NOTE 4—STOCKHOLDERS’ (DEFICIT) EQUITY

On October 29, 2019, the Company successfully consummated an underwritten public offering of 7,820,000 shares of BIOLASE common stock and a concurrent private placement of 69,695 shares of BIOLASE Series E Participating Convertible Preferred Stock, and on November 5, 2019, the underwriters of the public offering exercised their over-allotment option to acquire additional shares of BIOLASE common stock. The underwritten public offering and concurrent private placement resulted in net proceeds of $8.4 million after deducting underwriter discounts and other fees and expenses. See Note 15 for additional information.

Reverse Stock Split

At BIOLASE’s annual meeting of stockholders on May 9, 2018 (the “2018 Annual Meeting”), BIOLASE stockholders approved an amendment to BIOLASE’s Restated Certificate of Incorporation, as amended, to effect the Reverse Stock Split and on May 10, 2018, the Company filed an amendment (the “Amendment”) to its Restated Certificate of Incorporation, as amended, with the Secretary of State of the State of Delaware to effect the Reverse Stock Split, effective as of 11:59 p.m. on May 10, 2018. The Amendment also reduced the authorized shares of common stock from 200,000,000 shares to 40,000,000 shares. Prior year share and per share amounts have been adjusted to reflect the impact of the Reverse Stock Split.

Stock-Based Compensation

2002 Stock Incentive Plan

The 2002 Stock Incentive Plan (as amended effective as of May 26, 2004, November 15, 2005, May 16, 2007, May 5, 2011, June 6, 2013, October 30, 2014, April 27, 2015, and May 6, 2016, the “2002 Plan”) was replaced by the 2018 Plan (as defined below) with respect to future equity awards. Persons eligible to receive awards under the 2002 Plan included officers, employees, and directors of the Company, as well as consultants. As of September 30, 2019, a total of approximately 3.1 million shares of the Company’s common stock have been authorized for issuance under the 2002 Plan, of which approximately 1.0 million shares of the Company’s common stock have been issued pursuant to options that were exercised and restricted stock units (“RSUs”) that were settled in common stock and 1.3 million shares of common stock have been reserved for outstanding options and unvested RSUs, and no shares are available for future grants.

2018 Stock Incentive Plan

At the 2018 Annual Meeting, the Company’s stockholders approved the 2018 Long-Term Incentive Plan (as amended, the “2018 Plan”), which was amended by Amendment No. 1 to the 2018 Plan, approved by the Company’s stockholders at a special meeting on September 21, 2018 and Amendment No. 2 to the 2018 Plan, approved by the Company’s stockholder’s at its annual meeting of stockholders on May 15, 2019. The purposes of the 2018 Plan are (i) to align the interests of the Company’s stockholders and recipients of awards under the 2018 Plan by increasing the proprietary interest of such recipients in the Company’s growth and success; (ii) to advance the interests of the Company by attracting and retaining non-employee directors, officers, other employees, consultants, independent contractors and agents; and (iii) to motivate such persons to act in the long-term best interests of the Company and its stockholders.

Subject to the terms and conditions of the 2018 Plan, the number of shares authorized for grants under the 2018 Plan is 5.0 million. As of September 30, 2019, a total 3.9 million shares of the Company’s common stock have been reserved for outstanding options and unvested RSUs, and 1.1 million shares of common stock remain available for future grants.

The Company recognized stock-based compensation expense of $0.8 million and $0.5 million, for the three months ended September 30, 2019 and2018, respectively, and $1.9 million and $1.9 million for the nine months ended September 30, 2019 and September 30, 2018, respectively, based on the grant-date fair value. As of nine months ended September 30, 2019 the Company had approximately $2.3 million of total unrecognized compensation expense, net of estimated forfeitures, related to unvested share-based compensation arrangements. The Company expects that expense to be recognized over a weighted-average period of 1.69 years.

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

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

A summary of option activity for the nine months ended September 30, 2019 is as follows (in thousands, except per share data):

A summary of unvested stock option activity for the nine months ended September 30, 2019 is as follows (in thousands, except per share data):

Cash proceeds, along with fair value disclosures related to grants, exercises and vested options are as follows (in thousands, except per share amounts):

Restricted Stock Units

The Company granted approximately 1.9 million and 2.2 million RSUs during the three and nine months ended September 30, 2019, respectively.

A summary of unvested RSU activity for the nine months ended September 30, 2019 is as follows (in thousands, except per share amounts):

Warrants

The Company issues warrants to acquire shares of its common stock as approved by the Board. A summary of warrant activity for the nine months ended September 30, 2019 is as follows (in thousands, except exercise price amounts):

See Note 9 for additional information on the Western Alliance Warrants, the SWK Warrants, and the DPG Warrants (each as defined below).

Net Loss Per Share – Basic and Diluted

Basic net loss per share is computed by dividing net loss available to common stockholders by the weighted-average number of shares of the Company’s common stock outstanding for the period. In computing diluted net loss per share, the weighted average number of shares outstanding is adjusted to reflect the effect of potentially dilutive securities.

Outstanding stock options, RSUs and warrants to purchase approximately 5.6 million shares were not included in the calculation of diluted loss per share for the three and nine months ended September 30, 2019, as their effect would have been anti-dilutive. For the same 2018 periods, anti-dilutive outstanding stock options and warrants to purchase 3.2 million shares were not included in the computation of diluted loss per share.