Thank you, Joe. Good afternoon, everyone, and we apologize for the short delay.

Thanks for joining us today for BIOLASE's 2012 First Quarter Results Conference Call. You should have all received a copy by e-mail this morning of the release announcing the company’s results for the first quarter ended March 31, 2012.

Before we get started, I've been asked to make the following statements. The words and phrases "can be","may affect","may depend, "believe, "estimate, "project" and similar words and phrases are intended to identify forward-looking statements.

Forward-looking statements are subject to various known and unknown risks and uncertainties, and BIOLASE cautions you that any forward-looking information provided is not a guarantee of future performance. Actual results could differ materially from these anticipated in the forward-looking statements due to a number of factors, some of which are beyond the BIOLASE’s control and may be discussed in BIOLASE’s filings with the Securities and Exchange Commission.

All such forward-looking statements are current only as of the date on which the statements are made.

BIOLASE does not undertake any obligation to publicly update any forward-looking statements to reflect events or circumstances after the date on which the statement was made or reflect current unanticipated events. Also, as a quick reminder, a replay of the call will be available on the BIOLASE website at www.biolase.com.

The company’s first quarter 2012 results can also be found on the company’s quarterly report on Form 10-Q, which the company will file with the Securities and Exchange Commission.

With me on the call today from BIOLASE are Federico Pignatelli, Chairman and Chief Executive Officer; and Fred Furry, Chief Operating Officer and Chief Financial Officer. Federico and Fred will review the prepared remarks, including an update on the business, operational performance and outlook.

There will be a question-and-answer session at the end of the call followed by a few closing remarks. During our question-and-answer session, we will limit each call to one question and a follow-up question.

Callers are welcomed to reenter the queue to ask additional questions as time permits. We're planning to limit the session to no more than 90 minutes.

With that, I'd like to turn the call over to Federico.

Good afternoon, Matt, and thank you. I want to welcome all of you to our first quarter results conference call.

Thank you for participating. Today, we will review the progress and various accomplishments achieved by BIOLASE during the first quarter of 2012 as well as comment on our progress in key initiatives that will impact the coming periods.

First, let me briefly recap the 2012 first quarter. Net revenues in the quarter were $12.3 million, a growth rate of 17% over the $10.6 million in last year first quarter.

It bears nothing that during the 2011 first quarter we booked 3 million in iLase product sales to Henry Schein, our former exclusive global distributor to satisfy irrevocable one-time purchase orders, effectively the repayment of a liability in product for which we had been prepaid several quarters earlier. If you exclude those payment sales - those equipment sales, our revenues in Q1 actually reflect an increase of approximately $4.7 million or approximately 62% over adjusted revenues of $7.6 million for that prior year period.

We believe that these measures more accurately and illustrates more accurately the increase in overall productivity of our direct sales in select distributor model, and Fred will expand on this further when we discuss the financial details.

Now, I would like to walk through some of the operational and strategic highlights from the period, over which we expect to have a positive impact on the company's performance in 2012 and beyond. In general, the first quarter was a time of tremendous activity internally and externally.

We have made several important operational strategic moves that are all designed to improve our ability to become the dental industry top provider of the current solution, and more generally, to move towards becoming a true multi-product multi-platform corporation. As we discussed last quarter, BIOLASE completed a purchase of the remaining inventory of Waterlase MD Turbo laser systems held by Henry Schein, our former exclusive global distributor.

Pursuant to the agreement, we purchased Schein's inventory of Waterlase MD Turbo laser systems, and Schein released its liens on our assets. The liens related to the irrevocable prepaid purchase orders from August 2010 that were satisfied with the payment of products through July 2011.

We paid the entire purchase price by offsetting account receivables currently due from Schein from sales made in the normal course of business. None of the funds used to offset the purchase price were related to the original sales of the MD Turbo laser system that were purchased.

We recognize that the accounts receivable due from Schein that we used to purchase these laser systems would have otherwise been converted to cash for our operation. However, a significant portion of that cash would have been used to purchase inventory for our second quarter and beyond.

This transaction actually gave us the opportunity to purchase inventory at a price lower than our standard cost. Of the units we purchased, approximately one-third were dental units used by Schein's sales aides and 2-thirds were still new in box.

We plan to use the new in box units, primarily of the source of parts for our newly released Waterlase MDX line of all-tissue lasers and for our installed base of approximately 6,500 Waterlase MD Turbo laser systems. As for the used lasers, we plan to remanufacture these and sell 35 pre-owned units and place a number in dental schools-- a number of them in dental schools to promote the company's Waterlase technology.

This transaction has provided us with a tremendous source of low-priced inventory, but we also believe that the elimination of this inventory from the marketplace will benefit the selling efforts of our growing sales force.

Speaking of our sales organization, we promoted Bill Brown, a 30-year veteran of the medical laser industry from Vice President International to Vice President, Sales and Marketing during the quarter. Bill has made a tremendous number of contribution to our core growth and brand reputation over the past 10 years.

And we are confident that his leadership in his new role will be invaluable in driving our business in the future. As of today, Bill oversees the 2 managers and 32 external sales representatives in North America, and inside manager and inside sales group of 6 and a last network of distributors international.

Our external sales force continues to grow as we add new personnel and make new adjustments as productivity dictates. We are still targeting a team of 40 to 45 outside sales reps in North America by the end of 2012.

In the interest of generating greater probability among our sales force, we have made significant changes in our training and education programs in the past few months. Our first group of new hires is currently participating in our week-long introductory training course, and we anticipate the credits to bring us to greater success rate for new hires and increased productivity as these programs are rolled out across the group.

Further, we are continuing with the development of our inside sales group. We will utilize inside sales representatives to sell our diode laser systems, including the iLase and our newly introduced EPIC 10 in our array of lower-priced digital equipment.

We will also have a team of lead generators to help create additional opportunities for our external sales representatives for our various Waterlase products and our Cone Beam 3D digital imaging equipment.

We are very excited about the potential of our inside sales group as it ramps up during the second quarter. Our inside sales reps and lead generators are participating in the same new training and education programs that we have developed for our external sales representatives.

On the strategic front, we were also very active in the first quarter. We became the distributor for Cefla Dental Group's NewTom Cone Beam 3D imaging products in the U.S.

and Canada, thereby complementing the large family of BIOLASE DaVinci imaging products.

Cefla is a leading Italian dental equipment manufacturer, and NewTom products are considered to be among the highest quality 3D dental imaging products in the world. We are still in the early stages of our experts with digital imaging, and we have a lot to learn, but we believe that these products sign [ph] complement our internal developed laser technology.

As we have noted, BIOLASE has the largest specialized sales force and distribution network in dentistry, and we are current at the level as that commercial channel but having a

different product, services and selling opportunities and same call point.

In February, we introduced the Waterlase MDX line of all-tissue lasers. The MDX laser system blends features from the MD Turbo and other revolutionary iPlus in a modernized platform for practitioners that do not require advanced speed and functionality of the industry-leading iPlus, such as endodontics and periodontics.

The MDX 450 and 300 provide the company with quality laser system priced for the midpoint price range, and new customers are responding well to these options. The new Waterlase MDX laser system is a logical evolution of the Waterlase MD Turbo.

As a result, the new in-box MD Turbo purchased from Schein will be used as parts for the MDX at great savings. In fact, the parts and material for our MDX would have been more expensive to purchase from our vendors.

In May, we introduced the EPIC 10, the next generation of our total diode solution. This next generation diode soft tissue laser will have the shortest pulse available in the market today.

Short pulses are known to cause less thermal damage in tissue and produce cleaner cuts.

In addition, the EPIC 10 will have a built-in battery for a full day of operation and will be used as a design platform to build more powerful versions with different combinations of laser wavelengths. The EPIC 10 was recently demonstrated at the California Dental Association annual trade show and several other current dental industry events.

The EPIC 10 is not yet available for sale in the U.S. and is pending 510K clearance from the FDA.

Finally, on the marketing front, we are all looking forward to our upcoming World Clinical Laser Institute Super Symposium. The Super Symposium is the largest laser dentistry conference worldwide and is scheduled to kick off on June 7 in San Diego, California.

The Super Symposium is a great opportunity for dentists to be educated and work side-by-side with the finest laser dentists in the U.S. They will learn interesting new clinical laser techniques, valuable practice management tools and a series of opportunities for using the laser in conjunction with imaging to generate more business and wealth from the laser equipment investment.

I will now hand the call over to Fred Furry to go through the highlights of our financial results for the quarter.

Thank you, Federico, and good afternoon everyone. On a GAAP basis, revenue for the first quarter of 2012 totaled approximately $12.3 million, up 17% from $10.6 million in the same quarter 2011.

As Federico mentioned, however, excluding $3 million in iLase sales to Henry Schein to satisfy one-time prepay purchase orders during last year's first quarter, revenue in this year's first quarter actually reflects an increase of $4.7 million or 62% over adjusted revenue of $7.6 million for the same period in the prior year. In order to provide greater visibility into our increased revenues during the first quarter of 2012, we are adjusting for equipment sales to Schein to satisfy irrevocable purchase orders from August 2010.

While we recognize that this is not a GAAP measure, we believe it is a more accurate method to measure the true productivity of our current mix of direct sales and distributors. A table illustrating the effect of this irrevocable purchase orders from Schein is included in our press release.

Gross profit as a percentage of GAAP net revenue for the 2012 first quarter was 47.1% compared to 45.8% for the prior year comparable period and 42.2% in the fourth quarter of 2011.

Our operations team has worked hard to improve our manufacturing and production processes over the last 6 months, and we are beginning to see the impact of our efforts and our results. BioLase also experienced the benefit from a de-recognition of approximately 142,000 of warranty reserves associated with the purchase of inventory from Schein.

Our efficiencies have increased, manufacturing costs have been reduced, our supply chain is much more reliable, and we continue to move towards remanufacturing.

Further, as an added benefit, our product reliability has continued to improve along with our improved production capabilities. We've made good strides, but we also recognize that we must continue to focus on these efforts to further improve our manufacturing and production processes.

Operating expenses in this year's first quarter were $7.4 million compared to $5.2 million in the prior year period. Operating expenses were up year-over-year as we strengthen our spending on sales and marketing and also increase our efforts in engineering and development.

We recognize these efforts impact our bottom-line during the quarter, but we believe that these investments will ultimately provide both short and long-term benefits to our revenues and stockholders. On a GAAP basis, the net loss for the first quarter of 2012 totaled $1.7 million, or a loss of $0.05 per share, compared to a net loss of $750,000 or a loss of $0.03 per share in the 2011 first quarter.

After removing non-cash depreciation and amortization expenses of $125,000, stock-based other equity instruments and other non-cash compensation expense of $670,000, and interest expense of $5,000,

this year's first quarter resulted in a non-GAAP net loss of $872,000 or a loss of $0.03 per share compared with non-GAAP net income of $153,000 or $0.01 per share for the first quarter of 2011. Turning to the balance sheet, as of March 31, 2012, we had cash and cash equivalents of approximately $2.8 million, accounts receivable of $9 million, inventory of $10.3 million, and shareholders' equity of $11.9 million.

Moving on to financial guidance. We expect our unadjusted product revenues for the second quarter of 2012 to range from $13 million to $14 million, an increase of approximately $900,000 to $1.9 million or 7% to 16% compared to $12.1 million for the second quarter of 2011.

On an adjusted basis after excluding the revenues associated with the irrevocable one-time purchase orders from Schein in 2011, this represents an increase of $3 million to $4 million or 30% to 40%.

Note, however, that our second quarter results may be impacted by certain accounting consequences related to the termination agreement with Schein to purchase Schein's inventory of Waterlase MD Turbos, which was completed early in the second quarter. We have recognized certain effects of this transaction on the balance sheet and are currently in the process of researching the proper accounting treatment for the remaining aspects of this very complex transaction.

Our full year revenue guidance for 2012 remains $57 million to $60 million. Excluding equipment sales to Henry Schein to satisfy irrevocable one-time purchase orders effectively for the repayment of the liability and product of approximately $5.9 million during 2011, the midpoint of our guidance of $58.5 million represents an increase of 36% year-over-year.

Thank you, Fred. Before we hand the call over to the operator for questions, I have several concluding remarks.

Our top priority is and has always been growing shareholder value in a variety of ways. The goal always involves making both long and short-term decisions in balancing the benefits to the organization and its stock owners.

I want to again note that our goal for 2012 remains to execute and reset investor expectations where we deliver on our promises.

We experienced our guidance in the first quarter, and it is our intention to continue to grow, execute, and make rational investments as we progress in 2012. We have also made the decision to continue to invest in innovating new products in our core dental markets, but also to continue to commit the resources towards developing several of our laser-based technologies for new markets such as ophthalmology, orthopedics, and pain management.

Candidly, the results of these investments will continue to negatively impact our bottom-line in the near-term. We recognize this, but we strongly believe that these investments will bring greater return in the longer run, so that our investors will ultimately benefit to a much larger extent because of this philosophy.

Finally, to further reward our shareholders for their loyalty during this period of investment, our Board of Directors has adopted a 2% annual stock dividend policy for 2012 and declared a 0.5% stock dividend to stockholder record on March 15, 2012. This concludes our formal prepared remarks.

During the question-and-answer section of the call, we will limit each call to one question and then a follow-up question. Callers are obviously welcome to re-enter the queue to ask additional questions as time permits.

We plan to allocate up to 90 minutes, including Q&A to give you full access to management.

I would like now to open the call to questions.

First of all, with one question, I guess the main thing I'd like to understand is revenues for Waterlase, as I see here were, even though it's down sequentially, which is typical for the first quarter, it looks like they were up about 80% year-over-year, and can you tell me if there is anything different in the -- you're seeing in the marketplace that's driving this or is this the new marketing team or your marketing effort?

Oh, Greg, this is Fred. There are a couple of things at play here, one is yes, we have invested heavily in our sales and marketing group focus on these products.

We have the introduction of the Waterlase iPlus in Q1 - at least Q1 of last year or so, obviously that will be a little bit different, and we also have the introduction of the MDX, our midpoint lasers in Q1 of 2012. So those are a couple of the factors.

We have made a lot of efforts in the training of our sales force that's clearly another factor, but also we have - the Q1 of 2011 had approximately $3 million of diodes still to Schein under those irrevocable purchase orders. So that in essence inflated the diode sales in Q1 of 2011.

Without that in Q1 2012, you can see that the focus is really on the revolutionary Waterlase technology.

So what I'm hearing is it's really more the product expansion. You're not seeing anything different in the industry or the reception or just because of the product expansion that there is more reception in the industry?

No, I don't want to give you that impression. We are seeing - there are a couple -- there are several factors at play here, and it's not just one answer, but we're seeing a lot of new customers.

We're also seeing existing customers upgrading their technology, and we're also seeing overall increases in the enthusiasm of our product as it gains traction in the industry. I mean, iPlus is just about a year old right now, and it's really making a good impact in the industry.

One thing I would like to bring to the attention to all the listeners is that last year, in 2011, BioLase has sold 700 hard tissue or all-tissue lasers, mainly iPluses. And Schein has sold out of their inventory, roughly 300, in these.

So that is something that has to be taken in consideration to understand the difficulties for BIOLASE management to manage the company expectations last year, because of the aggressive marketing from Schein in getting rid of their inventory. As you know, we picked up the remaining inventory of around 150 of these MDs at a very convenient price to us, so we're very happy about that, but we're also very happy about the fact that we are not going to be suffering anymore from interferences in selling our hard tissue, all-tissue lasers.

So that is a fundamental change from 2011 to 2012. Also what you want to appreciate is the fact that overall, the all-tissue, hard tissue laser family overall increased by 1,000 units last year; that’s a big number.

And also we will have these 300 MDs generate consumables and service and warranty revenues in 2012. So overall, our performance in 2011 has been -- think of doing a year of restructuring in position, a good one, and it is very important to notice the fact that by taking away the $3 million in diode sales that was based on a right of first refusal that Schein has on a specific product, the iLase, we grew sales in excess of 40%, exactly 46%?

36%.

36%. So 36% is a nice growth, and it shows clearly that we are moving in the right direction.

Yes, certainly it appears that way. Can I -- was I able to do one more question or was that my follow-up question when I asked for clarity?

Yes, please go ahead.

Just regarding the marketing expense and the new marketing VP, I just want to get a sense for just how we should look at a new level of marketing expense relative to sales?

We will have Bill Brown that is here with us answer to it.

So marketing expenses will go up slightly, but primarily we’re shipping the way we're spending the money in marketing to a much more targeted and much more modern methods of marketing things, including social networking and internet-based things of the BIOLASE store and a number of expansion to basically globalize our business, not just send out E-mails and snail mails to our customer base.

By the way, I would like to add just last year we launched the BIOLASE store. And the BIOLASE store, it is a tremendous effect story.

We are very proud to see a quite dramatic increase in sales on a monthly basis basically. So we’re very proud of that move, and we believe that the BIOLASE store and the inside sale team effort will contribute substantially to our success.

Bill, I'm glad you were on the call. I mean, you have a pretty unique perspective on the way things run in the past and the way they're going to be run going forward.

Can you provide some perspective on how things have changed in the product adoption and in the sales and marketing state versus 5 years ago and today, and do you think that, I think that management is sort of implying that the core growth rate of the laser business is somewhere north of 30%. When you answer the question, can you give us some perspective whether that's what you believe your - what you think you can sustainably grow your business given the changes here?

I think if you really want to have a benchmark, you need to look at what happened with digital x-ray of systems of around 10 or 15 years ago where they were at under 10% adoption rate for a number of years and then jumped to 15%, and then within 3 to 5 years, were at 50%. I believe that we're just starting into the inflection point of getting into that kind of adoption, and that adoption of lasers at the dental level by the dentist is triggered by the large number of diode lasers that have been stalled over the last 5 years.

So as these doctors are getting the diode lasers and starting to do some basic procedures, they're getting more comfortable and their patients are actually asking them,"Can you actually deliver no-shot, no-drill dentistry?" And the fact is that they can't without an all-tissue laser.

And so there's a lot of opportunity now for us to go back within this group and actually allow them to deliver no-shot, no-drill dentistry to their patients, and I'm very optimistic.

Okay. So, I mean, can you just summarize why you think it's different that this company can grow at a sustainable 30% when you get passed all the Schein comps?

Because I think that goes to the valuation of the company, but a lot of people don't believe you can grow at that rate, obviously, given the company's value. So I just want to understand what management thinks is different, what they see is different versus say 5 years ago when you had spurts of growth, but they petered out, why is it different today?

Many things are different, Lenny. Number one, it is a way more mature market now.

Lasers, they are desirable; they are understood; they are a real alternative to conventional dentistry. It is funny, but it's not funny to know that conventional dentistry as it is now today with a burr is 9,000 years old was invented by the Egyptians, and I frankly don’t see a world that is expanding at a high speed of innovation continue with the technology that essentially is 9,000 years old.

So lasers are the alternative for many reasons. Number one is because we can offer painless dentistry, almost painless dentistry.

Number two, because we are far less invasive than dental burrs. Number three, because we can do more with a laser than with the burr.

Number four, that is very important, we are safe. Burrs, dental burrs that go from mouth to mouth to mouth of patients, and there is no ways to sterilize them.

There are independent studies that demonstrate that. So, the fact is that there is a clear high risk for patients to get cross contaminated.

So when a patient goes to a dentist and a dentist wears gloves and a mask is to protect himself, because he knows that everything he captures and puts in the mouth of the patient is contaminated. So why the patient he thinks that he is doing that to protect him, the patient?

No, he is protecting himself; the doctor is protecting himself. But lasers kill any kind of bacteria and any kind of virus, and it's very important to educate the public to understand the difference between a traditional dental burr and dentistry performed with a traditional dental burr and instead the modern high-tech dentistry that is performed with laser.

Number five, there is a tremendous amount of clinicals today supporting laser dentistry, something that we didn’t have in the past. Number six, we have thousands of users, something that we didn’t have in the past.

We sold 10,000 of tissue lasers worldwide, 1,000 that were sold just last year. So, there are so many things that are different compared to few years ago.

And let me also give the last one, the competitive grounds have cleaned out dramatically. Nobody could have been competing with the Waterlase technology, so we have several companies that were in the field of hard tissue laser dentistry that went out of business or out of this business because they couldn’t compete with us.

And so we are today in a market that is essentially definitely dominated by BIOLASE, and that is also another important advantage.

Yes, 2 additional questions. Fred, can you give an estimate if your dental business without the spending of newer products outside of your core market, whether you're profitable at this point, and can you describe any of those products that you expect to be commercialized this year?

I mean, in the product line, I mean, what other new products are coming out…

Yes, obviously these are kind of tricky questions. I don’t really want to break down too much into our R&D, what the -- for our current product platform and what's for our new platform.

But you can see what our R&D was for the year or for the quarter, about $3 million, and that's a pretty sizable charge, and you can compare that to our loss, just for the simplest way to evaluate what we're talking about here. I'm sorry, engineering development was $1.2 million, and so if you take the $1.2 million, and you take some component of our sales expansion, you can evaluate on your own whether you think we would break even or not.

I really don’t want to get into too much detail there. As for future product, there are - we have a whole host of things that our Waterlase technology is capable of.

It cuts tissue in such a unique way and such an intraumatic way, that it has a tremendous number of benefits around the body. We have over -- as you know, we have over 280 patents in this, and those are not just all in dentistry.

We have 30 those are already in ophthalmology; we're already approved as a general knife for the eye. We have approvals in orthopedics as well as just as general surgery.

So, we're in the stage right now where we may not have a business plan per say for, say, ophthalmology or orthopedics, but we're absolutely working to strengthen and understand our IP to make it very, very attractive for potential products, potential joint ventures or moving into those areas. And then one other notable thing is with the release of our IP, we have a lot more flexibility with respect to joining some sort of joint venture or some sort of agreement.

Lenny, also, look at the fact that overall, we burn cash of around in the quarter, around half a million dollar. It's not a big amount.

Compare to what used to be year and a half ago, 3 years ago is a tremendous improvement, and yes, we are investing in the future. We are a technology company and that is part of our mission.

Also Waterlase technology is, in essence, is a brand new surgical system for the human body, not just for dentistry. So with the absolutely now serving the shareholders' interest, now expanding this incredible technology to perform surgery on the human body in the most biological way by expanding in other fields that is, by the way, extremely promising.

Does that mean there won't be any commercialization this year of either non-dental or additional dental product?

Lenny, when we will have it, we will announce it.

Okay, all right. Then, that's all I wanted, I wanted, if you could comment.

Tallest question is that do you have some people concerned about your cash position? I know your cash burn isn't very high, but still I think some investors are concerned about the $2.5 million in cash you have, is this something, can you disclose and what you're doing to work on that?

Well, first of all, Lenny, I understand this is a concern, but the fact is that we have a substantial amount of cash completing in our inventory we just got - that we just purchased this inventory from Schein, and that is essentially cash, because will be transformed into cash, and, anyway, we needed to spend cash to buy parts. So, in reality, it is far less worrisome the cash situation than what it does appear.

Okay. Is there any - but is there any other plans to address it in terms of financing or…

Well, I can tell you, we are not going to sell securities. That's not in our intention at all.

We believe that the stock price is extremely the best that will be flagged. The reality is in the future opportunities of the company at all that is our belief, so given the fact that the stock is where it is, definitely we are not planning any sales of securities.

I was wondering if you could discuss the current conditions of the overseas markets and in particular Europe given everything that's going on in Europe right now with the economic crisis and then also some discussion about your plans at Japan.

Chris, nice to hear from you. Yes, Europe, it is definitely an interesting question given the fact that there is a lot of turmoil there, but on a macroeconomic point of view, I strongly believe that they will follow the example of what United States has been doing, so they will essentially print cash and re-launch the economy.

The signal of the last elections has been that the austerity is not really what the Europeans want. So it's going to be also higher factors, but against that, there are going to be incentives towards investments in capital equipment.

We are doing very well in France. We are doing okay in other countries, so we are also, by the way, expanding outside Europe in North Africa, and well, we see some very interesting opportunities there.

So it is -- Europe is a market that we believe will expand. Germany, it is definitely a stable and strong market in which we see an important future for BIOLASE.

Regarding Japan - Japan, we, maybe Bill, why don’t you answer to that question?

Yes, our sales, current sales in Japan are holding steady with the last few years, and we are, through our distributors, are very interested in introducing our digital imaging products there. The registration requirements for Japan for imaging is much less than what it is for laser.

So, we’re actually very optimistic, and we’ll be making some additional distribution and registrations in Japan this year.

But we, clearly, we are pursuing the registration of the laser. Again, we know that Japan is not an easy market from the regulatory point of view.

So we - what do we expect, probably end of 2013? Possibly, yes.

With our pleasure.

And clearly Japan is a great opportunity. It is a very, very receptive marketplace to laser dentistry.

Okay, and then my second question is for Fred. Just so we can - so this doesn’t come as a surprise, even though it’s a complicated transaction, just from an accounting point of view, what is the range of possibilities in terms of what impact the Schein transaction would have on reported numbers?

That’s a great question, Chris. But unfortunately, we’re not capable of answering that question right now.

Well, I suppose I’m capable, but I’m just - I'm not permitted to answer that question quite yet. I mean I could say a range between zero and some number, but that’s not a very appropriate response for you.

Okay, without getting into the magnitude, what I’m trying to figure out is, is it going to be viewed as contra-revenues and therefore depress some of the reported revenues and then on a non-GAAP basis, you’d have to increase backup. Is that sort of in the range of something that would happen or is it going to be at the below the line or where will it hit the GAAP numbers?

That’s the crux of what we’re evaluating and researching right now. We’re having some discussions with our service providers, and we'll be coming to a resolution fairly soon, but I just can’t comment on that quite yet.

You’re right on point to where the issue is, though.

Okay, and then finally just absent anything with the Schein, what can - given all the changes you’ve made on the factory floor lean field - and moving toward lean manufacturing and supply chain management and so forth, at least in the near-term on roughly the volumes that you’re putting up right now, where can gross profit margins go to? Will they equilibrate at -- will they max out at 50 or 55?

Could it get to 60? Where can these gross profit margins go?

Our goal for 2012 is really to push towards 50%. There are a lot of different factors involved.

It's not just the manufacturing floor, which -- there a couple of other things. For example, service and warranty costs are also in our gross profit margin.

But as our manufacturing capabilities improved, and we will see the benefit to other things, such as service as we go through this process. But we’re targeting 50% towards the end of the year.

My follow up on the Henry Schein issue, I thought you mentioned in the quarter that or in the report that it was closed in April. But were there some inventory transfers in the first quarter?

Well, the agreement was signed in principle with pretty much all the details laid out in late February. And it went through escrow and then closed in very early April, so in the second quarter.

What that creates is, and it’s sounding mumbo-jumbo, it creates a subsequent event which impacts how you account for certain things. Certain things on the balance sheet were able to be recognized, because it was subsequent to the quarter end but prior to issuance of the financial statements.

There are -- There's a couple of things that weren't able to be derecognized, because they were contractual obligations, and they don't necessarily go away until a contract is officially signed. And then there's, of course, as Mr.

Sassouni pointed out an issue with how you account for the repurchase and where it goes on the income statement if at all. So I know that's what we're working on there, but the vast majority, specifically to your question, the vast majority of products have been shipped and returned in the second quarter.

So at the end of the first quarter, you will see the AR from Schein that was used to repay this or to pay for this is on our balance sheet as AR, and there is no inventory reflected in our balance sheet at March 31 for this transaction.

So there's about $3 million extra of AR.

No, we haven't -- no, Greg, we haven't identified a number. We have some limitations on what we're permitted to say at this point in time, but at some point in the future, we'll be able to disclose more about the transaction and how it's accounted for, but I can't elaborate.

Anyway, it's way below $3 billion so…

But the fact is that - take as a measure, if you want, that what we are saying, that it would be more expensive for us to buy parts to build MDXs than what is the price that will be purchased. So that should put you at ease with the transaction.

But the other thing that I would like to bring all the shareholders to attention of this transaction is that this last transaction is not just about repurchasing the remaining little number of MDs that were in the hands of our past global distributor. It is a conclusion of an ordeal that has lasted for 6 years that was conceived by Robert Grant, our past CEO, and was a very ill decision towards the life of the company, and we suffered for 6 years because of that ill decision.

So the strategic move from the past CEO. I've been against that transaction from day one.

I lost my chairmanship position because of it. Now what we need to do here is to really take the 40,000-feet view approach and look at things from a great scale and not manual scale of the transaction.

The fact that we are now the Schein deal between BIOLASE and Schein, it is very important for the present and the future of BIOLASE. With that, I want to say Schein is a great company, so no criticism towards Schein.

That was the wrong partner for BIOLASE, and the fact that now we have cleaned the plate entirely of this relationship is where the investors should focus, in my opinion. We are now free, entirely free to do whatever we've been strategically due for us to do.

And we are already demonstrating - we have demonstrated last year with an increase of almost 100%, and we have demonstrated this quarter, Q1-over-Q1 of last year that our direct model works and will work even harder as we move ahead in time. A lot of resources have gone in time and money in closing this -- in terminating entirely this transaction with Schein.

A very substantial amount of legal money has gone into dealing with Schein in the past 18 months. So and a tremendous amount of my time and Fred's time and several other people in this company.

So if we take the approach of looking at things on a grand scale, what we have achieved in Q1 by closing completely this relationship, it is of great benefit to BIOLASE for the present and the future growth of the company.

Thank you for that explanation. And I want to just move on to the imaging business, if, if there is, if you could tell me if there is any revenues recorded in the first quarter?

And with the sign of the new product, is there - do you have a better sense of when that might start moving into a revenue generating phase?

Yes. We have recorded a minor amount of revenues in Q1.

We will start as of Q2 to see some interesting revenues, and we will increase - we will see basically revenues in imaging increase quarter-after-quarter. So we are very optimistic, but it is a fact that we have not prepared as much as we want it to be, and so there's been a delay, but now we feel to be in a very good position.

Also we had delays in regulatory approvals that have been frankly somewhat out of our control. And so we are in a good position now.

We are very optimistic about the growth, the potential growth of the imaging business.

Sure. All the regulatory hurdles, are they done now, that was just a really matter of marketing getting the word out?

Well, they've gone in United States, so they've gone in Canada. We have other countries in which we are doing - where we're doing work from the point of view of regulatory approvals, but the fact is that we have 2 major markets in which we are direct and we are doing, obviously, we see us growing nicely in that field.

And you'll be able to have the imaging equipment at the symposium coming up?

Absolutely.

We actually have a dedicated track for imaging, and we have several of the top imaging speakers and presenters from around the United States, and they are, to my knowledge, it's the first multi-day dedicated imaging tracks in an educational format like this….

And we also had pretty much all the units at the recent CDA last week. So...

Also between the DaVinci and the NewTom line, we have to understand that, in essence, we have the most complete imaging line of any other company in North America, so that is also to consider of the competitive advantage.

Okay. And just, finally on the EPIC 10, you mentioned there was a 510(k) already applied, is there any timeframe for when you will get some feedback on that one?

It's a simple 510(k) based on our ezlase product line, and it could be anywhere from 30 to 90 days.

From the day we filed.

Correct.

And so that would be, I guess I'm trying to understand, would that be in this quarter, the next quarter and…

We hope it's going to be this quarter, and again, the EPIC is the new line of diodes. We're going to have several models, and it is a great evolution of the ezlase that have been a very, very successful product.

But the EPIC is definitely a -- is the next generation. The ezlase that exist 6 years ago.

So this is the next generation of our diode line, and we feel that it's going to be graphic all over the marketplace, of the market share.

Yes, 2 questions. Fred, at one point, I think I recall you saying you were going to be cash flow neutral in the third quarter, and I just -- usually third quarter's sequentially down from the second.

So can you just clarify why you're going to be neutral in that quarter and not in the second quarter? Is there anything going on in the expense line and of the percent, of the 510K -- excuse me-- of the 510 K that you plan on filing this year, what percent have already been filed, overall?

Well, Lenny, we feel that we might be breakeven on a cash basis in Q2. We don't want to give a prediction here, but we feel that we could be close with or around to it, but regarding Q3, you have to consider that, we are ramping up also imaging, so - and we are ramping, we're going to have basically in full swing also the new diode line.

So all together, we don’t see really as deep in sales in Q3. And what was the last question that you had, I'm sorry?

Oh, I mean, let's say that you planned 510K filings was act. I was just wondering what progress, what percent had been filed so far, against the ex for the year?

We'll we are making progresses. Again, we are actively pursuing it, but obviously we give priorities to it so the one that we feel the most significant, they have the precedence, and we're not going to get into the details for competitive reasons on which one we're doing.

Okay. But can you disclose at least, have you made progress against the - I forgot the exact amount that you had planned on filing this year.

But I remember it was a substantial amount. Or I'm just asking, is the - what sort of progress you're making against those 510Ks to be filed, and the reason why I'm asking is, a lot of us are still waiting to see for the second half what kind of product, new products are coming out, and I'm anxious to find out, that’s why I'm asking that kind of question.

It is a very different question, but we are not going to give details when we will have 510Ks approved, we will announce them. But, definitely, we are focused on it, Lenny, so we believe that part of the strategy of increasing sales is increasing the product offering.

So obviously we've got to be active in 510Ks.

Yes, well. Thank you to all of you.

I understand it has been a difficult time to be invested in BIOLASE. We saw the stock going from $0.60 to almost $7.00, and then from there to around $2.5, and so a wide ride, but again, what I want to assure the shareholders obvious is that we're building value every day for you, for the owners of the company, and the direction of the company is a solid one, and the people that we have in this company, they are excellent people.

And we have a strategy, and we are very disciplined in following the strategy that we have, and we are strongly convinced that we will see the results. So, thank you for your commitment to the company, shareholders, and we will be talking again next quarter.

Thank you.