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4

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended

March 31, 2024

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to

Commission File Number: 001-36385

 

BIOLASE, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

87-0442441

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

 

27042 Towne Centre Drive, Suite 270

Lake Forest, California 92610

(Address of principal executive offices) (Zip Code)

(949) 361-1200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

symbol(s)

 

Name of each exchange on which registered

Common stock, par value $0.001 per share

 

BIOL

 

The NASDAQ Stock Market LLC

(NASDAQ Capital Market)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes ☐ No

As of May 6, 2024, the registrant had 33,394,979 shares of common stock, $0.001 par value per share, outstanding.

 

 

 


 

BIOLASE, INC.

INDEX

 

 

 

 

Page

PART I.

 

FINANCIAL INFORMATION

 

 

Item 1.

 

Financial Statements (Unaudited):

 

2

 

Condensed Consolidated Balance Sheets

 

2

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

 

3

 

 

Condensed Consolidated Statements of Convertible Redeemable Preferred Stock and Stockholders’ Equity (Deficit)

 

4

 

Condensed Consolidated Statements of Cash Flows

 

6

 

Notes to Condensed Consolidated Financial Statements

 

7

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

24

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

33

Item 4.

 

Controls and Procedures

 

33

 

 

 

 

 

PART II

 

OTHER INFORMATION

 

 

Item 1.

 

Legal Proceedings

 

34

Item 1A.

 

Risk Factors

 

34

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

36

Item 3.

 

Defaults Upon Senior Securities

 

36

Item 4.

 

Mine Safety Disclosures

 

36

Item 5.

 

Other Information

 

36

Item 6.

 

Exhibits

 

37

 

Signatures

 

39

 

1


 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BIOLASE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

(Unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

ASSETS

 

(Unaudited)

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

6,393

 

 

$

6,566

 

Accounts receivable, less allowance of $216 and $244 as of March 31, 2024 and December 31, 2023, respectively

 

 

5,687

 

 

 

5,483

 

Inventory

 

 

11,273

 

 

 

11,433

 

Prepaid expenses and other current assets

 

 

1,652

 

 

 

1,381

 

Total current assets

 

 

25,005

 

 

 

24,863

 

Property, plant, and equipment, net

 

 

4,846

 

 

 

5,525

 

Goodwill

 

 

2,926

 

 

 

2,926

 

Right-of-use assets, leases

 

 

1,313

 

 

 

1,519

 

Other assets

 

 

263

 

 

 

268

 

Total assets

 

$

34,353

 

 

$

35,101

 

LIABILITIES, CONVERTIBLE REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

4,915

 

 

$

6,065

 

Accrued liabilities

 

 

7,589

 

 

 

7,518

 

Stock warrant liability

 

 

3,780

 

 

 

1,363

 

Deferred revenue, current portion

 

 

2,343

 

 

 

2,452

 

Current portion of term loans

 

 

2,800

 

 

 

2,265

 

Total current liabilities

 

 

21,427

 

 

 

19,663

 

Deferred revenue

 

 

223

 

 

 

256

 

Warranty accrual

 

 

598

 

 

 

593

 

Non-current term loans, net of discount

 

 

11,207

 

 

 

11,782

 

Non-current operating lease liability

 

 

542

 

 

 

772

 

Other liabilities

 

 

87

 

 

 

79

 

Total liabilities

 

 

34,084

 

 

 

33,145

 

Mezzanine Equity:

 

 

 

 

 

 

Series H Convertible Redeemable Preferred stock, par value $0.001 per share; 370 shares authorized, 5 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

 

 

346

 

 

 

346

 

Series J Convertible Redeemable Preferred stock, par value $0.001 per share; 160 shares authorized, 16 and 15 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

 

 

1,857

 

 

 

1,857

 

Total mezzanine equity

 

 

2,203

 

 

 

2,203

 

Stockholders' equity (deficit):

 

 

 

 

 

 

Common stock, par value $0.001 per share; 180,000 shares authorized, 33,257 and 3,416 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

 

 

33

 

 

 

3

 

Additional paid-in capital

 

 

321,957

 

 

 

317,103

 

Accumulated other comprehensive loss

 

 

(639

)

 

 

(553

)

Accumulated deficit

 

 

(323,285

)

 

 

(316,800

)

Total stockholders' equity (deficit)

 

 

(1,934

)

 

 

(247

)

Total liabilities, convertible redeemable preferred stock and
 stockholders' equity (deficit)

 

$

34,353

 

 

$

35,101

 

 

See accompanying notes to condensed consolidated financial statements.

2


 

BIOLASE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Net revenue

 

$

10,131

 

 

$

10,467

 

Cost of revenue

 

 

6,795

 

 

 

7,130

 

Gross profit

 

 

3,336

 

 

 

3,337

 

Operating expenses:

 

 

 

 

 

 

Sales and marketing

 

 

3,383

 

 

 

4,622

 

General and administrative

 

 

3,196

 

 

 

2,459

 

Engineering and development

 

 

1,283

 

 

 

1,547

 

Total operating expenses

 

 

7,862

 

 

 

8,628

 

Loss from operations

 

 

(4,526

)

 

 

(5,291

)

Gain (loss) on foreign currency transactions

 

 

(96

)

 

 

20

 

Interest expense, net

 

 

(622

)

 

 

(577

)

Other income (loss), net

 

 

(1,222

)

 

 

 

Non-operating loss, net

 

 

(1,940

)

 

 

(557

)

Loss before income tax provision

 

 

(6,466

)

 

 

(5,848

)

Income tax provision

 

 

(19

)

 

 

(1

)

Net loss

 

 

(6,485

)

 

 

(5,849

)

Other comprehensive loss items:

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(86

)

 

 

80

 

Comprehensive loss

 

$

(6,571

)

 

$

(5,769

)

 

 

 

 

 

 

Net loss

 

$

(6,485

)

 

$

(5,849

)

Deemed dividend on convertible preferred stock

 

 

 

 

 

 

Net loss attributable to common stockholders

 

$

(6,485

)

 

$

(5,849

)

 

 

 

 

 

 

Net loss per share attributable to common stockholders:

 

 

 

 

 

 

Basic and Diluted - Note 1

 

$

(0.36

)

 

$

(17.83

)

Shares used in the calculation of net loss per share:

 

 

 

 

 

 

Basic and Diluted - Note 1

 

 

17,842

 

 

 

328

 

 

See accompanying notes to condensed consolidated financial statements.

3


 

BIOLASE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)

(In thousands)

(Unaudited)

 

 

 

Mezzanine Equity

 

 

 

Stockholders' Equity (Deficit)

 

 

 

Series H
Convertible Redeemable
Preferred Stock

 

 

Series J
Convertible Redeemable
Preferred Stock

 

 

 

Common Stock

 

 

Additional
 Paid-in

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity (Deficit)

 

Balance, December 31, 2023

 

 

5

 

 

$

346

 

 

 

15

 

 

$

1,857

 

 

 

 

3,416

 

 

$

3

 

 

$

317,103

 

 

$

(553

)

 

$

(316,800

)

 

$

(247

)

Sale of common stock units and pre-funded units, net of fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,795

 

 

 

8

 

 

 

2,776

 

 

 

 

 

 

 

 

 

2,784

 

Exercise of Class A Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,063

 

 

 

13

 

 

 

1,976

 

 

 

 

 

 

 

 

 

1,989

 

Paid-in-kind dividend on Series J Convertible Redeemable Preferred Stock

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of stock from
   RSUs, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

102

 

 

 

 

 

 

 

 

 

102

 

Exercise of common stock warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,979

 

 

 

9

 

 

 

 

 

 

 

 

 

 

 

 

9

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,485

)

 

 

(6,485

)

Foreign currency
   translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(86

)

 

 

 

 

 

(86

)

Balance, March 31, 2024

 

 

5

 

 

$

346

 

 

 

16

 

 

$

1,857

 

 

 

 

33,257

 

 

$

33

 

 

$

321,957

 

 

$

(639

)

 

$

(323,285

)

 

$

(1,934

)

 

See accompanying notes to condensed consolidated financial statements.

 

4


 

BIOLASE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)

(In thousands)

(Unaudited)

 

 

Stockholders' Equity (Deficit)

 

 

Common Stock

 

 

Additional
 Paid-in
Capital

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders'

 

 

Shares

 

 

Amount

 

 

Amount

 

 

Loss

 

 

Deficit

 

 

Equity (Deficit)

 

Balance, December 31, 2022

 

77

 

 

$

 

 

$

301,790

 

 

$

(733

)

 

$

(296,168

)

 

$

4,889

 

Sale of common stock and pre-funded warrants, net of fees

 

172

 

 

 

 

 

 

8,503

 

 

 

 

 

 

 

 

 

8,503

 

Issuance of stock from RSUs, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

521

 

 

 

 

 

 

 

 

 

521

 

Exercise of common stock warrants

 

14

 

 

 

 

 

 

14

 

 

 

 

 

 

 

 

 

14

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,849

)

 

 

(5,849

)

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

80

 

 

 

 

 

 

80

 

Balance, March 31, 2023

 

263

 

 

$

 

 

$

310,828

 

 

$

(653

)

 

$

(302,017

)

 

$

8,158

 

 

See accompanying notes to condensed consolidated financial statements.

5


 

BIOLASE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net loss

 

$

(6,485

)

 

$

(5,849

)

Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:

 

 

 

 

 

 

Depreciation

 

 

660

 

 

 

149

 

Recoveries of bad debts

 

 

(27

)

 

 

(17

)

Amortization of debt issuance costs

 

 

125

 

 

 

107

 

Change in fair value of warrants

 

 

556

 

 

 

 

Issuance costs for common stock warrants

 

 

830

 

 

 

 

Stock-based compensation

 

 

113

 

 

 

691

 

Gain on disposal of fixed assets

 

 

(156

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(177

)

 

 

700

 

Inventory

 

 

133

 

 

 

(1,890

)

Prepaid expenses and other current assets

 

 

(59

)

 

 

240

 

Accounts payable and accrued liabilities

 

 

(1,308

)

 

 

303

 

Deferred revenue

 

 

(143

)

 

 

(92

)

Net cash and cash equivalents used in operating activities

 

 

(5,938

)

 

 

(5,658

)

Cash Flows from Investing Activities:

 

 

 

 

 

 

Purchases of property, plant, and equipment

 

 

 

 

 

(587

)

Proceeds from disposal of property, plant, and equipment

 

 

197

 

 

 

 

Net cash and cash equivalents provided by (used in) investing activities

 

 

197

 

 

 

(587

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

Proceeds from the sale of common stock and pre-funded warrants, net of fees

 

 

2,784

 

 

 

8,503

 

Proceeds from the sale of warrants, net of fees

 

 

3,020

 

 

 

 

Principal payment on loan

 

 

(165

)

 

 

 

Proceeds from the exercise of common stock warrants

 

 

8

 

 

 

14

 

Net cash and cash equivalents provided by financing activities

 

 

5,647

 

 

 

8,517

 

Effect of exchange rate changes

 

 

(79

)

 

 

79

 

(Decrease) increase in cash and cash equivalents

 

 

(173

)

 

 

2,351

 

Cash and cash equivalents, beginning of period

 

 

6,566

 

 

 

4,181

 

Cash and cash equivalents, end of period

 

$

6,393

 

 

$

6,532

 

Supplemental cash flow disclosure:

 

 

 

 

 

 

Cash paid for interest

 

$

494

 

 

$

470

 

Cash received for interest

 

$

2

 

 

$

2

 

Cash paid (received) for income taxes

 

$

8

 

 

$

(14

)

Cash paid for operating leases

 

$

77

 

 

$

68

 

Non-cash property, plant and equipment additions acquired under inventory

 

$

27

 

 

$

 

Common stock issued upon cashless warrant exercise

 

$

1,989

 

 

$

 

Non-cash right-of-use assets obtained in exchange for lease obligation

 

$

 

 

$

464

 

 

See accompanying notes to condensed consolidated financial statements.

6


 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1—DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

The Company

BIOLASE, Inc. (“BIOLASE” and, together with its consolidated subsidiaries, the “Company”) is a leading provider of advanced laser systems for the dental industry. The Company develops, manufactures, markets, and sells laser systems that provide significant benefits for dental practitioners and their patients. The Company’s proprietary systems allow dentists, periodontists, endodontists, pediatric dentists, oral surgeons, and other dental specialists to perform a broad range of minimally invasive dental procedures, including cosmetic, restorative, and complex surgical applications. The Company’s laser systems are designed to provide clinically superior results for many types of dental procedures compared to those achieved with drills, scalpels, and other conventional instruments. Potential patient benefits include less pain, fewer shots, faster healing, decreased fear and anxiety, and fewer appointments. Potential practitioner benefits include improved patient care and the ability to perform a higher volume and wider variety of procedures and generate more patient referrals.

Basis of Presentation

The unaudited condensed consolidated financial statements include the accounts of BIOLASE and its wholly-owned subsidiaries and have been prepared on a basis consistent with the December 31, 2023 audited consolidated financial statements and include all material adjustments, consisting of normal recurring adjustments and the elimination of all material intercompany transactions and balances, necessary to fairly present the information set forth therein. The unaudited condensed consolidated financial statements do not include all the footnotes, presentations, and disclosures normally required by accounting principles generally accepted in the United States of America (“GAAP”) for complete consolidated financial statements.

The unaudited condensed consolidated results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results for the full year. The December 31, 2023 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto for the year ended December 31, 2023 included in included in BIOLASE’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the Securities and Exchange Commission (the “SEC”) on March 21, 2024 (the “2023 Form 10-K”).

Reverse Stock Split

At a special meeting of BIOLASE stockholders held on July 20, 2023 (the "special meeting"), BIOLASE stockholders approved an amendment to BIOLASE’s Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"), to effect a reverse stock split of BIOLASE common stock, par value $0.001 per share (the “common stock”), at a ratio between one-for-two (1:2) and one-for-one hundred (1:100). Immediately after the special meeting, BIOLASE's board of directors (the "Board") approved a one-for-one hundred (1:100) reverse stock split of the outstanding shares of the common stock (the “2023 Reverse Stock Split”). On July 26, 2023, BIOLASE filed an amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware to effect the 2023 Reverse Stock Split, which became effective on July 27, 2023. The amendment did not change the number of authorized shares of the common stock.

Except as the context otherwise requires, all common stock share numbers, share price amounts (including exercise prices, conversion prices, and closing market prices), shares issued upon the conversion of preferred shares, and shares issued upon the exercise of warrants contained in the unaudited condensed consolidated financial statements and notes thereto have been retroactively adjusted to reflect the 2023 Reverse Stock Split.

Liquidity and Management’s Plans - Going Concern

The Company incurred losses from operations and used cash in operating activities for the three months ended March 31, 2024 and for the years ended December 31, 2023, 2022, and 2021. The Company’s recurring losses, level of cash used in operations, and potential need for additional capital, along with uncertainties surrounding the Company’s ability to raise additional capital, raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

As of March 31, 2024, the Company had working capital of approximately $3.6 million. The Company’s principal sources of liquidity as of March 31, 2024 consisted of approximately $6.4 million in cash and cash equivalents and $5.7 million of net accounts receivable. As of December 31, 2023, the Company had working capital of approximately $5.2 million, $6.6 million in cash and cash equivalents and $5.5 million of net accounts receivable. The decrease in cash and cash equivalents since December 31, 2023 was

7


 

primarily due to a net loss of $6.5 million and principal payments on our term loan of $0.2 million, partially offset by net proceeds of $5.8 million from the February 2024 public offering and $0.2 million in proceeds from the disposal of property, plant, and equipment.

Additional capital requirements may depend on many factors, including, among other things, the rate at which the Company’s business grows, demands for working capital, manufacturing capacity, and any acquisitions that the Company may pursue. The Company expects that it will be required to raise capital through either equity or debt offerings. The Company cannot provide assurance that it will be able to successfully enter into any such equity or debt financings in the future or that the required capital would be available on acceptable terms, if at all, or that any such financing activity would not be dilutive to its stockholders.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of these condensed consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect amounts reported in the condensed consolidated financial statements and the accompanying notes. Significant estimates in these condensed consolidated financial statements include allowances on accounts receivable, inventory, and deferred taxes, as well as estimates for accrued warranty expenses, goodwill and the ability of goodwill to be realized, revenue deferrals, effects of stock-based compensation and warrants, contingent liabilities, the provision or benefit for income taxes, and preferred stock. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may differ materially from those estimates.

Critical Accounting Policies

Information with respect to the Company’s critical accounting policies, which management believes could have the most significant effect on the Company’s reported results and require subjective or complex judgments by management, is discussed in the Company’s 2023 audited financial statements included in the 2023 Form 10-K. Management believes that there have been no significant changes during the three months ended March 31, 2024 in the Company’s critical accounting policies from those disclosed in the Company’s 2023 audited financial statements included in the 2023 Form 10-K.

Fair Value of Financial Instruments

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 is based on assumptions that market participants would use, including a consideration of non-performance risk. Under the accounting guidance for fair value hierarchy, there are three levels of measurement inputs. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable, either directly or indirectly. Level 3 inputs are unobservable due to little or no corroborating market data.

The Company’s financial instruments, consisting of cash, cash equivalents, accounts receivable, accounts payable, accrued liabilities, warrants, and the SWK Loan (as defined below) as discussed in Note 9 – Debt, approximate fair value because of the relative short maturity of these items and the market interest rates the Company could obtain.

Concentration of Credit Risk, Interest Rate Risk and Foreign Currency Exchange Rate

Financial instruments which potentially expose the Company to a concentration of credit risk consist principally of cash and cash equivalents, and trade accounts receivable. The Company maintains its cash and cash equivalents with established commercial banks. At times, balances may exceed federally insured limits. To minimize the risk associated with trade accounts receivable, management performs ongoing credit evaluations of customers’ financial condition and maintains relationships with the Company’s customers that allow management to monitor current changes in business operations so the Company can respond as needed. The Company does not, generally, require customers to provide collateral before it sells them its products. However, the Company has required certain distributors to make prepayments for significant purchases of its products.

Substantially all of the Company’s revenue is denominated in U.S. dollars, including sales to international distributors. Only a small portion of its revenue and expenses is denominated in foreign currencies, principally the Euro and Indian Rupee. The Company’s foreign currency expenditures primarily consist of the cost of maintaining offices, consulting services, and employee-related costs. During the three months ended March 31, 2024 and 2023, respectively, the Company did not enter into any hedging contracts. Future fluctuations in the value of the U.S. dollar may affect the price competitiveness of the Company’s products outside the U.S.

8


 

Recent Accounting Pronouncements

Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”) in the form of accounting standards updates (“ASUs”) to the FASB’s Accounting Standards Codification (“ASC”).

The Company considers the applicability and impact of all ASUs. ASUs not listed below were assessed and determined not to be applicable or are expected to have minimal impact on the Company’s consolidated financial position and results of operations.

Recently Issued Accounting Standards

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures, to require enhanced income tax disclosures to provide information to assess how an entity’s operations and related tax risks, tax planning, and operational opportunities affect its tax rate and prospects for future cash flows. The amendments in this update provide that a business entity disclose (1) a tabular income tax rate reconciliation, using both percentages and amounts, (2) separate disclosure of any individual reconciling items that are equal to or greater than 5% of the amount computed by multiplying the income (loss) from continuing operations before income taxes by the applicable statutory income tax rate, and disaggregation of certain items that are significant and (3) amount of income taxes paid (net of refunds received) disaggregated by federal, state and foreign jurisdictions, including separate disclosure of any individual jurisdictions greater than 5% of total income taxes paid. These amendments are effective for the Company for annual periods in 2025, applied prospectively, with early adoption and retrospective application permitted. The Company intends to adopt the amendments in this update prospectively in 2025. The impact of the adoption of the amendments in this update is not expected to be material to the Company’s consolidated financial position and results of operations, since the amendments require only enhancement of existing income tax disclosures in the footnotes to the Company’s consolidated financial statements.

NOTE 3—REVENUE RECOGNITION

Contracts with Customers

Revenue for sales of products and services is derived from contracts with customers. The products and services promised in customer contracts include delivery of laser systems, imaging systems, and consumables as well as certain ancillary services such as training and extended warranties. Contracts with each customer generally state the terms of the sale, including the description, quantity and price of each product or service. Payment terms are stated in the contract and vary according to the arrangement. Because the customer typically agrees to a stated rate and price in the contract that does not vary over the life of the contract, the Company’s contracts do not contain variable consideration. The Company establishes a provision for estimated warranty expenses.

Performance Obligations

At contract inception, the Company assesses the products and services promised in its contracts with customers. The Company then identifies performance obligations to transfer distinct products or services to the customers. In order to identify performance obligations, the Company considers all of the products or services promised in contracts regardless of whether they are explicitly stated or are implied by customary business practices.

Revenue from products and services transferred to customers at a single point in time accounted for 85% of net revenue for the three months ended March 31, 2024 and 89% for the three months ended March 31, 2023. The majority of the Company’s revenue recognized at a point in time is for the sale of laser systems and consumables. Revenue from these contracts is recognized when the customer is able to direct the use of and obtain substantially all of the benefits from the product which generally coincides with title transfer during the shipping process.

Revenue from services transferred to customers over time accounted for 15% of net revenue for the three months ended March 31, 2024 and 11% for the three months ended March 31, 2023. The majority of the Company’s revenue that is recognized over time relates to product training and extended warranties. Deferred revenue attributable to undelivered elements, which primarily consists of product training, totaled approximately $0.4 million as of March 31, 2024 and December 31, 2023.

Transaction Price Allocation

The transaction price for a contract is allocated to each distinct performance obligation and recognized as revenue when, or as, each performance obligation is satisfied. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using the best estimate of the standalone selling price of each distinct good or service in a contract. The primary method used to estimate standalone selling price is the observable price when the good or service is sold separately in similar circumstances and to similar customers.

9


 

Significant Judgments

Revenue is recorded for extended warranties over time as the customer benefits from the warranty coverage. This revenue will be recognized equally throughout the contract period as the customer receives benefits from the Company's promise to provide such services. Revenue is recorded for product training when the customer attends a training program or upon the expiration of the obligation, which is generally after six months.

The Company also has contracts that include both the product sales and product training as performance obligations. In those cases, the Company records revenue for product sales at the point in time when the product has been shipped. The customer obtains control of the product when it is shipped, as all shipments are made FOB shipping point, and after the customer selects its shipping method and pays all shipping costs and insurance. The Company has concluded that control is transferred to the customer upon shipment.

Accounts Receivable

Accounts receivable are stated at estimated net realizable value. The allowance for doubtful accounts is based on an analysis of customer accounts and the Company’s historical experience with accounts receivable write-offs.

Contract Liabilities

The Company performs its obligations under a contract with a customer by transferring products and/or services in exchange for consideration from the customer. The Company typically invoices its customers as soon as control of an asset is transferred and a receivable for the Company is established. The Company, however, recognizes a contract liability when a customer prepays for goods and/or services, and the Company has not transferred control of the goods and/or services. The opening and closing balances of the Company’s contract liabilities are as follows (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Undelivered elements (training and installation)

 

$

406

 

 

$

449

 

Extended warranty contracts

 

 

2,160

 

 

 

2,259

 

Total deferred revenue

 

 

2,566

 

 

 

2,708

 

Less: long-term portion of deferred revenue

 

 

(223

)

 

 

(256

)

Deferred revenue — current

 

$

2,343

 

 

$

2,452

 

 

The balance of contract assets was immaterial as the Company did not have a significant amount of uninvoiced receivables at March 31, 2024 and December 31, 2023.

The amount of revenue recognized during the three months ended March 31, 2024 and 2023 that was included in the opening contract liability balance related to undelivered elements was $0.3 million and $0.2 million, respectively. The amounts related to extended warranty contracts was $0.9 million and $0.7 million for the three months ended March 31, 2024 and 2023, respectively.

Disaggregation of Revenue

The Company disaggregates revenue from contracts with customers into geographical regions and by the timing of when goods and services are transferred. The Company determined that disaggregating revenue into these categories depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by regional economic factors.

The Company’s revenues related to the following geographic areas were as follows (in thousands):

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

United States

 

$

6,690

 

 

$

6,758

 

International

 

 

3,441

 

 

 

3,709

 

Net revenue

 

$

10,131

 

 

$

10,467

 

 

10


 

Information regarding revenues disaggregated by the timing of when goods and services are transferred is as follows (in thousands):

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Revenue recognized over time

 

$

1,487

 

 

$

1,169

 

Revenue recognized at a point in time

 

 

8,644

 

 

 

9,298

 

Net revenue

 

$

10,131

 

 

$

10,467

 

 

The Company’s sales by end market were as follows (in thousands):

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

End-customer

 

$

6,690

 

 

$

6,758

 

Distributors

 

 

3,441

 

 

 

3,709

 

Net revenue

 

$

10,131

 

 

$

10,467

 

 

Shipping and Handling Costs and Revenues

Shipping and freight costs are treated as fulfillment costs. For shipments to end-customers, the customer bears the shipping and freight costs and has control of the product upon shipment. For shipments to distributors, the distributor bears the shipping and freight costs, including insurance, tariffs and other import/export costs.

 

NOTE 4—CONVERTIBLE REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

The Board, without further stockholder authorization, may authorize the issuance from time to time of up to 1,000,000 shares of the Company’s preferred stock. Of the 1,000,000 shares of preferred stock, as of March 31, 2024, 370,000 shares were designated as Series H, par value $0.001 per share, 160,000 shares were designated as Series J, par value $0.001 per share, and 125,000 shares were designated as Series I, par value $0.001 per share.

Preferred Stock

Series J Preferred Stock

On September 13, 2023, the Company consummated the sale of 75,000 Units (the "Units") with each Unit consisting of (A) one share of BIOLASE Series J Convertible Redeemable Preferred Stock, par value $0.001 per share and a stated value equal to $100.00 (the “Series J Convertible Preferred Stock”), and (B) one warrant (the “Series J Warrants”) to purchase one-half of one (0.50) share of Series J Convertible Preferred Stock, at a price to the public of $60.00 per Unit, less underwriting discounts and commissions. The public offering price of $60.00 per Unit reflects the issuance of the Series J Convertible Preferred Stock with an original issue discount of 40%. The Company filed a registration statement on Form S-1 in September 2023, which registered the Units, the Series J Convertible Preferred Stock, the Series J Warrants and the shares of Series J Convertible Preferred Stock and common stock underlying such securities and additional shares of Series J Convertible Preferred Stock that will be issued, if and when the Board declares such dividends, as paid in-kind dividends (“PIK dividends”) at a rate of 20% per annum and the shares of Common Stock issuable upon conversion of the Series J Convertible Preferred Stock issued as PIK dividends. The registration statement was declared effective on September 13, 2023 and the offering closed on September 18, 2023. Each Warrant has an exercise price of $30.00 per share, is exercisable for one-half of one (0.5) share of Series J Convertible Preferred Stock, is immediately exercisable and will expire one (1) year from the date of issuance.

Each share of Series J Convertible Preferred Stock is convertible at the option of the holder at any time into the number of shares of common stock determined by dividing the $100.00 stated value per share by a conversion price of $3.26. Each outstanding share of Series J Convertible Preferred Stock is mandatorily redeemable by the Company in cash on September 13, 2024 (the "Series J Maturity Date").

Gross proceeds from the offering were $4.5 million before broker fees and related expenses of approximately $1.0 million. In accordance with applicable accounting standards, the $4.5 million gross proceeds were allocated to the Series J Convertible Preferred Stock and the Series J Warrants in the amount of $3.5 million and $1.0 million, respectively. The allocation was based on the fair value of the Series J Warrants of $1.0 million as of the commitment date, with the residual proceeds of $3.5 million allocated to the

11


 

Series J Convertible Preferred Stock. Net proceeds allocated to the Series J Convertible Preferred Stock and Series J warrants was $2.7 million and $0.8 million respectively.

The Series J Convertible Preferred stock was classified as mezzanine equity on the consolidated balance sheet as they are contingently redeemable prior to the Series J Maturity Date and the conversion from preferred shares to shares of common stock is at the option of the holder at any time before the Series J Maturity Date. The Series J warrants were classified as accrued liabilities on the consolidated balance sheet as the warrants are convertible into preferred shares, which are mandatorily redeemable in cash upon the Series J Maturity Date if they are not converted to shares of common stock before such date.

The Series J Convertible Preferred Stock was issued at a discount with the total redemption value of the Series J Convertible Preferred Shares and PIK Dividends of $10.3 million. The redemption value in excess of the net proceeds received allocated to the Series J Convertible Preferred Shares was $7.6 million and was recognized as a decrease in additional paid-in-capital at the commitment date. Upon conversion of Series J warrants to Series J Convertible Preferred shares, the value of the Series J Convertible Preferred shares issued is the stated value per share plus the PIK dividend. The redemption value in excess of the net proceeds received from the exercise of warrants and the fair value of such warrants is recognized as a decrease in additional paid-in-capital at the conversion date.

As of March 31, 2024, 5,960 of the Series J warrants have been exercised to 2,980 Series J Convertible Preferred shares, 4,306 Series J Convertible Preferred shares have been issued as part of PIK dividends, and 66,465 Series J Convertible Preferred shares were converted to approximately 2.0 million shares of common stock. There have been no exercises of Series J warrants or conversions of Series J Convertible Preferred shares during the three months ended March 31, 2024.

The mezzanine classified Series J Convertible Preferred Stock are presented at their maximum redemption value that includes accretion related to the PIK dividends.

Series I Preferred Stock

On June 5, 2023, the Board declared a dividend of one one-thousandth of a share of Series I Preferred Stock, par value $0.001 per share ("Series I Preferred Stock"), for each share of common stock outstanding as of June 16, 2023 (as calculated on a pre 2023 Reverse Stock Split basis). The certificate of designation for the Series I Preferred Stock provided that all shares of Series I Preferred Stock not present in person or by proxy at any meeting of stockholders held to vote on the 2023 Reverse Stock Split immediately prior to the opening of the polls at such meeting would be automatically redeemed (the “Series I Initial Redemption”) and that any outstanding shares of Series I Preferred Stock that have not been redeemed pursuant to the Series I Initial Redemption would be redeemed in whole, but not in part, (i) if and when ordered by the Board or (ii) automatically upon the effectiveness of the amendment to the Certificate of Incorporation effecting the 2023 Reverse Stock Split that was subject to the vote (the "Series I Subsequent Redemption"). On July 20, 2023, the Series I Initial Redemption occurred, and on July 27, 2023, the Series I Subsequent Redemption occurred. As a result, no shares of Series I Preferred Stock remain outstanding as of July 27, 2023.

Series H Preferred Stock

On May 24, 2023, the Company consummated the sale of 175,000 Units (the "Units") with each Unit consisting of (A) one share of BIOLASE Series H Convertible Redeemable Preferred Stock, par value $0.001 per share and a stated value equal to $50.00 (the “Series H Convertible Preferred Stock”), and (B) one warrant (the “Series H Warrants”) to purchase one-half of one (0.50) share of Series H Convertible Preferred Stock, at a price to the public of $26.00 per Unit, less underwriting discounts and commissions. The public offering price of $26.00 per Unit reflects the issuance of the Series H Convertible Preferred Stock with an original issue discount of 48%. The Company filed a registration statement on Form S-1 in May 2023, which registered the Units, the Series H Convertible Preferred Stock, the Series H Warrants and the shares of Series H Convertible Preferred Stock and common stock underlying such securities and additional shares of Series H Convertible Preferred Stock that will be issued, if and when the Board declares such dividends, as paid in-kind dividends (“PIK dividends”) at a rate of 20% and the shares of Common Stock issuable upon conversion of the Series H Convertible Preferred Stock issued as PIK dividends. The registration statement was declared effective on May 24, 2023 and the offering closed on May 26, 2023. Each Warrant has an exercise price of $13.00 per share, is exercisable for one-half of one (0.5) share of Series H Convertible Preferred Stock, is immediately exercisable and will expire two (2) years from the date of issuance.

Each share of Series H Convertible Preferred Stock is convertible at the option of the holder at any time into the number of shares of common stock determined by dividing the $50.00 stated value per share by a conversion price of $13.98 (as adjusted for the 2023 Reverse Stock Split). Each outstanding share of Series H Convertible Preferred Stock is mandatorily redeemable by the Company in cash on May 24, 2025 (the "Series H Maturity Date").

12


 

Gross proceeds from the offering were $4.6 million before broker fees and related expenses of approximately $0.9 million. In accordance with applicable accounting standards, the $4.6 million gross proceeds were allocated to the Series H Convertible Preferred Stock and the Series H Warrants in the amount of $3.4 million and $1.2 million, respectively. The allocation was based on the fair value of the Series H Warrants of $1.2 million as of the commitment date, with the residual proceeds of $3.4 million allocated to the Series H Convertible Preferred Stock. Net proceeds allocated to the Series H Convertible Preferred Stock and Series H warrants was $2.7 million and $1.0 million respectively.

The Series H Convertible Preferred Stock was classified as mezzanine equity on the consolidated balance sheet as they are contingently redeemable prior to the Series H Maturity Date and the conversion from preferred shares to shares of common stock is at the option of the holder at any time before the Series H Maturity Date. The Series H warrants were classified as accrued liabilities on the consolidated balance sheet as the warrants are convertible into preferred shares, which are mandatorily redeemable in cash upon the Series H Maturity Date if they are not converted to shares of common stock before such date.

The Series H Convertible Preferred Stock was issued at a discount with the total redemption value of the Series H Convertible Preferred Shares and PIK Dividends of $10.5 million. The redemption value in excess of the net proceeds received allocated to the Series H Convertible Preferred Shares was $7.8 million and was recognized as a decrease in additional paid-in-capital at the commitment date. Upon conversion of Series H warrants to Series H Convertible Preferred shares, the value of the Series H Convertible Preferred shares issued is the stated value per share plus the PIK dividend. The redemption value in excess of the net proceeds received from the exercise of warrants and the fair value of such warrants is recognized as a decrease in additional paid-in-capital at the conversion date.

As of March 31, 2024, 40,000 of the Series H warrants have been exercised to 20,000 Series H Convertible Preferred shares, and 190,000 Series H Convertible Preferred shares have been converted to approximately 0.7 million shares of common stock. There has been no exercises of Series H warrants or conversion of Series H Convertible Preferred shares during the three months ended March 31, 2024.

The mezzanine classified Series H Convertible Preferred Stock are presented at their maximum redemption value that includes accretion related to the PIK dividends.

Stock-Based Compensation

2002 Stock Incentive Plan

The 2002 Stock Incentive Plan (as amended effective as of May 26, 2004, November 15, 2005, May 16, 2007, May 5, 2011, June 6, 2013, October 30, 2014, April 27, 2015, and May 6, 2017, the “2002 Plan”) was replaced by the 2018 Plan (as defined below) with respect to future equity awards. Persons eligible to receive awards under the 2002 Plan included officers, employees, directors of the Company, and consultants to the Company. As of March 31, 2024, a total of 1,244 shares have been authorized for issuance under the 2002 Plan, of which approximately 908 shares of common stock have been issued pursuant to options that were exercised and restricted stock units ("RSUs") that were vested, approximately 138 shares of common stock have been reserved for options that are outstanding, and no shares of common stock remain available for future grants.

2018 Stock Incentive Plan

At the 2018 annual meeting of stockholders, the Company’s stockholders approved the 2018 Long-Term Incentive Plan (as amended effective as of September 21, 2018, May 15, 2019, May 13, 2020, June 11, 2021, and April 27, 2023, the “2018 Plan”). The purposes of the 2018 Plan are (i) to align the interests of the Company’s stockholders and recipients of awards under the 2018 Plan by increasing the proprietary interest of such recipients in the Company’s growth and success; (ii) to advance the interests of the Company by attracting and retaining non-employee directors, officers, other employees, consultants, independent contractors, and agents; and (iii) to motivate such persons to act in the long-term best interests of the Company and its stockholders.

Under the terms of the 2018 Plan, approximately 53,677 shares of common stock remain available for issuance as of March 31, 2024. As of March 31, 2024, a total of 112,268 shares of common stock have been authorized for issuance under the 2018 Plan, of which approximately 11,353 shares have already been issued and approximately 47,238 shares of the Company’s common stock have been reserved for issuance upon the exercise of outstanding options or stock appreciation rights ("SARs"), and/or settlement of unvested RSUs under the 2018 Plan.

The Company recognized stock-based compensation expense of $0.1 million for the three months ended March 31, 2024, and $0.7 million for the three months ended March 31, 2023. As of March 31, 2024 and 2023, the Company had approximately $0.2 million and $1.0 million, respectively, of total unrecognized compensation expense, net of estimated forfeitures, related to unvested

13


 

share-based compensation arrangements. The Company expects that expense to be recognized over a weighted-average period of 1.1 years.

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

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Cost of revenue

 

$

 

 

$

18

 

Sales and marketing

 

 

22

 

 

 

197

 

General and administrative

 

 

92

 

 

 

429

 

Engineering and development

 

 

(1

)

 

 

47

 

Total

 

$

113

 

 

$

691

 

 

Stock Option Activity

There were no option grants or exercises during the three months ended March 31, 2024 and 2023.

Restricted Stock Units

A summary of unvested RSU activity for the three months ended March 31, 2024 is as follows (in thousands, except per share amounts):

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

Average Grant

 

 

 

Shares

 

 

Date Fair Value

 

Unvested RSUs as of December 31, 2023

 

 

44

 

 

$

18.50

 

Vested

 

 

(3

)

 

$

37.60

 

Forfeited or cancelled

 

 

(1

)

 

$

91.84

 

Unvested RSUs as of March 31, 2024

 

 

40

 

 

$

15.46

 

 

Warrants

From time to time, the Company issues warrants to acquire shares of common stock as approved by the Board.

February 2024 Public Offering

On February 15, 2024, the Company completed a public offering (the "February 2024 Offering") and issued (i) 7,795,000 units (the "Units"), with each Unit consisting of (A) one share of the Company’s common stock, par value $0.001 per share, (B) one Class A warrant to purchase one share of common stock (the "Class A Common Warrants"), each exercisable from time to time for one share of Common Stock at an exercise price of $0.66 per share, and (C) one Class B warrant to purchase one share of common stock (the "Class B Common Warrants"), each exercisable from time to time for one share of Common Stock at an exercise price of $0.748 per share and (ii) 8,205,000 pre-funded units (the "Pre-Funded Units"), with each Pre-Funded Unit consisting of (A) one pre-funded warrant (the "Pre-Funded Warrants"), each such Pre-Funded Warrant being exercisable from time to time for one share of Common Stock at an exercise price of $0.001 per share, (B) one Class A Common Warrant, and (C) one Class B Common Warrant. The Units were sold at the public offering price of $0.44 per Unit and the Pre-Funded Units were sold at the public offering price of $0.439 per Pre-Funded Unit. The Company received gross proceeds of approximately $7.0 million, before deducting underwriting discounts and commissions, estimated offering expenses, and before the exercise of warrants.

Based on the terms and conditions of the February 2024 public offering, the Company determined that liability classification was appropriate for the Class A and Class B warrants and recognized the gross proceeds from the issuance allocated to the warrants in excess of par of $3.7 million in accrued liabilities and expensed issuance costs of $0.6 million allocated to the warrants. The Class A warrants were valued using either a long stock position plus a long call position or a Black-Scholes call option model which was deemed appropriate given the warrants can be exercised via the stated exercise price, or an alternative cashless exercise for 0.95 shares per warrant, with a fair value that approximates 95% of the current stock price. The unobservable inputs utilized in determining the fair value of the Class A warrants, which are categorized as a Level 3 instrument, is the volatility rate of 85%. The Class B warrants were valued using a Monte Carlo simulation. The unobservable inputs utilized in determining the fair value of the Class B warrants, which are categorized as a Level 3 instrument, is the volatility rate of 85% as well as the probability of a future financing event.

14


 

Pursuant to that certain Securities Purchase Agreement, dated December 6, 2023, by and between the Company and the investor (the “Investor”) named in the signature page thereto (the “December 2023 Purchase Agreement”), the Company agreed, among other things, pursuant to Section 4.12 thereof not to enter into a Variable Rate Transaction (as defined in the December 2023 Purchase Agreement) for a period of one-hundred and eighty (180) days following the closing date of that offering (or June 5, 2024) (the “VRT Prohibition”). In order to induce the Investor to agree to waive the VRT Prohibition to enable the Company to effect the Offering, the Company and the Investor entered into a Consent and Waiver, dated February 12, 2024 (the “Consent and Waiver”), whereby the Company agreed to issue to the Investor a new warrant to purchase up to 2,221,880 shares of Common Stock (the “Investor Warrant”), which Investor Warrant is in a form substantially identical to the Class B Warrants that is described above. The Investor Warrants will be exercisable commencing on the effective date of stockholder approval for the issuance of the shares of Common Stock issuable upon exercise of the Investor Warrants and will expire on the fifth anniversary of such stockholder approval date.

Based on the terms and conditions of the Investor Warrant, the Company determined that liability classification was appropriate for the warrants and recognized a liability of $0.2 million in accrued liabilities at the date of issuance and expensed as issuance costs.

December 2023 Registered Direct Offering

On December 6, 2023, the Company entered into a Securities Purchase Agreement Purchase Agreement with a single institutional investor Purchaser, pursuant to which the Company issued in a registered direct offering, 331,000 shares of the Company’s common stock, and pre-funded warrants to purchase 779,940 shares of Common Stock with an exercise price of $0.001 per share, and in a concurrent private placement, warrants to purchase an aggregate of 2,221,880 shares of Common Stock with an initial exercise price of $1.23. The combined purchase price for one Share and two Common Warrants was $1.23, and the combined purchase price for one Pre-Funded Warrant and two Common Warrants was $1.229. The Company received gross proceeds of approximately $1.4 million, before deducting underwriting discounts and commissions, estimated offering expenses, and before the exercise of warrants. In connection with the closing of the February 2024 Offering, the exercise price of these warrants was reduced to $0.2256 per share due to certain anti-dilution provisions in these warrants.

Based on the terms and conditions of the December 2023 public offering, the Company determined that equity classification was appropriate for the pre-funded warrants and warrants, and recognized the net proceeds from the issuance of common stock, pre-funded warrants, and warrants in excess of par of $1.0 million in additional paid-in capital

September 2023 Offering

On September 18, 2023, the Company completed a public offering and issued, 75,000 units, with each Unit consisting of (A) one share of the Company’s Series J Convertible Redeemable Preferred Stock, par value $0.001 per share, and (B) one warrant to purchase one-half of one (0.50) share of Series J Convertible Preferred Stock, at a price to the public of $60.00 per Unit, less underwriting discounts and commissions. Each Warrant has an exercise price of $30.00 per share, is exercisable for one-half of one (0.5) share of Series J Convertible Preferred Stock, is immediately exercisable and will expire one (1) year from the date of issuance. The Company received gross proceeds of approximately $4.5 million, before deducting underwriting discounts and commissions, estimated offering expenses, and before the exercise of warrants.

Based on the terms and conditions of the September 2023 public offering, the Company determined that liability classification was appropriate for the warrants and recognized the gross proceeds from the issuance allocated to the warrants in excess of par of $1.0 million in accrued liabilities and expensed issuance costs of $0.2 million allocated to the warrants.

May 2023 Offering

On May 26, 2023, the Company completed a public offering and issued, 175,000 units, with each Unit consisting of (A) one share of the Company’s Series H Convertible Redeemable Preferred Stock, par value $0.001 per share, and (B) one warrant to purchase one-half of one (0.50) share of Series H Convertible Preferred Stock, at a price to the public of $26.00 per Unit, less underwriting discounts and commissions. Each Warrant has an exercise price of $13.00 per share, is exercisable for one-half of one (0.5) share of Series H Convertible Preferred Stock, is immediately exercisable and will expire two (2) years from the date of issuance. The Company received gross proceeds of approximately $4.6 million, before deducting underwriting discounts and commissions, estimated offering expenses, and before the exercise of warrants.

Based on the terms and conditions of the May 2023 public offering, the Company determined that liability classification was appropriate for the warrants and recognized the gross proceeds from the issuance allocated to the warrants in excess of par of $1.2 million in accrued liabilities and expensed issuance costs of $0.2 million allocated to the warrants.

15


 

January 2023 Offering

On January 9, 2023, the Company completed a public offering, pursuant to which the Company agreed to issue, in a registered direct offering, 171,678 shares of common stock, par value $0.001 per share, and pre-funded warrants to purchase 114,035 shares of common stock with an exercise price of $1.00 per share. The purchase price for one share of common stock was determined to be $35.00, and the purchase price for one January 2023 Pre-Funded Warrant was determined to be $34.00. The Company received aggregate gross proceeds from the transactions of approximately $9.9 million, before deducting underwriting discounts and commissions and other transaction expenses paid by the Company.

Based on the terms and conditions of the January 2023 public offering, the Company determined that equity classification was appropriate for the pre-funded warrants and recognized the net proceeds from the issuance of common stock and pre-funded warrants in excess of par of $8.5 million in additional paid-in capital.

A summary of the share equivalent of warrant activity for the three months ended March 31, 2024 is as follows (in thousands, except exercise price amounts):

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

Average

 

 

 

Shares

 

 

Exercise
Price

 

Warrants outstanding as of December 31, 2023

 

 

4,323

 

 

$

11.88

 

Granted or Issued

 

 

42,427

 

 

$

0.57

 

Exercised

 

 

(22,736

)

 

$

 

Warrants outstanding as of March 31, 2024

 

 

24,014

 

 

$