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BIOLASE's CEO Responds to Claims Made by Oracle Partners L.P.

IRVINE, CA -- (Marketwired) -- 05/16/14 -- BIOLASE, Inc. (NASDAQ: BIOL), the world's leading manufacturer and distributor of dental lasers, including the Company's proprietary WaterLase®, and a pioneer in laser surgery in other medical specialties, as well as a distributor of digital radiography, intra oral scanners, and chair-side milling machines and 3-D printers for dentistry, today announced that Federico Pignatelli, the Company's Chairman and Chief Executive Officer, has responded to claims and allegations made by Oracle Partners L.P. ("Oracle") in a press release dated May 14, 2014.

Federico Pignatelli, Chairman and CEO, said, "I would prefer not to respond to Oracle's absurd claims but their press release dated May 14, 2014 is an inappropriate attempt to mislead our stakeholders and accordingly it must be addressed. As such, I would like to bring the following items to the attention of our stakeholders:

  • Oracle has been blatantly trying to gain control of BIOLASE's Board of Directors (our "Board") since September 2013. This is evidenced in a large number of documents BIOLASE has obtained in discovery during our recent litigation against Oracle. It is now apparent to me that Oracle conspired to have Mr. Paul Clark and Mr. Jeffrey Nugent appointed to our Board, all the while purporting that they were uninterested parties. Together with Dr. Fred Moll, who was seemingly working while a BIOLASE's Board Member with Oracle, this very group attempted to illegally gain control of our Board. I believe that once they had control of our Board, their plan was to push through a financing that would be highly dilutive to our other shareholders. Oracle has proposed such a financing to our Board last August and it has been rejected. This type of dilutive financing could essentially pass control of BIOLASE to Oracle without requiring them to put forth a tender offer to our shareholders that would typically result in a premium to market.
  • I believe that the primary goal of the lawsuit filed by Oracle against BIOLASE on March 8th 2014 was to block the public offering under our universal shelf registration statement contemplated by the Board which would dilute Oracle's ownership position.
  • The director dispute arose because Messrs. Clark and Nugent did not properly disclose that they were conspiring with Oracle to gain control of our Board.
  • I believe that Oracle's lawsuit had a dramatic and meaningful impact on our end of quarter sales for the three months ended March 31, 2014. Like most companies that sell capital equipment, a significant portion of our sales closes in the last month of a quarter, and the uncertainty that the lawsuit created regarding the composition of our Board most definitely impacted the decision making process of most of buyers.
  • Despite its representations, Oracle has no experience whatsoever with dental equipment companies and, to the best of my knowledge, has not invested in the dental field prior to their investment in BIOLASE. Oracle's proposed director candidates of Messrs. Clark, Nugent, and Varma and Dr. Moll have had no experience in the dental business or even, with the exception of Dr. Moll, in medical equipment. In fact, their primary experience is in cosmetics, pharmaceuticals, and finance.
  • On several occasions, Oracle's representatives have told me that they actually disliked the dental business because they don't understand it and that they believe we should divest of our long standing dental business in order to concentrate our efforts in the application of our proprietary WaterLase technology in various other medical fields, which Oracle believes present vast opportunities for return on their investment.
  • I trust that the pending decision by the Chancery Court of Delaware will shed light on the true nature of Oracle's attempted takeover of BIOLASE. It is my firm belief that Oracle's lawsuit was an effort to disguise their ultimate goal to gain control of BIOLASE without paying the substantial premium that our stockholders deserve.
  • Oracle itself is a small fund with barely $700 million under management and that has vastly under performed in recent months, while tracking below its piers and Biotech indexes. Oracle is mostly invested in Biotech money losing and illiquid microcaps in which they own large stakes, in several of them along side long time partner Jack Schuler of Crabtree Partners, to control their destiny. I believe that Oracle is looking for publicity by trying to make for itself a "name" as an "activist investor" in the medical field.
  • BIOLASE, under my management, has improved revenues from an annualized run rate of products and services revenue of approximately $20 million based on the nine months ended September 30, 2010, to approximately $56 million for the year ended December 31, 2013. During this period, we expanded our product line from one well outdated WaterLase system to 3 advanced WaterLase systems and several cutting edge diode laser systems alongside a full complement of other truly innovative dental technologies such as ConBeam digital Radiography and the top of the line 3Shape Trio CAD/CAM digital impressions. Further, the newly developed proprietary Galaxy BioMill open architecture chair-side milling system, along with distribution of Stratasys (SSYS) OrthoDesk 3D printing, will be launched for marketing in the current quarter. This is the widest product offerings in BIOLASE's history.
  • In this process of re-structuring and re-launching BIOLASE's entire business into the first Total Technology Solution provider for Dental Practices, BIOLASE incurred a non-GAAP net loss of $13.3 million for the period from October 1, 2010 through March 31, 2014. Considering legal expenses related to the director dispute and shareholder litigation brought by Oracle of $682,000 during the three months ended March 31, 2014, and a one-time charge of approximately $1 million to our reserve for excess and obsolete inventory during the third quarter ended September 30, 2013, which was primarily related to inventory purchases made by prior management, the adjusted non-GAAP net loss for the period from October 1, 2010 through March 31, 2014 is approximately $11.7 million. This 3 year period loss needs to be compared to a non-GAAP net loss of $10.6 million for the nine months only ended September 30, 2010 that BIOLASE experienced right before my becoming the CEO with new management.
  • Further, during the period from October 1, 2010 through March 31, 2014, we invested approximately $14.8 million in engineering and development. Had I halted this continued investment in our future, BIOLASE would have generated adjusted non-GAAP net income, excluding engineering and development, of approximately $3.1 million. The investment in R&D has contributed BIOLASE building the largest array of cutting edge high tech products in its history that we expect to be a strong contributor of imminent and significant future growth.

About BIOLASE, Inc.
BIOLASE, Inc. is a biomedical company that develops, manufactures, and markets innovative lasers in dentistry and medicine and also markets and distributes high-end 2D and 3D digital imaging equipment, CAD/CAM intraoral scanners, and in-office milling machines and 3D printers; products that are focused on technologies that advance the practice of dentistry and medicine. The Company's proprietary laser products incorporate approximately 300 patented and patent-pending technologies designed to provide biologically clinically superior performance with less pain and faster recovery times. Its innovative products provide cutting-edge technology at competitive prices to deliver the best results for dentists and patients. BIOLASE's principal products are revolutionary dental laser systems that perform a broad range of dental procedures, including cosmetic and complex surgical applications, and a full line of dental imaging equipment. BIOLASE has sold more than 25,500 laser systems. Other laser products under development address ophthalmology and other medical and consumer markets.

For updates and information on WaterLase and laser dentistry, find BIOLASE online at www.biolase.com, Facebook at www.facebook.com/biolase, Twitter at www.twitter.com/biolaseinc, Pinterest at www.pinterest.com/biolase, LinkedIn at www.linkedin.com/company/biolase, Google+ at www.google.com/+BIOLASEIrvine, Instagram at www.instagram.com/biolaseinc, and YouTube at www.youtube.com/biolasevideos.

BIOLASE®, WaterLase®, and Total Technology Solution™ are registered trademarks or trademarks of BIOLASE, Inc.

Non-GAAP Disclosure
The non-GAAP financial information contained herein are a supplement to the corresponding financial measures prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Management believes that adjustments for these items assist investors in making comparisons of period-to-period operating results and that these items are not indicative of the Company's on-going core operating performance.

Management believes that the presentation of this non-GAAP financial information provides investors with greater transparency and facilitates comparison of operating results across a broad spectrum of companies with varying capital structures, compensation strategies, derivative instruments, and amortization methods, which provide a more complete understanding of our financial performance, competitive position, and prospects for the future. However, the non-GAAP financial measures presented herein have certain limitations in that they do not reflect all of the costs associated with the operations of our business as determined in accordance with GAAP. Therefore, investors should consider non-GAAP financial measures in addition to, and not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. Further, the non-GAAP financial measures presented by the Company may be different from the non-GAAP financial measures used by other companies.

Management uses non-GAAP net (loss) income (defined as net loss before interest, taxes, depreciation and amortization, and stock-based other equity instruments, and other non-cash compensation) in its evaluation of the Company's core after-tax results of operations and trends between fiscal periods and believes that these measures are important components of its internal performance measurement process. Management believes that this non-GAAP financial information reflects an additional way of viewing aspects of our business that, when viewed with our GAAP results, provide a more complete understanding of factors and trends affecting our business.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Statements contained in this press release that refer to BIOLASE's estimated or anticipated future results or other non-historical facts are forward-looking statements, as are any statements in this press release concerning prospects related to BIOLASE's strategic initiatives, product introductions and anticipated financial performance. Forward-looking statements can also 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. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect BIOLASE's current perspective of existing trends and information and speak only as of the date of this release. Actual results may differ materially from BIOLASE's current expectations depending upon a number of factors affecting BIOLASE's business. These factors include, among others, adverse changes in general economic and market conditions, competitive factors including but not limited to pricing pressures and new product introductions, uncertainty of customer acceptance of new product offerings and market changes, risks associated with managing the growth of the business, and those other risks and uncertainties that may be detailed, from time-to-time, in BIOLASE's reports filed with the SEC. BIOLASE does not undertake any responsibility to revise or update any forward-looking statements contained herein.

(financial table follows)

                               BIOLASE, INC.
 Reconciliation of GAAP Net (Loss) Income to Non-GAAP Net (Loss) Income and
                   Adjusted Non-GAAP Net Loss (Unaudited)
                               (in thousands)


                   Three                                   Three
                   Months       Twelve Months Ended        Months
                   Ended           December 31,            Ended
                   March   ----------------------------   December
                 31, 2014    2013      2012      2011     31, 2013   Total
                 --------  --------  --------  --------  --------- --------
GAAP net (loss)
 income          $ (4,887) $(11,482) $ (3,056) $ (4,486) $     174 $(23,737)
Adjustments:
  Interest
   expense, net       230       600       239       305        144    1,518
  Income tax
   provision
   (benefit)           24      (164)      111        89          6       66
  Depreciation
   and
   amortization
   expense            175       601       513       695        240    2,224
  Stock-based,
   other equity
   instruments,
   and other non-
   cash
   compensation
   expense            371     1,965     1,873     2,051        310    6,570
                 --------  --------  --------  --------  --------- --------
Non-GAAP net
 (loss) income     (4,087)   (8,480)     (320)   (1,346)       874  (13,359)
Unusual
 adjustments:
  One time legal
   expense
   related to
   director
   dispute and
   shareholder
   litigation
   brought by
   Oracle             682         -         -         -          -      682
  One time charge
   to increase
   reserve for
   excess and
   obsolete
   inventory            -     1,000         -         -          -    1,000
                 --------  --------  --------  --------  --------- --------
Adjusted non-GAAP
 net (loss)
 income            (3,405)   (7,480)     (320)   (1,346)       874  (11,677)
  Engineering &
   development        973     4,029     4,684     4,311        800   14,797
                 --------  --------  --------  --------  --------- --------
Adjusted non-GAAP
 net (loss)
 income excluding
 engineering &
 development     $ (2,432) $ (3,451) $  4,364  $  2,965  $   1,674 $  3,120
                 ========  ========  ========  ========  ========= ========

For further information, please contact:
Michael Porter
Porter, LeVay & Rose, Inc.
212-564-4700

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