NOTE 4—CONVERTIBLE REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

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. Of the 1,000,000 shares of preferred stock, as of September 30, 2024, 370,000 shares were designated as Series H, par value $0.001 per share, 160,000 shares were designated as Series J, par value $0.001 per share, and 125,000 shares were designated as Series I, par value $0.001 per share.

Preferred Stock

Series J Preferred Stock

On September 13, 2023, the Company consummated the sale of 75,000 Units (the "Units") with each Unit consisting of (A) one share of BIOLASE Series J Convertible Redeemable Preferred Stock, par value $0.001 per share and a stated value equal to $100.00 (the “Series J Convertible Preferred Stock”), and (B) one warrant (the “Series J Warrants”) to purchase one-half of one (0.50) share of Series J Convertible Preferred Stock, at a price to the public of $60.00 per Unit, less underwriting discounts and commissions. The

public offering price of $60.00 per Unit reflects the issuance of the Series J Convertible Preferred Stock with an original issue discount of 40%. The Company filed a registration statement on Form S-1 in September 2023, which registered the Units, the Series J Convertible Preferred Stock, the Series J Warrants and the shares of Series J Convertible Preferred Stock and common stock underlying such securities and additional shares of Series J Convertible Preferred Stock that will be issued, if and when the Board declares such dividends, as paid in-kind dividends (“PIK dividends”) at a rate of 20% per annum and the shares of Common Stock issuable upon conversion of the Series J Convertible Preferred Stock issued as PIK dividends. The registration statement was declared effective on September 13, 2023 and the offering closed on September 18, 2023. Each Warrant has an exercise price of $30.00 per share, is exercisable for one-half of one (0.5) share of Series J Convertible Preferred Stock, is immediately exercisable and will expire one (1) year from the date of issuance.

Each share of Series J Convertible Preferred Stock is convertible at the option of the holder at any time into the number of shares of common stock determined by dividing the $100.00 stated value per share by a conversion price of $3.26. Each outstanding share of Series J Convertible Preferred Stock is mandatorily redeemable by the Company in cash on September 13, 2024 (the "Series J Maturity Date").

Gross proceeds from the offering were $4.5 million before broker fees and related expenses of approximately $1.0 million. In accordance with applicable accounting standards, the $4.5 million gross proceeds were allocated to the Series J Convertible Preferred Stock and the Series J Warrants in the amount of $3.5 million and $1.0 million, respectively. The allocation was based on the fair value of the Series J Warrants of $1.0 million as of the commitment date, with the residual proceeds of $3.5 million allocated to the Series J Convertible Preferred Stock. Net proceeds allocated to the Series J Convertible Preferred Stock and Series J Warrants was $2.7 million and $0.8 million respectively.

The Series J Convertible Preferred stock was classified as mezzanine equity on the consolidated balance sheet as they are contingently redeemable prior to the Series J Maturity Date and the conversion from preferred shares to shares of common stock is at the option of the holder at any time before the Series J Maturity Date. The Series J Warrants were classified as accrued liabilities on the consolidated balance sheet as the warrants are convertible into preferred shares, which are mandatorily redeemable in cash upon the Series J Maturity Date if they are not converted to shares of common stock before such date.

The Series J Convertible Preferred Stock was issued at a discount with the total redemption value of the Series J Convertible Preferred Shares and PIK Dividends of $10.3 million. The redemption value in excess of the net proceeds received allocated to the Series J Convertible Preferred Shares was $7.6 million and was recognized as a decrease in additional paid-in-capital at the commitment date. Upon conversion of Series J Warrants to Series J Convertible Preferred shares, the value of the Series J Convertible Preferred Stock issued is the stated value per share plus the PIK dividend. The redemption value in excess of the net proceeds received from the exercise of warrants and the fair value of such warrants is recognized as a decrease in additional paid-in-capital at the conversion date.

On July 16, 2024, the Company issued an aggregate of 3,190,476 shares of its common stock, par value $0.001 per share, in exchange for (i) 2,546 shares of the Company’s Series J Convertible Redeemable Preferred Stock, par value $0.001 per share (the "Series J Preferred Stock"), and (ii) 8,000 Series J Preferred Warrants to purchase 4,000 shares of Series J Preferred Stock, pursuant to the terms of that certain Exchange Agreement (the "Exchange Agreement") entered into on July 16, 2024 by the Company and the investor named therein.

The Company issued common stock to the investor in reliance on the exemption from the registration requirements of the Securities Act of 1933, as amended, afforded by Section 3(a)(9) thereof. The shares of Common Stock issued upon exchange of the Series J Preferred Stock and Series J Preferred Warrants have not been registered under the Securities Act and may not be offered or sold in the United States in the absence of an effective registration statement or exemption from the registration requirements. No proceeds have been or will be received and no commissions have been or will be paid by the Company in connection with the exchange described herein.

The elimination of the Series J Preferred Warrants and the Series J Convertible Redeemable Preferred Stock were presented as a reduction in accrued liabilities and mezzanine equity in the amounts of $0.1 million and $0.3 million, respectively, with a corresponding increase to additional paid-in-capital.

On September 18, 2024, all 52,040 unexercised Series J Warrants expired, and all 15,805 unconverted Series J Convertible Preferred Stock were to be mandatorily redeemed at their stated value of $100.00. However, due to the pending bankruptcy filing, the Company was unable to complete this mandatory redemption in the amount of $1.6 million in cash to holders of these Series J Convertible Preferred Stock. The expiration of the Series J Warrants was presented as a $0.5 million decrease in accrued liabilities with a corresponding gain on warrants. The $1.6 million mandatory redemption amount for unsettled Series J Convertible Preferred Stock was presented as a decrease in mezzanine equity and an increase in accrued liabilities.

From the date of sale through the expiration date, 14,960 of the Series J Warrants were exercised for 7,480 shares of Series J Convertible Preferred Stock, 6,836 shares of Series J Convertible Preferred Stock were issued as part of PIK dividends, 2,546 shares of Series J Convertible Preferred Stock were exchanged for shares of common stock as part of the Exchange Agreement, and 70,965 shares of Series J Convertible Preferred Stock were converted to approximately 2.2 million shares of common stock. During the nine months ended September 30, 2024, 9,000 of the Series J Warrants were exercised for 4,500 Series J Convertible Preferred Stock, 4,500 shares of the Series J Convertible Preferred Stock were converted to common stock, 3,745 Series J Convertible Preferred Stock were issued as part of PIK dividends, and 2,546 shares of Series J Convertible Preferred Stock were exchanged for shares of common stock as part of the Exchange Agreement. As of September 30, 2024, there were no Series J Convertible Preferred Stock or Series J Warrants outstanding.

The mezzanine classified Series J Convertible Preferred Stock were presented at their maximum redemption value that included accretion related to the PIK dividends.

Series I Preferred Stock

On June 5, 2023, the Board declared a dividend of one one-thousandth of a share of Series I Preferred Stock, par value $0.001 per share ("Series I Preferred Stock"), for each share of common stock outstanding as of June 16, 2023 (as calculated on a pre 2023 Reverse Stock Split basis). The certificate of designation for the Series I Preferred Stock provided that all shares of Series I Preferred Stock not present in person or by proxy at any meeting of stockholders held to vote on the 2023 Reverse Stock Split immediately prior to the opening of the polls at such meeting would be automatically redeemed (the “Series I Initial Redemption”) and that any outstanding shares of Series I Preferred Stock that have not been redeemed pursuant to the Series I 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 2023 Reverse Stock Split that was subject to the vote (the "Series I Subsequent Redemption"). On July 20, 2023, the Series I Initial Redemption occurred, and on July 27, 2023, the Series I Subsequent Redemption occurred. As a result, no shares of Series I Preferred Stock remain outstanding as of July 27, 2023.

Series H Preferred Stock

On May 24, 2023, the Company consummated the sale of 175,000 Units (the "Units") with each Unit consisting of (A) one share of BIOLASE Series H Convertible Redeemable Preferred Stock, par value $0.001 per share and a stated value equal to $50.00 (the “Series H Convertible Preferred Stock”), and (B) one warrant (the “Series H Warrants”) to purchase one-half of one (0.50) share of Series H Convertible Preferred Stock, at a price to the public of $26.00 per Unit, less underwriting discounts and commissions. The public offering price of $26.00 per Unit reflects the issuance of the Series H Convertible Preferred Stock with an original issue discount of 48%. The Company filed a registration statement on Form S-1 in May 2023, which registered the Units, the Series H Convertible Preferred Stock, the Series H Warrants and the shares of Series H Convertible Preferred Stock and common stock underlying such securities and additional shares of Series H Convertible Preferred Stock that will be issued, if and when the Board declares such dividends, as paid in-kind dividends (“PIK dividends”) at a rate of 20% and the shares of Common Stock issuable upon conversion of the Series H Convertible Preferred Stock issued as PIK dividends. The registration statement was declared effective on May 24, 2023 and the offering closed on May 26, 2023. Each Series H Warrant has an exercise price of $13.00 per share, is exercisable for one-half of one (0.5) share of Series H Convertible Preferred Stock, is immediately exercisable and will expire two (2) years from the date of issuance.

Each share of Series H Convertible Preferred Stock is convertible at the option of the holder at any time into the number of shares of common stock determined by dividing the $50.00 stated value per share by a conversion price of $13.98 (as adjusted for the 2023 Reverse Stock Split). Each outstanding share of Series H Convertible Preferred Stock is mandatorily redeemable by the Company in cash on May 24, 2025 (the "Series H Maturity Date").

Gross proceeds from the offering were $4.6 million before broker fees and related expenses of approximately $0.9 million. In accordance with applicable accounting standards, the $4.6 million gross proceeds were allocated to the Series H Convertible Preferred Stock and the Series H Warrants in the amount of $3.4 million and $1.2 million, respectively. The allocation was based on the fair value of the Series H Warrants of $1.2 million as of the commitment date, with the residual proceeds of $3.4 million allocated to the Series H Convertible Preferred Stock. Net proceeds allocated to the Series H Convertible Preferred Stock and Series H Warrants was $2.7 million and $1.0 million, respectively.

The Series H Convertible Preferred Stock was classified as mezzanine equity on the consolidated balance sheet as they are contingently redeemable prior to the Series H Maturity Date and the conversion from preferred shares to shares of common stock is at the option of the holder at any time before the Series H Maturity Date. The Series H Warrants were classified as accrued liabilities on the consolidated balance sheet as the warrants are convertible into preferred shares, which are mandatorily redeemable in cash upon the Series H Maturity Date if they are not converted to shares of common stock before such date.

The Series H Convertible Preferred Stock was issued at a discount with the total redemption value of the Series H Convertible Preferred Shares and PIK Dividends of $10.5 million. The redemption value in excess of the net proceeds received allocated to the Series H Convertible Preferred Stock was $7.8 million and was recognized as a decrease in additional paid-in-capital at the commitment date. Upon conversion of Series H Warrants to Series H Convertible Preferred Stock, the value of the Series H Convertible Preferred Stock issued is the stated value per share plus the PIK dividend. The redemption value in excess of the net proceeds received from the exercise of warrants and the fair value of such warrants is recognized as a decrease in additional paid-in-capital at the conversion date.

As of September 30, 2024, 40,000 of the Series H Warrants have been exercised for 20,000 shares of Series H Convertible Preferred Stock, 1,923 shares of Series H Convertible Preferred Stock have been issued as part of PIK dividends, and 190,000 shares of Series H Convertible Preferred Stock have been converted to approximately 0.7 million shares of common stock. There have been no exercises of Series H Warrants or conversion of Series H Convertible Preferred Stock during the nine months ended September 30, 2024. As of September 30, 2024, there are 6,923 Series H Convertible Preferred Stock outstanding.

The mezzanine classified Series H Convertible Preferred Stock are presented at their maximum redemption value that includes accretion related to the PIK dividends.

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 September 30, 2024, 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, June 11, 2021, and April 27, 2023, 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 58,815 shares of common stock remain available for issuance as of September 30, 2024. As of September 30, 2024, a total of 112,268 shares of common stock have been authorized for issuance under the 2018 Plan, of which approximately 23,232 shares have already been issued and approximately 30,221 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 or deferred RSUs under the 2018 Plan.

The Company recognized stock-based compensation expense of $0.1 million for the three and nine months ended September 30, 2024, and $0.3 million and $1.1 million for the three and nine months ended September 30, 2023, respectively. As of September 30, 2024 and 2023, the Company had approximately $0.1 million and $0.7 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 1.2 years.

Stock Option Activity

There were no option grants or exercises during the nine months ended September 30, 2024 and 2023.

Restricted Stock Units

Warrants

From time to time, the Company issues warrants to acquire shares of common stock as approved by the Board.

February 2024 Public Offering

On February 15, 2024, the Company completed a public offering (the "February 2024 Offering") and issued (i) 7,795,000 units (the "Units"), with each Unit consisting of (A) one share of the Company’s common stock, par value $0.001 per share, (B) one Class A warrant to purchase one share of common stock (the "Class A Common Warrants"), each exercisable from time to time for one share of Common Stock at an exercise price of $0.66 per share, and (C) one Class B warrant to purchase one share of common stock (the "Class B Common Warrants"), each exercisable from time to time for one share of Common Stock at an exercise price of $0.748 per share and (ii) 8,205,000 pre-funded units (the "Pre-Funded Units"), with each Pre-Funded Unit consisting of (A) one pre-funded warrant (the "Pre-Funded Warrants"), each such Pre-Funded Warrant being exercisable from time to time for one share of Common Stock at an exercise price of $0.001 per share, (B) one Class A Common Warrant, and (C) one Class B Common Warrant. The Units were sold at the public offering price of $0.44 per Unit and the Pre-Funded Units were sold at the public offering price of $0.439 per Pre-Funded Unit. The Company received gross proceeds of approximately $7.0 million, before deducting underwriting discounts and commissions, estimated offering expenses, and before the exercise of warrants.

Based on the terms and conditions of the February 2024 Offering, the Company determined that liability classification was appropriate for the Class A Common Warrants and Class B Common Warrants and recognized the gross proceeds from the issuance allocated to the warrants in excess of par of $3.7 million in accrued liabilities and expensed issuance costs of $0.6 million allocated to the warrants. The Class A Common Warrants were valued using either a long stock position plus a long call position or a Black-Scholes call option model which was deemed appropriate given the warrants can be exercised via the stated exercise price, or an alternative cashless exercise for 0.95 shares per warrant, with a fair value that approximates 95% of the current stock price. The unobservable inputs utilized in determining the fair value of the Class A Common Warrants, which are categorized as a Level 3 instrument, is the volatility rate of 85%. The Class B Common Warrants were valued using a Monte Carlo simulation. The unobservable inputs utilized in determining the fair value of the Class B Common Warrants, which are categorized as a Level 3 instrument, is the volatility rate of 85% as well as the probability of a future financing event.

Pursuant to that certain Securities Purchase Agreement, dated December 6, 2023, by and between the Company and the investor (the “Investor”) named in the signature page thereto (the “December 2023 Purchase Agreement”), the Company agreed, among other things, pursuant to Section 4.12 thereof not to enter into a Variable Rate Transaction (as defined in the December 2023 Purchase Agreement) for a period of one-hundred and eighty (180) days following the closing date of that offering (or June 5, 2024) (the “VRT Prohibition”). In order to induce the Investor to agree to waive the VRT Prohibition to enable the Company to effect the Offering, the Company and the Investor entered into a Consent and Waiver, dated February 12, 2024 (the “Consent and Waiver”), whereby the Company agreed to issue to the Investor a new warrant to purchase up to 2,221,880 shares of Common Stock (the “Investor Warrant”), which Investor Warrant is in a form substantially identical to the Class B Common Warrants that is described above. The Investor Warrants will be exercisable commencing on the effective date of stockholder approval for the issuance of the shares of Common Stock issuable upon exercise of the Investor Warrants and will expire on the fifth anniversary of such stockholder approval date.

Based on the terms and conditions of the Investor Warrant, the Company determined that liability classification was appropriate for the warrants and recognized a liability of $0.2 million in accrued liabilities at the date of issuance and expensed as issuance costs.

December 2023 Registered Direct Offering

On December 6, 2023, the Company entered into a Securities Purchase Agreement with a single institutional investor Purchaser, pursuant to which the Company issued in a registered direct offering, 331,000 shares of the Company’s common stock, and pre-funded warrants to purchase 779,940 shares of Common Stock with an exercise price of $0.001 per share, and in a concurrent private placement, warrants to purchase an aggregate of 2,221,880 shares of Common Stock with an initial exercise price of $1.23. The combined purchase price for one Share and two Common Warrants was $1.23, and the combined purchase price for one Pre-Funded Warrant and two Common Warrants was $1.229. The Company received gross proceeds of approximately $1.4 million, before deducting underwriting discounts and commissions, estimated offering expenses, and before the exercise of warrants. In connection with the closing of the February 2024 Offering, the exercise price of these warrants was reduced to $0.2256 per share due to certain anti-dilution provisions in these warrants.

Based on the terms and conditions of the December 2023 public offering, the Company determined that equity classification was appropriate for the pre-funded warrants and warrants, and recognized the net proceeds from the issuance of common stock, pre-funded warrants, and warrants in excess of par of $1.0 million in additional paid-in capital

September 2023 Offering

On September 18, 2023, the Company completed a public offering and issued, 75,000 units, with each Unit consisting of (A) one share of the Company’s Series J Convertible Redeemable Preferred Stock, par value $0.001 per share, and (B) one warrant to purchase one-half of one (0.50) share of Series J Convertible Preferred Stock, at a price to the public of $60.00 per Unit, less underwriting discounts and commissions. Each Warrant has an exercise price of $30.00 per share, is exercisable for one-half of one (0.5) share of Series J Convertible Preferred Stock, is immediately exercisable and will expire one (1) year from the date of issuance. The Company received gross proceeds of approximately $4.5 million, before deducting underwriting discounts and commissions, estimated offering expenses, and before the exercise of warrants.

Based on the terms and conditions of the September 2023 public offering, the Company determined that liability classification was appropriate for the warrants and recognized the gross proceeds from the issuance allocated to the warrants in excess of par of $1.0 million in accrued liabilities and expensed issuance costs of $0.2 million allocated to the warrants.

During the nine months ended September 30, 2024, 9,000 Series J Warrants were exercised for 4,500 shares of Series J Convertible Preferred Stock and 8,000 Series J Warrants were exchanged for shares of common stock as part of the Exchange Agreement. On September 18, 2024, all 52,040 unexercised Series J Warrants expired, and no Series J Warrants remain outstanding as of September 30, 2024.

May 2023 Offering

On May 26, 2023, the Company completed a public offering and issued, 175,000 units, with each Unit consisting of (A) one share of the Company’s Series H Convertible Redeemable Preferred Stock, par value $0.001 per share, and (B) one warrant to purchase one-half of one (0.50) share of Series H Convertible Preferred Stock, at a price to the public of $26.00 per Unit, less underwriting discounts and commissions. Each Warrant has an exercise price of $13.00 per share, is exercisable for one-half of one (0.5) share of Series H Convertible Preferred Stock, is immediately exercisable and will expire two (2) years from the date of issuance. The Company received gross proceeds of approximately $4.6 million, before deducting underwriting discounts and commissions, estimated offering expenses, and before the exercise of warrants.

Based on the terms and conditions of the May 2023 public offering, the Company determined that liability classification was appropriate for the warrants and recognized the gross proceeds from the issuance allocated to the warrants in excess of par of $1.2 million in accrued liabilities and expensed issuance costs of $0.2 million allocated to the warrants.

January 2023 Offering

On January 9, 2023, the Company completed a public offering, pursuant to which the Company agreed to issue, in a registered direct offering, 171,678 shares of common stock, par value $0.001 per share, and pre-funded warrants to purchase 114,035 shares of common stock with an exercise price of $1.00 per share. The purchase price for one share of common stock was determined to be $35.00, and the purchase price for one January 2023 Pre-Funded Warrant was determined to be $34.00. The Company received aggregate gross proceeds from the transactions of approximately $9.9 million, before deducting underwriting discounts and commissions and other transaction expenses paid by the Company.

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.

Phantom Awards and Stock Appreciation Rights

In 2021, 2022 and 2023 the Company granted phantom RSUs which were granted in lieu of stock-settled RSUs historically granted for leadership bonuses and non-employee director service. The phantom RSUs had either time-based or performance-based vesting conditions and a cash settlement date in 2024 with the Company's option to settle the award in common stock at the sole discretion of the Board. At inception, these phantom RSUs were included as a component of long-term liability on the consolidated balance sheet and were not considered stock-based compensation due to the cash-settlement feature of the award and the then current limitation on the number of remaining shares authorized for issuance. In 2022, as a result of the Reverse Stock Split, the phantom awards were reclassed to equity and included as a component of additional paid-in-capital in the amount of $0.1 million, with a portion remaining as a component of long-term liability on the consolidated balance sheet due to certain guaranteed minimums, and the expense subsequent to the remeasurement date considered stock-based compensation. As of December 31, 2023, approximately 2,113 of these phantom RSUs were cancelled due to non-achievement of performance metrics, and during the three months ended March 31, 2024 an additional 828 units were cancelled due to non-achievement. In March 2024, the Board approved settlement of the remaining 291 phantom RSUs with time-based vesting conditions in quarterly cash installments through April 2025 in the aggregate amount of $0.6 million. As of September 30, 2024, $0.5 million was included in accrued liabilities on the consolidated balance sheet. As of December 31, 2023, $0.5 million was included in accrued liabilities and $0.2 million was included in additional paid-in-capital on the consolidated balance sheet

As of September 30, 2024, there are approximately 236 outstanding SARs granted in 2021 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 common stock at the sole discretion of the Board. These SARs were fully vested in 2022. No expense was recognized during the nine months ended September 30, 2024 and 2023, respectively.

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 loss is adjusted for any deemed dividends to preferred stockholders to compute net income attributable to common stockholders.

The 8,205,000 February 2024 Pre-Funded Warrants and 779,940 December 2023 Pre-Funded Warrants were included in the calculation of basic and diluted loss per share as of the date of issuance for the nine months ended September 30, 2024 as the underlying warrant shares are issuable for little or no cash consideration. The 114,035 January 2023 Pre-Funded Warrants were included in the calculation of basic and diluted loss per share as of the date of issuance for the three and nine months ended September 30, 2023 as the underlying warrant shares are issuable for little or no cash consideration.