BIOLASE, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity (Tables)

Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2018

Summary of Income Statement Classification of Compensation Expense

The following table summarizes the income statement classification of compensation expense associated with share-based payments (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Cost of revenue	$	127	$	69	$	289	$	176
Sales and marketing		134		53		368		219
General and administrative		258		279		932		978
Engineering and development		85		63		273		231
	$	604	$	464	$	1,862	$	1,604

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:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017
Expected term	5.9 years			5.3 years			5.9 years			5.5 years
Volatility		81.9	%		80.5	%		81.4	%		78.7	%
Annual dividend per share	$	—		$	—		$	—		$	—
Risk-free interest rate		2.90	%		1.76	%		2.50	%		1.95	%

Summary of Option Activity

A summary of option activity for the nine months ended September 30, 2018 is as follows (in thousands, except per share data):

						Weighted Average
				Weighted		Remaining		Aggregate
				Average		Contractual		Intrinsic
	Shares			Exercise Price		Term (Years)		Value(1)
Options outstanding, December 31, 2017		1,924		$	8.62		7.21	$	—
Granted at fair market value		487			1.98
Exercised		(1	)		2.10
Forfeited, cancelled, or expired		(401	)		11.26
Options outstanding at September 30, 2018		2,009		$	6.48		6.08	$	57
Options exercisable at September 30, 2018		1,114		$	8.30		4.76	$	—
Vested options expired during the quarter ended September 30, 2018		208		$	14.28

(1) The intrinsic value calculation does not include negative values. This can occur when the fair market value on the reporting date is less than the exercise price of the grant.

Summary of Unvested Stock Option Activity

A summary of unvested stock option activity for the nine months ended September 30, 2018 is as follows (in thousands, except per share data):

				Weighted
				Average Grant
	Shares			Date Fair Value
Unvested options at December 31, 2017		846		$	3.14
Granted		487		$	1.38
Vested		(337	)	$	3.40
Forfeited or cancelled		(102	)	$	2.58
Unvested options at September 30, 2018		894		$	2.15

Cash Proceeds, Along With Fair Value Disclosures Related to Grants, Exercises and Vesting Options

Cash proceeds, along with fair value disclosures related to grants, exercises and vested options are as follows (in thousands, except per share amounts):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Proceeds from stock options exercised	$	—	$	—	$	2	$	3
Tax benefit related to stock options exercised (1)	N/A		N/A		N/A		N/A
Intrinsic value of stock options exercised (2)	$	—	$	—	$	—	$	1
Weighted-average fair value of options granted during period	$	1.02	$	1.93	$	1.38	$	4.32
Total fair value of shares vested during the period	$	164	$	302	$	1,008	$	1,000

(1) Excess tax benefits received related to stock option exercises are presented as operating cash inflows. The Company currently does not receive a tax benefit related to the exercise of stock options due to the Company’s net operating losses.

(2) The intrinsic value of stock options exercised is the amount by which the market price of the stock on the date of exercise exceeded the market price of the stock on the date of grant.

Summary of Unvested Restricted Stock Units

A summary of unvested RSU activity for the nine months ended September 30, 2018 is as follows (in thousands, except per share amounts):

				Weighted
				Average Grant
	Shares			Date Fair Value
Unvested RSUs at December 31, 2017		358		$	4.84
Granted		2,747		$	1.81
Vested		(186	)	$	2.70
Forfeited or cancelled		(338	)	$	3.34
Unvested RSUs at September 30, 2018		2,581		$	1.81

Summary of Warrant Activity

The Company issues warrants to acquire shares of BIOLASE common stock as approved by the Board. A summary of warrant activity for the nine months ended September 30, 2018 is as follows (in thousands, except exercise price amounts):

				Weighted
				Average
	Shares			Exercise Price
Warrants outstanding, December 31, 2017		1,225		$	9.63
Granted or Issued		108		$	2.24
Exercised		—		$	—
Forfeited, cancelled, or expired		(52	)	$	2.35
Warrants outstanding at September 30, 2018		1,281		$	9.21
Warrants exercisable at September 30, 2018		1,255		$	9.07
Vested warrants expired during the quarter ended September 30, 2018		—		$	—

- Definition

Tabular disclosure of warrants or rights issued. Warrants and rights outstanding are derivative securities that give the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue to entice investors by a higher return potential. The main difference between warrants and call options is that warrants are issued and guaranteed by the company, whereas options are exchange instruments and are not issued by the company. Also, the lifetime of a warrant is often measured in years, while the lifetime of a typical option is measured in months. Disclose the title of issue of securities called for by warrants and rights outstanding, the aggregate amount of securities called for by warrants and rights outstanding, the date from which the warrants or rights are exercisable, and the price at which the warrant or right is exercisable.

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