S-1/A: BIOLASE, Inc. Announces Offering of Up To $7.48 Million in Units and Pre-Funded Units

BIOLASE, Inc., a leading provider of advanced laser systems for the dental industry, is offering up to $7.48 million in units and pre-funded units in a best efforts offering.

Summary

• BIOLASE, Inc. is a leading provider of advanced laser systems for the dental industry.
• The company develops, manufactures, markets, and sells laser systems that offer significant benefits for dental practitioners and their patients.
• BIOLASE is offering up to 8,800,000 units at an assumed public offering price of $0.85 per unit.
• Each unit consists of one share of common stock and a warrant to purchase one share of common stock.
• The company is also offering up to 8,800,000 pre-funded units, each consisting of one pre-funded warrant to purchase one share of common stock and a warrant to purchase one share of common stock.
• The offering is being made on a best efforts basis, meaning there is no guarantee that all or any of the securities will be sold.
• The company received aggregate gross proceeds of approximately $1.4 million from a registered direct offering and concurrent private placement in December 2023.
• On November 14, 2023, BIOLASE received a deficiency letter from Nasdaq regarding non-compliance with the minimum stockholders' equity requirement for continued listing.
• The company submitted a plan to Nasdaq on January 22, 2024, to regain compliance with the listing requirement.
• The company had net revenues of $10.9 million and $35.7 million for the three and nine months ended September 30, 2023, respectively.
• Net losses were $4.6 million and $15.3 million for the three and nine months ended September 30, 2023, respectively.
• As of September 30, 2023, the company had an accumulated deficit of $311.5 million.
• The company's independent registered public accounting firm has expressed substantial doubt about the company's ability to continue as a going concern.

Sentiment

Score: 3

Explanation: The company faces significant financial challenges, including recurring losses, negative cash flow, and non-compliance with Nasdaq listing requirements. There is substantial doubt about its ability to continue as a going concern. While the company has a strong product portfolio and is a leader in its niche, the financial risks and uncertainties result in a negative sentiment from an investment perspective.

Positives

• BIOLASE is a leading provider of advanced laser systems for the dental industry with a strong market position.
• The company's proprietary systems offer significant benefits for dental practitioners and their patients.
• Waterlase iPlus is the world's best-selling all-tissue dental laser.
• The company has a strong patent portfolio with approximately 241 active and 21 pending U.S. and international patents.
• BIOLASE is focused on expanding its product line and clinical applications.
• The company is exploring potential collaborations to apply its laser technologies to other medical applications.
• The company achieved record consumable sales in 2023, an increase of approximately 20% over 2022.
• The company has demonstrated leadership in creating awareness of the benefits of laser dentistry.
• The company has realized cost savings and improved quality from in-house manufacturing of key components.

Negatives

• The company has experienced net losses for each of the past several years.
• There is substantial doubt about the company's ability to continue as a going concern.
• The company is not in compliance with Nasdaq's minimum stockholders' equity requirement for continued listing.
• The company is vulnerable to continued global economic uncertainty and volatility in financial markets.
• Dentists and patients have been hesitant in adopting laser technologies.
• The company could be subject to significant warranty obligations if its products are defective.
• Product liability claims against the company could be costly and harm its reputation.
• The company's suppliers may not supply it with a sufficient amount or adequate quality of materials.
• The company's manufacturing operations are consolidated primarily in one facility, making it vulnerable to disruptions.
• The company's stock price has been, and could continue to be, volatile.

Risks

• Management has broad discretion over the use of net proceeds from the offering.
• Purchasers may experience immediate and substantial dilution.
• This is a best efforts offering with no minimum amount of securities required to be sold.
• The company needs to raise sufficient capital in this offering to support operations, and failure to do so could materially adversely impact its financial position.
• There is no public market for the Warrants or Pre-Funded Warrants.
• The Warrants are speculative in nature and may not have any value if the common stock price does not exceed the exercise price.
• Holders of Warrants and Pre-Funded Warrants will not have rights of holders of common stock until exercised.
• The COVID-19 pandemic has adversely affected, and may continue to adversely affect, the company's business.
• Failure to meet covenants in the credit agreements could result in acceleration of payment obligations.
• The company may not have sufficient funds to redeem outstanding shares of preferred stock.
• The company is vulnerable to global economic uncertainty and volatility in financial markets.
• The company's success depends in part on relationships with third-party distributors.
• Any failure in efforts to train dental practitioners could result in misuse of products and reduce market acceptance.
• The company could incur problems in manufacturing its products.
• The company could be subject to significant warranty obligations if products are defective.
• Product liability claims could be costly and harm the company's reputation.
• Suppliers may not supply sufficient amount or adequate quality of materials.
• The company is subject to risks associated with operating internationally.
• Security breaches of information technology systems could harm the company's reputation and customer relationships.
• Revenue and operating results fluctuate due to seasonality and other factors.
• Litigation could be costly and time-consuming to defend.
• A disruption at the manufacturing facility could result in a prolonged interruption of business.
• Loss of key management personnel or inability to attract or retain qualified personnel could adversely affect growth strategy.
• If patents or other intellectual property rights do not adequately protect technologies, the company could lose market share.
• Third-party claims of intellectual property infringement could incur liabilities and costs.
• Changes in government regulation or the inability to obtain or maintain necessary government approvals could have a material adverse effect.
• The company could be subject to or affected by federal and state health care laws, including fraud and abuse and health information privacy and security laws.
• Changes to reimbursement rates for procedures performed using the company's products may adversely impact the business.
• The company could be exposed to liabilities under the FCPA.
• Product sales or introductions could be delayed or canceled as a result of FDA regulatory requirements.
• Marketed products may be used by healthcare practitioners for indications that are not cleared or approved by the FDA.
• Failure to comply with the FDAs QSR could harm the business.
• Products are subject to recalls and other regulatory actions after receiving FDA clearance or approval.
• Failure to meet Nasdaq's continued listing requirements could result in delisting of common stock.
• The company's stock price has been, and could continue to be, volatile.
• The company does not intend to pay cash dividends on common stock.
• If securities or industry analysts do not publish research or publish inaccurate or unfavorable research, the share price and trading volume could decline.

Future Outlook

The company is forecasting revenue for fiscal year 2023 to be above fiscal year 2022. The company believes it is well-positioned to capitalize on the market opportunity for dental laser adoption and execute its growth strategies throughout 2024.

Industry Context

BIOLASE operates in the dental equipment market, which is estimated to be $10.6 billion globally and projected to grow at a compound annual rate of 6.2% through 2030. The company's focus on laser systems positions it within the fastest-growing segment of this market. The company faces competition from other laser system manufacturers as well as from traditional dental instrument providers.

Comparison to Industry Standards

• BIOLASE's Waterlase iPlus is marketed as the world's best-selling all-tissue dental laser, indicating a strong position compared to competitors.
• The company's focus on minimally invasive procedures aligns with the industry trend towards patient comfort and reduced procedure times.
• Compared to traditional dental instruments like high-speed drills and scalpels, BIOLASE's laser systems offer potential benefits such as reduced pain, faster healing, and less need for anesthesia.
• Competitor Dentsply Sirona offers the CEREC system, which is an in-office milling machine for dental restorations, representing a different approach to restorative dentistry.
• Other competitors like AMD Lasers and Convergent Dental offer laser systems, but BIOLASE's Waterlase technology is differentiated by its all-tissue capabilities and patented combination of water and laser energy.
• The company's revenue growth and market penetration are key metrics for comparison. While BIOLASE has a relatively small market share (estimated at 7-8% in the U.S. for all-tissue laser systems), its focus on innovation and education could drive future growth.
• The company's financial performance, including net losses and reliance on external financing, is an area where it lags behind industry standards set by larger, more established dental equipment manufacturers.

Legal Proceedings

• On January 4, 2023, Plaintiff PIPStek, LLC (a wholly-owned subsidiary of Sonendo, Inc.) filed a lawsuit against BIOLASE, Inc. in the Federal District Court for the District of Delaware, alleging that BIOLASEs Waterlase dental laser product infringes two PIPStek patents. A third patent was subsequently added to the case. The Complaint seeks unspecified damages and injunctive relief, as well as costs and attorneys fees against BIOLASE. BIOLASE has answered denying all of PIPSteks allegations and also asserting that the asserted patents are invalid and not infringed. BIOLASE intends to continue to vigorously and fully defend itself against PIPSteks claims. Trial in this matter is currently set for May 12, 2025.

Stakeholder Impact

• Shareholders: Potential dilution from the offering and future equity offerings. Stock price volatility and risk of delisting from Nasdaq.
• Employees: Potential impact on job security due to the company's financial challenges.
• Customers: Continued access to the company's products and services, potential benefits from new product development.
• Suppliers: Potential impact on business relationships depending on the company's financial stability and ability to meet its obligations.
• Creditors: Risk of default on debt obligations if the company is unable to improve its financial performance.

Next Steps

• The company plans to continue expanding awareness of the benefits of its dental lasers among dental specialists and general practitioners.
• The company plans to continue its Waterlase Trial Program in 2024.
• The company plans to distribute a docuseries, 'Talk Dental to Me,' to educate patients about the benefits of its technology.
• The company plans to continue to build out its infrastructure to support customers and drive revenue and profit growth.
• The company plans to expand its product line and clinical applications.
• The company plans to explore potential collaborations to apply its laser technologies to other medical applications.
• The company plans to generate revenue through OEM partnerships.

Key Dates

Keywords

dental laser systems, Waterlase, diode lasers, all-tissue dental lasers, soft-tissue dental lasers, minimally invasive dental procedures, dental consumables, dental accessories, dental technology, dental equipment market, periodontics, endodontics, oral surgery, pediatric dentistry, cosmetic dentistry, restorative dentistry, dental implants, root canal disinfection, teeth whitening, pain therapy, dental laser education, dental laser training