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, 2014

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 are included within accrued liabilities on the consolidated balance sheets and were as follows (in thousands):

	Years Ended December 31,
	2014			2013			2012
Initial warranty accrual, beginning balance	$	1,096		$	1,699		$	2,218
Provision for estimated warranty cost		1,214			475			1,705
Warranty expenditures		(861	)		(1,078	)		(2,224	)
Initial warranty accrual, ending balance		1,449			1,096			1,699
Less warranty accrual, long term		519			—			—
Total warranty accrual, current portion	$	930		$	1,096		$	1,699

Summary of Income Statement Classification of Compensation Expense

During the years ended December 31, 2014, 2013, and 2012, the Company recognized compensation cost related to stock options of $1.2 million, $1.6 million, and $1.6 million, respectively, based on the grant date fair value. The net impact to earnings for the years ended December 31, 2014, 2013, and 2012, was $(0.03), $(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,
	2014		2013		2012
Cost of revenue	$	134	$	288	$	245
Sales and marketing		401		585		514
General and administrative		616		594		668
Engineering and development		82		142		173
	$	1,233	$	1,609	$	1,600

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:

	2014			2013			2012
Expected term (years)		3.83			3.65			3.70
Volatility		94	%		84	%		97	%
Annual dividend per share	$	—		$	—		$	—
Risk-free interest rate		1.66	%		1.04	%		0.77	%