As filed with the Securities and Exchange Commission on August 14, 2000
Registration Statement No. 333-________
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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BRITESMILE, INC.
(Exact name of registrant as specified in its charter)
----------------------
UTAH 87-0410364
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
490 North Wiget Lane
Walnut Creek, CA 94598
(925) 941-6260
(Address, including zip code, and
telephone number, including area code,
of registrant's principal
executive offices)
----------------------
PAUL A. BOYER
CHIEF FINANCIAL OFFICER
BriteSmile, Inc.
490 North Wiget Lane
Walnut Creek, CA 94598
(925) 941-6260
(Name, address, including zip code, and
telephone number, including area code,
of agent for service)
COPY TO:
JEFFREY M. JONES, ESQ.
WAYNE D. SWAN, ESQ.
DURHAM JONES & PINEGAR, P.C.
BROADWAY CENTRE, SUITE 900
111 EAST BROADWAY
SALT LAKE CITY, UTAH 84111
(801) 415-3000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: from time
to time after the effective date of this Registration Statement as determined by
market conditions.
<PAGE>
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] _______.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ________.
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=======================================================================================================
Proposed Proposed
Maximum Maximum
Title of Class of Amount Offering Aggregate Registra-
Securities To be Price Offering tion
to be Registered Registered (1) Per Share (2) Price (2) Fee (2)
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<S> <C> <C> <C> <C>
Common Stock, 9,385,113 shares $ 4.9375 $ 46,338,995 $ 12,234
$.001 par value per share
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</TABLE>
(1) Includes 7,766,990 shares, representing 150% of the shares issuable
upon conversion of 5% Convertible Subordinated Notes at the assumed
conversion price of $3.8625 per share, and 1,618,123 shares issuable
upon exercise of warrants issued simultaneously with convertible notes.
(2) Estimated solely for purposes of calculating the registration fee on
the basis of the average high and low sale price of the common stock on
the Nasdaq National Market on August 10, 2000.
Pursuant to Rule 416, there are also registered hereby such additional
indeterminate number of shares of such Common Stock as may become issuable as
dividends or to prevent dilution resulting from stock splits, stock dividends or
similar transactions.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a)
OF THE ACT, MAY DETERMINE.
================================================================================
<PAGE>
Prospectus Subject to Completion. Dated August 14, 2000
The information in this prospectus is not complete, and it may change. This
prospectus is included in a registration statement that BriteSmile filed with
the Securities and Exchange Commission. The selling shareholders cannot sell
these securities until that registration statement becomes effective. This
prospectus is not an offer to sell these securities or the solicitation of an
offer to buy these securities in any state where an offer to sell or the
solicitation of an offer to buy is not permitted.
[GRAPHIC OMITTED][GRAPHIC OMITTED]
BriteSmile, Inc.
9,385,113 Shares
Common Stock, par value $.001 per share
The shareholders of BriteSmile, Inc. identified under the caption
"SELLING SHAREHOLDERS" on page 9 of this prospectus are offering and selling up
to 9,385,113 shares of BriteSmile's common stock (the "Shares") under this
prospectus. The Shares being offered include: (i) up to 7,766,990 shares which
may be issued upon the conversion of $20,000,000 principal amount of
BriteSmile's 5% Convertible Subordinated Notes due 2005 (the "Notes"), and (ii)
1,618,123 shares that may be issued upon the exercise of Common Stock purchase
warrants (the "Warrants") that were issued simultaneously with the Notes. The
Notes and the Warrants were previously issued by us in private placement
transactions. See "SELLING SHAREHOLDERS."
Even though the Shares may be offered for resale under this prospectus,
the Selling Shareholders are not obligated to sell all or any of the Shares. The
Selling Shareholders will receive all of the proceeds from the sale of the
Shares and we will receive none of those proceeds. We will, however, be relieved
of our obligations under the Notes if the Selling Shareholders convert them into
Common Stock, and we will receive proceeds from the exercise of the Warrants,
unless the Selling Shareholders take advantage of the "cashless" exercise
features of the Warrants.
INVESTING IN BRITESMILE'S COMMON STOCK INVOLVES RISKS. YOU SHOULD
CAREFULLY REVIEW "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF THINGS
YOU SHOULD CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.
BriteSmile's Common Stock is quoted on the Nasdaq National Market and
trades under the symbol "BSML". The closing sale price for the Common Stock on
August 10, 2000 on the Nasdaq National Market was $4.875 per share.
--------------------
The Securities and Exchange Commission and State Securities Regulators have
not approved or disapproved the Shares, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
August 10, 2000
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You should rely only on the information contained in this prospectus.
We have not authorized any other person to provide you with different
information. If anyone provides you with different or inconsistent information,
you should not rely on it. The selling shareholders are not making an offer to
sell these securities in any jurisdiction where the offer or sale is not
permitted. You should assume that the information appearing in this prospectus
is accurate as of the date on the front cover of this prospectus only. Our
business, financial condition, results of operations and prospects may have
changed since that date.
Table of contents
Summary about BriteSmile and this offering.....................................2
Where you can find more information............................................4
Incorporation of Certain Documents by Reference ...............................5
Explanation about forward-looking information..................................5
Risk factors...................................................................6
Use of proceeds................................................................9
Selling shareholders...........................................................9
Plan of distribution..........................................................11
Legal matters.................................................................12
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Summary
This summary highlights selected information and does not contain all
of the information that is important to you. We urge you to read the entire
prospectus carefully and any information incorporated in the prospectus before
you decide whether to buy our common stock. You should pay special attention to
the risks of investing in our common stock discussed under "Risk Factors."
BriteSmile
BriteSmile, Inc., a Utah corporation, and its affiliates develop,
produce, sell and lease advanced teeth whitening products, services and
technology. BriteSmile's operations include the development of technologically
advanced teeth whitening processes that are distributed in professional salon
settings known as BriteSmile Professional Teeth Whitening Centers ("Centers").
BriteSmile leases its technology to existing cosmetic dental offices known as
BriteSmile Professional Teeth Whitening Associated Centers ("Associated
Centers").
BriteSmile offers consumers a new, simple and safe way to return their
teeth to their optimal natural whiteness in just over a one and one-half hour
visit to a Center or Associated Center.
Consumers may choose to visit a Center or Associated Center. These
Centers are located in major metropolitan areas nationwide. BriteSmile Centers
offer clients a salon-like environment dedicated solely to the business of teeth
whitening and are staffed by licensed dentists and trained dental assistants.
Alternatively, consumers can visit a BriteSmile Associated Center, where a local
dentist administers the BriteSmile procedure in the dentist's established
office.
The BriteSmile Center provides the anchor in each market, with the
geographically contiguous Associated Centers providing consumers with multiple
location options. This "cluster" of Associated Centers surrounding a Center
allows BriteSmile to have maximum impact in a market, while at the same time
leveraging marketing and support dollars, and optimizing consumer exposure to
the BriteSmile brand.
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BriteSmile developed its current tooth whitening technology (the
"BriteSmile 2000 Light Activated Teeth Whitening System", "BS2000" or "LATW") in
the fiscal year ended March 31, 1999 ("Fiscal 1999") and began distribution in
the fourth fiscal quarter of Fiscal 1999. In November 1999 BriteSmile introduced
its new BriteSmile 3000 LATW keycard system (the "BS3000") into Associated
Centers. The BS3000, a mobile version of the BS2000, can be installed more
quickly and provides the flexibility and mobility required in dental offices.
The BS2000 and BS3000 teeth whitening devices utilize a gas plasma
light technology. The power level is well below levels used in other bleaching
systems. BriteSmile's unique fiberoptic delivery arm permits blue green light to
reach all 16 front teeth simultaneously, whitening the teeth by activating
BriteSmile's wavelength specific gel during three consecutive twenty-minute
sessions.
In 1998 under the direction of Dr. John Warner, BriteSmile pursued an
accelerated program to develop the LATW device and method. In connection with
this development effort, BriteSmile engaged two nationally recognized firms to
provide BriteSmile with product design and electrical engineering technology and
know how. Chemical products and reagents for use with the new LATW device were
developed under an agreement with OraCeutical LLC of Lee, Massachusetts. Dr.
Anthony Cipolla, D.D.S. provided technical support and clinical direction in
combining the device and chemical products to achieve an effective and safe LATW
system. BriteSmile conducted clinical trials during the fall of 1998 and began
to secure leased space for Centers, recruit staff and prepare advertising for
the new LATW product.
On February 15, 1999, BriteSmile introduced its new LATW system in
Centers located in Walnut Creek, California. Subsequently, BriteSmile has opened
13 additional Centers and over 500 Associated Centers throughout the U.S. and in
Argentina, Belgium, France, Holland, Italy, Japan, Singapore, and Switzerland.
BriteSmile's Centers are currently operating in Beverly Hills, Irvine, Pasadena,
Walnut Creek, Palo Alto and La Jolla, CA; Coral Gables, Ft. Lauderdale and Boca
Raton, FL; Honolulu, HI; Atlanta, GA; Houston, TX; Denver, CO; and Boston, MA.
At June 19, 2000 BriteSmile had 14 Centers in operation located in 9
major U.S. cities. Additionally, BriteSmile had contracted with dentists to
operate over 700 Associated Centers, of which, over 500 were in operation in
locations throughout the United States and around the world in countries
including Switzerland, Argentina, Japan, Belgium, Singapore and Italy.
BriteSmile plans to open additional Centers and Associated Centers throughout
the United States and in select additional foreign countries. BriteSmile is
committed to providing superior teeth whitening through leading-edge technology
and products.
This offering
As of August 3, 2000 the Company had closed Securities Purchase
Agreements ("Note Purchase Agreements") with eleven investors ("Investors"),
seven of whom had previously been affiliated with the Company, its executive
officers and directors (the "Note Offering"). Pursuant to the Note Purchase
Agreements, the Investors purchased the Company's 5% Subordinated Convertible
Notes due in five years (the "Notes") in the aggregate principal amount of
$20,000,000. Of the $20,000,000 total proceeds to the Company, $15,583,332 was
received in an initial closing on June 29, 2000. The balance of $4,416,667 was
received in a subsequent closing on August 3, 2000.
The Company also issued to the Investors, pro rata, warrants
("Warrants") to purchase a total of 1,618,122 shares of Common Stock.
Four of the Investors, who purchased a total of $4,300,000 principal
amount of the Notes, are unaffiliated with the Company. These unaffiliated
investors are CapEx, L.P., Pacific Mezzanine Fund, VenCap Opportunities Fund,
L.P., and Wendell Starke as Trustee under trust dated 10-02-1991.
Seven of the Investors, who purchased an aggregate amount of
$15,700,000 of the Notes, are presently affiliates of the Company. The
affiliated Investors include LCO Investments Limited (shareholder and affiliated
with director Anthony Pilaro), John Reed (shareholder, CEO and director), Gasper
Lazzara, Jr. (director), Andrew McKelvey (shareholder and affiliated with
director Bradford Peters), and Pequot Private Equity Fund II, L.P., Pequot
International Fund, Inc., and Pequot Partners Fund, L.P. (shareholders and
affiliated with director Gerald Poch).
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Terms and Conditions of the Notes
The Notes bear interest on the unpaid principal balance at the rate of
5% per annum. Interest on the Notes is payable in cash on the last day of each
March and the last day of each September during the term of the Notes. The
principal amount of the Notes is due and payable five years from the date of
purchase of the Notes.
The Notes are convertible into shares of the Company's Common Stock at
a per share conversion price of $6.18, which is 120% of the average of the
closing bid price of the Common Stock during the ten trading day period
immediately prior to June 27, 2000, the date the transaction documents for the
initial closing of the Note Offering were signed. On June 27, 2000, the closing
sales price of the Company's Common Stock as quoted on NASDAQ was $5.563. On
August 3, 2000, the effective date of the subsequent closing of the Note
Offering, the closing sales price of the Common Stock on NASDAQ was $4.563.
The conversion price of the Notes is subject to a one-time adjustment
downward in nine months from closing to 102% of the market price of the Common
Stock on the adjustment date (provided that in no event will such price be
adjusted downward to less than $3.8625 per share). The conversion price is also
subject to additional adjustments from time to time upon the occurrence of
certain other events described in the Notes and Warrants, including future
issuances of Common Stock for consideration less than the conversion price then
in effect, stock splits or reverse stock splits, and the occurrence of certain
major corporate events such as mergers, sale of assets, tender offers or
exchange offers.
Pursuant to a Registration Rights Agreement between the Investors and
the Company, the Company agreed to register with the Securities and Exchange
Commission (the "Commission"), within 120 days from the initial closing date of
June 27, 2000, the shares of Common Stock underlying the Notes and Warrants for
resale under the Securities Act of 1933, as amended.
Terms and Conditions of the Warrants
Each purchaser of Notes in the Note Offering also received Warrants to
purchase shares of Common Stock of the Company. Pursuant to the Note Purchase
Agreements, the number of shares of Common Stock issuable upon the exercise of
the Warrants is equal to the quotient of (A) the product of the aggregate
principal amount of Notes purchased by each Purchaser multiplied by 0.50,
divided by (B) $6.18 (the Conversion Price on the Issuance Date, as those terms
are defined in the Notes).
The Warrants issued in connection with the Note Offering have a term of
five years and an exercise price of $7.21 per share. The exercise price of the
Warrants equals 140% of $5.15, i.e. the 10-day average Market Price of the
Common Stock as of the date of signing the Note Purchase Agreement. The exercise
price of the Warrants is subject to adjustment upon certain events specified in
the Warrant, including the subsequent issuance by the Company of shares of its
Common Stock at prices lower than the original Warrant exercise price.
Copies of the form of Securities Purchase Agreement for the Note
Offering, together with the form of Notes and Warrants issued to the Investors,
are included as exhibits to the Company's Current Report on Form 8-K filed with
the Commission on July 3, 2000.
Where you can find more information
We file annual, quarterly and periodic reports, proxy statements and
other information with the United States Securities and Exchange Commission (the
"Commission"). You may inspect these documents without charge at the principal
office of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, the
New York Regional Office located at 7 World Trade Center, Suite 1300, New York,
New York 10048, and the Chicago Regional Office located at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and you may obtain copies of these
documents from the Commission's Public Reference Room at its principal office.
Information regarding the operation of the Public Reference Room may be obtained
by calling 1-800-SEC-0330. The Commission maintains a web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of the
Commission's web site is http://www.sec.gov.
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<PAGE>
We have filed a registration statement on Form S-3 with the Commission
relating to the offering by the selling shareholders of common stock pursuant to
this prospectus. The registration statement contains information not found in
this prospectus. For further information, you should refer to the registration
statement, which you can inspect and copy in the manner and at the sources
described above. Any statements we make in this prospectus or that we
incorporate by reference concerning the provisions of any document filed as an
exhibit to the registration statement or otherwise filed with the Commission are
not necessarily complete and, in each instance, reference is made to the copy of
such document so filed. Each such statement is qualified in its entirety by such
reference.
Incorporation of Certain Documents by Reference
We have filed the following documents with the Commission, each of
which is incorporated into and made a part of this prospectus:
o Our Annual Report on Form 10-KSB for the fiscal year ended April 1, 2000; o
Our current report on Form 8-K dated as of July 3, 2000; and o Our Quarterly
Report on Form 10-Q for the quarter ended July 1, 2000.
All of the documents we have filed pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date hereof and prior to the termination
of the offering made hereby are incorporated by reference into this prospectus
from the date we file the documents with the Commission. Any statement contained
in this prospectus or in a document incorporated in this prospectus by reference
shall be modified or superseded for purposes of this prospectus to the extent
that a statement contained in this prospectus or in any subsequently filed
document which is incorporated by reference into this prospectus modifies or
supersedes such statement. Any such statement so modified or superseded shall
not, except as so modified or superseded, constitute a part of this prospectus.
Upon request, we will provide a copy of any or all of the documents
incorporated by reference in this prospectus, without charge, to each person,
including any beneficial owner, to whom a copy of this prospectus is delivered.
You should direct written or telephone requests for such copies to our principal
office: BriteSmile, Inc., 490 North Wiget Lane, Walnut Creek, CA 94598,
Attention: Chief Financial Officer (telephone: (925) 941-6260).
Explanation about forward-looking information
This prospectus, including information contained in documents that are
incorporated by reference in this prospectus, contains "forward-looking
statements," as that term is defined by federal securities laws, that relate to
the financial condition, results of operations, plans, objectives, future
performance and business of BriteSmile. These statements are frequently preceded
by, followed by or include the words "believes," "expects," "anticipates,"
"estimates" or similar expressions. We have based these forward-looking
statements on our current expectations and projections about future events.
These forward-looking statements are not guarantees of future performance and
are subject to risks, uncertainties and assumptions, including, among other
things:
o Anticipated trends in our business, including consumer acceptance of
and willingness to pay for teeth whitening services;
o Adequacy of our management and infrastructure to manage growth in sales
and locations;
o Deployment of additional centers at new locations and increasing sales
at existing locations;
o Securing capital for future acquisitions and growth; and
o Adaptation to changes in the regulatory environment.
In addition to these risks, in the section of the prospectus entitled
"Risk Factors" we have summarized a number of the risks and uncertainties that
could affect the actual outcome of the forward-looking statements included in
this prospectus. We advise you not to place undue reliance on such
forward-looking statements in light of the material risks and uncertainties to
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which they are subject. We undertake no obligation to publicly update or revise
any forward-looking statements, whether as a result of new information, future
events or otherwise.
Risk Factors
An investment in our common stock involves risk. You should carefully
consider the risks described below in addition to the other information
presented in this prospectus or incorporated by reference into this prospectus
before deciding to invest in our common stock. The risks and uncertainties
described below are not the only ones facing BriteSmile. Additional risks and
uncertainties not presently known to us or that we currently deem immaterial may
also impair our business operations. If any of the following risks actually
occur, our business, financial condition, or results of operations could be
materially adversely affected.
We have a limited operating history upon which to evaluate our likelihood of
success.
We have only manufactured and distributed our BriteSmile 2000 Light
Activated Teeth Whitening Systems since November 1998, and our portable
BriteSmile 3000 LATW keycard system since November 1999. We opened our first
company-owned Center in Walnut Creek, California in February 1999, and
Associated Centers began performing the first teeth whitening procedures in
December 1999. Therefore, we have a limited relevant operating history upon
which to evaluate the likelihood of our success. Factors such as the risks,
expenses and difficulties frequently encountered in the operation and expansion
of a new business and the development and marketing of new products must be
considered in evaluating the likelihood of our success.
We have a history of losses and accumulated deficit and this trend of losses may
continue in the future.
For the fiscal year ended April 1, 2000 we had a net loss of
$23,516,000 and for the fiscal year ended March 31, 1999 we had a net loss of
$11,767,000. For the First Quarter ended July 1, 2000, we incurred a net loss of
$8,235,950. As of July 1, 2000, our accumulated deficit was $53,530,133. Our
ability to obtain and sustain profitability will depend, in part, upon the
successful marketing of our existing products and the successful and timely
introduction of new products. We can give no assurances that we will achieve
profitability or, if achieved, that we will sustain profitability.
Dependence on consumer acceptance of our light-activated teeth whitening
("LATW") method.
We derive substantially all of our revenues from our LATW methods and
procedures, a relatively new teeth-whitening concept for consumers. Our success
will depend in large part on our ability to successfully encourage consumers,
dentists, and dental office employees to switch from traditional bleaching tray
whitening methods to our LATW system.
Changes in technology.
The dental device and supply industry is characterized by rapid
technological change. As technological changes occur in the marketplace, we may
have to modify our products in order to become or remain competitive or to
ensure that our products do not become obsolete. If we fail to anticipate or
respond in a cost-effective and timely manner to government requirements, market
trends or customer demands, or if there are any significant delays in product
development or introduction, our revenues and profit margins may decline which
could adversely affect our cash flows, liquidity and operating results.
We may have problems raising the money needed in the future.
Our growth strategy includes investment in and expansion of Centers and
Associated Centers throughout the United States and internationally. To finance
our prior growth we have sold debt and equity securities. We are currently
exploring alternatives to fulfill these requirements, including the sale of
additional debt or equity securities, but cannot assure that additional
financing will be available when needed or that, if available, it will be on
terms favorable to us or our stockholders. If needed funds are not available, we
may be required to limit or forego the establishment of new Centers or
Associated Centers, the development of new products or limit the scope of our
current operations, which could have a material adverse effect on our business,
operating results and financial condition. We may be required to take other
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actions that may lessen the value of our common stock, including borrowing money
on terms that are not favorable to us. If we raise the needed funds through the
sale of additional shares of our common stock or securities convertible into
shares of our common stock it may result in dilution to current stockholders.
We are subject to competition.
The market for teeth whitening products and services is highly
competitive. Competition in the market for teeth whitening products and services
may intensify in the future. Numerous well-established companies and smaller
entrepreneurial companies are focusing significant resources on developing and
marketing products and services that will compete with our products and
services. In addition, many of our current and potential competitors have
greater financial, technical, operational, and marketing resources. We may not
be able to compete successfully against these competitors in developing our
services. Competitive pressures may also force prices for teeth whitening
services down and such price reductions may affect our potential future revenue.
We are susceptible to product liability suits and if a lawsuit is brought
against us it could result in us having to pay large legal expenses and/or
judgments.
Although we have not had any product liability claims, because of the
nature of the dental device industry, there can be no assurance that we will not
be subject to such claims in the future. Our products come into contact with
vulnerable areas of the human body, such as the mouth, tongue, teeth and gums,
and, therefore, the sale and support of dental products makes us susceptible to
the risk of such claims. A successful product liability claim or claim arising
as a result of use of our products brought against us, or the negative publicity
brought up by such claim, could have a material adverse effect upon our
business. We maintain product liability insurance with coverage limits of
$5,000,000 per occurrence and $5,000,000 per year. While we believe that we
maintain adequate insurance coverage, we do not guarantee that the amount of
insurance will be adequate to satisfy claims made against us in the future, or
that we will be able to obtain insurance in the future at satisfactory rates or
in adequate amounts.
Future growth may place strains on our managerial, operational and financial
resources.
If we grow as expected, a significant strain on our managerial,
operational and financial resources may occur. Further, as the number of our
Centers, Associated Centers, customers, advertisers and other business partners
grows, we will be required to manage multiple relationships with various
Associated Center dentists, customers, strategic partners and other third
parties. Future growth or increase in the number of our strategic relationships
will strain our managerial, operational and financial resources, inhibiting our
ability to achieve the rapid execution necessary to successfully implement our
business plan. In addition, our future success will also depend on our ability
to expand our sales and marketing organization and our support organization
commensurate with the growth of our business and the public's interest in teeth
whitening.
We may experience shortages of the supplies we need because we do not have
long-term agreements with suppliers.
Our success depends to a large degree on our ability to provide our
affiliated dentists with our state-of-the -art Light Activating Devices, and a
sufficient supply of teeth whitening gels and maintenance products. Since our
BriteSmile 2000 device was first used commercially, we have relied upon
manufacturing and supply agreements with multiple suppliers and one
manufacturer. We have no long-term purchase contracts or other contractual
assurance of continued supply, pricing or access to new products. While we
believe that we have good relationships with our suppliers, if we are unable to
obtain merchandise from one or more key vendors on a timely basis, or if there
is a significant change in our ability to obtain necessary equipment and
supplies, our results of operations could be seriously harmed.
We need to successfully manage our growth in order for the addition of our new
centers to be profitable.
Even though we have grown significantly in the past two years in terms
of numbers of Centers and Associated Centers opened and in operation, we may not
be able to achieve profitable operations at the Centers and to sustain the
growth in the number of Centers opened. Our growth is dependent, in large part,
upon opening and operating new Centers and Associated Centers on a profitable
basis, which in turn is subject to, among other things, securing suitable sites
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on satisfactory terms, hiring, training and retaining qualified dentists,
support staff, and other personnel, having adequate capital resources and
successfully integrating new Centers into existing operations. It is possible
that our new Centers will not achieve sales and profitability comparable to our
Centers which are currently profitable.
Our recent sale of 5% convertible subordinated notes and warrants to purchase
common stock may result in substantial dilution to our common shareholders.
On June 29, 2000 and August 3, 2000 we sold an aggregate of $20,000,000
in principal amount of 5% Convertible Promissory Notes, together with Warrants
to purchase up to 1,618,122 shares of Common Stock at $7.21 per share. Holders
of the Notes may convert their Notes into 3,236,245 shares of common stock at a
conversion price of $6.18 per share. The conversion price of the Notes is
subject to a one-time adjustment downward in nine months from closing to 102% of
the market price of the Common Stock on the adjustment date (provided that in no
event will such price be adjusted downward to less than $3.8625 per share). The
conversion price is also subject to additional adjustments from time to time
upon the occurrence of certain other events described in the Notes and Warrants,
including future issuances of Common Stock for consideration less than the
conversion price then in effect, stock splits or reverse stock splits, and the
occurrence of certain major corporate events such as mergers, sale of assets,
tender offers or exchange offers.
A large volume of sales of our common stock resulting from the conversion of
notes and/or the exercise of warrants may result in downward pressure or
increased volatility in the trading price of our common stock.
Because we have agreed to register for resale the shares of Common
Stock issuable upon conversion of the Notes and exercise of the Warrants, the
holders thereof may sell without regard to any volume restrictions, including
the volume restrictions set forth in Rule 144 promulgated under the Securities
Act of 1933. As a result, sales by the holders of the Notes and the Warrants
could lead to an excess supply of shares of our Common Stock being sold which
could, in turn, result in downward pressure or increased volatility in the
trading price of our Common Stock.
BriteSmile has a significant amount of debt
BriteSmile has a significant amount of debt outstanding consisting
primarily of $20 million principal amount of 5% Convertible Subordinated Notes.
The degree to which BriteSmile is leveraged could have important consequences to
the shareholders, including the following:
o BriteSmile's ability to obtain additional financings for working
capital, capital expenditures, acquisitions or general corporate
purposes may be impaired;
o BriteSmile must pay interest on its notes leaving less funds for other
purposes;
o BriteSmile may be at a competitive disadvantage to its less leveraged
competitors; and
o BriteSmile may be more vulnerable to a downturn in general
economic conditions.
If BriteSmile were to be in default under the notes for any reason,
there can be no assurance that any assets will remain for BriteSmile's
shareholders after payment of amounts owed to the note holders.
BriteSmile does not intend to pay dividends
BriteSmile does not anticipate paying any cash dividends on its common
stock to its shareholders for the foreseeable future. BriteSmile intends to
retain future earnings, if any, for use in the operation and expansion of its
business. In addition, the 5% Convertible Subordinate Notes contain, and it is
probable that any debt financing agreements entered into by BriteSmile in the
future will contain, restrictions on BriteSmile's ability to declare dividends.
8
<PAGE>
Use of proceeds
The shares of common stock being offered are solely for the accounts of
the selling shareholders. BriteSmile will not receive any proceeds from the sale
of the common stock. However, to the extent selling shareholders convert their
5% Convertible Subordinated Notes to common stock or exercise stock purchase
warrants, BriteSmile will be released from obligations under such notes or may
receive proceeds from the exercise of warrants, except in such cases where the
warrants have "cashless" exercise features and such features are invoked.
Selling Shareholders
The table below lists the selling shareholders and other information
regarding the actual or potential beneficial ownership of our common stock by
each of the selling shareholders as of August 10, 2000. Of the 9,385,113 shares
of common stock offered by the selling shareholders:
o Up to 7,766,990 shares are available for the resale of shares
issuable upon the conversion of the aggregate $20,000,000
principal amount of our 5% Convertible Subordinated Notes that
we issued on June 29, 2000 and August 3, 2000; and
o Up to 1,618,123 shares are issuable upon the exercise of
warrants issued to the purchasers of our convertible notes.
The second column of the table sets forth the number of shares
beneficially held by each selling shareholder on August 10, 2000, including the
number of shares which would have been held by each selling shareholder on
August 10, 2000 upon conversion of all principal on our convertible notes and
warrants then held by that selling shareholder without regard to restrictions on
the number of shares that a selling shareholder may own at any time.
Our conversion calculations with respect to the convertible notes
assume a conversion price per share of $5.15, which is the conversion price
described in the convertible notes. However, the convertible notes also contain
a provision for a one-time downward adjustment to no less than 75% of the then
prevailing market price of our common stock, which adjustment shall occur, if at
all, nine months after the original issuance date of the convertible notes.
Assuming such adjustment, the per share conversion price would be $3.8625. The
selling shareholders who hold convertible notes are offering the shares of
common stock that they may acquire on conversion of our Convertible Notes and
exercise of the related warrants, as indicated in the third column. The total
number of shares which we have registered for resale on conversion of the
Convertible Notes represent approximately 150% of the shares that would have
been issuable to the selling shareholders on August 10, 2000 upon conversion of
all of the Convertible Notes, assuming that the one-time downward adjustment had
been made as of such date to the lowest possible conversion price, plus
1,618,123 shares issuable upon the exercise of all of the warrants issued to
such selling shareholders. The information provided in the table below has been
obtained from the selling shareholders.
9
<PAGE>
<TABLE>
<CAPTION>
Shares Owned by Percentage of
or Issuable to Shares Owned Shares
Selling Shares Offered by Beneficially Beneficially
Shareholder Prior this Offering After this Owned After the
to Offering(1) Hereby Offering Offering(2)
Name of Selling Shareholders
<S> <C> <C> <C> <C>
LCO Investments Limited 13,633,159 (3) 1,106,391 12,526,768 51.9%
Andrew McKelvey 1,620,104 (4) 1,086,165 533,939 2.2%
Pequot Capital Management, Inc. 4,364,658 (5) 1,011,325 3,353,333 13.9%
John Reed 1,418,618 (6) 242,718 1,175,900 4.9%
Dr. Gasper Lazzara, Jr. 364,077 (7) 364,077 0 *
CapEx, L.P. 485,437 (8) 485,437 0 *
Pacific Mezzanine Fund 364,077 (9) 364,077 0 *
VenCap Opportunities Fund, L.P. 145,631 (10) 145,631 0 *
Wendell M. Starke as Trustee UDT 48,543 (11) 48,543 0 *
dated 10-02-1991
</TABLE>
---------------------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Commission. In computing the number of shares beneficially owned by a
person and the percentage ownership of that person, shares of common
stock subject to options, warrants or convertible securities held by
that person that are currently convertible or exercisable or
convertible or exercisable within 60 days of the date hereof are deemed
outstanding, subject to the limitation on the conversion of our
Convertible Notes which prevents the holders thereof from holding over
4.99% of our outstanding common stock at any time. Except as indicated
in the footnotes to this table and as provided pursuant to applicable
community property laws, the shareholders named in the table have sole
voting and investment power with respect to the shares set forth
opposite each shareholder's name.
(2) Percentage of Shares Beneficially Owned After this Offering reflects
23,970,685 shares outstanding as of August 10, 2000.
(3) Shares Owned Beneficially Prior to the Offering includes (i) 11,526,768
shares owned of record and beneficially by LCO Investments Limited,
(ii) 1,000,000 shares held indirectly through PdeP Tech Limited, a
subsidiary of LCO Investments Limited, (iii) 737,594 shares issuable
upon the conversion of convertible notes, and (iv) 368,797 shares
issuable upon exercise of warrants. Anthony M. Pilaro, a director of
BriteSmile. Mr. Pilaro is Chairman of CAP. CAP is the sole trustee of
the ERSE Trust, of which LCO is a wholly owned subsidiary.
(4) Shares Owned Beneficially Prior to the Offering includes (i) 533,939
shares owned directly, (ii) 724,110 shares issuable upon the conversion
of convertible notes, and (iii) 362,055 shares issuable upon exercise
of warrants.
(5) Shares Owned Beneficially Prior to the Offering includes (i) 1,666,667
shares held of record, 337,109 shares issuable upon conversion of
convertible notes, and 168,554 shares issuable upon exercise of
warrants by Pequot Private Equity Fund II, L.P.; (ii) 833,333 shares
held of record, 168,554 shares issuable upon conversion of convertible
notes, and 84,277 shares issuable upon exercise of warrants by Pequot
Partners Fund, L.P.; (iii) 833,333 shares held of record, 168,554
shares issuable upon conversion of convertible notes, and 84,277 shares
issuable upon exercise of warrants by Pequot International Fund, Inc.;
and (iv) 20,000 shares held of record by Pequot Scout Fund, L.P. All
of the Pequot entities listed above are managed by Pequot Capital
Management, Inc., which holds voting and dispositive power for all
shares of stock held by the Pequot entities.
(6) Shares Owned Beneficially Prior to the Offering includes (i) 575,900
shares owned beneficially, (ii) options to purchase 350,000 shares at
$2.50 per share, (iii) options to purchase 250,000 shares at $9.25 per
share, (iv) 161,812 shares issuable upon the conversion of convertible
notes, and (v) 80,906 shares issuable upon exercise of warrants.
(7) Shares Owned Beneficially Prior to the Offering includes (i) 242,718
shares issuable upon the conversion of convertible notes, and (ii)
121,359 shares issuable upon exercise of warrants.
(8) Shares Owned Beneficially Prior to the Offering includes (i) 323,625
shares issuable upon the conversion of convertible notes, and (ii)
161,812 shares issuable upon exercise of warrants.
(9) Shares Owned Beneficially Prior to the Offering includes (i) 242,718
shares issuable upon the conversion of convertible notes, and (ii)
121,359 shares issuable upon exercise of warrants.
11
<PAGE>
(10) Shares Owned Beneficially Prior to the Offering includes (i) 97,087
shares issuable upon the conversion of convertible notes, and (ii)
48,544 shares issuable upon exercise of warrants.
(11) Shares Owned Beneficially Prior to the Offering includes (i) 32,362
shares issuable upon the conversion of convertible notes, and (ii)
16,181 shares issuable upon exercise of warrants.
We are registering the shares for resale by the selling shareholders in
accordance with registration rights we have granted to the selling shareholders.
We will pay the registration and filing fees, printing expenses, listing fees,
blue sky fees, if any, and fees and disbursements of our counsel and the selling
shareholders' counsel in connection with this offering, but the selling
shareholders will pay any underwriting discounts, selling commissions and
similar expenses relating to the sale of the shares. In addition, we have agreed
to indemnify the selling shareholders, and certain affiliated parties against
certain liabilities, including liabilities under the Securities Act of 1933 (the
"Securities Act"), in connection with this offering. The selling shareholders
have agreed to indemnify us and our directors and officers, as well as any
person that controls us, against certain liabilities, including certain
liabilities under the Securities Act. The position of the Commission is that
indemnification of our directors or officers, or persons that control us for
liabilities under the Securities Act is against public policy as expressed in
the Securities Act and is therefore unenforceable.
Plan of Distribution
The selling shareholders (or, subject to applicable law, their
pledgees, donees, distributees, transferees or other successors in interest) may
sell shares from time to time in public transactions, on or off the Nasdaq
National Market, or private transactions, at prevailing market prices or at
privately negotiated prices, including but not limited to, one or any
combination of the following types of transactions:
o ordinary brokers' transactions;
o transactions involving cross or block trades or otherwise on
the Nasdaq National Market;
o purchases by brokers, dealers or underwriters as principal and
resale by such purchasers for their own accounts pursuant to
this prospectus;
o "at the market" to or through market makers or into an existing
market for the common stock;
o in other ways not involving market makers or established
trading markets, including direct sales to purchasers or sales
effected through agents;
o through transactions in options, swaps or other derivatives
(whether exchange-listed or otherwise);
o in privately negotiated transactions; or
o to cover short sales.
In effecting sales, brokers or dealers engaged by the selling
shareholders may arrange for other brokers or dealers to participate in the
resales. The selling shareholders may enter into hedging transactions with
broker-dealers, and in connection with those transactions, broker-dealers may
engage in short sales of the shares. The selling shareholders also may sell
shares short and deliver the shares to close out such short positions. The
selling shareholders also may enter into option or other transactions with
broker-dealers that require the delivery to the broker-dealer of the shares,
which the broker-dealer may resell pursuant to this prospectus. The selling
shareholders also may pledge the shares to a broker-dealer or financial
institution, and upon a default, the broker-dealer or financial institution may
effect sales of the pledged shares pursuant to this prospectus.
Brokers, dealers or agents may receive compensation in the form of
commissions, discounts or concessions from selling shareholders in amounts to be
negotiated in connection with the sale. The selling shareholders and any
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales and any such
commission, discount or concession may be deemed to be underwriting
compensation.
11
<PAGE>
Information as to whether underwriters who the selling shareholders may
select, or any other broker-dealer, is acting as principal or agent for the
selling shareholders, the compensation to be received by underwriters that the
selling shareholders may select or by any broker-dealer acting as principal or
agent for the selling shareholders, and the compensation to be paid to other
broker-dealers, in the event the compensation of such other broker-dealers is in
excess of usual and customary commissions, will, to the extent any such
information exists or is required, be set forth in a supplement to this
prospectus. Any dealer or broker participating in any distribution of the shares
may be required to deliver a copy of this prospectus, including a prospectus
supplement, if any, to any person who purchases any of the shares from or
through such dealer or broker.
We have advised the selling shareholders that during such time as they
may be engaged in a distribution of the shares they are required to comply with
Regulation M promulgated under the Exchange Act. With certain exceptions,
Regulation M precludes any selling shareholder, any affiliated purchasers and
any broker-dealer or other person who participates in a distribution from
bidding for or purchasing, or attempting to induce any person to bid for or
purchase any security that is the subject of the distribution until the entire
distribution is complete. Regulation M also prohibits any bids or purchases made
in order to stabilize the price of a security in connection with the
distribution of that security. All of the foregoing may affect the marketability
of the common stock.
Legal matters
The validity of the Shares offered hereby will be passed upon for
BriteSmile by Durham Jones & Pinegar, P.C., Broadway Centre, Suite 900, 111 East
Broadway, Salt Lake City, Utah 84144.
12
<PAGE>
II-2
Table of Contents
Summary about BriteSmile and this offering..........2
Where you can find more information.................4
Incorporation of Certain Documents by Reference ....5
Explanation about forward-looking information.......5
Risk factors........................................6
Use of proceeds.....................................9
Selling shareholders................................9
Plan of distribution...............................11
Legal matters......................................12
--------------------
BriteSmile, Inc.
9,385,113
SHARES
COMMON STOCK
--------------------
PROSPECTUS
-------------------
August __, 2000
13
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses to be incurred in
connection with the sale and distribution of the securities being registered
hereby, all of which will be borne by the Company. All amounts shown are
estimates except the Securities and Exchange Commission registration fee.
Filing Fee - Securities and Exchange Commission $ 12,234
Legal fees and expenses of the Company 15,000
Accounting fees and expenses 15,000
Blue Sky fees and expenses --
Printing expenses 500
Miscellaneous expenses 5,000
----------
Total Expenses $ 47,734
==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 16-10a-901 et. seq. of the Utah Business Corporation
Act (the "Utah Act"), together with Article 5 of the Bylaws of the Company,
provide for indemnification of the Company's directors, officers, employees,
fiduciaries or agents, subject to the Company's determination in each instance
that indemnification is in accordance with the standards set forth in the Utah
Act and in the Bylaws. The Company may purchase and maintain liability insurance
on behalf of a person who is or was a director, officer, employee, fiduciary, or
agent of the Company against liability asserted against or incurred by him or
her in that capacity or arising from his or her status as a director, officer,
employee, fiduciary, or agent, whether or not the Company would have power to
indemnify him or her against the same liability under the provisions of the
Bylaws. See Article 5 of the Company's Bylaws, which is incorporated herein by
reference and which qualifies the foregoing summary statement.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, or otherwise, the
Company has been informed that in the opinion of the Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
II-2
<PAGE>
ITEM 16. LIST OF EXHIBITS.
4 Articles Adopting Amended and Restated Articles of Incorporation dated
January 31, 2000 (incorporated by reference to Exhibit 3.05 to the
Quarterly Report on Form 10-QSB of BriteSmile, Inc. for the quarter
ended December 31, 1999)
5 Opinion of Durham, Evans, Jones & Pinegar, P.C.
23.1 Consent of Durham, Evans, Jones & Pinegar, P.C., included in Exhibit 5
filed herewith.
23.2 Consent of Ernst & Young LLP
-------------------
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement. Notwithstanding the foregoing, any
increase or decrease in the volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any derivation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the Registration Statement;
and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) do not
apply if the registration statement is on Form S-3, Form S-8 or Form
F-3, and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
with or furnished to the Commission by the Company pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), that are incorporated by reference in this
Registration Statement.
II-3
<PAGE>
(2) That, for the purposes of determining any liability under the
Securities Act, each post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Company's annual report
pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Exchange Act) that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the indemnification provisions described herein, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Walnut Creek, State of California, on this 14th day
of August, 2000.
BriteSmile, Inc.
By: /s/ Paul A. Boyer
-----------------------------
Paul A. Boyer
Executive VP, Chief Financial
Officer and Secretary
II-5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Anthony M. Pilaro Chairman of the Board of August 14, 2000
--------------------- Directors
Anthony M. Pilaro
/s/ John L. Reed Chief Executive Officer August 14, 2000
---------------- and Director (Principal
John L. Reed Executive Officer)
/s/ Linda S. Oubre Director August 14, 2000
------------------
Linda S. Oubre
/s/ R. Eric Montgomery Director August 14, 2000
----------------------
R. Eric Montgomery
/s/ Jennifer A. Scott Director August 14, 2000
---------------------
Jennifer A. Scott
/s/ Gerald Poch Director August 14, 2000
---------------
Gerald Poch
Director August , 2000
--------------------------- ---
Dr. Gasper Lazzara, Jr.
/s/ Bradford Peters Director August 14, 2000
-------------------
Brad Peters
Director August , 2000
------------------ ---
Harry Thompson
Director August , 2000
------------------ ---
Peter Schecter
EXHIBIT INDEX
4 Articles Adopting Amended and Restated Articles of Incorporation dated
January 31, 2000 (incorporated by reference to Exhibit 3.05 to the
Quarterly Report on Form 10-QSB of BriteSmile, Inc. for the quarter
ended December 31, 1999)
5 Opinion of Durham, Evans, Jones & Pinegar, P.C.
23.1 Consent of Durham, Evans, Jones & Pinegar, P.C., included in Exhibit 5
filed herewith.
23.2 Consent of Ernst & Young LLP
II-6
