<PAGE> 1
As filed with the Securities and Exchange Commission on July 10, 1997
Registration No. 333-________________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
-------------------------
BIOLASE TECHNOLOGY, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 3843 87-0442441
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification
Number)
981 Calle Amanecer, San Clemente, California 92673
(714) 361-1200
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Principal Executive Offices)
Federico Pignatelli
Chairman of the Board
BioLase Technology, Inc.
981 Calle Amanecer
San Clemente, California 92673
(714) 361-1200
(Name, Address and Telephone Number of Agent for Service)
Copies of Communications to:
Alan D. Jacobson, Esq.
Cathryn S. Gawne, Esq.
Shapiro, Rosenfeld & Close
A Professional Corporation
2029 Century Park East, Suite 2600
Los Angeles, California 90067
(310) 277-1818
Telecopier No.: (310) 201-4776
APPROXIMATE DATE OF COMMENCEMENT
OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration
Statement becomes effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, as amended, check the following box: [x]
--------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================================================================
PROPOSED PROPOSED AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM MAXIMUM REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE AGGREGATE OFFERING FEE
PER PRICE(1)
UNIT(1)
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<S> <C> <C> <C> <C>
Common Stock 2,738,982 shares (2) $3.5625 $9,757,623.38 $2,956.56
- --------------------------------------------------------------------------------------------------------------------------------
Total 2,738,982 shares $3.5625 $9,757,623.38 $2,956.56
================================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(c) and (g).
(2) Consists of (i) up to 1,818,072 shares of common stock, $.001 par
value (the "Common Stock") issued or issuable upon conversion of
the Registrant's Series A 6% Redeemable Cumulative Convertable
Preferred Stock; (ii) 700,910 shares of Common Stock issuable
upon exercise of the Registrant's Common Stock Purchase Warrants;
(iii) 20,000 shares of Common Stock issuable upon exercise of
stock options; and (iv) 200,000 shares of Common Stock issued in
a private placement.
--------------------
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until this Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE> 2
BIOLASE TECHNOLOGY, INC.
Cross-Reference Sheet Showing Location in Prospectus
of Information Required by Items of Form S-1
<TABLE>
<CAPTION>
Form S-1 Registration
Statement Item and Heading Location in Prospectus
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<S> <C> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus ......................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus ............................................. Inside Front Cover; Outside Back
Cover Pages
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges .............................. Prospectus Summary; Risk Factors;
Not Applicable
4. Use of Proceeds ........................................ Use of Proceeds
5. Determination of Offering Price ........................ Plan of Distribution
6. Dilution ............................................... Not Applicable
7. Selling Security Holders ............................... Principal and Selling
Stockholders
8. Plan of Distribution ................................... Outside Front Cover Page; Plan
of Distribution
9. Description of Securities to be Registered ............. Dividend Policy; Description of
Securities
10. Interests of Named Experts and Counsel ................. Legal Matters; Experts
11. Information With Respect to Registrant
11.(a) Description of Business .................... Business
11.(b) Description of Property .................... Business
11.(c) Legal Proceedings .......................... Business
11.(d) Market Price of and Dividends on the
Registrant's Common Equity and Related
Stockholder Matters ........................ Price Range of Common Stock;
Dividend Policy
11.(e) Financial Statements ....................... Consolidated Financial Statements
11.(f) Selected Financial Data .................... Selected Consolidated Financial Data
11.(g) Supplementary Financial Information ........ Not Applicable
11.(h) Management's Discussion and Analysis of
Financial Condition and Results of Operations Management's Discussion and Analysis of
Financial Condition and Results of
Operations
11.(i) Changes in and Disagreements With
Accountants on Accounting and Financial
Disclosure ................................. Not Applicable
11.(j) Quantitative and Qualitative Disclosures
About Market Risk .......................... Not Applicable
11.(k) Directors and Executive Officers ........... Management
11.(l) Executive Compensation ..................... Management
11.(m) Security Ownership of Certain Beneficial
Owners and Management ...................... Principal and Selling Stockholders
11.(n) Certain Relationships and Related Transactions Not Applicable
12. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities ............................. Not Applicable
</TABLE>
<PAGE> 3
PROSPECTUS
Subject to Completion dated July 10, 1997
2,738,982 Shares
BIOLASE TECHNOLOGY, INC.
Common Stock
--------------------------
This Prospectus relates to an aggregate of 2,738,982 shares of
common stock, $.001 par value ("Common Stock") of BioLase Technology, Inc., a
Delaware corporation ("BioLase" and, together with its consolidated
subsidiaries, the "Company"), heretofore issued, or issuable, to the persons
listed herein (the "Selling Stockholders"), pursuant to, among other things, the
conversion of the Company's Series A 6% Redeemable Cumulative Convertible
Preferred Stock, $.001 par value (the "Series A Preferred Stock") and the
exercise of the Company's Common Stock Purchase Warrants (the "Warrants") and
certain options to purchase Common Stock (the "Options"). Such shares of Common
Stock are being offered for the respective accounts of the Selling Stockholders
on The Nasdaq SmallCap Market at the then-prevailing prices, or in negotiated
transactions. The Common Stock is traded on The Nasdaq SmallCap Market under the
symbol "BLTI". On July 7, 1997, the last sale price of the Common Stock as
reported on The Nasdaq SmallCap Market was $3 11/16 per share. See "Price Range
of Common Stock". The Company will receive no proceeds from the sale of such
shares of Common Stock by the Selling Stockholders; however, it will receive
proceeds from the exercise of the Warrants and the Options. See "Use of
Proceeds". The expenses of preparing and filing the Registration Statement, of
which this Prospectus forms a part (estimated at $75,000), are being paid by the
Company.
-------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-------------------------
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<PAGE> 4
The shares offered hereby were or will be acquired by the Selling
Stockholders from the Company in a private placement or upon the conversion of
the Series A Preferred Stock or the exercise of the Warrants or Options, and are
"restricted securities" under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus has been prepared for the purpose of
registering the shares under the Securities Act to allow for future sales by the
Selling Stockholders to the public without restriction. To the knowledge of the
Company, the Selling Stockholders have made no arrangement with any brokerage
firm for the sale of the shares. The Selling Stockholders may be deemed
"underwriters" within the meaning of the Securities Act. Any commissions
received by a broker or dealer in connection with resales of the shares may be
deemed underwriting commissions or discounts under the Securities Act. See "Plan
of Distribution".
The date of this Prospectus is ___________, 1997.
2
<PAGE> 5
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and in accordance therewith
files annual and quarterly reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information concerning the Company can be inspected at the
Commission's Public Reference Section, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as at the Commission's regional offices at 7
World Trade Center, 13th Floor, New York, New York 10048 and at Citicorp Center,
500 West Madison Street, Room 1400, Chicago, Illinois 60661-2511. Copies of such
material can also be obtained at prescribed rates at the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. In
addition, the Commission maintains a World Wide Web site on the Internet at
http:\\www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants, including the Company, that file
electronically with the Commission.
3
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus. This Prospectus contains, in addition to
historical information, forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from the
results discussed in the forward-looking statements. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Forward-Looking Statements". Factors that could cause or contribute to such
differences include those discussed under "Risk Factors" as well as those
discussed elsewhere in this Prospectus.
THE COMPANY
BioLase Technology, Inc., a Delaware corporation ("BioLase" and,
together with its consolidated subsidiaries, the "Company"), designs, develops,
manufactures and markets laser-based systems for use in dental and medical
applications. The current generation of the Company's laser-based systems
incorporates its proprietary technology ("HydroKinetic(TM)") into its surgical
tissue cutting system ("Millennium(TM)"), which utilizes electromagnetic energy
laser pulses to rapidly energize and transform atomized water droplets into
smaller, high-speed mechanical cutting water particles. The Millennium(TM)
system is not currently marketed in the United States, pending Food and Drug
Administration ("FDA") clearance, but is being distributed in Germany for dental
applications. The Company supports its earlier generations of laser-based
systems with replacement parts and service. The Company also has (i) an
automated system used in endodontic procedures for locating and shaping root
canals, known as the Canal Finder System(TM), which the Company markets along
with a full range of other proprietary and non-proprietary endodontic products,
and (ii) an air-water spray laser accessory, LaserSpray(TM), designed to cool
the tissue receiving laser energy and the surrounding tissue, that is
incorporated into the Company's laser-based systems and can be employed with
fiber-coupled laser systems manufactured by others. The Company is also
developing the LaserBrush(TM), a toothbrush that utilizes a light source to
activate whitening and anti-bacterial agents in special toothpaste compounds
also being developed by the Company; a fluid conditioning system, known as
FlavorFlow(TM), that sanitizes, flavors and administers fluids and enhances the
scent of air present during dental and medical procedures; and a line of
biomaterials for dental and medical applications.
The Company's predecessor, Societe Endo Technic, S.A. ("SET"), was
formed in Marseilles, France in 1984. Three years later, the Company acquired
77% of the outstanding shares of SET. Subsequently, various patents and other
intellectual property utilized by SET were transferred to the Company. See
"Business".
The Company's principal executive offices are located at 981 Calle
Amanecer, San Clemente, California 92673, and its telephone number at that
location is (714) 361-1200.
4
<PAGE> 7
THE OFFERING
Common Stock offered hereby.... ................................2,738,982 shares
Common Stock to be outstanding
after this Offering........... ............................ 14,164,414 shares(1)
Use of proceeds....................The Company will not receive any portion
of the proceeds from the Common Stock
to be sold in this Offering; however, it will
receive proceeds from the exercise of
Warrants and Options, which proceeds will be
used for working capital and general
corporate purposes. See "Use of Proceeds".
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
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Year Ended December 31, Three Months Ended March 31,
------------------------- ----------------------------
1995 1996 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Consolidated Statements of Operations (unaudited)
Data:
Sales $ 1,152,182 $ 691,829 $ 143,615 $ 134,405
Gross profit $ 311,020 $ 132,660 $ 7,792 $ 21,535
Operating expenses $ 2,356,072 $ 2,621,652 $ 514,267 $ 792,485
Loss from operations $(2,045,052) $(2,488,992) $ (506,475) $ (770,950)
Net loss $(2,023,822) $(2,463,259) $ (496,718) $ (767,734)
Net loss per share $ (0.21) $ (0.21) $ (0.04) $ (0.06)
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996 March 31, 1997
------------------ --------------
(unaudited)
<S> <C> <C>
Consolidated Balance Sheet Data:
Working capital $ 3,669,758 $ 3,627,330
Total stockholders' equity $ 3,913,980 $ 3,944,880
</TABLE>
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(1) Based on the number of shares outstanding at July 7, 1997. Assumes
exercise of the Warrants and Options; excludes (i) 1,253,910 shares of
Common Stock, not being registered hereunder, reserved for issuance upon
exercise of options outstanding at July 7, 1997; and (ii) 681,876 shares
of Common Stock otherwise reserved for possible issuance under the
Company's 1990, 1992 and 1993 Stock Option Plans and 1990 and 1993 Stock
Compensation Plans. See Note 9 of Notes to Consolidated Financial
Statements.
5
<PAGE> 8
RISK FACTORS
THIS OFFERING INVOLVES SUBSTANTIAL INVESTMENT RISK, AND THE SHARES
SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE
INVESTMENT. IN EVALUATING AN INVESTMENT IN SHARES OF THE COMPANY, PROSPECTIVE
INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS, AMONG OTHERS, AS
WELL AS ALL OTHER INFORMATION SET FORTH HEREIN, INCLUDING THE EXHIBITS HERETO,
OR SUPPLIED SEPARATELY BY THE COMPANY IN WRITING. THE FOLLOWING DISCUSSION OF
RISK FACTORS IS NOT COMPREHENSIVE, AND EACH PROSPECTIVE INVESTOR IS ADVISED TO
MAKE ITS OWN ANALYSIS OF THE RISKS ASSOCIATED WITH AN INVESTMENT IN THE SHARES.
1. History of Net Losses; Future Profitability Uncertain. The
Company reported net losses of $5,470,643, $7,549,262, $3,050,333, $2,023,822
and $2,463,259 for the years ended December 31, 1992, 1993, 1994, 1995 and 1996,
respectively, and net losses of $496,718 and $767,734 for the three months ended
March 31, 1996 and 1997, respectively. The Company had an accumulated deficit of
$25,567,163 at March 31, 1997. During the past five years, the Company has not
generated sufficient revenue to permit it to operate on a profitable basis. The
Company's ability to achieve profitable operations in the future will depend in
large part upon obtaining regulatory approvals for certain of its products and
successfully bringing its products to market. The likelihood of long-term
success of the Company must be considered in light of the expenses, difficulties
and delays frequently encountered in the development and commercialization of
new products and competitive factors in the marketplace, as well as the
burdensome regulatory environment in which the Company operates. There can be no
assurance that the Company will ever achieve significant revenues or profitable
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the Consolidated Financial Statements.
2. Viability as Going Concern; Need for Additional Funding. The
Company has suffered recurring losses from operations and shows a need for
continued funding that raises substantial doubt about its ability to continue as
a going concern. The Company's ability to continue as a going concern is
dependent upon its ability to obtain outside financing through the issuance of
either additional shares of its Common or Preferred Stock or debt securities
and, ultimately, upon a movement to profitability through increased sales,
continued engineering development and cost containment. Management believes that
significant additional capital resources will be required to complete the FDA
approval process seeking authorization for the use of the Company's
HydroKinetic(TM) and laser-based technologies for hard tissue and dermatological
applications and to fund the Company's working capital in the event the
marketing of its new products does not generate sufficient profitability and
cash flow by mid-1998. The Company's capital requirements depend on numerous
factors, including the progress of its research and development programs, the
progress of pre-clinical and clinical testing, the time and cost involved in
obtaining regulatory approvals, the cost of filing, prosecuting, defending and
enforcing patent claims and other intellectual property rights and competing
technological and market developments.
Based on its current business plan, the Company believes that its
working capital will remain adequate to meet its obligations through mid-1998,
by which time it will need to obtain additional equity or debt financing.
However, if the Company experiences unanticipated cash requirements during that
time, the Company could require additional capital at an earlier date to fund
its operations, continue its engineering and development programs and to pursue
the FDA approval
6
<PAGE> 9
process. The Company may seek such additional funding through public or private
financings or collaborative or other arrangements with third parties. There can
be no assurance that additional funds will be available on acceptable terms, if
at all. If additional funds are raised by issuing equity securities, further
substantial dilution to existing stockholders may result. If adequate funds are
not available, the Company's ability to meet its obligations would be greatly
impaired, and the Company may be unable to continue operations. The Company's
consolidated financial statements do not include any adjustments that might
result from the outcome of the uncertainty about the Company's ability to
continue as a going concern. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements.
3. Product Development. The development of new technology is a
lengthy and capital intensive process and is subject to unforeseen risks,
delays, problems, and costs. The Company's success will in part depend upon its
ability to design, develop and introduce new products and enhancements on a
timely basis to meet changing customer needs, technological developments and
evolving industry standards. There can be no assurance that the Company will be
able successfully to develop any additional products, including products
currently under development, or enhance existing products. See "Business - The
Millennium(TM) System" and "Business - Other Dental and Medical Products".
Unanticipated technical or other problems may occur which could delay the
Company's development programs. Failure to complete development of key products
could result in the complete loss of the funds committed by the Company to such
products, which could be substantial. In addition, products as complex as the
Company's laser-based systems may contain latent defects which could from time
to time become apparent during commercial use. Remedying such defects could
require significant modifications at substantial costs to the Company.
4. Uncertainty of Product and Market Acceptance. The Company
commenced marketing of its new HydroKinetic(TM) tissue cutting system, the
Millennium(TM) system, in Germany in the third quarter of 1996, and initial
sales commenced in Germany during the second quarter of 1997. There can be no
assurance that the Millennium(TM) system will receive market acceptance; in
addition, there can be no assurance that there will be market acceptance of any
of the Company's products that may be introduced in the future. Lasers have not
been widely used in certain medical and dental applications, and their effective
use requires training and experience. The acceptance of lasers may be adversely
affected by their high cost, concerns by patients and practitioners about their
safety and efficacy, and the substantial market acceptance and penetration of
conventional dental and medical tools. Current economic pressure may make dental
and medical practitioners reluctant to purchase substantial capital equipment or
invest in new technology. The failure of dental and medical lasers to achieve
broad market acceptance would have a material adverse effect on the Company's
business, financial condition and results of operations.
While the Company believes that its HydroKinetic(TM) technology
should be effective in a broad range of medical and dental applications, this
belief (except with respect to dental hard tissue and certain dermatological
applications, for which clinical research has been and is being conducted) is
based largely on preliminary in vitro and in vivo research and extrapolation of
observations in such clinical research. No assurances can be given that the
Company's HydroKinetic(TM) technology will prove to be applicable to, or will
find market acceptance in, any medical or dental fields or that the Company
will receive clearance from the FDA or other regulatory agencies to market the
Millennium(TM) system or other products embodying its HydroKinetic(TM)
technology for application in any such fields. See "Business - The
Millennium(TM) System."
5. International Sales. In the years ended December 31, 1994, 1995
and 1996, approximately 57%, 70% and 47%, respectively, of the Company's sales
were export sales, of which approximately 85%, 72% and 80%, respectively, were
sales to Europe. To the extent that international sales continue to make a
substantial contribution to Company revenues, currency fluctuations could make
products less competitive in foreign markets, contribute to fluctuations in the
Company's operating results and, if the Company makes sales denominated in
foreign currencies or maintains significant net assets or liabilities
denominated in foreign currencies, expose the Company to currency exchange
valuation risks. Political instability, longer receivable collection periods and
difficulty in collecting accounts receivable also pose risks to international
sales. Moreover, the laws of certain countries, or the enforcement thereof, may
not protect the Company's products and intellectual property rights to the same
extent as the laws of the United States. There can be no assurance that these
factors will not have a material adverse effect on the Company's business and
financial condition and results of operations. See Note 13 of Notes to
Consolidated Financial Statements.
6. Product Liability Risk; Limited Insurance Coverage. The
manufacture and sale of the Company's laser-based systems entail significant
risk of product liability claims in the event that the use of such systems is
alleged to have resulted in adverse effects
7
<PAGE> 10
on a patient. Although the Company has taken and will continue to take what it
believes are appropriate precautions, including maintaining general liability
and commercial liability insurance policies which include coverage for product
liability claims, there can be no assurance that the Company's insurance
coverage limits are or will be adequate to protect the Company from any
liabilities it might incur in connection with the sale of its products. In the
future, product liability insurance or such increased coverage may not be
available on acceptable terms or on any other basis. A product liability claim
or series of claims successfully asserted against the Company in excess of its
insurance coverage could have a material adverse effect on the Company's
business and financial condition and results of operations. Additionally, it is
possible that adverse product liability actions could negatively affect the
Company's ability to obtain and maintain regulatory approval for its products,
as well as damage the Company's reputation in any or all markets in which it
participates.
7. Competition; Possible Technological Obsolescence. Development by
others of new or improved products, processes, or technologies may make the
Company's products obsolete or less competitive. The ability of the Company to
compete is dependent on the Company's ability regularly to enhance and improve
its products and successfully develop and market new products. Many of the
Company's competitors have greater financial, managerial, marketing, and
technical resources than the Company. There can be no assurance that the Company
will successfully differentiate itself from its competitors, that the market
will consider the Company's products to be superior to its competitors'
products, that the Company's competitors will not develop new or enhanced
products that are more effective than the products which have been or may be
developed by the Company, or that the Company will be able to adapt to evolving
markets and technologies, develop new products, or achieve and, if achieved,
maintain technological advantages.
8. Patents and Proprietary Rights; Proprietary Technology. The
Company relies, to a significant extent, on patents, trade secrets, and
confidentiality agreements to protect its proprietary technology. There can be
no assurance as to the breadth or degree of protection which existing or future
patents, if any, may afford the Company, that such patents will not be
circumvented or invalidated, or that the Company's products do not and will not
infringe on patents or violate proprietary rights of others. If a patent
infringement claim is asserted against the Company, or if the Company is
required to enforce its rights under an issued patent, the cost of such actions
may be very high, whether or not the Company is successful. While the Company is
unable to predict what such costs would be if it is obligated to pursue patent
litigation, its ability to fund its operations and to pursue its business goals
may be adversely affected. See "Business - Patents and Proprietary Technology".
9. Government Regulation. The Company's products are subject to
significant government regulation in the United States and other countries. To
test clinically, produce, and market products for human diagnostic and
therapeutic use, the Company must comply with mandatory procedures and safety
standards established by the FDA and comparable state and foreign regulatory
agencies. Typically, such standards require that products be approved by the
government agency as safe and effective for their intended use before being
marketed for human applications. The approval process is expensive and
time-consuming, and no assurance can be given that any agency will grant
approval for the sale of the Company's products for various clinical
applications, or that the length of time the approval process will require will
not be extensive.
8
<PAGE> 11
The FDA also imposes requirements on manufacturers and sellers of
products under its jurisdiction, such as labeling, manufacturing practices,
record keeping, and reporting. The FDA also may impose post-marketing practices,
including record keeping, reporting and other requirements. There can be no
assurance that the appropriate approvals from the FDA will be granted, that the
process to obtain such approvals will not be expensive or lengthy, or that the
Company will have sufficient funds to pursue such approvals. The failure to
receive requisite approvals for certain of the Company's products or processes,
when and if developed, or significant delays in obtaining such approvals, could
prevent the Company from commercializing its products as anticipated, and could
have a material adverse effect on the business of the Company.
The Company is also subject to regulation under the Radiation
Control for Safety and Health Act administered by the Center for Devices and
Radiological Health ("CDRH") of the FDA. This law requires laser manufacturers
to file new product and annual reports, to maintain quality control, product
testing, and sales records, to incorporate certain design and operating features
in lasers sold to end-users, and to certify and label each laser sold to an
end-user as belonging to one of four classes, based on the level of radiation
from the laser that is accessible to users. Various warning labels must be
affixed and certain protective devices installed, depending on the class of the
product. The CDRH is empowered to seek fines and other remedies for violations
of regulatory requirements.
Various state dental boards are considering the adoption of
restrictions on the use of lasers by dental hygienists. In addition, dental
boards in a number of states are considering educational requirements regarding
use of dental lasers. While the scope of these restrictions and educational
requirements is not now known, they could have an adverse effect on sales of the
Company's laser-based products.
The FDA and other governmental agencies, both in the United States
and in foreign countries, may adopt additional rules and regulations that may
affect the Company's ability to develop and market its products. See "Business -
Government Regulation".
10. Dependence on Suppliers. The Company purchases most of the
components included in its products from multiple suppliers; however, it does
not maintain long-term supply contracts with any of these suppliers. In
addition, the Company purchases the fiber optic delivery system used in its
Millennium(TM) system from a single source. The disruption or termination of
this source could have a material adverse effect on the Company's ability to
manufacture its Millennium(TM) system and, consequently, on its business,
financial condition and results of operations. See "Business - Manufacturing."
11. Possible Volatility of Common Stock Price; Limited Public
Market; Compliance With Nasdaq Listing Requirements. The Company's Common Stock
has been listed on The Nasdaq SmallCap Market since November 12, 1992, and the
Company has no present plans to apply to list the Common Stock on any other
domestic securities exchange, although in April 1997, the Company's Common Stock
was listed on the Berlin Stock Exchange. Trading in the Common Stock has
generally been sporadic since its listing on The Nasdaq SmallCap Market, and
there can be no assurance that an active trading market in the Common Stock will
be established or maintained.
The market prices for securities of emerging companies, including
the Company, have historically been highly volatile. Significant volatility in
the market price of shares of Common Stock may arise due to factors such as the
Company's developing business, historic losses and relatively low price per
share. In addition, future announcements concerning the Company or its
competitors may have a significant impact on the market price of the Common
Stock. Such announcements might include financial results, the results of
testing, technological innovations, new commercial products, changes to
government regulations, government decisions on commercialization of products,
developments concerning proprietary rights, litigation or public concern as to
safety of the Company's products. As long as there is only a limited public
market for the Common Stock, the sale of a significant number of shares of
Common Stock at any particular time could be difficult to achieve at the market
prices prevailing
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<PAGE> 12
immediately before such shares are offered, and the offering of a significant
number of shares of Common Stock at one time could cause a severe decline in the
price of the Common Stock.
For continued inclusion on The Nasdaq SmallCap Market, an issuer
must have total assets of at least $2,000,000 and shareholders' equity of at
least $1,000,000. On November 6, 1996, The Nasdaq Stock Market, Inc. proposed
changes to these maintenance requirements. The proposed criteria for continued
inclusion would require an issuer to maintain (i) net tangible assets (total
assets less the sum of total liabilities and goodwill) of $2,000,000, (ii) net
income of $500,000 in two of the three most recent fiscal years, or (iii) market
capitalization of at least $35,000,000, in addition to a minimum bid price of $1
per share, a market value of the market float of at least $1,000,000 (and a
public float of at least 500,000 shares), at least two market makers and a
minimum of 300 shareholders. At March 31, 1997, the Company had net tangible
assets of $3,944,880 and a market capitalization in excess of $35,000,000;
however, it did not meet the alternative net income criterion. If the proposed
maintenance standards are implemented and the Company continues to suffer
significant losses from operations (see " - History of Net Losses; Future
Profitability Uncertain") without additional financing, it may not be able to
meet the requirements for the continued listing of Common Stock on The Nasdaq
SmallCap Market, in which case the Common Stock may be delisted from trading on
The Nasdaq SmallCap Market.
If the Common Stock were excluded from quotation and trading on The
Nasdaq SmallCap Market, it would likely trade on the over-the-counter market, in
what is commonly referred to as the "Electronic Bulletin Board" or "pink
sheets". Should that occur, holders of Common Stock may find it more difficult
to dispose of, or obtain accurate quotations for the market price of, Common
Stock. In addition, if the Common Stock is not quoted on The Nasdaq SmallCap
Market, it may be subject to a rule that imposes restrictive sales practice
requirements on broker-dealers selling such securities to persons other than
established customers and accredited investors. For transactions covered by this
rule, the broker-dealer must make a special suitability determination for the
purchaser and must receive the purchaser's written consent to the transaction
prior to any purchase. Consequently, the rule may restrict the ability of
broker-dealers to sell or limit the interest of broker-dealers in selling Common
Stock and may adversely affect the ability of holders of Common Stock to sell
shares. The exclusion of a security from continued quotation on The Nasdaq
SmallCap Market may also cause a decline in share price, a diminution of news
coverage of the Company, and greater difficulty in arranging future financing.
12. Restructuring of Management. The Company's management was
substantially restructured in 1995. As a result, the Company's current operating
management has had only limited experience in the administration and management
of the Company. Donald A. La Point, who is the President and Chief Executive
Officer of the Company, was appointed to those positions in the first quarter of
1995.
Current management has instituted a cost curtailment program that
has reduced the number of Company employees to 25. If and when the scale of the
Company's operations increases, the Company will be required to increase the
number of employees, including the number of management personnel. No assurance
can be given that the Company will be able to attract and retain additional
personnel, and particularly management personnel, having the capabilities that
the Company will seek.
13. Reliance Upon Key Employees. The success of the Company is
substantially dependent on the efforts of certain key personnel of the Company.
The loss of such key
10
<PAGE> 13
personnel could adversely affect the Company's business and prospects. In such
event, there can be no assurance that the Company would be able to employ
qualified replacements on terms favorable to the Company. In seeking qualified
personnel, the Company will be required to compete with companies having greater
financial and other resources than the Company has. As some of its products are
developed, the Company will have to attract additional marketing, manufacturing,
technical, scientific and administrative personnel. Since the future success of
the Company is, to a significant degree, dependent upon its ability to attract
and retain qualified personnel, the Company's inability or failure to attract
and retain such personnel could have a materially adverse impact on the business
of the Company. See "Management".
14. No Dividends on Common Stock. The Company has not paid any cash
dividends on its Common Stock since its incorporation, and the Board of
Directors does not anticipate declaring any cash dividends on Common Stock in
the foreseeable future. The Company currently intends to utilize any earnings it
may achieve for reinvestment in its business. Future dividend policy will also
depend on the Company's earnings, capital requirements, financial condition,
debt covenants, and other factors considered relevant by the Company's Board of
Directors. It is unlikely that any dividends on Common Stock will be declared by
the Company in the foreseeable future.
15. Possible Issuance of Additional Shares. The Company is
authorized to issue 50,000,000 shares of Common Stock, of which 13,425,450
shares are issued and outstanding as of July 7, 1997. As of that date,
1,974,820 shares of Common Stock have been reserved for future issuance upon
exercise of outstanding options and warrants, and an additional 681,876 shares
have been reserved for possible issuance pursuant to the Company's stock option
and stock compensation plans. Further, the Company has authorized 1,000,000
shares of preferred stock, $.001 par value per share (the "Preferred Stock"), of
which 100 shares have been designated as Series A Preferred Stock, one share of
which is currently outstanding. The Company's Board of Directors has authority
to issue Preferred Stock in one or more series and to fix the rights,
privileges, restrictions and preferences thereof. Accordingly, the Company may
issue one or more series of Preferred Stock in the future that will have
preference over the Common Stock and the Series A Preferred Stock, with respect
to the payment of dividends and upon its liquidation, dissolution, or winding up
or have voting or conversion rights which could adversely effect the voting
power and percentage ownership of the holders of the Common Stock and the Series
A Preferred Stock. Although it has no present commitments to do so (except as
noted above), the Company may issue additional shares of Common Stock,
additional shares of Preferred Stock and other securities in the future. Any
such issuances could reduce the proportionate ownership and voting rights of any
shares sold in this Offering. See "Description of Securities".
16. Impairment of Intangible Assets. During the fourth quarter of
1994, the Company recorded a charge of $959,000, representing a provision for
the impairment of the carrying value of its patents due to uncertainty regarding
the recoverability of such carrying value. The Company's 1994 evaluation
included consideration of such factors as the Company's failure by the fourth
quarter of 1994 to achieve sufficient sales to permit profitable operations,
extinguishment of debt which had been issued to acquire certain patents, and the
underutilization of issued patents in various jurisdictions. See Note 12 of
Notes to Consolidated Financial Statements.
11
<PAGE> 14
USE OF PROCEEDS
The Company will not receive any portion of the proceeds from the
sale of Common Stock to be sold in this Offering. The Company may receive net
proceeds of up to $2,493,185 from the exercise of the Warrants and the Options;
management currently anticipates that any such proceeds will be utilized for
working capital and for other general corporate purposes.
PRICE RANGE OF COMMON STOCK
Since November 12, 1992, the Company's Common Stock has been
authorized for inclusion on the National Association of Securities Dealers
Automated Quotation System ("Nasdaq"). The Company's Common Stock has been
quoted daily on such system under the symbol "BLTI". The following table sets
forth, for the periods indicated, the high and low sales prices for the Common
Stock as reported by Nasdaq. The prices represent quotations between dealers,
without adjustment for retail mark up, mark down or commission, and do not
necessarily represent actual transactions. The following quotations should not
be construed to imply that an established trading market for the Common Stock
exists.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
1997
----
1st Quarter 4 9/16 3
2nd Quarter 6 1/4 2 1/2
3rd Quarter 3 11/16 3 1/2
(through July 7,
1997)
1996
----
1st Quarter 3 7/8 2 1/8
2nd Quarter 5 9/16 3 1/8
3rd Quarter 4 5/8 2 1/2
4th Quarter 4 3/4 2 5/16
1995
----
1st Quarter 2 1/8 5/8
2nd Quarter 1 3/8 1/2
3rd Quarter 4 3/8 7/8
4th Quarter 4 1 3/4
</TABLE>
On July 7, 1997, the last sale price of the Common Stock as reported
on The Nasdaq SmallCap Market was $3 11/16 per share and the approximate number
of record holders of the Company's Common Stock was 310.
DIVIDEND POLICY
The Company has not paid any cash dividends on its Common Stock
since its incorporation and anticipates that, for the foreseeable future,
earnings, if any, will be retained for use in its business.
12
<PAGE> 15
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data as of December
31, 1995 and 1996, and for each of the respective years then ended, are derived
from the consolidated financial statements of the Company, which have been
audited by Coopers & Lybrand L.L.P., independent auditors, and are included
elsewhere in this Prospectus. The following selected consolidated financial data
with respect to the Company's consolidated statement of operations for the year
ended December 31, 1994 are derived from the consolidated statement of
operations of the Company, which has been audited by KPMG Peat Marwick LLP,
independent auditors, and is included elsewhere in this Prospectus. The
following selected consolidated financial data with respect to the Company's
consolidated balance sheets as of December 31, 1992, 1993 and 1994, and for each
of the respective years ended December 31, 1992 and 1993, are derived from the
Company's consolidated financial statements that were also audited by KMPG Peat
Marwick LLP but are not included herein. The following selected consolidated
financial data as of March 31, 1997 and for the three-month periods ended March
31, 1996 and 1997 are derived from unaudited consolidated financial statements
that, in the opinion of the management of the Company, reflect all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
of the financial position as of such date and results of operations for these
periods. Operating results for the three-month period ended March 31, 1997 are
not necessarily indicative of the results that may be expected for the entire
year ending December 31, 1997. The data set forth below should be read in
conjunction with the Company's Consolidated Financial Statements and Notes
thereto included elsewhere in this Prospectus and with "Management's Discussion
and Analysis of Financial Condition and Results of Operations".
<TABLE>
<CAPTION>
Three Months
Year Ended December 31, Ended March 31,
---------------------------------------------------- --------------------
1992(1) 1993(1) 1994 1995 1996 1996 1997
-------- ------- -------- --------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
(in thousands, except per share data)
Consolidated Statements of
Operations Data:
Sales $ 5,536 $ 2,416 $ 1,136 $ 1,152 $ 692 $ 144 $ 134
Gross profit (loss) $ 1,922 $ (491) $ (57) $ 311 $ 133 $ 8 $ 22
Operating expenses $ 7,347 $ 7,014 $ 3,918 $ 2,356 $ 2,622 $ 514 $ 792
Loss from operations $ (5,425) $ (7,506) $ (3,975) $ (2,045) $ (2,489) $ (506) $ (771)
Loss before extraordinary item $ (5,471) $ (7,549) $ (3,472) $ (2,024) $ (2,463) $ (497) $ (768)
Net loss $ (5,471) $ (7,549) $ (3,050) $ (2,024) $ (2,463) $ (497) $ (768)
Loss per share:
Loss before extraordinary item $ (1.52) $ (1.57) $ (0.45) $ (0.21) $ (0.21) $ (0.04) $ (0.06)
Extraordinary gain $ -- $ -- $ 0.05 $ -- $ -- $ -- $ --
Net loss $ (1.52) $ (1.57) $ (0.40) $ (0.21) $ (0.21) $ (0.04) $ (0.06)
Shares used in computation of
net loss per share (2) 3,603 4,794 7,671 9,851 11,532 11,254 13,237
</TABLE>
13
<PAGE> 16
<TABLE>
<CAPTION>
December 31, March 31,
------------------------------------------ ---------
1992(1) 1993(1) 1994 1995 1996 1997
------ ------ ------ ------ ------ --------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
(in thousands)
Consolidated Balance Sheet Data:
Working capital $1,230 $1,370 $1,170 $1,524 $3,670 $3,627
Total assets $5,574 $4,894 $2,427 $2,512 $4,689 $4,788
Long-term liabilities $ 251 $ 629 $ 22 $ -- $ -- $ --
Stockholders' equity (3) $2,760 $2,691 $1,684 $1,844 $3,914 $3,945
</TABLE>
- -------------
(1) 1992 and 1993 include the operations of Societe Endo Technic, S.A.
which were divested in 1994. See Note 10 of Notes to Consolidated
Financial Statements.
(2) The basis for determining the number of shares used in computing net
loss per share is described in Note 1 of Notes to Consolidated
Financial Statements.
(3) The Company has never declared or paid dividends on its Common
Stock.
14
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended March 31, 1997 and 1996
Sales decreased $10,000 for the first quarter of 1997 as compared to
the same period of 1996. The Company's laser division had sales of $15,000 for
the first quarter of 1997, a decrease of $26,000 from the $41,000 reported for
the same period in 1996. The reduction is attributable principally to the
Company's decision to cease marketing of its historic laser products in
anticipation of launching its new HydroKinetic(TM) tissue cutting system, the
Millennium(TM), within the German market, scheduled for the second quarter of
1997. (The preceding sentence constitutes a forward looking statement
[hereinafter identified as "FLS"]. Each of the forward looking statements in
this Prospectus is subject to various factors that could cause actual results to
differ materially from the results anticipated in such forward looking
statement, as more fully discussed in this section under "-Forward Looking
Statements".) Domestically, the Company anticipates the introduction of its
light-amplified toothbrush, the LaserBrush(TM), in the second half of 1997.
(FLS) The Company does not expect significant sales based upon its
HydroKinetic(TM) technology in the domestic market unless and until it receives
regulatory clearance to market its Millennium(TM) for certain hard-tissue
applications within the dental field and other applications within the
dermatological field. (FLS) Sales for the Company's endodontic division were
$127,000 for the first quarter of 1997 compared to $106,000 for the same period
in 1996, an increase of $21,000 due principally to increased marketing by the
Company at trade shows and conferences during the first quarter of 1997 compared
to the same period in 1996.
Gross profit increased to $22,000 during the first quarter of 1997,
up $14,000 from the $8,000 reported for the comparable period in 1996. As a
result of a reduction in fixed manufacturing costs offset by reduced sales, the
Company's laser division experienced comparable losses of approximately $48,000
at the gross profit line in the quarters ended March 31, 1997 and 1996. The
Company's endodontic division reported a gross profit of $70,000 for the first
quarter of 1997 compared to a gross profit of $54,000 for the comparable period
in 1996, reflecting increased sales.
Operating expenses increased $278,000, or 54%, to $792,000 during
the first quarter of 1997 from the $514,000 reported during the first quarter of
1996. Sales and marketing expenses were $274,000 during the first quarter of
1997 compared to $180,000 reported for the same period in 1996, an increase of
$94,000 due principally to greater participation by the Company at foreign
dermatological and domestic dental trade shows. General and administrative
expenses increased $84,000 from the $152,000 reported during the first quarter
of 1996 to $236,000 for the same period in 1997. The increase was due
principally to higher legal, patent and insurance expenses incurred in the first
quarter of 1997 as compared to the first quarter of 1996. Engineering and
development expenses were $277,000 for the first quarter of 1997, an increase of
$96,000 from the $181,000 reported during the same period in 1996. The increase
was due principally to 1997 costs related to the completion of engineering
prototypes of Millennium(TM), design of a new delivery system handpiece for
Millennium(TM), continued costs related to the refinement of LaserBrush(TM) and
various on-going clinical studies.
15
<PAGE> 18
The net loss for the first quarter of 1997 increased $271,000, or
55%, from the $497,000 reported for the same period in 1996, due principally to
the increase in operating expenses previously discussed. The loss per share
increased from $0.04 per share reported during the first quarter of 1996 to
$0.06 per share for the first quarter of 1997. The increase in loss per share is
attributable primarily to an increase in net loss.
Years Ended December 31, 1996 and 1995
Sales for 1996 were $692,000, compared to $1,152,000 reported in
1995, a decrease of $460,000, or 40%. The Company's laser division reported
sales of $290,000, a decrease of $447,000 from the $737,000 reported in 1995.
The Company's endodontic division reported sales in 1996 comparable to those
reported in 1995.
The decrease in laser division sales principally reflects reduced
laser unit shipments to Germany, the primary user market for the Company's
laser-based systems, attributable to a pending product introduction and the
Company's establishing new distribution arrangements for the German market.
These arrangements were partially motivated by a desire to obtain a more
experienced German distributor in anticipation of the introduction of the
Company's new HydroKinetic(TM) tissue cutting system, the Millennium(TM) system,
which addresses a broader market than the Company's previous laser-based
systems. (FLS) The Company shipped its first production unit of Millennium(TM)
to Germany for clinical evaluation and demonstration purposes during the third
quarter of 1996. Following such evaluation and demonstration, the Company
executed a distribution agreement with a major German dental equipment
distributor for distribution of the Millennium(TM). Minimum purchase commitments
under the agreement are $12,000,000 over a three-year period with shipments
under the agreement expected to commence in the second quarter of 1997. (FLS)
Domestically, the Company does not anticipate a significant increase in sales
for its laser division unless and until it receives regulatory clearance to
market its laser-based systems for certain hard-tissue applications within the
dental field and other applications within the dermatological field. (FLS) The
Company has commenced clinical trials of its Millennium(TM) system to obtain
clinical data for a hard-tissue application to the Food and Drug Administration
("FDA"). The Company plans to apply for FDA approvals relating to dermatology
and cosmetic surgery utilizing its HydroKinetic(TM) technology as well. (FLS)
Gross profits were $133,000, or 19% of sales for 1996, compared to
$311,000, or 27% of sales, for 1995. The Company's laser division reported a
gross loss of $89,000 on sales of $290,000 for 1996 compared to a gross profit
of $84,000 on sales of $737,000 reported in 1995. The movement from a gross
profit to a gross loss position for the laser division was due principally to
the reduction in sales for 1996. While product contribution margins in 1996 for
the laser division were similar to those in 1995, the disproportionate reduction
in gross profit compared to sales was due principally to the lower absorption
during 1996 of fixed overhead costs as a result of the lower sales volume. The
Company's endodontic division reported gross profits in 1996 comparable to those
reported in 1995 on similar sales for both years.
Operating expenses increased $266,000, or 11%, to $2,622,000 in
1996, from the $2,356,000 reported in 1995. Sales and marketing expenses in 1996
were comparable to 1995 while general and administrative expenses increased
$140,000, or 17%, to $941,000 in 1996, compared to $801,000 reported in 1995.
The Company anticipates increased sales and marketing expenses during 1997 in
support of the planned launching of its Millennium(TM) system and
LaserBrush(TM). (FLS) The increase in general and administrative expenses is due
principally to promotional expenses incurred in communicating the Company's
technology to the
16
<PAGE> 19
investment, medical, dental and scientific communities and legal costs related
to contract and patent counsel, partially offset by reductions in the Company's
general insurance premiums. Engineering and development expenses were $984,000
in 1996, an increase of $57,000, or 6%, from the $927,000 reported in 1995. The
increase was due principally to costs related to engineering design and clinical
studies of its Millennium(TM) system. The Company is presently in the final
phase of its engineering design of its LaserBrush(TM) toothbrush and anticipates
the launching of its toothbrush in the second half of 1997. (FLS) Accordingly,
increased engineering and development costs are anticipated during 1997 in
support of the design and launching of the LaserBrush(TM) toothbrush and other
product related research. (FLS) Litigation and settlement costs increased
$43,000 during 1996 to $77,000, from $34,000 reported in 1995 due principally to
the Company's decision to settle a claim that was filed in 1995.
The Company's net loss for 1996 increased by $439,000, or 22%, from
a net loss of $2,024,000 in 1995, to a net loss of $2,463,000 in 1996. The loss
per share remained the same at $0.21 per share for 1996 as in 1995 due to the
increase in weighted average shares outstanding; 11,532,000 in 1996 compared to
9,851,000 in 1995.
Years Ended December 31, 1995 and 1994
Sales for 1995 of $1,152,000 remained at similar levels to those
reported for 1994 of $1,136,000. Laser division sales for 1995 were $737,000
compared to $810,000 reported in 1994, a decrease of $73,000, or 9%, while sales
for the endodontic division increased by $89,000, or 27%, from $326,000 in 1994
to $415,000 in 1995. The decrease in sales of the laser division was due to
continued confusion present in both the international and domestic laser markets
with respect to technologies, particularly the inability of dental practitioners
to determine which wavelength technology will be best suited for their
respective practices. The increase in endodontic product sales was due to the
Company's focused marketing campaign for 1995, which included advertisements in
specific professional and trade journals, geographic mailing campaigns and an
increased presence at professional trade shows.
The Company's policy regarding commonly shared expenses is to
allocate a pool of such expenses, inclusive of depreciation and amortization,
among cost of sales, selling and marketing expenses, general and administrative
expenses, and engineering and development expenses. During the fourth quarter of
1994, the Company recorded a charge of $959,000, representing a provision for
the impairment of the carrying value of its patents due to uncertainty regarding
the recoverability of such carrying value. One effect of this charge was to
decrease the amount of depreciation and amortization expense included within the
pool of shared expenses in periods subsequent to the charge. See Note 12 of
Notes to Consolidated Financial Statements.
Cost of sales as a percentage of sales for 1995 dropped to 73% from
105% in 1994. The improvement in the cost of sales percentage was due primarily
to the reduction in manufacturing overhead during 1995 attributable to a
reduction in inventory levels during 1995. The allocation of depreciation and
amortization expense to cost of sales was $125,000 less in 1995 than in 1994,
attributable primarily to the 1994 recognition of patent impairment.
Sales and marketing expenses increased by $107,000, or 22%, from
$488,000 in 1994 to $595,000 in 1995. The increase was a result of the Company's
efforts to achieve greater name recognition through increased advertising in
professional and trade journals, utilization of direct mailers and increased
participation at trade shows and professional organization
17
<PAGE> 20
conventions. This increase was partially offset by a reduction of $37,000 in
allocated depreciation and amortization costs in 1995 as compared to 1994,
attributable primarily to the 1994 recognition of patent impairment.
General and administrative expenses in 1995 were $801,000 compared
to $1,008,000 in 1994, a decrease of $207,000, or 21%. The decrease was due
principally to reductions in operations resulting in reduced costs related to
personnel and professional services and a decrease of $50,000 in allocated
depreciation and amortization costs in 1995 as compared to 1994, attributable
primarily to the 1994 recognition of patent impairment. These decreases were
partially offset by an $82,000 increase to general insurance costs experienced
in 1995 and a $26,000 reduction in bad debt recoveries in 1995.
Engineering and development expenses decreased $424,000, or 31%,
from $1,351,000 in 1994 to $927,000 in 1995. The decrease was due principally to
reductions in material utilization for engineering projects in 1995 and 1995
personnel reductions. Also contributing to the decrease was a reduction of
$37,000 in allocated depreciation and amortization costs in 1995 as compared to
1994, attributable primarily to the 1994 recognition of patent impairment.
Litigation and settlement costs for 1995 decreased $78,000, or 70%,
from $112,000 in 1994 to $34,000 in 1995. The reduction was due principally to a
reduction in the number of minor law suits combined with the Company's decision
to administer more suits internally rather than engaging outside attorneys. See
Note 7 of Notes to Consolidated Financial Statements.
The Company's loss from operations for 1995 decreased $1,930,000, or
49%, from a $3,975,000 loss in 1994 to a $2,045,000 loss in 1995, due
principally to factors previously mentioned in this section combined with
continued efforts by the Company to reduce its product costs and increase its
operating efficiencies.
Other income in 1995 was $21,000 compared to $503,000 in 1994, a
decrease of $482,000, or 96%. The decrease was due principally to a 1994 gain on
the dissolution of the Company's foreign subsidiary. See Note 10 of Notes to
Consolidated Financial Statements. This decrease was offset to some extent by a
$23,000 increase in net interest income in 1995.
The Company recognized an extraordinary gain of $421,000 in 1994
related to an early extinguishment of debt that was not available in 1995. See
Note 5 of Notes to Consolidated Financial Statements.
The Company's net loss for 1995 decreased by $1,026,000, or 34%,
from a net loss of $3,050,000, or $0.40 per share in 1994, to a net loss of
$2,024,000, or $0.21 per share in 1995. The loss per share decreased by $0.19 in
1995 when compared to 1994, of which, $0.13 per share related to the decrease in
net loss and $0.06 per share related to the change in weighted average shares
outstanding: 9,851,000 in 1995 as compared to 7,671,000 in 1994.
FINANCIAL CONDITION
The Company's working capital needs have been financed by the
issuance of various equity securities through several private placement
offerings over the past three years, which generated net proceeds of $4,400,000,
$1,293,000 and $2,054,000 during the fiscal years
18
<PAGE> 21
ended December 31, 1996, 1995 and 1994, respectively, and $720,000 for the
three-month period ended March 31, 1997.
The Company's liquidity at March 31, 1997 was comparable to that of
December 31, 1996. Cash and cash equivalents increased $112,000 due to cash
proceeds received from the issuance of the Company's Common Stock through a
private placement and the exercise of employee stock options, aggregating
$799,000 and the liquidation of $250,000 in marketable securities, largely
offset by cash used by operations of $837,000 and expenditures related to
capital equipment and patent and trademark applications, aggregating $100,000.
Working capital declined $43,000 to $3,627,000 at March 31, 1997, compared to
the $3,670,000 reported at December 31, 1996. Cash used by operations increased
$353,000 from the $484,000 reported during the first quarter of 1996 to $837,000
for the first quarter of 1997. This increase was due principally to the
increased net loss experienced in the first quarter of 1997 and a rise in
inventory partially offset by an increase in accounts payable associated with
the ramp-up of manufacturing the Millennium(TM).
The Company expects to record revenue from its first shipments of
Millennium(TM) during the second quarter of 1997. These revenues are expected to
be reflected as an account receivable in the Company's consolidated condensed
balance sheet at June 30, 1997, with collection of such account receivable
anticipated during the third quarter of 1997. (FLS) The Company's inventory and
accounts payable levels should increase during the second quarter of 1997 to
reflect an anticipated increase in Millennium(TM) production and inventory
build-up in anticipation of commencement of LaserBrush(TM) production. (FLS)
Working capital at December 31, 1996 was $3,670,000, compared to $1,524,000 at
December 31, 1995, reflecting the relatively greater proceeds from the sale of
equity securities in 1996 than in 1995. The Company's current ratio improved to
5.7 to 1 at December 31, 1996, compared to 3.3 to 1 at December 31, 1995.
Cash and cash equivalents at December 31, 1996 were $349,000,
compared to $1,566,000 at the end of the preceding year, a decrease of
$1,217,000 which was due principally to the 1996 investment of proceeds from the
sale of equity securities in United States Treasury Notes, $3,500,000 of which
is shown as marketable securities in the Company's balance sheet at December 31,
1996. Cash used by operating activities was $2,151,000 in 1996, compared to
$1,673,000 in 1995. The increase in cash used by operating activities is due
principally to the reduction in revenue combined with increases in operating
expenses experienced in 1996. Net cash used by investing activities increased
$3,519,000 to $3,576,000 in 1996, from $57,000 reported in 1995. The increase
was due principally to a $4,000,000 purchase of United States Treasury Notes
reduced by the liquidation of $500,000 of such notes during 1996. Net cash
provided by financing activities increased $2,378,000 to $4,511,000 in 1996,
from $2,133,000 in 1995. This increase was due principally to the increase in
proceeds from issuance of equity securities.
Current assets increased $2,254,000, or 103%, from December 31, 1995
to December 31, 1996. The increase is due principally to the $3,500,000 balance
of United States Treasury Notes held by the Company combined with an $81,000
increase in accounts receivable. The increase was offset by a $1,217,000
reduction in cash and cash equivalents resulting primarily from the purchase of
marketable securities and a $97,000 reduction in prepaid expenses and other
current assets, principally arising from the release of cash restricted in 1995
to collateralize a letter of credit for endodontic product purchases.
19
<PAGE> 22
Current liabilities at December 31, 1996 increased $108,000, or 16%,
from the 1995 year end due principally to a $147,000 increase in accrued costs
and expenses, attributable primarily to 1996 financing expenses, and a $68,000
increase in accounts payable, reflecting increases in 1996 fourth quarter
inventory purchases, partially offset by an $85,000 reduction in other current
liabilities, reflecting lower 1996 deposits on sales orders and contingent loss
reserves.
Property, plant and equipment decreased $95,000 at December 31,
1996, as compared to the preceding year end reflecting continuing depreciation
and amortization of $150,000, partially offset by capital expenditures
aggregating $55,000. Patents and licenses increased $21,000 at December 31, 1996
from the preceding year end due to capitalized costs related to various patent
applications.
Stockholders' equity at December 31, 1996 was $3,914,000 compared to
$1,844,000 at the prior year-end. In October, 1996, the Company completed a
private placement of 100 shares of its Series A Preferred Stock, receiving net
proceeds of $4,400,000. 99 shares of the Series A Preferred Stock were
subsequently converted into an aggregate 1,800,018 shares of the Company's
Common Stock. During 1996, 88,766 stock options were exercised resulting in net
proceeds of $133,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company remains dependent upon its ability to obtain outside
financing either through the issuance of additional shares of its Common or
Preferred Stock or through borrowings until it achieves sustained profitability
through increased sales, product improvement through engineering, and cost
containment. (FLS) The Company's focus has been realigned to emphasize the
marketing of its HydroKinetic(TM) system, Millennium(TM), and LaserBrush(TM) and
the continued development of biomaterial products and cost-effective laser-based
technologies for medical and dental surgical applications.
Based on the Company's current business plan, working capital should
be sufficient to enable the Company to meet its obligations through mid-1998, at
which point the Company would be dependent upon either the successful marketing
of its Millennium(TM) and its soon-to-be-released LaserBrush(TM) or additional
financing. (FLS) There are no assurances that the Company will be successful in
either marketing its new products or obtaining financing required to sustain its
operations. (FLS) If unsuccessful, the Company's ability to meet its obligations
and to continue operations could be impaired. (FLS) The consolidated financial
statements do not give effect to any adjustments that might be necessary if the
Company were unable to meet its obligations or continue operations. (FLS)
Financing the development of laser-based medical and dental devices
and instruments and the operations of the Company has been achieved principally
through private placements of Common Stock and Series A Preferred Stock and
exercises of stock options and warrants. During the three years ended December
31, 1996, the Company raised approximately $7,747,000 of equity funds. The
Company obtained additional equity funding through the issuance of 200,000
shares of its Common Stock in a private placement resulting in net proceeds of
approximately $720,000 during the three-month period ending March 31, 1997.
Management believes that significant additional resources will be required to
complete the process designed to lead to FDA clearance to market the Company's
laser-based technologies for hard tissue and dermatological applications in the
United States
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and to fund the Company's working capital needs by mid-1998. (FLS) The Company
expects to generate the necessary resources through the revenue generated by its
new products, the issuance of equity securities in either public offerings or
private placements, or debt financing. (FLS) No assurance can be given, however,
that the Company will be able to obtain such resources.
The Company is presently analyzing various computer software and
hardware to meet its operational needs and anticipates capital expenditures to
increase significantly during the third quarter of 1997 in connection with the
acquisition of such software and hardware. (FLS) Presently, no other significant
capital expenditure projects are imminent.
In October 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation," which sets forth accounting and disclosure
requirements for stock-based compensation arrangements. SFAS No. 123
encourages, but does not require, companies to measure stock-based compensation
cost using a fair-value method, rather than the intrinsic-value method
prescribed by Accounting Principles Board Opinion No. 25. The Company has
adopted the disclosure-only provisions of SFAS No. 123. See Note 9 of Notes to
Consolidated Financial Statements for information regarding the Company's
stock-based compensation plans. In February 1997, the FASB issued SFAS No. 128,
"Earnings Per Share". SFAS No. 128 specifies the computation of earnings per
share, and requires companies to adopt its provisions for fiscal years beginning
after December 15, 1997 and to restate all prior periods back to January 1,
1997. The implementation of SFAS No. 128 is not expected to have a material
effect on the earnings per share data presented by the Company. See Note 1 of
Notes to Consolidated Financial Statements.
The Company does not currently hold any market risk sensitive
instruments for trading or other purposes.
IMPACT OF CHANGING PRICES ON SALES AND INCOME
The Company attempts to minimize the impact of inflation on
production and operating costs through cost control programs and productivity
improvements. Over the past three years, the inflation rate has been relatively
low. Nonetheless, the Company has continued to face increases in the cost of
labor and some materials, despite pressure for price reductions from many
customers. Due to intense competition, the Company in 1996 generally was not
able to raise prices to its customers to pass along the cost increases
experienced. The Company, however, shall continue to pursue price reductions
from its material vendors in an attempt to improve its margins. (FLS)
FORWARD LOOKING STATEMENTS
The forward looking statements contained in this Prospectus are
subject to various risks, uncertainties and other factors that could cause
actual results to differ materially from the results anticipated in such forward
looking statements. Included among the important risks, uncertainties and other
factors are those hereinafter discussed.
Few of the forward looking statements in this Prospectus deal with
matters that are within the unilateral control of the Company. There is
substantial government regulation of the manufacture and sale of medical
products, including many of the Company's products, by governmental agencies in
both the United States and foreign countries. These governmental agencies often
have considerable discretion in determining whether and when to approve the
marketing of the Company's products that have not yet received such approval.
The availability of equity and debt financing to the Company is
affected by, among other things, domestic and world economic conditions and the
competition for funds. Rising interest rates might affect the feasibility of
debt financing that is offered. Potential investors and lenders will be
influenced by their evaluations of the Company and its products and comparisons
with alternative investment opportunities.
The Company's products do not provide the exclusive means for
accomplishing an objective, and customers may choose alternative means. Many of
the Company's competitors have much greater financial resources and technical
capabilities than does the Company, which may enable such competitors to design
and produce superior products or to market their
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products in a manner that achieves commercial success even in the face of
technical superiority on the part of the Company's products.
The Company's patents may not offer effective protection against
competitors. Competitors may be able to design around the Company's patents or
employ technologies not covered by such patents. In addition, the Company's
patents may be challenged, and even if such patents are upheld, the diversion of
financial and human resources associated with patent litigation could adversely
affect the Company. The Company may be found to be violating the patents of
others and forced to obtain a license under such patents or modify the design of
its products.
Rapid technological developments are expected to continue in the
industries in which the Company competes. The Company may not be able to
develop, manufacture and market products which meet changing user requirements
or which successfully anticipate or respond to technological changes on a
cost-effective and timely manner.
While the Company believes that its HydroKinetic(TM) technology
should be effective in a broad range of medical and dental applications, this
belief (except with respect to dental hard tissue and certain dermatological
applications, for which clinical research has been and is being conducted) is
based largely on preliminary in vitro and in vivo research and extrapolation of
observations in such clinical research. No assurances can be given that the
Company's HydroKinetic(TM) technology will prove to be applicable to, or will
find market acceptance in, any medical or dental fields or that the Company
will receive clearance from the FDA or other regulatory agencies to market the
Millennium(TM) system or other products embodying its HydroKinetic(TM)
technology for application in any such fields. See "Business - The
Millennium(TM) System."
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BUSINESS
INTRODUCTION
The Company designs, develops, manufactures and markets laser-based
systems for use in dental and medical applications. The current generation of
the Company's laser-based systems incorporates its proprietary HydroKinetic(TM)
technology into its surgical tissue cutting system, Millennium(TM), which
utilizes electromagnetic energy laser pulses to rapidly energize and transform
atomized water droplets into smaller, high-speed mechanical cutting water
particles. The Millennium(TM) system is not currently marketed in the United
States, pending FDA clearance, but is being distributed in Germany for dental
and oral surgical applications. The Company supports its earlier generations of
laser-based systems with replacement parts and service. The Company also has (i)
an automated system used in endodontic procedures for locating and shaping root
canals, known as the Canal Finder System(TM), which the Company markets along
with a full range of other proprietary and non-proprietary endodontic products,
and (ii) an air-water spray laser accessory, LaserSpray(TM), designed to cool
the tissue receiving laser energy and the surrounding tissue, that is
incorporated into the Company's laser-based systems and can be employed with
fiber-coupled laser systems manufactured by others. The Company is also
developing LaserBrush(TM), a toothbrush that utilizes a light source to activate
whitening and anti-bacterial agents in special toothpaste compounds also being
developed by the Company; a fluid conditioning system known as FlavorFlow(TM),
that sanitizes, flavors and administers fluids and enhances the scent of air
present during dental and medical procedures; and a line of biomaterials for
dental and medical applications.
The Company's predecessor, Societe Endo Technic, S.A. ("SET"), was
formed in Marseilles, France in 1984. Three years later, the Company acquired
77% of the outstanding shares of SET. Subsequently, various patents and other
intellectual property utilized by SET were transferred to the Company. SET was
dissolved in 1994. See Note 10 of Notes to Consolidated Financial Statements.
GENERAL
Until 1991, the Company's principal products were the Canal Finder
System(TM), an automated endodontic (root canal) handpiece, and other endodontic
products. In August 1991, the Company completed development of the Laser-35(TM),
a 25-Watt, Nd:YAG (neodymium: yttrium aluminum garnet) dental laser-based
system, and in February 1992, commenced the first deliveries of the Laser-35(TM)
manufactured by the Company. In the first quarter of 1993, the Company completed
development of a second generation of Nd:YAG dental laser-based systems, the
Nylad(TM) series with 6, 12 and 20-Watt systems, and commenced shipments in June
1993. In 1993, the Company commenced development of Elmer(TM), a 6-Watt,
Er,Cr:YSGG (erbium, chromium: yttrium scandium gallium garnet) specialized laser
which incorporated proprietary technology that served as the forerunner for the
Company's new HydroKinetic(TM) tissue cutting system, the Millennium(TM) system.
In 1995, the Company commenced design of its Millennium(TM) system, which
incorporates its patent-pending HydroKinetic(TM) technology. This technology
employs electromagnetic energy laser pulses to rapidly energize and transform
small atomized water droplets into smaller, high-speed mechanical cutting
particles of water. The design of the
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Millennium(TM) system for dental and oral surgical applications was completed in
late 1996, at which point the Company commenced marketing efforts in Germany.
In 1995, the Company completed development of LaserSpray(TM), an
air-water spray accessory using its proprietary Target Tissue Cooling System(TM)
("TTCS(TM)") technology and thereafter incorporated into all of the Company's
laser-based systems. LaserSpray(TM), which is designed to cool the tissue
receiving laser energy and adjacent tissue, can also be employed in conjunction
with fiber-coupled laser systems not manufactured by the Company. In 1996, the
Company commenced the development of a toothbrush for the consumer market,
called the LaserBrush(TM), that utilizes a light source to activate whitening
and anti-bacterial agents in special toothpaste compounds developed by the
Company, which it anticipates introducing during the second half of 1997. (FLS)
More recently, the Company commenced development of FlavorFlow(TM), a system
which sanitizes and alters the flavor and scent of fluids administered during
medical, dental and oral surgical treatments.
The Company is also developing a group of biomaterials under the
trade names PerioFil(TM), PerioSeal(TM), LaserBond(TM) and EndoPlas(TM) for use
in periodontics, endodontics, general dentistry, orthopedics and other medical
applications; commercialization of these biomaterials depends on completion of
development and regulatory approval.
LASER BACKGROUND
The term "laser" is an acronym for Light Amplification by Stimulated
Emission of Radiation. A laser is an apparatus that stimulates the atoms in a
core material (such as a gas or crystal) to emit packets of light and then
amplifies and focuses the light in a single beam. Laser light, which consists of
a single wavelength of light, differs from light emitted from an ordinary light
bulb primarily through greater concentration and intensity. Lasers are typically
classified by the element or compound that emits light when energized, such as
carbon dioxide (CO2), Nd:YAG, argon, ruby and erbium.
Lasers were first developed for research, industrial and military
uses and, more recently, have been adapted for many medical and dental
applications. The benefits of lasers in medical and dental applications are
generally believed to include reduced pain, minimized infection, promotion of
rapid healing, reduced bleeding, reduced scarring, increased precision and
time-effective procedures. Lasers are currently used in a wide variety of
medical fields including dermatology, plastic surgery, ophthalmology,
otolaryngology (ear, nose and throat ("ENT")), gynecology, urology, cardiology,
gastroenterology and general surgery.
Medical and dental laser-based systems, including the Company's
Millennium(TM) system, are highly specialized tools specifically designed for a
particular application or set of applications. The most important factors in
developing a laser-based system for a specific application are the wavelength of
the laser, its pulse length, energy per pulse, the method of delivery of the
laser energy to the tissue, and the method, if any, of cooling the tissue.
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A matter that has required attention in the development of lasers
for medical and dental applications is the temperature sensitivity of soft
tissue, bone, tooth enamel and dentin. Temperature increases in excess of five
degrees centigrade can cause irreversible deterioration in vital tissue. The
Company's patented TTCS(TM), incorporated into its laser-based systems, is
intended to enable the user to apply focused energy levels on hard tissue (i.e.
bone, enamel, dentin), and avoid damage to the tissue being lased and the
surrounding tissue by cooling with an air-water spray the tissue receiving the
energy and the contiguous region. TTCS(TM) can also be available as an accessory
to be installed on lasers manufactured by other companies.
THE MILLENNIUM(TM) SYSTEM
The Company has recently developed its Millennium(TM) system which
involves a new use of laser-based technology, addressing these critical factors,
for a variety of dental and medical applications. HydroKinetic(TM) technology
combines the Company's TTCS(TM) with its erbium laser-based system to generate
electromagnetic energy pulses that rapidly energize and transform atomized water
droplets into smaller high-speed mechanical cutting water particles capable of
precisely removing hard tissue, such as tooth, bone and cartilage, and soft
tissue.
The current Millennium(TM) system (19"H x 24"W x 18"D) consists of a
flexible fiber-optic delivery system and mobile floor HydroKinetic(TM) tissue
cutting system for dental and oral surgical applications. This system contains
an erbium laser, power supply, internal cooling system, control panel and
HydroKinetic(TM) tissue cutting system modules. The Millennium(TM) system uses
electromagnetic energy pulses from the erbium laser to rapidly energize and
transform atomized water droplets, a safe, biocompatible cutting agent, into
smaller, high-speed mechanical cutting water particles. Through this unique
process of HydroKinetic(TM) tissue cutting, the Millennium(TM) system is capable
of cutting both hard and soft human tissue. To give medical practitioners more
flexibility, Millennium(TM) systems may also be used without water for standard
laser-based applications such as dermatology, opthalmology and otolaryngology
(ENT). BioLase commenced marketing the Millennium(TM) system to Germany in the
second half of 1996, and initial shipments to Germany under a three-year
purchase commitment commenced during the second quarter of 1997.
The Company believes that its Millennium(TM) system, utilizing its
patent-pending HydroKinetic(TM) technology, has a broader range of applications
than conventional laser systems. While the Company currently is marketing the
Millennium(TM) system only for dental and oral surgical applications in Germany,
other medical disciplines presently being explored for utilization of this
proprietary technology include dermatology, plastic/cosmetic surgery, orthopedic
surgery, otolaryngology (ENT) and ophthalmology. (FLS) Any marketing of the
Millennium(TM) system in the United States for use in dental, dermatological,
plastic or cosmetic surgical, oral maxillofacial, orthopedic, otolaryngological
(ENT), ophthalmological or other medical applications would require regulatory
clearance for each protocol. The Company may be required to engage in further
development of the Millennium(TM) system or to complete clinical studies
successfully in order to pursue regulatory clearance for the use of the
Millennium(TM) system in various protocols. (FLS) No assurances can be given
that any such regulatory clearances will be granted. See " - Government
Regulation". Use of the Millennium(TM) system for non-dental applications may
require certain modifications in the current hardware and software
configurations of the Millennium(TM) system.
The Company has recently received certification of its compliance
with the Medical Device Directive, evidenced by the "CE" mark, established
within the European Community. See " - Government Regulation".
While the Company believes that its HydroKinetic(TM) technology
should be effective in a broad range of medical and dental applications, this
belief (except with respect to dental hard tissue and certain dermatological
applications, for which clinical research has been and is being conducted) is
based largely on preliminary in vitro and in vivo research and extrapolation of
observations in such clinical research. No assurances can be given that the
Company's HydroKinetic(TM) technology will prove to be applicable to, or will
find market acceptance in, any medical or dental fields or that the Company
will receive clearance from the FDA or other regulatory agencies to market the
Millennium(TM) system or other products embodying its HydroKinetic(TM)
technology for application in any such fields.
Applications and Potential Applications of the Millennium(TM) System.
Dentistry. The Millennium(TM) system currently being marketed by the
Company in Germany is configured for dental and oral surgical applications.
There are approximately 150,000 dentists in active practice in the United States
and an additional 400,000 dentists in other countries where the Company intends
to market its products. Industry analysts believe that, as the U.S. population
grows and ages and more natural teeth are retained, the demand for dental
services will increase along with the demand for newer and improved technology.
The Company believes that the Millennium(TM) system is well suited for a variety
of dental and oral surgical applications such as cavity preparation and
restoration, implant
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preparation, aesthetic dentistry, periodontics (treatment of gum disease) and
prosthodontics (replacement of teeth); however, this device has not yet been
cleared for marketing for hard or soft tissue dental or medical applications in
the United States. See "- Government Regulation".
Plaque and Periodontal Disease. Plaque is a sticky, colorless
film of bacteria that forms on teeth. If not removed regularly, it can cause
cavities or gum (periodontal) disease. Most adults have periodontal disease,
which can exist without symptoms for years. When plaque is allowed to build up
in the crevice between tooth and gum, it eventually separates the gum from the
tooth root. As the gum pulls away, the bone underneath deteriorates. The
resulting periodontitis causes tooth loss in 70% of all adults, according to the
American Academy of Periodontology.
When plaque hardens, it becomes tartar, a rough, porous
material that can be removed only by professional cleaning. Although tartar
itself is not believed to cause periodontal disease, the presence of tartar
makes plaque harder to remove. The Millennium(TM) system can be utilized for the
removal of plaque and tartar as well as the treatment of infected tissue
associated with periodontal disease.
Cavity Preparation/Aesthetic Dentistry. Aesthetic
considerations are gaining increased importance in dentistry, as patients seek
natural looking dental restorations. Due to these aesthetic concerns, natural
colored composites are replacing amalgam (gold and silver) fillings in the
restoration of cavities.
When working with composites in cavity restorations, dentists
must preserve the tooth structure and veneer (the thin ceramic covering the
front surface) to enhance bonding of the composite and minimize stress upon the
reconstructed tooth. Penetration of the bonding materials into the tooth
structure and thus the strength of the adhesive bond between the tooth and the
composite material depend upon cavity preparation procedures that minimize
cracks, fuses and fractures of the enamel rods and dentin tubules. In addition,
decay must be removed, and the interior of the cavity preparation must be clean
and free of debris such as that left by conventional dental drills. The Company
believes that its Millennium(TM) system can cut precisely and cleanly with
minimal disruption to tooth structure, thus providing improved preparation for
restorations with enhanced adhesive and aesthetic qualities.
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Osseous (Bone) Implant Surgery. Bone implants are used for bone
stabilization, to add strength to existing bone and to serve as the
infrastructure for reconstructive dental procedures. For such procedures, it is
important that the bone cutting for the implant placement be clean and that the
practitioner not damage the bone itself during cutting by the generation of
excessive heat. Thermal damage, such as that caused by conventional dental
drills, can impede or destroy the fusion of the bone to the implant. The Company
believes that the Millennium(TM) system, through its Hydro Kinetic(TM)
technology, can effectively cut bone cleanly and without thermal damage. (FLS)
Prosthodontics. The replacement of missing teeth and the
significant restoration of decayed or damaged teeth have evolved as dental
specialties as a result of the development of stronger ceramic, porcelain and
composite materials. The onlay and inlay require not only precise cavity
preparation, but also strong adhesion of the bonding which is necessary for
enhancement of retention. The Company believes that the Millennium(TM) system
can effectively minimize cracking, melting and fracturing of the enamel or
dentin structure during cavity preparation and promote a stronger bond or
adhesion, thereby facilitating a more durable and aesthetic restoration. (FLS)
The Company also believes the Millennium(TM) system has the
ability to precisely cut the appropriate shoulder preparation to be used to
retain removable or partial dentures and distribute stress force along the
anchor tooth. (FLS) The Company believes that because the Millennium(TM) system
minimizes vibration, use of the system can provide increased patient comfort and
conserve tooth structure. (FLS)
The osseous (bone) implant placement process usually requires
procedures uncovering the soft tissue and shaping around the neck of the tooth.
The Company believes that the Millennium(TM) system can be used effectively for
these procedures, as a result of its ability to cut oral soft tissue cleanly,
precisely and without induced bleeding. (FLS)
The Millennium(TM) system can also be utilized in the
preparation of crowns to shape shoulders and margins, facilitating improved
impressions and enabling secure and closed margins for longer life of the crown.
The Company believes that benefits associated with this potential use of the
Millennium(TM) system include reduction of the vibration, high-pitched noise and
microfracturing of teeth associated with the conventional dental drill. (FLS)
The soft tissue that surrounds the crown preparation area usually requires
shaping or lengthening prior to taking an impression. The Company believes that
use of the Millennium(TM) system to remove or reshape the tissue, will lead to
reduced bleeding and increased patient comfort.
Dermatology and Plastic/Cosmetic Surgery. An estimated 400,000 worldwide
laser-based skin resurfacing procedures will be performed this year. Laser skin
resurfacing, which has been evolving as a surgical technique since it was first
introduced in 1993, involves using a high-energy laser beam to remove dermal
layers. This surgical process normally leaves a swollen, red wound which must
heal over a period of weeks or months. If successful, this procedure reduces
wrinkles and produces some tightening of the skin. Most of these surgeries are
performed by dermatologists, plastic surgeons, oculoplastic surgeons, and
various other sub-specialists using short-pulsed carbon-dioxide lasers.
Currently, there is a worldwide installed base of approximately 4,000 lasers for
this application alone. This installed base is expected to grow to 10,000 units
by the year 2000.
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The Company's Millennium(TM) system is being clinically tested for
removal of wrinkles, scars and warts and skin resurfacing and appears to be as
effective as current laser technology offered by other manufacturers. (FLS) The
Company believes that the Millennium(TM) system may also offer some clinical
advantages in terms of non-thermal, controlled removal of dermal soft tissue.
(FLS) In particular, a practitioner will have the ability to use
HydroKinetic(TM) technology for certain cosmetic surgery procedures (e.g., bone,
cartilage, and skin reshaping) or to reduce the amount of air and water used
during an application, thereby allowing the use of the laser medium to remove
the skin surface with less depth of radiation than that typically experienced
when using laser systems with wavelengths that differ from that of the
Millennium(TM) system. (FLS) A newer skin toning technique under development
will use Er,Cr:YSGG laser energy from the Millennium(TM) system, at a very low
power setting, to tighten the skin by slightly heating the underlying layer of
collagen to cause shrinkage. (FLS) The Company has recently submitted a 510(k)
application to the FDA to obtain marketing clearance for a broad range of
dermatological applications. See "- Government Regulation".
Oral/Maxillofacial Surgery. Over 7,000 specialists practice
oral/maxillofacial surgery in the U.S. The highest volume procedure is
temporomandibular joint (TMJ) surgery, where the surgeon reshapes the patient's
jaw to correct a bite problem. These specialists have also become involved with
cosmetic surgery, including facial skin resurfacing with lasers. The Company
believes that its Millennium(TM) system can provide significant advantages in
TMJ surgery, as a single surgical instrument that efficiently cuts bone,
cartilage, and soft tissue. (FLS)
Orthopedic Surgery. According to the American College of Surgeons,
nearly 21,000 orthopedic surgeons in the U.S. perform in excess of 3,000,000
annual surgeries, including joint arthroscopy, spinal disc alterations and
arthroplasties of knee, shoulder and hip. Statistics on international procedures
are not compiled, but industry experts estimate at least 1,000,000 annual
procedures outside of the United States. Laser use in orthopedic surgery has
been limited to a very small percentage of surgeons using long-pulse holmium
lasers in arthroscopic procedures. The main advantage of a holmium laser is
finesse for tissue sculpting. However, the medical community has criticized the
holmium laser as being too slow compared to the traditional mechanical
endoscopic cutting devices. Thermal damage caused by the pulsed holmium laser
has also been an issue. By contrast, the Company believes that the
Millennium(TM) system can offer significant advantages in terms of improved
speed, non-thermal effect, and providing one surgical device that can perform
all the functions that a surgeon needs for bone and cartilage cutting, along
with the ability to perform bone shaping and sculpting. (FLS)
Otolaryngology. The Company believes that the unique bone-cutting
capability of the Millennium(TM) system lends itself to surgical procedures in
the ear and nasal passages, where hard tissue (primarily cartilage) must be
precisely removed under endoscopic control. (FLS) Approximately 400,000 ear,
nose, and throat (ENT) surgical procedures are performed in the United States
each year by some 10,000 specialists with an estimated 650,000 additional annual
procedures internationally. Currently, lasers are utilized in less than 5% of
these surgeries. Primary applications for lasers in ENT now include: laser
assisted palatoplasty (partial removal of the palate); uvulopalatoplasty
(partial removal of the uvula and the palate to reduce sleep apnea and snoring);
tonsillectomy (surgical removal of tonsils); and myringotomy (surgical creation
of a small hole in the tympanic membrane of a child's ear for drainage of fluid
caused by chronic ear infection). The Company believes, based on in-vitro tests,
that the Millennium(TM) system may provide an improved surgical tool for
performing some types of ENT procedures. (FLS)
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Ophthalmology. The Company is targeting its Millennium(TM)
technology for two main ophthalmic surgical procedures: cataract removal and
vitreal microsurgery (where strands of vitreous membrane in the eye must be
cut), especially in medically compromised patients, such as diabetics.
Approximately 5,000,000 cataract extractions are performed annually, worldwide.
Due to the growth rate of the elderly segment of the population, the number of
cataract removals is expected to expand at an annual rate of at least 10%. There
is also an increasing demand for improved high-technology methods of cataract
removal.
A cataract forms as part of the aging process, as the lens of the
eye hardens and opacifies, leading to reduced vision. Conventional methods of
cataract removal involve the use of ultrasonic devices to emulsify the lens and
surgical instruments to remove the lens. Drawbacks to these techniques include
postoperative discomfort for the patient and unnecessary trauma to healthy
ocular tissue. In-vitro studies suggest that the Millennium(TM) system may offer
a less traumatic method of cataract lens removal. Vitreal surgery, which
currently involves the use of mechanical cutting instruments, could also benefit
from the increased precision and decreased pressure offered by the
Millennium(TM) system's tissue cutting technology. (FLS)
OTHER DENTAL AND MEDICAL PRODUCTS
LaserBrush(TM). In 1996, BioLase commenced the development of a
toothbrush for the consumer market, called the LaserBrush(TM), that utilizes a
light source to activate whitening and anti-bacterial agents in
special toothpaste compounds developed by the Company. The LaserBrush(TM), which
utilizes the Company's patented and patent-pending technology, is designed to
bring into the consumer's home technology which utilizes optical energy to
activate ingredients in toothpastes, formulated by the Company, to neutralize
certain harmful bacteria, and clean and whiten teeth. (FLS) The
LaserBrush(TM), which is configured much like a conventional toothbrush, is
smaller than conventional motorized tooth brushing instruments. The Company is
currently preparing for production of the LaserBrush(TM), and a launch of the
product is anticipated during the second half of 1997. (FLS) The Company's
marketing strategy will focus on the selective replacement of traditional and
motorized toothbrushes at a price competitive with conventional motorized
toothbrushes. (FLS)
Nylad(TM) Series and Laser-35(TM) -- Mobile Laser Systems. The Nylad
6(TM), Nylad 12(TM) and Nylad 20(TM) (24"H x 18"W x 23"D) consisted of mobile
floor systems, each containing an Nd:YAG 6, 12 or 20-Watt laser, appropriate
power supply and cooling system, a computerized console to regulate intensity
and pulse characteristics, and the TTCS(TM). The Laser-35(TM) (42"H x 16"W x
22"D) consisted of a mobile floor system containing an Nd:YAG 25-Watt laser,
appropriate power supply and cooling system, a computerized console to regulate
intensity and pulse characteristics and the TTCS(TM). These laser-based systems
were designed to be used in both soft and hard tissue dental procedures; BioLase
received FDA clearance to market these systems for soft tissue procedures. See
"- Government Regulation". The Company has discontinued the manufacturing of its
Nylad(TM) series and its Laser-35(TM), although it may elect to manufacture and
market any or all of these laser-based systems in the future; however, the
Company continues to support those systems that are in operation, both domestic
and abroad, with the fabrication and distribution of replacement parts that are
utilized by its service department, its distributors' service departments and
other technically qualified service affiliates.
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LaserSpray(TM). LaserSpray(TM) is a stand-alone product that
incorporates a patented technology to allow a dental or medical practitioner to
deliver a coolant spray of air and water to tissue sites during surgical laser
interventions. Its technology has been incorporated into all of the Company's
laser-based systems and LaserSpray(TM) may be installed with fiber-coupled
lasers manufactured by other companies. The LaserSpray(TM) uses BioLase's
proprietary TTCS(TM) which has applications for various medical and dental
lasers. The Company believes that thermal effects resulting from high
temperatures can be significantly reduced when the LaserSpray(TM) cooling system
is used during application of laser-based energy. (FLS) The Company has
completed development of LaserSpray(TM), and is currently discussing licensing
the system with certain manufacturers; however, to date no such licensing
arrangements have been consummated.
FlavorFlow(TM) Fluid Conditioning System. In response to recently
proposed standards for use of sanitized fluids in dental and medical
procedures, BioLase has been developing the FlavorFlow(TM) fluid conditioning
system, a system utilizing patent-pending technology to sanitize, flavor and
administer fluids and enhance the scent of air present during medical and dental
treatments. FlavorFlow(TM) is designed to overcome the unpleasant tastes and
odors which patients typically associate with pain and discomfort and which
contribute to negative clinical experiences. The Company believes that when the
FlavorFlow(TM) system is utilized to deliver sanitized fluids, the possibility
of parasitic (such as potentially lethal cryptosporidium) and bacterial
infection being introduced through the fluids used during medical and dental
interventions would be significantly reduced. (FLS) The Company expects that a
market for the FlavorFlow(TM) fluid conditioning system will exist only after
new standards regarding sanitized fluids are imposed. (FLS)
Biomaterials. Biomaterials are natural or synthetic materials that
are compatible with living tissue and are suitable for surgical implanting into
the human body. The Company's biomaterials, under the trade names PerioFil(TM),
PerioSeal(TM), EndoPlas(TM) and LaserBond(TM), for use in endodontics,
periodontics and general dentistry, as well as medical applications in
orthopedics and oral/maxillofacial surgery, are currently in the product
development stage. PerioFil(TM) and PerioSeal(TM) are being developed to permit
bone regeneration and tissue welding without interference of soft tissue and may
permit the dental or medical practitioner to avoid the second surgical
intervention associated with certain other implantable membranes. (FLS)
PerioFil(TM) is a thin, transparent film of synthetic collagen and other
biocompatible compounds. PerioSeal(TM) is a thin, semi-transparent synthetic
membrane of collagen, hydroxyapatite and other biocompatible compounds. Both
PerioFil(TM) and PerioSeal(TM) are being developed to provide protection and
comfort for dentin and bone from the migration of epithelium following
periodontal surgery as it slowly dissolves in the human body. (FLS)
EndoPlas(TM) is an endodontic enhancing biomaterial that, when
energized by certain laser wavelengths, enlarges and promotes sealing of the
root canal. The Company believes that the benefits associated with the use of
EndoPlas(TM) will include reduced trauma to the canal wall (which in turn may
lead to fewer post-operative complications), increased patient comfort and
reduced chair time compared to conventional root canal therapy. (FLS)
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LaserBond(TM) is a patented paste formulation that can be
used to seal pits, fissures and cracks that develop in the tooth structure. When
activated with certain laser systems. LaserBond(TM) fuses to the tooth structure
and acts as a filling material. The Company's patents cover any such filling
materials involving hydroxyapatite, which constitutes 90% of dental enamel and
bone tissue. The Company believes that the hydroxyapatite-based filling material
can be successfully laser-fused with the natural hydroxyapatite in the enamel
and dentin to form a solid crystalline bond and thus become an integral part of
the tooth. (FLS)
Upon completion of the Company's testing and regulatory clearance,
certain formulations of the biomaterials will be marketed. (FLS) The Company
intends to submit applications to the FDA for clearance to market these
biomaterials in the United States; however, no such applications have been
submitted to date. The approval process can be expensive and time-consuming, and
no assurance can be given that any agency will grant approval for the sale of
the Company's products for routine clinical applications, or that the length of
time the approval process will require will not be extensive. (FLS) See "-
Government Regulation".
Canal Finder System. Endodontic procedures (root canals) involve
removing pulp and dentin material from the root of the tooth, typically by
drilling through the crown of the tooth and inserting flexible micro-files in
the tooth canal. The practitioner must file the inside cavity, with
ever-increasing size instrumentation, to enlarge the canal and remove debris.
Since most human tooth canals are highly curved and conventional files are flat
and inflexible, they tend to remove excess dentin material from the inside of
curves, while leaving the outside of curves unworked. In addition, conventional
files tend to push debris deeper into the canal, rather than pulling out debris,
which can lead to the growth of a cyst or granuloma.
The Company has developed its patented Canal Finder System(TM)
("CFS") designed to be used in endodontic root canal procedures for locating and
shaping root canals. The CFS handpiece embodies a patented automated method that
is geared to impart lengthwise vibratory motion to the file, with no rotation.
There is a clutch action that allows the file to stop working when too great a
resistance is met, so that if a curve is not being negotiated the file will not
create its own canal. The clutch action and the non-rotational movement of the
file are also designed to minimize the damage resulting from files breaking in
the root canal, which often requires extraction of the tooth. The proprietary
CFS files are engineered to have a maximized cutting angle on the outside of a
curve, and a minimized cutting angle on the inside of a curve, to compensate for
a file's natural tendency to straighten canals. The cutting angles of the files
are also engineered to cut only on withdrawal, and to migrate debris up and out
of the tooth, rather than to compact debris at the base of the canal. CFS files
are rounded at the tip to enhance the file's ability to follow a tightly curved
canal without forming a ledge or groove. Management believes that the principal
advantages of the CFS are, first, that the system is designed to adapt
automatically to the resistance placed on the file and, second, the CFS allows
root canals to be done substantially faster than other traditional techniques.
(FLS)
The CFS allows the dentist to stock fewer instruments, since the CFS
can complete a given procedure using fewer files and can facilitate the filing
of canals. The Company believes that CFS shapes and cleans root canals better
than conventional techniques, thus reducing tooth trauma and providing a more
successful root canal procedure with less risk of infection. (FLS)
Other Endodontic Products. The Company offers a full range of
proprietary and non- proprietary endodontic products used by dentists and
endodontic specialists. Proprietary
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products include an irrigation/washing device, reamers, filling compounds, an
endodontic storage and sterilization system, and patented hand-held filing
instruments. The Company also distributes a variety of non-proprietary products
such as gutta percha and paper points to provide a full endodontic product line
for its dental and endodontic customers.
By offering a wide assortment of products to the dentist and
endodontist, management believes it is better positioned to cross-sell products,
increase its sales per sales call, and provide a full-service image to its
customers. The Company has an ongoing development effort, and may develop
additional products for which patents may be applied. (FLS)
MANUFACTURING
The Company, as a medical device manufacturer, is required by the
FDA to comply with Good Manufacturing Practice ("GMP") regulations. As a result,
the Company's manufacturing processes must meet certain standards regarding
quality assurance and documentation. See " - Government Regulation".
The Company fabricates certain proprietary components of the
Millennium(TM) system and Laser-35(TM) and Nylad(TM) series laser-based systems,
and inspects, tests and packages all components prior to inclusion within a
finished product or shipment as a replacement part. By designing and
manufacturing key proprietary products, the Company believes it can better
control quality, limit outside access to its proprietary technology, control
costs and manage manufacturing process changes more efficiently and effectively.
Each laser-based system is assembled and tested by trained Company
production personnel. After assembly of a system is complete, it undergoes
pre-shipment testing, including extended periods of continuous operation.
The Company contracts with various non-affiliated companies to
manufacture certain of its laser-based components and other non-laser-based
products under private label, according to the Company's specifications.
Substantially all of the Company's products are manufactured in the United
States. At present, all products manufactured by third parties are sent to the
Company's headquarters in San Clemente, California for quality control, final
assembly if necessary, and shipment to customers or distributors.
The Company has identified alternate suppliers for almost all of its
components. A change in the suppliers of certain system components, however,
would require new regulatory approvals and, in particular, could require an
amendment to the "CE" mark granted to the Company pursuant to the European
Community's Medical Device Directive thus impairing the Company's ability to
distribute its systems in many European countries requiring such an approval.
Product repairs are currently performed by the Company's
distributors and service affiliates overseas and by Company personnel and
service affiliates in the United States.
ENGINEERING AND DEVELOPMENT
During the years ended December 31, 1994, 1995, and 1996, the
Company expended approximately $1,351,000, $927,000 and $984,000, respectively,
on engineering and development. Such expenditures were directed primarily to
development of the Company's HydroKinetic(TM) technology and, in 1996, to
development of the LaserBrush(TM).
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COMPETITION
The medical and dental laser marketplaces are extremely competitive,
with several wavelengths competing for acceptance and a number of manufacturers
competing for sales to that segment of the healthcare community, which is
positioned to purchase laser-based products.
The Company's principal competitors within the dental field have
included American Dental Technology, Inc., a manufacturer of an Nd:YAG laser
system, Sunrise Technologies, Inc., a manufacturer of a series of Nd:YAG lasers
and a holmium laser, and Luxar Corporation, the manufacturer of a line of CO2
lasers. Presently, the Company's primary competitors in the dental marketplace
include Premier Laser Systems, Inc. ("Premier"), the only company to date that
has obtained FDA clearance to market a laser system, its Er:YAG laser system,
for certain hard-tissue applications. Premier manufactures Er:YAG, Nd:YAG and
argon laser systems. Certain foreign competitors, including KaVo, Inc. and
Fotona, Inc., have developed Er:YAG laser systems and are marketing them in
Europe and the Pacific Rim. Several companies, such as HGM, Inc. and Ion Laser
Technology, Inc., manufacture argon laser systems adapted from the industrial
field and typically used for specialized teeth-whitening applications and the
curing of various bonding acrylics. The Company believes that its
HydroKinetic(TM) technology incorporated in its Millennium(TM) system has
certain advantages in comparison to the traditional laser technology employed by
its competitors for hard-tissue applications, as clinical studies have indicated
that there is no adverse thermal effect associated with the use of the
HydroKinetic(TM) technology. (FLS) The Company is not aware of any other medical
or dental laser-based system that can cut through bone, enamel and dentin as
effectively as its Millennium(TM) system, that can be used efficiently on as
wide a range of applications, or that can incorporate air, water and a laser
beam within a single handpiece or delivery system. (FLS) The Company believes
that a wide range of applications is important to provide a sufficient cost
justification to the practitioner to support customer demand. (FLS)
Competition within the aesthetic surgery and oral/maxillofacial
fields is intense and technological developments are expected to continue at a
rapid pace. Several companies have received clearance from the FDA for various
related cosmetic surgical applications for which BioLase intends to compete, but
the Company cannot enter this highly competitive marketplace unless and until it
receives clearance by the FDA to market its Millennium(TM) system for such
applications, of which there can be no assurance. (FLS) The Company's primary
competitors in this field include Coherent, Inc., Sharplan Laser, Inc., and
Palomar Medical Technologies, Inc. which manufacture a variety of CO2 laser
systems. The Company believes that the variability offered by its Millennium(TM)
system, to adjust the amount of air and water used, will provide a more
versatile instrument to the practitioner. (FLS) In particular, a practitioner
will have the ability to use HydroKinetic(TM) technology for certain cosmetic
surgery procedures (e.g., bone, cartilage, and skin reshaping) or to reduce the
amount of air and water used during an application, thereby allowing the use of
the laser medium to remove the skin surface with less depth of radiation than
that typically experienced when using laser systems with wavelengths that differ
from that of the Millennium(TM) system. (FLS)
A number of the Company's competitors have substantially greater
financial resources and engineering, development, manufacturing and marketing
capabilities. The Company believes that its patent protection, and pending
patent protection, should provide a competitive advantage to the Company over
the next several years. (FLS) However, there can be no assurance that technology
superior to that of the Company will not be developed or that the
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Company's patent and patent-pending protection will be upheld or will prove to
have commercial value. See " - Patents and Proprietary Technology".
BioLase faces substantial competition in all markets which it seeks
to distribute the Millennium(TM) system. Competition in these markets consists
of numerous medical laser manufacturers promoting their respective lasers to
users via trade show exhibitions, advertisements, product demonstrations,
educational workshops, and sales representatives. In addition, the Company will
compete against conventional non-laser surgical methodologies and devices such
as high and low-speed drills in the dental field and scalpels, saws drills and
punches in the medical field. These traditional methods have been proven and
tested, require minimal special training for established practitioners, and
generally require less capital investment than the Millennium(TM) system.
However, the Company believes that users of conventional methods and traditional
laser-based methods are continually evaluating new technologies that may provide
improved and effective techniques to replace existing technologies. BioLase
believes that the Millennium(TM) system represents a strong candidate to replace
existing technologies in various markets. (FLS)
PATENTS AND PROPRIETARY TECHNOLOGY
The Company has patented and patent-pending technology related to
the Millennium(TM) system and the Laser-35(TM) and Nylad(TM) series systems,
including the U.S. patent issued on the TTCS(TM), and additional U.S. and
foreign patents and patent-pending technologies related to LaserSpray(TM),
LaserBrush(TM) and FlavorFlow(TM). In 1994, the United States Patent Office
granted the Company a patent covering a portable, hand-held laser tooth brushing
instrument which was the predecessor to the LaserBrush(TM). The Company also
holds a patent on its Canal Finder System(TM) and on certain of its filing
instruments. There can be no assurance that the issued patents or subsequent
patents, if issued, will adequately protect the Company's technology or that
such patents will provide protection against infringement claims by competitors.
BioLase also relies upon trade secrets, unpatented proprietary
know-how and continuing technological innovation to develop its competitive
position. The Company enters into confidentiality and technology agreements with
its employees pursuant to which such employees agree to maintain the
confidentiality of the Company's proprietary information and to assign to the
Company any inventions relating to the Company's business made by them while in
the Company's employ. There can be no assurance, however, that others may not
acquire or independently develop similar technology or, if patents are not
issued with respect to products arising from the Company's engineering and
development activities, that the Company will be able to maintain information
pertinent to such research as proprietary technology or trade secrets.
MARKETING
The Company markets its Millennium(TM) system in Germany through a
distributor in that country, its other laser-based and related products through
distributors throughout the world and its endodontic product line via
telemarketing in the United States and through distributors in the international
market. The Company currently distributes its laser-based and endodontic
products in the United States, Europe, Middle East and Far East and is actively
working to expand its worldwide network.
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The Company seeks third-party endorsements from respected
practitioners, professional associations and universities. By inviting selected
entities to conduct independent evaluations, the Company hopes to induce those
entities to become influential independent supporters of the Company's products.
(FLS) Management believes that the perceived benefits of the Company's products
to practitioners and patients will result in positive word-of-mouth publicity
for the Company. (FLS)
The Company attends regional and national trade shows and sponsors
seminars to promote its Millennium(TM) system as well as its other products.
Health professionals often participate in seminars and in some regions are
required to engage in continuing certified education regarding advancements in
the dental and medical fields. Management believes that establishing lasers and
advanced technology as competitive marketing advantages for practitioners will
be important in creating sales growth. (FLS)
The Company's long-term marketing strategy is based on the belief
that the consuming public will come to demand the use of laser-based and
HydroKinetic(TM) technologies in medical and dental treatments. (FLS) The
Company believes that the public is becoming increasingly aware of the benefits
of lasers in dental, ENT, ophthalmological, dermatological, cosmetic and general
surgical applications and that the consuming public will be a key factor in
increasing demand for laser and HydroKinetic(TM) technologies within the medical
and dental professions. (FLS)
The Company expects to commence marketing of its LaserBrush(TM) and
FlavorFlow(TM) products in 1997 and 1998, respectively. (FLS) Distribution of
the LaserBrush(TM) will include direct marketing through the use of infomercials
scheduled for release in the second half of 1997, while the Company intends to
market its FlavorFlow(TM) and LaserSpray(TM) through major catalog houses in the
United States and through medical and dental distributors internationally. (FLS)
LaserSpray(TM) has been cleared for marketing by the FDA, and the Company
intends to introduce it commercially in 1998. (FLS)
CUSTOMERS
The Company's customers include distributors, dentists, medical
doctors and hospitals. With the introduction of the Company's LaserBrush(TM)
scheduled for release in the second half of 1997, the Company's customer base is
expected to extend to consumers as well. During fiscal 1996, Dental-Fachhandel,
the Company's previous German distributor, accounted for approximately 20% of
the Company's sales. Two distributors, Dental-Fachhandel and Graham Field Asia
Co. Ltd., accounted for approximately 41% and 17%, respectively, of the
Company's sales during fiscal 1995. During fiscal 1994, two distributors, Letec
GmbH and Flagship Medical, Inc. accounted for approximately 43% and 12%,
respectively, of the Company's sales. No other customers accounted for more than
10% of the Company's sales in 1996, 1995 or 1994.
Although the Company's German distributor is required to purchase in
excess of an additional $11 million of Millennium(TM) systems through 1999, the
amount of unfilled orders on hand is not significant. At present, the Company
maintains adequate inventories to supply other current orders of its products,
and no significant amount of backlog exists for such products.
GOVERNMENT REGULATION
The Company's products are subject to significant government
regulation in the United States and other countries. To clinically test,
manufacture and market products for human diagnostic and therapeutic use, the
Company must comply with mandatory regulations and
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safety standards established by the FDA and comparable state and foreign
regulatory agencies. Typically, products must meet regulatory standards as safe
and effective for their intended use prior to being marketed for human
applications. The clearance process is expensive and time consuming, and no
assurance can be given that any agency will grant clearance for the sale of the
Company's products for routine clinical applications, that the length of time
the process will require will not be extensive, or that the cost of the process
will not be substantial.
There are two principal methods by which FDA regulated devices may
be marketed in the United States. One method is under a Pre-Market Approval
("PMA"). A PMA application is required for a Class III medical device that does
not qualify for consideration under Section 510(k), discussed below. The review
period for a PMA application is fixed at 180 days, but the FDA typically takes
much longer to complete its review. As part of the approval of a PMA
application, the FDA typically requires clinical testing to determine safety and
efficacy of the device. To conduct human clinical testing, typically the FDA
must approve an Investigational Device Exemption ("IDE"). Currently, the Company
does not have PMA applications pending for any of its products.
The other method is under Section 510(k) of the Food, Drug and
Cosmetics Act where applicants must demonstrate that the device for which
clearance is sought is substantially equivalent to a predicate device. The FDA's
stated intention is to review 510(k) notifications as quickly as possible,
generally within 90 days; however, the complexity of a submission or a
requirement for additional information will typically extend the review period
beyond 90 days. Domestic marketing of the product must be deferred until
clearance is received by the applicant from the FDA. In some instances, an IDE
is required for clinical trials for a 510(k) notification. In the event that a
510(k) notification is turned down by the FDA, a PMA is generally then required.
The Company intends to utilize the 510(k) notification procedure whenever
applicable. BioLase recently submitted a 510(k) application to the FDA to obtain
marketing clearance for a range of dermatological and surgical applications for
its Millennium(TM) system.
In 1991, the FDA granted the Company clearance to market its
Laser-35(TM) for soft tissue cutting in dentistry, and in 1992, the Nylad(TM)
series lasers also received clearance by the FDA for soft tissue cutting in
dentistry. The Company also received clearance from the FDA for its
LaserSpray(TM) tissue cooling system in 1995. The Company has received clearance
to market its erbium laser technology for certain soft tissue cutting
applications.
The Company is actively pursuing clearance to market its
Millennium(TM) system for certain applications within the dental and
dermatological fields and expects to pursue clearances to market the
Millennium(TM) for other medical applications. The Company has recently
commenced clinical studies in the U.S. related to certain hard tissue dental
applications of its HydroKinetic(TM) technology in its attempt to obtain
clearance from the FDA to market its Millennium(TM) system for that purpose.
During 1996, it successfully completed clinical studies in Germany for both soft
and hard tissue applications resulting in its obtaining clearance to market its
Millennium(TM) system in Germany for various dental applications.
The FDA also imposes various requirements on manufacturers and
sellers of products it regulates under its jurisdiction, such as labeling,
manufacturing practices, record keeping and reporting. The FDA also may require
post-marketing practices, record keeping and reporting requirements.
There can be no assurance that the appropriate approvals from the
FDA will be
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granted, that the process to obtain such approvals will not be expensive or
lengthy, or that the Company will have sufficient funds to pursue such
approvals. The failure to receive requisite approvals for the Company's products
or processes, when and if developed, or significant delays in obtaining such
approvals, would prevent the Company from commercializing its products as
anticipated and could have a materially adverse effect on the business of the
Company. (FLS)
The Company is also subject to regulation under the Radiation
Control for Safety and Health Act of 1968 (the "Safety Act") administered by the
Center for Devices and Radiological Health ("CDRH") of the FDA. The CDRH
controls energy emissions of light and sound and electronic waves from
electronic products. These regulations require a laser manufacturer to file new
product and annual reports, to maintain quality control, product testing and
sales records, to distribute appropriate operation manuals, to incorporate
certain design and operating features in lasers sold to end-users and to certify
and label each laser sold to end-users as one of four classes of lasers (based
on the level of radiation from the laser). In addition, various warning labels
must be affixed to the product and certain protective devices must be installed,
depending upon the class of product. Under the Safety Act, the Company is also
required to register with the FDA as a medical device manufacturer and is
subject to inspection on a routine basis by the FDA for compliance with Good
Manufacturing Practice ("GMP") regulations. The GMP regulations impose certain
procedural and documentation requirements upon the Company relevant to its
manufacturing, testing and quality control activities. The CDRH is empowered to
seek remedies for violations of these regulatory requirements under the Federal
Food, Drug and Cosmetic Act. The Company believes that it is currently in
substantial compliance with these regulations.
Various state dental boards are considering the adoption of
restrictions on the use of lasers by dental hygienists. In addition, dental
boards in a number of states are considering educational requirements regarding
the use of dental lasers. The scope of these restrictions and educational
requirements is not now known, and they could have an adverse effect on sales of
the Company's laser-based products.
Foreign sales of the Company's laser-based products are subject to
the regulatory requirements of the importing country or, if applicable, the
harmonized standards of the European Community. These vary widely among the
countries and may include technical approvals, such as electrical safety, as
well as demonstration of clinical efficacy. The Company is currently working to
meet certain foreign country regulatory requirements for certain of its
products, and there can be no assurance that additional approvals will be
obtained. The Company recently received notification that the Millennium(TM)
system has been granted the "CE" mark evidencing compliance with quality, safety
and performance requirements mandated by the Medical Device Directive adopted by
the European Community. The Medical Device Directive is the latest standard of
medical device safety and performance which has been adopted by the fourteen
member states of the European Community and requires that all medical device
products be compliant by June, 1998 to be eligible for marketing within the
member states.
The FDA and other governmental agencies, both in the United States
and in foreign countries, may adopt additional rules and regulations that may
affect the Company's ability to develop and market its products. There can be no
assurances that the Company's existing products will meet any future legislative
acts or requirements.
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EMPLOYEES
As of July 7, 1997, the Company employed 25 people on a full-time
basis, consisting of 15 people in engineering and development/manufacturing, six
in administration and four in sales/customer service. The Company's employees
are not represented by a labor union, and it has experienced no work stoppage.
The Company believes that its employee relations are good.
PROPERTIES
The Company's principal offices are at 981 Calle Amanecer, San
Clemente, California where the Company leases approximately 23,000 square feet
pursuant to a lease expiring in 2000. In addition, the Company's sales office is
located at 8029 Forsyth Boulevard, Suite 201, Clayton, Missouri where the
Company leases approximately 600 square feet pursuant to a month-to-month lease.
The Company believes that its facilities are sufficient for its current needs.
LEGAL PROCEEDINGS
On April 26, 1995, the Company was named as an additional defendant
in Hazel Lafern Moore v. David A. Pyner, D.D.S., Florida Dental Team, P.A.,
Princeton Medical Management Southeast, Inc. and Laser Endo Technic, Inc.
initially filed in the 17th Judicial Circuit in and for Broward County, Florida
on April 21, 1994. The plaintiff alleges that she underwent laser dental surgery
with a laser allegedly produced by the Company and seeks unspecified damages
from the Company in excess of $15,000 on theories of product liability, based on
allegations that the laser was defective by reason of design, manufacture and
lack of product warnings. The Company has answered the complaint, denying the
majority of the plaintiff's material factual allegations and asserting various
affirmative defenses. The Company is vigorously contesting liability. The
Company believes that liability, should there be any resulting from plaintiff's
claims, would be covered by insurance.
Trans Leasing International v. Elie M. Makhoul v. Laser Endo Technic
Corporation, was filed July 6, 1994 in the Circuit Court of Cook County,
Illinois, Municipal Department, First District. This action involves a
third-party claim against the Company in a suit in which a dentist, who was the
lessee of a dental laser system manufactured by the Company, had been sued for
breach of the equipment lease by the financing institution that was the lessor.
Plaintiff's theories include common law fraud, violation of the Consumer Fraud
And Deceptive Business Practices Act, and intentional and negligent
misrepresentations. The third party claim against the Company in this action is
for $78,408 in compensatory damage, $15,000 in lost profits,
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$50,000 in punitive damages, and attorney's fees and related costs. The Company
intends to defend against the claims vigorously. The case has been inactive
since the third party plaintiff filed for protection under the U.S. Bankruptcy
Law on July 10, 1995.
The Company does not believe that these lawsuits or any other
lawsuits to which it is a party will have a material adverse effect on the
Company's financial condition. (FLS)
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MANAGEMENT
The Company's executive officers and directors as of July 7, 1997 are
as follows:
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Federico Pignatelli (1) Chairman of the Board of Directors
Donald A. La Point President, Chief Executive Officer and Director
Stephen R. Tartamella Vice President of Finance/Administration,
Chief Financial Officer and Secretary
Andrew Kimmel Vice President of Internal Programs
Ioana Rizoiu Vice President of Research and Development
George V. d'Arbeloff (1) Director
</TABLE>
- -------------------
(1) Member of Audit and Compensation Committees.
FEDERICO PIGNATELLI, 44, has been Chairman of the Board of Directors
since January 1994 and a director of the Company since August 1991. Since 1992,
he has been President of EuroCapital Partners, Inc., an investment banking firm.
He also serves as Chairman of the Board and Chief Executive Officer of Studio
Management, Inc., the general partner of Pier 59 Studio, L.P., a limited
partnership that operates in New York City the world's largest complex of
professional photographic and digital studios, and as a director of Fountain
Powerboat Industries, Inc., a high performance sport powerboat and sport fishing
boat manufacturer listed on The Nasdaq National Market System. From 1990 to
1992, Mr. Pignatelli was associated with Gruntal & Company, an investment
banking firm and brokerage firm, as a Managing Director. Previously, Mr.
Pignatelli was associated with Ladenburg, Thalmann & Co., Inc., a New York
investment banking and brokerage firm, as a Managing Director.
DONALD A. LA POINT, 43, has been President and Chief Executive
Officer of the Company since February 1995. Mr. La Point joined the Company in
1991 as Regional Sales Manager, and later became National Director of Sales. Mr.
La Point was elected a director of the Company in May 1994, was elected as
Executive Vice President of Marketing and Sales in July 1994, and became Chief
Executive Officer in February 1995 and President in March 1995. He is a fellow
in the American Society for Lasers in Medicine and Surgery and is a member of
the Academy of Laser Dentistry, the German Laser Academy and the Korean Laser
Association. In 1995, Mr. La Point received certification from Harvard Medical
School in Current Concepts in Cutaneous Laser Surgery.
STEPHEN R. TARTAMELLA, 44, has been Vice President of
Finance/Administration and Chief Financial Officer of the Company since August
1995. Mr. Tartamella joined the Company in 1994 as a consultant and became
Corporate Controller in May 1994. Mr. Tartamella served as a financial
consultant from October 1992 until joining BioLase in 1994. From mid-1990 to
October 1992, Mr. Tartamella served as Vice President of Finance/Administration
and Chief Financial Officer of Taylor Dunn Manufacturing, a manufacturer of
electric and gas powered utility carts.
40
<PAGE> 43
ANDREW KIMMEL, 27, has been Vice President of Internal Programs of
the Company since May 1997. Mr. Kimmel joined BioLase in 1991 as an electrical
engineer and held various key positions within the Company's engineering and
service departments. He was promoted to Director of Regulatory Affairs in 1995,
where his primary area of responsibility was the aggregation and submission of
data for FDA applications for the Company's products. In 1996, Mr. Kimmel
was appointed project manager for the Company's Millennium(TM) system.
IOANA RIZOIU, 33, has served as Vice President of Research and
Development of the Company since May 1997. Ms. Rizoiu joined BioLase in February
1992 as a physicist, where she played a significant role in the development of
the Company's prior laser-based products and its present HydroKinetic(TM)
technology. In 1995, she was promoted to Director of Research and Development,
where her responsibilities included the design and development of the delivery
system utilized to transport the HydroKinetic(TM) technology to the target
tissue. She has also served as project manager for the LaserBrush(TM) toothbrush
since 1995.
GEORGE V. D'ARBELOFF, 52, joined the Company's Board of Directors in
December 1996. Mr. d'Arbeloff has served since November 1996 as the Chief
Executive Officer of Retail Solutions, Inc., a start-up company involved in the
development and marketing of inventory control and scanning-based computer
systems for retail stores. From 1967 to November 1996, he served in various
executive capacities with Teradyne, Inc., a manufacturer of testing equipment
for the semiconductor and electronics industries, including Vice President of
Corporate Relations from 1995 to 1996, Vice President and General Manager of the
Semiconductor Test Group from 1992 to 1995 and Vice President and General
Manager of the Industrial/Consumer Division of the Semiconductor Test Group from
1982 to 1992.
The Company's directors hold office until the next annual meeting of
stockholders and until their successors are duly elected and qualified. Officers
serve at the pleasure of the Board of Directors.
DIRECTORS' COMPENSATION
The Company's non-employee directors do not receive cash directors'
fees, but are reimbursed for expenses incurred in connection with their duties
as directors. On August 8, 1996, Mr. Pignatelli, in his capacity as Chairman of
the Board of Directors, received options to purchase 50,000 shares of Common
Stock at an exercise price of $2.531 per share.
On the date of each annual meeting of Biolase's stockholders at
which directors are elected (which generally occurs in June of each year), each
non-employee director elected at such meeting is automatically granted an option
to purchase 20,000 shares of Common Stock, which option vests at the rate of
5,000 shares per quarter, beginning three months after the grant date. Any
non-employee director who is first elected a director at any time other than at
an annual meeting of stockholders is automatically granted an option on the date
of his election as a director for a number of shares determined by multiplying
1,667 times the full number of months remaining until the next June 1, which
options vest at a rate of 1,667 shares per month beginning on the last day of
the first full month following the grant date. On June 11, 1996, Federico
Pignatelli and Gordon Werner (a former member of the Board of Directors who
resigned December 12, 1996) each received options to purchase 20,000 shares of
Common Stock, at an exercise price of $4.125 per share. On December 12, 1996,
the date on which he was elected to the Board of Directors, Mr. d'Arbeloff
received options to purchase 8,335 shares of Common Stock, which number was
determined as described above, at an exercise price of $3.563 per share.
41
<PAGE> 44
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides compensation information with respect to
each person who served as the Company's chief executive officer during the year
ended December 31, 1996 (the "Named Officer") for the periods indicated. No
other executive officer of the Company received total salary and bonus in excess
of $100,000 during 1996.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------- ----------------------
Name and Fiscal Securities Underlying
Principal Position Year Salary Bonus Options (#)
- ------------------ ------ ------ ----- -----------------
<S> <C> <C> <C> <C>
Donald A. La Point, Chief 1996 $104,167 - 100,000
Executive Officer(1) 1995 $101,367 - 250,000(2)
</TABLE>
- -------------------------
(1) Mr. La Point was elected Chief Executive Officer of the Company on
February 13, 1995.
(2) Includes options to purchase an aggregate of 250,000 shares, of
which options to purchase 145,000 shares were granted in previous
years and amended in 1995 to reduce the exercise price thereof.
FISCAL YEAR 1996 OPTION GRANTS
Shown below is information regarding stock options granted to the
Named Officer during the year ended December 31, 1996.
<TABLE>
<CAPTION>
Number of
Securities Percent of Total
Underlying Options Granted Exercise
Options to Employees in Price Expiration
Name Granted(#) Fiscal Year ($/Share) Date
- ------------- ----------- ---------------- --------- -------
<S> <C> <C> <C> <C>
Donald A. La Point 100,000(1) 34% 2.531 8/7/06
</TABLE>
- -------------------------
(1) These options vest 25% at the date of grant, with the balance
vesting monthly over 12 months commencing September 1, 1996.
42
<PAGE> 45
FISCAL YEAR OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
Shown below is information regarding unexercised stock options held
by the Named Officer at December 31, 1996. No stock options were exercised by
the Named Officer during 1996.
<TABLE>
<CAPTION>
Number of Securities Underlying
Unexercised Options at Value of Unexercised In-The-Money
Name Fiscal Year End (#) Options at Fiscal Year End ($)
- ---------- ------------------------------- --------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Donald A.
La Point 275,729 74,271 637,773 134,127
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1996, Mr. Pignatelli was the only member of the Company's
Compensation Committee who was an officer or employee of the Company during such
year.
43
<PAGE> 46
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock of the Company as of July 7, 1997
(assuming conversion of the Series A Preferred Stock and exercise of the
Warrants and the Options), and as adjusted to reflect the sale of the 2,738,982
shares of Common Stock offered hereby, (i) by all persons known by the Company
to beneficially own more than 5% of the outstanding shares, (ii) by each
director of the Company, (iii) by the Named Executive Officer; (iv) by all
executive officers and directors of the Company as a group, and (v) by the
Selling Stockholders. Unless otherwise indicated, the persons listed below have
sole voting and investment power with respect to the shares listed across from
their names in the table below.
<TABLE>
<CAPTION>
Shares Beneficially Owned Shares to be Sold Shares Beneficially Owned
Name of Beneficial Owner Before Offering(1) in This Offering After Offering(1)
- -------------------------------------------- ------------------------- ----------------- ---------------------------
Number Percent Number Number Percent
------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
Federico Pignatelli(2) 338,750 2.4 - 338,750 2.4
Donald A. La Point(3) 357,292 2.6 - 357,292 2.5
George V. d'Arbeloff(4) 34,850 * 23,182(5) 13,335 *
All executive officers and directors
as a group (6 persons)(6) 1,051,586 7.4 - 1,030,065 6.9
Program One, Inc. dba
Perspective Advisory Group(7) 1,635,917 11.9 1,351,375 284,542 2.0
R. Gilbert & Elaine P. Allenby 64,117 * 46,364 17,753 *
Barclay Investments, Inc. 38,182 * 38,182 - *
William E. Barron IRA 49,364 * 46,364 3,000 *
Bigelow Plumbing Profit Sharing Plan
& Trust, John R. Bigelow - Trustee 26,858 * 23,182 3,676 *
Carla & John Bigelow 24,118 * 23,182 936 *
Bingle Trust, Robert P. Bingle - Trustee 51,521 * 46,364 5,157 *
Walter D. Bonin IRA 46,364 * 46,364 - *
Bradley Resources Company 25,954 * 23,054 2,900 *
Budish Trust, Ceder Trust Co. Ltd. - Trustee 92,728 * 92,728 - *
I.W. Caplitz IRA 24,182 * 23,182 1,000 *
William A. Chamlee 23,182 * 23,182 - *
Craig D. Chandor 23,182 * 23,182 - *
Cobb Trust, Bertrand E. Cobb - Trustee 29,682 * 23,182 6,500 *
John D. Collins IRA 23,794 * 23,182 612 *
John D. & Amelia M. Collins 23,182 * 23,182 - *
Ralph J. Doudera 46,364 * 46,364 - *
Huijun Fang 23,182 * 23,182 - *
Daniel Ferron IRA 28,182 * 23,182 5,000 *
Frances Ferron IRA 28,182 * 23,182 5,000 *
Flagship Medical 20,000 * 20,000 - *
E. Haffner & Joanne D. Fournier 33,182 * 23,182 10,000 *
William L. Frangel IRA 23,742 * 23,182 560 *
Richard Friedman 23,182 * 23,182 - *
G. Gargiulo & Co., Inc. 4,545 * 4,545 - *
Gem Holdings Corp. 200,000 1.5 200,000 - *
Bruce J. Gilmartin 46,364 * 46,364 - *
Haffner's Car Care Corp. 33,182 * 23,182 10,000 *
Ronald I. Heller IRA 46,364 * 46,364 - *
Edward Henderson 5,000 * 5,000 - *
Indian Creek Capital Ltd. 23,182 * 23,182 - *
InTerBanC Mortgage Service, Inc. 23,182 * 23,182 - *
Robert M. Kessler 71,482 * 23,182 48,300 *
Edward J. & Pauline A. Kulak 25,722 * 23,182 2,540 *
John D. Lane Revocable Living
Trust DTD 9/14/89 25,182 * 23,182 2,000 *
Steven Lee 23,182 * 23,182 - *
Antoinette Lenkowski 23,182 * 23,182 - *
Robert K. Mann 146,364 1.1 146,364 - *
Robert & Sharon Mann 23,182 * 23,182 - *
Raymond and Carolyn Marchuk 46,364 * 46,364 - *
Faye L. McNall 23,182 * 23,182 - *
Herbert J. Millette 23,182 * 23,182 - *
David S. Nagelberg IRA 23,182 * 23,182 - *
Sean A. & Julie M. O'Neill 23,182 * 23,182 - *
PacVest Associates(8) 76,365 * 76,365 - *
John Paino 122,728 * 92,728 30,000 *
John & Sarah Paino 75,918 * 69,546 6,372 *
Susan Paley 50,976 * 46,364 4,612 *
Carlene Phillips IRA 24,031 * 23,182 849 *
Greig J. & Susan V. Picking 23,182 * 23,182 - *
Frank D. Pietroski 23,182 * 23,182 - *
James J. Pope 23,182 * 23,182 1,000 *
Robert A. Pustell Trust, Robert A. and
Margaret A. Pustell - Trustees 23,182 * 23,182 - *
Quad Capital Partners 23,182 * 23,182 - *
Arthur H. Robbins & Co. 79,630 * 69,546 10,084 *
Marvin H. Rothberg 24,182 * 23,182 1,000 *
Dennis S. Sargent IRA 23,182 * 23,182 - *
Dennis S. & Elissa P. Sargent 23,182 * 23,182 - *
Zalton Sarkady 23,182 * 23,182 - *
Ruth Schneider IRA 46,364 * 46,364 - *
Stephen & Judy Swanson 23,182 * 23,182 - *
Wallington Investments Ltd. 370,912 2.8 370,912 - *
Yan-fang Wang 23,182 * 23,182 - *
West TN ENT Clinic Benefit Plan dtd. 1/8/89,
James H. Barker - Trustee 23,971 * 23,182 789 *
Western Reserve Life Assurance Company 165,910 1.2 115,910 50,000 *
</TABLE>
______________
* Less than one percent.
(1) The number of shares beneficially owned by each stockholder is determined
under rules promulgated by the Securities and Exchange Commission, and the
information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares
as to which the individual has sole or shared voting or investment power
and also any shares which the individual has the right to acquire within 60
days after July 7, 1997. The inclusion herein of such shares, however, does
not constitute an admission that the named stockholder is a direct or
indirect beneficial owner of such shares. Unless otherwise indicated, each
person or entity named in the table has sole voting and investment power
(or shares such power with his or her spouse) with respect to all shares of
Common Stock listed as owned by such person or entity.
(2) Includes 151,250 shares of Common Stock issuable pursuant to options
exercisable within 60 days of July 7, 1997.
(3) Includes 356,250 shares of Common Stock issuable pursuant to options
exercisable within 60 days of July 7, 1997.
(4) Includes 11,668 shares of Common Stock issuable pursuant to options and
warrants exercisable within 60 days of July 7, 1997.
(5) Includes 5,000 shares of Common Stock issuable pursuant to warrants, of
which warrants to purchase 3,333 shares are exercisable within 60 days of
July 7, 1997.
(6) Includes 826,668 shares of Common Stock issuable pursuant to options and
warrants exercisable within 60 days of July 7, 1997.
(7) The address of Program One, Inc. is 17 Tripp Road, Woodstock, Connecticut
06281. Program One, Inc. expressly disclaims beneficial ownership of the
shares of Common Stock attributed to it in the above table; it does not
have sole or shared power or ability to direct the vote of said shares,
but does have shared power to dispose or direct the disposition of said
shares.
(8) Robert Mann is an officer and director of Program One, Inc., which
holds an aggregate of 1,284,552 shares of Common Stock, and PacVest
Associates, which holds an aggregate of 76,365 shares of Common Stock.
He is the spouse of Sharon Mann, who, with Mr. Mann, holds an aggregate
of 23,182 shares of Common Stock. Mr. Mann expressly disclaims beneficial
ownership of the shares held by Program One, Inc., PacVest Associates
and Robert and Sharon Mann.
(9) Frank D. Pietroski is an officer of PacVest Associates and a director of
Program One, Inc. Mr. Pietroski expressly disclaims beneficial ownership
of the shares held by Program One, Inc. and PacVest Associates.
44
<PAGE> 47
DESCRIPTION OF SECURITIES
The authorized capital stock of BioLase consists of (i) 50,000,000
shares of Common Stock, $.001 par value, of which 13,425,450 shares were issued
and outstanding at July 7, 1997, and (ii) 1,000,000 shares of preferred stock,
par value $.001, 100 shares of which have been designated as Series A Preferred
Stock, of which one share was issued and outstanding at July 7, 1997. As of
July 7, 1997, there were approximately 310 holders of record of shares of
Common Stock and one holder of record of Series A Preferred Stock.
Preferred Stock. BioLase is authorized to issue 1,000,000 shares
of Preferred Stock, par value $.001 per share. One hundred shares of the
authorized Preferred Stock have been designated as a series identified as the
Series A Preferred Stock.
At any time, the remaining share of Series A Preferred Stock, which
has a nominal conversion value of $50,000 per share, may be converted into no
less than 9,721 and no more than 18,054 shares of Common Stock based on the
average closing price of shares of Common Stock for the five trading days
preceding, but not including, the date on which the share is presented for
conversion.
Any share of Series A Preferred Stock not previously converted will be
deemed to have been presented for conversion into Common Stock and to have been
converted (i) on October 16, 1998 or (ii) at the option of the BioLase Board of
Directors at any time when BioLase has entered into a letter of intent or
agreement, conditional or unconditional, with one or more broker-dealers with a
view towards an underwritten public offering of Common Stock or other securities
of BioLase pursuant to an effective registration statement under the Securities
Act, and at the time the BioLase Board of Directors takes action to cause such
automatic conversion such letter of intent or agreement has not been terminated
or suspended and remains in force and effect.
Holders of the Series A Preferred Stock are entitled to receive
cumulative dividends at the rate of $750 per quarter per share. Such dividends
will accrue and be payable on the last business day of each calendar quarter
to the holders of record of Series A Preferred Stock on such date.
BioLase may by written notice to the registered holders thereof call
all or any portion of the then outstanding Series A Preferred Stock for
redemption. The notice shall specify a redemption date no less than 28 days
after the date of such notice on which all Series A Preferred Stock shall be
redeemed by BioLase. Between the date of such notice and the redemption date,
the Series A Preferred Stock may be converted into shares of Common Stock. In
redemption for each share of Series A Preferred Stock outstanding on the
redemption date, BioLase shall pay to the holder thereof in cash a redemption
price per share equal to the sum of (i) $60,000 and (ii) an amount equal to the
difference calculated by subtracting (A) all dividends paid on such share of
Series A Preferred Stock since October 16, 1996 from (B) six percent per annum
on $50,000 for the period from October 16, 1996 through the redemption date. In
connection with a redemption, the holder of a share of Series A Preferred Stock
shall not be entitled to receive any dividends previously accrued but unpaid.
45
<PAGE> 48
Each share of Series A Preferred Stock has the same voting power as a
share of the Common Stock, except as otherwise provided by applicable law, and
is entitled to a preference in liquidation equal to the sum of (i) $50,000 and
(ii) an amount equal to the difference calculated by subtracting (A) all
dividends paid on such share since October 16, 1996 from (B) 6% per annum on
$50,000 for the period from October 16, 1996 through the date on which such
liquidation is finally determined. All shares of Series A Preferred Stock are
fully paid and nonassessable.
BioLase's Board of Directors is empowered, without further action
by the stockholders, to issue from time to time one or more additional series of
Preferred Stock with such rights, privileges, restrictions, preferences and
limitations as the Board of Directors may determine. The rights, privileges,
restrictions and preferences and limitations of separate series of Preferred
Stock may differ with respect to such matters as may be determined by the Board
of Directors, including, without limitation, the rate of dividends, method of
payment of dividends, terms of redemption, amounts payable on liquidation,
sinking fund provisions, conversion rights, and voting rights.
The issuance of shares of Preferred Stock could have an anti-takeover
effect under certain circumstances. Since the voting rights to be accorded to
any series of Preferred Stock remain to be fixed by the Board of Directors, the
holders of one or more series of Preferred Stock may, if the Board so
authorizes, be entitled to vote separately as a class in connection with
approval of certain extraordinary corporate transactions in circumstances where
Delaware law does not require a class vote, or might be given a
disproportionately large number of votes. Such Preferred Stock could also be
convertible into a large number of shares of Common Stock under certain
circumstances or have other terms which might render the acquisition of a
controlling interest in the Company more difficult or more costly. Shares of
Preferred Stock could be privately placed with purchasers who might side with
the management of the Company in opposing a hostile tender offer or other
attempt to obtain control. The issuance of Preferred Stock as an anti-takeover
device might preclude shareholders from taking advantage of a situation which
might be favorable to their interests. BioLase has no present intention of
issuing Preferred Stock in any manner that might serve as an anti-takeover
device.
Common Stock. The holders of Common Stock are entitled to share
equally in dividends on such Common Stock, if, as, and when declared by the
Board of Directors, out of funds legally available therefor, subject to the
priorities accorded any series of Preferred Stock which may be issued. Upon any
liquidation, dissolution, or winding-up of BioLase, the assets of BioLase, after
the payment of BioLase debts and liabilities and any liquidation preferences of,
and unpaid dividends on, any class of Preferred Stock then outstanding, will be
distributed pro rata to the holders of the Common Stock.
The holders of Common Stock do not have preemptive or conversion
rights to subscribe for any securities of the Company and have no right to
require the Company to redeem or purchase their shares. Unless the nature of the
transaction in which shares are to be issued or any applicable statutes require
such approval, the Board of Directors has the authority to issue shares of
Common Stock without obtaining stockholder approval. Holders of Common Stock are
entitled to one vote for each share of Common Stock held of record on all
matters
46
<PAGE> 49
submitted to a vote of stockholders. There is no cumulative voting of shares in
the election of directors.
Shares of any series of Preferred Stock could rank senior to Common
Stock with respect to, among other things, dividends and liquidation rights and
could have voting rights that could, among other things, provide holders of
shares of a series of Preferred Stock with more votes per share than those
accorded holders of shares of Common Stock, with the right to vote on specified
or all matters as a class, and with the right to elect one or more directors as
a class.
Warrants. As of July 7, 1997, Warrants to purchase an aggregate of
700,910 shares of Common Stock were issued and outstanding, composed of Warrants
to purchase 500,000 shares of Common Stock issued to purchasers of Units in the
Company's October 1996 private placement (the "Unit Warrants"), Warrants to
purchase an aggregate of 190,910 shares of Common Stock issued to the placement
agent and sub-agents for such private placement (the "Agent Warrants") and
Warrants to purchase 10,000 shares of Common Stock issued in December 1996 to a
private investor (the "Private Warrants").
Unit Warrants. Each Unit Warrant expires on December 31, 1998 and
entitles the original holder thereof (and certain permitted transferees) under
certain conditions to purchase one share of Common Stock at an exercise price of
Three Dollars and Fifty Cents ($3.50). The Unit Warrants contain anti-dilution
protection with respect to the occurrence of certain events such as stock
splits, stock dividends, merger, consolidation, and sale of assets.
A purchaser of Unit Warrants may exercise such Unit Warrants to
purchase 3,333 shares of Common Stock if such purchaser remained the record
holder (except for certain permitted transferees), through June 13, 1997, of the
Series A Preferred Stock constituting part of the Unit or all of the shares of
Common Stock into which such Series A Preferred Stock is converted. The
purchaser of that Unit may exercise Unit Warrants to purchase an additional
1,667 shares of Common Stock if such purchaser remains the record holder,
through October 11, 1997, of the Series A Preferred Stock constituting part of
the Unit or all of the shares of Common Stock into which such Series A Preferred
Stock is converted.
Commencing January 1, 1998, the Company may by written notice to the
registered holders thereof call all of the then outstanding Unit Warrants for
redemption, provided the closing price for Common Stock in the principal market
in which it then trades has equalled or exceeded $6.00 per share for the twenty
(20) trading days preceding the date of such notice. The notice shall specify a
redemption date no less than thirty (30) days after the date of such notice on
which all Unit Warrants then remaining unexercised and outstanding shall be
redeemed by the Company. Between the date of the notice and the redemption date,
Unit Warrants may be exercised if otherwise exercisable. In redemption for each
Unit Warrant, the Company shall pay to the holder thereof in cash the sum of
$0.01.
In the event of the liquidation, dissolution, or winding-up of the
Company, holders of the Unit Warrants will not be entitled to participate in the
assets of the Company. Holders of Unit Warrants will have no dividend, voting,
preemptive, liquidation, or other rights of a stockholder of the Company. The
Company is not required to issue fractional shares of Common Stock upon exercise
of the Unit Warrants.
47
<PAGE> 50
The Company may at any time, and from time to time, extend the
exercise period of the Unit Warrants provided that written notice of such
extension is given to the holders thereof prior to the expiration date then in
effect. The Company may also, at any time, reduce the exercise price of the Unit
Warrants by written notification to the holders thereof.
Agent Warrants. Each Agent Warrant expires on December 31, 1998 and
will entitle the holder thereof to purchase one share of Common Stock at an
exercise price of $3.50. The Agent Warrants contain anti-dilution protection
with respect to the occurrence of certain events such as stock splits, stock
dividends, merger, consolidation, and sale of assets. The Agent Warrants are not
subject to call for redemption.
In the event of the liquidation, dissolution, or winding-up of the
Company, holders of the Agent Warrants will not be entitled to participate in
the assets of the Company. Holders of Agent Warrants will have no dividend,
voting, preemptive, liquidation, or other rights of a stockholder of the
Company. The Company is not required to issue fractional shares of Common Stock
upon exercise of the Agent Warrants.
The Company may at any time, and from time to time, extend the
exercise period of the Agent Warrants provided that written notice of such
extension is given to the holders thereof prior to the expiration date then in
effect. The Company may also, at any time, reduce the exercise price of the
Agent Warrants by written notification to the holders thereof.
Private Warrants. The Private Warrants are substantially similar to
the Agent Warrants.
Transfer Agent. U.S. Stock Transfer Corp., 1745 Gardena Avenue, 2nd
Floor, Glendale, California 91204 is transfer agent for the Common Stock. The
Company acts as Transfer Agent for the Series A Preferred Stock and as Warrant
Agent for the Warrants.
PLAN OF DISTRIBUTION
The shares of Common Stock subject to this Prospectus may be sold
from time to time by the Selling Stockholders for their own accounts. The
Selling Stockholders may offer and sell the shares from time to time in
transactions on The Nasdaq SmallCap Market on terms to be determined at the time
of such sales. The Selling Stockholders may also make private sales directly or
through a broker or brokers. Alternatively, the Selling Stockholders may from
time to time offer shares of Common Stock offered hereby to or through
underwriters, dealers or agents, who may receive consideration in the form of
discounts and commissions; such compensation, which may be in excess of normal
brokerage commissions, may be paid by the Selling Stockholders and/or purchasers
of the shares of Common Stock offered hereby for whom such underwriters, dealers
or agents may act. The Selling Stockholders and any dealers or agents that
participate in the distribution of the shares of Common Stock offered hereby may
be deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act, and any discounts, commissions or concessions received and any
profit realized by them on the resale of shares as principals may be deemed
underwriting compensation under the Securities Act. The aggregate proceeds to
the Selling Stockholders from sales of the Common Stock offered hereby will be
the purchase price of the Common Stock less any brokers' commissions. The Common
Stock offered hereby may be sold from time to time in one or more transactions
at a fixed price, which may be changed, or at varying prices determined at the
time of such sale or at negotiated prices.
48
<PAGE> 51
The Common Stock issuable upon conversion of the Series A Preferred
Stock and exercise of the Warrants and Options and offered hereby will be issued
by the Company in accordance with the respective terms thereof.
The Company is contractually obligated to keep this Prospectus current
for as long a period as any Warrants remain outstanding and for two years
thereafter. The Company may from time to time notify the Selling Stockholders
that this Prospectus is not current and that sales of the Common Stock may not
occur until the Prospectus is supplemented by sticker or amendment, as
appropriate. To the extent required, the specific shares of Common Stock to be
sold, the names of the Selling Stockholders, the respective purchase prices and
public offering prices, the names of any agent, dealer or underwriter and any
applicable commissions or discounts with respect to a particular offer will be
set forth in an accompanying Prospectus supplement, or, if appropriate, a
post-effective amendment to the Registration Statement of which this Prospectus
forms a part.
The laws of certain states may require that sale of the shares of
Common Stock offered hereby be conducted solely through brokers or dealers
registered in those states. In addition, in certain states the shares of Common
Stock offered hereby may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption therefrom is
available.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the Common Stock offered hereby may not
simultaneously engage in market making activities with respect to the Common
Stock for a period of two business days prior to the commencement of such
distribution. In addition, without limiting the foregoing, the Selling
Stockholders will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder including, without limitation, Rules 10b-2,
10b-6 and 10b-7, which provisions may limit the timing of purchases and sales of
Common Stock by Selling Stockholders.
The Company will pay substantially all the expenses incurred by the
Selling Stockholders and the Company incident to this Offering and the sale of
the Common Stock offered hereby to the public, but excluding any underwriting
discounts, commissions or transfer taxes. The expenses are estimated to be
approximately $75,000.
The Company has agreed to indemnify the Selling Stockholders against
certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon
for the Company by Shapiro, Rosenfeld and Close, a Professional Corporation, Los
Angeles, California. Alan D. Jacobson, Of Counsel to Shapiro, Rosenfeld and
Close, holds options to purchase an aggregate of 40,000 shares of the Company's
Common Stock, all of which options are fully vested. Options to purchase 20,000
of such shares have an exercise price of $2.00 per share and expire in 2004; the
remaining options have an exercise price of $3.25 per share and expire in 2006.
49
<PAGE> 52
EXPERTS
The consolidated financial statements of the Company as of December
31, 1996 and 1995 and for the respective years then ended included in this
Prospectus have been audited by Coopers & Lybrand L.L.P., as stated in their
report appearing herein, which includes an explanatory paragraph regarding the
uncertainty of the Company's ability to continue as a going concern, and have
been so included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The consolidated financial statements of the Company for the year
ended December 31, 1994 have been included herein and in the Registration
Statement in reliance upon the authority of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing. The report of KPMG Peat
Marwick LLP contains an explanatory paragraph that states that the Company's
consolidated financial statements have been prepared assuming the Company will
continue as a going concern. The Company has suffered recurring losses from
operations and shows a need for continued funding that raises substantial doubt
about the entity's ability to continue as a going concern. The consolidated
financial statements and financial statement schedule do not include any
adjustments that might result from the outcome of that uncertainty.
ADDITIONAL INFORMATION
A registration statement on Form S-1 (the "Registration Statement")
relating to the securities offered hereby has been filed by the Company with the
Commission. This Prospectus does not contain all of the information set forth in
the Registration Statement and the exhibits thereto. Statements contained in
this Prospectus as to the contents of any contract or other document referred to
are not necessarily complete and in each instance reference is made to the copy
of such contract or other document filed as an Exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. For further information with respect to the Company and the Common
Stock being offered hereby, reference is made to the Registration Statement and
Exhibits. A copy of the Registration Statement may be inspected by anyone
without charge at the Commission's principal office located at 450 Fifth Street,
N.W., Washington, D.C. 20549, the Pacific Regional Office located at 5670
Wilshire Boulevard, 11th Floor, Los Angeles, California 90036-3648, the New York
Regional Office located at 7 World Trade Center, 13th Floor, New York, New York
10048, and the Chicago Regional Office located at Northwestern Atrium Center,
500 West Madison Street, Chicago, Illinois 60661-2511, and copies of all or any
part thereof may be obtained from the Public Reference Branch of the Commission
upon the payment of certain fees prescribed by the Commission. The Commission
also maintains a World Wide Web site on the Internet at http:\\www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants, including the Company, that file electronically with the
Commission.
50
<PAGE> 53
BIOLASE TECHNOLOGY, INC.
AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
Page
----
<S> <C>
FINANCIAL STATEMENTS
Report Of Independent Accountants F-2
Independent Auditors' Report F-3
Consolidated Balance Sheets As Of December 31, 1995 And 1996
And March 31, 1997 (Unaudited) F-4
Consolidated Statements of Operations For The Years Ended
December 31, 1994, 1995 And 1996 And For The Three Months
Ended March 31, 1996 And 1997 (Unaudited) F-5
Consolidated Statements of Stockholders' Equity For The Years
Ended December 31, 1994, 1995 And 1996 And For The Three
Months Ended March 31, 1996 And 1997 (Unaudited) F-6
Consolidated Statements of Cash Flows For The Years Ended
December 31, 1994, 1995 And 1996 And For The Three Months
Ended March 31, 1996 And 1997 (Unaudited) F-7
Notes To Consolidated Financial Statements F-9
SCHEDULES
Report Of Independent Accountants S-1
Independent Auditors' Report S-2
II - Consolidated Valuation And Qualifying Accounts And Reserves S-3
</TABLE>
All Schedules, except Schedule II, have been omitted as the required information
is shown in the consolidated financial statements, or notes thereto, or the
amounts involved are not significant or the schedules are not applicable.
F-1
<PAGE> 54
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
BioLase Technology, Inc.
We have audited the accompanying consolidated balance sheets of BioLase
Technology, Inc. and its subsidiary as of December 31, 1996 and 1995, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of BioLase Technology,
Inc. and its subsidiary as of December 31, 1996 and 1995, and the results of
their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that BioLase Technology, Inc. will continue as a going concern. As discussed in
Note 2 to the consolidated financial statements, the Company has suffered
recurring losses from operations and shows a need for continued funding that
raises substantial doubt about its ability to continue as a going-concern.
Management's plans in regard to these matters are also described in Note 2 to
the consolidated financial statements. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
COOPERS & LYBRAND L.L.P.
Newport Beach, California
March 4, 1997
F-2
<PAGE> 55
[KPMG LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Biolase Technology Incorporated:
We have audited the accompanying consolidated statements of operations, changes
in shareholders' equity and cash flows of Biolase Technology, Inc. and
subsidiaries for the year ended December 31, 1994. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and the cash flows
of Biolase Technology, Inc. and subsidiaries for the year ended December 31,
1994, in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that BioLase Technology, Inc. will continue as a going concern. As discussed in
Note 2 to the consolidated financial statements, the Company has suffered
recurring losses from operations and shows a need for continued funding that
raises substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 2 to
the consolidated financial statements. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
KPMG PEAT MARWICK LLP
Orange County, California
March 17, 1995
F-3
<PAGE> 56
BIOLASE TECHNOLOGY, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
---------------------------- March 31,
1995 1996 1997
------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C>
A S S E T S:
Current assets:
Cash and cash equivalents $ 1,565,655 $ 349,457 $ 460,836
Marketable securities -- 3,500,000 3,250,000
Accounts receivable, less allowance of $64,617 at December 31,
1995, $21,957 at December 31, 1996, and $22,930 at
March 31, 1997 64,622 145,463 150,933
Inventories, net of reserves of $491,335 at December 31, 1995,
$485,154 at December 31, 1996 and at March 31, 1997 390,928 376,479 518,027
Prepaid expenses and other current assets 170,232 73,723 90,460
------------ ------------ ------------
Total current assets 2,191,437 4,445,122 4,470,256
Property and equipment, net 289,016 194,078 223,901
Patents, licenses and trademarks, less accumulated amortization of
$327,614 at December 31, 1995 and 1996, and at March 31, 1997 10,070 31,215 71,167
Other assets 21,270 18,929 22,482
------------ ------------ ------------
Total assets $ 2,511,793 $ 4,689,344 $ 4,787,806
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 41,880 $ 109,582 $ 163,124
Accrued expenses 404,752 615,635 636,728
Accrued costs related to dissolution of foreign subsidiary 109,748 46,167 43,074
Capital lease obligation 22,324 -- --
Other current liabilities 89,000 3,980 --
------------ ------------ ------------
Total liabilities 667,704 775,364 842,926
------------ ------------ ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $.001, 1,000,000 shares authorized:
Series A 6% Redeemable Cumulative Convertible Preferred Stock, 1
share issued and outstanding at December 31, 1996 and at
March 31,1997 -- -- --
Common stock, par value, $.001, 50,000,000 shares authorized,
issued 11,241,164 at December 31, 1995, 13,129,949 at
December 31, 1996 and 13,392,449 at March 31, 1997 11,241 13,130 13,392
Additional paid-in capital 24,169,018 28,700,279 29,498,651
Accumulated deficit (22,336,170) (24,799,429) (25,567,163)
------------ ------------ ------------
Total stockholders' equity 1,844,089 3,913,980 3,944,880
------------ ------------ ------------
Total liabilities and stockholders' equity $ 2,511,793 $ 4,689,344 $ 4,787,806
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 57
BIOLASE TECHNOLOGY, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
Years Ended December 31, March 31,
-------------------------------------------- ----------------------------
1994 1995 1996 1996 1997
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
(Unaudited)
Sales $ 1,135,728 $ 1,152,182 $ 691,829 $ 143,615 $ 134,405
Cost of sales 1,192,305 841,162 559,169 135,823 112,870
------------ ------------ ------------ ------------ ------------
Gross profit (loss) (56,577) 311,020 132,660 7,792 21,535
------------ ------------ ------------ ------------ ------------
Operating expenses:
Sales and marketing 487,785 594,651 618,964 180,141 273,803
General and administrative 1,008,370 801,013 941,332 152,175 235,987
Engineering and development 1,351,320 926,752 984,418 180,317 277,440
Litigation and settlement costs 111,618 33,656 76,938 1,434 5,255
Provision for patents 958,850 -- -- -- --
------------ ------------ ------------ ------------ ------------
Total operating expenses 3,917,943 2,356,072 2,621,652 514,267 792,485
------------ ------------ ------------ ------------ ------------
Loss from operations (3,974,520) (2,045,052) (2,488,992) (506,475) (770,950)
------------ ------------ ------------ ------------ ------------
Other income (expense):
Interest income (expense) (1,500) 21,230 25,733 9,757 3,216
Gain on dissolution of foreign
subsidiary 504,405 -- -- -- --
------------ ------------ ------------ ------------ ------------
Total other income 502,905 21,230 25,733 9,757 3,216
------------ ------------ ------------ ------------ ------------
Loss before extraordinary
item (3,471,615) (2,023,822) (2,463,259) (496,718) (767,734)
Extraordinary gain on extinguish-
ment of debt 421,282 -- -- -- --
------------ ------------ ------------ ------------ ------------
Net loss ($ 3,050,333) ($ 2,023,822) ($ 2,463,259) ($ 496,718) ($ 767,734)
============ ============ ============ ============ ============
Loss per share of common stock:
Loss before extraordinary gain ($ 0.45) ($ 0.21) ($ 0.21) ($ 0.04) ($ 0.06)
Extraordinary gain 0.05 -- -- -- --
------------ ------------ ------------ ------------ ------------
Net loss per share ($ 0.40) ($ 0.21) ($ 0.21) ($ 0.04) ($ 0.06)
------------ ------------ ------------ ------------ ------------
Weighted average shares outstanding
7,671,118 9,850,961 11,531,527 11,253,818 13,237,060
============ ============ ============ ============ ============
See accompanying notes to consolidated financial statements.
</TABLE>
F-5
<PAGE> 58
BIOLASE TECHNOLOGY, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Foreign
Preferred Stock Common Stock Additional Receivable Currency
--------------- ---------------- Paid-In From Accumulated Translation
Shares Amount Shares Amount Capital Stockholders Deficit Adjustment Total
------ ------ ------ ------ ---------- ------------ ----------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at January 1, 1994 7,381,053 $7,381 $20,064,376 $(296,154) $(17,262,015) $177,078 $2,690,666
Issuance of common stock for
services 1,250 1 2,968 -- -- -- 2,969
Private placements of common
stock 979,800 980 2,053,153 -- -- -- 2,054,133
Stock issued upon
extinguishment of debt 50,000 50 74,950 -- -- -- 75,000
Issuance of shares for
fractional interest
on reverse split 9 -- -- -- -- -- --
Earned escrow shares -- -- -- 88,246 -- -- 88,246
Write-off of receivable from
stockholders -- -- (178,534) 178,534 -- -- --
Effect of dissolution of
foreign subsidiary -- -- -- -- -- (177,078) (177,078)
Net loss -- -- -- -- (3,050,333) -- (3,050,333)
----------- ------- ----------- --------- ------------ --------- ---------
Balances at December 31, 1994 8,412,112 8,412 22,016,913 (29,374) (20,312,348) -- 1,683,603
Private placements of common
stock 2,300,000 2,300 1,290,407 -- -- -- 1,292,707
Exercise of stock options 39,150 39 67,986 -- -- -- 68,025
Exercise of stock purchase
warrants 489,900 490 793,712 -- -- -- 794,202
Issuance of shares for
fractional interest on
reverse split 2 -- -- -- -- -- --
Earned escrow shares -- -- -- 29,374 -- -- 29,374
Net loss -- -- -- -- (2,023,822) -- (2,023,822)
----------- ------- ----------- --------- ------------ --------- ---------
Balances at December 31, 1995 11,241,164 11,241 24,169,018 -- (22,336,170) -- 1,844,089
Private placement of preferred
stock 100 $ -- -- -- 4,400,000 -- -- -- 4,400,000
Exercise of stock options -- -- 88,766 89 133,061 -- -- -- 133,150
Conversion of preferred stock
to common stock (99) -- 1,800,018 1,800 (1,800) -- -- -- --
Issuance of shares for
fractional interest on
reverse split -- -- 1 -- -- -- -- -- --
Net loss -- -- -- -- -- -- (2,463,259) -- (2,463,259)
--- ---- ----------- ------- ----------- --------- ------------ --------- ----------
Balances at December 31, 1996 1 -- 13,129,949 13,130 28,700,279 -- (24,799,429) -- 3,913,980
Private placement of common
stock (unaudited) -- -- 200,000 200 719,685 -- -- -- 719,885
Exercise of stock options
(unaudited) -- -- 62,500 62 78,687 -- -- -- 78,749
Net loss (unaudited) -- -- -- -- -- -- (767,734) -- (767,734)
--- ---- ----------- ------- ----------- --------- ------------ --------- ----------
Balances at March 31, 1997
(unaudited) 1 $ -- 13,392,449 $13,392 $29,498,651 $ -- $(25,567,163) $ -- $3,944,880
=== ==== =========== ======= =========== ========= ============ ========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 59
BIOLASE TECHNOLOGY, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
Years Ended December 31, March 31,
---------------------------------------- --------------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(Unaudited)
Cash flows from operating activities:
Net loss ($3,050,333) ($2,023,822) ($2,463,259) ($ 496,718) ($ 767,734)
Adjustments to reconcile net loss to
net cash used by operating
activities:
Gain on foreign subsidiary
dissolution, including cash
surrendered of $19,403 (523,808) -- -- -- --
Extraordinary gain on extinguishment
of debt (421,282) -- -- -- --
Earned escrow shares of common stock 88,246 29,374 -- -- --
Depreciation and amortization 432,043 183,442 149,746 39,111 30,463
Issuance of common stock for services 2,969 -- -- -- --
Provision for bad debts (10,335) 337 (5,900) -- --
Provision for inventory write-off 23,460 24,500 37,663 -- --
Provision for patents 958,850 -- -- -- --
Changes in assets and liabilities:
Accounts receivable 129,388 (14,689) (74,941) 32,790 (5,470)
Inventories (148,280) 228,664 (23,214) (94,586) (141,548)
Prepaid expenses and other assets 113,022 (46,762) 98,850 60,651 (20,290)
Accounts payable (114,199) (37,561) 67,702 (9,099) 53,542
Accrued expenses (43,808) (16,633) 210,883 13,567 21,093
Accrued costs related to
dissolution of foreign
subsidiary (53,041) (17,526) (63,581) (6,700) (3,093)
Other current liabilities (2,000) 18,000 (85,020) (23,000) (3,980)
---------- ---------- ---------- ----------- -----------
Net cash used by operating
activities (2,619,108) (1,672,676) (2,151,071) (483,984) (837,017)
---------- ---------- ---------- ----------- -----------
Cash flows from investing activities:
Purchase of marketable securities -- -- (4,000,000) -- --
Sale of marketable securities -- -- 500,000 -- 250,000
Additions to property and
equipment (53,387) (47,041) (54,808) (23,967) (60,286)
Additions to patents, licenses
and trademarks (53,264) (10,070) (21,145) (6,163) (39,952)
---------- ---------- ---------- ----------- -----------
Net cash (used) provided by
investing activities (106,651) (57,111) (3,575,953) (30,130) 149,762
---------- ---------- ---------- ----------- -----------
</TABLE>
Continued
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 60
BIOLASE TECHNOLOGY, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
<TABLE>
<CAPTION>
Three Months Ended
Years Ended December 31, March 31,
---------------------------------------- --------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(Unaudited)
Cash flows from financing activities:
Payments of capital lease obligations ($ 134,814) ($ 21,533) ($ 22,324) ($ 5,557) $ --
Proceeds from issuance of common
stock, net 2,054,133 1,292,707 -- -- 719,885
Proceeds from exercise of stock options -- 68,025 133,150 33,742 78,749
Proceeds from exercise of stock
purchase warrants -- 794,202 -- -- --
Proceeds from issuance of preferred
stock, net -- -- 4,400,000 -- --
----------- ----------- ----------- ----------- -----------
Net cash provided by
financing activities 1,919,319 2,133,401 4,510,826 28,185 798,634
----------- ----------- ----------- ----------- -----------
Increase (decrease) in cash
and cash equivalents (806,440) 403,614 (1,216,198) (485,929) 111,379
Cash and cash equivalents at beginning of
period 1,968,481 1,162,041 1,565,655 1,565,655 349,457
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of period $ 1,162,041 $ 1,565,655 $ 349,457 $ 1,079,726 $ 460,836
=========== =========== =========== =========== ===========
Supplemental cash flow disclosure:
Cash paid during the period for
interest $ 27,605 $ 13,312 $ 4,410 $ 1,625 $ 913
=========== =========== =========== =========== ===========
Noncash financing activities:
Issuance of common stock for debt $ 75,000 $ -- $ -- $ -- $ --
=========== =========== =========== =========== ===========
Conversion of preferred stock to
common stock $ -- $ -- $ 4,356,000 $ -- $ --
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE> 61
BIOLASE TECHNOLOGY, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information at March 31, 1997 and for the
three-month periods ended March 31, 1996 and 1997 is unaudited)
1. Summary Of Significant Accounting Policies:
BioLase Technology, Inc. (the "Company"), which changed its name from
Laser Medical Technology, Inc. in May 1994, was incorporated in
Delaware in February 1987 as Pamplona Capital Corp. ("Pamplona"). Also
in 1987, Pamplona acquired 77% of the outstanding shares of Societe
Endo Technic, S.A. ("SET"), a French corporation, which in turn had a
100%-owned subsidiary, Societe Endo Technic, Inc., doing business as
Endo Technic Corporation (a California corporation). In connection with
the dissolution of SET (Note 10), the Company purchased certain assets
of SET, including 100% of the stock of Societe Endo Technic, Inc., for
nominal consideration.
The Company's primary business is the design, development,
manufacturing and marketing of advanced laser products for dental and
other surgical applications, and the distribution of endodontic
products manufactured by third parties.
Principles Of Consolidation:
The consolidated financial statements include the accounts of BioLase
Technology, Inc. and its subsidiary after eliminating intercompany
accounts and transactions. Losses of SET which were otherwise allocable
to the minority interest, but which were cumulatively in excess of such
minority interest, were charged to the Company's results of operations
until the dissolution of SET in 1994 (Note 10).
Interim Information:
The accompanying financial statements at March 31, 1997 and for the
three-month periods ended March 31, 1996 and 1997 are unaudited. These
financial statements reflect all adjustments, consisting of only normal
recurring adjustments which, in the opinion of management, are
necessary for a fair statement of the financial position at March
31, 1997, and the results of operations for the three-month periods
ended March 31, 1996 and 1997. The results of operations for the
three-month period ended March 31, 1997 are not necessarily indicative
of the results to be expected for the year ending December 31, 1997.
Revenue Recognition:
Sales and related cost of sales are recognized upon shipment of
products. The Company's laser-based products and endodontic
handpieces are generally under warranty against defects in material
and workmanship for a period of one year.
F-9
<PAGE> 62
BIOLASE TECHNOLOGY, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Information at March 31, 1997 and for the
three-month periods ended March 31, 1996 and 1997 is unaudited)
1. Summary Of Significant Accounting Policies, Continued:
Cash Equivalents:
The Company considers all highly liquid debt instruments with a
maturity of three months or less at the time of purchase to be cash
equivalents. Cash equivalents are carried at cost, which approximates
market.
At December 31, 1995 and 1996, and at March 31, 1997, the Company had
approximately $1,533,000, $161,000 and $254,000, respectively, of cash
balances that were in excess of the federally-insured limit of $100,000
per bank.
Marketable Securities:
Marketable securities consist of United States government treasury
notes having maturities greater than three months at the time of
acquisition, which are readily saleable. Marketable securities are
carried at cost, which approximates market value.
Inventories:
Inventories are valued at the lower of cost or market (determined by
the first-in, first-out method).
Property And Equipment:
Property and equipment, including property under capital lease
agreements, are carried at cost less accumulated depreciation and
amortization. Maintenance and repairs are expensed as incurred. Upon
sale or disposition of assets, any gain or loss is included in the
consolidated statement of operations.
The cost of property and equipment is generally depreciated using the
straight-line method over the estimated useful lives of the respective
assets, which are generally not greater than five years. Leasehold
improvements are amortized over the lesser of the estimated useful
lives of the assets or the related lease terms.
F-10
<PAGE> 63
BIOLASE TECHNOLOGY, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Information at March 31, 1997 and for the
three-month periods ended March 31, 1996 and 1997 is unaudited)
1. Summary Of Significant Accounting Policies, Continued:
Patents, Licenses And Trademarks:
Costs incurred to establish and successfully defend patents, licenses
and trademarks, and to acquire product and process technology are
capitalized. All amounts assigned to these patents, licenses and
trademarks are amortized on a straight-line basis over an estimated
eight-year useful life.
The Company has assigned a value to certain patents which were
transferred to the Company by a then significant stockholder equal to
the stockholder's cost basis of $10,100 per patent plus capitalizable
costs incurred after acquisition by the Company.
The continuing carrying value of patents, licenses and trademarks is
assessed based upon the Company's operating experience, expected cash
flows from related products and other factors as deemed appropriate
(Note 12).
Engineering And Development:
Company-sponsored engineering and development costs related to both
present and future products are expensed as incurred.
Estimates:
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Income Taxes:
The Company follows Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes", which requires the
recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, deferred income
taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their
financial reporting amounts at each year-end based on enacted tax laws
and statutory tax rates applicable to the periods in which the
differences
Continued
F-11
<PAGE> 64
BIOLASE TECHNOLOGY, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Information at March 31, 1997 and for the
three-month periods ended March 31, 1996 and 1997 is unaudited)
1. Summary Of Significant Accounting Policies, Continued:
Income Taxes, Continued:
are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the
amount expected to be realized. The provision for income taxes
represents the tax payable for the period and the change during the
period in deferred tax assets and liabilities.
Stock-Based Compensation:
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation". SFAS No. 123 defines a fair
value based method of accounting for an employee stock option. Fair
value of the stock option is determined considering factors such as the
exercise price, the expected life of the option, the current price of
the underlying stock and its volatility, expected dividends on the
stock, and the risk-free interest rate for the expected term of the
option. Under the fair value based method, compensation cost is
measured at the grant date based on the fair value of the award and is
recognized over the service period. Pro forma disclosures for entities
that elect to continue to measure compensation cost under the intrinsic
method provided by Accounting Principles Board No. 25 must include the
effects of all awards granted in fiscal years that begin after December
15, 1994 (Note 9).
Loss Per Share And Shares Outstanding:
Loss per share was determined by dividing the net loss by the weighted
average number of shares outstanding during the applicable period.
Common stock equivalents, which consist of stock options and stock
purchase warrants, have been excluded from per share calculations, as
the effect of these common stock equivalents is anti-dilutive. The
shares outstanding and other share information have been adjusted for
all periods presented to reflect the one-for-four reverse stock split
which occurred on February 15, 1994.
Continued
F-12
<PAGE> 65
BIOLASE TECHNOLOGY, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Information at March 31, 1997 and for the
three-month periods ended March 31, 1996 and 1997 is unaudited)
1. Summary Of Significant Accounting Policies, Continued:
Recently Issued Accounting Pronouncements:
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings Per Share." SFAS No. 128 requires companies to adopt
its provisions for fiscal years beginning after December 15, 1997 and
requires restatement of all prior period earnings per share ("EPS")
data presented. Earlier application is not permitted. SFAS No. 128
specifies the computation, presentation and disclosure requirements for
EPS. The implementation of SFAS No. 128 is not expected to have a
material effect on the EPS data presented by the Company.
2. Basis Of Presentation:
The Company's consolidated financial statements have been presented on
the basis that it will continue as a going concern, which contemplates
the realization of assets and the satisfaction of liabilities in the
normal course of business. The Company reported net losses of
$3,050,333, $2,023,822 and $2,463,259 for the years ended December 31,
1994, 1995 and 1996, respectively, and $767,734 for the three-month
period ended March 31, 1997, and has an accumulated deficit of
$25,567,163 at March 31, 1997. These recurring losses and the need for
continued funding, discussed below, raise substantial doubt about the
Company's ability to continue as a going concern.
The Company remains dependent upon its ability to obtain outside
financing either through the issuance of additional shares of its
common stock or preferred stock or through borrowings until it achieves
sustained profitability through increased sales, continued efforts of
engineering redesign, and cost curtailment. The Company's focus has
been realigned to emphasize the marketing of its laser-based
HydroKinetic(TM) tissue cutting systems (the Millennium(TM)) and
LaserBrush(TM) and the continued development of biomaterial products
and cost-effective laser technologies for medical and dental surgical
applications.
Continued
F-13
<PAGE> 66
BIOLASE TECHNOLOGY, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Information at March 31, 1997 and for the
three-month periods ended March 31, 1996 and 1997 is unaudited)
2. Basis Of Presentation, Continued:
Based on the Company's current business plan, working capital should be
sufficient to enable the Company to meet its obligations through mid-
1998, at which point the Company would be dependent upon either the
successful marketing of its Millennium(TM) and its soon-to-be-released
LaserBrush(TM) or additional financing. There are no assurances that
the Company will be successful in either marketing its new products or
obtaining financing required to sustain its operations. If
unsuccessful, the Company's ability to meet its obligations and to
continue operations could be impaired. The consolidated financial
statements do not give effect to any adjustments that might be
necessary if the Company were unable to meet its obligations or
continue operations.
Financing the development of laser-based medical and dental products
and operations of the Company has been achieved principally through
private placements of preferred and common stock and the exercise of
stock options and stock purchase warrants. During the three years ended
December 31, 1996, and the three-month period ended March 31, 1997, the
Company has raised approximately $7,747,000 and $720,000, respectively,
of equity funds. Management believes that significant additional
resources will be required to complete the FDA approval process seeking
authorization for the use of the Company's HydroKinetic(TM) and
laser-based technologies for hard-tissue and dermatological
applications and to fund the Company's working capital in the event the
marketing of its new products does not generate sufficient
profitability and cash flow by mid-1998. The Company expects to
generate the necessary resources through the sale of its new products
or through the issuance of equity securities in either public offerings
or private placements, or through debt financing. No assurance can be
given, however, that the Company will be able to obtain such resources.
3. Inventories:
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, March 31,
-----------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Raw materials $178,669 $ 96,823 $134,036
Work-in-process - - 148,000
Finished goods 212,259 279,656 235,991
-------- -------- --------
$390,928 $376,479 $518,027
======== ======== ========
</TABLE>
Continued
F-14
<PAGE> 67
BIOLASE TECHNOLOGY, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Information at March 31, 1997 and for the
three-month periods ended March 31, 1996 and 1997 is unaudited)
4. Property And Equipment:
Property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------- March 31,
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Leasehold improvements $ 149,282 $ 149,282 $ 149,282
Equipment and computers 674,575 725,882 737,320
Furniture and fixtures 103,707 107,208 156,056
Demonstration units 247,354 247,354 247,354
---------- ---------- ----------
1,174,918 1,229,726 1,290,012
Less, Accumulated
depreciation
and amortization (885,902) (1,035,648) (1,066,111)
---------- --------- ---------
$ 289,016 $ 194,078 $ 223,901
========== ========== ==========
</TABLE>
Included in property and equipment are assets held under capital leases
of approximately $16,600 and $1,027 at December 31, 1995 and 1996,
respectively, net of accumulated amortization.
5. Related Party Transactions:
Effective February 8, 1994, Dr. Guy Levy resigned as a member of the
Board of Directors. A settlement of Dr. Levy's employment agreement was
subsequently negotiated which resulted in the Company obtaining all
patents and patent-pending applications held by Dr. Levy related to the
Company's business and provided that Dr. Levy will not compete with the
Company for a period of three years. The Company paid Dr. Levy a lump
sum of $100,000 and issued 50,000 shares of the Company's common stock
having a market value of $75,000, subject to certain restrictions, for
payment in full of all royalties due or which may have become due with
respect to assigned patents and patent-pending applications. Such
payment was reduced by $20,000 to repay to the Company a loan that had
been previously guaranteed by Dr. Levy. Accordingly, in 1994, the
Company recognized an extraordinary gain on the extinguishment of
royalties payable to Dr. Levy of $421,282, or $.05 per share.
Continued
F-15
<PAGE> 68
BIOLASE TECHNOLOGY, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Information at March 31, 1997 and for the
three-month periods ended March 31, 1996 and 1997 is unaudited)
6. Accrued Expenses:
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31,
------------------------ March 31,
1995 1996 1997
-------- ------- -------
<S> <C> <C> <C>
Accrued professional fees $138,596 $158,416 $127,101
Accrued legal and settlement costs 28,524 88,292 149,791
Accrued private placement costs - 72,984 71,272
Sales tax payable 48,331 46,514 48,643
Accrued rent 41,049 32,253 30,054
Accrued warranty 57,164 15,000 15,000
Accrued vacation 25,490 48,354 53,901
Other 65,598 153,822 140,966
-------- -------- --------
$404,752 $615,635 $636,728
======== ======== ========
</TABLE>
7. Litigation:
A suit entitled Dental World, Inc. v. BioLase Technology, Inc., f/k/a
Laser Medical Technology, Inc., filed September 18, 1995 in the United
States District Court for the Southern District of Texas has been
settled. The complaint sought damages in excess of $250,000 based upon
claims of negligence, product liability, breach of express and implied
warranties, and violation of the consumer provisions of the Texas
Deceptive Trade Practices Act, arising out of the Company's April 1992
sale of a Laser-35 to the plaintiff. On March 3, 1997, the Company
agreed to pay the plaintiff $50,000 and the plaintiff agreed to return
to the Company the subject Laser-35.
On April 26, 1995, the Company was named as an additional defendant in
Hazel Lefern Moore v. David A. Pyner, D.D.S., Florida Dental Team,
P.A., Princeton Medical Management Southeast, Inc. and Laser Endo
Technic, Inc., initially filed in the 17th Judicial Circuit in and for
Broward County, Florida on April 21, 1994. The plaintiff alleges that
she under- went laser dental surgery with a laser allegedly produced by
the Company and seeks unspecified damages from the Company on theories
of product liability, based on allegations that the laser was
defective by reason of design, manufacture and lack of product
warnings. The Company has answered the complaint, denying the majority
of plaintiff's material factual allegations and asserting various
affirmative defenses. The Company is
Continued
F-16
<PAGE> 69
BIOLASE TECHNOLOGY, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Information at March 31, 1997 and for the
three-month periods ended March 31, 1996 and 1997 is unaudited)
7. Litigation, Continued:
vigorously contesting liability. The case has not yet been set for
trial, and discovery is ongoing. The Company believes that liability,
should any result from plaintiff's claims, would be covered by
insurance.
Trans Leasing International v. Elie M. Makhoul v. Laser Endo Technic
Corporation, was filed July 6, 1994 in the Circuit Court of Cook
County, Illinois, Municipal Department, First District. This action
involves a third-party claim against the Company in a suit in which a
dentist, who was the lessee of a dental laser system manufactured by
the Company, had been sued for breach of the equipment lease by the
financing institution that was the lessor. The theories of the
third-party plaintiff include common law fraud, violation of the
Consumer Fraud and Deceptive Business Practices Act, and intentional
and negligent misrepresentations. The third-party claim against the
Company in this action is for $78,408 in compensatory damage, $15,000
in lost profits, $50,000 in punitive damages, and attorney's fees and
related costs. The Company intends to defend against the claims
vigorously. The case has been inactive since the third-party plaintiff
filed for protection under the U.S. Bankruptcy Law on July 10, 1995.
The Company does not believe that these lawsuits or any other lawsuits
to which it is a party will have a material adverse effect on the
Company's results of operations or its financial condition.
8. Lease Commitments:
The Company leases plant and office facilities under long-term
operating leases. The following is a schedule of future minimum rental
payments required under operating leases that have initial or remaining
non-cancellable lease terms in excess of one year are as follows:
<TABLE>
Fiscal Years Ending December 31,
--------------------------------
<S> <C>
1997 $139,386
1998 139,386
1999 139,386
2000 92,924
--------
$511,082
========
</TABLE>
Continued
F-17
<PAGE> 70
BIOLASE TECHNOLOGY, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Information at March 31, 1997 and for the
three-month periods ended March 31, 1996 and 1997 is unaudited)
8. Lease Commitments, Continued:
Rent expense was $122,805, $148,775, $136,938 and $34,477 for the years
ended December 31, 1994, 1995, 1996 and for the three months ended
March 31, 1997, respectively.
9. Stockholders' Equity:
Equity Financing:
The Company has raised equity capital through several private offerings
during the three years ended December 31, 1996 and the three months
ended March 31, 1997 as follows:
<TABLE>
<CAPTION>
Number
Of Shares
Of Common Net Cash
Stock Consideration
----------- -------------
Years Ended December 31,
------------------------
<S> <C> <C> <C>
1994 979,800* $2,054,133
1995 2,300,000 $1,292,707
1996 1,800,018** $4,400,000
Three months ended March 31, 1997 200,000 $ 719,885
</TABLE>
*Includes 29,800 shares issued as commissions in 1994.
**Excludes one share of Preferred Stock - see below.
Preferred Stock:
On October 16, 1996, the Company completed a private placement (the
"Placement") in which the Company issued and sold 100 units, each
consisting of one share of its Series A 6% Redeemable Cumulative
Convertible Preferred Stock (the "Preferred Stock") which, at the
option of the holder, may be converted into a variable number of shares
of common stock that cannot exceed 18,182 shares, and 5,000 Redeemable
Common Stock Purchase Warrants (the "Placement Warrants") expiring 1998
which are exercisable under certain conditions. Gross proceeds in the
Placement were $5,000,000 and net proceeds, after commissions of
$400,000 and estimated expenses, were $4,400,000.
Continued
F-18
<PAGE> 71
BIOLASE TECHNOLOGY, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Information at March 31, 1997 and for the
three-month periods ended March 31, 1996 and 1997 is unaudited)
9. Stockholders' Equity, Continued:
In November 1996, 99 of the 100 shares of Preferred Stock were
converted to common stock at a rate of 18,182 common shares for each
preferred share, resulting in an aggregate conversion to 1,800,018
shares of common stock. The shares of common stock issued upon the
conversion are "restricted securities" as defined in Rule 144
promulgated under the Securities Act of 1933, as amended (the "Act").
Accordingly, such shares may be resold only pursuant to a registration
statement under the Act or in accordance with an exemption from such
registration requirement. The Company is obligated to file a registra-
tion statement covering the resale of such shares of common stock.
Common Stock:
On February 28, 1997, the Company completed a private placement in
which it issued and sold 200,000 shares of its common stock to an
accredited investor (the "Investor"). Gross proceeds from the private
placement were $725,000 before direct expenses of approximately $5,000.
The shares of common stock issued in connection with the private
placement are "restricted securities" as defined in Rule 144
promulgated under the Act. Accordingly, such shares may be resold only
pursuant to a registration statement under the Act or in accordance
with an exemption from such registration requirement. The Company is
obligated to file a registration statement covering the resale of such
shares.
The Company has occasionally issued shares of its common stock to
individuals for services rendered. The estimated fair value of the
common stock was charged to earnings as compensation for these
services. No shares were issued for services in 1995, 1996 or for the
three-month period ended March 31, 1997, and 1,250 shares valued at
$2,968 were issued for services in 1994.
Common Stock Options And Warrants:
The Company has adopted the 1990 Stock Option Plan (the "1990 Plan"),
the 1992 Stock Option Plan (the "1992 Plan") and the 1993 Stock Option
Plan (the "1993 Plan" and collectively with the 1990 Plan and 1992
Plan, the "Plans"). Each of the Plans enable the Company to offer
equity participation to employees, officers, directors and consultants
of the Company through stock options and, with respect to the 1990 and
1992 Plans, stock appreciation rights.
Continued
F-19
<PAGE> 72
BIOLASE TECHNOLOGY, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Information at March 31, 1997 and for the
three-month periods ended March 31, 1996 and 1997 is unaudited)
9. Stockholders' Equity, Continued:
Common Stock Options And Warrants, Continued:
A total of 375,000 shares of common stock were authorized for issuance
under the 1990 Plan, of which, at March 31, 1997, 83,000 had been
issued upon option exercise, 165,750 were reserved for issuance upon
exercise of outstanding options and 126,250 were available for the
granting of additional options. A total of 150,000 shares of common
stock were authorized for issuance under the 1992 Plan, of which, at
March 31, 1997, 46,516 shares had been issued upon option exercise,
80,875 were reserved for issuance upon exercise of outstanding options,
and 22,609 were available for the granting of additional options. A
total of 1,500,000 shares of common stock were authorized for issuance
under the 1993 Plan, of which, at March 31, 1997, 60,900 had been
issued upon option exercise, 897,785 were reserved for issuance upon
exercise of outstanding options, and 541,315 were available for the
granting of additional options. Any shares which are reserved for
issuance under an outstanding option which expires or terminates
unexercised, or any shares which are used by participants to pay all or
part of the purchase price of any option exercised, may again be
reserved for issuance upon exercise of newly granted options under the
respective Plans. However, shares with respect to which stock
appreciation rights have been exercised may not again be made subject
to an award.
At the discretion of a committee comprised of non-employee directors or
other non-employees appointed by the Board of Directors (the
"Committee"), employees, officers, directors and consultants of the
Company and its subsidiary may become participants in the Plans upon
receiving grants in the form of stock options or, in the case of the
1990 and 1992 Plans, stock appreciation rights.
Stock options may be granted as nonqualified stock options or incentive
stock options, but incentive stock options may not be granted at a
price less than 100% of the fair market value of the stock as of the
date of grant (110% as to any 10% stockholder at the time of grant);
nonqualified stock options may not be granted at a price less than 85%
of the fair market value of the stock as of the date of grant. Stock
options may be exercised no more than ten years after the date of grant
and no more than three years after death or disability, whichever
occurs earlier. In the case of options granted under the 1993 Plan,
payment of the purchase price for shares of stock acquired through the
exercise of stock options must be paid in cash. At the discretion of
the Committee, the purchase price for shares of stock acquired through
the exercise of stock options under the 1990 and 1992 Plans may be paid
Continued
F-20
<PAGE> 73
BIOLASE TECHNOLOGY, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Information at March 31, 1997 and for the
three-month periods ended March 31, 1996 and 1997 is unaudited)
9. Stockholders' Equity, Continued:
Common Stock Options And Warrants, Continued:
by cash, shares of common stock valued at their fair market value at
the date of exercise or by delivery of recourse promissory notes or a
combination of notes, cash and shares of the Company's common stock.
Incentive stock options have not been awarded under any of the Plans to
date. The following table summarizes the activity under the Plans:
<TABLE>
<CAPTION>
Option Price Per
Shares Share
---------- ---------------
<S> <C> <C>
Options outstanding, December 31, 1993 642,500 $2.00 - $16.00
Granted 473,750 2.00 - 2.38
Surrendered (250,250) 2.00 - 16.00
---------- ---------------
Options outstanding, December 31, 1994 866,000 2.00 - 10.50
Granted 725,000 0.75 - 7.20
Exercised (39,150) 1.50 - 2.38
Surrendered (412,400) 1.50 - 2.38
---------- ---------------
Options outstanding, December 31, 1995 1,139,450 0.75 - 10.50
Granted 318,335 2.53 - 4.13
Exercised (88,766) 1.50
Surrendered (67,109) 1.50 - 2.80
---------- ---------------
Options outstanding, December 31, 1996 1,301,910 0.75 - 10.50
Exercised (62,500) 0.75 - 1.50
Surrendered (95,000) 4.13 - 7.20
---------- ---------------
Options outstanding, March 31, 1997 1,144,410 $0.75 - $10.50
========== ===============
Options exercisable, March 31, 1997 908,836 $0.75 - $10.50
========== ===============
</TABLE>
Stock options granted under the 1990 Plan may include the right to
acquire an Accelerated Ownership Nonqualified Stock Option ("AO"). If
an option grant contains the AO feature and if the participant pays all
or part of the purchase price of the option with shares of the
Company's common stock held by the participant for at least six months,
then upon exercise of the option, the participant is granted an AO to
purchase at the fair market value as of the date of the AO grant the
number of shares of common stock of the Company
Continued
F-21
<PAGE> 74
BIOLASE TECHNOLOGY, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Information at March 31, 1997 and for the
three-month periods ended March 31, 1996 and 1997 is unaudited)
9. Stockholders' Equity, Continued:
Common Stock Options And Warrants, Continued:
equal to the sum of the number of whole shares used by the participant
in payment of the purchase price and the number of whole shares, if
any, withheld by the Company as payment for withholding taxes. An AO
may be exercised between the date of grant and the date of expiration,
which will be the same as the date of expiration of the option to which
the AO is related. At March 31, 1997, 50,000 options outstanding under
the 1990 Plan include the AO feature.
In addition to the option plans discussed above, the Company has
several agreements with certain vendors and other persons under which
options, not under any of the Plans, to purchase shares of the
Company's common stock have been granted. The shares issuable upon
exercise of such options have not been registered under the Act.
The following table summarizes option transactions outside the
Company's option plans:
<TABLE>
<CAPTION>
Option Price Per
Shares Share
------- ----------------
<S> <C> <C>
Options outstanding, December 31, 1993 103,750 $0.80 - $12.00
Granted - -
Surrendered (1,250) 0.80
------- ----------------
Options outstanding, December 31, 1994 102,500 5.00 - 12.00
Granted 20,000 2.00
Surrendered - -
------- ----------------
Options outstanding, December 31, 1995 122,500 2.00 - 12.00
Granted - -
Surrendered - -
------- ----------------
Options outstanding, December 31, 1996 122,500 2.00 - 12.00
Granted - -
Surrendered - -
------- ----------------
Options outstanding, March 31, 1997 122,500 $2.00 - $12.00
======= ================
Options exercisable, March 31, 1997 120,000 $2.00 - $12.00
======= ================
</TABLE>
Continued
F-22
<PAGE> 75
BIOLASE TECHNOLOGY, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Information at March 31, 1997 and for the
three-month periods ended March 31, 1996 and 1997 is unaudited)
9. Stockholders' Equity, Continued:
Common Stock Options And Warrants, Continued:
The majority of all the Company's options outstanding and exercisable
at December 31, 1996 and March 31, 1997 are at an exercise price of
between $0.75 and $3.00. Additionally, at December 31, 1996, the
weighted average exercise price for options exercisable was $2.97 with
a weighted average remaining term of 6.5 years. At March 31, 1997, the
weighted average exercise price for options exercisable was $2.82 with
a weighted average remaining term of 6.7 years.
Warrants to purchase 489,900 shares of common stock at $3.25 per share
were issued in conjunction with a placement of the Company's common
stock in 1994, including 14,900 warrants issued as commission to the
placement agent. The warrants included a call feature whereby the
Company had the right, upon thirty days' notification, to call such
warrants for redemption at any time the market price per share exceeded
138.46% of the exercise price for ten consecutive trading days. In the
event of such a call, the Company could redeem any warrants remaining
outstanding at the end of the notification period for nominal
consideration.
On June 2, 1995, the Company reduced the exercise price of such
warrants from $3.25 to $1.625 per share, which had the effect of making
the warrants subject to call when the common stock traded at or above
$2.25 per share. The closing bid price of the Company's common stock on
June 2, 1995 was $0.6875 per share. On August 24, 1995, the Company
called for redemption all such warrants which would be outstanding on
September 25, 1995. All of the outstanding warrants were exercised
prior to the redemption date. The Company issued 489,900 shares of its
common stock upon exercise of the warrants; net proceeds received
aggregated $794,202, excluding direct expenses of $1,885.
In October 1996, the Company issued 500,000 Placement Warrants expiring
October 16, 1998, each entitling the holder to purchase one share of
common stock at $3.50 per share under certain conditions. An additional
190,910 warrants, expiring December 31, 1998, were also issued in
connection with the Placement, which are also exercisable at $3.50 per
share.
On December 2, 1996, the Company granted warrants to purchase 10,000
shares of common stock at $3.50 per share to consultants. These
warrants expire December 31, 1998.
Continued
F-23
<PAGE> 76
BIOLASE TECHNOLOGY, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Information at March 31, 1997 and for the
three-month periods ended March 31, 1996 and 1997 is unaudited)
9. Stockholders' Equity, Continued:
Pro Forma Effect Of Stock-Based Compensation:
The Company has adopted the disclosure-only provisions of SFAS No. 123.
Had compensation cost been determined based on the fair value of
awards under the 1990, 1992 and 1993 Plans on the respective dates of
grant in a manner consistent with the method promulgated by SFAS No.
123, the Company's net loss and loss per share would have been
increased to the pro forma amounts below:
<TABLE>
<CAPTION>
For The Years Ended
December 31,
---------------------------
1995 1996
---------- ----------
<S> <C> <C>
Net loss:
As reported ($2,023,822) ($2,463,259)
Pro forma ($2,073,714) ($2,730,811)
Loss per share:
As reported ($0.21) ($0.21)
Pro forma ($0.21) ($0.24)
</TABLE>
The fair value of each option grant was estimated on the date of the
grant using the Black-Scholes option pricing model. The assumptions
used for the Black-Scholes computation for the years ended December 31,
1995 and 1996 are as follows: the risk-free interest rate was the U.S.
Zero Coupon Bond rate for the corresponding grant date, ranging from
5.68% to 7.46% in 1995 and 5.4% to 5.64% in 1996; the exercise price is
equal to the fair market value of the underlying common stock at the
grant date; the expected life of the option is the term to expiration,
ranging from 1-4 years; volatility is 53.02%; and the common stock will
pay no dividends.
10. Dissolution Of SET:
In March 1994, the Board of Directors of SET, a French corporation 77%
owned by the Company, authorized the Director General of SET to advise
the French Commercial Court of its inability to pay its debts.
Accordingly, the Commercial Court ordered the dissolution of SET. As
the Company no longer had control over the operations of SET, such
operations are excluded from the consolidated results of the Company in
1994, 1995 and 1996.
Continued
F-24
<PAGE> 77
BIOLASE TECHNOLOGY, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Information at March 31, 1997 and for the
three-month periods ended March 31, 1996 and 1997 is unaudited)
10. Dissolution Of SET, Continued:
In 1994, the Company recognized a loss on its investment in SET of
$1,697,032, offset by a reversal of losses previously recognized in
consolidation of $2,201,437. The net result was a recognized gain of
$504,405, including the effect of the reversal of the cumulative
foreign currency translation adjustment of $177,078.
11. Income Taxes:
The following table presents the current and deferred provision for
federal and state income taxes for the years ended December 31, 1994,
1995 and 1996:
<TABLE>
<CAPTION>
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Current:
Federal $ - $ - $ -
State 1,600 1,600 1,600
----- ----- -----
1,600 1,600 1,600
Deferred:
Federal - - -
State - - -
----- ----- -----
$1,600 $1,600 $1,600
===== ===== =====
</TABLE>
The foregoing tax provisions are included in general and administrative
expense in the accompanying consolidated statements of operations.
Continued
F-25
<PAGE> 78
BIOLASE TECHNOLOGY, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Information at March 31, 1997 and for the
three-month periods ended March 31, 1996 and 1997 is unaudited)
11. Income Taxes, Continued:
The effects of temporary differences which give rise to deferred tax
provision (benefit) at December 31, 1994, 1995 and 1996 consist of:
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Property and equipment $ - $ 320,965 $ 20,796
Reserves not currently deductible 136,000 (346,611) (89,418)
Inventories - 41,518 (7,925)
Capital loss carryforward 256,000 21,498 -
State taxes - 770 (226)
Net operating losses 1,173,500 1,395,841 1,462,117
--------- --------- ---------
1,565,000 1,433,981 1,385,344
Change in valuation allowance (1,565,000) (1,433,981) (1,385,344)
--------- --------- ---------
Total $ - $ - $ -
========= ========= =========
</TABLE>
The provision (benefit) for income taxes differs from the amount that
would result from applying the federal statutory rate at December 31,
1994, 1995 and 1996 as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Statutory regular federal income tax rate (34.0%) (34.0%) (34.0%)
State income taxes, net of federal benefit 0.1 0.1 0.1
Loss due to deconsolidation (24.5) - -
Change in valuation allowance 57.7 33.6 36.1
Other 0.7 0.3 (2.2)
----- ----- -----
Total 0.0% 0.0% 0.0%
===== ===== =====
</TABLE>
Continued
F-26
<PAGE> 79
BIOLASE TECHNOLOGY, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Information at March 31, 1997 and for the
three-month periods ended March 31, 1996 and 1997 is unaudited)
11. Income Taxes, Continued:
The components of the deferred income tax assets as of December 31,
1995 and 1996 are as follows:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Property and equipment $ 320,965 $ 341,760
Reserves not currently deductible 370,389 280,972
Inventories 41,518 33,594
Capital loss carryforward 277,498 277,498
State taxes 770 544
Net operating losses 7,435,841 8,897,958
--------- ---------
8,446,981 9,832,326
Valuation allowance (8,446,981) (9,832,326)
--------- ---------
Total $ - $ -
========= =========
</TABLE>
The Company has established a valuation allowance against its deferred
tax assets due to the uncertainty surrounding the realization of such
assets. Management periodically evaluates the recoverability of the
deferred tax assets. At such time as it is determined that deferred tax
assets are realizable, the valuation allowance will be reduced.
At December 31, 1996, the Company had a capital loss carryforward of
$640,873, which will expire in 2000.
As of December 31, 1996, the Company had net operating loss
carryforwards for federal and state purposes of approximately
$22,748,000 and $12,511,000, respectively. The net operating loss
carryforwards begin expiring in 2002 and 1997, respectively. The
utilization of net operating loss carryforwards may be limited under
the provisions of Internal Revenue Code Section 382 and similar state
provisions.
Continued
F-27
<PAGE> 80
BIOLASE TECHNOLOGY, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Information at March 31, 1997 and for the
three-month periods ended March 31, 1996 and 1997 is unaudited)
12. Provision For Patents:
The Company included a charge to its 1994 operations of $958,850
representing a provision for the carrying value of its patents due to
uncertainties related to the future recoverability of such carrying
values. The Company's evaluation of its capitalized patent costs
considered such factors as reductions in sales during fiscal 1994,
extinguishment of debt which was used to acquire certain patents, and
the under-utilization of existing patents in various geographic regions
of the world.
13. Business Segment And Sales Concentrations:
The Company designs, develops, manufactures and markets advanced laser-
based products for dental and other surgical applications, and markets
and distributes endodontic products manufactured by third parties.
These activities comprise the Company's only business segment.
The Company has distributorship agreements for dental lasers in Europe,
the Middle East and the Far East. In 1994, 1995 and 1996, export sales
were $644,000, $807,000 and $328,000, respectively, of which 85%, 72%
and 80%, respectively, were sales to Europe.
Two customers accounted for $492,563 and $139,900 of consolidated sales
in 1994, respectively, two customers accounted for $473,268 and
$193,353 of consolidated sales in 1995, respectively, and one customer
accounted for $141,654 of consolidated sales in 1996.
F-28
<PAGE> 81
2,738,982 Shares
BIOLASE TECHNOLOGY, INC.
Common Stock
PROSPECTUS
_________, 1997
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations not contained in this Prospectus and,
if given or made, such information or representations must not be relied upon as
having been authorized by the Company or the Selling Stockholders. This
Prospectus does not constitute an offer of any securities other than those to
which it relates or an offer to sell, or a solicitation of an offer to buy, to
any person in any jurisdiction where such an offer or solicitation would be
unlawful. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that the information
contained herein is correct as of any time subsequent to the date hereof.
TABLE OF CONTENTS
Page
----
Available Information
Prospectus Summary
Risk Factors
Use of Proceeds
Price Range of Common Stock
Dividend Policy
Selected Consolidated
Financial Data
Management's Discussion
and Analysis of Financial
Condition and Results of
Operations
Business
Management
Principal and Selling
Stockholders
Description of Securities
Plan of Distribution
Legal Matters
Experts
Additional Information
Index to Consolidated
Financial Statements
<PAGE> 82
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
See forth below are the expenses estimated in connection with the
issuance and distribution of the Registrant's securities, other than
underwriting commissions and discounts.
Except for the SEC registration fee, all expenses are estimated.
<TABLE>
<S> <C>
SEC registration fee $ 3,009
Printing and engraving expenses 10,000
Accounting fees and expenses 25,000
Legal fees and expenses 25,000
Blue Sky filing fees and expenses 3,000
Transfer Agent's fees and expenses 1,000
Miscellaneous expenses 7,991
-----
Total $75,000
=======
</TABLE>
Item 14. Indemnification of Directors and Officers.
The Certificate of Incorporation and Bylaws of the Registrant indemnify its
officers and directors to the fullest extent permitted by Section 145 of the
Delaware General Corporation Law and applicable law. Section 145 of the Delaware
General Corporation Law makes provision for the indemnification of officers,
directors and other corporate agents in terms sufficiently broad to indemnify
such persons, under certain circumstances, for liabilities (including
reimbursement of expenses incurred) arising under the Securities Act of 1933, as
amended (the "Securities Act").
Item 15. Recent Sales of Unregistered Securities.
The following sets forth all sales of unregistered securities by the
Registrant within the past three years:
On September 30, 1994, the Company issued and sold an aggregate of
979,800 shares of its Common Stock, par value $.001 per share ("Common Stock"),
and 489,900 redeemable stock purchase warrants (the "1994 Warrants") in a
private placement to a group of offshore investors. Eurocapital Ltd. acted as
placement agent in the transaction. The net proceeds received by the Company
were $2,054,133, after placement agent commissions and nonaccountable expenses
aggregating $177,413 and direct expenses of $24,704. The Company also issued as
additional placement agent compensation 29,800 shares of Common Stock and 14,900
1994 Warrants.
In accordance with Rule 901 promulgated under the Securities Act,
the offer and sale of the 1,009,600 shares of Common Stock and the 504,800 1994
Warrants were not included within the terms "offer", "offer to sell", "sell",
"sale" and "offer to buy" as used in Section 5 of the Securities Act. Each of
the purchasers of such securities represented and warranted to and agreed with
the Company that, among other things, (a) such purchaser was not a U.S. person,
as defined in Regulation S ("Regulation S") promulgated under the Securities
Act, (b) the offer of such securities to such purchaser was made outside the
United States, (c) such purchaser was outside the United States at the time the
buy order for such securities was originated, (d) such purchaser would offer or
resell such securities only in compliance with the provisions of Regulation S
and all other applicable securities laws and regulations and would offer or
resell the securities in the United States or to or for the benefit of a U.S.
person, as defined in Regulation S, only if such securities were registered
under the Securities Act or an exemption from such registration was available,
and (e) such purchaser was acquiring such securities for investment purposes and
not with a view towards the distribution thereof. The placement agent certified
to the Company, among other things, that (i) no offer or sale of such securities
was made except in an offshore transaction, as defined in Regulation S, (ii) no
offer or sale of such securities was made to a U.S. person, and (iii) it engaged
in no directed selling efforts, as defined in Regulation S, in the United States
in connection with the offer and sale of such securities. Stop transfer
instructions with respect to the shares were given to the Company's transfer
agent.
On August 24, 1995, the Company called all 1994 Warrants for
redemption, and all of the 1994 Warrants were exercised prior to the redemption
date, as extended, of October 25, 1995. The Company received proceeds of
$820,300 from the exercise of the 504,800 1994 Warrants. No underwriters were
involved in the exercise.
In accordance with Rule 901 promulgated under the Securities Act,
the offer and sale of the 504,800 shares of Common Stock upon the exercise of
the 504,800 1994 Warrants were not included within the terms "offer", "offer to
sell", "sell", "sale" and "offer to buy" as used in Section 5 of the Securities
Act. The 1994 Warrants were exercised by persons who had given the
representations, warranties and agreements in connection with the offer and sale
of the 1994 Warrants. Each such person certified that such person was not a U.S.
person, that the 1994 Warrants were not being exercised on behalf of a U.S.
person, and that such person was exercising the 1994 Warrants outside of the
United States, and the shares of Common Stock issued upon exercise of the 1994
Warrants were not delivered within the United States.
On May 31, 1995, the Company issued and sold an aggregate of
2,000,000 shares of its Common Stock in a private placement to a group of
offshore investors. Eurocapital Ltd. acted as placement agent in the
transaction. The net proceeds received by the Company were $922,307, after
placement agent commissions and nonaccountable expenses aggregating $60,000 and
direct expenses of $17,693.
In accordance with Rule 901 promulgated under the Securities Act,
the offer and sale of the 2,000,000 shares of Common Stock were not included
within the terms "offer", "offer to sell", "sell", "sale" and "offer to buy" as
used in Section 5 of the Securities Act. Each of the purchasers of such shares
of Common Stock represented and warranted to and agreed with the Company that,
among other things, (a) such purchaser was not a U.S. person, (b) the offer of
such shares to such purchaser was made outside the United States, (c) such
purchaser was outside the United States at the time the buy order for such
shares was originated, (d) such purchaser would offer or resell such shares only
in compliance with the provisions of Regulation S and all other applicable
securities laws and regulations and would offer or resell such shares in the
United States or to or for the benefit of a U.S. person only if such securities
were registered under the Securities Act or an exemption from such registration
was available, and (e) such purchaser was acquiring such shares for investment
purposes and not with a view towards the distribution thereof. The placement
agent certified to the Company, among other things, that (i) all offers and
sales of such shares were made in offshore transactions, (ii) no offer or sale
of such shares was made to a U.S. person and (iii) it engaged in no directed
selling efforts in the United States in connection with the offer and sale of
such shares. Stop transfer instructions with respect to the shares were given to
the Company's transfer agent.
On July 26, 1995, the Company issued and sold 300,000 shares of
Common Stock in a private placement to an individual. The net proceeds received
by the Company were $370,400, after direct expenses of $4,600. No underwriters
were involved in the transaction.
In accordance with Rule 901 promulgated under the Securities Act,
the offer and sale of the 300,000 shares of Common Stock were not included
within the terms "offer", "offer to sell", "sell", "sale" and "offer to buy" as
used in Section 5 of the Securities Act. The purchaser of such shares of Common
Stock represented and warranted to and agreed with the Company that, among other
things, (a) such purchaser was not a U.S. person, (b) the offer of such shares
to such purchaser was made outside the United States, (c) such purchaser was
outside the United States at the time the buy order for such shares was
originated, (d) such purchaser would offer or resell such shares only in
compliance with the provisions of Regulation S and all other applicable
securities laws and regulations and would offer or resell such shares in the
United States or to or for the benefit of a U.S. person only if such securities
were registered under the Securities Act or an exemption from such registration
was available, and (e) such purchaser was acquiring such shares for investment
purposes and not with a view towards the distribution thereof. Stop transfer
instructions with respect to the shares were given to the Company's transfer
agent.
On October 16, 1996, the Company issued and sold an aggregate of 100
units, each consisted of one share of the Company's Series A 6% Redeemable
Cumulative Convertible Preferred Stock (the "Series A Preferred Stock") and
5,000 redeemable common stock purchase warrants expiring in 1998 which are
exercisable under certain conditions, in a private placement to a group of
accredited investors. PacVest Associates, Inc. ("PacVest") acted as placement
agent in the transaction. The net proceeds received by the Company were
$4,400,000, after placement agent commissions of $400,000 and direct expenses of
$200,000. The placement agent also received as additional compensation 90,910
stock purchase warrants expiring in 1998, and the Company issued an additional
100,000 stock purchase warrants expiring in 1998 to a director of PacVest in
connection with the transaction.
II-1
<PAGE> 83
Each share of Series A Preferred Stock was convertible into a
variable number of shares of Common Stock not exceed 18,182 shares. All such
stock purchase warrants are exercisable at $3.50 per share. On November 15,
1996, 99 of the 100 shares of the Series A Preferred Stock issued in the private
placement were converted into Common Stock, resulting in an aggregate conversion
to 1,800,018 shares of Common Stock. The remaining share of Series A Preferred
Stock may be converted into no less than 9,721 and no more than 18,054 shares of
Common Stock, based
II-2
<PAGE> 84
on the average closing price for the five trading days preceding, but not
including, the date on which the share is presented for conversion.
The offer and sale of the Series A Preferred Stock and the warrants
were exempt from the registration requirements of the Securities Act under
Sections 4(2) and 4(6) as (i) a transaction by an issuer not involving a public
offering, and (ii) a transaction involving offers or sales by an issuer solely
to accredited investors that meet certain requirements under the Securities Act.
Each investor represented to and agreed with the Company that, among other
things, (i) the investor was an accredited investor, (ii) the investor was
acquiring the shares of Common Stock for its own account, for investment, and
not for resale, distribution or disposition, and (iii) the investor will offer
or sell the shares of Common Stock only if registered under the Securities Act
or pursuant to an exemption from the registration requirements of the Securities
Act. The issuance of the underlying Common Stock on conversion of the Series A
Preferred Stock was exempt from the registration requirements of the Securities
Act under Section 3(a)(9) as an exchange of securities by an issuer with its
existing securityholders exclusively where no commission or other remuneration
was paid or given directly or indirectly for soliciting such exchange. The
certificates representing the shares so issued have restrictive legends endorsed
thereon reflecting the restrictions on transferability arising out of the
forgoing matters, and the Company has issued stop transfer instructions to its
transfer agent.
On February 28, 1997, the Company issued and sold 200,000 shares of
its Common Stock to an accredited investor in a private placement. Net proceeds
from the private placement were $720,000 after direct expenses of $5,000. No
underwriters were involved in the transaction.
The offer and sale of Common Stock were exempt from the registration
requirements of the Securities Act under Sections 4(2) and 4(6) as (i) a
transaction by an issuer not involving a public offering, and (ii) a transaction
involving offers or sales by an issuer solely to an accredited investor that
meets certain requirements under the Act. The investor represented to and agreed
with the Company that, among other things, (i) the investor was an accredited
investor, (ii) the investor was acquiring the shares of Common Stock for its own
account, for investment, and not for resale, distribution or disposition, and
(iii) the investor will offer or sell the shares of Common Stock only if
registered under the Securities Act or pursuant to an exemption from the
registration requirements of the Securities Act. The certificates representing
the shares so issued have restrictive legends endorsed thereon reflecting the
restrictions on transferability arising out of the forgoing matters, and the
Company has issued stop transfer instructions to its transfer agent.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
3. Articles of Incorporation and Bylaws:
3.1 Restated Certificate of Incorporation, as amended.
3.2 Amended and Restated Bylaws.
II-3
<PAGE> 85
4. Instruments Defining the Rights of Securities
Holders:
4.1 Certificate of Designations, Preferences and
Rights of Series A 6% Redeemable Cumulative
Convertible Preferred Stock.(1)
4.2 Common Stock Purchase Warrants (Unit Warrants).(2)
4.3 Common Stock Purchase Warrants (Agent
Warrants).(2)
5. Opinions:
5.1 Opinion of Shapiro, Rosenfeld & Close.*
10. Material Contracts:
10.1 Premises Lease for 981 Calle Amanecer, San
Clemente, California.(3)
10.9 1992 Stock Option Plan.(3)
10.18a First Amendment to Amended and Restated 1993 Stock
Option Plan.(4)
10.19 Amended and Restated 1993 Stock
Compensation Plan.(5)
10.20 Form of 1993 Stock Option Agreement.(5)
10.21 Termination Agreement between the Registrant, Guy
Levy and Francois Levy dated February 23, 1994.(5)
10.22 Placement Agent Agreement between the Registrant
and EuroCapital, Ltd. dated July 22, 1994.(6)
10.24 Placement Agent Agreement between the Registrant
and EuroCapital, Ltd. dated May 23, 1995.(7)
10.25 Amended and Restated 1993 Stock Option Plan.(7)
10.26 Distribution Agreement between the Registrant and
Orbis High Tech Dental GmbH.(2)**
21. Subsidiaries
23. Consents of Experts and Counsel:
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Shapiro, Rosenfeld & Close (contained
in Exhibit 5.1).*
-----------------
* To be filed by amendment.
** Portions of this Agreement have been omitted pursuant to a
confidentiality request filed with the Securities and
Exchange Commission.
(1) Filed with the Registrant's Quarterly Report on Form 10-QSB
dated November 19, 1996 and incorporated by reference.
(2) Filed with the Registrant's Annual Report on Form 10-KSB
dated April 11, 1997 and incorporated by reference.
(3) Filed with the Registrant's Registration Statement on Form
S-1 dated October 9, 1992 and incorporated by reference.
(4) Filed with the Registrant's Annual Report on Form 10-KSB
dated May 6, 1996 and incorporated by reference.
(5) Filed with the Registrant's Annual Report on Form 10-K dated
April 14, 1994 and incorporated by reference.
II-4
<PAGE> 86
(6) Filed with the Registrant's Quarterly Report on Form 10-Q
dated November 17, 1994 and incorporated by reference.
(7) Filed with the Registrant's Quarterly Report on Form 10-QSB
dated September 15, 1995 and incorporated by reference.
(b) Financial Statement Schedules.
II - Consolidated Valuation and Qualifying Accounts and
Reserves
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the
registration statement (or the most recent
post-effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth in
the registration statement;
(iii) To include any material information with respect
to the plan of distribution not previously
disclosed in the registration statement or any
material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the Certificate of Incorporation, the Delaware
General Corporation Law or otherwise, the Registration has been informed that in
the opinion of the commission such indemnification as against public policy as
expressed in the Act, and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
II-5
<PAGE> 87
person in connection with the securities being registered hereunder, the
Registrant will, unless in the opinion of its counsel the matter has already
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it against public
policy as expressed in the Act, and shall be governed by the final adjudication
of such issue.
The undersigned Registrant hereby undertakes:
(1) That for purposes of determining any liability under the Act,
the information omitted form the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424B(b)(1) or (4) or 497(h)
under the Act, as amended, shall be deemed to be part of this registration as of
the time it was declared effective.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, each post-effective amendment shall be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-6
<PAGE> 88
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San
Clemente, State of California on the 10th day of July, 1997.
REGISTRANT:
BIOLASE TECHNOLOGY, INC.
By: /s/ DONALD A. LA POINT
-------------------------------------
Donald A. La Point
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Federico Pignatelli and Stephen R.
Tartamella, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place, and stead, in any and all capacities, to sign any and all amendments
(including post-effect amendments) to this Registration Statement, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agent, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
In accordance with the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ DONALD A. LA POINT President, Chief Executive Officer July 10, 1997
- ------------------------- (Principal Executive Officer) and
Donald A. La Point a Director
/s/ STEPHEN R. TARTAMELLA Vice President, Chief Financial July 10, 1997
- ------------------------- Officer (Principal Financial and
Stephen R. Tartamella Accounting Officer) and Secretary
/s/ FEDERICO PIGNATELLI Chairman of the Board of Directors July 10, 1997
- -------------------------
Federico Pignatelli
/s/ GEORGE V. D'ARBELOFF Director July 10, 1997
- -------------------------
George V. d'Arbeloff
</TABLE>
II-7
<PAGE> 89
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
BioLase Technology, Inc.
Our report, which contains an explanatory paragraph regarding the Company's
ability to continue as a going concern, on the consolidated financial statements
of BioLase Technology, Inc. and its subsidiary is included on page F-2 of this
Form S-1. In connection with our audit of such consolidated financial
statements, we have also audited the related financial statement schedule listed
in the index on page F-1 of this Form S-1.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Newport Beach, California
March 4, 1997
S-1
<PAGE> 90
KPMG Letterhead
INDEPENDENT AUDITORS' REPORT
The Board of Directors
BioLase Technology, Inc.:
Under the date of March 17, 1995, we reported on the consolidated statements of
operations, changes in stockholders' equity and cash flows of BioLase
Technology, Inc. and subsidiaries for the year ended December 31, 1994. In
connection with our audit of the aforementioned consolidated financial
statements, we also have audited the related consolidated financial statement
schedule as of December 31, 1994 and for the year then ended. This consolidated
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on this consolidated financial
statement schedule based on our audit.
In our opinion, such consolidated financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
The audit report on the consolidated financial statements of BioLase Technology,
Inc. and subsidiaries referred to above contains an explanatory paragraph that
states that the Company's consolidated financial statements have been prepared
assuming the Company will continue as a going concern. The Company has suffered
recurring losses from operations and shows a need for continued funding that
raises substantial doubt about its ability to continue as a going concern. The
consolidated financial statements and financial statement schedule do not
include any adjustments that might result from the outcome of this uncertainty.
KPMG PEAT MARWICK LLP
Orange County, California
March 17, 1995
S-2
<PAGE> 91
BIOLASE TECHNOLOGY, INC.
SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
AND RESERVES
(Information at March 31, 1997 and for the
three-month periods ended March 31, 1996 and 1997 is unaudited)
<TABLE>
<CAPTION>
Allowance For
Doubtful Accounts Slow-Moving Inventory
----------------- ---------------------
<S> <C> <C>
Balance at January 1, 1994 $ 248,135 $ 839,445
Charged (credited) to operations (10,335) 23,460
Write-offs (138,234) (285,773)
--------- ---------
Balance at December 31, 1994 99,566 577,132
Charged to operations 337 24,500
Write-offs (35,286) (110,297)
--------- ---------
Balance at December 31, 1995 64,617 491,335
Charged (credited) to operations (5,900) 37,663
Write-offs (36,760) (43,844)
--------- ---------
Balance at December 31, 1996 21,957 485,154
Charged to operations -- --
Recoveries 973 --
--------- ---------
Balance at March 31, 1997 $ 22,930 $ 485,154
========= =========
</TABLE>
S-3
<PAGE> 1
EXHIBIT 3.1
RESTATED
CERTIFICATE OF INCORPORATION
OF
LASER MEDICAL TECHNOLOGY, INC.
Laser Medical Technology, Inc. (the "Corporation"), a corporation
organized and existing under the laws of the State of Delaware, hereby certifies
as follows:
1. The name of the Corporation was Endo Technic International
Corporation. Endo Technic International Corporation was originally incorporated
as Pamplona Capital Corp., and the original Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of Delaware (the
"Delaware Secretary") on February 10, 1987. A Certificate of Amendment of the
Restated Certificate of Incorporation was filed with the Delaware Secretary on
March 2, 1992, which amendment changed the name of the Corporation to Laser
Medical Technology, Inc. and reflected a one for two reverse stock split.
Another Certificate of Amendment was filed with the Delaware Secretary on June
14, 1993, which amendment restricted revision of the Bylaws and made provisions
for a staggered Board of Directors. A Restated Certificate of Incorporation was
filed with the Delaware Secretary on February 15, 1994, effecting a one-for-four
reverse stock split.
2. This Restated Certificate of Incorporation restates,
integrates and amends the Certificate of Incorporation of this Corporation.
3. The text of the Certificate of Incorporation as amended or
supplemented heretofore is further amended hereby to read as herein set forth in
full:
FIRST: The name of the Corporation is BioLase Technology, Inc.
SECOND: The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
THIRD: The total number of shares of stock which the Corporation
shall have authority to issue is FIFTY ONE MILLION (51,000,000) shares of which
stock FIFTY MILLION (50,000,000) shares of $.001 par value shall be common stock
and of which ONE MILLION (1,000,000) shares of $.001 par value shall be
preferred stock. Upon the date of filing hereof each four outstanding shares of
common stock is combined, reconstituted and converted into one new share of
common stock. In lieu of issuing fractional shares, fractional shares shall be
rounded to the next highest whole share.
FOURTH: The Board of Directors is authorized, subject to
limitations prescribed by law, to provide for the issuance of the shares of
preferred stock in one or more series and by filing a certificate pursuant to
the applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in each such series, and to fix the designation,
powers, preferences and rights of the shares of each such series and the
qualifications, limitations or restrictions thereof.
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The authority of the Board with respect to each series shall
include, but not be limited to, determination of the following:
(a) The number of shares constituting that series and the
distinctive designation of that series;
(b) The dividend rate on the shares of that series whether
dividends shall be cumulative, and, if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends on shares of that
series;
(c) Whether that series shall have voting rights, in addition to
the voting rights provided by law, and, if so, the terms of such voting rights;
(d) Whether that series shall have conversion privileges, and, if
so, the terms and conditions of such conversion, including provision for
adjustment of the conversion rate in such events as the Board of Directors shall
determine;
(e) Whether or not the shares of that series shall be redeemable,
and, if so, the terms and conditions of such redemption, including the date upon
or after which they shall be redeemable, and the amount per share payable in
case of redemption, which amount may vary under different conditions, and at
different redemption dates;
(f) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms and
amount of such sinking fund;
(g) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment of shares
of that series;
(h) Any other relative rights, preferences and limitations of
that series, unless otherwise provided by the certificate of determination.
FIFTH: Election of directors at an annual or special meeting of
stockholders need not be by written ballot unless the bylaws of the Corporation
shall otherwise provide. The number of directors of the Corporation which shall
constitute the whole Board of Directors shall be such as from time to time shall
be fixed by or in the manner provided in the bylaws.
SIXTH: A director of the Corporation shall not be personally
liable for monetary damages to the Corporation or its stockholders for breach of
any fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders; (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) under Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derives an
improper personal benefit.
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SEVENTH: A director or officer of the Corporation shall not be
disqualified by his or her office from dealing or contracting with the
Corporation as a vendor, purchaser, employee, agent or otherwise. No
transaction, contract or act of the Corporation shall be void or voidable or in
any way affected or invalidated by reason of the fact that any director or
officer of the Corporation is a member of any firm, a stockholder, director or
officer of any corporation or trustee or beneficiary of any trust that is in any
way interest in such transaction, contract or act. No director or officer shall
be accountable or responsible to the Corporation for or in respect to any
transaction, contract or act of the Corporation or for any gain or profit
directly or indirectly realized by him or her by reason of the fact that he or
she or any firm in which he or she is a member of any corporation of which he or
she is stockholder, director, or officer, or any trust of which he or she is a
trustee, or beneficiary, is interested in such transaction, contract or act;
provided the fact that such director or officer or such firm, corporation,
trustee, or beneficiary of such trust, is so interested shall have been
disclosed or shall have been known to the members of the Board of Directors as
shall be present at any meeting at which action upon such contract, transaction
or act shall have been taken. Any director may be counted in determining the
existence of quorum at any meeting of the Board of Directors which shall
authorize or take action in respect to any such contract, transaction or act,
and may vote to authorize, ratify or approve any such contract, transaction or
act, and any officer of the Corporation may take any action within the scope of
his or her authority, respecting such contract, transaction or act with like
force and effect as if he or she or any firm of which he or she is a member, or
any corporation of which he or she is a stockholder, director or officer or any
trust in which he or she is a trustee or beneficiary, were not interested in
such transaction, contract or act. Without limiting or qualifying the foregoing,
if in any judicial or other inquiry, suit, cause or proceeding, the question of
whether a director or officer of the Corporation has acted in good faith is
material, and notwithstanding any statute or rule of law or equity to the
contrary (if any there be) his or her good faith shall be presumed in the
absence of proof to the contrary by clear and convincing evidence.
EIGHTH: In furtherance and not in limitation of the powers
conferred by the laws of the State of Delaware, the Board of Directors of the
Corporations expressly authorized and empowered to make, alter and repeal the
Bylaws of the Corporation, subject to the power of the stockholders of the
Corporation to alter or repeal any Bylaw made by the Board of Directors.
NINTH: Whenever a compromise or arrangement is proposed between
the Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of Title 8 of the Delaware Code,
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be, to
be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
this Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
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TENTH: The Corporation reserves the right to amend and repeal any
provision contained in this Certificate of Incorporation in the manner
prescribed by the laws of the State of Delaware. All rights herein conferred are
granted subject to this reservation.
ELEVENTH: The location of the registered office of this
Corporation within the State of Delaware is 1013 Centre Road, City of
Wilmington, County of New Castle, and the name of the registered agent at such
address is Corporation Service Company.
This Restated Certificate of Incorporation was duly adopted by
the Board of Directors in accordance with Sections 242 and 245 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said BioLase Technology, Inc., has caused
this Certificate to be signed by the President and attested by the Secretary,
this 19th day of May, 1994.
Laser Medical Technology, Inc.
By: /s/ Ira J. Fertik
----------------------------
President
By: /s/ Michael B. Jeffers
----------------------------
Secretary
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EXHIBIT 3.2
BIOLASE TECHNOLOGY, INC.
(a Delaware corporation)
AMENDED AND RESTATED BYLAWS
ARTICLE I
OFFICES
Section 1.1. Registered Office.
The registered office of BioLase Technology, Inc. (the
"Corporation") in the State of Delaware shall be located at the principal place
of business in that state of the corporation or individual acting as the
Corporation's registered agent in the State of Delaware.
Section 1.2. Principal Executive Office.
The principal executive office of the Corporation for the
transaction of the business of the Corporation shall be at such place as may be
established by the Board of Directors (the "Board"). The Board is granted full
power and authority to change said principal executive office from one location
to another.
Section 1.3. Other Offices.
The Corporation may have other offices, either within or without
the State of Delaware, at such place or places as the Board from time to time
may designate or the business of the Corporation may require.
ARTICLE II
MEETING OF STOCKHOLDERS
Section 2.1. Date, Time and Place.
Meetings of stockholders of the Corporation shall be held on such
date and at such time and place, either within or without the State of Delaware,
as shall be designated by the Board and stated in the written notice of the
meeting or in a duly executed written waiver of notice of the meeting.
Section 2.2. Annual Meetings.
Annual meetings of stockholders for the election of directors to
the Board and for the transaction of such other business as may be stated in the
written notice of the meeting or as may properly come before the meeting shall
be held on such date and at such time and place, either within or without the
State of Delaware, as shall be designated by the Board and stated in the written
notice of the meeting or in a duly executed written waiver of notice of the
meeting.
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Section 2.3. Special Meetings.
Special meetings of stockholders for any purpose or purposes,
unless otherwise prescribed by the General Corporation Law of the State of
Delaware, the Certificate of Incorporation or these Bylaws, may be called by the
Board, the Chairman, the Chief Executive Officer ("CEO") or the President.
Special meetings of stockholders shall be called by the Board or the Secretary
at the written request of stockholders holding a majority of the aggregate
number of shares of the capital stock of the Corporation issued and outstanding
and entitled to vote at such meeting. Such written request shall state the
purpose or purposes for which the special meeting is called. The place, date and
time of a special meeting shall be fixed by the Board or the officer calling the
meeting and shall be stated in the written notice of such meeting, which notice
shall state the purpose or purposes for which the meeting is called. Business
transacted at a special meeting shall be confined to the purpose or purposes
stated in the written notice of meeting and matters germane thereto.
Section 2.4. Notice of Meetings.
Written notice of the place, date and time of, and the general
nature of the business to be transacted at a meeting of stockholders shall be
given to each stockholder of record entitled to vote at such meeting, in the
manner prescribed by Section 6.1 of these Bylaws, not less than ten (10) nor
more than sixty (60) days prior to the date of the meeting.
Section 2.5. Stockholder List.
The Secretary or other officer in charge of the stock ledger of
the Corporation shall prepare and make, at least ten (10) days prior to a
meeting of stockholders, a complete list of stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares of stock of the Corporation registered in
the name of each stockholder. Such list shall be open to examination by any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list also shall be produced and kept at the
place and time of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 2.6. Voting Rights.
In order that the Corporation may determine the stockholders
entitled to notice of, and to vote at, a meeting of stockholders or at any
adjournment(s) thereof or to express consent or dissent to corporate action in
writing without a meeting, the Board may fix a record date in the manner
prescribed by Section 9.1 of these Bylaws. Each stockholder entitled to vote at
a meeting of stockholders or to express consent or dissent to corporate action
in writing without a meeting may authorize another person or persons to act for
such stockholder by proxy in the manner prescribed by Section 2.7 of these
Bylaws. Except as specifically provided otherwise by the General Corporation Law
of the State of Delaware, the Certificate of Incorporation, or these Bylaws,
each holder of capital stock entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting
shall be entitled to one vote for each share of such stock registered in such
stockholder's name on the books and records of the Corporation as of the record
date.
Section 2.7. Proxies.
Each proxy shall be in writing and shall be executed by the
stockholder giving the proxy or by such stockholder's duly authorized attorney.
No proxy shall be voted or acted upon after three (3) years from its date,
unless the proxy expressly provides for a longer period.
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Unless and until voted, every proxy shall be revocable at the pleasure of the
person who executed it or of his or her legal representative or assigns, except
in those cases where an irrevocable proxy permitted by the General Corporation
Law of the State of Delaware shall have been given.
Section 2.8. Quorum and Adjournment(s) of Meetings.
Except as specifically provided otherwise by the General
Corporation Law of the State of Delaware, the Certificate of Incorporation, or
these Bylaws, a majority of the aggregate number of shares of each class of
capital stock issued and outstanding and entitled to vote, present in person or
represented by proxy, shall constitute a quorum for the transaction of business
at a meeting of stockholders. If such majority shall not be present in person or
represented by proxy at a meeting of stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have the power to
adjourn the meeting from time to time until holders of the requisite number of
shares of stock entitled to vote at the meeting shall be present in person or
represented by proxy. When a meeting of stockholders is adjourned to another
place, date or time, notice need not be given of the adjourned meeting if the
place, date, and time of such adjourned meeting are announced at the meeting at
which the adjournment is taken. At any such adjourned meeting at which a quorum
shall be present in person or represented by proxy, stockholders may transact
any business that might have been transacted at the meeting as originally
noticed, but only those stockholders entitled to vote at the meeting as
originally noticed shall be entitled to vote at any adjournment(s) thereof. If
the adjournment is for more than thirty (30) days, or if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
Section 2.9. Required Vote.
Except as specifically provided otherwise by the General
Corporation Law of the State of Delaware, the Certificate of Incorporation, or
these Bylaws, the affirmative vote of a majority of the shares of each class of
capital stock present in person or represented by proxy at a meeting of
stockholders at which a quorum is present and entitled to vote on the subject
matter (including, but not limited to, the election of directors to the Board)
shall be the act of the stockholders with respect to the matter voted upon.
Section 2.10. Action Without Meeting.
Notwithstanding contrary provisions of these Bylaws covering
notices and meetings, any action required or permitted to be taken at an annual
or special meeting of stockholders may be taken by stockholders without a
meeting, without prior notice, and without a vote if a consent in writing,
setting forth the action so taken, shall be signed by the holders of shares of
capital stock issued and outstanding and entitled to vote on the subject matter
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting of stockholders at which all such
shares of stock entitled to vote thereon were present and voted. Prompt notice
of the taking of corporate or other action by stockholders without a meeting by
less than unanimous written consent of stockholders shall be given to those
stockholders who have not consented in writing.
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ARTICLE III
DIRECTORS
Section 3.1. Board of Directors.
The business and affairs of the Corporation shall be managed by,
or under the direction of, a Board of Directors. The Board may exercise all such
powers of the Corporation and do all such lawful acts and things on its behalf
as are not by the General Corporate Law of the State of Delaware, the
Certificate of Incorporation or these Bylaws directed or required to be
exercised or done by stockholders.
Section 3.2. Number.
The number of directors which shall constitute the whole Board
shall be fixed from time to time by the resolution of the Board. In no event
shall the total number of directors which shall constitute the whole Board be
fixed by the Board at less than three (3) or more than five (5). With the
exception of the initial Board which shall be elected by the incorporator of the
Corporation, and except as provided otherwise in these Bylaws, directors shall
be elected at the annual meeting of stockholders. Each director shall hold
office until the annual meeting of stockholders next succeeding his or her
election or appointment and until his or her successor is elected and qualified
or until his or her earlier resignation or removal.
Section 3.3. Resignation and Removal.
Any director or member of a committee of the Board may resign at
any time upon written notice to the Board, the Chairman of the Board, the CEO or
the President. Unless specified otherwise in the notice, such resignation shall
take effect upon receipt of the notice by the Board, the Chairman of the Board,
the CEO or the President. The acceptance of a resignation shall not be necessary
to make it effective. Any director may be removed, either with or without cause,
as provided by the General Corporation Law of the State of Delaware.
Section 3.4. Vacancies and Newly Created Directorships.
Vacancies occurring for any reason and newly-created
directorships resulting from an increase in the authorized number of directors
which shall constitute the whole Board, as fixed pursuant to Section 3.2 of
these Bylaws, shall be filled by the election of a new director or directors by
a majority of the remaining members of the Board of Directors, although such
majority is less than a quorum, or by a plurality of votes cast at a special
meeting of stockholders called for such purpose, Any director so chosen shall
hold office until the annual meeting of stockholders next succeeding his or her
election or appointment and until his or her successor shall be elected and
qualified, or until his or her earlier resignation or removal.
ARTICLE IV
MEETINGS OF THE BOARD OF DIRECTORS
Section 4.1. Date, Time and Place.
Meetings of the Board shall be held on such date and at such time
and place, either within or without the State of Delaware, as shall be
determined by the Board pursuant to these Bylaws.
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Section 4.2. Annual Meetings.
After the annual meeting of stockholders, the newly-elected Board
may hold a meeting, on such date and at such time and place as shall be
determined by the Board, for the purpose of organization, election of officers
and such other business that may properly come before the meeting. Such meeting
may be held without notice.
Section 4.3. Regular Meetings.
Regular meetings of the Board may be held without notice on such
date and at such time and place as shall be determined from time to time by the
Board.
Section 4.4. Special Meetings.
Special meetings of the Board may be held at any time upon the
call of the Chairman of the Board, the CEO, the President or the Secretary by
means of oral, telephonic, written, facsimile or other similar notice, duly
given, delivered, sent or mailed to each director at least 48 hours prior to the
special meeting, in the manner prescribed by Section 6.1 of these Bylaws.
Special meetings of the Board may be held at any time without notice if all of
the directors are present or if those directors not present waive notice of the
meeting in writing either before or after the date of the meeting.
Section 4.5. Quorum.
A majority of the whole Board as fixed pursuant to Section 3.2 of
these Bylaws shall constitute a quorum for the transaction of business at a
meeting of the Board. If a quorum shall not be present at a meeting of the
Board, the directors present thereat may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present.
Section 4.6. Required Vote.
Except as specifically provided otherwise by the General
Corporation Law of the State of Delaware or the Certificate of Incorporation,
the affirmative vote of a majority of the directors present at a meeting of the
Board at which a quorum is present shall be the act of the Board with respect to
the matter voted upon.
Section 4.7. Action Without Meeting.
Any action required or permitted to be taken at a meeting of the
Board, or committee thereof, may be taken by directors without a meeting if all
of the members of the Board, or committee thereof, consent thereto in writing
and such writing is filed with the minutes of proceedings of the Board, or
committee thereof.
Section 4.8. Telephone Meetings.
Members of the Board, or any committee thereof, may participate
in a meeting of the Board, or committee thereof, by means of conference
telephone or similar communications equipment by means of which all of the
members participating in the meeting can hear each other. Participation by
members of the Board, or committee thereof, by such means shall constitute
presence in person of such members at such meeting.
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ARTICLE V
COMMITTEES OF THE BOARD OF DIRECTORS
Section 5.1. Designation and Powers.
The Board may designate one or more committees from time to time
in its discretion, by resolution passed by the affirmative vote of a majority of
the whole Board as fixed pursuant to Section 3.2 of these Bylaws. Each committee
shall consist of one or more of the directors on the Board. The Board may
designate one or more directors as alternate members of any committee who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not such member or members constitute a quorum, may unanimously appoint
another member of the Board to act at the meeting in the place of any such
absent or disqualified member. Any such committee, to the extent provided in the
resolution of the Board, shall have and may exercise all of the powers and
authority of the Board in the management of the business and affairs of the
Corporation and may authorize the corporate seal of the Corporation affixed to
all papers which may require it; but no such committee shall have the power or
authority in reference to amending the Certificate of Incorporation or these
Bylaws, adopting an agreement of merger or consolidation, recommending to
stockholders the sale, lease, or exchange of all or substantially all of the
Corporation's assets, or recommending to stockholders a dissolution of the
Corporation or a revocation of a dissolution; and, unless the resolution of the
Board expressly so provides, no such committee shall have the power or authority
to declare a dividend or to authorize the issuance of stock of the Corporation
or any class or series of stock. Each committee shall keep regular minutes of
its meetings and shall report the same to the Board when requested to do so.
ARTICLE VI
NOTICES
Section 6.1. Delivery of Notice.
Notices to stockholders and, except as permitted below, to
directors on the Board shall be in writing and may be delivered by mail or by
messenger. Notice by mail shall be deemed to be given at the time when such
notice is deposited in a United States post office or letter box, enclosed in a
postage-paid sealed wrapper, and addressed to a stockholder or director at his
respective address appearing on the books and records of the Corporation, unless
such stockholder or director shall have filed with the Secretary a written
request that notices intended for such stockholder or director be mailed or
delivered to some other address, in which case the notice shall be mailed to or
delivered at the address designated in such request. Notice by messenger shall
be deemed to be given when such notice is delivered to the address of a
stockholder or director as specified above. Notices to directors also may be
given orally in person or by telephone (promptly confirmed in writing), or by
telex, overnight courier or facsimile transmission or other similar means, or by
leaving the notice at the residence or usual place of business of a director.
Notice by oral communication (promptly confirmed in writing), telex, overnight
courier or facsimile transmission or other similar means shall be deemed to be
given upon dispatch of such notice. Notice by messenger shall be deemed to be
given when such notice is delivered to a director's residence or usual place of
business. Notices, requests, and other communications required or permitted to
be given or communicated to the Corporation by the Certificate of Incorporation,
these Bylaws, or any other agreement shall be in writing and may be delivered by
messenger, United States mail, telex, overnight courier or facsimile
transmission or other similar means. Notice to the Corporation shall be deemed
to be given upon actual receipt of such notice by the Corporation.
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Section 6.2. Waiver of Notice.
Whenever notice is required to be given by the General
Corporation Law of the State of Delaware, the Certificate of Incorporation, or
these Bylaws, a written waiver of notice signed by the person entitled thereto,
whether before or after the time stated in the notice, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of stockholders, Board, or committee of the Board
need be specified in any written waiver of notice.
ARTICLE VII
OFFICERS
Section 7.1. Officers.
At its annual meeting, or at such other meeting as it may
determine, or by unanimous written consent of the directors without meeting, the
Board shall elect such officers as the Board from time to time may designate or
the business of the Corporation may require. The Chairman of the Board shall be
selected from among the directors on the Board, but no other executive officer
need be a member of the Board. Any number of offices may be held by the same
person.
Section 7.2. Other Officers and Agents.
The Board also may elect such other officers and agents as the
Board from time to time may determine to be advisable. Such officers and agents
shall serve for such terms, exercise such powers, and perform such duties as
shall be specified from time to time by the Board.
Section 7.3. Tenure, Resignation, Removal and Vacancies.
Each officer of the Corporation shall hold his or her office
until his or her successor is elected and qualified, or until his or her earlier
resignation or removal; provided, that if the term of office of any officer
elected pursuant to Section 7.2 of these Bylaws shall have been fixed by the
Bylaws or determined by the Board or other governing body, such person shall
cease to hold office no later than the date of expiration of such term,
regardless of whether any other person shall have been elected or appointed to
succeed such person. Each officer shall hold his or her office until his or her
successor is elected and qualified or until his or her earlier resignation or
removal. Any officer elected by the Board may be removed at any time, with or
without cause, by the Board; provided, that any such removal shall be without
prejudice to the rights, if any, of the officer so employed under any employment
contract or other agreement with the Corporation. Any officer may resign at any
time upon written notice to the Board, the Chairman of the Board, the CEO or the
President. Unless specified otherwise in the notice, such resignation shall take
effect upon receipt of the notice by the Board, the Chairman of the Board, the
CEO or the President. The acceptance of the resignation shall not be necessary
to make it effective. Any vacancy occurring in any office of the Corporation by
death, resignation, removal or otherwise shall be filled by the Board and such
successor or successors shall hold office for such term as may be specified by
the Board.
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Section 7.4. Authority and Duties.
All officers and agents, as between themselves and the
Corporation, shall have such authority and perform such duties in the management
of the Corporation as may be provided in these Bylaws and as generally pertain
or are necessarily incidental to the particular office or agency. In addition to
the powers and duties hereinafter specifically prescribed for certain officers
of the Corporation, the Board from time to time may impose or confer upon any of
the officers such additional duties and powers as the Board may see fit, and the
Board from time to time may impose or confer any or all of the duties and powers
hereinafter specifically prescribed for any officer upon any other officer or
officers. The Board may give general authority to any officer to affix the
corporate seal of the Corporation and to attest the affixing by his or her
signature.
Section 7.5. The Chairman of the Board.
The Chairman of the Board shall act as chairman at all meetings
of the stockholders at which he or she is present and shall preside at all
meetings of the Board of Directors at which he or she is present. In the event
of disability or absence of the Chairman of the Board, these duties shall be
performed by the Vice Chairman or a director selected by the Board. The Chairman
of the Board shall provide general leadership in matters of policy and long-term
programs, and shall have the right to delegate authority to the other officers
of the Corporation. Except when by law the signature of the CEO or President is
required, the Chairman of the Board shall possess the same power as the CEO and
the President to sign all certificates, contracts and other instruments of the
Corporation which may be authorized by the Board of Directors.
Section 7.6. The Chief Executive Officer.
The Chief Executive Officer ("CEO"), subject to the control of
the Board of Directors, shall have general and active supervision of the
business and affairs of the Corporation, shall sign certificates, contracts and
other instruments of the Corporation as authorized, and shall perform all such
other duties as are properly required of him or her by the Board of Directors or
by the Chairman of the Board. The CEO shall have the right to delegate authority
to the other officers of the Corporation.
Section 7.7. The President.
The President, subject to the control of the Board of Directors
and the CEO, shall perform such duties as are properly required of him or her by
the Board of Directors, and shall sign such certificates, contracts and other
instruments of the Corporation as are authorized specifically or generally by
the Board of Directors or the CEO. The President shall have the right to
delegate authority to the other officers of the Corporation.
Section 7.8. The Vice President(s).
The several Vice Presidents shall perform the
duties and have the powers as may, from time to time, be assigned to them by the
Board of Directors, the Chairman of the Board, the CEO or the President.
Section 7.9. The Treasurer.
The Treasurer shall have the care and custody of all the funds of
the Corporation and shall deposit the same in such banks or other depositories
as the Board of Directors, or any officer or officers thereunder duly authorized
by the Board of Directors, shall, from time to time,
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direct or approve. He or she shall keep a full and accurate account of all
monies received and paid on account of the Corporation, and shall render a
statement of his accounts whenever the Board of Directors shall require. He or
she shall perform all other necessary acts and duties in connection with the
administration of the financial affairs of the Corporation, and shall generally
perform all the duties usually appertaining to the affairs of the treasurer of a
corporation. When required by the Board of Directors, he or she shall give bonds
for the faithful discharge of his or her duties in such sums and with such
sureties as the Board of Directors shall approve. In the absence or disability
of the Treasurer, the person designated by the CEO or the President shall
perform his or her duties.
Section 7.10. The Secretary.
The Secretary shall attend to the giving of notice of all
meetings of stockholders and of the Board of Directors and committees thereof,
and shall keep minutes of all proceedings at meetings of the stockholders, of
the Board of Directors and of all meetings of such other committees of the Board
of Directors as shall designate him or her to so serve. The Secretary shall have
charge of the corporate seal and shall have authority to attest any and all
instruments or writings to which the same may be affixed. He or she shall keep
and account for all books, documents, papers and records of the Corporation,
except those for which some other officer or agent is properly accountable. He
or she shall generally perform all the duties usually appertaining to the office
of secretary of a corporation. In the absence or disability of the Secretary,
the person designated by the CEO or the President shall perform his or her
duties.
Section 7.11. The Assistant Secretary(ies).
The Assistant Secretary, if any be so appointed by the Board, or
if there be more than one, the Assistant Secretaries, shall perform such duties
as may be specifically assigned to them from time to time by the Board, the CEO
or the President. In case of the absence or disability of the Secretary, and if
the Board, the CEO or the President has so authorized, the Assistant Secretary,
or if there be more than one Assistant Secretary, such Assistant Secretary as
the Board, the CEO or the President shall designate, shall perform the duties of
the office of the Secretary.
ARTICLE VIII
CERTIFICATES OF STOCK
Section 8.1. Form and Signature.
The stock certificates representing the stock of the Corporation
shall be in such form or forms not inconsistent with the General Corporation Law
of the State of Delaware, the Certificate of Incorporation and these Bylaws as
the Board shall approve from time to time. Stock certificates shall be numbered,
the certificates for the shares of stock to be numbered consecutively, and shall
be entered in the books and records of the Corporation as such certificates are
issued. No certificate shall be issued for any share until the consideration
therefor has been fully paid. Stock certificates shall exhibit the holder's
name, certify the class and series of stock and the number of shares in such
class and series of stock owned by the holder, and shall be signed (a) by the
Chairman of the Board, or any Vice Chairman of the Board, or the CEO, or the
President, or a Vice President, and (b) by the Treasurer, or any Assistant
Treasurer, or the Secretary, or any Assistant Secretary. Any or all of the
signatures on a stock certificate may be facsimiles. In case any officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed on a certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, such certificate may be
issued by the Corporation with the same effect as if he or she were such
officer, transfer agent or
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registrar on the date of issuance.
Section 8.2. Lost, Stolen or Destroyed Certificates.
The Board may direct that a new stock certificate be issued in
place of any certificate theretofore issued by the Corporation which is alleged
to have been lost, stolen, or destroyed, upon the making of an affidavit of that
fact by the person, or his or her legal representative, claiming the certificate
of stock to be lost, stolen or destroyed. When authorizing such issuance of a
new certificate, the Board, in its discretion and as a condition precedent to
the issuance thereof, may require the owner of the lost, stolen or destroyed
certificate, or his or her legal representative, to advertise the same in such
manner as the Board shall require and/or to give the Corporation a bond in such
sum as the Board shall direct as indemnity against any claim that may be made
against the Corporation, any transfer agent or any registrar on account of the
alleged loss, theft, or destruction of any such certificate or the issuance of
such new certificate.
Section 8.3. Registration of Transfer.
Shares of common stock of the Corporation shall be transferable
only upon the Corporation's books by the holders thereof in person or by their
duly authorized attorneys or legal representatives, and upon such transfer the
old certificates shall be surrendered to the Corporation by the delivery thereof
to the person in charge of the stock and transfer books and ledgers of the
Corporation, or to such other person as the Board may designate. Upon surrender
to the Corporation of a certificate for shares, duly endorsed or accompanied by
proper evidence of succession, assignment, or authority to transfer, the
Corporation shall issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction on its books and records.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1. Record Date.
In order that the Corporation may determine the stock holders
entitled to notice of, and to vote at, a meeting of stockholders, or to express
consent or dissent to corporate action in writing without meeting, or entitled
to receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion,
or exchange of stock, or for the purpose of any other lawful action, the Board
may fix, in advance, a record date which shall not be more than sixty (60) nor
less than ten (10) days prior to the date of such meeting nor more than sixty
(60) days prior to any other action. A determination of stockholders of record
entitled to notice of, and to vote at, a meeting of stockholders shall apply to
any adjournment(s) of such meeting; provided, however, that the Board may, in
its discretion, and shall if otherwise required by these Bylaws fix a new record
date for the adjourned meeting.
Section 9.2. Registered Stockholders.
Except as specifically provided otherwise by the General
Corporation Law of the State of Delaware, the Corporation shall be entitled to
recognize the exclusive right of a person registered on its books and records as
the owner of shares of stock of the Corporation to receive dividends and to vote
as such owner, shall be entitled to hold such person liable for calls and
assessments, and shall not be bound to recognize any equitable or other claim
to, or interest in, such stock on the part of any other person, whether or not
the Corporation shall have
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express or other notice thereof.
Section 9.3. Dividends.
The Board shall declare and pay dividends ratably, share for
share, on the Corporation's capital stock in all sums so declared, out of funds
legally available therefor.
Section 9.4. Dividend Declarations.
Dividends on the capital stock of the Corporation may be declared
quarterly, semiannually or annually as the Board may from time to time, in its
discretion, determine.
Section 9.5. Checks and Notes.
All checks and drafts on the bank accounts of the Corporation,
all bills of exchange and promissory notes of the Corporation, and all
acceptances, obligations, and other instruments for the payment of money drawn,
signed, or accepted by the Corporation shall be signed or accepted, as the case
may be, by such officer or officers, agent or agents, and in such manner as
shall be thereunto authorized from time to time by the Board or by officers of
the Corporation designated by the Board to make such authorization.
Section 9.6. Fiscal Year.
The fiscal year of the Corporation shall commence on January 1
and end on December 31 of each year, unless otherwise fixed by resolution of the
Board.
Section 9.7. Corporate Seal.
The corporate seal shall be circular in form and shall have
inscribed thereon the name of the Corporation, the year of its organization, and
the words "Corporate Seal" and "Delaware." The seal may be used by causing it or
a facsimile thereof to be impressed, affixed or otherwise reproduced.
Section 9.8. Voting of Securities of Other Issuers.
In the event that the Corporation shall own and/or have power to
vote any securities (including, but not limited to, shares of stock) of any
other issuer, such securities shall be voted by the Chairman of the Board or by
such other person or persons, to such extent, and in such manner as may be
determined by the Board. If the Corporation shall be a general partner in any
partnership, the acts of the Corporation in such capacity may be approved by the
Board and taken by the officers as may be authorized or determined by the Board
from time to time.
Section 9.9. Transfer Agents.
The Board may make such rules and regulations as it may deem
expedient concerning the issuance, transfer and registration of securities
(including, but not limited to, stock) of the Corporation. The Board may appoint
one or more transfer agents and/or one or more registrars and may require all
stock certificates and other certificates evidencing securities of the
Corporation to bear the signature of either or both.
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Section 9.10. Books and Records.
Except as specifically provided otherwise by the General
Corporation Law of the State of Delaware, the books and records of the
Corporation may be kept at such place or places, either within or without the
State of Delaware, as may be designated by the Board.
ARTICLE X
INDEMNIFICATION
Section 10.1. Indemnification and Insurance.
(a) Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director, officer,
employee or agent of the Corporation is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or agent
or in any other capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by the Corporation to the fullest
extent authorized by the General Corporation Law of the State of Delaware, as
the same exists or may hereafter be amended, against all costs, charges,
expenses, liabilities and losses (including attorneys' fees, judgments, fines,
ERISA excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith as so
incurred or suffered and such indemnification shall continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to the
benefit of his or her heirs, executors and administrators. The right to
indemnification conferred in this Section 10.1 shall be a contract right and
shall include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that, if the General Corporation Law of the State of Delaware requires,
the payment of such expenses incurred by a director or officer in his or her
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding, shall be made only upon delivery to
the Corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this Section 10.1 or
otherwise.
(b) Right of Claimant to Bring Suit. If a claim under paragraph
(a) of this Section 10.1 is not paid in full by the Corporation within thirty
days after a written claim has been received by the Corporation, the claimant
may at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim and, if successful in whole or in part, the claimant
shall be entitled to be paid also the expenses of prosecuting such claim. It
shall be a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has not met the standards of
conduct which make it permissible under the General Corporation Law of the State
of Delaware for the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is
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proper in the circumstances because he or she has met the applicable standard of
conduct set forth in the General Corporation Law of the State of Delaware, nor
an actual determination by the Corporation (including its Board, independent
legal counsel, or its stockholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of conduct.
(c) Non-Exclusivity of Rights. The right to indemnification and
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Section 10.1 shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
(d) Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the General Corporation Law of the State of Delaware.
(e) Witness. To the extent that any director, officer, employee
or agent of the Corporation or another corporation, partnership, joint venture,
trust or other enterprise is by reason of such position a witness in any action,
suit or proceeding, he or she shall be indemnified against all costs and
expenses actually and reasonably incurred by him or her on his or her behalf in
connection therewith.
ARTICLE XI
AMENDMENTS TO THESE BYLAWS
Section 11.1. By the Stockholders.
These Bylaws may be amended or repealed in whole or in part and
new Bylaws may be adopted by the affirmative vote of a majority of the aggregate
number of shares of each class of the capital stock issued and outstanding and
entitled to vote on the subject matter, present in person or represented by
proxy at a meeting of stockholders provided that notice thereof is stated in the
written notice of the meeting.
Section 11.2. By the Board of Directors.
These Bylaws may be amended or repealed in whole or in part and
new Bylaws may be adopted by a majority of the Board as provided by Section
109(a) of the General Corporation Law of the State of Delaware and the
Certificate of Incorporation.
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CERTIFICATE OF SECRETARY
OF
BIOLASE TECHNOLOGY, INC.
(a Delaware corporation)
I hereby certify that I am the duly elected and acting Secretary
of said corporation and that the foregoing Bylaws, comprising 13 pages,
constitute the Bylaws of said corporation as duly adopted by the unanimous
written consent of the Board of Directors, dated March 24, 1995.
/s/ Stephen R. Tartamella
-------------------------
Stephen R. Tartamella, Secretary
<PAGE> 1
EXHIBIT 21
BioLase Technology, Inc.
(a Delaware corporation)
Listing of Subsidiaries
<TABLE>
<CAPTION>
Name of Subsidiary Jurisdiction of Organization Doing Business As
- ------------------ ---------------------------- -----------------
<S> <C> <C>
Societe Endotechnic, Inc. California Endo Technic Corporation
LASERBRUSH Incorporated Delaware Not Applicable
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
BioLase Technology, Inc.:
We consent to the incorporation by reference in the registration statement on
Form S-1 of BioLase Technology, Inc. (formerly Laser Medical Technology, Inc.)
of our report dated March 17, 1995, relating to the consolidated statements of
operations, stockholders' equity and cash flows for the year ended December 31,
1994, and the related schedule, which report appears in the December 31, 1996
Annual Report on Form 10-KSB of BioLase Technology, Inc. We also consent to the
references to our firm under the headings "Selected Consolidated Financial Data"
and "Experts" in the registration statement.
Our report dated March 17, 1995, contains an explanatory paragraph that states
that the Company's consolidated financial statements have been prepared assuming
the Company will continue as a going concern. The Company has suffered recurring
losses from operations and shows a need for continued funding that raises
substantial doubt about its ability to continue as a going concern. The
consolidated financial statements and consolidated financial statement schedule
do not include any adjustments that might result from the outcome of that
uncertainty.
KPMG PEAT MARWICK LLP
Orange County, California
July 7, 1997
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of our
report, which includes an explanatory paragraph regarding the uncertainty of the
Company's ability to continue as a going concern, dated March 4, 1997, on our
audits of the consolidated financial statements and financial statement schedule
of BioLase Technology, Inc. We also consent to the reference to our firm under
the captions "Selected Consolidated Financial Data" and "Experts".
COOPERS & LYBRAND L.L.P.
Newport Beach, California
July 7, 1997
