LOS ANGELES, Aug. 12, 2014 (GLOBE NEWSWIRE) -- Federico Pignatelli, former Chairman and Chief Executive Officer of BIOLASE, Inc. (Nasdaq:BIOL), today began a new campaign on behalf of BIOLASE stockholders to ensure BIOLASE Directors and executive management are held accountable for their statements and for business results.
As publicly chronicled Mr. Pignatelli has been engaged in debate concerning corporate governance practices and the composition of the BIOLASE Board of Directors. Mr. Pignatelli believes that the current Board is acting under the direction of Oracle Partners (Oracle), BIOLASE's largest stockholder, and Larry N. Feinberg, Oracle's Managing Partner. On June 12, 2014 Mr. Pignatelli resigned as the Company's Chairman and Chief Executive Officer, and on August 6, 2014 he resigned as a Director in protest after having served on the Board for the past 23 years.
"As a stockholder no longer encumbered by the restrictions that applied to me as a Director, I am now able to speak on behalf of BIOLASE's stockholders and serve as watchdog over BIOLASE's management and Board," said Mr. Pignatelli. "The BIOLASE Board is devoid of independence as there are no Directors who might provide a voice in opposition to the desires of Oracle or simply question the beliefs and recommendations of other Directors. I look forward to helping BIOLASE realize the full potential of its technologies and products through ensuring the accountability of its leadership."
As Mr. Pignatelli served as CEO through June 12, 2014, he was intimately familiar with the Company's operations and financial performance until approximately two weeks before the close of the second quarter on June 30, 2014. The core of BIOLASE's business is selling capital equipment to dentists, and historically the final weeks of a quarter are the most active in terms of sales. Based upon his knowledge of quarterly sales and pending customer shipments as of mid-June, Mr. Pignatelli believes that current management deliberately manipulated the closing of sales that should have been recorded in the second quarter, and instead will record those sales in the third quarter. Doing so resulted in an artificially reduced net revenue figure for the second quarter of $10.2 million. With a $4 million decline in revenue compared with the prior-year second quarter, management orchestrated financial results that allowed for interpretation in the Company's news release as "clearly demonstrat[ing] why BIOLASE needed new leadership."
"As of the date of Mr. Pignatelli's departure as CEO, BIOLASE was on track to record sales for the second quarter of 2014 of $13.5 million to $14 million," said Mr. Pignatelli. "It is my understanding that BIOLASE employees received specific instructions from management following my departure as CEO not to close any more business during the quarter and to shift all pending sales into the third quarter, even if doing so required 'sweetening' the terms for the customer." Notably BIOLASE publicly announced Mr. Pignatelli's resignation fully two business days and four calendar days after his resignation was tendered, which provided management ample time for behind-the scenes, self-serving plans and actions before customers learned of the change in leadership.
In addition BIOLASE's 2014 second quarter and first half financial results included legal fees of $2.5 million and $3.2 million, respectively, "incurred by the Company at the direction of its former Chairman and CEO in connection with the litigation to resolve the dispute over our corporate governance and the composition of BIOLASE's Board [to maintain independence against a hostile shareholder]." According to Mr. Pignatelli, as of his departure on June 12 the legal fees incurred and paid during the first half of 2014 were approximately one-half that amount, and he questions whether BIOLASE is paying legal expenses incurred by Oracle for Oracle's sole benefit. Mr. Pignatelli has provided BIOLASE with the opportunity to explain these expenses privately, but to date they have not done so.
Regarding the Company's news release reporting second quarter financial results and the subsequent investment community conference call, Mr. Pignatelli observed, "I am disheartened that BIOLASE's management, in particular CEO Jeffrey Nugent, went out of their way to levy highly personal attacks on me and use inflammatory language to describe me and my accomplishments at the Company. Such behavior is inconsistent with the alleged standing in the business community Mr. Nugent claims to have earned, and speaks poorly as to his integrity and judgment. There is no need for a specific rebuttal on my behalf other than to identify those statements as unfit for anyone in a position of executive leadership and stewardship of stockholder value."
He added, "Potential liberties taken when reporting second quarter financial results and disparaging personal comments about me aside, what most concerns me is the very real possibility that current and former Directors with loyalties to Oracle appear to have misappropriated corporate opportunities belonging to BIOLASE."
As reported in a news release issued June 27, 2014, Mr. Pignatelli initiated a process to obtain certain books and records from BIOLASE management relating to suspected wrongdoing, mismanagement and corporate governance failures by the Company's Board of Directors. Included in that "demand letter" are allegations that in September 2013, Alexander Arrow, a former Director and former President of the Company, and Dr. Frederic Moll, a Director of the Company, held a secret meeting with Mr. Feinberg and Neocis, Inc., a start-up company developing robotic healthcare technologies. As a result of that meeting, rather than working out a potential transaction for the benefit of BIOLASE and it stockholders, Mr. Pignatelli believes that certain Directors personally invested in Neocis. Further, Mr. Pignatelli believes that Mr. Moll potentially misappropriated a BIOLASE corporate opportunity when he diverted potential investors in BIOLASE to Auris, where Mr. Moll serves as Chairman and Chief Executive Officer.
"I will be watching with especially keen interest any future developments between BIOLASE and Neocis, and BIOLASE and Auris," he commented. "I was shocked to hear Mr. Nugent largely play down the extremely valuable technology developed under the DRAGON code name during the second quarter conference call, perhaps as a set-up to a future transaction. The value of DRAGON is considerable and the specifics have not yet been made public, owing to competitive considerations and the fact the patents covering this technology are still pending. Indeed I believe it is DRAGON that attracted Oracle to BIOLASE once it was introduced to them by Dr. Arrow and Mr. Moll."
He continued, "The DRAGON technology is a critical asset to BIOLASE's future with potential for broad, multibillion-dollar applications in medicine and dentistry. Prior to my departure the DRAGON technology was to be made public soon. I will be vigilant in ensuring it is properly and timely exploited for the benefit of stockholders."
About Federico Pignatelli
Federico Pignatelli has served on the BIOLASE Board of Directors continuously from 1991 through August 2014 and currently is the beneficial owner of approximately 1.8 million shares of BIOLASE common stock. He served as executive vice chairman from 1994 through 2006, and as interim chief executive officer from September 2006 to January 2007. He served as chairman of the Board of Directors and as chief executive officer from September 2010 through June 2014, during which time and at his request he was paid an annual salary of $1.
Under his leadership, from 1994 to early 2006 when he resigned as Executive Chairman, revenues grew from approximately $1 million to approximately $70 million and the Company's market capitalization increased from approximately $3.5 million to approximately $500 million. In his second round as Chairman and CEO, he managed a formidable business and financial turnaround by restructuring what was essentially a bankrupt BIOLASE, into a success again, tripling revenues from approximately $20 million to approximately $60 million with an increase in market capitalization from approximately $15 million in August 2010 to approximately $130 million in February 2013, twice exceeding $200 million during the period. Since Paul Clark and Jeff Nugent became members the Board and allied with Oracle Partners as its agents, the price of BIOLASE common stock has dropped by approximately 40% as of today.