BIOLASE, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity (Tables)

Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2017

Summary of Income Statement Classification of Compensation Expense

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
Cost of revenue	$	69	$	29	$	176	$	198
Sales and marketing		53		89		219		410
General and administrative		279		522		978		1,614
Engineering and development		63		48		231		246
	$	464	$	688	$	1,604	$	2,468

Assumptions on Estimation of Stock Option Fair Values

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

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
Expected term	5.3 years			5.9 years			5.5 years			5.8 years
Volatility		80.5	%		86.6	%		78.7	%		85.5	%
Annual dividend per share	$	—		$	—		$	—		$	—
Risk-free interest rate		1.76	%		1.30	%		1.95	%		1.32	%

Summary of Option Activity

A summary of option activity under the 2002 Plan for the nine months ended September 30, 2017 is as follows (in thousands, except per share data):

						Weighted Average
				Weighted		Remaining		Aggregate
				Average		Contractual		Intrinsic
	Shares			Exercise Price		Term (Years)		Value(1)
Options outstanding, December 31, 2016		6,612		$	2.06		7.70	$	178
Granted at fair market value		1,355			1.30
Exercised		(3	)		0.86
Forfeited, cancelled, or expired		(750	)		1.85
Options outstanding at September 30, 2017		7,214		$	1.94		6.95	$	4
Options exercisable at September 30, 2017		4,014		$	2.29		5.35	$	—
Vested options expired during the quarter ended September 30, 2017		5		$	2.50

(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 under the 2002 Plan for the nine months ended September 30, 2017 is as follows (in thousands, except per share data):

				Weighted
				Average Grant
	Shares			Date Fair Value
Unvested options at December 31, 2016		3,259		$	1.16
Granted		1,355		$	0.86
Vested		(921	)	$	1.08
Forfeited or cancelled		(494	)	$	1.03
Unvested options at September 30, 2017		3,199		$	1.08

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 under the 2002 Plan are as follows for the three and nine months ended September 30 (in thousands, except per share amounts):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
Proceeds from stock options exercised	$	—	$	1	$	3	$	1
Tax benefit related to stock options exercised (1)	N/A		N/A		N/A		N/A
Intrinsic value of stock options exercised (2)	$	—	$	—	$	1	$	—
Weighted-average fair value of options granted during period	$	0.86	$	1.13	$	0.39	$	0.99
Total fair value of shares vested during the period	$	302	$	317	$	1,000	$	1,370

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

(2) The intrinsic value of stock options exercised is the amount by which the market price of the stock on the date of exercise exceeded the market price of the stock on the date of grant.

Summary of Unvested Restricted Stock Units

A summary of unvested RSU activity under the 2002 Plan for the nine months ended September 30, 2017 is as follows (in thousands, except per share amounts):

				Weighted
				Average Grant
	Shares			Date Fair Value
Unvested restricted stock units at December 31, 2016		419		$	1.23
Granted		2,321		$	1.23
Vested		(387	)	$	1.28
Forfeited or cancelled		(130	)	$	0.98
Unvested restricted stock units at September 30, 2017		2,223		$	1.23

Summary of Warrant Activity

The Company issues warrants to acquire shares of BIOLASE common stock as approved by the Board. A summary of warrant activity for the nine months ended September 30, 2017 is as follows (in thousands, except exercise price amounts):

			Weighted
			Average
	Shares		Exercise Price
Warrants outstanding, December 31, 2016		11,406	$	3.64
Granted or Issued		3,926	$	1.80
Exercised		—	$	—
Forfeited, cancelled, or expired		—	$	—
Warrants outstanding at September 30, 2017		15,332	$	3.17
Warrants exercisable at September 30, 2017		11,271	$	3.64
Vested warrants expired during the quarter ended September 30, 2017		—	$	—

- Definition

Tabular disclosure of warrants or rights issued. Warrants and rights outstanding are derivative securities that give the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue to entice investors by a higher return potential. The main difference between warrants and call options is that warrants are issued and guaranteed by the company, whereas options are exchange instruments and are not issued by the company. Also, the lifetime of a warrant is often measured in years, while the lifetime of a typical option is measured in months. Disclose the title of issue of securities called for by warrants and rights outstanding, the aggregate amount of securities called for by warrants and rights outstanding, the date from which the warrants or rights are exercisable, and the price at which the warrant or right is exercisable.

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