NOTE 11—CONCENTRATIONS

Revenue from Waterlase systems, the Company’s principal product, comprised 63% and 53% of total net revenue for the three and six month periods ended June 30, 2011, respectively, and 19% and 26% of total net revenue, respectively, for the same periods in 2010. Revenue from Diode systems comprised 14% and 24% of total net revenue for the three and six month periods ended June 30, 2011, respectively, and 26% and 21%, for the same periods of 2010.

Approximately 26% and 30% of the Company’s net revenue in the three and six month periods ended June 30, 2011 was generated through sales to HSIC worldwide. Approximately 42% and 44% of the Company’s net revenue in the three and six month periods ended June 30, 2010 was generated through sales to HSIC worldwide.

There were no sales concentrations greater than 10% within any individual country outside the United States for the three and six month periods ended June 30, 2011 and 2010.

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.

Accounts receivable concentrations from two distributors totaled $2.0 million, or 31%, at June 30, 2011 and from one international distributor in the amount of $430,000, or 13%, at December 31, 2010.

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 a delay in manufacturing and a possible loss of sales, which would adversely affect the Company’s results of operations.