BIOLASE Reports 2013 Third Quarter, Nine-Month Results

BIOLASE Reports 2013 Third Quarter, Nine-Month Results 
Q3 Net Revenue of $12.3 Million; Year-to-Date Net Revenue of $41.2
Million, Increase of 8% Year Over Year; Q3 Imaging Revenue Increases
42%, Year Over Year; Reserves $1 Million for Excess and Obsolete
Inventory in Q3 
IRVINE, CA -- (Marketwired) -- 11/11/13 --  BIOLASE, Inc. (NASDAQ:
BIOL), the world's leading manufacturer and distributor of dental
lasers, and a pioneer in laser surgery in other medical specialties,
today reported unaudited financial results for the third quarter and
nine months ended September 30, 2013. 
Financial Highlights for the Nine Months and Third Quarter ended
September 30, 2013: 


 
--  Net revenue of $41.2 million for the nine months ended September 30,
    2013, an 8% increase over net revenues of $38.3 million for the same
    prior year period.
--  Net revenue of $12.3 million for Q3 2013, a 10% decrease as compared
    to net revenues of $13.8 million for Q3 2012.
--  Non-GAAP net loss for Q3 2013 of $3.2 million, or a loss of $0.10 per
    share, as compared to non-GAAP net income of $96,000, or income of
    $0.00 per share, for Q3 2012.
--  Increased reserve for excess and obsolete inventory by $1 million
    during Q3 2013; one time charge had direct impact to cost of sales and
    gross margin for the quarter and nine months ended September 30, 2013.
--  Net revenue from the sale of core laser systems increased
    approximately $90,000, or 0.3%, for the nine months ended September
    30, 2013, as compared to the prior year period; decreased
    approximately $2.0 million, or 20%, for Q3 2013 as compared to Q3
    2012.
--  Net revenue from the sale of digital imaging systems and CAD/CAM
    intraoral scanners increased approximately $1.6 million, or 94%, for
    the nine months ended September 30, 2013, as compared to the prior
    year period.

  
Operating Highlights of the 2013 Third Quarter: 


 
--  Sold 2,688,172 shares of common stock in a registered direct public
    offering to a single investor, Camber Capital Management, LLC
    ("Camber"). The offering price of $1.86 per share, a price equal to
    the closing price on September 23, 2013, resulted in gross proceeds of
    $5 million, before deducting placement agent commissions and offering
 
   expenses of approximately $408,000.
--  Entered into a strategic agreement with Valam Corporation to develop,
    market, and sell office-based laser systems to Ear, Nose, and Throat
    (or "ENT") doctors; BIOLASE's EPIC 10 soft-tissue laser is cleared by
    the FDA for use in ENT surgical procedures.
--  An informational news segment discussing the use of BIOLASE's
    WaterLase in dental procedures aired on CNBC on Saturday, August 17,
    2013, and will be aired on upcoming broadcasts of the Fox Business
    Network and Bloomberg International Network in the coming months.
--  Declared a one-half percent stock dividend payable on September 13,
    2013, to stockholders of record as of August 30, 2013.

  
Other Highlights of the 2013 Third Quarter: 


 
--  Granted several new patents:
    --  In the U.S. for mitigating the effects of presbyopia using
        infrared lasers; significantly expands on BIOLASE's previously
        issued U.S. Patent No. 7,665,467 regarding methods and devices for
        treating presbyopia.
    --  In the U.S. and Japan for delivering sterile water; significantly
        expands on BIOLASE's fluid conditioning system technology which is
        already covered in several U.S. and international patents.
    --  In the U.S. for finger switch actuation of handheld medical
        instrumentation; an innovative new patent that addresses the need
        for improved efficiency and space accommodation in surgical
        operating rooms.
--  WaterLase technology was featured in 18 new peer-reviewed journal
    articles published in the English language during the 2013 third
    quarter. These articles concluded, among other things, that lasers
    improve the removal of debris in root canals, WaterLase technology
    leads to a high bactericidal effect with a significant reduction in
    operating times, WaterLase technology has a shallower learning curve
    for dentists, and WaterLase assisted endodontic treatment using radial
    firing tips lead to less adverse effects.

  
Highlights Subsequent to the 2013 Third Quarter: 


 
--  Entered letter of commitment with Auris Surgical Robotics, Inc.
    ("Auris"), the developer of a robotic microsurgical system designed
    specifically for ophthalmic surgery, to develop a new product for
    ophthalmologists; the product is planned to feature BIOLASE's patented
    WaterLase YSGG all-tissue atr
aumatic cutting technology mounted on a
    unique robotic operating system manufactured by Auris.
--  Issued a new patent in the U.S. for treating eye conditions with
    low-level light therapy; significantly expands on a previously issued
    U.S. Patent regarding methods and devices for treating presbyopia.
--  Named industry veteran Brian Jaffe as Vice President, North American
    Sales and Marketing. Mr. Jaffe comes to BIOLASE from Millennium Dental
    Technologies, where he held the position of Vice President of Global
    Sales.
--  Amended our two revolving credit agreements with Comerica Bank to
    waive non-compliance with our earnings before income tax,
    depreciation, and amortization ("EBITDA") covenant at September 30,
    2013.

  
Net revenue for the 2013 third quarter totaled $12.3 million, compared
with $13.8 million in the 2012 third quarter, a decrease of
approximately $1.5 million, or 10%. Net revenue for the nine months
ended September 30, 2013, totaled $41.2 million, an increase of
approximately $2.9 million, or 8%, as compared with net revenue of
$38.3 million for the nine months ended September 30, 2012. The
decrease to net revenue for the three months ended September 30, 2013
was primarily attributable to approximately $2 million in reduced
laser system revenues offset by slight increases in imaging systems,
consumables and other, and services revenues. The increase to net
revenue for the nine months ended September 30, 2013, was primarily
attributable to increased imaging systems revenues of approximately
$1.6 million, increased consumables and other of $401,000 and
increased service revenue of $743,000.  
Federico Pignatelli, Chairman and CEO, said, "We are dissatisfied
with the results for the third quarter ended September 30, 2013. We
believe that the Company's results were primarily due to inadequate
execution within our sales force and subpar marketing efforts in
connection with the Company's transition from just selling WaterLase
dental lasers to selling a wide range of lasers, including
soft-tissue diodes, and other technological solutions for dentists,
digital radiography, and CAD/CAM intra-oral scanners. While we
believe this transition is strategically necessary for the long-term
growth of BIOLASE as a Total Technology Solution provider, this
transition caused unanticipated short-term inefficiencies, which can
occur during a strategic shift such as the one we have implemented.
The effects from these inefficiencies may have been exacerbated by
unforeseen market factors, as well, such as the confusion over the
implementation of the Patient Protection and Affordable Care Act and
the continued uncertainty related to the Congressional impasse over
the U.S. budget and the debt ceiling, which affected the buying
decision process of the dental community, which i
s comprised of
140,000 small business owners. Consequently, we have developed plans
to rapidly address all of the issues at hand, including making a
number of changes within our sales and marketing departments and
implementing new strategies along with certain cost containment
measures. 
"We have shifted our strategic approach and believe that these
proactive changes to grow into a high-tech, multi-product
manufacturer and distributor are essential to develop a winning sales
and marketing strategy for BIOLASE. In the process of shifting our
approach, we view the Company's third quarter performance as the
lowest part in this cycle of radical change at BIOLASE, and we expect
a stronger fourth quarter and 2014 in all segments of our business,
primarily driven by our WaterLase product line. We are also
optimistic about the potential of several upcoming product launches,
including the Galaxy BioMill System, which was announced today. We
plan to introduce the Galaxy BioMill System, an in-office, chair-side
milling machine for dental implants, at the upcoming Greater New York
Dental Meeting, the largest dental congress and exposition in the
United States, which will be held from November 29 through December
4, 2013. 
"On the management side, one of the key changes that we have made was
to replace our Vice Presidents of both Sales and Marketing with an
industry veteran with significant experience and a successful track
record in sales and marketing for both dental lasers and digital
imaging systems, Brian Jaffe. Brian comes to BIOLASE from a direct
competitor, Millennium Dental Technologies, where he held the
position of Vice President of Global Sales. Prior to his role with
Millennium, Mr. Jaffe was the Vice President of Sales and Marketing
at Vatech America, a leading supplier of dental cone beam and digital
radiographic systems, and Suni Medical Systems, Inc., a pioneer in
digital radiography. We are enthusiastic with the depth and breadth
of knowledge that Brian brings to BIOLASE for global sales of both
dental lasers and digital radiography. 
"As a further step, our Board has authorized the Company to seek the
services of an investment bank to assist BIOLASE in exploring
possible M&A transactions with the goal of maximizing shareholder
value. We have already begun the process of interviewing and
evaluating several investment banks and while we cannot assure that
any particular opportunity will be pursued or that a transaction will
occur, the Company is currently valued at approximately one-times
revenues, and we believe that some of its assets could be worth
significantly more. With developmental pre-launch business
opportunities in ophthalmology, otolaryngology, orthopedics,
podiatry, pain management, and veterinary therapeutic laser products,
BIOLASE has more opportunities than we can pursue on our own. Selling
one or more of them could generate the funds that could give us the
working capital we need for our core businesses. 
"Lastly, given the current unsatisfactory performance of the business
and stock valuation, I have decided to refuse any Board proposed
option compensation this year. The Board has traditionally awarded me
equity compensation and, if offered, I will not accept it and remain
at my symbolic $1 annual salary," concluded Pignatelli. 
Alexander K. Arrow, M.D., President and Chief Operating Officer,
commented, "Our plan for reforming sales and marketing includes more
than just replacing some of our Vice Presidents. We have also
assigned five Sales Managers to regions that cover the United States
and Canada, a layer of sales management consistent with best
practices with sales forces of our size but something that BIOLASE
has not had in the past. These regional sales managers have histories
of success and will travel with our sales force and ensure that they
perform the things that sales representatives must do on a daily,
weekly, and monthly basis to be successful. We believe training and
closer management of these 'key performance indicators' will improve
the effectiveness of the sales force. The regional sales managers
will also be responsible for recruiting additional account managers
in their regions. 
"Another change in strategy has been our establishment of an
'imaging-specific' sales group to assist our laser sales force in
closing sales of digital radiography and CAD/CAM intra-oral scanners.
We began this recently as a pilot program in select geographic
regions and it has met with initial success. As such, we have hired
several imaging-specific sales specialists in recent weeks, and we
plan to hire several more during the fourth quarter. We are also
establishing an industry-specific sales team to address our entry
into the ENT market.  
"Operationally, we have developed cost re
duction plans that fall
within our costs of sales and sales and marketing expense categories,
which we have partially completed. These are having an effect in our
fourth quarter and we believe that they could be significant in 2014,
as well," concluded Dr. Arrow. 
For the nine months ended September 30, 2013, laser system net
revenue increased by approximately $90,000, as compared to the same
period of 2012, despite decreasing by approximately $2.0 million, or
20%, in the 2013 third quarter as compared to the prior year quarter. 
Fred Furry, CFO, commented, "Our third quarter results mask several
of the positives we have seen since the beginning of the year.
Contrary to the contraction of our U.S. laser sales, our
international laser sales were up 22% for the nine months ended
September 30, 2013, as compared to the same period in 2012. In
addition, imaging revenues were up 94% and consumables were up 9% in
the first nine months of 2013 as compared to the same period in 2012.
Our high-margin domestic sales in the third quarter were weak,
however, and as Messrs. Pignatelli and Arrow have noted, we believe
that we have taken steps to address this trend, such as the
establishment of a regional sales structure and contemplating
modifications to our sales incentive compensation program. As these
measures take effect, we believe our top line will strengthen and
grow." 
Imaging revenues, which included both cone beam digital imaging and
CAD/CAM intraoral scanners, totaled approximately $961,000, or 8% of
net revenue, during the 2013 third quarter as compared to $675,000,
or 5% of net revenue, for the prior year quarter. For the nine months
ended September 30, 2013, imaging revenues increased by approximately
$1.6 million, or 94%, as compared to the same period of 2012. The
increases for the three and nine months ended September 30, 2013,
were driven by increased sales efforts and increased equipment
offerings at various value propositions. 
Consumables and other net revenue, which includes consumable products
such as disposable tips, increased by approximately 8% for the 2013
third quarter as compared to the prior year quarter. For the nine
months ended September 30, 2013, consumables and other net revenue
increased by approximately 9%.  
Gross profit as a percentage of net revenue was 31% for the 2013
third quarter as compared to 46% for the prior year quarter. For the
nine months ended September 30, 2013, gross profit as a percentage of
net revenue was 37% as compared to 46% for the prior year period. The
quarter-over-quarter and year-over-year decreases were pr
imarily due
to higher sales of licensed imaging equipment, which generally carry
lower margins than our laser products, and increased international
laser sales, which generally carry a lower margin than our domestic
laser sales. In addition, we increased our reserve for excess and
obsolete inventory by $1 million during the third quarter due to
changes in market factors and the decreased velocity of our
inventory. 
"Our results for the third quarter and nine months ended September
30, 2013 include the effects from a charge of approximately $1
million to our reserve for excess and obsolete inventory during the
third quarter. This adjustment was based on negative market trends
that have impacted our ability to sell certain of our older products
and the decreased velocity of our inventory over the past several
measurement points. This one time charge is reflected in our cost of
sales for the third quarter and negatively impacted both our gross
profit and GAAP net losses for both the third quarter and nine months
ended September 30, 2013," concluded Furry. 
Operating expenses totaled $7.7 million, or 62% of net revenue for
the 2013 third quarter, as compared to $6.7 million, or 48% of net
revenue, in the 2012 third quarter. For the nine months ended
September 30, 2013, operating expenses totaled $24.2 million, or 59%
of net revenue, as compared with $21.3 million, or 56% of net
revenue, for the nine months ended September 30, 2012, an increase of
$2.9 million, or 13%. The quarter-over-quarter and year-over-year
increases were primarily driven by a substantial investment in our
sales and marketing efforts during 2013, legal expenses related to
enforcing and protecting our intellectual property portfolio and
class action lawsuits, and increases to our allowance for doubtful
accounts.  
Effective for sales beginning January 1, 2013, the Patient Protection
and Affordable Care Act imposed a 2.3% medical device excise tax on
certain product sales to customers located in the U.S. As a result,
we incurred excise tax expenses of $89,000, or 0.7% of net revenue,
for the 2013 third quarter and $308,000, or 0.8% of net revenue, for
the nine months ended September 30, 2013. 
Our net loss for the 2013 third quarter totaled approximately $4.0
million, or a loss of $0.13 per share, compared to a net loss of
$548,000, or a loss of $0.02 per share, for the 2012 third quarter.
After removing interest expense of $182,000, depreciation and
amortization expenses of $141,000, and stock-based, other equity
instruments, and other non-cash compensation expense of $554,000, the
2013 third quarter resulted in a non-GAAP net loss of $3.2 million,
or a loss of $0.10 per share, compared with non-GAAP net income of
$96,000, or income of $0.00 per share, for the 2012 third quarter.  
For the nine months ended September 30, 2013, our net loss totaled
approximately $9.2 million, or a loss of $0.29 per share, as compared
to a net loss of $4.1 million, or a loss of $0.13 per share, for the
nine months ended September 30, 2012. After removing interest expense
of $386,000, depreciation and amortization expenses of $439,000, and
stock-based, other equity instruments, and other non-cash
compensation expense of $1.5 million, the nine months ended September
30, 2013, resulted in a non-GAAP net loss of $6.9 million, or a loss
of $0.22 per share, compared with a non-GAAP net loss of $2.1
million, or a loss of $0.07 per share, for the nine months ended
September 30, 2012.  
On August 23, 2013 and August 26, 2013, two putative securities class
action lawsuits were filed against the Company and certain of our
officers and directors in the United States District Court for the
Central District of California. On October 22, 2013, four individual
plaintiffs each filed motions to consolidate these actions and to be
appointed as lead plaintiff pursuant to the Private Securities
Litigation Reform Act of 1995. Those motions are currently scheduled
to be heard on December 13, 2013. No other dates have been set. As of
September 30, 2013, we have accrued $250,000 for legal costs expected
to be incurred in connection with these matters. We believe that the
claims contained in the lawsuits are without merit and intend to
vigorously defend against the claims. 
Liquidity and Capital Resources
 As of September 30, 2013, BIOLASE
had approximately $5.0 million in working capital. Cash and cash
equivalents totaled approximately $4.2 million at September 30, 2013,
compared to $2.5 million at December 31, 2012.  
Net accounts receivable totaled $10.8 million at September 30, 2013,
compared to $11.7 million at December 31, 2012. At September 30,
2013, the Company had two revolving credit facilities totaling $8.0
million, with $2.5 million of available borrowings.  
On September 23, 2013, we entered into a subscription agreement with
Camber Capital Management, LLC, pursuant to which we agreed to sell
2,688,172 shares of its common stock at a price per share of $1.86
for gross proceeds of $5 million. The net pro
ceeds to the Company
were $4.6 million, after deducting associated costs of $408,000,
which included the placement agent fee of 5% to Northland Securities,
Inc. The shares of common stock sold were issued pursuant to a
prospectus supplement, which was filed with the Securities and
Exchange Commission (the "SEC") September 26, 2013, in connection
with a registration statement on Form S-3, as amended, which was
declared effective by the SEC on September 19, 2013. 
On November 8, 2013, we amended our two revolving credit agreements
with Comerica Bank to waive noncompliance with our minimum EBITDA
covenant for the quarter ended September 30, 2013, reset our EBITDA
covenant for the quarter ending December 31, 2013, and establish
covenants for the remaining term of the agreements. In connection
with this amendment, we issued Comerica Bank 100,000 warrants and
incurred an amendment fee of $10,000. Furthermore, the amendment
includes liquidity ratio and liquid asset covenants, and an equity
raise requirement that established March 1, 2014 as the latest date
by which the Company is required to raise at least $3.0 million.  
Financial Outlook
 The Company is reducing its net revenue guidance
for the year ending December 31, 2013 to a range of $57 million to
$59 million. 
Conference Call
 As previously announced, BIOLASE will hold a
conference call to discuss these financial results as follows: 
Date: 
 Monday, November 11, 2013 
Time: 
 4:30pm Eastern Time 
Dial-in numbers: 
 1-877-407-4019 (toll-free/U.S. & Canada) 
1-201-689-8337 (toll/international) 
Live webcast: 
 www.biolase.com, under 'Investors' 
The archived webcast will be available for 90 days on the Company's
website, www.biolase.com, in the 'Investors' section under 'Audio
Archive.'  
About BIOLASE, Inc.
 BIOLASE, Inc. is a biomedical company that
develops, manufactures, and markets innovative lasers in dentistry
and medicine and also markets and distributes high-end 2D and 3D
digital imaging equipment and CAD/CAM intraoral scanners; products
that are focused on technologies that advance the practice of
dentistry and medicine. The Company's proprietary laser products
incorporate approximately 300 patented and patent-pending
technologies designed to provide biologically clinically superior
performance with less pain and faster recovery times. Its innovative
products provide cutting-edge technology at competitive prices to
deliver the best results for dentists and patients. BIOLASE's
principal products are revolutionary dental laser systems that
perform a broad range of dental procedures, including cosmetic and
complex surgical applications, and a full line of dental imaging
equipment. BIOLASE has sold more than 23,900 lasers. Other laser
products under development address ophthalmology and other medical
and consumer markets. 
For updates and information on WaterLase and laser dentistry, find
BIOLASE online at www.biolase.com, Facebook at
www.facebook.com/biolase, Twitter at www.twitter.com/biolaseinc,
Pinterest at www.pinterest.com/biolase, LinkedIn at
www.linkedin.com/company/biolase, Google+ at
www.google.com/+BIOLASEIrvine, Instagram at
www.instagram.com/biolaseinc and YouTube at
www.youtube.com/biolasevideos.  
BIOLASE(R), WaterLase(R), iPlus(R), EPIC(TM), Galaxy(TM), and
BioMill(TM) are all registered trademarks or trademarks of BIOLASE,
Inc. 
Non-GAAP Financial Measures
 The non-GAAP financial measures
contained herein are a supplement to the corresponding financial
measures prepared in accordance with generally accepted accounting
principles ("GAAP"). The non-GAAP financial measures presented
exclude the items summarized in the table on page 12 of this press
release. Management believes that adjustments for these items assist
investors in making comparisons of period-to-period operating results
and that these items are not indicative of the Company's on-going
core operating performance.  
Management uses non-GAAP net (loss) income and non-GAAP net (loss)
income per basic a
nd diluted share in its evaluation of the Company's
core after-tax results of operations and trends between fiscal
periods and believes that these measures are important components of
its internal performance measurement process. Management believes
that providing these non-GAAP financial measures allows investors to
view the Company's financial results in the way that management views
the financial results.  
The non-GAAP financial measures presented herein have certain
limitations in that they do not reflect all of the costs associated
with the operations of the Company's 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. The non-GAAP financial measures presented by the Company
may be different from the non-GAAP financial measures used by other
companies.  
Safe Harbor Statement under the Private Securities Litigation Reform
Act of 1995
 Statements contained in this press release that refer to
BIOLASE's estimated or anticipated future results or other
non-historical facts are forward-looking statements, as are any
statements in this press release concerning prospects related to
BIOLASE's strategic initiatives, product introductions and
anticipated financial performance. Forward-looking statements can
also be identified through the use of words such as "anticipates,"
"expects," "intends," "plans," "believes," "seeks," "estimates,"
"may," "will," and variations of these words or similar expressions.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect BIOLASE's current
perspective of existing trends and information and speak only as of
the date of this release. Actual results may differ materially from
BIOLASE's current expectations depending upon a number of factors
affecting BIOLASE's business. These factors include, among others,
adverse changes in general economic and market conditions,
competitive factors including but not limited to pricing pressures
and new product introductions, uncertainty of customer acceptance of
new product offerings and market changes, risks associated with
managing the growth of the business, and those other risks and
uncertainties that may be detailed, from time-to-time, in BIOLASE's
reports filed with the SEC. BIOLASE does not undertake any
responsibility to revise or update any forward-looking statements
contained herein.  


 
                                                                            
                               BIOLASE, INC.                                
                                                                            
                   CONSOLIDATED STATEMENTS OF OPERATIONS                    
              (unaudited, in thousands, except per share data)              
                                                                            
                                  Three Months Ended     Nine Months Ended  
                                     September 30,         September 30,    
                                 --------------------  -------------------- 
                                    2013       2012       2013       2012   
                                 ---------  ---------  ---------  --------- 
                                                                            
Product and services revenue     $  12,311  $  13,710  $  41,008  $  38,147 
License fees and royalty revenue        34         71        181        129 
                                 ---------  ---------  ---------  --------- 
  Net revenue                       12,345     13,781     41,189     38,276 
Cost of revenue                      8,516      7,500     26,005     20,688 
                                 ---------  ---------  ---------  --------- 
Gross profit                         3,829      6,281     15,184     17,588 
                       
          ---------  ---------  ---------  --------- 
Operating expenses:                                                         
  Sales and marketing                4,164      3,635     13,554     11,383 
  General and administrative         2,460      1,839      7,305      6,271 
  Engineering and development          977      1,195      2,987      3,657 
  Excise tax                            89         --        308         -- 
                                 ---------  ---------  ---------  --------- 
    Total operating expenses         7,690      6,669     24,154     21,311 
                                 ---------  ---------  ---------  --------- 
Loss from operations                (3,861)      (388)    (8,970)    (3,723)
                                 ---------  ---------  ---------  --------- 
Gain (loss) on foreign currency                                             
 transactions                           16        (28)       (74)      (137)
Interest expense, net                 (182)       (98)      (386)      (140)
                                 ---------  ---------  ---------  --------- 
Non-operating loss, net               (166)      (126)      (460)      (277)
                                 ---------  ---------  ---------  --------- 
Loss before income tax (benefit)                                            
 provision                          (4,027)      (514)    (9,430)    (4,000)
Income tax (benefit) provision          22         34       (182)        97 
                                 ---------  ---------  ---------  --------- 
Net loss                         $  (4,049) $    (548) $  (9,248) $  (4,097)
                                 =========  =========  =========  ========= 
                                                                            
Net loss per share:                                                         
  Basic                          $   (0.13) $   (0.02) $   (0.29) $   (0.13)
                                 =========  =========  =========  ========= 
  Diluted                        $   (0.13) $   (0.02) $   (0.29) $   (0.13)
                                 =========  =========  =========  ========= 
Shares used in the calculation                                              
 of net loss per share:                                                     
  Basic                             32,367     31,890     32,062     31,803 
                                 =========  =========  =========  ========= 
  Diluted                           32,367     31,890     32,062     31,803 
                                 =========  =========  =========  ========= 
                                                                            
                                                                            

 
                                                                            
                               BIOLASE, INC.                                
                                                                            
                        CONSOLIDATED BALANCE SHEETS                         
              (unaudited, in thousands, except per share data)              
                                                                            
                                              September 30,   December 31,  
                                                  2013            2012      
                                             --------------  -------------- 
                   ASSETS                                                   
Current assets:                                                             
  Cash and cash equivalents                  $        4,151  $        2,543 
  Accounts receivable, less allowance of                                    
   $554 in 2013 and $304 in 2012                     10,802          11,680 
  Inventory, net                                     11,745          11,142 
  Prepaid expenses and other current assets           1,062           1,552 
                                             --------------  -------------- 
    Total current assets                             27,760          26,917 
Property, plant, and equipment, net                   1,711           1,509 
Intangible assets, net                                  200             300 
Goodwill                                              2,926           2,926 
Deferred tax asset                                       16              16 
Other assets                                            246             305 
                                             --------------  -------------- 
    Total assets                             $       32,859  $       31,973 
                                             ==============  ============== 
                                                                            
    LIABILITIES AND STOCKHOLDERS' EQUITY                                    
                  (DEFICIT)                                  
               
Current liabilities:                                                        
  Lines of credit                            $        5,534  $        1,637 
  Accounts payable                                    9,346           7,663 
  Accrued liabilities                                 4,484           6,267 
  Customer deposits                                     174             582 
  Deferred revenue, current portion                   3,184           3,226 
                                             --------------  -------------- 
    Total current liabilities                        22,722          19,375 
Deferred tax liabilities                                602             663 
Other liabilities, long-term                             34             141 
                                             --------------  -------------- 
    Total liabilities                                23,358          20,179 
                                             --------------  -------------- 
Stockholders' equity (deficit):                                             
  Preferred stock, par value $0.001                      --              -- 
  Common stock, par value $0.001                         37              34 
  Additional paid-in capital                        147,676         140,747 
  Accumulated other comprehensive loss                 (297)           (320)
  Accumulated deficit                              (121,516)       (112,268)
                                             --------------  -------------- 
                                                     25,900          28,193 
  Treasury stock (cost of 1,964 shares                                      
   repurchased)                                     (16,399)        (16,399)
                                             --------------  -------------- 
    Total Stockholders' equity                        9,501          11,794 
                                             --------------  -------------- 
    Total liabilities and stockholders'                                     
     equity                                  $       32,859  $       31,973 
                                             ==============  ============== 
                                                                            
                                                                            
                                                                            
                               BIOLASE, INC.                                
                                                                            
  Reconciliation of GAAP Financial Results to Non-GAAP Financial Measures   
              (unaudited, in thousands, except per share data)              
                                                                            
                                  Three Months Ended     Nine Months Ended  
                                     September 30,         September 30,    
                                 --------------------  -------------------- 
                                    2013       2012       2013       2012   
                                 ---------  ---------  ---------  --------- 
                                                                            
GAAP net loss                    $  (4,049) $    (548) $  (9,248) $  (4,097)
Adjustments:                                                                
  Interest expense                     182         98        386        140 
  Depreciation and amortization                                             
   expense                             141        126        439        373 
  Stock-based, other equity                                                 
   instruments, and other non-                                              
   cash compensation expense           554        420      1,490      1,490 
                                 ---------  ---------  ---------  --------- 
Non-GAAP net (loss) inc
ome       $  (3,172) $      96  $  (6,933) $  (2,094)
                                 =========  =========  =========  ========= 
                                                                            
GAAP net loss per share, basic                                              
 and diluted                     $   (0.13) $   (0.02) $   (0.29) $   (0.13)
Adjustments:                                                                
  Interest expense                    0.01       0.00       0.01       0.00 
  Depreciation and amortization                                             
   expense                            0.00       0.00       0.01       0.01 
  Stock-based, other equity                                                 
   instruments, and other non-                                              
   cash compensation expense          0.02       0.02       0.05       0.05 
                                 ---------  ---------  ---------  --------- 
Non-GAAP net (loss) income per                                              
 share, basic and diluted        $   (0.10) $    0.00  $   (0.22) $   (0.07)
                                 =========  =========  =========  ========= 

  
For further information, please contact: 
Michael Porter 
Porter, LeVay & Rose, Inc. 
212-564-4700