BRITESMILE INC, 10QSB, 2000-02-09

BRITESMILE INC
10QSB, 2000-02-09
MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES

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<PAGE>

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the Quarterly Period Ended: December 31, 1999

[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934

For the Transition Period from to
---------- ---------
Commission File Number: 1-11064

BRITESMILE, INC.
(Exact name of small business issuer as specified in its charter)

UTAH 87-0410364
- --------------------------------------------- ---------------------------------
(State or other jurisdiction of incorporation (IRS employer identification no.)
or organization)

490 North Wiget Lane
Walnut Creek, California 94598
- ---------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)

(925) 941-6260
(Issuer's telephone number, including area code)

(Former name, former address and former fiscal year,
if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.

X yes no

The Company had 23,448,183 shares of common stock outstanding at January 31,
2000.

Transitional small business disclosure format. Yes No X

<PAGE>

BRITESMILE, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets as of March 31, 1999 and December
31, 1999.....................................................................3

Condensed Consolidated Statements of Operations for the three months ended
December 31, 1999 and 1998, respectively.....................................5

Condensed Consolidated Statements of Operations for the nine months ended
December 31, 1999 and 1998, respectively.....................................6

Condensed Consolidated Statements of Cash Flows for the nine months ended
December 31, 1999 and 1998, respectively.....................................7

Notes to Condensed Consolidated Financial Statements.........................8

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...........................................11

PART II. OTHER INFORMATION

Item 1. Legal Proceedings..............................................18

Item 2. Changes in Securities..........................................18

Item 5. Other Information..............................................18

Item 6. Exhibits and Reports on Form 8-K...............................19

<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BRITESMILE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
December 31, March 31,
1999 1999
(Unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents............................................ $ 2,878,148 $ 6,199,701
Trade accounts receivable, net of allowance for doubtful
accounts of $83,125 and $486,243, respectively...................... 413,991 74,936
Inventories (see Note 2)............................................. 133,584 16,244
Prepaid expenses and other........................................... 604,174 319,206
Assets held for sale................................................. - 1,260,000
------------- -----------

Total current assets................................... 4,029,897 7,870,087
----------- -----------

PROPERTY, EQUIPMENT AND IMPROVEMENTS, at cost:
Furniture, fixtures and equipment.................................... 4,006,402 813,209
Construction in progress............................................. 6,109,659 1,269,183
Leasehold improvements............................................... 4,479,422 685,699
----------- -----------
14,595,483 2,768,091

Less accumulated depreciation and amortization....................... 1,048,470 245,614
----------- -----------

Net property, equipment and improvements.............. 13,547,013 2,522,477
----------- -----------

OTHER ASSETS............................................................. - 39,640
----------- -----------

$17,576,910 $10,432,204
=========== ===========
</TABLE>

The accompanying notes to condensed
consolidated financial statements are an
integral part of these condensed consolidated
balance sheets.

<PAGE>

BRITESMILE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)

LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
December 31, March 31,
1999 1999
(Unaudited)
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable...................................................... $ 2,832,372 $ 2,031,711
Current portion of long-term debt..................................... - 797,523
Accrued expenses...................................................... 1,688,511 1,543,500
Accrued advertising................................................... 203,214 -
Accrued termination costs............................................. 219,211 -
Accrued gift certificate liability.................................... 124,900 -
------------ ------------

Total current liabilities................................. 5,068,208 4,372,734

OTHER LONG-TERM LIABILITIES............................................... 84,094 -
------------ ------------

Total liabilities......................................... 5,152,302 4,372,734
------------ ------------

STOCKHOLDERS' EQUITY (see Note 3):
Common stock, $.001 par value; 50,000,000 shares authorized
and 20,114,846 and 17,137,854 shares outstanding, respectively.... 20,115 17,138
Additional paid-in capital............................................ 50,590,029 27,820,791
Accumulated deficit................................................... (38,185,536) (21,778,459)
------------ -------------

Total stockholders' equity ............................... 12,424,608 6,059,470
------------ ------------

$ 17,576,910 $ 10,432,204
============ ============
</TABLE>

The accompanying notes to condensed
consolidated financial statements are an
integral part of these condensed consolidated
balance sheets.

4
<PAGE>

BRITESMILE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
December 31, 1999 December 31, 1998
(Unaudited) (Unaudited)
REVENUES:
<S> <C> <C>
Center whitening fees, net........................................... $ 1,683,081 $ -
Associated Center whitening fees, net................................ 599,259 -
Product sales........................................................ 70,244 -
------------- ------------------

Total revenues, net.............................................. 2,352,584 -
------------- ------------------

OPERATING COSTS AND EXPENSES:
Center selling and occupancy costs................................... 3,470,857 -
Whitening and product cost of sales.................................. 147,719 -
Selling, General and administrative expenses......................... 4,088,352 1,458,808
Research and development expenses.................................... 348,225 1,525,090
Depreciation and amortization........................................ 372,384 26,259
Termination benefits, impairment charges and write-down of assets.... 91 -
------------- ------------------

Total operating costs and expenses............................... 8,427,628 3,010,157
------------- ------------------

Loss from operations......................................... (6,075,044) (3,010,157)
------------- ------------------

OTHER INCOME (EXPENSE), net:
Interest expense..................................................... (5,666) (20,914)
Interest income...................................................... 94,754 46,971
------------- ------------------

Total other income (expense), net................................ 89,088 26,057
------------- ------------------

Loss before income tax provision............................. (5,985,956) (2,984,100)

INCOME TAX PROVISION..................................................... - -
------------- ------------------

Net loss .................................................... $ (5,985,956) $ (2,984,100)
============= ==================

BASIC AND DILUTED NET LOSS PER SHARE..................................... $ (0.30) $ (0.30)
============= ==================

WEIGHTED AVERAGE SHARES - BASIC AND DILUTED.............................. 20,074,016 10,048,410
============= ==================
</TABLE>

The accompanying notes to condensed
consolidated financial statements are an
integral part of these condensed
consolidated statements.

<PAGE>

BRITESMILE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
December 31, 1999 December 31, 1998
(Unaudited) (Unaudited)
REVENUES:
<S> <C> <C>
Center whitening fees, net........................................... $ 3,642,285 $ -
Associated Center whitening fees, net................................ 957,914 -
Product sales........................................................ 97,329 500,957
--------------- -------------

Total revenues, net.............................................. 4,697,528 500,957
--------------- -------------

OPERATING COSTS AND EXPENSES:
Center selling and occupancy costs................................... 6,720,716 -
Whitening and product cost of sales.................................. 375,929 423,290
Selling, General and administrative expenses......................... 11,796,295 2,530,000
Research and development expenses.................................... 1,417,540 2,922,272
Depreciation and amortization........................................ 802,856 95,000
Termination benefits, impairment charges and write-down of assets.... 301,291 3,127,000
--------------- -------------

Total operating costs and expenses............................... 21,414,627 9,097,562
--------------- -------------

Loss from operations......................................... (16,717,101) (8,596,605)
---------------- --------------

OTHER INCOME (EXPENSE), net:
Interest expense..................................................... (23,776) (72,221)
Interest income...................................................... 333,798 130,657
--------------- -------------

Total other income (expense), net................................ 310,022 58,436
--------------- -------------

Loss before income tax provision............................. (16,407,077) (8,538,169)

INCOME TAX PROVISION..................................................... - -
--------------- -------------

Net loss .................................................... $ (16,407,077) $ (8,538,169)
=============== =============

BASIC AND DILUTED NET LOSS PER SHARE..................................... $ (0.87) $ (1.04)
=============== =============

WEIGHTED AVERAGE SHARES - BASIC AND DILUTED.............................. 18,783,918 8,233,305
=============== =============
</TABLE>

The accompanying notes to condensed
consolidated financial statements are an
integral part of these condensed
consolidated statements.

<PAGE>

BRITESMILE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
December 31, 1999 December 31, 1998
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (16,407,077) $ (8,537,565)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization........................................ 802,856 95,102
Termination benefits, impairment charges and
write-down of assets.............................................. 219,211 2,259,254
Cost recognized for issuance of stock and stock options.............. 1,652,946 680,562
Gain on sale of assets............................................... - 5,896
Changes in assets and liabilities:
Trade accounts receivable...................................... (339,055) (201,425)
Inventories.................................................... (117,340) -
Prepaid expenses and other..................................... (284,968) -
Other assets................................................... 39,640 -
Trade accounts payable......................................... 800,661 684,732
Accrued expenses............................................... 145,011 -
Accrued advertising............................................ 203,214 -
Gift certificate liability..................................... 124,900 -
Other liabilities.............................................. 84,094 -
-------------- -------------

Net cash used in operating activities...................... (13,075,907) (5,013,444)
-------------- -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of assets, net........................................ 462,477 135,759
Purchase of property and equipment........................................... (11,827,392) (390,862)
-------------- -------------

Net cash used in investing activities...................... (11,364,915) (255,103)
-------------- -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt......................................... - (229,078)
Proceeds from common stock offering.......................................... 15,706,766 15,013,000
Proceeds from stock option issuance (see Note 3)............................. 5,412,503 -
-------------- -------------

Net cash provided by financing activities.................. 21,119,269 14,783,922
-------------- -------------

NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS............................ (3,321,553) 9,515,375

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD............................ 6,199,701 503,279
-------------- -------------

CASH AND CASH EQUIVALENTS AT END OF THE PERIOD.................................. $ 2,878,148 $ 10,018,654
============== =============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for interest...................................................... $ 23,776 $ 71,921
============== =============

Cash paid for income taxes.................................................. $ - $ 300
============== =============
</TABLE>

The accompanying notes to condensed
consolidated financial statements are an
integral part of these condensed
consolidated statements.

7
<PAGE>

BRITESMILE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(1) DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS

BriteSmile, Inc., a Utah corporation ("BriteSmile" or the "Company"),
and its affiliates develop, produce and sell advanced teeth whitening products
and services. In February 1999 the Company introduced its new Light Activated
Teeth Whitening System technology (the "BriteSmile Light Activated Teeth
Whitening System" or "LATW", patents pending), including its new BriteSmile 2000
system ("BS2000"), new whitening gel and new whitening process. The LATW is
distributed in Company-owned retail salon settings known as BriteSmile
Professional Teeth Whitening Centers ("Centers") and in certain independent
premier cosmetic dental offices known as BriteSmile Professional Teeth Whitening
Associated Centers ("Associated Centers"). In November 1999 the Company
introduced its new BriteSmile 3000 LATW keycard system ("BS3000") into
Associated Centers. This new mobile version of the BS2000 can be installed more
quickly and provides the needed flexibility and mobility in dental offices.

In February 1999 the LATW was introduced in the Company's first
Center in Walnut Creek, California. In March 1999, the Company opened its first
Associated Center in Louisville, Kentucky. As of February 11, 2000, the Company
continued to open Centers and Associated Centers. As of February 8, 2000, the
Company had 14 Centers and 190 Associated Centers in operation.

The Company is not engaged in the practice of dentistry. Each
licensed dentist who operates a Center or Associated Center maintains full
control over dental matters, including the supervision of dental auxiliaries and
the administration of the LATW procedure.

The Company does not believe that its business follows seasonal
trends. However, because certain of the Company's Centers are located within a
mall environment, the potential for seasonality exists. As a result, the
Company's sales performance could potentially be effected.

Unless specified to the contrary herein, references to BriteSmile or
to the Company refer to the Company and its subsidiaries on a consolidated
basis.

Basis of Presentation

The accompanying unaudited condensed consolidated financial
statements have been prepared by the Company in accordance with the rules and
regulations of the Securities and Exchange Commission for Form 10-QSB, and
accordingly, do not include all of the information and footnotes required by
generally accepted accounting principles. In the opinion of management, these
unaudited condensed consolidated financial statements reflect all adjustments,
which consist only of normal recurring adjustments, which are necessary to
present fairly the Company's financial position, results of operations and cash
flows as of December 31, 1999 and for the periods presented herein. These
unaudited condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's annual report on Form 10-KSB for the fiscal year ended
March 31, 1999.

The results of operations for the nine months ended December 31, 1999
are not necessarily indicative of the results that may be expected for the
remainder of the fiscal year ending March 31, 2000.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or
market. Inventories consist principally of dental supplies as of March 31, 1999
and December 31, 1999, respectively, and are summarized as follows:

<TABLE>
<CAPTION>
December 31, March 31, 1999
1999
-------------------- ---------------------
<S> <C> <C>
Finished Goods.................................. $ 133,584 $ 16,244
==================== =====================
</TABLE>

<PAGE>

BRITESMILE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-(CONTINUED)

Income Taxes

The Company uses the asset and liability method of accounting for
income taxes. Under this method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax basis. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be settled or recovered. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in the period that includes the enactment date.

The Company has recognized no tax benefit for the net operating
losses incurred during the three and nine months ended December 31, 1999 due to
uncertainties about the Company's ability to generate future earnings to offset
such losses.

Basic and Diluted Net Loss Per Common Share

Basic net loss per common share is calculated based upon the weighted
average number of common shares outstanding during the periods presented.

In calculating net loss per share for the three and nine months ended
December 31, 1999 and 1998, there were warrants and options to purchase
5,652,433 and 4,036,167 potential common shares, respectively, that were not
included in the computation of diluted net loss per share as their effect would
have been anti-dilutive, thereby decreasing the net loss per common share.

Reclassifications

Certain reclassifications have been made in the prior period's
consolidated financial statements to conform with the current year presentation.

(3) STOCKHOLDERS' EQUITY

In June 1999, the Company completed a private placement of 1,355,555
shares of its common stock for $15,000,000. 1,004,043 shares were sold to
private investors, and the remaining 351,512 were sold to a group of
individuals, including members of senior management, the Company's Board of
Directors and key consultants ("Management Purchasers").

Pursuant to Registration Rights Agreements entered into with the
Company, the non-Management Purchasers acquired certain rights to cause the
Company to register their shares for offer and sale under the Securities Act of
1933, as amended (the "Piggyback Registration Rights").

Pursuant to Amended and Restated Registration Rights Agreements
entered into between the Company and the Management Purchasers, the Management
Purchasers acquired Piggyback Registration Rights, and also certain limited
demand registration rights.

On October 29, 1999, LCO Investments Limited ("LCO"), the principal
shareholder of the Company, exercised options to purchase 1,173,334 shares of
common stock of the Company, resulting in proceeds of $5,280,003 to the Company.
The Company granted the options to LCO in April 1996 and May 1997 in connection
with private placements of the Company's common stock.

9
<PAGE>

BRITESMILE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(4) STOCK OPTIONS

During 1990, the Company adopted an employee stock option plan, which
was approved by the shareholders on September 5, 1990 (the "1990 Plan"). In
January 1997, the Company adopted the 1997 Stock Option and Incentive Plan
("1997 Plan"), which was subsequently amended by the Board of Directors of the
Company in January 1999 to increase the total number of shares available for
issuance under the plan from 2 million to 4 million (the "Revised 1997 Plan").
Substantially all of the employee stock options outstanding at December 31, 1999
have been issued pursuant to the Revised 1997 Plan. Only 182 of all stock
options outstanding at December 31, 1999 were granted under the 1990 Plan. No
additional options will be granted under the 1990 Plan. Under the Revised 1997
Plan, the Company is authorized to issue up to four million shares of common
stock pursuant to stock awards or upon the exercise of options granted under the
plan. The shareholders of the Company approved the issuance of up to two million
shares of common stock under the Company's 1997 Plan as originally adopted in
1997. At the Company's 1999 Annual Meeting, shareholders approved the issuance
of the additional two million shares now available under the Revised 1997 Plan.
On November 24, 1999, the Board of Directors amended the 1997 Plan to increase
the total number of shares available for issuance under the plan from 4 million
to 4.8 million. Selected option grants to consultants pursuant to consulting
agreements have been issued outside the Revised 1997 Plan. The option price per
share is determined by the board of directors, but shall be no less than the
fair market value of the underlying shares on the date of the grant. Options
granted under the Revised 1997 Plan generally vest at various intervals up to
five years and expire after ten years.

(5) SUBSEQUENT EVENTS

On January 18, 2000, the Company issued and sold in a private
placement 3,333,333 shares (the "New Shares") of its Common Stock, par value
$.001 per share, for aggregate proceeds of $20,000,000 (the "Private
Placement"). The purchase price of the New Shares was $6.00 per share. The New
Shares represent 14.2 percent of the Company's total shares of Common Stock
issued and outstanding, after giving effect to the Private Placement.

The New Shares were issued to three private investors, Pequot Private
Equity Fund II, L.P.(1,666,667 shares), Pequot Partners Fund, L.P. (833,333
shares), and Pequot International Fund, Inc. (833,333 shares).

Effective February 1, 2000, the Company issued an aggregate 30,927
shares of restricted common stock to three affiliated purchasers (Quota Rabbicco
II, Ltd., Argonaut Partnership, L.P. and David E. Gerstenhaber), in a private
placement for cash proceeds to the Company of $185,562.

Effective February 8, 2000, the Company issued 77,318 shares of
restricted common stock to Andrew J. McKelvey in a private placement for cash
proceeds to the Company of 463,908.

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Results of Operations

THIS QUARTERLY REPORT ON FORM 10-QSB CONTAINS, IN ADDITION TO HISTORICAL
INFORMATION, FORWARD-LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS AND
UNCERTANTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE
RESULTS ANTICIPATED BY THE COMPANY AND DISCUSSED IN THE FORWARD-LOOKING
STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES ARE
DISCUSSED BELOW IN THE SECTION ENTITLED "FORWARD-LOOKING STATEMENTS."

The following table sets forth, for the periods indicated, certain
information relating to the operations of the Company expressed in dollars
(rounded) and percentage changes from period to period. Data in the table
reflects the consolidated results of the Company for the three and nine month
periods ended December 31, 1999 and 1998, respectively.

<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
----------------------------------------- ------------------------------------------
% OF % OF
CHG CHG
FROM FROM
DECEMBER DECEMBER 1998 TO DECEMBER DECEMBER 1998 TO
31, 1999 31, 1998 1999 31, 1999 31, 1998 1999
-------------- ------------ ------- ----------- -------------

Unaudited Statement of Operations Data:
<S> <C> <C> <C> <C> <C> <C>
Center whitening fees, net....... $ 1,683,000 $ - -% $ 3,642,000 $ - -%
Associated Center whitening fees,
net 599,000 - - 958,000 - -
Product sales.................... 71,000 - - 97,000 501,000 (80.6)
------------ ------------ ----------- ------------
Total revenues, net...... 2,353,000 - - 4,697,000 501,000 837.5
------------ ------------ ----------- ------------

Operating Costs and Expenses:
Selling and occupancy costs...... 3,471,000 - - 6,721,000 - -
Whitening and product cost of sales 148,000 - - 376,000 423,000 (11.1)
Selling, general and administrative 4,088,000 1,459,000 180.2 11,796,000 2,530,000 366.3
Research and development expenses 348,000 1,525,000 (77.2) 1,418,000 2,922,000 (51.5)
Depreciation and amortization.... 373,000 26,000 1,334.6 803,000 95,000 745.3
Termination benefits, impairment
charges and write-down of assets - - - 301,000 3,127,000 (90.4)
------------ ------------ ----------- ------------
Total operating costs and
expenses................... 8,428,000 3,010,000 180.0 21,415,000 9,097,000 135.4
------------ ------------ ----------- ------------

Other Income (Expense), net:
Interest expense................. (6,000) (21,000) (71.4) (24,000) (72,000) 66.7
------------ ------------ ----------- ------------
Interest income.................. 95,000 47,000 102.1 334,000 131,000 155.0
------------ ------------ ----------- ------------
Net income (loss).............. $ (5,986,000) $ (2,984,000) 100.6% $(16,407,000) $ (8,538,000) 92.2%
============ ============ ============ ============
</TABLE>

The following are explanations of significant period to period changes for the
three months ended December 31, 1999 and 1998:

Revenues

Total Revenues, net. Total revenues, net increased to
$2,353,000 from $-0- for the three months ended December 31, 1999 compared to
the three months ended December 31, 1998.

Center Whitening Fees, net. Center whitening fees, net for the
three months ended December 31, 1999 totaled $1,683,000. As a result of the
Company's discontinuation of the laser-based teeth whitening devices during
fiscal year 1999, there were no sales during the three months ended December 31,
1998. During the three months ended December 31, 1999, the Company opened 2 new
Centers, for a total of 8. Teeth whitening fees are expected to increase during
the next twelve months as a result of the planned opening of 12 additional
Centers as well as full year operating experience over the next twelve months at
newly opened and existing Centers.

Associated Center Whitening Fees. Associated Center whitening fees
for the three months ended December 31, 1999 totaled $599,000. During the three
months ended December 31, 1999, the Company opened 78 new Associated Centers,
for a total of 89. Associated Center whitening fees are expected to increase
during the next twelve months as a result of the planned openings of additional
Associated Centers as well as full year operating experience over the next
twelve months at newly opened and existing Associated Centers.

<PAGE>

Product Sales. Product sales for the three months ended December 31,
1999 totaled $71,000. Product sales for the three months ended December 31, 1999
represent the Company's toothpaste and newly introduced Sonicare toothbrush
retail products sold at Centers. Product sales are expected to increase during
the next twelve months as a result of the introduction of additional oral care
retail products to be sold at Centers, Associated Centers and through an
E-Commerce website (to be introduced in fiscal year 2001). Product sales for the
three months ended December 31, 1998, represent the discontinuation of the
chemical products related to the old laser-based teeth whitening devices.

Operating Costs and Expenses

Center Selling and Occupancy Costs. Center selling and occupancy
costs totaled $3,471,000 for the three months ended December 31, 1999. Of this
amount, $1,137,000 was advertising and promotional costs directed to increase
brand awareness to consumers. Center selling and occupancy costs are expected to
increase during the next twelve months as a result of the opening of 12
additional Centers as well as full year operating experience at the 8 existing
Centers. Center selling and occupancy costs as a percentage of Center whitening
fees was 206.2% for the three months ended December 31, 1999. The lower
operating margins represent newly opened Centers. The Company did not operate
any Centers during the three months ended December 31, 1998.

Whitening and Product Cost of Sales. Whitening and product cost of
sales for the three months ended December 31, 1999 totaled $148,000. Whitening
and product cost of sales consisted primarily of whitening gel and teeth
whitening procedure supplies as well as the Company's toothpaste and Sonicare
toothbrush products. Whitening cost of sales as a percentage of combined
whitening fees was 1.4% for the three months ended December 31, 1999. Product
cost of sales as a percentage of product sales was 18.3% for the three months
ended December 31, 1999. For the three months ended December 31, 1998, product
cost of sales, exclusive of inventory write-downs, represent the discontinuation
of the chemical products related to the old laser-based teeth whitening devices.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $2,629,000, or 180.2%, from $1,459,000 to
$4,088,000 for the three months ended December 31, 1999 compared to the three
months ended December 31, 1998. The increase in selling, general and
administrative expenses was primarily the result of the introduction of 2 new
Centers during the quarter in addition to the operation of the 6 existing
Centers, the addition of 78 new Associated Centers in addition to the operation
of the 11 existing Associated Centers, and costs incurred to open future Centers
and Associated Centers.

Included in the selling, general and administrative expenses for the
three months ended December 31, 1999 were $1,012,000 of advertising,
promotional, and call center costs directed to increase brand awareness to
consumers, and sales of the whitening service to prospective Associated Center
dentists. The Company also incurred $1,100,000 of professional service costs
during the three months ended December 31, 1999, related to public relations,
executing Center and Associated Center agreements, executing leases,
intellectual property, legal fees, employee recruitment and general corporate
matters. Included in professional service costs are one-time, non-cash charges
totaling $589,000 for the fair value of stock options granted to various
consultants to the Company. The Company expects to issue options to consultants
in the future at fair market value. The Company also incurred $105,000 related
to the development and expansion of international Associated Centers in Japan,
Argentina, Switzerland and Italy.

During the three months ended December 31, 1999, the Company
consolidated its Call Center operations from Los Angeles and its general and
administrative operations from Lester, Pennsylvania, to its headquarters
facility in Walnut Creek. The Company expects to realize savings of
approximately $1,000,000 during the next twelve months as a result of this
consolidation. Management expects selling, general and administrative expenses
to be leveraged more efficiently as sales from Centers and Associated Centers
increase in the future.

Research and Development Expenses. Research and development expenses
decreased by $1,177,000, or 77.2%, from $1,525,000 to $348,000 for the three
months ended December 31, 1999 compared to the three months ended December 31,
1998. This decrease was primarily attributable to the development of the
BriteSmile 3000 LATW system and keycard which was introduced into Associated
Centers during the three months ended December 31, 1999. Research and
development expenses incurred during the three months ended December 31, 1998
related to the development of the BriteSmile 2000 LATW system, which was
introduced at the Company's first Center in Walnut Creek, California in February
1999. The Company also incurred additional expenses related to clinical and
efficacy studies.

<PAGE>

Depreciation and Amortization. Depreciation and amortization
increased by $347,000, or 1,334.6%, from $26,000 to $373,000 for the three
months ended December 31, 1999 compared to the three months ended December 31,
1998. This increase was primarily attributable to the addition of 2 Centers, in
addition to the operation of 6 existing Centers and the introduction of the
BriteSmile 3000 LATW system into 78 new Associated Centers, in addition to the
11 existing Associated Centers that have the BriteSmile 2000 LATW system.

Total Operating Costs and Expenses. Total operating costs and
expenses increased by $5,418,000, or 180.0%, from $3,010,000 to $8,428,000 for
the three months ended December 31, 1999 compared to the three months ended
December 31, 1998, for the reasons discussed above.

Interest Expense. Interest expense decreased $15,000, or 72.9%, from
$21,000 to $6,000 for the three months ended December 31, 1999 compared to the
three months ended December 31, 1998. Interest expense consisted primarily of
mortgage interest paid on the Company's former headquarters facility.

Interest Income. Interest income increased $48,000, or 102.1%, from
$47,000 to $95,000 for the three months ended December 31, 1999 compared to the
three months ended December 31, 1998. This decrease was primarily related to
increased average available cash on-hand to invest.

Net Loss. The net loss increased by $3,002,000, or 100.6%, from
$2,984,000 to $5,986,000 for the three months ended December 31, 1999 compared
to the three months ended December 31, 1998 due to a combination of the factors
described above.

The following are explanations of significant period to period changes for the
nine months ended December 31, 1999 and 1998:

Revenues

Total Revenues, net. Total revenues, net increased by $4,196,000,
or 837.5%, from $501,000 to $4,697,000 for the nine months ended December 31,
1999 compared to the nine months ended December 31, 1998.

Center Whitening Fees, net. Center whitening fees, net for the nine
months ended December 31, 1999 totaled $3,642,000. As a result of the Company's
discontinuation of laser-based teeth whitening devices during fiscal year 1999,
there were no sales during the nine months ended December 31, 1998. During the
nine months ended December 31, 1999, the Company opened a total of 8 Centers.
Teeth whitening fees are expected to increase during the next twelve months as a
result of the planned opening of 12 additional Centers as well as full year
operating experience over the next twelve months at newly opened and existing
Centers.

Associated Center Whitening Fees. Associated Center whitening fees
for the nine months ended December 31, 1999 totaled $958,000. During the nine
months ended December 31, 1999, the Company opened 89 Associated Centers.
Associated Center whitening fees are expected to increase during the next twelve
months as a result of the planned openings of additional Associated Centers as
well as full year operating experience over the next twelve months at newly
opened and existing Associated Centers.

Product Sales. Product sales decreased $404,000, or 80.6%, from
$501,000 to $97,000 for the nine months ended December 31, 1999 compared to the
nine months ended December 31, 1998. Product sales for the nine months ended
December 31, 1999 represent the Company's toothpaste and newly introduced
Sonicare toothbrush retail products sold at Centers. Product sales are expected
to increase during the next twelve months as a result of the introduction of
additional oral care retail products to be sold at Centers, Associated Centers
and through an E-Commerce website (to be introduced in fiscal year 2001).
Product sales for the nine months ended December 31, 1998 represent the
discontinuation of chemical products related to the old laser-based teeth
whitening devices.

Operating Costs and Expenses

Center Selling and Occupancy Costs. Center selling and occupancy
costs totaled $6,721,000 for the nine months ended December 31, 1999. Of this
amount, $3,534,000 was advertising and promotional costs directed to increase
brand awareness to consumers. Center selling and occupancy costs are expected to
increase during the next twelve months as a result of the opening of 12
additional Centers as well as full year operating experience at the 8 existing
Centers. Center selling and occupancy costs as a percentage of Center whitening
fees was 184.5% for the nine months ended December 31, 1999. The lower operating
margins represent newly opened Centers. The Company did not operate any Centers
during the nine months ended December 31, 1998.

13
<PAGE>

Whitening and Product Cost of Sales. Whitening and product cost of
sales decreased by $47,000, or 11.1%, from $423,000 to $376,000 for the nine
months ended December 31, 1999 compared to the nine months ended December 31,
1998. Whitening and product cost of sales consisted primarily of whitening gel
and teeth whitening procedure supplies as well as the Company's toothpaste and
Sonicare toothbrush products. Whitening cost of sales as a percentage of
combined whitening fees was 7.3% for the nine months ended December 31, 1999.
Product cost of sales as a percentage of product sales was 42.3% for the nine
months ended December 31, 1999. For the nine months ended December 31, 1998,
product cost of sales, exclusive of inventory write-downs, represent the
discontinuation of the chemical products related to the old laser-based teeth
whitening devices.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $9,266,000, or 367.4%, from $2,530,000 to
$11,796,000 for the nine months ended December 31, 1999 compared to the nine
months ended December 31, 1998. The increase in selling, general and
administrative expenses was primarily the result of the introduction of 8
Centers, the addition of 89 Associated Centers, and costs incurred to open
future Centers and Associated Centers.

Included in the selling, general and administrative expenses for the
nine months ended December 31, 1999 were $2,731,000 of advertising, promotional,
and call center costs directed to increase brand awareness to consumers, and
ssales of the whitening service to prospective Associated Center dentists. The
Company also incurred $4,542,000 of professional service costs during the nine
months ended December 31, 1999, related to public relations, executing Center
and Associated Center agreements, executing leases, intellectual property, legal
fees, employee recruitment and general corporate matters. Included in
professional service costs are one-time, non-cash charges totaling $1,653,000
for the fair value of stock options granted to various consultants to the
Company. The Company expects to issue options to consultants in the future at or
above fair market value, thus eliminating these charges. The Company also
incurred $437,000 related to the development and expansion of international
Associated Centers in Japan, Argentina, Switzerland and Italy.

During the nine months ended December 31, 1999, the Company
consolidated its Call Center operations from Los Angeles and its general and
administrative operations from Lester, Pennsylvania, to its headquarters
facility in Walnut Creek. The Company expects to realize savings of
approximately $1,000,000 during the next twelve months as a result of this
consolidation. Management expects selling, general and administrative expenses
to be leveraged more efficiently as sales from Centers and Associated Centers
increase in the future.

Research and Development Expenses. Research and development expenses
decreased by $1,504,000, or 51.5%, from $2,922,000 to $1,418,000 for the nine
months ended December 31, 1999 compared to the nine months ended December 31,
1998. This increase was primarily attributable to the development of the
BriteSmile 3000 LATW system and keycard which was introduced into Associated
Centers during the three months ended December 31, 1999. Research and
development expenses incurred during the nine months ended December 31, 1998
related to the development of the BriteSmile 2000 LATW system, which was
introduced at the Company's first Center in Walnut Creek, California in February
1999. The Company also incurred additional expenses related to clinical and
efficacy studies.

Depreciation and Amortization. Depreciation and amortization
increased by $708,000, or 745.3%, from $95,000 to $803,000 for the nine months
ended December 31, 1999 compared to the nine months ended December 31, 1998.
This increase was primarily attributable to the 8 Centers, and the introduction
of the BriteSmile 3000 LATW system into 89 Associated Centers in operation
during the nine months ended December 31, 1999.

Termination Benefits, Impairment Charges and Write-Down of Assets.
Termination of benefits, impairment charges and write-down of assets decreased
by $2,826,000, or 90.4%, from $3,127,000 to $301,000 for the nine months ended
December 31, 1999 compared to the nine months ended December 31, 1998. During
the nine months ended December 31, 1999, the Company recorded a $301,000 charge
related to the relocation of its Lester, Pennsylvania office to California.
These costs consisted primarily of lease termination accruals and employee
severance.

During the nine months ended December 31, 1998, the Company's Board
of Directors and management decided to close its Utah operating facility,
discontinue all activities related to the industrial and scientific laser lines
of business, discontinue development and sales of its laser-based LTW device -
the arc lamp tooth whitening system, and move its headquarters to Pennsylvania.
As a result of the Company's decision to relocate its operations to Pennsylvania
and to focus exclusively on the tooth whitening market, nearly all of the
Company's 63 employees located in Utah were scheduled for termination. A
termination benefits liability of $200,000 was established and charged to
expense during the three-month period ended June 30, 1998. At September 30,
1998, the Company completed its termination plan and paid benefits of
approximately $200,000 to former employees. In October 1998, the Company
discontinued sales of take-home and in-office tooth whitening chemical products
as a result of management's shift in focus to BriteSmile Whitening Centers.

<PAGE>

In addition to employee termination costs, the Company recorded other
charges of $2,927,000 in the nine-month period ending December 31, 1998. These
charges include the write-down of $418,000 of inventories classified as cost of
products sold, the impairment and write-down of patents and a joint venture
related to discontinued technology (assets which will provide limited or no
future benefit to the Company) for $657,000, settlement of canceled purchase
commitments for $402,000, write-down on assets available for sale at fair value
for $367,000, property write-downs and losses on sale of properties for
$425,000, and $658,000 of charges related to uncollectable accounts receivable
and accrued expenses associated with discontinued product lines.

Total Operating Costs and Expenses. Total operating costs and
expenses increased by $12,318,000, or 135.4%, from $9,097,000 to $21,415,000 for
the nine months ended December 31, 1999 compared to the nine months ended
December 31, 1998, for the reasons discussed above.

Interest Expense. Interest expense decreased $48,000, or 67.1%, from
$72,000 to $24,000 for the nine months ended December 31, 1999 compared to the
nine months ended December 31, 1998. Interest expense consisted primarily of
mortgage interest paid on the Company's former headquarters facility.

Interest Income. Interest income increased $203,000, or 155.5%, from
$131,000 to $334,000 for the nine months ended December 31, 1999 compared to the
nine months ended December 31, 1998. This decrease was primarily related to
increased average available cash on-hand to invest.

Net Loss. The net loss increased by $7,869,000, or 92.2%, from
$8,538,000 to $16,407,000 for the nine months ended December 31, 1999 compared
to the nine months ended December 31, 1998 due to a combination of the factors
described above.

Liquidity and Capital Resources

General

The Company's principal sources of liquidity are cash flows from
operations and cash on hand. At December 31, 1999, the Company had $2,878,000 of
cash and cash equivalents. The Company is in the early stages of opening Centers
and Associated Centers. As of December 31, 1999, the Company has opened 8
Centers and 89 Associated Centers. The Company expects to open additional
Centers and Associated Centers by the end of fiscal 2000 and beyond. The
Company's opening of additional Centers and Associated Centers is contingent
upon several factors, including available cash resources, ability to secure
leases for its Centers and acceptance by the consumer and Associated Center
dentists of the Company's service. Currently, the Centers and Associated Centers
which are open are operating at a loss. The Company expects that operating
losses will continue through fiscal 2000. The Company expects capital
expenditures to be approximately $18,000,000 for its fiscal year ended March 31,
2000. It is expected that the Company's principal uses of cash will be to
provide working capital, finance capital expenditures and for other general
corporate purposes. The Company believes that its current sources of liquidity
and the recent $20,000,000 equity contribution received in January 2000, will be
adequate to meet its anticipated requirements for working capital, capital
expenditures and other general corporate purposes and expansion during the next
twelve months. There can be no assurance, however, that the Company's business
will generate cash flows at or above current levels or that cost savings from
consolidation efforts can be achieved. Accordingly, the Company may choose to
defer capital expenditure plans and extend vendor payments for additional cash
flow flexibility.

In April 1999 the Company sold the building and land formerly used as
its corporate headquarters in Salt Lake City, Utah and classified as held for
sale in the March 31, 1999 consolidated balance sheet. The $1,260,000 of net
proceeds from the sale were used primarily to repay outstanding mortgages on the
property that totaled $797,000.

In June 1999 the Company completed a private placement of 1,355,555
shares of its common stock for $15,000,000. 1,004,043 shares were sold to
private investors, and the remaining 351,512 were sold to a group of
individuals, including members of senior management, the Company's Board of
Directors and key consultants.

15
<PAGE>

On January 18, 2000, the Company issued and sold in a private
placement 3,333,333 shares (the "New Shares") of its Common Stock, par value
$.001 per share, for aggregate proceeds of $20,000,000 (the "Private
Placement"). The purchase price of the New Shares was $6.00 per share. The New
Shares represent 14.2% of the Company's total shares of Common Stock issued and
outstanding, after giving effect to the Private Placement.

December 31, 1999 Compared to March 31, 1999

As of December 31, 1999, the Company had liquid assets (cash and cash
equivalents and trade accounts receivable) of $3,292,000, a decrease of 47.5%,
or $2,983,000, from March 31, 1999 when liquid assets were $6,275,000. Cash
decreased $3,322,000, or 53.6%, to $2,878,000 at December 31, 1999 from
$6,200,000 at March 31, 1999. This decrease in cash was primarily the result of
the Company funding capital expenditures, advertising and for general-purpose
use. Trade accounts receivable increased $339,000, or 452.0%, to $414,000 at
December 31, 1999 from $75,000 at March 31, 1999. This increase is primarily the
result of the introduction of the BriteSmile 3000 LATW system and keycard to
Associated Centers as well as the increase in the number of Associated Centers
in operation during the nine months ended December 31, 1999.

Current assets decreased by $3,840,000, or 48.8%, to $4,030,000 at
December 31, 1999 from $7,870,000 at March 31, 1999. This decrease was primarily
the result of a decrease in cash of $3,322,000, described above, and a decrease
in assets held for sale of $1,260,000, offset in part by increases in accounts
receivable and prepaid expenses of $339,000 and $285,000, respectively.

Long-term assets increased $10,985,000, or 428.8%, to $13,547,000 at
December 31, 1999 from $2,562,000 at March 31, 1999. This increase was primarily
the result of leasehold improvements at the 8 Centers in operation and
additional Centers under construction, the shipment of 78 BriteSmile 3000 LATW
systems and purchase of computer and related equipment during the nine months
ended December 31, 1999.

Current liabilities increased by $695,000, or 15.9%, to $5,068,000 at
December 31, 1999 from $4,373,000 at March 31, 1999. This increase was primarily
the result of an increase in trade accounts payable of $801,000 due to the
additional operating expenses at the Company's 7 Centers. Additionally, accrued
advertising increased $203,000 and accrued termination costs increased $219,000.
These increases were offset in part by a decrease of $798,000 in current portion
of long-term debt as a result of the repayment of outstanding mortgages on the
property held for sale that served as the Company's former corporate
headquarters in Salt Lake City, Utah.

The Company's working capital decreased by $4,535,000, or 129.7%, to
a deficit of $1,038,000 at December 31, 1999 from a surplus of $3,497,000 at
March 31, 1999, for the reasons described above.

The Company used net cash of $13,076,000 in operating activities
during the nine months ended December 31, 1999, primarily as a result of the net
loss incurred during the period.

The Company used net cash of $11,365,000 in investing activities
during the nine months ended December 31, 1999, primarily for capital
expenditures relating to the Company's expansion efforts in Centers and
Associated Centers.

The Company provided net cash of $21,119,000 from financing
activities during the nine months ended December 31, 1999, primarily due to the
successful completion of a private placement of 1,355,555 shares of its common
stock for $15,000,000 in June 19999. In addition, the Company's principal
shareholder, LCO Investments Limited, exercised options to purchase 1,173,334
shares of common stock of the Company, resulting in proceeds of $5,280,003 to
the Company.

<PAGE>

Inflation

Most of the Company's products are purchased in finished form and
packaged by the supplier or at the Company's headquarters. The Company
anticipates usual inflationary increases in the price of its products and does
not intend to pass these increases along to its customers, primarily as a result
of other operating efficiencies gained through changing the sourcing of certain
of its products. In general, the Company does not believe that inflation has had
a material effect on its results of operations in recent years. However, there
can be no assurance that the Company's business will not be affected by
inflation in the future.

Seasonality

Year 2000 Compliance

Prior to January 1, 2000, there was widespread concern that computer
systems could experience problems handling dates beyond the year 1999. This was
referred to as the "Year 2000" issue. It was believed that some computer
programs or computer hardware could recognize a date using "00" as the year 1900
rather than the year 2000, and that this could result in a system failure or
miscalculations causing disruption of operations.

In anticipation of the Year 2000 issue, the Company took steps to
ensure that its operations and systems would properly recognize dates beyond
December 31, 1999. The Company also gathered information about the Year 2000
compliance of its significant suppliers. These efforts were made in an attempt
to prevent any disruption of the Company's business on or after January 1, 2000,
due to the Year 2000 issue.

Since January 1, 2000, the Company has experienced no difficulties or
business disruptions resulting from the Year 2000 issue. Similarly, to date the
Company is not aware of any external agent or supplier who has suffered a Year
2000 issue that will materially impact the Company's results of operations,
liquidity, or capital resources.

While management intends to continue to monitor the Year 2000 issue
and any impact on the Company, management currently has no plans to devote
significant time or resources to the Year 2000 issue.

Forward Looking Statements

The statements contained in this Report that are not purely
historical are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 and Section 21E of the Securities
Exchange Act. These statements relate to the Company's expectations, hopes,
beliefs, anticipations, commitments, intentions and strategies regarding the
future. They may be identified by the use of words or phrases such as
"believes," "expects," "anticipates," "should," "plans," "estimates," and
"potential," among others. Forward-looking statements include, but are not
limited to, statements contained in Management's Discussion and Analysis of
Financial Condition and Results of Operations regarding the Company's financial
performance, revenue and expense levels in the future and the sufficiency of its
existing assets to fund future operations and capital spending needs. Actual
results could differ materially from the anticipated results or other
expectations expressed in such forward-looking statements. The Company believes
that many of the risks set forth here and in the Company's SEC filings are part
of doing business in the industry in which the Company operates and competes and
will likely be present in all periods reported. The forward-looking statements
contained in this Report are made as of the date of this Report and the Company
assumes no obligation to update them or to update the reasons why actual results
could differ from those projected in such forward-looking statements. Among
others, risks and uncertainties that may affect the business, financial
condition, performance, development, and results of operations of the Company
include:

o Government regulation of the Company's products and teeth whitening
procedures, including: (i) current restrictions or controls on the
practice of dentistry by general business corporations, and (ii)
future, unknown enactments or interpretations of current regulations
which could, in the future, affect the Company's operational
structure and relationships with licensed dentists.

o Failure of the Company to generate, sustain or manage growth,
including failure to develop new products and expand Center and
Associated Center locations;

o The loss of product market share to competitors and/or development of
new or superior technologies by competitors;

o Ongoing operating losses associated with the Company's abandonment of
its industrial laser product line and laser-based teeth whitening
technologies, in favor of development of new, light-activated teeth
whitening technologies;

o Failure of the Company to secure additional financing to complete its
aggressive plan for the rollout of a broad base of teeth
whitening centers nationwide;

o Unproven market for the Company's new whitening products, whitening
process, "Whitening Center" and "Associated Center" concepts, in
light of competition from traditional take-home whitening products
and bleaching tray methods;

o Lack of product diversity.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

The Company is involved in various other claims and legal actions
arising in the ordinary course of business. In the opinion of management, the
ultimate disposition of these other matters will not have a material adverse
effect on the Company's operations or financial condition.

ITEM 2. CHANGES IN SECURITIES.

There were no unregistered sales of securities by the Company during
the three-month period covered by this Report.

On January 18, 2000, the Company issued 3,333,333 shares of
restricted common stock valued at $20,000,000 to Pequot Private Equity Fund II,
L.P., Pequot Partners Fund, L.P., and Pequot International Fund, Inc. See the
Company's Current Report on Form 8-K filed with the Commission on January 26,
2000.

Effective February 8, 2000, the Company issued 77,318 shares of
restricted common stock to Andrew J. McKelvey in a private placement for cash
proceeds to the Company of 463,908.

ITEM 5. OTHER INFORMATION.

Effective November 24, 1999, the Company appointed Bradford G. Peters
and Harry Thompson to its Board of Directors. Bradford G. Peters is the
President of Blackfin Capital, a privately held investment management company
based in New York. Prior to founding Blackfin Capital, Mr. Peters was with
Morgan Stanley in the Private Wealth Management Group.

Harry Thompson is the President of The Strategy Group and Managing
Director of Swiss Army Brands, Inc. Prior to founding The Strategy Group, Mr.
Thompson served in senior management of several core units of the Interpublic
Group of Companies, one of the world's leading advertising groups. Mr. Thompson
also has served as either Manager or Chairman of several telecommunications
companies of The Galesi Group.

In addition to serving as a Director to BriteSmile, Mr. Peters serves
on the Boards of three other private companies - Clique.com, Storcomm and
CyberXpo.com. Currently, Mr. Thompson is a Director of Schwinn/GT Corp. and has
been a Director of several start-up companies in the high-tech and consumer
goods and services areas. Mr. Peters holds a M.B.A. from Duke University. Mr.
Thompson has a M.B.A. from Harvard Business School.

The appointments of Mr. Peters and Mr. Thompson bring the BriteSmile
Board of Directors to a total of ten members.

<PAGE>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(A) EXHIBITS

Exhibit No. Description
- ----------- -----------

3.04 Articles of Amendment Adopting Revised Articles of Incorporation dated
August 11, 1998, filed herewith.

3.05 Articles Adopting Amended and Restated Articles of Incorporation dated
January 31, 2000, filed herewith.

10.A Employment Letter dated September 27, 1999 between the Company and Paul A.
Boyer, filed herewith.

10.B Employment Letter dated January 25, 1999 between the Company and Richard
Craven, filed herewith.

10.C Employment Letter dated June 11, 1999 between the Company and
Frederick E. Jones III, filed herewith.

10.D Employment Letter dated July 10, 1998 between the Company and Cheryl
Sullivan Lester, filed herewith.

10.E Employment Letter dated August 20, 1999 between the Company and Miles
Nikaido, filed herewith.

10.F Consulting Agreement dated May 15, 1998 between the Company and John
Warner, filed herewith.

10.G Form BriteSmile, Inc. Confidentiality and Non-Competition Agreement signed
by certain officers and directors, filed herewith.

(B) REPORTS ON FORM 8-K

The Company filed no Current Reports on Form 8-K during the quarter for which
this report is filed.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

BRITESMILE, INC.

/s/ John L. Reed February 8, 2000
- -------------------------------------------- ----------------
John L. Reed Date
Chief Executive Officer

/s/ Paul A. Boyer February 8, 2000
- -------------------------------------------- ----------------
Paul A. Boyer Date
Chief Financial Officer

ARTICLES OF AMENDMENT
ADOPTING REVISED ARTICLES OF INCORPORATION

ION LASER TECHNOLOGY, INC.
to be known as

BRITESMILE, INC.

Pursuant to Section 16-10a-1007 of the Utah Revised Business
Corporation Act, as amended (the "Act"), Ion Laser Technology, Inc., a Utah
corporation (the "Corporation") adopts the following Articles of Amendment to
its Articles of Incorporation, which amendment constitutes a revision and
restatement of the Articles of Incorporation of Ion Laser Technology, Inc.

FIRST: The name of the Corporation is Ion Laser Technology,
Inc.

SECOND: The Corporation's Articles of Incorporation are
hereby amended and restated to read in their entirety as follows:

ARTICLE I - NAME

The name of this corporation is BriteSmile, Inc.

ARTICLE II - DURATION

The duration of this corporation is perpetual.

ARTICLE III - PURPOSE

A. The purpose for which this corporation is organized is to engage in
the research, development, manufacture and sale of lasers and all business
associated therewith.

B. This corporation shall have all of the powers granted or allowed by
the Utah Business Corporation Act, as may be amended from time to time, and all
of the powers necessary or convenient to effect any or all of the purposes for
which this corporation is organized.

C. This corporation shall have power to acquire by purchase, exchange,
gift, bequest, subscription or otherwise, and to hold, own, mortgage, pledge,
hypothecate, sell, assign, transfer, exchange or otherwise dispose of or deal in
or with its own corporate securities or stock or other securities, including,
without limitation, any shares of stock, bonds, debentures, notes, mortgages, or
other obligations, and any certificates, receipts or other instruments
representing rights or interests therein or any property or assets created or
issued by any person, firm, association, or corporation, or any government or
subdivisions, agencies or instrumentalities thereof, to make payment therefor in
any lawful manner or to issue in exchange therefor its own securities or to use
its unrestricted and unreserved earned surplus and/or unrestricted and
unreserved capital surplus for the purchase of its own shares, and to exercise
as owner or holder

<PAGE>

of any securities, any and all rights, power and privileges in respect therefor.

D. This corporation shall have power to act as fully and to the same
extent as a natural person might, or could do, in any part of the world as
principal, agent, partner, general or limited, trustee or otherwise, either
alone or in conjunction with any person, firm or corporation.

ARTICLE IV - STOCK

The aggregate number of shares of common stock which this corporation
shall have authority to issue is 50,000,000 shares, $0.001 par value per share.

ARTICLE V - INDEMNIFICATION AND LIMITATION OF LIABILITY

This corporation shall indemnify all officers, directors and agents to
the fullest extent permitted by law.

To the fullest extent permitted by the Utah Business Corporation Act as
the same exists or may hereafter be amended, a director of this corporation
shall not be liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director.

ARTICLE VI - PRE-EMPTIVE RIGHTS

Shareholders shall not have pre-emptive rights to acquire shares of
common stock of this corporation.

ARTICLE VII - POWER OF DIRECTORS TO
MORTGAGE OR PLEDGE PROPERTY

The Directors shall have the power to mortgage, pledge, or otherwise
encumber the property of the corporation, including, but not limited to, all or
substantially all of the corporation's property or assets, with or without the
corporation's good will, and such action by the Directors shall be deemed to be
made in the usual and regular course of the corporation's business.

ARTICLE VII - COMMON DIRECTORS

No contract or other transaction between this corporation and one or
more of its Directors or any other corporation, firm, association or entity in
which one or more of its Directors are directors or officers or are financially
interested, shall be either void or voidable, because of such relationship or
interest, or because such Director or Directors are present at the meeting of
the Board of Directors, or a committee thereof, which authorizes, approves or
ratifies such contract or transaction, or because his or their votes are counted
for such purpose if: (a) the fact of such relationship or interest is disclosed
known to the Board of Directors or committee which authorizes, approves or
ratifies the contract or transaction by vote or consent sufficient for the
purpose without counting the vote or consent of such interested Director; or (b)
the fact of such

<PAGE>

relationship or interest is disclosed or known to the shareholders entitled top
vote and they authorize, approve or ratify such contract or transaction by vote
or written consent; or (c) the contract or transaction is fair and reasonable to
the corporation. Common or interested Directors may be counted in determining
the presence of a quorum at a meeting of the Board of Directors or committee
thereof which authorizes, approves or ratifies such contract or transaction.

ARTICLE IX - REVISED ARTICLES

These Revised Articles of Incorporation supersede the original Articles
of Incorporation and all amendments thereto.

THIRD: The amendment contained in the foregoing restated
Articles of Incorporation (i.e., the change of name as provided in Article I)
was approved and adopted by vote of the shareholders of the Corporation on
August 11, 1998.

FOURTH: The number of shares of common stock of the
Corporation outstanding and entitled to vote thereon at the time of such
adoption was 7,669,772.

FIFTH: The number of shares voted for such amendment was
6,095,527, and the number of shares voted against such amendment was 37,056.

DATED effective this 11th day of August, 1998.

ION LASER TECHNOLOGY, INC.

By: /s/ Richard V. Trefz
---------------------------------
Richard V. Trefz, President

ARTICLES ADOPTING

AMENDED AND RESTATED ARTICLES OF INCORPORATION

BRITESMILE, INC.

Pursuant to Section 16-10a-1007 of the Utah Revised Business
Corporation Act, as amended (the "Act"), BriteSmile, Inc., a Utah corporation
(the "Corporation"), adopts the following Articles of Amendment and Restatement
of its Articles of Incorporation, which amendment constitutes an amendment and
restatement of the Articles of Incorporation of the Corporation.

FIRST: The name of the Corporation is BriteSmile, Inc.

SECOND: The Corporation's Articles of Incorporation are
hereby amended and restated to read in their entirety as follows:

ARTICLE I - NAME

The name of this corporation is BriteSmile, Inc.

ARTICLE II - PURPOSES AND POWERS

The Corporation is organized to engage in any and all lawful acts,
activities, and/or pursuits for which corporations may presently or hereafter be
organized under the Utah Revised Business Corporation Act.

The Corporation shall have all powers allowed by law, including without
limitation those powers described in Section 16-10a-302 of the Utah Revised
Business Corporation Act, as amended and supplemented. The purposes stated
herein shall be construed as powers as well as purposes and the enumeration of a
specific purpose or power shall not be construed to limit or restrict the
meaning of general terms or the general powers; nor shall the expression of one
thing be deemed to exclude another not expressed, although it be of like nature.

ARTICLE III - CAPITAL STOCK

The aggregate number of shares of Common Stock which this corporation
shall have authority to issue is Fifty Million (50,000,000) shares, $0.001 par
value per share. All voting rights of the Corporation shall be exercised by the
holders of the Common Stock and the holders of the Common Stock of the
Corporation shall be entitled to receive the net assets of the

<PAGE>

Corporation upon dissolution. All shares of the Common Stock shall be fully paid
and nonassessable.

ARTICLE IV - LIMITATION OF LIABILITY

Within the meaning of and in accordance with Section 16-10a-841 of the
Utah Revised Business Corporation Act:

(1) No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for any action taken or any
failure to take any action as a director, except as provided in this Article IV.

(2) The limitation of liability contemplated in this Article IV shall
not extend to (a) the amount of a financial benefit received by a director to
which he is not entitled, (b) an intentional infliction of harm on the
Corporation or its shareholders, (c) a violation of Section 16- 10a-842 of the
Utah Revised Business Corporation Act, or (d) an intentional violation of
criminal law.

(3) Any repeal or modification of this Article IV by the shareholders
of the Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or modification.

(4) Without limitation, this Article IV shall be applied and
interpreted, and shall be deemed to incorporate, any provision of the Utah
Revised Business Corporation Act, as the same exists or may hereafter be
amended, any provision of any act that may replace or supplement the Utah
Revised Business Corporation Act, as well as any applicable interpretation of
Utah law, so that personal liability of directors and officers of the
Corporation to the Corporation or its shareholders, or to any third person,
shall be eliminated or limited to the fullest extent as from time to time
permitted by Utah law.

ARTICLE V - ACTION BY SHAREHOLDER CONSENT

Within the meaning of and in accordance with Sections 16-10a-704 and
1704(4) of the Utah Revised Business Corporation Act, and subject to the
qualifications and limitations thereof, and of any applicable rules of any
exchange or market on which the Company's shares may be traded:

Any action which may be taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice, if one or
more consents in writing, setting forth the action so taken, shall be signed by
the holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or take the action at a meeting at
which all shares entitled to vote thereon were present and voted.

<PAGE>

THIRD: These Amended and Restated Articles of Incorporation were
recommended to the shareholders by the Board of Directors pursuant to a
resolution of the Board of Directors dated December 22, 1999, and adopted by the
holders of a majority of the Company's issued and outstanding shares of Common
Stock at a Special Meeting of Shareholders of the Company held January 31, 2000.

FOURTH: The number of shares of Common Stock of the Corporation
outstanding and entitled to vote thereon at the time of such adoption was
20,140,925, with 14,978,298 shares being represented at the meeting. The number
of votes cast in favor of adoption of the Articles was 14,932,014. The number of
votes cast against adoption of the Articles was 36,951. The number of shares
abstaining was 9,333.

DATED effective this 31st day of January, 2000.

BRITESMILE, INC.

By: /s/ Paul A. Boyer
-------------------------------------
Paul A. Boyer, CFO and Secretary

[BriteSmile Company Logo]

September 27, 1999

Mr. Paul Boyer
PO Box 980064
3504 West Daybreaker Drive
Park City, UT 84098-0064

VIA fax: 801-974-1928

Dear Paul,

Per our discussion, this letter serves as our offer of employment with
BriteSmile, Walnut Creek California.

Position and Terms: Vice President and Chief Financial Officer

Annual Base Salary of $160,000

- -Stock Options: 150,000 shares vested over five years on the
following schedule

-Year 1--50,000 shares vest at the
anniversary of your starting date.

-Years 2-5--25,000 shares vest at the end of
each year.

- -Temporary Living Expense: BriteSmile will pay for temporary living
expense including travel up to three months
(i.e. rent/utilities). BriteSmile will also
provide the equivalent of one months salary
to cover incidental expenses.

- -Moving Expenses: All household goods from Utah to California
at reasonable competitive costs.

- -Other Benefits: Medical and dental benefits are covered in
the enclosed package.

- -Involuntary Termination: If your employment is terminated at any time
without cause, you will be entitled to six
months of salary continuation.

Paul I believe the above summarizes our offer in brief but concise terms. We are
extremely happy that you will be joining the BriteSmile team and we look forward
to your starting with us.

Sincerely, Accepted Paul A. Boyer
9-27-99
/s/ John Reed

John Reed
cc: Linda Oubre
Tony Pilaro

[BriteSmile Company Logo]

January 25, 1999

Mr. Richard Craven
1110 Armanda Drive
Pasadena, California 91103

Dear Richard,

It is my pleasure to offer you employment with BriteSmile. The specifics of this
offer are detailed below.

Title: Vice President, Center Operations.

Reporting: This position reports to Linda Oubre,
President, BriteSmile Center Division.

Responsibilities: Manages all Center operations including
recruitment and hiring of all staff,
implementation of operating policies and
procedures, training, materials management,
and quality control.

Base Salary: Annual base salary of $132,500.

Stock Options: You will be granted options to purchase
110,000 shares of BriteSmile stock based on
your performance and according to the
following provisions:
o Option to purchase shares will be at the
market price of BriteSmile stock on the
close of business January 19, 1999.
o Vesting schedule will be:
20,000 per year at the end of years 1-4.
30,000 at the end of year 5.

Benefits: You will receive employee benefits including
holidays, vacation, life insurance, and
medical and dental insurance according to
BriteSmile company policy.

Start Date: Your start date will be January 18, 1999.

Sole Endeavor: BriteSmile shall be your sole endeavor. Any
patents, licenses, or business ideas related
to BriteSmile's business generated during
the term of your employment will be owned by
BriteSmile.

At Will Employment: Your employment is considered at will
employment which can be terminated at any
time. If employment is terminated "without
cause" ("cause" is defined as business
dishonesty or any conduct involving moral
turpitude) then you will be entitled to

<PAGE>

severance pay according to BriteSmile
company policy.

Please acknowledge your acceptance of this offer by signing and dating below.
Let me know if you have any questions.

Sincerely,

/s/Linda S. Oubre
Linda S. Oubre
President, Center Division
BriteSmile

Accepted

/s/ Richard F. Craven Date 2/25/99
- ------------------------------------------- -------------------------------

cc: Tony Pilaro
Michael Bonner
Carol Lewis

[BriteSmile Company Logo]

June 11, 1999

Mr. Frederick E. Jones III
205 West 54th Street
Apartment 11A
New York, NY 10019

Dear Mr. Jones:

BriteSmile, Inc. ("BriteSmile") extends this offer of
employment to you under the following terms:

Position at BriteSmile: You shall serve in such capacity as
may be reasonably designated by the Chief Executive Officer (the "CEO") of
BriteSmile, initially as Vice President, BriteSmile International Limited
("BriteSmile International"), a subsidiary of BriteSmile.

Salary: $8,333 per month base salary. Depending on your
performance and the performance of BriteSmile International, you may receive
bonus payments; but any such bonus shall be payable solely at the discretion of
the CEO.

Stock Options: Subject to the approval of BriteSmile's Board,
you will receive a grant of options to purchase 150,000 shares of BriteSmile's
Common Stock on your first day of employment with BriteSmile. The right to
exercise options on 30,000 of such shares shall vest (become exercisable) on the
date of grant (the first day of your employment) provided you have remained in
the employ of BriteSmile from the first day of you employment to such
anniversary.

These options will have an exercise price equal to $11-3/8
which is the closing price of BriteSmile's Common Stock on the date hereof, and
will be granted pursuant to and be subject to all the provisions of BriteSmile's
stock option plan. In order to participate in the BriteSmile's stock option
plan, you will need to execute a standard stock option agreement.

Duties: You will report to, and shall perform such duties as
may be reasonably assigned to you by, the CEO of BriteSmile International.
Initially you shall be fully responsible for identifying, developing and
executing all aspects of BriteSmile's teeth whitening plans and business model
in all areas of the world other than the United States and Canada. You
acknowledge that your duties may involve a significant amount of worldwide
travel and agree to undertake such travel. At BriteSmile's reasonable request,
you agree to relocate to such country or countries in the European Union as
BriteSmile shall designate. BriteSmile shall pay your reasonable relocation
expenses in connection with any such move.

Benefits: You will be provided health, dental, life and
disability insurance according to BriteSmile's standard policies, subject to
your eligibility. You shall also be entitled to participate in BriteSmile's
other benefit plans that are made available to its executives generally subject
to the terms of those plans.

<PAGE>

Start Date: You will begin work at BriteSmile International on
such date as is mutually agreed by yourself and BriteSmile, but not later than
August 31, 1999.

Confidentiality: You agree to keep all nonpublic information
regarding BriteSmile confidential and not to use it except in furtherance of
BriteSmile's business.

Termination of Employment: You acknowledge that you are an
employee at will and that BriteSmile may terminate your employment at any time,
with or without cause.

Law: This letter shall be governed by the laws of the State of
New York.

If you wish to accept this offer as delineated above, please
countersign at the bottom of the page and return a copy of this letter to us as
soon as possible. After August 31, 1999 this document is no longer valid unless
previously executed and received by us.

BriteSmile, Inc.

By /s/ John Reed
-----------------------
Name:
Title: CEO

Acknowledge and agreed to this 16th day of June, 1999.
------

/s/ Frederick E. Jones III
- -------------------------
FREDERICK E. JONES III

BriteSmile
Walnut Creek Office
101 Ygnacio Valley Road
Walnut Creek, CA 94596

Tel: 925-906-1900
Fax: 925-906-1919

REVISED

July 10, 1998

Ms. Cheryl Sullivan Lester
6224 Viewcrest Drive
Oakland, CA 94619

Dear Cheryl,

It is my pleasure to offer you employment with BriteSmile. The specifics of this
offer are detailed below.

Title: Vice President, Center Marketing and
Advertising.

Reporting: This position reports to Linda Oubre,
President, BriteSmile Center Division.

Responsibilities: Develops and executed marketing strategies
for launch of teeth whitening centers.
Manages branding, agency relationships,
advertising placement, and medial relations
in center markets. Directs consumer research
activities. Manages marketing activities
for laser eye and other center concepts as
they are implemented.

Base Salary: Annual base salary of $120,000.

Incentive Plan: An incentive bonus plan will be
developed and agreed upon no later than
September 30, 1998. This incentive will
consist of a minimum annual target of 10% of
base salary and will be based on short-term
and long-term company goals for center
launches, budgeted income and cash flow, and
procedure volume.

Stock Options: Options to buy shares of BriteSmile will be
granted. The options incentive plan will be
comparable with those paid to individuals of
similar level in the company.

Benefits: You will receive employee benefits including
vacation according

<PAGE>

to BriteSmile Company policy.

Start Date: Your start date will be August 5, 1998.

Sole Endeavor: BriteSmile shall be your sole endeavor. Any
patents, licenses, or business ideas related
to BriteSmile's business generated during
the terms of your employment will be owned
by BriteSmile.

At Will Employment: Your employment is considered at will employment
which can be terminated at any time. If employment is terminated "without cause"
("cause" is defined as business dishonesty or any conduct involving moral
turpitude) then you will be entitled to severance pay according to BriteSmile
company policy.

We have a very exciting time in front of us, and I look forward to you being a
part of the team that "makes it happen". Please acknowledge your acceptance of
this offer by signing and dating below. Let me know if you have any questions.

Sincerely,

/s/ Linda S. Oubre
Linda S. Oubre
President, Center Division
BriteSmile

Accepted
/s/ Cheryl S. Lester Date 7/10/98
- ------------------------------------------- -------------------------------

cc: Tony Pilaro
Michael Bonner
Carol Lewis

EXHIBIT 10.E HERE

EXHIBIT 10.F HERE

BRITESMILE, INC. CONFIDENTIALITY AND NON-DISCLOSURE AGREEMENT

This Confidentiality and Non-Disclosure Agreement is between
BriteSmile, Inc. ("BriteSmile") and ___________________ ("Employee/Consultant").

AGREEMENT

BriteSmile is a nationwide provider of an advanced tooth whitening
procedure. In this regard, BriteSmile has developed tooth whitening technology,
and manages BriteSmile tooth whitening centers.
In consideration of this Agreement and of BriteSmile's promise of new
or continued employment or service, and the covenants and conditions contained
herein, and other valuable and sufficient consideration, the adequacy of which
is hereby acknowledged, the parties to this Agreement agree as follows:
1. Covenant of Confidentiality and Non-Disclosure.
a. In order for Employee/Consultant to provide, or to continue
to provide, services to BriteSmile, BriteSmile has provided and/or is
required to provide Employee/Consultant with certain trade secrets and
proprietary information of BriteSmile ("Proprietary Information").
b. As used in this Agreement, the term Proprietary Information
is defined to include: (i) all software, computer programs, source
code, object code, system documentation, user documentation, system
designs, program materials, screen displays, manuals, operation
processes, equipment design, product specifications, written materials,
documentation, data and information regarding products or services,
whether finished, under development or being tested, whether any or all
of the foregoing are in tangible, magnetic, digital or other form; (ii)
concepts, methods, techniques, formats, patterns, compilations,

<PAGE>

programs, devices, designs, technology, equipment, formulas, processes,
packaging, testing, information, data, systems, operations, ideas,
research, improvements, inventions, discoveries and know-how; (iii)
information relating to BriteSmile's customers, accounts, suppliers,
distributors, marketing activities or plans, business plans,
distribution, pricing, financial matters, financial statements, or any
information revealed to BriteSmile by third parties under any
confidentiality agreement, understanding or duty; and (iv) information
generally regarded as confidential in the industry or business in which
BriteSmile is engaged, which are or shall be owned, developed, used by,
related to or arise from BriteSmile, its businesses, activities,
investigations, work of its employees or agents, utilization of
equipment, supplies, facilities or information, now or in the future,
whether or not published, patented, copyrighted, registered or suitable
therefore.
c. Employee/Consultant acknowledges that BriteSmile's
Proprietary Information is valuable, special and unique to its
business; that it is not widely known; and that BriteSmile's business
depends on such Proprietary Information.
d. Employee/Consultant acknowledges that BriteSmile has taken,
and continues to take, reasonable and necessary steps to protect its
Proprietary Information and keep it confidential, including requiring
him/her to sign this Agreement.
e. Based on the foregoing, Employee/Consultant agrees as
follows:
(i) All rights to Proprietary Information are and
shall remain the sole property of and in control of
BriteSmile;
(ii) Except as required by applicable law or as
authorized in writing by BriteSmile's Board of Directors,
he/she will keep BriteSmile's Proprietary Information
confidential;

Page 2

<PAGE>

(iii) Except as required by applicable law or as
authorized in writing by BriteSmile's Board of Directors,
he/she will not, at any time: (a) reproduce or copy; (b)
disclose or transfer; (c) aid encourage or allow any other
person, business or entity to gain possession or access to;
(d) use, sell, or exploit; or (e) encourage or allow any other
person, business or entity to use, sell or exploit, any of
BriteSmile's Proprietary Information;
(iv) He/she will not or disclose any information
received by BriteSmile from a third party for the period
required by any confidentiality agreement, understanding or
duty between BriteSmile and the relevant third party; and
(v) He/she will notify future employers and customers
of the terms of this provision and his/her responsibilities
hereunder.
2. Injunctive Relief. Employee/Consultant agrees that irreparable harm
shall be presumed in the event of any breach of this Agreement, and further
agrees that in connection with any such breach, damages would be difficult if
not impossible to ascertain, and the faithful observance of all terms of this
Agreement is an essential condition to employment or service with BriteSmile.
Furthermore, Employee/Consultant agrees that this Agreement is intended to
protect the proprietary rights of BriteSmile in important ways, and the threat
of any misuse of the technology of BriteSmile would be extremely harmful because
of the importance of that technology. In light of these considerations,
Employee/Consultant agrees that any court of competent jurisdiction may
immediately enjoin any breach of this Agreement, upon the request of BriteSmile,
and Employee/Consultant specifically releases BriteSmile from the requirement of
posting any bond in connection with temporary or interlocutory injunctive
relief, to the extent permitted by law.
3. Modification of Agreement by Court. Employee/Consultant
agrees that if any

Page 3

<PAGE>

provision of this Agreement or the application thereof is held invalid, the
invalidity shall not affect other provisions or applications of the Agreement
which can be given effect without the invalid provisions or applications and to
this end the provisions of the Agreement are declared to be severable.
Employee/Consultant further agrees that if any court or tribunal refuses to
enforce the restrictive covenants contained herein, neither this Agreement nor
any part thereof, shall be void, and that the particular restriction deemed to
be unreasonable or unenforceable shall be reduced or otherwise modified by such
court or tribunal, but only to the extent necessary to permit its enforcement
and only in such court's jurisdiction. Employee/Consultant further agrees that
if any provision cannot be reduced or modified to make it reasonable and/or
permit its enforcement, that provision shall then be severed from this Agreement
and the remaining provisions shall be interpreted in such a way as to give
maximum validity and enforceability to this Agreement.
4. Modification of Agreement by Parties. Employee/Consultant agrees
that this Agreement may not be changed, modified, released, discharged,
abandoned, or otherwise terminated, in whole or in part, except by an instrument
in writing, by both parties.
5. Term of Agreement. Employee/Consultant acknowledges that the terms
of this Agreement shall survive termination of his/her employment.
6. Non-Waiver. Employee/Consultant agrees that the failure of
BriteSmile to take an action under this Agreement or the waiver of a breach of
this Agreement shall not affect BriteSmile's rights to require performance
hereunder or constitute a waiver of any subsequent breach.
7. Governing Law. Employee/Consultant and BriteSmile agrees that any
disputes or controversies of any kind relating in any way to this Agreement,
whether sounding in tort, contract or otherwise, shall be construed in
accordance with the laws of the United States and the State of California.

Page 4

<PAGE>

8. Forum Selection. Employee/Consultant agrees that any judicial
proceeding related in any way to this Agreement, shall be brought exclusively in
the state or federal courts of the State of California.
9. Consent to Jurisdiction. Employee/Consultant and BriteSmile hereby
consent to the jurisdiction of the state and federal courts of the State of
California and waive any rights to contest the power of the courts of the State
of California to exercise personal jurisdiction over them.
10. Existing Employment Agreements. Employee/Consultant acknowledges
that the terms of any existing employment agreements remain in full force and
effect to the extent they do not conflict with the terms of this Agreement, in
which case the terms of this Agreement shall control.
12. Headings. The paragraph headings in this Agreement are for
purposes of convenience only and shall not limit or otherwise affect any of the
terms hereof.

13. Attorneys' Fees and Costs. BriteSmile and Employee/Consultant
agree that in the event of a dispute arising under or related in any way to this
Agreement, the non-prevailing party shall pay all costs and expenses, including
reasonable attorneys' fees, that may arise or accrue from enforcing this
Agreement, obtaining an interpretation of any provision of this Agreement, or in
pursuing any remedy provided by applicable law whether such remedy is pursued or
interpretation is sought by mediation, arbitration, the filing of a lawsuit, an
appeal, and/or otherwise.

Dated this day of Dated this day of
---- -----
, 2000. , 2000.
- ------------- -----------------

BriteSmile, Inc.

By:
--------------------------------- ----------------------------------------
Its:
--------------------------------- ----------------------------------------

Page 5

<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000866734
<NAME> BRITESMILE, INC.

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,878,000
<SECURITIES> 0
<RECEIVABLES> 497,000
<ALLOWANCES> 83,000
<INVENTORY> 134,000
<CURRENT-ASSETS> 4,030,000
<PP&E> 14,595,000
<DEPRECIATION> 1,048,000
<TOTAL-ASSETS> 17,577,000
<CURRENT-LIABILITIES> 5,068,000
<BONDS> 0
0
0
<COMMON> 20,000
<OTHER-SE> 12,405,000
<TOTAL-LIABILITY-AND-EQUITY> 17,577,000
<SALES> 4,698,000
<TOTAL-REVENUES> 4,698,000
<CGS> 6,758,000
<TOTAL-COSTS> 6,758,000
<OTHER-EXPENSES> 14,657,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 310,000
<INCOME-PRETAX> (16,407,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (16,407,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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