BIOLASE(BIOL) - 2024 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis ITEM 1. FINANCIAL STATEMENTS This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, equity, cash flows, and detailed notes Condensed Consolidated Balance Sheets Total assets decreased to $30,641 thousand, liabilities slightly decreased, and stockholders' deficit widened to $(4,329) thousand | Date | Amount (in thousands) | | :--- | :--- | | June 30, 2024 | $30,641 | | December 31, 2023 | $35,101 | | Date | Amount (in thousands) | | :--- | :--- | | June 30, 2024 | $32,767 | | December 31, 2023 | $33,145 | | Date | Amount (in thousands) | | :--- | :--- | | June 30, 2024 | $(4,329) | | December 31, 2023 | $(247) | - Current liabilities increased significantly from $19.663 million at December 31, 2023, to $31.176 million at June 30, 2024, primarily due to the reclassification of term loans to the current portion[6][86] Condensed Consolidated Statements of Operations and Comprehensive Loss Net revenue decreased, while net loss attributable to common stockholders improved for both three and six months ended June 30, 2024 Net Revenue (in thousands) | Period | 2024 (in thousands) | 2023 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $11,555 | $14,286 | $(2,731) (-19.1%) | | Six Months Ended June 30 | $21,687 | $24,753 | $(3,066) (-12.4%) | Gross Profit (in thousands) | Period | 2024 (in thousands) | 2023 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $4,609 | $6,118 | $(1,509) (-24.7%) | | Six Months Ended June 30 | $7,946 | $9,454 | $(1,508) (-16.0%) | Net Loss Attributable to Common Stockholders (in thousands) | Period | 2024 (in thousands) | 2023 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $(2,798) | $(14,245) | $11,447 (Improved) | | Six Months Ended June 30 | $(9,283) | $(20,094) | $10,811 (Improved) | Basic and Diluted Net Loss Per Share | Period | 2024 | 2023 | | :--- | :--- | :--- | | Three Months Ended June 30 | $(0.08) | $(26.14) | | Six Months Ended June 30 | $(0.36) | $(45.98) | Condensed Consolidated Statements of Convertible Redeemable Preferred Stock and Stockholders' Equity (Deficit) Total stockholders' deficit widened to $(4,329) thousand by June 30, 2024, driven by net losses and currency adjustments Total Stockholders' Equity (Deficit) (in thousands) | Date | Amount (in thousands) | | :--- | :--- | | June 30, 2024 | $(4,329) | | December 31, 2023 | $(247) | - Common Stock Shares Outstanding increased from 3,416 thousand at December 31, 2023, to 33,406 thousand at June 30, 2024[10] - Additional Paid-in Capital increased from $317.103 million to $322.380 million[10] - Accumulated Deficit increased from $(316.800) million to $(326.083) million[10] Condensed Consolidated Statements of Cash Flows Net cash and cash equivalents decreased by $1,294 thousand for H1 2024, mainly from operating activities, partially offset by financing Net Cash Flows Used in Operating Activities (in thousands) | Period | 2024 (in thousands) | 2023 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Six Months Ended June 30 | $(6,672) | $(9,220) | $2,548 (Improved) | Net Cash Flows Provided by (Used in) Investing Activities (in thousands) | Period | 2024 (in thousands) | 2023 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Six Months Ended June 30 | $257 | $(944) | $1,201 (Improved) | Net Cash Flows Provided by Financing Activities (in thousands) | Period | 2024 (in thousands) | 2023 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Six Months Ended June 30 | $5,219 | $12,793 | $(7,574) (Decreased) | Net Change in Cash and Cash Equivalents (in thousands) | Period | 2024 (in thousands) | 2023 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Six Months Ended June 30 | $(1,294) | $2,749 | $(4,043) (Decreased) | Notes to Condensed Consolidated Financial Statements Detailed notes explain financial statements, covering business, accounting policies, revenue, equity, debt, leases, segments, and taxes NOTE 1—DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION BIOLASE faces substantial doubt about its going concern ability due to recurring losses, cash usage, and Nasdaq delisting - BIOLASE is a leading provider of advanced laser systems for the dental industry, developing, manufacturing, marketing, and selling proprietary systems for minimally invasive dental procedures[13] - The company incurred losses from operations and used cash in operating activities for the three and six months ended June 30, 2024, and for the years ended December 31, 2023 and 2022[19] - The company's recurring losses, cash usage, and difficulty raising additional capital (exacerbated by Nasdaq delisting) raise substantial doubt about its ability to continue as a going concern[19] - As of June 30, 2024, the company had a working capital deficit of approximately $9.1 million, with $5.3 million in cash and cash equivalents[20] NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the company's significant accounting policies, fair value measurements, and the impact of a new income tax disclosure standard - Significant estimates in financial statements include allowances on accounts receivable, inventory, deferred taxes, warranty expenses, goodwill, revenue deferrals, stock-based compensation, warrants, and contingent liabilities[22] - No significant changes in critical accounting policies during the six months ended June 30, 2024, from those disclosed in the 2023 Form 10-K[23] - The company's financial instruments (cash, accounts receivable, accounts payable, accrued liabilities, warrants, and SWK Loan) approximate fair value due to short maturity and market interest rates[25] - ASU No. 2023-09, effective for the company in 2025, requires enhanced income tax disclosures but is not expected to materially impact the company's consolidated financial position and results of operations[29] NOTE 3—REVENUE RECOGNITION Revenue is primarily recognized at a single point in time upon product shipment, with a smaller portion recognized over time for services Revenue Recognition Timing (in thousands) | Period | Revenue recognized over time (2024) | Revenue recognized at a point in time (2024) | Revenue recognized over time (2023) | Revenue recognized at a point in time (2023) | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $1,713 (14.8%) | $9,842 (85.2%) | $1,415 (9.9%) | $12,871 (90.1%) | | Six Months Ended June 30 | $3,201 (14.8%) | $18,486 (85.2%) | $2,584 (10.4%) | $22,169 (89.6%) | Revenue by Geographic Area (in thousands) | Period | United States (2024) | International (2024) | United States (2023) | International (2023) | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $8,240 (71.3%) | $3,315 (28.7%) | $10,741 (75.2%) | $3,545 (24.8%) | | Six Months Ended June 30 | $14,930 (68.8%) | $6,757 (31.2%) | $17,499 (70.7%) | $7,254 (29.3%) | - Total deferred revenue was $2.318 million as of June 30, 2024, down from $2.708 million as of December 31, 2023[38] NOTE 4—CONVERTIBLE REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) This note details preferred and common stock activities, including issuances, conversions, warrant exercises, and stock-based compensation - As of June 30, 2024, 17,136 shares of Series J Convertible Preferred Stock were outstanding, with 70,965 shares converted to approximately 2.2 million common shares[49] - As of June 30, 2024, 6,923 shares of Series H Convertible Preferred Stock were outstanding, with 190,000 shares converted to approximately 0.7 million common shares[55] Stock-Based Compensation Expense (in thousands) | Period | 2024 | 2023 | | :--- | :--- | :--- | | Three Months Ended June 30 | $(46) (gain) | $84 (expense) | | Six Months Ended June 30 | $67 (expense) | $775 (expense) | Warrants Outstanding (Share Equivalent, in thousands) | Date | Shares | Weighted Average Exercise Price | | :--- | :--- | :--- | | December 31, 2023 | 4,323 | $11.88 | | Granted or Issued (6 months to June 30, 2024) | 42,427 | $0.57 | | Exercised (6 months to June 30, 2024) | (22,874) | $— | | June 30, 2024 | 23,876 | $2.52 | - The February 2024 Public Offering issued 7,795,000 units (common stock + Class A & B warrants) and 8,205,000 pre-funded units (pre-funded warrants + Class A & B warrants), generating gross proceeds of approximately $7.0 million[61] NOTE 5—INVENTORY Total inventory decreased to $10,904 thousand at June 30, 2024, with estimates for excess and obsolete amounts reducing inventory by $2.3 million Inventory Composition (in thousands) | Category | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Raw materials | $5,528 | $6,168 | | Work-in-process | $1,514 | $1,299 | | Finished goods | $3,862 | $3,966 | | Total Inventory | $10,904 | $11,433 | - Inventory was reduced by estimates for excess and obsolete amounts totaling $2.3 million as of June 30, 2024, and $2.5 million as of December 31, 2023[77] NOTE 6—PROPERTY, PLANT, AND EQUIPMENT Net property, plant, and equipment decreased to $4,263 thousand at June 30, 2024, with depreciation expense of $1.3 million for H1 2024 Property, Plant, and Equipment, Net (in thousands) | Date | Amount | | :--- | :--- | | June 30, 2024 | $4,263 | | December 31, 2023 | $5,525 | Depreciation Expense (in thousands) | Period | 2024 | 2023 | | :--- | :--- | :--- | | Three Months Ended June 30 | $700 | $1,400 | | Six Months Ended June 30 | $1,300 | $1,600 | NOTE 7—INTANGIBLE ASSETS AND GOODWILL Goodwill remained at $2.9 million with no impairment, and no amortization expense was recognized as all intangible assets are fully amortized - Goodwill (indefinite life) was $2.9 million as of June 30, 2024, and December 31, 2023[81] - No impairment was identified in the annual impairment test as of September 30, 2023, or in a quantitative assessment during Q4 2023[80] - No amortization expense was recognized for intangible assets during the three and six months ended June 30, 2024 and 2023, as all such assets are fully amortized[81] NOTE 8—ACCRUED LIABILITIES Accrued liabilities increased slightly to $7,662 thousand at June 30, 2024, primarily due to higher payroll and professional services Accrued Liabilities (in thousands) | Category | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Payroll and benefits | $3,640 | $3,343 | | Warranty accrual, current portion | $1,000 | $1,321 | | Operating lease liability | $904 | $888 | | Accrued professional services | $994 | $422 | | Taxes | $349 | $452 | | Accrued insurance premium | $161 | $473 | | Other | $614 | $619 | | Total Accrued Liabilities | $7,662 | $7,518 | Warranty Accrual Balance (in thousands) | Period | June 30, 2024 | June 30, 2023 | | :--- | :--- | :--- | | Balance, beginning of period (6 months) | $1,914 | $1,653 | | Provision for estimated warranty cost (6 months) | $1,487 | $1,960 | | Warranty expenditures (6 months) | $(1,558) | $(1,841) | | Balance, end of period | $1,843 | $1,772 | NOTE 9—DEBT Total debt, net of discount, was $13,425 thousand at June 30, 2024, with the SWK Loan reclassified to current liabilities due to its May 2025 maturity Debt Details (in thousands) | Category | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | SWK Loan (principal) | $13,695 | $14,560 | | EIDL Loan (principal) | $150 | $150 | | Discount and debt issuance costs | $(420) | $(663) | | Total Debt | $13,425 | $14,047 | Current vs. Non-Current Term Loans (in thousands) | Category | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Current term loans | $13,275 | $2,265 | | Non-current term loans, net of discount | $150 | $11,782 | Interest Expense, Net (in thousands) | Period | 2024 | 2023 | | :--- | :--- | :--- | | Three Months Ended June 30 | $586 | $583 | | Six Months Ended June 30 | $1,208 | $1,160 | - The weighted-average interest rate as of June 30, 2024, was 14.59%[85] - The SWK Loan's remaining long-term balances were reclassified to current liabilities due to its May 31, 2025, maturity date[86] NOTE 10—LEASES Right-of-use assets were $1.1 million and total lease liabilities were $1.2 million as of June 30, 2024, with most obligations due in 2024 and 2025 Right-of-Use Assets and Lease Liabilities (in thousands) | Date | Right-of-Use Assets | Total Lease Liabilities | | :--- | :--- | :--- | | June 30, 2024 | $1,101 | $1,219 | Maturities of Lease Liabilities (in thousands) | Year | Amount | | :--- | :--- | | Remainder of 2024 | $919 | | 2025 | $410 | | 2026 | $1 | | Total future minimum lease obligations | $1,330 | - The weighted-average remaining lease term was 1.4 years as of June 30, 2024[90] - The weighted-average discount rate was 12.3% as of June 30, 2024[90] NOTE 11—SEGMENT INFORMATION The company operates in a single business segment, with 69% of H1 2024 net revenue from the United States and 31% from international sales - The company operates in a single business segment[93] Net Revenue by Geographic Location (in thousands) | Period | United States (2024) | International (2024) | United States (2023) | International (2023) | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $8,240 (71%) | $3,315 (29%) | $10,741 (75%) | $3,545 (25%) | | Six Months Ended June 30 | $14,930 (69%) | $6,757 (31%) | $17,499 (71%) | $7,254 (29%) | Property, Plant, and Equipment by Geographic Location (in thousands) | Date | United States | International | Total | | :--- | :--- | :--- | :--- | | June 30, 2024 | $4,035 | $228 | $4,263 | | December 31, 2023 | $5,283 | $242 | $5,525 | NOTE 12—CONCENTRATIONS Revenue is primarily from laser systems (52% for Q2 2024) and consumables (33%), with no single customer exceeding 10% of revenue Revenue by Product Category (in thousands) | Category | Q2 2024 | % of Total | Q2 2023 | % of Total | H1 2024 | % of Total | H1 2023 | % of Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Laser systems | $6,007 | 52.0% | $8,754 | 61.3% | $11,182 | 51.6% | $15,019 | 60.7% | | Consumables and other | $3,835 | 33.2% | $4,117 | 28.8% | $7,304 | 33.6% | $7,150 | 28.9% | | Services | $1,713 | 14.8% | $1,415 | 9.9% | $3,201 | 14.8% | $2,584 | 10.4% | | Net Revenue | $11,555 | 100.0% | $14,286 | 100.0% | $21,687 | 100.0% | $24,753 | 100.0% | - No individual customer represented more than 10% of the company's revenue for the three and six months ended June 30, 2024 or 2023[97] - The company purchases certain key components from single suppliers, posing a risk of manufacturing delays and sales loss if suppliers change[98] NOTE 13—INCOME TAXES The company maintains a full valuation allowance against its net deferred tax assets, resulting in effective tax rates significantly lower than the statutory rate - The company has a full valuation allowance against its net deferred tax assets due to net losses in prior years[99] Income Tax Provision (in thousands) | Period | 2024 | 2023 | Effective Tax Rate (2024) | Effective Tax Rate (2023) | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $20 | $31 | 0.7% | 0.6% | | Six Months Ended June 30 | $40 | $31 | 0.4% | 0.3% | - The effective tax rate differs from the statutory rate of 21% primarily due to the valuation allowance and current liabilities from estimated state and foreign tax liabilities[101] NOTE 14—SUBSEQUENT EVENTS On July 16, 2024, the company issued 3,190,476 common shares in exchange for Series J Preferred Stock and Warrants under a Section 3(a)(9) exemption - On July 16, 2024, the company issued 3,190,476 common shares in exchange for 2,546 Series J Preferred Stock and 8,000 Series J Preferred Warrants[102] - The exchange was exempt from registration requirements under Section 3(a)(9) of the Securities Act of 1933, as amended, and involved no proceeds or commissions[103] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the company's financial condition, operational results, liquidity, and capital resources Overview BIOLASE, Inc. is a leading provider of advanced dental laser systems, holding approximately 241 active patents and having sold over 47,700 systems globally - BIOLASE is a leading provider of advanced laser systems for the dental industry, specializing in minimally invasive dental procedures[108] - The company offers Waterlase (all-tissue) and diode (soft-tissue) laser systems, with Waterlase cleared for over 80 clinical indications[109] - As of December 31, 2023, BIOLASE maintained approximately 241 active U.S. and international patents[109] - Over 47,700 laser systems have been sold in more than 80 countries since 1998[109] Business and Outlook The company's strategy focuses on increasing demand for its dental laser systems and consumables, with a forecast for fiscal year 2024 revenue to exceed 2023 - The company's strategy is to increase awareness and demand for its products among dental practitioners and patients, emphasizing clinical benefits[114] - A key goal is to increase consumables revenue by selling more single-use accessories[114] - Plans include expanding product lines and clinical applications through enhancements and transformational innovations, exploring adjacent medical applications (e.g., ophthalmology, orthopedics)[115] - Revenue declined by 19% for Q2 2024 and 12% for H1 2024 compared to the same periods in 2023, primarily due to decreased laser system sales from macro-economic factors like increased interest rates[116][130][137] - The company forecasts revenue for fiscal year 2024 to be above fiscal year 2023[116] Recent Developments BIOLASE's common stock was delisted from Nasdaq on June 20, 2024, and now trades on the OTC Markets (OTCQB) following a $7.0 million public offering in February 2024 - Nasdaq delisted the company's common stock, with trading suspended on June 20, 2024, due to non-compliance with bid price and equity requirements[116][117] - The company's common stock now trades on the OTC Markets (OTCQB) under the symbol "BIOL"[117] - A February 2024 public offering issued 7,795,000 units and 8,205,000 pre-funded units, generating approximately $7.0 million in gross proceeds[118] - The February 2024 offering triggered anti-dilution provisions, reducing the exercise price of December 2023 Warrants to $0.2256 per share[120] Critical Accounting Estimates The company's critical accounting policies, involving significant estimates and judgments, remain unchanged from those disclosed in the 2023 Form 10-K - No significant changes in critical accounting policies during the six months ended June 30, 2024, from those disclosed in the 2023 Form 10-K[121] Results of Operations Net revenue decreased, gross profit declined, and operating expenses decreased, while net loss improved significantly due to non-operating income Net Revenue (in thousands) | Period | 2024 (in thousands) | 2023 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $11,555 | $14,286 | $(2,731) (-19.1%) | | Six Months Ended June 30 | $21,687 | $24,753 | $(3,066) (-12.4%) | Gross Profit (in thousands) | Period | 2024 (in thousands) | 2023 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $4,609 (39.9% of revenue) | $6,118 (42.8% of revenue) | $(1,509) (-24.7%) | | Six Months Ended June 30 | $7,946 (36.6% of revenue) | $9,454 (38.2% of revenue) | $(1,508) (-16.0%) | Total Operating Expenses (in thousands) | Period | 2024 (in thousands) | 2023 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $7,829 (67.8% of revenue) | $9,990 (69.9% of revenue) | $(2,161) (-21.6%) | | Six Months Ended June 30 | $15,691 (72.4% of revenue) | $18,618 (75.3% of revenue) | $(2,927) (-15.7%) | Net Loss (in thousands) | Period | 2024 (in thousands) | 2023 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $(2,798) | $(4,868) | $2,070 (Improved) | | Six Months Ended June 30 | $(9,283) | $(10,717) | $1,434 (Improved) | Non-GAAP Disclosure The company provides non-GAAP financial measures, specifically Adjusted EBITDA, to offer investors greater transparency and facilitate period-to-period comparisons of core operating results - Non-GAAP financial measures, like Adjusted EBITDA, are provided to assist investors in comparing period-to-period operating results and understanding ongoing core performance[123] - Adjusted EBITDA is defined as net loss before interest, taxes, depreciation, stock-based and other non-cash compensation, severance expense, change in allowance for doubtful accounts, increase in inventory reserves, stock warrant issuance costs, and loss on warrants[125] - Non-GAAP measures have limitations and should be considered in addition to, not as a substitute for, GAAP measures[124] Adjusted EBITDA Adjusted EBITDA for Q2 2024 was $(2.545) million, a slight decrease, while H1 2024 Adjusted EBITDA was $(6.074) million, an improvement from 2023 Adjusted EBITDA (in thousands) | Period | 2024 | 2023 | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $(2,545) | $(2,311) | $(234) (Decreased) | | Six Months Ended June 30 | $(6,074) | $(6,760) | $686 (Improved) | - GAAP net loss attributable to common stockholders for the three months ended June 30, 2024, was $(2,798) thousand, compared to $(14,245) thousand in 2023[127] - GAAP net loss attributable to common stockholders for the six months ended June 30, 2024, was $(9,283) thousand, compared to $(20,094) thousand in 2023[127] Comparison of Results of Operations This section provides a detailed comparison of the company's financial performance for the three and six months ended June 30, 2024, versus the same periods in 2023 Three Months Ended June 30, 2024 Compared with Three Months Ended June 30, 2023 Net revenue decreased by 19% to $11.6 million, gross profit declined by 24.7%, and total operating expenses decreased by 21.6% - Net revenue decreased by $2.7 million (19%) to $11.6 million, primarily due to decreased laser systems sales from macro-economic environment and increased interest rates[128][130] - Gross profit decreased by $1.5 million (24.7%) to $4.6 million. Gross profit margin decreased by 3% to 39.9%, mainly due to higher warranty/freight expenses and unfavorable fixed expense absorption[130] - Sales and marketing expense decreased by $2.5 million (40%) to $3.7 million, driven by $1.1 million lower compensation costs, $0.9 million decrease in depreciation, and $0.4 million decrease in other expenses[131] - General and administrative expense increased by $0.7 million (30%) to $3.1 million, primarily due to $0.5 million higher legal, audit, and consulting expenses and $0.2 million increase in accruals for a new performance award program[132] - Engineering and development expense decreased by $0.4 million (26%) to $1.1 million, due to $0.2 million lower compensation costs and $0.2 million decrease in legal/consulting fees from fewer engineering projects[132] Six Months Ended June 30, 2024 Compared with Six Months Ended June 30, 2023 Net revenue decreased by 12% to $21.7 million, gross profit declined by 16%, and total operating expenses decreased by 15.7% - Net revenue decreased by $3.1 million (12%) to $21.7 million, primarily due to decreased laser systems sales, partially offset by increased consumables and other revenue[135][137] - Gross profit decreased by $1.5 million (16%) to $7.9 million. Gross profit margin decreased by 1% to 36.6%, mainly due to higher warranty/freight expenses and unfavorable fixed expense absorption[137][138] - Sales and marketing expense decreased by $3.7 million (34%) to $7.1 million, due to $1.8 million lower compensation, $0.8 million decrease in depreciation, and $0.8 million decrease in other expenses[139] - General and administrative expense increased by $1.4 million (30%) to $6.3 million, primarily due to $0.9 million higher legal, audit, and consulting expenses and $0.5 million increase in accruals for a new performance award program[140] - Engineering and development expense decreased by $0.6 million (21%) to $2.4 million, due to $0.2 million lower compensation costs and $0.4 million decrease in legal/consulting fees from fewer engineering projects[140] Non-Operating Income (Loss) Q2 2024 saw $1.1 million in other income, mainly from warrant revaluation, while H1 2024 had $0.1 million in other expense, including warrant issuance costs - Other Income (Expense), Net (Three Months): $1.1 million income in Q2 2024, primarily from $1.0 million gains on revaluation of liability-classified stock warrants and $0.1 million gains on fixed asset disposal[134] - Other Income (Expense), Net (Six Months): $(0.1) million expense in H1 2024, including $0.8 million issuance costs for February 2024 public offering warrants, partially offset by $0.5 million gains on warrant revaluation and $0.2 million gains on fixed asset disposal[142] Loss on Foreign Currency Transactions (in thousands) | Period | 2024 | 2023 | | :--- | :--- | :--- | | Three Months Ended June 30 | $(112) | $(235) | | Six Months Ended June 30 | $(208) | $(215) | Interest Expense, Net (in thousands) | Period | 2024 | 2023 | | :--- | :--- | :--- | | Three Months Ended June 30 | $(586) | $(583) | | Six Months Ended June 30 | $(1,208) | $(1,160) | Net Loss The net loss for Q2 2024 was $2.8 million, an improvement from $4.9 million in the prior year, with H1 2024 net loss also improving to $9.3 million Net Loss (in thousands) | Period | 2024 | 2023 | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $(2,798) | $(4,868) | $2,070 (Improved) | | Six Months Ended June 30 | $(9,283) | $(10,717) | $1,434 (Improved) | Liquidity and Capital Resources - Going Concern The company had $5.3 million in cash and a $9.1 million working capital deficit as of June 30, 2024, raising substantial doubt about its ability to continue as a going concern - Cash and Cash Equivalents: $5.3 million as of June 30, 2024, down from $6.6 million at December 31, 2023[144] - Working Capital Deficit: Approximately $9.1 million as of June 30, 2024[149] Net Cash Flows (Six Months Ended June 30, in thousands) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Operating Activities | $(6,672) | $(9,220) | | Investing Activities | $257 | $(944) | | Financing Activities | $5,219 | $12,793 | | Net Change in Cash | $(1,294) | $2,749 | - Recurring losses, cash usage, and challenges in raising capital (exacerbated by Nasdaq delisting) raise substantial doubt about the company's ability to continue as a going concern[151] - The company needs to raise additional capital or significantly increase sales and reduce expenses to continue operations beyond the next 12 months[151] Term Loan This section incorporates by reference the details of the SWK Loan from Note 9, including its principal outstanding, maturity date, and compliance with debt covenants - Refers to Note 9 for details on the SWK Loan, including its $13.3 million principal outstanding as of June 30, 2024, and May 2025 maturity[86][152] - The company was in compliance with debt covenants as of June 30, 2024[87] EIDL Loan This section incorporates by reference the details of the EIDL Loan from Note 9, including its principal amount, interest rate, and payment schedule - Refers to Note 9 for details on the EIDL Loan, including its $150,000 principal amount, 3.75% interest rate, and monthly payments through July 2050[88][152] February 2024 Public Offering This section reiterates the details of the February 2024 public offering, which generated approximately $7.0 million in gross proceeds from the issuance of units and pre-funded units - Reiterates the February 2024 public offering, which generated approximately $7.0 million in gross proceeds from the issuance of 7,795,000 units and 8,205,000 pre-funded units[152] Recent Accounting Pronouncements This section refers to Note 2 for a description of recently issued and adopted accounting pronouncements, their adoption dates, and expected effects on the company's financial results - Refers to Note 2 for details on recent accounting pronouncements, their adoption dates, and expected effects on financial results[153] Additional Information This section lists various registered trademarks and trademarks owned by BIOLASE, Inc - Lists several registered trademarks and trademarks owned by BIOLASE, Inc., including Waterlase®, Epic®, and WCLI®[154] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The company states that quantitative and qualitative disclosures about market risk are "Not applicable" - The company states that quantitative and qualitative disclosures about market risk are "Not applicable"[154] ITEM 4. CONTROLS AND PROCEDURES Management concluded that disclosure controls were effective as of June 30, 2024, despite a prior material weakness in net loss per share calculations - Management concluded that disclosure controls and procedures were effective as of June 30, 2024[155] - A material weakness was identified in internal control over financial reporting regarding the proper presentation of net loss per share attributable to common stockholders for unique and complex transactions in prior periods[156] - Remediation efforts include implementing additional controls to ensure sufficient investigation and documentation of complex transactions and engaging technical experts[158] PART II. OTHER INFORMATION This section provides other information, including legal proceedings, risk factors, and exhibits ITEM 1. LEGAL PROCEEDINGS The company is involved in a patent infringement lawsuit filed by PIPStek, LLC, alleging infringement of its Waterlase dental laser product, with trial set for May 12, 2025 - BIOLASE is a defendant in a patent infringement lawsuit filed by PIPStek, LLC, concerning its Waterlase dental laser product[159] - The lawsuit alleges infringement of two (later three) PIPStek patents and seeks unspecified damages and injunctive relief[159] - BIOLASE denies allegations, asserts patent invalidity, and intends to vigorously defend itself; trial is scheduled for May 12, 2025[159] ITEM 1A. RISK FACTORS The company faces substantial doubt about its ability to continue as a going concern due to recurring losses, negative cash flow, and challenges in raising capital, exacerbated by its Nasdaq delisting - Substantial doubt exists about the company's ability to continue as a going concern due to recurring losses, negative cash flow, and the need for additional capital[160][161] - The delisting from Nasdaq makes it harder to attract investors and limits financing types, as the common stock is no longer a "covered security" and is subject to state regulation[161][162] - Nasdaq delisting could lead to limited market quotations, reduced liquidity, "penny stock" designation (requiring more stringent broker rules), limited news coverage, and decreased ability to raise future financing[164] - The common stock is subject to "penny stock" rules (market price less than $5.00 per share), which can make transactions cumbersome and reduce investment value[164][165] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report - No unregistered sales of equity securities or use of proceeds to report[168] ITEM 3. Defaults Upon Senior Securities There were no defaults upon senior securities to report - No defaults upon senior securities to report[168] ITEM 4. Mine Safety Disclosures The company states that mine safety disclosures are "Not applicable" - The company states that mine safety disclosures are "Not applicable"[168] ITEM 5. Other Information No director or officer adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during Q2 2024 - No director or officer adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during Q2 2024[168] ITEM 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including various agreements, certificates of incorporation amendments, and warrant forms - Lists various exhibits, including Placement Agency Agreement, Restated Certificate of Incorporation amendments, Certificates of Designation for preferred stock, and forms of warrants[169][170] - Includes XBRL Instance Document, Schema Document, and Cover Page Interactive Data File[170]