NOTE 4—REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

BIOLASE's board of directors (the "Board"), without further stockholder authorization, may authorize the issuance from time to time of up to 1,000,000 shares of the Company’s preferred stock.

Preferred Stock

Series G Preferred Stock

On March 1, 2022, the Board declared a dividend of one one-thousandth of a share of Series G Preferred Stock, par value $0.001 per share ("Series G Preferred Stock"), for each share of BIOLASE common stock outstanding as of close of market on March 25, 2022 (as calculated on a pre-Reverse Stock Split basis). The certificate of designation for the Series G Preferred Stock provided that all shares of Series G Preferred Stock not present in person or by proxy at the 2022 Annual Meeting immediately prior to the opening of the polls at the 2022 Annual Meeting would be automatically redeemed (the “Initial Redemption”) and that any outstanding shares of Series G Preferred Stock that have not been redeemed pursuant to the Initial Redemption would be redeemed in whole, but not in part, (i) if and when ordered by the Board or (ii) automatically upon the effectiveness of the amendment to the Certificate of Incorporation effecting the Reverse Stock Split that was subject to the vote at the 2022 Annual Meeting (the “Subsequent Redemption”). On April 28, 2022, both the Initial Redemption and the Subsequent Redemption occurred. As a result, no shares of Series G Preferred Stock remain outstanding. On June 6, 2022, the Series G Preferred Stock was eliminated.

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, par value $0.001 per shares ("Series F Preferred Stock"), and 45,000,000 warrants (the “July 2020 Warrants”), exercisable for 1,800,000 shares 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 was 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 $10.00 per share. Each share of Series F Preferred Stock was convertible into 100 shares of common stock, and each July 2020 Warrant entitled the holder thereof to purchase one twenty-fifth share BIOLASE common stock at an exercise price of $10.00 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. Upon conversion, including the conversion described below, this discount was accreted and also recognized as a deemed dividend to preferred stockholders in the amount of $0.2 million, $0.5 million and $14.7 million for the years ended December 31, 2022, 2021, and 2020, respectively.

The remaining shares of Series F Preferred Stock were converted into shares of BIOLASE common stock in the first quarter of 2022 with none outstanding as of March 31, 2023 and December 31, 2022. On March 3, 2022, the Series F Preferred Stock was eliminated.

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, 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, directors of the Company, and consultants to the Company. As of March 31, 2023, a total of 124,400 shares have been authorized for issuance under the 2002 Plan, of which approximately 41,000 shares of BIOLASE common stock have been issued pursuant to options that were exercised and restricted stock units ("RSUs") that were vested, approximately 22,000 shares of common stock have been reserved for options that are outstanding, and no 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 effective as of September 21, 2018, May 15, 2019, May 13, 2020, and June 11, 2021, the “2018 Plan”). 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.

Under the terms of the 2018 Plan, approximately 0.1 million shares of BIOLASE common stock are available for issuance as of March 31, 2023. As of March 31, 2023, a total of 1.5 million shares of common stock have been authorized for issuance under the 2018 Plan, of which approximately 1.0 million shares of the Company’s common stock have been reserved for issuance upon the exercise of outstanding options or stock appreciation rights ("SARs"), and/or settlement of unvested RSUs or phantom awards under the 2018 Plan.

The Company recognized stock-based compensation expense of $0.7 million for the three months ended March 31, 2023, and $0.2 million for the three months ended March 31, 2022. As of March 31, 2023 and 2022, the Company had approximately $1.0 million and $0.8 million, respectively, 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 0.9 years.

As of March 31, 2023 approximately $0.2 million of the total stock compensation cost recognized during the three months ended March 31, 2023 related to performance-based awards was recognized as a liability, with none as of March 31, 2022.

Restricted Stock Units

Warrants

The Company issues warrants to acquire shares of BIOLASE common stock as approved by the Board.

January 2023 Public Offering

On January 9, 2023, BIOLASE completed a public offering, pursuant to which BIOLASE agreed to issue, in a registered direct offering, 17,167,855 shares of BIOLASE common stock, par value $0.001 per share, and pre-funded warrants to purchase 11,403,571 shares of BIOLASE common stock with an exercise price of $0.01 per share. The purchase price for one share of common stock was determined to be $0.35, and the purchase price for one January 2023 Pre-Funded Warrant was determined to be $0.34. BIOLASE received aggregate gross proceeds from the transactions of approximately $9.9 million, before deducting underwriting discounts and commissions and other transaction expenses paid by BIOLASE.

Based on the terms and conditions of the January 2023 public offering, the Company determined that equity classification was appropriate for the pre-funded warrants and recognized the net proceeds from the issuance of common stock and pre-funded warrants in excess of par of $8.5 million in additional paid-in capital.

June 2022 Direct Offering and Private Placement

On June 27, 2022, the Company entered into a Securities Purchase Agreement with certain accredited institutional investors, pursuant to which the Company agreed to issue to the Purchasers (as defined therein), (i) in a registered direct offering, 678,745 shares of BIOLASE common stock, and pre-funded warrants to purchase 726,660 shares of BIOLASE common stock (the “June 2022 Pre-Funded Warrants”) with an exercise price of $0.001 per share, and (ii) in a concurrent private placement, warrants to purchase 1,405,405 shares of BIOLASE common stock (each a "Common Warrant" and together with the June 2022 Pre-Funded Warrants, the “June 2022 Warrants”). The combined purchase price for one share of BIOLASE common stock and one Common Warrant was $4.625, and the combined purchase price for one June 2022 Pre-Funded Warrant and one Common Warrant was $4.624. In the offering and concurrent private placement, the Company received aggregate gross proceeds of approximately $6.5 million before deducting fees to the placement agent and other transaction expenses.

Based on the terms and conditions of the June 2022 Warrants, the Company determined that equity classification was appropriate and recognized the net proceeds in excess of par of $5.6 million in additional paid-in capital.

Phantom Awards and Stock Appreciation Rights

During the year ended December 31, 2022, the Company issued approximately 31,000 phantom RSUs in lieu of stock-settled RSUs historically granted for leadership bonuses and non-employee director service. During the year ended December 31, 2021, the Company issued approximately 402,000 phantom RSUs. The phantom RSUs have either time-based or performance-based vesting conditions and could be settled in cash in 2024 with the Company's option to settle the award in BIOLASE common stock at the sole discretion of the Board. These phantom RSUs are included as a component of long-term liability on the consolidated balance sheet and are not considered stock-based compensation due to the cash-settlement feature of the award and limitation on the number of remaining shares authorized for issuance as of March 31, 2023. If at any time the determination is made to settle the phantom RSUs in BIOLASE common stock, the awards will be included as a component of additional paid-in capital on the consolidated balance sheet. The expense recognized during the three months ended March 31, 2023 and 2022 was $0.1 million, respectively. As of March 31, 2023, $0.2 million was included in additional paid-in-capital and $0.3 million was included in short-term liabilities on the

consolidated balance sheet. As of December 31, 2022, $0.1 million was included in additional paid-in-capital and $0.3 million was included in long-term liabilities on the consolidated balance sheet.

During the year ended December 31, 2021, the Company issued approximately 39,000 SARs in lieu of stock-settled RSUs historically granted for non-employee director service. Upon exercise, the SARs could be settled in cash with the Company's option to settle in BIOLASE common stock at the sole discretion of the Board. These SARS were included in accrued liabilities on the consolidated balance sheet and not considered stock-based compensation due to the cash-settlement feature of the award and limitation on the number of remaining shares authorized for issuance. In 2022, as a result of the Reverse Stock Split, the SARs were reclassed to equity and included as a component of additional paid-in-capital on the consolidated balance sheet in the amount of $0.5 million. These SARs were fully vested in 2022. No expense was recognized during the three months ended March 31, 2023 and the expense recognized during the three months ended March 31, 2022 was $0.2 million.

Net Loss Per Share – Basic and Diluted

Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of BIOLASE common stock outstanding for the period. In computing diluted net loss per share, the weighted average number of shares of common stock outstanding is adjusted to reflect the effect of potentially dilutive securities. Net income (loss) is adjusted for any deemed dividends to preferred stockholders to compute net income attributable to common stockholders. The January 2023 Pre-Funded Warrants were included in the calculation of basic and diluted loss per share for the period ended March 31, 2023 as the underlying warrant shares are issuable for little or no cash consideration.

Outstanding stock options, RSUs, and warrants to purchase approximately 2.7 million and 0.9 million shares were not included in the calculation of diluted loss per share amounts for the periods ended March 31, 2023 and March 31, 2022, respectively, as their effect would have been anti-dilutive.