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

Quarterly report pursuant to Section 13 or 15(d)

Accrued Liabilities and Deferred Revenue

Accrued Liabilities and Deferred Revenue

6 Months Ended

Jun. 30, 2012

Accrued Liabilities and Deferred Revenue [Abstract]

ACCRUED LIABILITIES AND DEFERRED REVENUE

NOTE 7—ACCRUED LIABILITIES AND DEFERRED REVENUE

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


	June 30, 2012		December 31, 2011
Payroll and benefits	$	1,684	$	1,928
Warranty accrual		1,980		2,218
Sales tax		491		526
Accrued professional services		759		669
Accrued insurance premium		98		433
Accrued support services		—		200
Other		189		203

Accrued liabilities	$	5,201	$	6,177

Changes in the initial product warranty accrual, and the expenses incurred under initial and extended warranties, for the three and six months ended June 30, 2012 and 2011 were as follows (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Initial warranty accrual, beginning balance	$	1,926		$	2,728		$	2,218		$	2,725
Provision for estimated warranty cost		661			448			783			956
Warranty expenditures		(607	)		(490	)		(1,021	)		(995	)

Initial warranty accrual, ending balance		1,980			2,686			1,980			2,686
Total warranty accrual, long term		—			431			—			431

Total warranty accrual, current portion	$	1,980		$	2,255		$	1,980		$	2,255

Deferred revenue is comprised of the following (in thousands):


	June 30, 2012			December 31, 2011
Undelivered elements (training, installation and product and support services)	$	1,374		$	1,105
Extended warranty contracts		1,302			1,056

Total deferred revenue		2,676			2,161

Less long-term amounts:
Extended warranty contracts		(11	)		(25	)

Total deferred revenue, long-term		(11	)		(25	)

Total deferred revenue, current portion	$	2,665		$	2,136

On May 20, 2010, the Company entered into a license agreement (the “2010 P&G Agreement”), with Procter and Gamble Company (“P&G”), which replaced an existing license agreement between the Company and P&G (the “2006 P&G Agreement”). Pursuant to the 2010 P&G Agreement, the Company agreed to continue granting P&G an exclusive license to certain of the Company’s patents to enable P&G to develop products aimed at the consumer market and P&G agreed to pay royalties based on sales of products developed with such intellectual property. On June 28, 2011, the Company entered into an amendment to the 2010 P&G Agreement (the “2011 P&G Amendment”) which extended the effective period for the 2010 P&G Agreement from December 31, 2010 through June 30, 2011, and resulted in the Company recognizing the previously deferred $375,000 of revenue as royalty revenue during the quarter ended June 30, 2011.

The 2011 P&G Amendment also provided that effective January 1, 2011, P&G’s exclusive license to the Company’s patents converted to a non-exclusive license unless P&G paid the Company a license payment in the amount of $187,500 by the end of the third quarter of 2011, and at the end of each quarter thereafter, throughout the term of the 2010 P&G Agreement. As a result of P&G not making any payments to the Company in the third and fourth quarters of the year ended December 31, 2011, their license converted to a non-exclusive license. The Company is currently engaged in an active collaboration with P&G to commercialize a consumer product utilizing its patents.