Redeemable Preferred Stock and Stockholders' Equity
|3 Months Ended|
Mar. 31, 2021
|Temporary Equity And Equity [Abstract]|
|Redeemable Preferred Stock and Stockholders' Equity||
NOTE 4—REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
BIOLASE's board of directors (the "Board"), without further stockholder authorization, may issue from time to time up to 1,000,000 shares of the Company’s preferred stock. Of the 1,000,000 shares of preferred stock, 69,565 shares are designated as Series E Participating Convertible Preferred Stock, par value $0.001 per share (“Series E Preferred Stock”), and 18,000 shares are designated as Series F Convertible Preferred Stock, par value $0.001 per share (“Series F Preferred Stock”).
On February 10, 2021, BIOLASE issued and sold in an underwritten bought deal offering an aggregate of 14,000,000 shares of common stock at a price of $1.03 per share less underwriting discounts and commissions (the "Equity Offering"). The Company received gross proceeds of approximately $14.4 million before deducting underwriting discounts and commissions and estimated offering expenses of $1.1 million.
Series F Convertible Preferred Stock
On July 23, 2020, the Company consummated the sale of an aggregate of 18,000 shares of Series F Preferred Stock and 45,000,000 warrants (the “July 2020 Warrants”), with each warrant exercisable for one share of BIOLASE common stock, through a
registered rights offering the Company completed on July 22, 2020 (the “Rights Offering”). Each share of Series F Preferred Stock is convertible at the Company’s option at any time on or after July 22, 2021 or at the option of the holder at any time, into the number of shares of BIOLASE common stock determined by dividing the $1,000 stated value per share of the Series F Preferred Stock by a conversion price of $0.40 per share. Each share of Series F Preferred Stock is convertible into 2,500 shares of common stock, and each July 2020 Warrant entitles the holder thereof to purchase one share BIOLASE common stock at a conversion price of $0.40 per share.
In accordance with applicable accounting standards, the $18.0 million gross proceeds from the Rights Offering were allocated to the Series F Preferred Stock and the July 2020 Warrants in the amount of $2.7 million and $15.3 million, respectively. The allocation was based on the fair value of the July 2020 Warrants of $15.3 million as of the commitment date, with the residual proceeds of $2.7 million allocated to the Series F Preferred Stock.
The Series F Preferred Stock contained a beneficial conversion feature which resulted in a deemed dividend to preferred stockholders of approximately $2.7 million, upon immediate accretion. Additionally, the July 2020 Warrants were recognized as a discount to the Series F Preferred Stock, and upon conversion of approximately 17,000 Series F Preferred Stock to common stock, this discount was accreted and also recognized as a deemed dividend to preferred stockholders in the amount of $0.5 million and $14.7 million for the three months ended March, 31, 2021 and the year ended December 31, 2020, respectively.
Approximately 268 and 882 shares of Series F Preferred Stock remained outstanding as of March 31, 2021 and December 31, 2020, respectively.
Redeemable Preferred Stock
Series E Participating Convertible Preferred Stock
As of March 31, 2021 and December 31, 2020, there were no shares of Series E Preferred Stock issued and outstanding.
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, 2017, 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 March 31, 2021, a total of 3,110,000 shares have been authorized for issuance under the 2002 Plan, of which 1,036,171 shares of common stock have been issued pursuant to options that were exercised, 971,735 shares of common stock have been reserved for options and restricted stock units ("RSUs") that are outstanding, and 0 shares of common stock remain available for future grants.
2018 Stock Incentive Plan
At the 2018 annual meeting of stockholders, 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, as approved by the Company’s stockholders on May 15, 2019 and Amendment No. 3 to the 2018 Plan, as approved by the Company’s stockholders on May 13, 2020. 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 12,221,101. As of March 31, 2021, a total 5,745,827 shares of the Company’s common stock have been reserved for issuance upon the exercise of outstanding options and or settlement of unvested RSUs, and 1,812,307 shares of the Company’s common stock remain available for future grants.
The Company recognized stock-based compensation expense of $0.9 million and $0.7 million for the three month period ended March 31, 2021 and 2020, respectively. As of March 31, 2021 and 2020, the Company had approximately $0.7 million and $1.1 million, respectively, of total unrecognized compensation expense, net of estimated forfeitures, related to unvested share-based compensation arrangements. As of March 31, 2021 and December 31, 2020, $0.4 million and $0.9 million of the total stock compensation cost related to performance-based awards was recognized as a liability. The Company expects that expense to be recognized over a weighted-average period of 1.2 years or by June 2022.
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 three months ended March 31, 2021 is as follows (in thousands, except per share data):
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.
A summary of unvested stock option activity for the three months ended March 31, 2021 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):
Excess tax benefits received related to stock option exercises are presented as operating 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.
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 exercise price of the options.
Restricted Stock Units
During the three months ended March 31, 2021, the Company granted approximately 1.2 million RSUs and the Company canceled approximately 0.5 million RSUs with performance based vesting due to non-achievement of the performance targets.
A summary of unvested RSU activity for the three months ended March 31, 2021 is as follows (in thousands, except per share amounts):
The Company issues warrants to acquire shares of BIOLASE common stock as approved by the Board. During the first quarter of 2021, the Company received proceeds of $15.0 million from warrants exercised in 2021 and $1.5 million from warrants exercised at the end of the fourth quarter of 2020, which was a receivable included in other current assets as of December 31, 2020.
A summary of warrant activity for the three months ended March 31, 2021 is as follows (in thousands, except exercise price amounts):
See Note 9 for 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 income (loss) per share is computed by dividing income (loss) available to common stockholders by the weighted-average number of shares of BIOLASE common stock outstanding for the period. In computing diluted net income (loss) per share, the weighted average number of shares of common stock outstanding is adjusted to reflect the effect of potentially dilutive securities. Income is adjusted for any deemed dividends to preferred stockholders to compute income available to common stockholders.
Outstanding stock options, RSUs, and warrants to purchase approximately 25,290,000 and 3,400,000 shares were not included in the calculation of diluted loss per share amounts for the periods ended March 31, 2021 and March 31, 2020, respectively, as their effect would have been anti-dilutive. Also excluded in the calculation of diluted loss per share amount for the three months ended March 31, 2021, are the 670,000 shares of BIOLASE common stock issuable upon conversion of the 268 shares of Series F Preferred Stock outstanding as of March 31, 2021.