Basis of Presentation
|12 Months Ended|
Dec. 31, 2011
|Basis of Presentation/Supplementary Balance Sheet Information [Abstract]|
|BASIS OF PRESENTATION||
NOTE 1—BASIS OF PRESENTATION
BIOLASE Technology Inc., (the “Company”) incorporated in Delaware in 1987, is a medical technology company operating in one business segment that develops, manufactures, and markets lasers, and markets and distributes dental imaging equipment and other products designed to improve technologies for applications and procedures in dentistry and medicine.
Basis of Presentation
The consolidated financial statements include the accounts of BIOLASE Technology, Inc. and its wholly-owned subsidiaries. The Company has eliminated all material intercompany transactions and balances in the accompanying consolidated financial statements. Certain amounts for prior years have been reclassified to conform to the current year presentation.
Use of Estimates
The preparation of these consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect amounts reported in the consolidated financial statements and the accompanying notes. Significant estimates in these consolidated financial statements include allowances on accounts receivable, inventory and deferred taxes, as well as estimates for accrued warranty expenses, indefinite-lived intangible assets and the ability of goodwill to be realized, revenue deferrals for multiple element arrangements, effects of stock-based compensation and warrants, contingent liabilities and the provision or benefit for income taxes. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may differ materially from those estimates.
Fair Value of Financial Instruments
The Company’s financial instruments, consisting of cash, accounts receivable, accounts payable, and other accrued expenses, approximate fair value because of the short maturity of these items. Financial instruments consisting of short term debt approximate fair value since the interest rate approximates the market rate for debt securities with similar terms and risk characteristics.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market or, if none exists, the most advantageous market, for the specific asset or liability at the measurement date (referred to as the “exit price”). The fair value should be based on assumptions that market participants would use, including a consideration of nonperformance risk. Level 1 measurement of fair value is quoted prices in active markets for identical assets or liabilities.
Liquidity and Management’s Plans
The Company has suffered recurring losses from operations and has not generated cash from operations for the three years ended December 31, 2011. The Company’s inability to generate cash from operations and its potential need for additional capital, and the uncertainties surrounding its ability to raise such funding, raise substantial doubt about its ability to continue as a going concern. Accordingly, the financial statements have been prepared assuming that the Company will continue to operate as a going concern, which contemplates that the Company will realize its assets and satisfy its liabilities and commitments in the ordinary course of business. The financial statements do not include adjustments relating to the recoverability of recorded asset amounts or the amounts or classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
In order for the Company to continue operations beyond the next twelve months and be able to discharge its liabilities and commitments in the normal course of business, the Company must sell its products directly to end-users and through distributors; establish profitable operations through increased sales and a reduction of operating expenses; and potentially raise additional funds, principally through the additional sales of securities or debt financings to meet its working capital needs. The Company intends to increase sales by increasing our product offerings, expanding our direct sales force and expanding its distributor relationships both domestically and internationally. However, the Company cannot guarantee that it will be able to increase sales, reduce expenses or obtain additional funds when needed or that such funds, if available, will be obtainable on terms satisfactory to the Company. If the Company is unable to increase sales, reduce expenses or raise sufficient additional it may be unable to continue to fund its operations, develop its products or realize value from its assets and discharge its liabilities in the normal course of business. These uncertainties raise substantial doubt about the Company’s ability to continue as a going concern.
At December 31, 2011, the Company had approximately $9.0 million in working capital. The Company’s principal sources of liquidity at December 31, 2011 consisted of $3.3 million in cash and cash equivalents, and $8.9 million of net accounts receivable.
On May 27, 2010, the Company entered into a Loan and Security Agreement (the “Loan and Security Agreement”) with MidCap Financial, LLC (whose interests were later assigned to its affiliate MidCap Funding III, LLC) and Silicon Valley Bank in respect of a $5 million term loan, of which $3 million was borrowed on such date. On February 8, 2011, the Company repaid all outstanding balances under the Loan and Security Agreement, which included approximately $2.6 million in principal, $30,000 of accrued interest, and $169,000 of loan related expenses. In connection therewith, the banks released their security interest in all of our assets. Unamortized costs totaling approximately $240,000 associated with the term loan payable were expensed in February 2011. The warrants that the Company paid to the banks in consideration for the facility were exercised in full on a cashless basis in February 2011 for 78,172 shares of common stock.
The Company filed a Form S-3 Registration Statement with the SEC utilizing a “shelf” registration process in April 2010 which was declared effective by the SEC on April 29, 2010. Pursuant to this “shelf” registration statement (the “2010 Shelf Registration Statement”), the Company was able to sell common stock, preferred stock, or warrants in one or more offerings up to an aggregate public offering price of $9.5 million. On December 23, 2010, the Company entered into a Controlled Equity Offering Agreement (the “Offering Agreement”) with Ascendiant Securities, LLC (“Ascendiant”), as sales agent. During the year ended December 31, 2011, the Company sold approximately 2.2 million shares of common stock over time in privately negotiated transactions with gross proceeds of approximately $7.5 million through the Offering Agreement. Net proceeds totaled approximately $7.2 million after a 3.75% commission and direct costs. The sale of stock was an “at the market” offering as defined in Rule 415 under the Securities Act of 1993. “At the market” sales include sales made directly on the NASDAQ Capital Market, the existing trading market for our common stock, or sales made to or through a market maker other than on an exchange.
In connection with the 2010 Shelf Registration Statement, the Company entered into an agreement with Rodman & Renshaw, LLC (“Rodman & Renshaw”) in April 2011 where they arranged for the sale of shares of common stock in a registered direct placement (the “April 2011 Registered Direct Placement”) with a fee of 4.5% of the aggregate gross proceeds. In connection with the April 2011 Registered Direct Placement, the Company sold an aggregate of 320,000 shares of common stock to certain institutional investors with a purchase price of $5.60 per share for gross proceeds of approximately $1.8 million. The net proceeds from the April 2011 Registered Direct Placement totaled approximately $1.7 million. The costs of approximately $124,000 were paid in April 2011 upon the closing of the transaction. The shares of common stock sold in connection with the April 2011 Registered Direct Placement were issued pursuant to a prospectus supplement dated April 11, 2011 to the 2010 Shelf Registration Statement, which was filed with the SEC.
The transactions under the Offering Agreement and the April 2011 Registered Direct Placement exhausted the securities available for sale under the 2010 Shelf Registration Statement.
In June 2011, the Company entered into a securities purchase agreement (the “June 2011 Securities Purchase Agreement”) with certain institutional investors (the “June 2011 Purchasers”) under which it sold an aggregate of 1,625,947 shares of common stock at a price of $5.55 per share, together with five-year warrants to purchase 812,974 shares of common stock having an exercise price of $6.50 per share (the “June 2011 Warrants”). The June 2011 Warrants were not exercisable for six months following their issuance. Gross proceeds from the offering totaled approximately $9 million, and net proceeds, after commissions and other offering expenses of approximately $622,000, totaled approximately $8.4 million. The Company used the proceeds for working capital and general corporate purposes. In connection with the June 2011 Securities Purchase Agreement, the Company entered into an agreement with Rodman & Renshaw in which they agreed to act as the Company’s exclusive placement agent for the offering and the Company paid them fees totaling approximately $451,000 and reimbursed expenses of $50,000. The commissions and expenses paid to Rodman and Renshaw were included in the offering expenses.
The common stock and the June 2011 Warrants were offered and sold, and the common stock issuable upon exercise of the June 2011 Warrants were offered, pursuant to exemptions from registration set forth in section 4(2) of the 1933 Act and Rule 506 of Regulation D promulgated under the 1933 Act. As such, the common stock, the June 2011 Warrants, and the common stock issuable upon exercise of the June 2011 Warrants were not permitted to be re-offered or resold absent either registration under the 1933 Act or the availability of an exemption from the registration requirements.
The June 2011 Securities Purchase Agreement was subject to a registration rights agreement whereby the Company would have incurred penalties of up to 3.0% of the offering proceeds if it was unable to file a registration statement by July 19, 2011. The Company filed a registration statement on Form S-3 with the SEC to register the Registerable Securities (File No. 333-175664) on July 19, 2011 which was declared effective by the SEC on August 25, 2011, thereby satisfying the registration rights agreement.
On August 2, 2011, the Company repurchased 90,000 of the June 2011 Warrants for $99,900 or $1.11 per underlying share, plus expenses of $30,000.
On September 23, 2010, the Company entered into a Distribution and Supply Agreement (the “D&S Agreement”) with Henry Schein, Inc. (“HSIC”), effective August 30, 2010, which terminated all prior agreements with HSIC. Under the D&S Agreement, the Company granted HSIC certain non-exclusive distribution rights in North America and several international markets with respect to the Company’s dental laser systems, accessories, and related support and services in certain circumstances. In addition, the Company granted HSIC exclusivity in selected international markets subject to review of certain performance criteria. In connection with the D&S Agreement, HSIC placed two irrevocable purchase orders totaling $9 million for the Company’s products. The first purchase order, totaling $6 million, was for the purchase of the iLase systems and was required to be fulfilled by June 30, 2011. The first purchase order was fully satisfied during the first quarter of 2011. The second purchase order, totaling $3 million, was for the purchase of a combination of laser systems and was required to be fulfilled by August 25, 2011. The second purchase order was fully satisfied during the third quarter of 2011.
On February 22, 2012, the Company entered into a definitive agreement (the “2012 Termination Agreement”) with HSIC, a leading U.S. dental product and equipment distributor and the Company’s former exclusive distributor in North America, to purchase the remaining inventory of Waterlase MD Turbo laser systems held by HSIC. The 2012 Termination Agreement terminates and supersedes all prior agreements with HSIC.
The entire disclosure for organization, consolidation and basis of presentation of financial statements disclosure.
Reference 1: http://www.xbrl.org/2003/role/presentationRef