BIOLASE, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Summary of Significant Accounting Policies (Tables)

Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2013

Estimated Useful Lives of Property, Plant and Equipment

The cost of property, plant, and equipment is depreciated using the straight-line method over the following estimated useful lives of the respective assets, except for leasehold improvements, which are depreciated over the lesser of the estimated useful lives of the respective assets or the related lease terms.

Building	30 years
Leasehold improvements	3 to 5 years
Equipment and computers	3 to 5 years
Furniture and fixtures	5 years

Changes in Initial Product Warranty Accrual and Expenses Under Initial and Extended Warranties

Changes in the initial product warranty accrual and the expenses incurred under our initial and extended warranties for the years ended December 31 were as follows (in thousands):

	Years Ended December 31,
	2013			2012			2011
Initial warranty accrual, beginning balance	$	1,699		$	2,218		$	2,725
Provision for estimated warranty cost		475			1,705			1,586
Warranty expenditures		(1,078	)		(2,224	)		(2,093	)
Initial warranty accrual, ending balance		1,096			1,699			2,218
Total warranty accrual, long term		—			—			—
Total warranty accrual, current portion	$	1,096		$	1,699		$	2,218

Summary of Income Statement Classification of Compensation Expense

During the years ended December 31, 2013, 2012, and 2011, the Company recognized compensation cost related to stock options of $1.6 million, $1.6 million, and $1.5 million, respectively, based on the grant date fair value. The net impact to earnings for the years ended December 31, 2013, 2012, and 2011, was $(0.05), $(0.05), and $(0.05) per diluted share, respectively. The following table summarizes the income statement classification of compensation expense associated with share-based payments (in thousands):

	Years Ended December 31,
	2013		2012		2011
Cost of revenue	$	288	$	245	$	175
Sales and marketing		585		514		463
General and administrative		594		668		751
Engineering and development		142		173		139
	$	1,609	$	1,600	$	1,528

Assumptions on Estimation of Stock Option Fair Values

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

	2013			2012			2011
Expected term (years)		3.65			3.70			4.15
Volatility		84	%		97	%		105	%
Annual dividend per share	$	0.00		$	0.00		$	0.00
Risk-free interest rate		1.04	%		0.77	%		1.53	%

- Definition

Tabular disclosure of the allocation of equity-based compensation costs to a given line item on the balance sheet and income statement for the period. This may include the reporting line for the costs and the amount capitalized and expensed.

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