SOURCE: BIOLASE Technology, Inc.

July 19, 2005 17:31 ET

BIOLASE Announces Filing of Its Form 10-K and Fiscal Year 2004 Results

BIOLASE Reports Fiscal 2004 Revenue of $60.7 Million

SAN CLEMENTE, CA -- (MARKET WIRE) -- July 19, 2005 -- BIOLASE Technology, Inc. (NASDAQ: BLTIE), a medical technology company that develops, manufactures and markets lasers and related products focused on technologies for improved applications and procedures in dentistry and medicine, announced today the filing of its Form 10-K, which includes results for the fourth quarter and fiscal year ended December 31, 2004 as well as restated financial statements for fiscal years ended December 31, 2002 and 2003. Additionally, the Company filed today its amended Forms 10-Q/A for the first three quarters of 2004 and the quarters of 2003. All references below reflect the effects of the restatements for fiscal years 2002, 2003 and the first three quarterly periods of 2004.

Net revenue for the fourth quarter and fiscal year ended December 31, 2004 was $19.1 million and $60.7 million, respectively. This compares with net revenue of $15.9 million and $48.8 million for the fourth quarter and fiscal year ended December 31, 2003, respectively.

Revenue from the Company's principal product category, the Waterlase® system, comprised approximately 89% of net revenue for the fourth quarter of 2004. This compares with Waterlase revenue of 93% for the fourth quarter of 2003. Approximately 60% of the Waterlase related revenue in the fourth quarter of 2004 was comprised of the new Waterlase MD™ product.

Gross margin during the fourth quarter of 2004 was 57% as compared to 68% in the same period in 2003. Gross margin for the year ended December 31, 2004 was 59% as compared to 64% for the year ended December 31, 2003. Gross margin was primarily impacted in the fourth quarter of 2004 by increased manufacturing costs related to the initial production of the Waterlase MD, additional reserves of $0.3 million for excess and obsolete inventory and an increase in costs related to customer training and WCLI seminars of $0.4 million. Gross margin for fiscal year 2004 includes increases in excess and obsolete inventory of $0.4 million and $1.9 million of costs related to customer training and WCLI seminars.

Operating expenses were $20.4 million and $45.4 million for the fourth quarter and fiscal year ended December 31, 2004, respectively. This compares with operating expenses of $8.3 million and $24.4 million for the fourth quarter and fiscal year ended December 31, 2003, respectively. As described in greater detail below, operating expenses for fiscal year 2004 were principally affected by the litigation of the Diodem patent matter, including legal expenses of approximately $3.1 million and settlement expenses of $6.4 million. Additionally, the Company's operating expenses for the fiscal year 2004 were impacted by costs of approximately $1.3 million associated with the Sarbanes-Oxley Act of 2002 ("SOX") and increased sales and marketing expense as a result of the introduction of the Company's new Waterlase MD product.

Sales and marketing expense was $6.4 million or 34% of net revenue for the fourth quarter of 2004 as compared to $5.8 million or 37% of net revenue for the same period in 2003. The increase in sales and marketing expense from the same period in 2003 is related to the launch of the Waterlase MD, continued expansion of the Company's sales force and increased marketing expense associated with the Company's consumer awareness initiatives. General and administrative expense was $5.7 million or 30% of net revenue for the fourth quarter of 2004 as compared to $1.6 million or 10% of net revenue for the same period in 2003. Increases in general and administrative expense in the fourth quarter of 2004 are related to higher legal costs of approximately $2.1 million for the Diodem litigation as well as higher infrastructure and professional services expense of approximately $0.9 million, principally as a result of SOX. Engineering and development expense was $1.1 million or 6% of net revenue for the fourth quarter of 2004 as compared to $0.8 million or 5% of net revenue for the same period in 2003. Increases in engineering and development expense are due primarily to the development of the Company's research initiatives in other medical specialties.

Loss before income taxes was $9.4 million and $8.8 million for the fourth quarter and fiscal year 2004, respectively. As noted above, the primary reason for the loss in the fourth quarter and fiscal year relates to legal and settlement expenses for the patent infringement lawsuit with Diodem LLC, increased expenses associated with SOX, and an intangible impairment charge of $0.7 million related to trade names acquired as part of the American Dental Laser acquisition in 2003. This compares with income before income taxes of $2.7 million and $7.2 million for the fourth quarter and fiscal year 2003, respectively.

Largely as a result of the operating loss incurred in the fourth quarter of 2004, the Company determined that a valuation reserve was necessary due to the uncertainty of the future realization of its deferred tax assets. This decision was primarily based on the Company's cumulative three-year historical performance of pre-tax losses for its U.S. operations, the main determination for recording such a reserve. The recognition of this valuation reserve does not affect operating results, cash flow or the timing of income taxes payable in the future. At December 31, 2004, the Company had net operating loss carry forwards for federal and state purposes of approximately $39.0 million and $11.3 million, respectively, which will begin expiring in 2005. The net income tax provision was $14.2 million for the fourth quarter of 2004, bringing the full fiscal year income tax provision to $14.4 million. The full valuation reserve at December 31, 2004 was $21.1 million. Due to recording the full valuation reserve of deferred tax assets in 2004, the Company expects to record a nominal provision for income taxes in 2005.

Net loss was $23.6 million or $1.04 per diluted share for the fourth quarter of 2004 and $23.2 million or $1.00 per diluted share for fiscal year 2004. This compares with net income of $14.6 million or $0.64 per diluted share for the fourth quarter of 2003 and $19.0 million or $0.84 per diluted share for fiscal year 2003. Net income for 2003 included a net income tax benefit of $11.9 million, resulting from the reduction of the Company's deferred tax asset valuation, which totaled approximately $16.2 million.

Cash flow used in operating activities for the year ended December 31, 2004 was $1.6 million compared to cash flow generated by operating activities of $6.5 million for the year ended December 31, 2003.

Robert E. Grant, President and CEO, commented, "We appreciate the support of our stockholders in what has proven to be a difficult period. The Form 10-K and restatement process has been a significant disruption to our operations and management focus. With this filing behind us, we are now able to dedicate our resources to the implementation of the Company's strategic plan."

Restatement of Consolidated Financial Statements

As previously reported, the Company decided to restate its financial statements after reaching the conclusion that it had under accrued sales tax and related penalties and interest for fiscal 2002. The Company and its Audit Committee discussed the conclusions to restate its financial statements with its independent registered public accounting firm. The impact of these sales tax and related adjustments that affected 2002, 2003 and the first three quarters of 2004, as well as other adjustments in the areas of value-added tax, payroll and related accruals, deferred revenue, and other accrued liabilities, led the Company to conclude that the consolidated financial statements as of and for the years ended December 31, 2002 and 2003, and the four quarters of 2003 and the first three quarters of 2004 also needed to be restated.

The Company's restated consolidated financial statements for the years ended December 31, 2002 and 2003 are included in its Form 10-K for the December 31, 2004 fiscal year filed today. Restated financial statements for the quarters ended March 31, 2004, June 30, 2004, September 30, 2004 and the related comparative periods are included in Forms 10-Q/A also filed today. The Company has concluded that the aggregate effect of the corrections made to the historical financial statements resulted in pretax income in 2002 being reduced by $447,000, pretax income in 2003 being reduced by $516,000, and pretax income for the first three quarters of 2004 being increased by $318,000. These adjustments resulted in pretax income, on a cumulative basis for these periods, being reduced by $645,000, or approximately 6.9% of the total cumulative pretax income for 2002, 2003 and the first three quarters of 2004, as originally reported.

The following tables have been presented to reflect the restatement impact to the Company's financial statements:

                         BIOLASE TECHNOLOGY, INC.
        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
                   (in thousands, except per share data)

               Fiscal year ended   Fiscal year ended   Nine months ended
               December 31, 2002   December 31, 2003   September 30, 2004
               -----------------   -----------------   ------------------
                  As                  As                  As
              Previously    As    Previously    As    Previously    As
               Reported  Restated  Reported  Restated  Reported  Restated
               --------  --------  --------  --------  --------  --------
Net revenue     $27,257   $27,257   $49,081   $48,783   $41,426   $41,578
Gross profit     16,772    16,854    31,551    31,250    25,726    25,109
Other income,
 net                 63        63        76        76        --        48
Income (loss)
 from
 operations       1,412       965     7,441     6,925      (169)      149
Net income        1,498     1,051    19,058    19,049       155       344
Net income
 per share:

    Basic       $  0.08   $  0.05   $  0.91   $  0.91   $  0.01   $  0.01
    Diluted        0.07      0.05      0.83      0.84      0.01      0.01


                    BIOLASE TECHNOLOGY, INC.
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
              (in thousands, except per share data)

                             March 31,               June 30,
                             ---------               --------
                    As Previously    As    As Previously    As
Quarters of 2004       Reported   Restated    Reported   Restated
                       --------   --------    --------   --------
Net revenue             $14,425    $14,530     $14,805    $14,738
Gross profit              9,287      8,844       9,701      9,122
Other income
 (loss), net                 --         16          --         16
Legal settlement             --         --          --         --
Impairment of
 intangible asset            --         --          --         --
Income (loss)
 from operations          1,170      1,085         965      1,208
Net income (loss)           672        616         716        853
Net income (loss)
 per share:

    Basic               $  0.03    $  0.03     $  0.03    $  0.04
    Diluted                0.03       0.03        0.03       0.03


                          September 30,           December 31,
                          -------------           ------------
                    As Previously    As                     As
Quarters of 2004       Reported   Restated               Reported
                       --------   --------    --------   --------
Net revenue             $12,038    $12,310                $19,073
Gross profit              7,059      7,143                 10,900
Other income
 (loss), net                 --         16                    (16)
Legal settlement             --         --                 (6,446)
Impairment of
 intangible asset            --         --                   (747)
Income (loss)
 from operations         (2,304)    (2,144)                (9,509)
Net income (loss)        (1,233)    (1,125)              *(23,558)
Net income (loss)
 per share:

    Basic               $ (0.05)   $ (0.05)               $ (1.04)
    Diluted               (0.05)     (0.05)                 (1.04)

* Includes effect of net income tax provision of $14.2 million.


                    BIOLASE TECHNOLOGY, INC.
      CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
              (in thousands, except per share data)

                             March 31,               June 30,
                             ---------               --------
                    As Previously    As    As Previously    As
Quarters of 2003       Reported   Restated    Reported   Restated
                       --------   --------    --------   --------
Net revenue             $ 9,214    $ 9,198     $10,375    $10,346
Gross profit              5,867      5,820       6,360      6,247
Other income, net            --         16          --         16
Income from operations      886        839       1,195      1,047
Net income                  940        893       1,253      1,092
Net income per share:

    Basic               $  0.05    $  0.04     $  0.06    $  0.05
    Diluted                0.04       0.04        0.05       0.05


                          September 30,           December 31,
                          -------------           ------------
                    As Previously    As    As Previously    As
Quarters of 2003       Reported   Restated    Reported   Restated
                       --------   --------    --------   --------
Net revenue             $13,453    $13,377     $16,090    $15,862
Gross profit              8,429      8,357      10,946     10,826
Other income, net            --         19          --         25
Income from operations    2,544      2,438       2,816      2,601
Net income                2,567      2,436      14,298     14,628
Net income per share:

    Basic               $  0.12    $  0.11     $  0.66    $  0.68
    Diluted                0.11       0.10        0.61       0.64

The Company's detailed financial results can be found in its Form 10-K as
filed with the Securities and Exchange Commission today. The following
tables summarize selected results of operations and balance sheet data
for the periods indicated:


                           BIOLASE TECHNOLOGY, INC.
                CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
                     (in thousands, except per share data)

                                   Three Months Ended       Years Ended
                                      December 31,          December 31,
                                      ------------          ------------
                                            (Restated)           (Restated)
                                    2004       2003       2004       2003
                                 --------   --------   --------   --------

Net revenue                      $ 19,073   $ 15,862   $ 60,651   $ 48,783
Cost of revenue                     8,173      5,036     24,642     17,533
                                 --------   --------   --------   --------
  Gross profit                     10,900     10,826     36,009     31,250
                                 --------   --------   --------   --------
Other (loss) income                   (16)        25         32         76

Operating expenses:
  Sales and marketing               6,414      5,811     23,126     16,800
  General and administrative        5,733      1,596     11,506      5,096
  Engineering and development       1,053        843      3,576      2,505
  Legal settlement                  6,446          -      6,446          -
  Impairment of intangible asset      747          -        747          -
                                 --------   --------   --------   --------
    Total operating expenses       20,393      8,250     45,401     24,401
                                 --------   --------   --------   --------
(Loss) income  from operations     (9,509)     2,601     (9,360)     6,925

  Gain on foreign currency
   transactions                        41         97         86        232
  Gain on forward exchange contract     -          -          -         22
  (Loss) gain on marketable
   securities                          (5)         -         91          -
  Interest income                     155          6        470         27
  Interest expense                    (55)       (12)       (88)       (55)
                                 --------   --------   --------   --------

(Loss) income before income taxes  (9,373)     2,692     (8,801)     7,151
  (Provision) benefit for income
    taxes                         (14,185)    11,936    (14,413)    11,898
                                 --------   --------   --------   --------
Net (loss) income                $(23,558)  $ 14,628   $(23,214)  $ 19,049
                                 ========   ========   ========   ========

Net (loss) income per share -
  Basic                          $  (1.04)  $   0.68   $  (1.00)   $  0.91
                                 ========   ========   ========   ========
  Diluted                        $  (1.04)  $   0.64   $  (1.00)   $  0.84
                                 ========   ========   ========   ========

Shares used in computing net
 (loss) income per share -
  Basic                            22,588     21,550     23,181     20,993
                                 ========   ========   ========   ========
  Diluted                          22,588     22,753     23,181     22,689
                                 ========   ========   ========   ========


                    BIOLASE TECHNOLOGY, INC.
             CONSOLIDATED BALANCE SHEETS (Unaudited)
                         (in thousands)
                                                              (Restated)
                                               December 31,   December 31,
                                                  2004            2003
                                               ------------   ------------

Assets
Current assets:
   Cash and cash equivalents                   $      6,140   $     11,111
   Short-term investments                            25,326              -
   Accounts receivable, less allowance of
    $384 and $64 in 2004 and 2003,
    respectively                                      9,635          5,771
   Inventory                                          8,180          3,808
   Deferred tax asset                                     -          1,508
   Prepaid expenses and other current
    assets                                            1,814          1,260
                                               ------------   ------------
          Total current assets                       51,095         23,458

Property, plant and equipment, net                    3,025          1,973
Intangible assets, net                                1,662          2,587
Goodwill                                              2,926          2,926
Deferred tax asset                                        -         12,651
Other assets                                             38          1,041
                                               ------------   ------------
          Total assets                         $     58,746   $     44,636
                                               ============   ============

Liabilities and Stockholders' Equity
Current liabilities:
   Accounts payable                            $      7,147   $      3,796
   Accrued liabilities                                8,467          5,551
   Accrued legal settlement                           3,000              -
   Line of credit                                         -          1,792
   Deferred revenue                                   2,468          1,229
   Current portion of deferred gain                      63             63
   Debt                                                   -            888
                                               ------------   ------------
          Total current liabilities                  21,145         13,319
   Deferred gain                                         16             79
   Deferred tax liability                               161              -
   Accrued legal settlement-net of
    current portion                                   3,446              -
                                               ------------   ------------
          Total liabilities                          24,768         13,398
                                               ------------   ------------

Stockholders' equity:
   Preferred stock, par value $0.001,
    1,000 shares authorized, no shares
    issued and outstanding                                -              -
   Common stock, par value $0.001, 50,000
    shares authorized, 24,482 and 21,559
    shares issued; 22,518 and 21,559
    outstanding in 2004 and 2003,
    respectively                                         25             22
   Additional paid-in capital                       101,562         59,134
   Treasury stock (cost of 1,964 shares
    repurchased)                                    (16,399)             -
   Accumulated other comprehensive loss                (225)          (147)
   Accumulated deficit                              (50,985)       (27,771)
                                               ------------   ------------
          Total stockholders' equity                 33,978         31,238
                                               ------------   ------------
          Total liabilities and
           stockholders' equity                $     58,746   $     44,636
                                               ============   ============


Upcoming Conference Call

BIOLASE management intends to host a conference call to discuss its financial results and business outlook after the Company files the Form 10-Q for both the first and second quarters of 2005.

About BIOLASE

BIOLASE Technology, Inc. (http://www.biolase.com) is a medical technology company that designs, manufactures and markets proprietary dental laser systems that allow dentists, oral surgeons and other specialists to perform a broad range of common dental procedures, including cosmetic applications. The Company's products incorporate patented and patent pending technologies focused on reducing pain and improving clinical results. The Waterlase® system uses a patented combination of water and laser to precisely cut hard tissue, such as bone and teeth, and soft tissue, such as gums, with minimal or no damage to surrounding tissue. The company also offers the LaserSmile™ system, which uses a laser to perform soft tissue and cosmetic procedures, including tooth whitening.

This press release may contain forward-looking statements within the meaning of safe harbor provided by the Securities Reform Act of 1995 that are based on the current expectations and estimates by our management. These forward-looking statements can be identified through the use of words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," "may," "will," and variations of these words or similar expressions. Forward-looking statements are based on management's current, preliminary expectations and are subject to risks and uncertainties, which may cause the Company's actual results to differ materially from the statements contained herein. Forward-looking statements in this release include statements regarding realization of our deferred tax asset, recording provisions for 2005 income taxes and holding an investor conference call after filing our 2005 first and second quarter reports. These statements speak only as of the date hereof, are based upon the information available to us now, are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors. Such information is subject to change, and we undertake no obligation to update such statements.

Contact Information

  • For further information, please contact:
    Robert E. Grant, President & CEO

    John W. Hohener, Executive Vice President and CFO

    Scott Jorgensen, Director of Finance & Investor Relations

    BIOLASE Technology, Inc.
    +1-949-361-1200