance through October 31, 2019, or earlier in the event that an additional equity or subordinated debt financing is consummated with gross proceeds of not less than $5.0 million, or in the event of a default under the Credit Agreement. The Second Amendment contains representations, warranties, covenants, releases, and conditions customary for a forbearance and credit agreement amendment of this type. In 2019 we obtained additional equity financing greater than $5.0 million.

On November 6, 2019, we agreed to further amend the Credit Agreement (the “Third Amendment”). Pursuant to the Third Amendment, SWK granted the us a waiver of our non-compliance with certain financial covenants in the Credit Agreement. Also pursuant to the Third Amendment, we 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, we consolidated the SWK Warrants issued to SWK on November 9, 2018 and May 7, 2019, and the exercise price was adjusted to $1.00.

As of December 31, 2019, we were not in compliance with our debt covenants under the Credit Agreement (as amended). In March 2020, we entered into a Fourth Amendment to the Credit Agreement. Under the Fourth Amendment, we obtained a waiver of our non-compliance with certain financial covenants contained in the Credit Agreement through March 31, 2020.  Also pursuant to the Fourth Amendment, we agreed to revise (i) the financial covenants to adjust minimum revenue and EBITDA levels and (ii) revise the financial covenants with respect to unencumbered liquid assets. In connection with the Fourth Amendment, the Company amended the exercise price of the SWK Warrants to $0.49 per share.

Public Offering of Common Shares and Private Placement of Unregistered Preferred Shares

On October 29, 2019, we consummated the sale of 7,820,000 shares of BIOLASE common stock at a price to the public of $0.5750 per share in an underwritten public offering and in addition, granted the underwriters a 30-day over-allotment option to purchase up to an additional 1,173,000 shares of BIOLASE common stock at the public offering price, less the underwriting discount.

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On October 29, 2019, we also sold to existinginvestors affiliated with Jack W. Schuler and Oracle Investment Management, Inc., 69,565 unregistered shares of our Series E Preferred Stock at a price of $57.50 per share in a concurrent private placement. Each share of preferred stock is automatically convertible into 100 shares of common stock at a conversion price equal to $0.5750 per share, subject to customary anti-dilution adjustments, at such time as BIOLASE increases the amount of its authorized common stock to permit the full conversion.

At the closing, we received approximately $4.2 million in net proceeds from the common stock offering, after deducting the underwriting discount, and approximately $4.0 million in gross proceeds from the concurrent private placement, resulting in total net proceeds from the offering and private placement of approximately $8.2 million.

On November 5, 2019, the underwriters exercised their over-allotment option to purchase an additional 1,173,000 shares of BIOLASE common stock at a share price of $0.5750 per share for approximately $0.6 million in net proceeds, after deducting the underwriting discount.

Line of Credit

On October 28, 2019, BIOLASE, Inc. 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”), secured by substantially all of the Company’s assets, with 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.

Our obligations under the Loan Agreement are secured by a security interest in substantially all of our property. No borrowings may be made under the Loan Agreement unless and until Exim Bank agrees to guarantee the PMB Loan and we have 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, we are 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 us to maintain unrestricted cash at Lender plus unused availability under the PMB Loan in an amount equal to at least the Burn Rate. “Burn Rate” means our net profit/net loss plus depreciation plus amortization plus stock-based compensation, measured on a trailing three month basis. In addition, the Loan Agreement contains customary affirmative and negative covenants for financings of its type (subject to customary exceptions).

The Loan Agreement provides that the occurrence of any of the following events (subject to applicable cure periods, if any) will constitute an event of default: payment default, loans in excess of the credit limit, breach of representation or warranty, covenant breach, incurrence of certain liens, certain events with respect to the collateral, cross-defaults to certain other indebtedness or obligations secured by liens, a Material Adverse Change (as defined in the Loan Agreement) or a breach of a material agreement that may reasonably result in a Material Adverse Change, final judgement in excess of a certain monetary threshold, certain events of bankruptcy or insolvency, any guarantee or pledge ceasing to be in effect, payment of certain subordinated debt, a Change in Control (as defined in the Loan Agreement), a change in our President, Chief Executive Officer, or Chief Financial Officer under certain circumstances, a change in two or more members of our Board of Directors within 90 days under certain circumstances, or any felony indictment of any of our directors, officers or significant stockholders. Upon the occurrence and during the continuation of an event of default, the Lender may exercise any remedies available to it, including accelerating the repayment of the PMB Loan.

As of March 31, 2020, we had approximately $3.0 million of unused availability under this facility, and in April 2020, we borrowed $3.0 million on this facility.

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Paycheck Protection Program Loan

On April 14, 2020, BIOLASE was granted a PPP Loan from Pacific Mercantile Bank in the aggregate amount of $2,980,000, pursuant to the Paycheck Protection Program under Division A, Title I of the CARES Act, which was enacted March 27, 2020.

The PPP Loan, which was in the form of a Note dated April 13, 2020 issued by BIOLASE, matures on April 13, 2022 and bears interest at a rate of 1.0% per annum, payable monthly commencing on November 1, 2020. The Note may be prepaid at any time prior to maturity with no prepayment penalties. Funds from the PPP Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020. We intend to use the entire Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the PPP Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.

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.

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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.

We identified a material weakness in internal control related to ineffective financial statement close process controls as they relate to the accounting for our Series E Convertible Preferred Stock. During our review of the consolidated financial statements as of December 31, 2019, we determined that the classification of the Series E Convertible Preferred Stock on the consolidated balance sheet was incorrect and that due to the fact that the Series E Convertible Preferred Stock is redeemable at the control of the stockholder, it should have been classified as mezzanine equity pursuant to the accounting guidance in Accounting Standards Codification Topic 480 – “Distinguishing Liabilities from Equity,” and not a component of permanent equity.  We believe that these control deficiencies were a result of a misinterpretation of the terms and conditions of the Certificate of Designations with respect to the Series E Convertible Preferred Stock Agreement which led to the misclassification. The error was corrected and the material weakness did not result in any misstatements to the consolidated financial statements, and the correction of the error did not result in any changes to previously released financial results. Based on this material weakness, the Company’s management concluded that at December 31, 2019, the Company’s internal control over financial reporting was not effective. As of March 31, 2020, the material weakness in internal controls had not been remediated.

Remediation

Management has been implementing and continues to implement measures designed to ensure that control deficiencies contributing to the material weakness are remediated and operate, such that these controls are designed, implemented, and operating effectively. The remediation actions include: (i) additional levels of review; (ii) additional training; and (iii) use of external consultants on highly technical accounting matters; and (iv) enhanced quarterly reporting on the remediation measures to the Audit Committee of the Board of Directors.  We believe that these actions will remediate the material weakness. The weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that the remediation of this material weakness will be completed prior to the end of fiscal 2020.

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PART II. OTHER INFORMATION

ITEM1. 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

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 March 31, 2020, BIOLASE received a deficiency letter from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market (“Nasdaq”) notifying BIOLASE that, based on the BIOLASE’s stockholders’ equity of $377,000 as of December 31, 2019, as reported in its Annual Report on Form 10-K for the year ended December 31, 2019, BIOLASE is no longer in compliance with the minimum stockholders’ equity requirement for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(b)(1), which requires listed companies to maintain stockholders’ equity of at least $2.5 million. BIOLASE has until May 15, 2020 to provide Nasdaq with a specific plan to achieve and sustain compliance with the foregoing listing requirement. If the Company’s plan to regain compliance is accepted, Nasdaq may grant an extension of up to 180 calendar days from the date of the letter for the Company to evidence compliance.

On December 3, 2019, we received a deficiency letter from the Listing Qualifications Department of The NASDAQ 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 pursuant to NASDAQ Listing Rule 5550(a)(2) (the “Bid Price Rule”). In accordance with NASDAQ rules,  we have been provided an initial period of 180 calendar days, or until June 1, 2020 (the “Compliance Date”), to regain compliance with the Bid Price Rule. If, at any time before the Compliance Date, the bid price for our common stock closes at $1.00 or more for a minimum of 10 consecutive business days, the Staff will provide written notification to us that it complies with the Bid Price Rule.

If we do not regain compliance with the Bid Price Rule by the Compliance Date, we may be eligible for an additional 180 calendar day compliance period. To qualify, we would need to provide written notice of our intention to cure the deficiency during the additional compliance period, by effecting a reverse stock split, if necessary, provided that it meets the continued listing requirement for the market value of publicly held shares and all other initial listing standards, with the exception of the bid price requirement.

If we do not regain compliance with the Bid Price Rule by the Compliance Date and are not eligible for an additional compliance period at that time, the Staff will provide written notification to us that our common stock may be delisted. At that time, we may appeal the Staff’s delisting determination to a NASDAQ Listing Qualifications Panel.

We intend to monitor the closing bid price of our common stock and may, if appropriate, consider available options to regain compliance with the Bid Price Rule. However, we may not regain compliance with the Bid Price Rule or any of the other NASDAQ continued listing requirements in the future.

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 NASDAQ, the announcement or implementation of such a reverse stock split could negatively affect the price of our common stock.

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Non-compliance with the objective and subjective criteria for the Paycheck Protection Program loan could have a material adverse effect on our business.  

On April 14, 2020, BIOLASE availed of PPP Loan from Pacific Mercantile Bank in the aggregate amount of $2,980,000, pursuant to the Paycheck Protection Program under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The PPP Loan, which was in the form of a Note dated April 13, 2020 issued by the Company, matures on April 13, 2022 and bears interest at a rate of 1.0% per annum, payable monthly commencing on November 1, 2020. The Note may be prepaid by the Company at any time prior to maturity with no prepayment penalties. Funds from the PPP Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020. The Company intends to use the entire Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the PPP Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act

On April 23, 2020, the Secretary of the U.S. Department of the Treasury stated that the SBA will perform a full review of any PPP loan over $2.0 million before forgiving the loan. In order to apply for the PPP Loan, we were required to certify, among other things, that the current economic uncertainty made the PPP Loan request necessary to support our ongoing operations. We made this certification in good faith after analyzing, among other things, the maintenance of our entire workforce, notwithstanding certain obvious “work-from-home” limitations associated with the nature of our business. We also took into account our need for additional funding to continue operations, and our ability to currently access alternative forms of capital in the current market environment. Following this analysis, we believe that we satisfied all eligibility criteria for the PPP Loan, and that our receipt of the PPP Loan is consistent with the objectives of the PPP of the CARES Act. If it is later determined that we were ineligible to receive the PPP Loan, we may be required to repay the PPP Loan in its entirety and/or be subject to additional penalties and adverse publicity, which could have a material adverse effect on our business, results of operations, and financial condition.

ITEM 5. OTHER INFORMATION

Nasdaq Deficiency Letter

On March 31, 2020, BIOLASE received a deficiency letter from the Listing Qualifications Department of the Nasdaq Stock Market notifying BIOLASE that, based on the BIOLASE’s stockholders’ equity of $377,000 as of December 31, 2019, as reported in its Annual Report on Form 10-K for the year ended December 31, 2019, BIOLASE is no longer in compliance with the minimum stockholders’ equity requirement for continued listing on the Nasdaq Capital Market under Nasdaq Listing Rule 5550(b)(1), which requires listed companies to maintain stockholders’ equity of at least $2.5 million. BIOLASE has until May 15, 2020 to provide Nasdaq with a specific plan to achieve and sustain compliance with the foregoing listing requirement. If the Company’s plan to regain compliance is accepted, Nasdaq may grant an extension of up to 180 calendar days from the date of the letter for the Company to evidence compliance.

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ITEM 6. EXHIBITS

			Incorporated by Reference
Exhibit	Description	Filed Herewith	Form	Period Ending/Date of Report	Exhibit	Filing Date
3.1.1	Restated Certificate of Incorporation, including, (i) Certificate of Designations, Preferences and Rights of 6% Redeemable Cumulative Convertible Preferred Stock of the Registrant; (ii) Certificate of Designations, Preferences and Rights of Series A 6% Redeemable Cumulative Convertible Preferred Stock of the Registrant; (iii) Certificate of Correction Filed to Correct a Certain Error in the Certificate of Designation of the Registrant; and (iv) Certificate of Designations of Series B Junior Participating Cumulative Preferred Stock of the Registrant.		S-1, Amendment No. 1	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
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

44

			Incorporated by Reference
Exhibit	Description	Filed Herewith	Form	Period Ending/Date of Report	Exhibit	Filing Date
4.1	Form of Warrant Issued on November 7, 2014		8-K	11/03/2014	99.1	11/07/2014
4.2	Form of Warrant issued on August 8, 2016		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 September 27, 2018 to SWK Funding, LLC		10-Q	09/30/2019	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	05/10/2019
4.8	Consolidated Amended and Restated Warrant to Purchase Common Stock, dated November 9, 2019, by and between the Registrant and SWK Funding LLC		10-Q	09/30/2019	4.8	11/08/2019
10.7	Confidential Settlement Agreement, dated January 25, 2019, by and between the Registrant and CAO, Group, Inc.		10-K	12/31/2018	10.28	03/08/19
10.8	Promissory Note dated April 13, 2020, by and between the Registrant and Pacific Mercantile Bank	X
10.9	Letter Agreement Amending Employment with Todd Norbe, dated April 12, 2020	*
10.10	Letter Agreement Amending Employment with John Beaver, dated April 12, 2020	*
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended	**
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended	**

45

			Incorporated by Reference
Exhibit	Description	Filed Herewith	Form	Period Ending/Date of Report	Exhibit	Filing Date
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 March 31, 2020, 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.

46

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)
May 8, 2020	By:	/s/ Todd A. Norbe
Date		Todd A. Norbe
		President and Chief Executive Officer
				(Principal Executive Officer)
May 8, 2020	By:	/s/ JOHN R. BEAVER
Date		John R. Beaver
		Executive Vice President and Chief Financial Officer
			(Principal Financial Officer and
			Principal Accounting Officer)

47

EX-10.8

Ex. 10.8

U.S. Small Business Administration   NOTE

SBA Loan #	61646970-06
SBA Loan Name	Biolase, Inc.
Date	April 13, 2020
Loan Amount	$2,980,000.00
Interest Rate	1% Fixed
Borrower	Biolase, Inc.
Operating Company	NA
Lender	Pacific Mercantile Bank

1.	PROMISE TOPAY:
	In return for the Loan, Borrower promises to pay to the order of Lender the amount of
	Two Million Nine Hundred Eighty Thousand and 00/100	Dollars,
	interest on the unpaid principal balance, and all other amounts required by this Note.
2.	DEFINITIONS:
	“Collateral” means any property taken as security for payment of this Note or any guarantee of this Note.
	“Guarantor” means each person or entity that signs a guarantee of payment of this Note.
	“Loan” means the loan evidenced by this Note.
	“Loan Documents” means the documents related to this loan signed by Borrower, any Guarantor, or anyone who pledges collateral.
	“SBA” means the Small Business Administration, an Agency of the United States of America.

Page 1/6

3.	PAYMENTTERMS:
	Borrower must make all payments at the place Lender designates. The payment terms for this Note are:
	Borrower must pay interest-only monthly payments of accrued interest at a fixed interest rate of one percent (1.00%) for the term of two years. Principal and accrued interest is due and payable at maturity.
	Borrower must pay one payment of interest only on the disbursed principal balance one month from the month of initial disbursement on this Note; payment must be made on the first calendar day in the month it is due.
	Borrower must pay interest payments beginning two months from the month of initial disbursement on this Note; payments must be made on the first calendar day in the months they are due.
	Borrower will not have to make any payments for six months following the date of disbursement of the loan. Interest will accrue during this six-month deferment and will be due and payable at maturity.
	Section 1102 of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) “Paycheck Protection Program” (“PPP”) provides for the forgiveness of up to the full principal amount of the loan and any accrued interest, if the Borrower uses all of the loan proceeds for forgivable purposes, as defined in the CARES Act and implementing regulations, over the eight week period following the date of the loan.
	Loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities, however, not more than twenty-five percent (25%) of the forgiven amount may be for non-payroll costs.
	If Borrower uses PPP loan proceeds for unauthorized purposes, Borrower will be obligated to repay those amounts plus accrued interest at maturity under the terms and conditions of this Note.
	All remaining principal and accrued interest is due and payable two (2) years from date of initial disbursement.

Page 2/6

4.	DEFAULT:
	Borrower is in default under this Note if Borrower does not make a payment when due under this Note, or if Borrower or Operating Company:
	A.	Fails to do anything required by this Note and other LoanDocuments;
	B.	Defaults on any other loan withLender;
	C.	Does not preserve, or account to Lender’s satisfaction for, any of the Collateral or itsproceeds;
	D.	Does not disclose, or anyone acting on their behalf does not disclose, any material fact to Lender orSBA;
	E.	Makes, or anyone acting on their behalf makes, amaterially false or misleading representation to Lender or SBA;
	F.	Defaults on any loan or agreement with another creditor, if Lender believes the default may materially affect Borrower ’s ability to pay thisNote;
	G.	Fails to pay any taxes whendue;
	H.	Becomes the subject of a proceeding under any bankruptcy or insolvencylaw;
	I.	Has a receiver or liquidator appointed for any part of their business orproperty;
	J.	Makes an assignment for the benefit ofcreditors;
	K.	Has any adverse change in financial condition or business operation that Lender believes may materially affect Borrower ’s ability to pay thisNote;
	L.	Reorganizes, merges, consolidates, or otherwise changes ownership or business structure without Lender ’s prior written consent;or
	M.	Becomes the subject of a civil or criminal action that Lender believes may materially affect Borrower ’s ability to pay thisNote.
5.	LENDER ’S RIGHTS IF THERE IS ADEFAULT:
	Without notice or demand and without giving up any of its rights, Lender may:
	A.	Require immediate payment of all amounts owing under thisNote;
	B.	Collect all amounts owing from any Borrower orGuarantor;
	C.	File suit and obtainjudgment;
	D.	Take possession of any Collateral;or
	E.	Sell, lease, or otherwise dispose of, any Collateral at public or private sale, with or withoutadvertisement.
6.	LENDER ’S GENERALPOWERS:
	Without notice and without Borrower ’s consent, Lender may:
	A.	BidonorbuytheCollateralatitssaleorthesaleofanotherlienholder,atanypriceitchooses;
	B.	Incur expenses to collect amounts due under this Note, enforce the terms of this Note or any other Loan Document, and preserve or dispose of the Collateral. Among other things, the expenses may include payments for property taxes, prior liens, insurance, appraisals, environmental remediation costs, and reasonable attorney ’s fees and costs. If Lender incurs such expenses, it may demand immediate repayment from Borrower or add the expenses to the principalbalance;
	C.	Release anyone obligated to pay thisNote;
	D.	Compromise, release, renew, extend or substitute any of the Collateral;and
	E.	Take any action necessary to protect the Collateral or collect amounts owing on thisNote.

Page 3/6

7.	WHEN FEDERAL LAWAPPLIES:
	When SBA is the holder, this Note will be interpreted and enforced under federal law, including SBA regulations. Lender or SBA may use state or local procedures for filing papers, recording documents, giving notice, foreclosing liens, and other purposes. By using such procedures, SBA does not waive any federal immunity from state or local control, penalty, tax, or liability. As to this Note, Borrower may not claim or assert against SBA any local or state law to deny any obligation, defeat any claim of SBA, or preempt federal law.
8.	SUCCESSORS ANDASSIGNS:
	Under this Note, Borrower and Operating Company include the successors of each, and Lender includes its successors and assigns.
9.	GENERALPROVISIONS:
	A.	All individuals and entities signing this Note are jointly and severallyliable.
	B.	Borrower waives all suretyshipdefenses.
	C.	Borrower must sign all documents necessary at any time to comply with the Loan Documents and to enable Lender to acquire, perfect, or maintain Lender ’s liens onCollateral.
	D.	Lender may exercise any of its rights separately or together, as many times and in any order it chooses. Lender may delay or forgo enforcing any of its rights without giving up any ofthem.
	E.	Borrowermaynot useanoralstatementofLenderorSBAtocontradictor alterthewrittentermsofthis Note.
	F.	If any part of this Note is unenforceable, all other parts remain ineffect.
	G.	To the extent allowed by law, Borrower waives all demands and notices in connection with this Note, including presentment, demand, protest, and notice of dishonor. Borrower also waives any defenses based upon any claim that Lender did not obtain any guarantee; did not obtain, perfect, or maintain a lien upon Collateral; impaired Collateral; or did not obtain the fair market value of Collateral at asale.

Page 4/6

10. STATE-SPECIFICPROVISIONS:

Page 5/6

11.	BORROWER ’S NAME(S) ANDSIGNATURE(S):
	By signing below, each individual or entity becomes obligated under this Note as Borrower.
	BIOLASE, INC
	By:	/s/ John R. Beaver
		John R. Beaver,EVP/CFO

Page 6/6

EX-10.9

Ex 10.9

Biolase, Inc.
4 Cromwell
Irvine, California 92618

April 12, 2020

Todd Norbe

c/o Biolase, Inc.

4 Cromwell

Irvine, California 92618 

Re: Amendment to Employment Agreement

Dear Mr. Norbe:

This letter agreement shall serve to amend that certain Employment Agreement, dated August 7, 2018 (the “Employment Agreement”), by and between Biolase, Inc. (the “Company”) and Todd Norbe. Capitalized terms used herein by not defined shall have those means ascribed to them in the Employment Agreement.

Effective as of April 12, 2020, the parties hereby agree as follows:

1.In light of Executive’s voluntary offer to reduce his base salary by forty percent (40.0%), in connection with the Company’s COVID-19 cost reduction measures, Section 3 of the Employment Agreement is hereby amended such that the provision that Executive be paid “at the annual rate of not less than $400,000.00 per annum” shall read “at the annual rate of not less than $240,000.00 per annum” for a temporary period of time running from the date hereof, through the date that management presents, and the Company’s Board of Directors approves, the return-to-work plan wherein the Company’s furlough is fully lifted. In addition, the Company agrees to make every effort during the 2020 fiscal year, to the extent possible depending on the financial condition and performance of the Company, to keep Executive whole in connection with the Employment Agreement as it existed prior to the Amendment.

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

Ex 10.9

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

Very truly yours,

BIOLASE, INC.

By: /s/ Jonathan T. Lord

Name: Jonathan T. Lord

Chair: Chairman of the Board of Directors

ACKNOWLEDGED AND AGREED:

/s/ Todd Norbe

Todd Norbe

EX-10.10

Ex 10.10

Biolase, Inc.
4 Cromwell
Irvine, California 92618

April 12, 2020

John R. Beaver

c/o Biolase, Inc.

4 Cromwell

Irvine, California 92618 

Re: Amendment to Employment Agreement

Dear Mr. Beaver:

This letter agreement shall serve to amend that certain Employment Agreement, dated September 30, 2017 (the “Employment Agreement”), by and between Biolase, Inc. (the “Company”) and John R. Beaver. Capitalized terms used herein by not defined shall have those means ascribed to them in the Employment Agreement.

Effective as of April 12, 2020, the parties hereby agree as follows:

1.In light of Executive’s voluntary offer to reduce his base salary by forty percent (40.0%), in connection with the Company’s COVID-19 cost reduction measures, Section 3 of the Employment Agreement is hereby amended such that the provision that Executive be paid “at the annual rate of not less than $325,000.00 per annum” shall read “at the annual rate of not less than $195,000.00 per annum” for a temporary period of time running from the date hereof, through the date that management presents, and the Company’s Board of Directors approves, the return-to-work plan wherein the Company’s furlough is fully lifted. In addition, the Company agrees to make every effort during the 2020 fiscal year, to the extent possible depending on the financial condition and performance of the Company, to keep Executive whole in connection with the Employment Agreement as it existed prior to the Amendment.

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

Ex 10.10

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

Very truly yours,

BIOLASE, INC.

By: /s/ Jonathan T. Lord

Name: Jonathan T. Lord

Chair: Chairman of the Board of Directors

ACKNOWLEDGED AND AGREED:

John R. Beaver

John R. Beaver

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 March 31, 2020 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: May 8, 2020	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 March 31, 2020 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: May 8, 2020	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 March 31, 2020 (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: May 8, 2020	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 March 31, 2020 (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: May 8, 2020	By:	/s/ JOHN R. BEAVER
		John R. Beaver
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

XML

Segment Information (Tables)

3 Months Ended

Mar. 31, 2020

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
	March 31,
	2020		2019
United States	$	3,129	$	6,116
International		1,654		4,210
	$	4,783	$	10,326

Summary of Property, Plant and Equipment by Geographic Location

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

	March 31,		December 31,
	2020		2019
United States	$	742	$	908
International		275		285
	$	1,017	$	1,193

XML

Summary of Opening and Closing Balances of Contract Liabilities (Detail) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Revenue Recognition [Abstract]
Undelivered elements (training, installation, product and support services)	$ 476	$ 559
Extended warranty contracts	1,896	2,063
Total deferred revenue	2,372	2,622
Less long-term portion of deferred revenue	390	385
Deferred revenue — current	$ 1,982	$ 2,237

XML

Schedule of Revenue and Percentages of Revenue Sales by Product Line (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Disaggregation Of Revenue [Line Items]
Net revenue	$ 4,783	$ 10,326
Product Concentration Risk | Sales Revenue, Net
Disaggregation Of Revenue [Line Items]
Percentage of sales	100.00%	100.00%
Laser systems
Disaggregation Of Revenue [Line Items]
Net revenue	$ 2,051	$ 5,964
Laser systems | Product Concentration Risk | Sales Revenue, Net
Disaggregation Of Revenue [Line Items]
Percentage of sales	42.90%	57.80%
Imaging systems
Disaggregation Of Revenue [Line Items]
Net revenue		$ 552
Imaging systems | Product Concentration Risk | Sales Revenue, Net
Disaggregation Of Revenue [Line Items]
Percentage of sales		5.30%
Consumables and other
Disaggregation Of Revenue [Line Items]
Net revenue	$ 1,472	$ 2,112
Consumables and other | Product Concentration Risk | Sales Revenue, Net
Disaggregation Of Revenue [Line Items]
Percentage of sales	30.80%	20.50%
Services
Disaggregation Of Revenue [Line Items]
Net revenue	$ 1,260	$ 1,695
Services | Product Concentration Risk | Sales Revenue, Net
Disaggregation Of Revenue [Line Items]
Percentage of sales	26.30%	16.40%
License fees and royalties
Disaggregation Of Revenue [Line Items]
Net revenue		$ 3

XML

Commitments and Contingencies

3 Months Ended

Mar. 31, 2020

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 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-month period ended March 31, 2019, the Company recorded an additional loss on patent litigation of $0.2 million which represented the change in fair value of the restricted stock to be issued to CAO at March 31, 2019. Subsequent to March 31,2019, the Company reversed the additional loss commensurate with the fluctuations in the Company’s share price. As of March 31, 2020 and December 31, 2019, the accrued liability relating to this agreement was $1.0 million.

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Intangible Assets and Goodwill

3 Months Ended

Mar. 31, 2020

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. Due to the uncertainty surrounding the impact of COVID-19 on the Company’s business, the Company performed an assessment at March 31, 2020 which resulted in no impairment required.  Beyond the impact of COVID-19, 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 March 31, 2020 and December 31, 2019, the Company had goodwill (indefinite life) of $2.9 million. As of March 31, 2020 and December 31, 2019, all intangible assets have been fully amortized and no amortization expense was recognized during the three months ended March 31, 2020 and 2019.

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Consolidated Statements Of Redeemable Preferred Stock and Stockholders' (Deficit) Equity (Unaudited) - USD ($) $ in Thousands	Total	Redeemable Preferred Stock	Common Stock and Additional Paid-in Capital	Accumulated Other Comprehensive Loss	Accumulated Deficit
Beginning balance at Dec. 31, 2018			$ 228,451	$ (670)	$ (216,692)
Issuance of common stock upon exercise of options			3
Settlement of liability awards			202
Stock-based compensation expense			634
Other comprehensive loss				(55)
Net loss	$ (4,900)				(4,900)
Ending balance at Mar. 31, 2019	6,973		229,290	(725)	(221,592)
Total redeemable preferred stock, beginning balance at Dec. 31, 2019	3,965	$ 3,965
Issuance of Redeemable preferred stock
Total redeemable preferred stock, ending balance at Mar. 31, 2020	3,965	$ 3,965
Beginning balance at Dec. 31, 2019	377		235,625	(701)	(234,547)
Settlement of liability awards			151
Stock-based compensation expense			640
Other comprehensive loss				(18)
Net loss	(6,006)				(6,006)
Ending balance at Mar. 31, 2020	$ (4,856)		$ 236,416	$ (719)	$ (240,553)

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Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2020	May 04, 2020
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1
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 Common Stock, Shares Outstanding		31,743,102
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity Interactive Data Current	Yes
Title of 12(b) Security	Common stock at par value $0.001 per share
Security Exchange Name	NASDAQ
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
Document Transition Report	false
Document Quarterly Report	true

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Revenue Recognition

3 Months Ended

Mar. 31, 2020

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 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 74% and 84% of net revenue for the three months ended March 31, 2020 and March 31, 2019, respectively. The majority of the Company’s revenue recognized at a point in time is for the sale 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 26% and 16% of net revenue for the three months ended March 31, 2020 and March 31, 2019, 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 $0.5 million and $0.6 million as of March 31, 2020 and December 31, 2019, 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 doubtful accounts is based on an analysis of customer accounts and the Company’s historical experience with accounts receivable write-offs.

Contract Liabilities

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

	March 31,		December 31,
	2020		2019
Undelivered elements (training, installation, product    and support services)	$	476	$	559
Extended warranty contracts		1,896		2,063
Total deferred revenue		2,372		2,622
Less long-term portion of deferred revenue		390		385
Total deferred revenue — long -term		390		385
Deferred revenue — current	$	1,982	$	2,237

The balance of contract assets was immaterial as the Company did not have a significant amount of uninvoiced receivables at March 31, 2020 and December 31, 2019.

The amount of revenue recognized during the three months ended March 31, 2020 that was included in the opening contract liability balance related to undelivered elements was $0.1 million and related to extended warranty contracts was $1.0 million.

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
	March 31,
	2020		2019
United States	$	3,129	$	6,116
International		1,654		4,210
	$	4,783	$	10,326

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

	Three Months Ended
	March 31,
	2020		2019
Revenue recognized over time	$	1,260	$	1,698
Revenue recognized at a point in time		3,523		8,628
Total	$	4,783	$	10,326

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

	Three Months Ended
	March 31,
	2020		2019
End-customer	$	2,340	$	6,346
Distributors		2,443		3,980
	$	4,783	$	10,326

The Company acts as the principal in all its imaging equipment distribution sales. The Company takes possession and control of the equipment before they are sold and transferred to the customer. 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 revenue and percentages of revenue of the Company’s sales by product line were as follows for the periods indicated:

	Three Months Ended
	March 31,
	2020				2019
Laser systems	$	2,051	42.9	%	$	5,964	57.8	%
Imaging systems		—	—	%		552	5.3	%
Consumables and other		1,472	30.8	%		2,112	20.5	%
Services		1,260	26.3	%		1,695	16.4	%
License fees and royalties		—	—	%		3	—	%
Total revenue	$	4,783	100.0	%	$	10,326	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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Leases - Information related to Right-of-use Assets and Liabilities (Detail) $ in Thousands	3 Months Ended
	Mar. 31, 2020 USD ($)
Leases [Abstract]
Cash paid for operating lease liabilities	$ 192
Weighted-average discount rate	0.00%

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Debt - Summary of Principal Outstanding and Unamortized Discount (Detail) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Debt Disclosure [Abstract]
Term loan	$ 15,000	$ 15,000
Discount and debt issuance costs on term loan	(1,438)	(1,534)
Total	$ 13,562	$ 13,466

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Intangible Assets and Goodwill - Additional Information (Detail) - USD ($)	3 Months Ended		6 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Jun. 30, 2019	Dec. 31, 2019
Goodwill And Intangible Assets Disclosure [Abstract]
Intangible assets and goodwill impairment			$ 0
Goodwill	$ 2,926,000			$ 2,926,000
Amortization expense	$ 0	$ 0

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Concentrations - Additional Information (Detail) - Product Concentration Risk - Customer	3 Months Ended		12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Sales Revenue, Net
Concentration Risk [Line Items]
Number of customers which represented more than 10% of the Company's revenue	0	0
Concentration Risk Percentage	100.00%	100.00%
Account Receivable
Concentration Risk [Line Items]
Number of customers which represented more than 10% of the Company's accounts receivable	1		1
Minimum | Sales Revenue, Net
Concentration Risk [Line Items]
Concentration Risk Percentage	10.00%	10.00%
Minimum | Account Receivable
Concentration Risk [Line Items]
Concentration Risk Percentage	10.00%		10.00%

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Segment Information - Additional Information (Detail) - Sales Revenue, Net - Customer	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Customer Concentration Risk | United States
Segment Reporting Information [Line Items]
Percentage of sales	65.00%
Customer Concentration Risk | International
Segment Reporting Information [Line Items]
Percentage of sales	35.00%
Geographic Concentration Risk | International
Segment Reporting Information [Line Items]
Number of customers which represented more than 10% of the Company's revenue	0	0

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Classification of Compensation Expense Associated with Share-Based Payments (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Allocated Share-based Compensation Expense	$ 719	$ 757
Cost of Revenue
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Allocated Share-based Compensation Expense	51	82
Sales and Marketing
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Allocated Share-based Compensation Expense	210	160
General and Administrative
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Allocated Share-based Compensation Expense	425	441
Engineering and Development
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Allocated Share-based Compensation Expense	$ 33	$ 74

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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
	Mar. 31, 2020	Mar. 31, 2019
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Proceeds from stock options exercised		$ 3
Weighted-average fair value of options granted during period	$ 0.54	$ 1.53
Total fair value of shares vested during the period	$ 67	$ 342

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Inventory - Additional Information (Detail) - USD ($) $ in Millions	Mar. 31, 2020	Dec. 31, 2019
Inventory Disclosure [Abstract]
Inventory reduced by estimate for excess and obsolete amount	$ 1.3	$ 1.3

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Leases (Tables)

3 Months Ended

Mar. 31, 2020

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):

	Three Months Ended,
	March 31, 2020
Cash paid for operating lease liabilities	$	192
Right-of-use assets obtained in exchange for new operating    lease obligations		—
Weighted-average remaining lease term		—
Weighted-average discount rate		0.0	%

Schedule of Maturities of Lease Liabilities

Maturities of lease liabilities as of March 31, 2020 for leases that have commenced were as follows (in thousands):

Due in 12 month period ended March 31,
2020	$	138
2021		7
Thereafter		—
	$	145
Less imputed interest		(5	)
Total lease liabilities	$	140
Current operating lease liabilities		140
Non-current lease liabilities		—
Total lease liabilities	$	140

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

Future minimum rental commitments under lease agreements, as of March 31, 2020, with non-cancelable terms greater than one year for each of the years ending December 31 are as follows (in thousands):

	Year Ended
	December 31,
2020 (nine months)	$	217
2021		448
2022		481
2023		492
2024		503
2025 and thereafter		462
Total future minimum lease obligations	$	2,603

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Inventory (Tables)

3 Months Ended

Mar. 31, 2020

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):

	March 31,		December 31,
	2020		2019
Raw materials	$	4,465	$	3,689
Work-in-process		1,475		1,064
Finished goods		6,252		6,242
Inventory	$	12,192	$	10,995

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Subsequent Event

3 Months Ended

Mar. 31, 2020

Subsequent Events [Abstract]

Subsequent Event

NOTE 15—SUBSEQUENT EVENT

Paycheck Protection Program Loan

On April 14, 2020, Biolase, Inc., was granted a loan from Pacific Mercantile Bank in the aggregate amount of $2,980,000, pursuant to the Paycheck Protection Program under Division A, Title I of the CARES Act, which was enacted March 27, 2020.

The PPP Loan, which was in the form of a Note dated April 13, 2020 issued by the Company, matures on April 13, 2022 and bears interest at a rate of 1.0% per annum, payable monthly commencing on November 1, 2020. The Note may be prepaid by the Company at any time prior to maturity with no prepayment penalties. Funds from the PPP Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020. The Company intends to use the entire Loan amount for qualifying expenses. Under the terms of the PPP, amounts spent on authorized purchases over eight weeks after receiving the loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.

The application for these funds requires the Company to, in good faith, certify that the current economic uncertainty made the loan request necessary to support the ongoing operations of the Company. This certification further requires the Company to take into account our current business activity and our ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. The receipt of these funds, and the forgiveness of the loan attendant to these funds, is dependent on the Company having initially qualified for the loan and qualifying for the forgiveness of such loan based on our future adherence to the forgiveness criteria.

Revolving Credit Facility

In April 2020, the Company borrowed $3.0 million under the PMB Loan.

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Concentrations - Summary of Net Revenue from Various Products (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Concentration Risk [Line Items]
Net revenue	$ 4,783	$ 10,326
Product Concentration Risk | Sales Revenue, Net
Concentration Risk [Line Items]
Percentage of sales	100.00%	100.00%
Laser systems
Concentration Risk [Line Items]
Net revenue	$ 2,051	$ 5,964
Laser systems | Product Concentration Risk | Sales Revenue, Net
Concentration Risk [Line Items]
Percentage of sales	42.90%	57.80%
Imaging systems
Concentration Risk [Line Items]
Net revenue		$ 552
Imaging systems | Product Concentration Risk | Sales Revenue, Net
Concentration Risk [Line Items]
Percentage of sales		5.30%
Consumables and other
Concentration Risk [Line Items]
Net revenue	$ 1,472	$ 2,112
Consumables and other | Product Concentration Risk | Sales Revenue, Net
Concentration Risk [Line Items]
Percentage of sales	30.80%	20.50%
Services
Concentration Risk [Line Items]
Net revenue	$ 1,260	$ 1,695
Services | Product Concentration Risk | Sales Revenue, Net
Concentration Risk [Line Items]
Percentage of sales	26.30%	16.40%
License fees and royalties
Concentration Risk [Line Items]
Net revenue		$ 3

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Commitments and Contingencies - Additional Information (Detail) - USD ($)		1 Months Ended	3 Months Ended		12 Months Ended
	Jan. 25, 2019	Jan. 31, 2019	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2018	Dec. 31, 2019
Commitment And Contingencies [Line Items]
Contingent loss on patent litigation settlement				$ (190,000)
Accrued liability			$ 4,079,000			$ 4,744,000
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 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 loss on patent litigation settlement					$ (1,500,000)
Payment for litigation settlement in cash		$ 500,000		$ 200,000
Accrued liability			$ 1,000,000			$ 1,000,000

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Summary of Property, Plant, and Equipment (Detail) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Property Plant And Equipment [Line Items]
Property, plant, and equipment gross, excluding land	$ 10,354	$ 10,353
Accumulated depreciation and amortization	(9,496)	(9,322)
Property, plant, and equipment, net before land	858	1,031
Land	159	162
Property, plant, and equipment, net	1,017	1,193
Building
Property Plant And Equipment [Line Items]
Property, plant, and equipment gross, excluding land	205	209
Leasehold Improvements
Property Plant And Equipment [Line Items]
Property, plant, and equipment gross, excluding land	2,004	2,004
Equipment and Computers
Property Plant And Equipment [Line Items]
Property, plant, and equipment gross, excluding land	7,477	7,479
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	$ 34	$ 27

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Assumptions Used in Estimating Fair Value of Stock Options Granted (Detail)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Share Based Compensation Arrangement By Share Based Payment Award Fair Value Assumptions And Methodology [Abstract]
Expected term	5 years 10 months 24 days	6 years 1 month 6 days
Volatility	82.20%	86.20%
Risk-free interest rate	1.25%	2.64%

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Summary of Unvested Restricted Stock Units (Detail) - Restricted Stock Units (RSUs)	3 Months Ended
	Mar. 31, 2020 $ / shares shares
Shares
Beginning Balance | shares	3,564,000
Granted | shares	20,000
Vested | shares	(416,000)
Forfeited or cancelled | shares	(840,000)
Ending Balance | shares	2,328,000
Weighted Average Grant Date Fair Value
Unvested RSUs at December 31, 2019 | $ / shares	$ 1.68
Granted | $ / shares	0.38
Vested | $ / shares	0.67
Forfeited or cancelled | $ / shares	1.96
Unvested RSUs at March 31, 2020 | $ / shares	$ 1.63

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Redeemable Preferred Stock and Stockholders' (Deficit) Equity (Tables)

3 Months Ended

Mar. 31, 2020

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
	March 31,
	2020		2019
Cost of revenue	$	51	$	82
Sales and marketing		210		160
General and administrative		425		441
Engineering and development		33		74
	$	719	$	757

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
	March 31,
	2020			2019
Expected term	5.9 years			6.1 years
Volatility		82.2	%		86.2	%
Annual dividend per share	$	—		$	—
Risk-free interest rate		1.25	%		2.64	%

Summary of Option Activity

A summary of option activity for the three months ended March 31, 2020 is as follows (in thousands, except per share data):

				Weighted		Weighted Average Remaining
				Average		Contractual		Aggregate
	Shares			Exercise Price		Term (Years)		Intrinsic Value(1)
Options outstanding, December 31, 2019		1,287		$	5.77			$	—
Granted at fair market value		20		$	0.77
Exercised		—		$	—
Forfeited, cancelled, or expired		(32	)	$	8.87
Options outstanding at March 31, 2020		1,275		$	5.61		5.68	$	—
Options exercisable at March 31, 2020		1,061		$	6.35		5.11	$	—
Vested options expired during the quarter    ended March 31, 2020		17		$	13.2

(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 three months ended March 31, 2020 is as follows (in thousands, except per share data):

				Weighted
				Average Grant
	Shares			Date Fair Value
Unvested options at December 31, 2019		254		$	1.44
Granted		20		$	0.54
Vested		(47	)	$	1.63
Forfeited or cancelled		(14	)	$	2.61
Unvested options at March 31, 2020		213		$	1.25

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
	March 31,
	2020		2019
Proceeds from stock options exercised	$	—	$	3
Tax benefit related to stock options exercised (1)	N/A		N/A
Intrinsic value of stock options exercised (2)	$	—	$	—
Weighted-average fair value of options granted during period	$	0.54	$	1.53
Total fair value of shares vested during the period	$	67	$	342

(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 strike price of the stock on the date of grant.

Summary of Unvested Restricted Stock Units

A summary of unvested RSU activity for the three months ended March 31, 2020 is as follows (in thousands, except per share amounts):

				Weighted
				Average Grant
	Shares			Date Fair Value
Unvested RSUs at December 31, 2019		3,564		$	1.68
Granted		20		$	0.38
Vested		(416	)	$	0.67
Forfeited or cancelled		(840	)	$	1.96
Unvested RSUs at March 31, 2020		2,328			1.63

Summary of Warrant Activity

The Company issues warrants to acquire shares of the Company’s common stock as approved by the Board. A summary of warrant activity for the three months ended March 31, 2020 is as follows (in thousands, except exercise price amounts):

			Weighted
			Average
	Shares		Exercise Price
Warrants outstanding, December 31, 2019		2,083	$	6.12
Granted or Issued		—	$	—
Exercised		—	$	—
Forfeited, cancelled, or expired		—	$	—
Warrants outstanding at March 31, 2020		2,083	$	5.96
Warrants exercisable at March 31, 2020		2,083	$	5.96
Vested warrants expired during the quarter    ended March 31, 2020		—	$	—

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Income Taxes

3 Months Ended

Mar. 31, 2020

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 months ended March 31, 2020 and 2019. 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 months ended March 31, 2020 and March 31, 2019, the Company recorded an income tax benefit of $19,000 and a provision of $15,000, respectively, resulting in an effective tax rate of 0.2% and 0.3%, respectively. The income tax provisions for the three months ended March 31, 2020 and 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)

3 Months Ended

Mar. 31, 2020

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):

	March 31,			December 31,
	2020			2019
Term loan	$	15,000		$	15,000
Discount and debt issuance costs on term loan		(1,438	)		(1,534	)
Total	$	13,562		$	13,466

Summary of Future Minimum Principal and Interest Payments

The future minimum principal and interest payments as of March 31, 2020 are as follows (in thousands):

	Principal		Interest (1)
2020		—		1,388
2021		2,100		1,793
2022		2,800		1,472
2023		10,100		2,455
Total future payments	$	15,000	$	7,108
(1) estimated using LIBOR rates as at March 31, 2020

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Redeemable Preferred Stock and Stockholders' (Deficit) Equity - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Temporary Equity And Stockholders Equity [Line Items]
Temporary equity preferred stock, shares authorized	1,000,000		1,000,000
Temporary equity preferred stock, shares issued	70,000		70,000
Temporary equity preferred stock, shares outstanding	70,000		70,000
Compensation expense related to stock options	$ 0.7	$ 0.8
Net impact of stock-based compensation expense to earnings per basic share	$ (0.02)	$ (0.04)
Net impact of stock-based compensation expense to earnings per diluted share	$ (0.02)	$ (0.04)
Total unrecognized compensation expense	$ 1.1
Unrecognized share based compensation expense to be recognized over weighted-average period	1 year 6 months
Outstanding stock options, RSUs and warrants excluded from diluted loss per share	3,400,000	5,700,000
Restricted Stock Units (RSUs)
Temporary Equity And Stockholders Equity [Line Items]
Granted	0
Cancelled grants due to non achievement of performance targets	840,000
2002 Stock Incentive Plan
Temporary Equity And Stockholders Equity [Line Items]
Common stock authorized for issuance	3,100,000
Common stock issued pursuant to options exercised	1,000,000
Options and restricted stock units outstanding	1,200,000
Options available for future grants	0
2018 Long-Term Incentive Plan
Temporary Equity And Stockholders Equity [Line Items]
Common stock authorized for issuance	5,000,000
Options and restricted stock units outstanding	2,300,000
Options available for future grants	800,000
Maximum
Temporary Equity And Stockholders Equity [Line Items]
Temporary equity preferred stock, shares authorized	1,000,000
Series B Junior Participating Preferred Stock [Member]
Temporary Equity And Stockholders Equity [Line Items]
Temporary equity preferred stock, shares authorized	500,000
Private Placement | Series E Participating Convertible Preferred Stock
Temporary Equity And Stockholders Equity [Line Items]
Temporary equity preferred stock, shares issued	69,565		69,565
Temporary equity preferred stock, shares outstanding	69,565		69,565

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Concentrations (Tables)

3 Months Ended

Mar. 31, 2020

Risks And Uncertainties [Abstract]

Schedule of Revenue and Percentages of Revenue Sales by Product Line

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

	Three Months Ended
	March 31,
	2020				2019
Laser systems	$	2,051	42.9	%	$	5,964	57.8	%
Imaging systems		—	—	%		552	5.3	%
Consumables and other		1,472	30.8	%		2,112	20.5	%
Services		1,260	26.3	%		1,695	16.4	%
License fees and royalties		—	—	%		3	—	%
Total revenue	$	4,783	100.0	%	$	10,326	100.0	%

Revenue from the Company’s products for the three months ended March 31, 2020 and 2019 are as follows (dollars in thousands):

	Three Months Ended
	March 31,
	2020				2019
Laser systems	$	2,051	42.9	%	$	5,964	57.8	%
Imaging systems		—	—	%		552	5.3	%
Consumables and other		1,472	30.8	%		2,112	20.5	%
Services		1,260	26.3	%		1,695	16.4	%
License fees and royalties		—	—	%		3	—	%
Total revenue	$	4,783	100.0	%	$	10,326	100.0	%

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Summary of Disaggregation of Revenues Related to Geographic Areas (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Disaggregation Of Revenue [Line Items]
Net revenue	$ 4,783	$ 10,326
United States
Disaggregation Of Revenue [Line Items]
Net revenue	3,129	6,116
International
Disaggregation Of Revenue [Line Items]
Net revenue	$ 1,654	$ 4,210

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Leases

3 Months Ended

Mar. 31, 2020

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 Prepaid and 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):

	Three Months Ended,
	March 31, 2020
Cash paid for operating lease liabilities	$	192
Right-of-use assets obtained in exchange for new operating    lease obligations		—
Weighted-average remaining lease term		—
Weighted-average discount rate		0.0	%

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 March 31, 2020 for leases that have commenced were as follows (in thousands):

Due in 12 month period ended March 31,
2020	$	138
2021		7
Thereafter		—
	$	145
Less imputed interest		(5	)
Total lease liabilities	$	140
Current operating lease liabilities		140
Non-current lease liabilities		—
Total lease liabilities	$	140

As of March 31, 2020, right-of-use assets were $0.1 million and lease liabilities were $0.1 million. During the three months ended March 31, 2020, the Company entered into two new real property leases which will commence in July 1, 2020.  The Company expects to recognize a right-of-use asset and an offsetting lease liability in the amount of $1.8 million in the unaudited consolidated balance sheet upon lease commencement.

Future minimum rental commitments under lease agreements, as of March 31, 2020, with non-cancelable terms greater than one year for each of the years ending December 31 are as follows (in thousands):

	Year Ended
	December 31,
2020 (nine months)	$	217
2021		448
2022		481
2023		492
2024		503
2025 and thereafter		462
Total future minimum lease obligations	$	2,603

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Property, Plant, and Equipment

3 Months Ended

Mar. 31, 2020

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):

	March 31,			December 31,
	2020			2019
Building	$	205		$	209
Leasehold improvements		2,004			2,004
Equipment and computers		7,477			7,479
Furniture and fixtures		634			634
Construction in progress		34			27
Total		10,354			10,353
Accumulated depreciation and amortization		(9,496	)		(9,322	)
Property, plant, and equipment, net before land		858			1,031
Land		159			162
Property, plant, and equipment, net	$	1,017		$	1,193

Depreciation and amortization expense related to property, plant, and equipment totaled $0.2 million and $0.3 million for the three months ended March 31, 2020 and March 31, 2019, respectively.

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

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

Critical Accounting Policies

Information with respect to the Company’s critical accounting policies, which management believes could have the most significant effect on the Company’s reported results and require subjective or complex judgments by management is contained in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of the 2019 Form 10-K. Management believes that there have been no significant changes during the three months ended March 31, 2020 in the Company’s critical accounting policies from those disclosed in Item 7 of the 2019 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, and the SWK Loan as discussed in Note 9, approximate fair value because of the 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 three-month periods ended March 31, 2020 and 2019, 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.

Recently Issued Accounting Standards

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform. This ASU was issued because the London Interbank Offered Rate (LIBOR) is a benchmark interest rate referenced in a variety of agreements that are used by all types of entities. At the end of 2021, banks will no longer be required to report information that is used to determine LIBOR. As a result, LIBOR could be discontinued. Other interest rates used globally could also be discontinued for similar reasons. ASU 2020-04 provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. Companies can apply the ASU immediately. However, the guidance will only be available for a limited time (generally through December 31, 2022). The Company is currently evaluating alternative benchmark rates to replace LIBOR and is still in the process of evaluating the impact that adopting this new accounting standard will have on its consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The standard’s main goal is to improve financial reporting by requiring earlier recognition of credit losses on financing receivables and other financial assets in scope and to replace the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company will be required to use a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. The standard will be effective for the Company beginning January 1, 2023, with early adoption permitted beginning January 1, 2019. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements.

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Consolidated Statements Of Operations And Comprehensive Loss (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Income Statement [Abstract]
Net revenue	$ 4,783	$ 10,326
Cost of revenue	3,430	6,804
Gross profit	1,353	3,522
Operating expenses:
Sales and marketing	2,704	3,879
General and administrative	3,010	2,393
Engineering and development	991	1,424
Change in fair value of patent litigation settlement liability		190
Total operating expenses	6,705	7,886
Loss from operations	(5,352)	(4,364)
Loss on foreign currency transactions	84	43
Interest expense	589	478
Non-operating loss (income), net	673	521
Loss before income tax provision	(6,025)	(4,885)
Income tax provision	(19)	15
Net loss	(6,006)	(4,900)
Other comprehensive income item:
Foreign currency translation adjustment	(18)	(55)
Comprehensive loss	$ (6,024)	$ (4,955)
Net loss per share:
Basic	$ (0.19)	$ (0.23)
Diluted	$ (0.19)	$ (0.23)
Shares used in the calculation of net loss per share:
Basic	31,509	21,134
Diluted	31,509	21,134

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Accrued Liabilities - Additional Information (Detail) - Maximum	3 Months Ended
	Mar. 31, 2020
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
	Mar. 31, 2020	Mar. 31, 2019
Property Plant And Equipment [Abstract]
Depreciation and amortization expenses	$ 0.2	$ 0.3

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Leases - Additional Information (Detail)		3 Months Ended
	Jan. 02, 2019 USD ($)	Mar. 31, 2020 USD ($) Lease	Jul. 01, 2020 USD ($)	Dec. 31, 2019 USD ($)	Jan. 01, 2019 USD ($)
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		$ 135,000		$ 276,000
Operating lease, liability		$ 140,000
Lessee, operating lease incremental borrowing rate					12.78%
Operating lease, lease not yet commenced, description		the Company entered into two new real property leases which will commence in July 1, 2020.
Number of new real property leases | Lease		2
Scenario Forecast
Lessee Lease Description [Line Items]
Operating lease, right-of-use asset			$ 1,800,000
Operating lease, liability			$ 1,800,000
ASU 2016-02
Lessee Lease Description [Line Items]
Operating lease, right-of-use asset					$ 800,000
Operating Lease Right Of Use Asset Statement Of Financial Position Extensible List					us-gaap:PrepaidExpenseAndOtherAssetsCurrent
Adjustment for deferred rent					$ 200,000
Operating Lease, Liability, Statement of Financial Position [Extensible List]					us-gaap:AccruedLiabilitiesCurrent
Operating lease, liability					$ 1,000,000
Cumulative-effect adjustment to retained earnings	$ 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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Summary of Unvested Stock Option Activity (Detail) - $ / shares shares in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Weighted Average Grant Date Fair Value
Granted	$ 0.54	$ 1.53
Stock Options
Shares
Beginning Balance	254
Granted	20
Vested	(47)
Forfeited or cancelled	(14)
Ending Balance	213
Weighted Average Grant Date Fair Value
Beginning Balance	$ 1.44
Granted	0.54
Vested	1.63
Forfeited or cancelled	2.61
Ending Balance	$ 1.25

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Components of Inventory (Detail) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Components of inventory, net of allowances
Raw materials	$ 4,465	$ 3,689
Work-in-process	1,475	1,064
Finished goods	6,252	6,242
Inventory	$ 12,192	$ 10,995

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Income Taxes - Additional Information (Detail) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Income Tax Disclosure [Abstract]
Liability for unrecognized tax benefit, including related estimates of penalties and interest	$ 0	$ 0
Income tax provision (benefit)	$ (19,000)	$ 15,000
Projected annual effective tax rate	0.20%	0.30%
Statutory tax rate	21.00%

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Summary of Net Revenue by Geographic Location (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Segment Reporting Information [Line Items]
Net revenue	$ 4,783	$ 10,326
United States
Segment Reporting Information [Line Items]
Net revenue	3,129	6,116
International
Segment Reporting Information [Line Items]
Net revenue	$ 1,654	$ 4,210

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Leases - Schedule of Maturities of Lease Liabilities (Detail) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Leases [Abstract]
2020	$ 138
2021	7
Total lease payments	145
Less imputed interest	(5)
Total lease liabilities	140
Current operating lease liabilities	$ 140	$ 323

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Property, Plant, and Equipment (Tables)

3 Months Ended

Mar. 31, 2020

Property Plant And Equipment [Abstract]

Summary of Property, Plant, and Equipment

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

	March 31,			December 31,
	2020			2019
Building	$	205		$	209
Leasehold improvements		2,004			2,004
Equipment and computers		7,477			7,479
Furniture and fixtures		634			634
Construction in progress		34			27
Total		10,354			10,353
Accumulated depreciation and amortization		(9,496	)		(9,322	)
Property, plant, and equipment, net before land		858			1,031
Land		159			162
Property, plant, and equipment, net	$	1,017		$	1,193

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2020

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, 2019 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 months ended March 31, 2020 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, 2019, included in BIOLASE’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2020 (the “2019 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 months ended March 31, 2020. The Company’s recurring losses, level of cash used in operations, and 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.

Fourth Amendment to the SWK Loan

As of December 31, 2019, the Company was not in compliance with certain of its loan covenants under the Term Loan (as defined below). On March 25, 2020 the Company and SWK Funding, LLC entered into a Fourth Amendment to the Credit Agreement and granted the Company a waiver of such covenants through March 31, 2020. The Fourth Amendment included revisions to the financial covenants and to the warrant price for the SWK warrants. See Note 9 for additional information.

Due to the uncertainty surrounding the Company’s continued inability to meet debt covenants in addition to the uncertainties surrounding the impact of COVID-19 on the Company’s business, the Company is not forecasting compliance with its debt covenants in the next twelve months and has classified the Term Loan with SWK Funding, LLC (the “Term Loan”) as a short-term liability.

As of March 31, 2020, the Company had negative working capital of approximately $3.7 million. The Company’s principal sources of liquidity as of March 31, 2020 consisted of approximately $1.8 million in cash, cash equivalents and restricted cash and $4.7 million of accounts receivable, net.  

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, the Company must increase sales of its products, control or potentially reduce expenses and establish profitable operations in order to generate cash from operations or obtain additional funds when needed.

Additional capital requirements may depend on many factors, including, among other things, the rate at which the Company’s business grows, the extent of the Company’s revenue from ventilator sales, the COVID-19 pandemic and the actions taken to contain it, demands for working capital, manufacturing capacity, and any acquisitions that the Company may pursue. From time to time, the Company could be required, or may otherwise attempt, to raise capital through either equity or debt offerings. The Company cannot provide assurance that it will be able to successfully enter into any such equity or debt financings in the future or that the required capital would be available on acceptable terms, if at all, or that any such financing activity would not be dilutive to its stockholders.

COVID-19 Risk and Uncertainties and CARES Act

Additionally, on January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally and on March 13, 2020, the United States declared a national emergency with respect to the coronavirus outbreak. This outbreak has severely impacted global economic activity, tax and many countries and many states in the United States have reacted to the outbreak by instituting quarantines, mandating business and school closures and restricting travel. These mandated business closures have included dental office closures in Europe and the United States for all but emergency procedures. Our salespeople have been unable to call on dental customers during these closures. In addition, most dental shows and workshops scheduled in the first and second quarters of 2020 have been canceled. There is no assurance that sales will return to normal levels during the second quarter of 2020 or at any time thereafter.  However, the full impact of the COVID-19 outbreak continues to evolve and it is uncertain as to the full magnitude that the pandemic will have on the Company’s financial condition, liquidity, and future results of operations. Management is actively monitoring the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce and have taken actions to mitigate the impact including among other things, temporary reductions in pay, furloughs of certain positions along with deferrals in payment for cash preservation. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2020.

On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.” The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property.

We continue to examine the impact that the CARES Act may have on our business. Currently, we are unable to determine the impact that the CARES Act will have on our financial condition, results of operations, or liquidity.

Paycheck Protection Program Loan (“PPP Loan”)

On April 14, 2020, Biolase, Inc., was granted a loan from Pacific Mercantile Bank in the aggregate amount of $2,980,000.00, pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020.

The PPP Loan, which was in the form of a Note dated April 13, 2020 issued by the Company, matures on April 13, 2022 and bears interest at a rate of 1.0% per annum, payable monthly commencing on November 1, 2020. The Note may be prepaid by the Company at any time prior to maturity with no prepayment penalties. Funds from the PPP Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020. The Company intends to use the entire PPP Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the PPP Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.

The application for these funds requires the Company to, in good faith, certify that the current economic uncertainty made the loan request necessary to support the ongoing operations of the Company. This certification further requires the Company to take into account our current business activity and our ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. The receipt of these funds, and the forgiveness of the loan attendant to these funds, is dependent on the Company having initially qualified for the loan and qualifying for the forgiveness of such loan based on our future adherence to the forgiveness criteria.

Use of Estimates

Use of Estimates

The preparation of these consolidated financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”) requires the Company to make estimates and assumptions that affect amounts reported in the consolidated financial statements and the accompanying notes. Significant estimates in these consolidated financial statements include allowances on accounts receivable, inventory, and deferred taxes, as well as estimates for accrued warranty expenses, goodwill and the ability of goodwill to be realized, revenue deferrals, effects of stock-based compensation and warrants, contingent liabilities, 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 Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of the 2019 Form 10-K. Management believes that there have been no significant changes during the three months ended March 31, 2020 in the Company’s critical accounting policies from those disclosed in Item 7 of the 2019 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, and the SWK Loan as discussed in Note 9, approximate fair value because of the 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 three-month periods ended March 31, 2020 and 2019, 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.

Recently Issued Accounting Standards

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform. This ASU was issued because the London Interbank Offered Rate (LIBOR) is a benchmark interest rate referenced in a variety of agreements that are used by all types of entities. At the end of 2021, banks will no longer be required to report information that is used to determine LIBOR. As a result, LIBOR could be discontinued. Other interest rates used globally could also be discontinued for similar reasons. ASU 2020-04 provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. Companies can apply the ASU immediately. However, the guidance will only be available for a limited time (generally through December 31, 2022). The Company is currently evaluating alternative benchmark rates to replace LIBOR and is still in the process of evaluating the impact that adopting this new accounting standard will have on its consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The standard’s main goal is to improve financial reporting by requiring earlier recognition of credit losses on financing receivables and other financial assets in scope and to replace the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company will be required to use a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. The standard will be effective for the Company beginning January 1, 2023, with early adoption permitted beginning January 1, 2019. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements.

Revenue Recognition

REVENUE RECOGNITION

Contracts with Customers

Revenue for sales of products and services is derived from contracts with customers. The products and services promised in customer contracts include delivery of laser systems, imaging systems, and consumables as well as certain ancillary services such as training and extended warranties. Contracts with each customer generally state the terms of the sale, including the description, quantity and price of each product or service. Payment terms are stated in the contract and vary according to the arrangement. Because the customer typically agrees to a stated rate and price in the contract that does not vary over the life of the contract, the Company’s contracts do not contain variable consideration. The Company establishes a provision for estimated warranty 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 74% and 84% of net revenue for the three months ended March 31, 2020 and March 31, 2019, respectively. The majority of the Company’s revenue recognized at a point in time is for the sale 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 26% and 16% of net revenue for the three months ended March 31, 2020 and March 31, 2019, 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 $0.5 million and $0.6 million as of March 31, 2020 and December 31, 2019, 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 doubtful accounts is based on an analysis of customer accounts and the Company’s historical experience with accounts receivable write-offs.

Contract Liabilities

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

	March 31,		December 31,
	2020		2019
Undelivered elements (training, installation, product    and support services)	$	476	$	559
Extended warranty contracts		1,896		2,063
Total deferred revenue		2,372		2,622
Less long-term portion of deferred revenue		390		385
Total deferred revenue — long -term		390		385
Deferred revenue — current	$	1,982	$	2,237

The balance of contract assets was immaterial as the Company did not have a significant amount of uninvoiced receivables at March 31, 2020 and December 31, 2019.

The amount of revenue recognized during the three months ended March 31, 2020 that was included in the opening contract liability balance related to undelivered elements was $0.1 million and related to extended warranty contracts was $1.0 million.

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
	March 31,
	2020		2019
United States	$	3,129	$	6,116
International		1,654		4,210
	$	4,783	$	10,326

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

	Three Months Ended
	March 31,
	2020		2019
Revenue recognized over time	$	1,260	$	1,698
Revenue recognized at a point in time		3,523		8,628
Total	$	4,783	$	10,326

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

	Three Months Ended
	March 31,
	2020		2019
End-customer	$	2,340	$	6,346
Distributors		2,443		3,980
	$	4,783	$	10,326

The Company acts as the principal in all its imaging equipment distribution sales. The Company takes possession and control of the equipment before they are sold and transferred to the customer. 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 revenue and percentages of revenue of the Company’s sales by product line were as follows for the periods indicated:

	Three Months Ended
	March 31,
	2020				2019
Laser systems	$	2,051	42.9	%	$	5,964	57.8	%
Imaging systems		—	—	%		552	5.3	%
Consumables and other		1,472	30.8	%		2,112	20.5	%
Services		1,260	26.3	%		1,695	16.4	%
License fees and royalties		—	—	%		3	—	%
Total revenue	$	4,783	100.0	%	$	10,326	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.

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 months ended March 31, 2020 and 2019. 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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Segment Information

3 Months Ended

Mar. 31, 2020

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 months ended March 31, 2020, sales to customers in the United States accounted for approximately 65% of net revenue and international sales accounted for approximately 35% of net revenue, respectively. No individual country, other than the United States, represented more than 10% of total net revenue during the three months ended March 31, 2020 or 2019.

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

	Three Months Ended
	March 31,
	2020		2019
United States	$	3,129	$	6,116
International		1,654		4,210
	$	4,783	$	10,326

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

	March 31,		December 31,
	2020		2019
United States	$	742	$	908
International		275		285
	$	1,017	$	1,193

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Accrued Liabilities

3 Months Ended

Mar. 31, 2020

Payables And Accruals [Abstract]

Accrued Liabilities

NOTE 8—ACCRUED LIABILITIES

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

	March 31,		December 31,
	2020		2019
Payroll and benefits	$	1,465	$	1,726
Warranty accrual, current portion		911		865
Lease liability		140		323
Accrued professional services		443		330
Taxes		31		242
Accrued insurance premium		374		546
Other		715		712
Total accrued liabilities	$	4,079	$	4,744

Changes in the initial product warranty accrual and the expenses incurred under the Company’s initial and extended warranties for the three months ended March 31, 2020 and 2019 are included within accrued liabilities on the Consolidated Balance Sheets and were as follows (in thousands):

	Three Months Ended
	March 31,
	2020			2019
Balance, January 1	$	1,110		$	1,308
Provision for estimated warranty cost		203			239
Warranty expenditures		(156	)		(163	)
Balance, March 31		1,157			1,384
Less warranty accrual, long-term		246			577
Total warranty accrual, current portion	$	911		$	807

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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Redeemable Preferred Stock and Stockholders' (Deficit) Equity

3 Months Ended

Mar. 31, 2020

Temporary Equity And Equity [Abstract]

Redeemable Preferred Stock and Stockholders' (Deficit) Equity

NOTE 4—REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ (DEFICIT) EQUITY

Redeemable Preferred Stock

The board of directors of Biolase (the “Board”), without further stockholder authorization, may from time to time authorize the issuance of up to 1,000,000 shares of the Company’s preferred stock. Of the 1,000,000 shares of preferred stock, 500,000 shares are designated as Series B Junior Participating Cumulative Preferred Stock. In 2019, the Company sold Series E Convertible Preferred Shares in a private offering and as of March 31, 2020 and December 31, 2019, 69,565 of these shares were issued and outstanding.

The shares of Series E Preferred Stock automatically convert into shares of Common Stock upon receipt of the Requisite Stockholder Approval (as defined in the Certificate of Designations, Preferences and Rights of Series E Participating Convertible Preferred Stock. The shares of Series E Preferred Stock have no other conversion rights.

The Purchase Agreement contains customary representations, warranties and covenants by the Company, customary indemnification obligations of the Company and the Investors, including for liabilities under the Securities Act, and other obligations of the parties. The representations, warranties and covenants contained in the Purchase Agreement were made only for purposes of such agreement and as of specific dates, were solely for the benefit of the parties to such agreement and may be subject to limitations agreed upon by the contracting parties.

The shares of Series E Preferred Stock were offered in reliance upon exemptions from registration under the Securities Act afforded by Regulation D and corresponding provisions of state securities laws. The Company has agreed to use commercially reasonable efforts to file, within 30 days following receipt of the Requisite Stockholder Approval, a registration statement with the U.S. Securities and Exchange Commission to register the resale of the shares of Common Stock underlying the Series E Preferred Stock.

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 March 31, 2020, 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 1.2 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, as approved by the Company’s 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 March 31, 2020, a total 2.3 million shares of the Company’s common stock have been reserved for outstanding options and unvested RSUs, and 0.8 million shares of the Company’s common stock remain available for future grants.

The Company recognized stock-based compensation expense of $0.7 million and $0.8 million, for the three months ended March 31, 2020 and 2019, respectively, based on the grant-date fair value. The net impact of stock-based compensation expense to earnings was $(0.02), and $(0.04) per basic and diluted share for the three months ended March 31, 2020 and 2019, respectively. At March 31, 2020, the Company had approximately $1.1 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 1.5 years.

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

	Three Months Ended
	March 31,
	2020		2019
Cost of revenue	$	51	$	82
Sales and marketing		210		160
General and administrative		425		441
Engineering and development		33		74
	$	719	$	757

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

	Three Months Ended
	March 31,
	2020			2019
Expected term	5.9 years			6.1 years
Volatility		82.2	%		86.2	%
Annual dividend per share	$	—		$	—
Risk-free interest rate		1.25	%		2.64	%

A summary of option activity for the three months ended March 31, 2020 is as follows (in thousands, except per share data):

				Weighted		Weighted Average Remaining
				Average		Contractual		Aggregate
	Shares			Exercise Price		Term (Years)		Intrinsic Value(1)
Options outstanding, December 31, 2019		1,287		$	5.77			$	—
Granted at fair market value		20		$	0.77
Exercised		—		$	—
Forfeited, cancelled, or expired		(32	)	$	8.87
Options outstanding at March 31, 2020		1,275		$	5.61		5.68	$	—
Options exercisable at March 31, 2020		1,061		$	6.35		5.11	$	—
Vested options expired during the quarter    ended March 31, 2020		17		$	13.2

(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 three months ended March 31, 2020 is as follows (in thousands, except per share data):

				Weighted
				Average Grant
	Shares			Date Fair Value
Unvested options at December 31, 2019		254		$	1.44
Granted		20		$	0.54
Vested		(47	)	$	1.63
Forfeited or cancelled		(14	)	$	2.61
Unvested options at March 31, 2020		213		$	1.25

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
	March 31,
	2020		2019
Proceeds from stock options exercised	$	—	$	3
Tax benefit related to stock options exercised (1)	N/A		N/A
Intrinsic value of stock options exercised (2)	$	—	$	—
Weighted-average fair value of options granted during period	$	0.54	$	1.53
Total fair value of shares vested during the period	$	67	$	342

(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 strike price of the stock on the date of grant.

Restricted Stock Units

There were no material grants made during the three months ended March 31, 2020, and the Company canceled approximately 840,000 grants with performance based vesting due to non achievement of the performance targets.

A summary of unvested RSU activity for the three months ended March 31, 2020 is as follows (in thousands, except per share amounts):

				Weighted
				Average Grant
	Shares			Date Fair Value
Unvested RSUs at December 31, 2019		3,564		$	1.68
Granted		20		$	0.38
Vested		(416	)	$	0.67
Forfeited or cancelled		(840	)	$	1.96
Unvested RSUs at March 31, 2020		2,328			1.63

Warrants

The Company issues warrants to acquire shares of the Company’s common stock as approved by the Board. A summary of warrant activity for the three months ended March 31, 2020 is as follows (in thousands, except exercise price amounts):

			Weighted
			Average
	Shares		Exercise Price
Warrants outstanding, December 31, 2019		2,083	$	6.12
Granted or Issued		—	$	—
Exercised		—	$	—
Forfeited, cancelled, or expired		—	$	—
Warrants outstanding at March 31, 2020		2,083	$	5.96
Warrants exercisable at March 31, 2020		2,083	$	5.96
Vested warrants expired during the quarter    ended March 31, 2020		—	$	—

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 3.4 million shares were not included in the calculation of diluted loss per share for the three months ended March 31, 2020, as their effect would have been anti-dilutive. For the same 2019 periods, anti-dilutive outstanding stock options and warrants to purchase 5.7 million shares were not included in the computation of diluted loss per share.

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Revenue Recognition - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Revenue Recognition [Abstract]
Revenue from products and services transferred to customers, percentage	74.00%	84.00%
Revenue from services transferred to customers over time, percentage	26.00%	16.00%
Undelivered elements (product training, installation, product and support services)	$ 476		$ 559
Revenue recognized from contract liability	100
Extended warranties recognized	$ 1,000

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Summary of Sales by End Market (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Disaggregation Of Revenue [Line Items]
Net revenue	$ 4,783	$ 10,326
End-customer
Disaggregation Of Revenue [Line Items]
Net revenue	2,340	6,346
Distributors
Disaggregation Of Revenue [Line Items]
Net revenue	$ 2,443	$ 3,980

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Debt - Additional Information (Detail)					1 Months Ended			3 Months Ended		9 Months Ended
	Oct. 28, 2019 USD ($)	May 07, 2019 USD ($)	Nov. 09, 2018 USD ($) Day $ / shares shares	Sep. 27, 2018 USD ($) $ / shares	Mar. 31, 2020 USD ($) $ / shares	Nov. 30, 2019 $ / shares	Oct. 31, 2019 $ / shares	Mar. 31, 2020 USD ($) $ / shares	Mar. 31, 2019 USD ($)	Sep. 30, 2019 USD ($)	Apr. 30, 2020 USD ($)	Dec. 31, 2019 USD ($)	May 31, 2019 $ / shares	Mar. 06, 2018 USD ($) $ / shares
SWK Warrants
Debt Instrument [Line Items]
Warrants adjusted strike price | $ / shares					$ 0.49	$ 1.00	$ 1.00
Initial exercise price of warrants | $ / shares			$ 1.34
Warrants issued to purchase shares of common stock | shares			372,023
Warrants expire date			Nov. 09, 2026
Number of trading days of average closing price of common stock | Day			10
Warrants expiration period			8 years
Warrants fair value assumptions, expected volatility rate			81.79%
Warrants fair value assumptions annual dividend per share | $ / shares			$ 0.00
Warrants fair value assumptions, risk-free interest rate			3.13%
Warrants, estimated fair value			$ 400,000
DPG Warrants
Debt Instrument [Line Items]
Finder's fee			$ 400,000
Initial exercise price of warrants | $ / shares			$ 1.34
Warrants issued to purchase shares of common stock | shares			279,851
Warrants expire date			Nov. 09, 2026
Number of trading days of average closing price of common stock | Day			10
Warrants expiration period			8 years
Warrants fair value assumptions, expected volatility rate			81.79%
Warrants fair value assumptions annual dividend per share | $ / shares			$ 0.00
Warrants fair value assumptions, risk-free interest rate			3.13%
Warrants, estimated fair value			$ 300,000
DPG Warrants | Warrants Issued on November 9, 2018
Debt Instrument [Line Items]
Initial exercise price of warrants | $ / shares			$ 1.34		0.8767			$ 0.8767
DPG Warrants | Warrants Issued on May, 2019
Debt Instrument [Line Items]
Initial exercise price of warrants | $ / shares					$ 1.4197			$ 1.4197					$ 2.17
Original Western Alliance Warrant
Debt Instrument [Line Items]
Initial exercise price of warrants | $ / shares														$ 2.35
Western Alliance Warrant
Debt Instrument [Line Items]
Initial exercise price of warrants | $ / shares				$ 2.13
Warrants expire date				Sep. 27, 2028
SWK Warrants and DPG Warrants
Debt Instrument [Line Items]
Warrants effective-interest method amortization period								5 years
Credit Agreement, First Amendment | SWK Warrants
Debt Instrument [Line Items]
Additional warrants to purchase common stock value		$ 200,000
Credit Agreement, First Amendment | DPG Warrants
Debt Instrument [Line Items]
Additional warrants to purchase common stock value		100,000
Additional finders fee		100,000
Maximum | Original Western Alliance Warrant
Debt Instrument [Line Items]
Warrants issued to purchase shares of common stock equal value														$ 120,000
Maximum | Western Alliance Warrant
Debt Instrument [Line Items]
Warrants issued to purchase shares of common stock equal value				$ 120,000
Pacific Mercantile Bank | Subsequent Event
Debt Instrument [Line Items]
Line of credit, outstanding borrowings											$ 3,000,000
SWK Loan
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity									$ 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 (A) no less than $1.5 million or (B) 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	$ 500,000
Weighted-average interest rate					12.25%			12.25%
SWK Loan | LIBOR
Debt Instrument [Line Items]
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.
Line of credit facility bearing floating interest rate per annum			10.00%
SWK Loan | Credit Agreement, First Amendment
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 Securities and Exchange Commission before September 30, 2019, with a proposed maximum aggregate offering price of at least $10.0 million if the Company did not reach set minimum revenue levels for the three-month period ended September 30, 2019, and (c) require minimum liquidity of $1.5 million at all times. The First Amendment provided that if aggregate minimum revenue and EBITDA levels were not achieved by September 30, 2019, the minimum liquidity requirement would 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										$ 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
Financial covenant additional borrowings												2,500,000
Loan origination and other fees to be paid		$ 100,000
SWK Loan | Credit Agreement, Second Amendment [Member]
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity										$ 5,000,000
SWK Loan | Maximum
Debt Instrument [Line Items]
Debt instrument covenants unencumbered liquid assets			$ 1,500,000
SWK Loan | Minimum | Credit Agreement, Second Amendment [Member]
Debt Instrument [Line Items]
Gross proceeds from subordinated debt threshold limit										$ 5,000,000
Western Alliance | Business Financing Agreement
Debt Instrument [Line Items]
Repayments of lines of credit			$ 900,000
Loan Agreement | Pacific Mercantile Bank
Debt Instrument [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%
Line of credit, outstanding borrowings					$ 0			$ 0				0
Line of credit facility, unused availability					$ 3,000,000			$ 3,000,000				$ 2,700,000
Loan Agreement | Pacific Mercantile Bank | Subsequent Event
Debt Instrument [Line Items]
Line of credit facility, current borrowing capacity											$ 3,000
Loan Agreement | Pacific Mercantile Bank | Maximum
Debt Instrument [Line Items]
Interest rate	6.00%
Loan Agreement | Exim Bank
Debt Instrument [Line Items]
Line of credit facility expiration date	Oct. 28, 2020
Annual fee	$ 52,500
Termination fee	$ 30,000

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Components of Accrued Liabilities (Detail) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019	Mar. 31, 2019
Payables And Accruals [Abstract]
Payroll and benefits	$ 1,465	$ 1,726
Warranty accrual, current portion	911	865	$ 807
Lease liability	140	323
Accrued professional services	443	330
Taxes	31	242
Accrued insurance premium	374	546
Other	715	712
Total accrued liabilities	$ 4,079	$ 4,744

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Consolidated Statements Of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Cash Flows from Operating Activities:
Net loss	$ (6,006)	$ (4,900)
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:
Depreciation and amortization	177	258
Provision for bad debts	987	19
Amortization of discounts on lines of credit	46	38
Amortization of debt issuance costs	50	49
Stock-based compensation	719	757
Deferred income taxes	(32)	(5)
Earned interest income, net		(1)
Change in fair value of patent litigation settlement liability		190
Changes in operating assets and liabilities:
Accounts receivable	3,024	(650)
Inventory	(1,197)	225
Prepaid expenses and other current assets	(142)	463
Accounts payable and accrued liabilities	(1,541)	(1,514)
Deferred revenue	(219)	37
Net cash and cash equivalents used in operating activities	(4,134)	(5,034)
Cash Flows from Investing Activities:
Purchases of property, plant, and equipment	(9)	(8)
Net cash and cash equivalents used in investing activities	(9)	(8)
Cash Flows from Financing Activities:
Payments of equity offering costs	(117)
Proceeds from exercise of stock options		3
Net cash and cash equivalents (used in) provided by financing activities	(117)	3
Effect of exchange rate changes	(18)	(49)
Decrease in cash, cash equivalents and restricted cash	(4,278)	(5,088)
Cash, cash equivalents and restricted cash, beginning of period	6,101	8,356
Cash, cash equivalents and restricted cash, end of period	1,823	3,268
Supplemental cash flow disclosure:
Cash paid for interest	485	430
Cash paid for income taxes	28	31
Cash paid for operating leases	192	189
Non-cash accrual for capital expenditures	$ 7	24
Non-cash right-of-use assets obtained in exchange for lease obligation		$ 824

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Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 1,511	$ 5,789
Restricted cash	312	312
Accounts receivable, less allowance of $3,560 and $2,531 in 2020 and 2019, respectively	4,749	8,760
Inventory	12,192	10,995
Prepaid expenses and other current assets	1,205	1,163
Total current assets	19,969	27,019
Property, plant, and equipment, net	1,017	1,193
Goodwill	2,926	2,926
Right of use asset	135	276
Other assets	484	433
Total assets	24,531	31,847
Current liabilities:
Accounts payable	4,056	5,332
Accrued liabilities	4,079	4,744
Deferred revenue, current portion	1,982	2,237
Term loan (net of discount)	13,562	13,466
Total current liabilities	23,679	25,779
Deferred revenue	390	358
Warranty accrual	246	245
Other liabilities	1,107	1,123
Total liabilities	25,422	27,505
Commitments and contingencies — Note 11
Redeemable preferred stock:
Preferred stock, par value $0.001 per share; 1,000 shares authorized, 70 and 70 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively	3,965	3,965
Stockholders' equity:
Common stock, par value $0.001 per share; 40,000 shares authorized, 31,582 and 31,439 shares issued and 31,537 and 31,439 outstanding as of March 31, 2020 and December 31, 2019, respectively	32	31
Additional paid-in-capital	236,384	235,594
Accumulated other comprehensive loss	(719)	(701)
Accumulated deficit	(240,553)	(234,547)
Total stockholders' (deficit) equity	(4,856)	377
Total liabilities, redeemable preferred stock and stockholders' (deficit) equity	$ 24,531	$ 31,847

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Debt

3 Months Ended

Mar. 31, 2020

Debt Disclosure [Abstract]

Debt

NOTE 9—DEBT

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

	March 31,			December 31,
	2020			2019
Term loan	$	15,000		$	15,000
Discount and debt issuance costs on term loan		(1,438	)		(1,534	)
Total	$	13,562		$	13,466

Lines of Credit

Pacific Mercantile Bank

On October 28, 2019, the Company entered into a loan and security agreement (the “Loan Agreement”) with Pacific Mercantile Bank, as lender (the “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.

The Company’s obligations under the Loan Agreement are secured by a security interest in substantially all of the Company’s property. No borrowings may be made under the Loan Agreement unless and until Exim Bank agrees to guarantee the PMB Loan and the Company 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, the Company was required to pay an initial fee and is required to pay an annual fee of $52,500 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 the Company to maintain unrestricted cash at the Lender plus unused availability under the PMB Loan in an amount equal to at least the Burn Rate. “Burn Rate” means the Company’s net profit/net loss plus depreciation plus amortization plus stock-based compensation, measured on a trailing three month basis. In addition, the Loan Agreement contains customary affirmative and negative covenants for financings of its type (subject to customary exceptions).

As of March 31, 2020 and December 31, 2019, the Company had no borrowings outstanding and unused availability under this credit facility of  $3.0 million and $2.7 million, respectively. The Company was in compliance with all debt covenants at March 31, 2020.

In April 2020, the Company drew $3.0 million under the PMB Loan. Additional information is discussed in Note 15 – Subsequent Events.

Term Loan

On November 9, 2018, the Company entered into a five-year secured Credit Agreement (“Credit Agreement”) with SWK Funding LLC (“SWK”), pursuant to which the Company has borrowed $12.5 million (“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 the 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 Bank under the business financing agreement entered into in 2018.

The Credit Agreement contains financial and non-financial covenants requiring the Company to, among other things, (i) maintain unencumbered liquid assets of (A) no less than $1.5 million or (B) 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.

As of March 31, 2019, the Company was not in compliance with certain covenants in the Credit Agreement and in May 2019, SWK granted the Company a waiver of such covenants. 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 Securities and Exchange Commission before September 30, 2019, with a proposed maximum aggregate offering price of at least $10.0 million if the Company did not reach set minimum revenue levels for the three-month period ended September 30, 2019, and (c) require minimum liquidity of $1.5 million at all times. The First Amendment provided that if aggregate minimum revenue and EBITDA levels were not achieved by September 30, 2019, the minimum liquidity requirement would be increased to $3.0 million, until the Company has obtained additional equity or debt funding of no less than $5.0 million. In 2019, the Company obtained additional equity financing greater than $5.0 million. The Company borrowed the additional $2.5 million during the year ended December 31, 2019.

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 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 warrants as additional debt issuance costs.

On September 30, 2019, BIOLASE, Inc entered into the Second Amendment to 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 amended the Credit Agreement to provide for a 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 and with such other material terms and conditions acceptable to SWK in its commercially reasonable discretion. 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 that an additional equity or subordinated debt financing is consummated with gross proceeds of not less than $5 million, or in the event of a default under the Credit Agreement.

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 price was adjusted to $1.00 and the impact of this was de minimis.

As of December 31, 2019, the Company was not in compliance with the covenants under the Credit Agreement, as amended, and on March 25, 2020, the Company agreed to further amend the Credit Agreement (“Fourth Amendment”). Pursuant to the Fourth Amendment to the Credit Agreement, SWK granted the Company a waiver of the Company’s non-compliance with certain financial covenants contained in the Credit Agreement through March 31, 2020. Also pursuant to the Fourth Amendment, the Company and SWK agreed to (i) revise financial covenants to adjust minimum revenue and EBITDA levels and (ii) revise the financial covenant with respect to required unencumbered liquid assets.

The Company does not anticipate it will regain compliance with the financial covenants under the Credit Agreement by June 30, 2020 due to the uncertainty surrounding the impact of COVID-19 on its business. Therefore the Term Loan is classified as a current liability in the unaudited consolidated balance sheets.

The Company recognized approximately $0.6 million and $0.5 million in interest expense for the three months ending March 31, 2020 and 2019, respectively.  The weighted-average interest rate as of March 31, 2020 was 12.25%.  

Western Alliance Warrants

On March 6, 2018, the Company issued to Western Alliance warrants (the “Original Western Alliance Warrants”) to purchase up to the number of shares of common stock equal to $120,000 divided by the applicable exercise price at the time such warrants are exercised. The Original Western Alliance Warrants are fully vested and exercisable. The Original Western Alliance Warrants may be exercised with a cash payment from Western Alliance, or, in lieu of a cash payment, Western Alliance may convert the warrants into a number of shares, in whole or in part. The initial exercise price of the warrants was $2.35 per share. On September 27, 2018, the Company entered into the Second Modification Agreement to amend the Original Business Financing Agreement. In connection with the Second Modification Agreement, the Original Western Alliance Warrants were terminated, and the Company issued new warrants (the “Western Alliance Warrants”) to purchase up to the number of shares of common stock equal to $120,000 divided by the exercise price of $2.13, which was the closing price of the Company’s common stock on September 27, 2018. 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 per share less than the exercise price. 

SWK Warrants

In connection with the Credit Agreement, the Company issued warrants to SWK (the “SWK Warrants”) on November 9, 2018, to purchase up to 372,023 shares of the Company’s common stock. The SWK Warrants are immediately exercisable and expire on November 9, 2026. The exercise price of the SWK Warrants is $1.34, which was the average closing price of the Company’s common stock for the ten trading days immediately preceding November 9, 2018. 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 SWK Warrants 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%; and resulted in an estimated fair value of $0.4 million.  

In November 2019, these warrants were consolidated and the strike price was adjusted to $1.00, and in March 2020, the strike price was adjusted a second time to $0.49.  The impact of both reprice events was de minimis to the unaudited consolidated financial statements.

DPG Warrants

In connection with the SWK Loan, the Company paid a finder’s fee to Deal Partners Group of $0.4 million cash and issued warrants to purchase up to 279,851 shares of common stock (the “DPG Warrants”). The DPG Warrants were issued on November 14, 2018, were exercisable immediately, and expire on November 9, 2026. The exercise price of the DPG Warrants is $1.34 which was the average closing price of the Company’s common stock for the ten trading days immediately preceding November 9, 2018. 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 DPG Warrants of $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%. In November 2019, the exercise price of the DPG Warrants issued on November 9, 2018 was adjusted from $1.34 per share to $0.8767 per share and the exercise price of the DPG Warrants issued on May, 2019 was adjusted from $2.17 per share to $1.4197 per share. The impact of the reprice was de minimis to the unaudited consolidated financial statements.

The value of both the SWK Warrants and the DPG Warrants was recognized as a discount on the SWK Loan and are being amortized on a straight-line basis which approximates the effective-interest method, over the loan term of five years. 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 sheet as of March 31, 2020.

The future minimum principal and interest payments as of March 31, 2020 are as follows (in thousands):

	Principal		Interest (1)
2020		—		1,388
2021		2,100		1,793
2022		2,800		1,472
2023		10,100		2,455
Total future payments	$	15,000	$	7,108
(1) estimated using LIBOR rates as at March 31, 2020

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Inventory

3 Months Ended

Mar. 31, 2020

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):

	March 31,		December 31,
	2020		2019
Raw materials	$	4,465	$	3,689
Work-in-process		1,475		1,064
Finished goods		6,252		6,242
Inventory	$	12,192	$	10,995

Inventory has been reduced by estimates for excess and obsolete amounts totaling $1.3 million and $1.3 million as of March 31, 2020 and December 31, 2019, respectively.

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Concentrations

3 Months Ended

Mar. 31, 2020

Risks And Uncertainties [Abstract]

Concentrations

NOTE 13—CONCENTRATIONS

Revenue from the Company’s products for the three months ended March 31, 2020 and 2019 are as follows (dollars in thousands):

	Three Months Ended
	March 31,
	2020				2019
Laser systems	$	2,051	42.9	%	$	5,964	57.8	%
Imaging systems		—	—	%		552	5.3	%
Consumables and other		1,472	30.8	%		2,112	20.5	%
Services		1,260	26.3	%		1,695	16.4	%
License fees and royalties		—	—	%		3	—	%
Total revenue	$	4,783	100.0	%	$	10,326	100.0	%

No individual customer represented more than 10% of the Company’s revenue for the three months ended March 31, 2020 or 2019.

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.

One individual customer represented more than 10% of the Company’s accounts receivable at March 31, 2020 and December 31, 2019.

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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Description of Business and Basis of Presentation - Additional Information (Detail) - USD ($)	Apr. 14, 2020	Mar. 31, 2020	Dec. 31, 2019	Mar. 31, 2019	Dec. 31, 2018
Basis Of Presentation [Line Items]
Cash and cash equivalents, including restricted cash		$ 1,823,000	$ 6,101,000	$ 3,268,000	$ 8,356,000
Accounts receivable, net		4,749,000	$ 8,760,000
SWK Loan
Basis Of Presentation [Line Items]
Working capital		$ (3,700,000)
Pacific Mercantile Bank | Paycheck Protection Program | Subsequent Event
Basis Of Presentation [Line Items]
Loan granted amount from bank	$ 2,980,000.00
Note issued date	Apr. 13, 2020
Note maturity date	Apr. 13, 2022
Note interest rate per annum	1.00%
Note payable commencing date	Nov. 01, 2020
Note prepayment penalties	$ 0

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Summary of Revenues Disaggregated by Timing of Goods and Services Transferred (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Disaggregation Of Revenue [Line Items]
Net revenue	$ 4,783	$ 10,326
Revenue Recognized Over Time
Disaggregation Of Revenue [Line Items]
Net revenue	1,260	1,698
Revenue Recognized at a Point in Time
Disaggregation Of Revenue [Line Items]
Net revenue	$ 3,523	$ 8,628

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Debt - Summary of Future Minimum Principal and Interest Payments (Detail) - USD ($) $ in Thousands		Mar. 31, 2020	Dec. 31, 2019
Debt Disclosure [Abstract]
2021		$ 2,100
2022		2,800
2023		10,100
Total future payments		15,000	$ 15,000
2020	[1]	1,388
2021	[1]	1,793
2022	[1]	1,472
2023	[1]	2,455
Total future payments	[1]	$ 7,108

[1] estimated using LIBOR rates as at March 31, 2020

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Changes in Initial Product Warranty Accrual and Expenses Under Initial and Extended Warranties (Detail) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Movement in Standard Product Warranty Accrual
Balance, January 1	$ 1,110	$ 1,308
Provision for estimated warranty cost	203	239
Warranty expenditures	(156)	(163)
Balance, March 31	1,157	1,384
Less warranty accrual, long-term	246	577	$ 245
Total warranty accrual, current portion	$ 911	$ 807	$ 865

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Description of Business and Basis of Presentation

3 Months Ended

Mar. 31, 2020

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, 2019 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 months ended March 31, 2020 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, 2019, included in BIOLASE’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2020 (the “2019 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 months ended March 31, 2020. The Company’s recurring losses, level of cash used in operations, and 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.

Fourth Amendment to the SWK Loan

As of December 31, 2019, the Company was not in compliance with certain of its loan covenants under the Term Loan (as defined below). On March 25, 2020 the Company and SWK Funding, LLC entered into a Fourth Amendment to the Credit Agreement and granted the Company a waiver of such covenants through March 31, 2020. The Fourth Amendment included revisions to the financial covenants and to the warrant price for the SWK warrants. See Note 9 for additional information.

Due to the uncertainty surrounding the Company’s continued inability to meet debt covenants in addition to the uncertainties surrounding the impact of COVID-19 on the Company’s business, the Company is not forecasting compliance with its debt covenants in the next twelve months and has classified the Term Loan with SWK Funding, LLC (the “Term Loan”) as a short-term liability.

As of March 31, 2020, the Company had negative working capital of approximately $3.7 million. The Company’s principal sources of liquidity as of March 31, 2020 consisted of approximately $1.8 million in cash, cash equivalents and restricted cash and $4.7 million of accounts receivable, net.  

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, the Company must increase sales of its products, control or potentially reduce expenses and establish profitable operations in order to generate cash from operations or obtain additional funds when needed.

Additional capital requirements may depend on many factors, including, among other things, the rate at which the Company’s business grows, the extent of the Company’s revenue from ventilator sales, the COVID-19 pandemic and the actions taken to contain it, demands for working capital, manufacturing capacity, and any acquisitions that the Company may pursue. From time to time, the Company could be required, or may otherwise attempt, to raise capital through either equity or debt offerings. The Company cannot provide assurance that it will be able to successfully enter into any such equity or debt financings in the future or that the required capital would be available on acceptable terms, if at all, or that any such financing activity would not be dilutive to its stockholders.

COVID-19 Risk and Uncertainties and CARES Act

Additionally, on January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 outbreak”) and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally and on March 13, 2020, the United States declared a national emergency with respect to the coronavirus outbreak. This outbreak has severely impacted global economic activity, tax and many countries and many states in the United States have reacted to the outbreak by instituting quarantines, mandating business and school closures and restricting travel. These mandated business closures have included dental office closures in Europe and the United States for all but emergency procedures. Our salespeople have been unable to call on dental customers during these closures. In addition, most dental shows and workshops scheduled in the first and second quarters of 2020 have been canceled. There is no assurance that sales will return to normal levels during the second quarter of 2020 or at any time thereafter.  However, the full impact of the COVID-19 outbreak continues to evolve and it is uncertain as to the full magnitude that the pandemic will have on the Company’s financial condition, liquidity, and future results of operations. Management is actively monitoring the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce and have taken actions to mitigate the impact including among other things, temporary reductions in pay, furloughs of certain positions along with deferrals in payment for cash preservation. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2020.

On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.” The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property.

We continue to examine the impact that the CARES Act may have on our business. Currently, we are unable to determine the impact that the CARES Act will have on our financial condition, results of operations, or liquidity.

Paycheck Protection Program Loan (“PPP Loan”)

On April 14, 2020, Biolase, Inc., was granted a loan from Pacific Mercantile Bank in the aggregate amount of $2,980,000.00, pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020.

The PPP Loan, which was in the form of a Note dated April 13, 2020 issued by the Company, matures on April 13, 2022 and bears interest at a rate of 1.0% per annum, payable monthly commencing on November 1, 2020. The Note may be prepaid by the Company at any time prior to maturity with no prepayment penalties. Funds from the PPP Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020. The Company intends to use the entire PPP Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the PPP Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.

The application for these funds requires the Company to, in good faith, certify that the current economic uncertainty made the loan request necessary to support the ongoing operations of the Company. This certification further requires the Company to take into account our current business activity and our ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. The receipt of these funds, and the forgiveness of the loan attendant to these funds, is dependent on the Company having initially qualified for the loan and qualifying for the forgiveness of such loan based on our future adherence to the forgiveness criteria.

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Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Statement Of Financial Position [Abstract]
Allowance for accounts receivable	$ 3,560	$ 2,531
Temporary equity preferred stock, par value	$ 0.001	$ 0.001
Temporary equity preferred stock, shares authorized	1,000,000	1,000,000
Temporary equity preferred stock, shares issued	70,000	70,000
Temporary equity preferred stock, shares outstanding	70,000	70,000
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	40,000,000	40,000,000
Common stock, shares issued	31,582,000	31,439,000
Common stock, shares outstanding	31,537,000	31,439,000

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Summary of Option Activity (Detail) shares in Thousands	3 Months Ended
	Mar. 31, 2020 $ / shares shares
Shares
Beginning Balance | shares	1,287
Granted at fair market value | shares	20
Forfeited, cancelled, or expired | shares	(32)
Ending Balance | shares	1,275
Options exercisable at March 31, 2020 | shares	1,061
Vested options expired during the quarter ended March 31, 2020 | shares	17
Weighted-Average Exercise Price
Beginning Balance | $ / shares	$ 5.77
Granted at fair market value | $ / shares	0.77
Forfeited, cancelled, or expired | $ / shares	8.87
Ending Balance | $ / shares	5.61
Options exercisable at March 31, 2020 | $ / shares	6.35
Vested options expired during the quarter ended March 31, 2020 | $ / shares	$ 13.2
Weighted-Average Remaining Contractual Term (Years)
Options outstanding	5 years 8 months 4 days
Options exercisable	5 years 1 month 9 days

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Summary of Warrant Activity (Detail) - Warrants shares in Thousands	3 Months Ended
	Mar. 31, 2020 $ / shares shares
Shares
Beginning Balance | shares	2,083
Ending Balance | shares	2,083
Warrants exercisable at March 31, 2020 | shares	2,083
Weighted Average Exercise Price
Beginning Balance | $ / shares	$ 6.12
Ending Balance | $ / shares	5.96
Warrants exercisable at March 31, 2020 | $ / shares	$ 5.96

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Summary of Property, Plant and Equipment by Geographic Location (Detail) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Segment Reporting Information [Line Items]
Property, plant, and equipment, net	$ 1,017	$ 1,193
United States
Segment Reporting Information [Line Items]
Property, plant, and equipment, net	742	908
International
Segment Reporting Information [Line Items]
Property, plant, and equipment, net	$ 275	$ 285

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Leases - Future Minimum Rental Commitments Under Lease Agreements (Detail) $ in Thousands	Dec. 31, 2019 USD ($)
Leases [Abstract]
2020 (nine months)	$ 217
2021	448
2022	481
2023	492
2024	503
2025 and thereafter	462
Total future minimum lease obligations	$ 2,603

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Subsequent Event - Additional Information (Detail) - Pacific Mercantile Bank - Subsequent Event - USD ($)	Apr. 14, 2020	Apr. 30, 2020
Subsequent Event [Line Items]
Line of credit, outstanding borrowings		$ 3,000,000
Paycheck Protection Program
Subsequent Event [Line Items]
Loan granted amount from bank	$ 2,980,000.00
Note issued date	Apr. 13, 2020
Note maturity date	Apr. 13, 2022
Note interest rate per annum	1.00%
Note payable commencing date	Nov. 01, 2020
Note prepayment penalties	$ 0
Paycheck Protection Program | Minimum
Subsequent Event [Line Items]
Number of days eligible for deduction of qualifying expenses after receiving loan	56 days

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Accrued Liabilities (Tables)

3 Months Ended

Mar. 31, 2020

Payables And Accruals [Abstract]

Components of Accrued Liabilities

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

	March 31,		December 31,
	2020		2019
Payroll and benefits	$	1,465	$	1,726
Warranty accrual, current portion		911		865
Lease liability		140		323
Accrued professional services		443		330
Taxes		31		242
Accrued insurance premium		374		546
Other		715		712
Total accrued liabilities	$	4,079	$	4,744

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 months ended March 31, 2020 and 2019 are included within accrued liabilities on the Consolidated Balance Sheets and were as follows (in thousands):

	Three Months Ended
	March 31,
	2020			2019
Balance, January 1	$	1,110		$	1,308
Provision for estimated warranty cost		203			239
Warranty expenditures		(156	)		(163	)
Balance, March 31		1,157			1,384
Less warranty accrual, long-term		246			577
Total warranty accrual, current portion	$	911		$	807

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Revenue Recognition (Tables)

3 Months Ended

Mar. 31, 2020

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):

	March 31,		December 31,
	2020		2019
Undelivered elements (training, installation, product    and support services)	$	476	$	559
Extended warranty contracts		1,896		2,063
Total deferred revenue		2,372		2,622
Less long-term portion of deferred revenue		390		385
Total deferred revenue — long -term		390		385
Deferred revenue — current	$	1,982	$	2,237

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
	March 31,
	2020		2019
United States	$	3,129	$	6,116
International		1,654		4,210
	$	4,783	$	10,326

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
	March 31,
	2020		2019
Revenue recognized over time	$	1,260	$	1,698
Revenue recognized at a point in time		3,523		8,628
Total	$	4,783	$	10,326

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
	March 31,
	2020		2019
End-customer	$	2,340	$	6,346
Distributors		2,443		3,980
	$	4,783	$	10,326

Schedule of Revenue and Percentages of Revenue Sales by Product Line

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

	Three Months Ended
	March 31,
	2020				2019
Laser systems	$	2,051	42.9	%	$	5,964	57.8	%
Imaging systems		—	—	%		552	5.3	%
Consumables and other		1,472	30.8	%		2,112	20.5	%
Services		1,260	26.3	%		1,695	16.4	%
License fees and royalties		—	—	%		3	—	%
Total revenue	$	4,783	100.0	%	$	10,326	100.0	%

Revenue from the Company’s products for the three months ended March 31, 2020 and 2019 are as follows (dollars in thousands):

	Three Months Ended
	March 31,
	2020				2019
Laser systems	$	2,051	42.9	%	$	5,964	57.8	%
Imaging systems		—	—	%		552	5.3	%
Consumables and other		1,472	30.8	%		2,112	20.5	%
Services		1,260	26.3	%		1,695	16.4	%
License fees and royalties		—	—	%		3	—	%
Total revenue	$	4,783	100.0	%	$	10,326	100.0	%