NOTE 11—CONCENTRATIONS

Revenue from Waterlase systems, the Company’s principal product, which includes the iPlus, MDX systems, and the MD Turbo, comprised 67% and 64% of total net revenue for the three and nine months ended September 30, 2012, respectively, and 63% and
57%, respectively, for the same periods in 2011. Revenue from Diode systems comprised 7% and 9% of total net revenue for the three and nine months ended September 30, 2012, respectively, and 17% and 21%, respectively, for the same periods of 2011. Revenue from consumables, service and warranty contracts comprised 21% and 22% of total net revenue for the three and nine months ended September 30, 2012, respectively, and 19% and 20%, respectively, for the same periods of 2011. Revenue from imaging systems comprised 5% of total net revenue for the three and nine months ended September 30, 2012, and 1% and 0%, respectively, for the same periods in 2011.

Approximately 5% and 4% of the Company’s net revenue in the three and nine months ended September 30, 2012, respectively, was generated through sales to HSIC worldwide. Approximately 14% and 24% of the Company’s net revenue in the three and nine months ended September 30, 2011, respectively, was generated through sales to HSIC worldwide, of which 49% and 68%, respectively, was related to non-cancellable prepaid purchase orders which were fully satisfied in 2011.

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.

No individual customer represented more than 10% of the Company’s accounts receivable at September 30, 2012 and December 31, 2011.

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 could adversely affect the Company’s results of operations.