NOTE 15—SUBSEQUENT EVENTS

Public Offering and Concurrent Private Placement

On October 29, 2019, BIOLASE sold 7,820,000 shares of its common stock in an underwritten public offering (the “Public Offering”) at a public offering price of $0.5750 per share and received net proceeds of approximately $4.2 million, after deducting underwriting discounts, but before deducting other fees and expenses. The Company granted the underwriters of the Public Offering an over-allotment option to purchase up to an additional 1,173,000 shares of common stock at the public offering price, less the underwriting discount, which the underwriters exercised on November 5, 2019, for which it received approximately $0.6 million, after deducting underwriting discounts. Concurrently with the Public Offering, the company sold to certain existing shareholders an aggregate of 69,565 shares of Series E Participating Convertible Preferred Stock, par value $0.001 per share, at a per share price of $57.50 in a private placement, and received gross proceeds of approximately $4.0 million, before deducting fees and expenses. Each share of Series E Preferred Stock will be convertible into 100 shares of common stock reflecting a conversion price equal to $0.5750 per share, subject to customary anti-dilution adjustments. The shares of Series E Participating Convertible Preferred Stock automatically convert into shares of common stock upon a stockholder vote to approve an amendment of BIOLASE’s charter to increase the number of authorized shares of BIOLASE common stock and satisfy Nasdaq requirements with respect to the issuance of common stock upon conversion of the Series E Participating Convertible Preferred Stock.

On November 5, 2019, the underwriters exercised their over-allotment option and the Company issued an additional 1.1 million shares for gross proceeds of approximately $0.6 million.

Loan Agreement

On October 28, 2019, BIOLASE entered into the Loan Agreement with Pacific Mercantile Bank, as Lender, which provides for the PMB Loan, a revolving line of credit in a maximum principal amount not to exceed the lesser of (i) $3 million or (ii) the sum of 90% of the Eligible Accounts (as defined in the Loan Agreement) plus 75% of the Eligible Inventory (as defined in the Loan Agreement, and subject to certain limitations set forth therein); provided that the maximum principal amount of the PMB Loan may be reduced from time to time in Lender’s good faith business judgment as set forth in the Loan Agreement. Borrowings under the PMB Loan may be used for working capital. The PMB Loan matures on October 28, 2021, unless earlier terminated.

BIOLASE’s obligations under the Loan Agreement are secured by a security interest in substantially all of BIOLASE’s property. No borrowings may be made under the Loan Agreement unless and until Exim Bank agrees to guarantee the PMB Loan and BIOLASE has entered into a borrower agreement with Exim Bank. Borrowings under the PMB Loan bear interest at a daily rate equal to the prime rate published in The Wall Street Journal, plus 1.5% per annum; provided, that the interest rate in effect on any day shall not be less than 6.0% per annum. Additionally, BIOLASE is required to pay an initial and annual fee of $52,500 to Exim Bank, as well as a termination fee equal to $30,000 in the event the Loan Agreement is terminated on or prior to October 28, 2020.

The Loan Agreement requires BIOLASE to maintain unrestricted cash at Lender plus unused availability under the PMB Loan in an amount equal to at least the Burn Rate (as defined in the Loan Agreement). In addition, the Loan Agreement contains customary affirmative and negative covenants for financings of its type (subject to customary exceptions). Upon the occurrence and during the continuation of an event of default (as described in the Loan Agreement), Lender may exercise any remedies available to it, including accelerating the repayment of the PMB Loan.

SWK Loan Amendment

On November 6, 2019, the Company agreed to further amend the Credit Agreement. Pursuant to the Third Amendment, SWK granted the Company a waiver of the Company’s non-compliance with certain financial covenants in the Credit Agreement. Also pursuant to the Third Amendment, the Company and SWK agreed to (i) revise financial covenants to adjust minimum revenue and EBITDA levels and (ii) remove the automatic increase of the minimum liquidity requirement based on certain aggregate minimum revenue and EBITDA levels as of September 30, 2019 (which was added pursuant to the First Amendment). In connection with the Third Amendment, the Company consolidated the SWK Warrants issued to SWK on November 9, 2018 and May 7, 2019. The terms of the SWK Warrants remained the same.