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

                                    FORM 10-K

[X]     ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
        OF 1934

For the Fiscal Year Ended: December 28, 2002

[ ]     TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
        ACT OF 1934

Commission File Number: 1-11064

                                BRITESMILE, INC.
             (Exact name of registrant as specified in its charter)

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

         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)

 Securities registered pursuant to                    Name of each exchange
     Section 12(b) of the Act:                        on which registered:
----------------------------------              --------------------------------
               None                                      Not Applicable

Securities registered pursuant to Section 12(g) of the Act:
-----------------------------------------------------------
          common stock, par value $0.001

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.
Yes     X      No
      ------      ----

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-K contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

Indicate by checkmark whether the registrant is an accelerated filer (as defined
in Exchange Act Rule 12B-2)
Yes             No    X
    -------         -------

The aggregate market value of the registrant's common stock held by
non-affiliates as of March 12, 2003 was approximately $6,875,347 based on the
closing sale price of the issuer's stock as reported by the NASDAQ SmallCap
Market on such date.

The number of shares of common stock, less treasury shares, of the registrant
outstanding as of March 12, 2003 was 2,428,539.


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                        BRITESMILE, INC. AND SUBSIDIARIES

                                TABLE OF CONTENTS


PART I.

Item 1.  Business..............................................................3

Item 2.  Properties............................................................9

Item 3.  Legal Proceedings.....................................................9

Item 4.  Submission of Matters to a Vote of Security Holders..................12


PART II.

Item 5.  Market for Registrant's Common Equity and Related Stockholder
         Matters..............................................................12

Item 6.  Selected Financial Data..............................................15

Item 7.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations............................................18

Item 8.  Financial Statements and Supplementary Data..........................30

Item 9.  Changes in and Disagreements with Accountants on Accounting
         and Financial Disclosure.............................................30


PART III.

Item 10. Directors and Executive Officers of the Registrant...................30

Item 11. Executive Compensation...............................................34

Item 12. Security Ownership of Certain Beneficial Owners and Management.......37

Item 13. Certain Relationships and Related Transactions.......................40

Item 14. Controls and Procedures..............................................42

PART IV.

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.....42

Signatures....................................................................48

Certifications................................................................49


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THIS ANNUAL REPORT ON FORM 10-K 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" AND ELSEWHERE IN THIS ANNUAL REPORT. THE
FOLLOWING DISCUSSION SHOULD BE READ TOGETHER WITH OUR FINANCIAL STATEMENTS AND
RELATED NOTES THERETO INCLUDED ELSEWHERE IN THIS DOCUMENT.

During the fourth quarter of Fiscal 2002, the Company announced a 15 to 1
reverse stock split, which took effect January 27, 2003. All references in this
Report to numbers of the Company's shares and to share prices herein have been
adjusted for the 15 to 1 reverse stock split.

During the fourth quarter of the Company's fiscal year ended April 1, 2000, the
Company adopted a 52/53-week (4 week - 4 week - 5 week quarter) fiscal calendar.
In addition, the Company changed its year-end from March to December. Data in
this Report reflects the consolidated results of the Company for the audited 52
week period ended December 28, 2002 ("Fiscal 2002") and December 29, 2001
("Fiscal 2001"), the audited 39 week transition periods ended December 30, 2000
(the "Transition Period"), and the unaudited 52 week period ended December 30,
2000 ("Fiscal 2000").

PART I.

ITEM 1.           BUSINESS

Introduction

BriteSmile, Inc., a Utah corporation (the "Company" or "BriteSmile"), 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-like settings dedicated solely to providing the Company's
teeth whitening services and products and which are known as BriteSmile
Professional Teeth Whitening Centers ("Centers"), and also in existing
independent dental offices known as BriteSmile Professional Teeth Whitening
Associated Centers ("Associated Centers").

BriteSmile offers consumers a new, simple and safe way to return teeth to their
optimal natural whiteness in just one visit to a BriteSmile Center or BriteSmile
Associated Center. The BriteSmile teeth whitening system utilizes a combination
of proprietary gas plasma light or LED technology and wavelength specific gel.
The unique fiber optic delivery arm of the BriteSmile device permits blue-green
light to reach all 16 front teeth simultaneously, whitening the teeth by
activating the wavelength specific gel, which is applied to the teeth during
three consecutive twenty-minute sessions. Including the time necessary for
initial customer evaluation and consultation, prep work and clean up, the
customer can complete an entire teeth whitening visit in approximately 90
minutes. The result is immediate superior teeth whitening -- a clinically proven
average of 8-9 shades whiter -- and a patient satisfaction rate of over 98%.

BriteSmile developed its light-activated teeth whitening ("LATW") technology
during the fiscal year ended March 31, 1999 ("Fiscal 1999"), and in February
1999 began placement of its BS2000 LATW system (the "BS2000") in both Centers
and Associated Centers. Currently, the BS2000 is used exclusively in Centers. In
November 1999, BriteSmile introduced its mobile BS3000 LATW keycard system
("BS3000") into Associated Centers, and in May 2001, commenced shipping to
Associated Centers its state-of-the-art BS3000PB LATW system (the "BS3000PB"),
representing the latest refinements to the mobile LATW device used in Associated
Centers. The BS3000 and BS3000PB can be installed more quickly than the BS2000
and provide the flexibility and mobility required in dental offices. A dentist
at an Associated Center activates the BS3000 device by inserting a key card,
which has been programmed to allow the device to perform the number of whitening
procedures, purchased by the Associated Center. The Company ships key cards to
an Associated Center after receiving a key card order via phone or fax or over
the Internet. The BS3000PB device incorporates a code number system, which
enables the dentist to program the device with a numerical code to perform
whitening procedures based upon the number of such procedures purchased from


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the Company.  The Company  provides the Associated  Center dentist with the code
numbers to program the BS3000PB via fax or e-mail, thus, eliminating the need to
ship key cards to Associated Centers. The Company is continuing its research and
development efforts to improve its current LATW systems in order to maintain and
strengthen its competitive advantage.

Centers are located in major metropolitan areas nationwide. Centers offer
customers a salon-like environment dedicated solely to teeth whitening and are
staffed by licensed dentists and trained dental assistants. Alternatively,
consumers can visit an Associated Center, where a local dentist supervises the
BriteSmile procedure in his or her dental office.

As of December 28, 2002, BriteSmile had 14 Centers operating in the following
locations: Beverly Hills, Irvine, Walnut Creek, Palo Alto and La Jolla, CA;
Chicago, IL; Phoenix, AZ; Boca Raton, FL; Honolulu, HI; Atlanta, GA; Houston,
TX; Denver, CO; Boston, MA; and New York, NY. The Centers serve as the anchor in
12 major U.S. markets, with the geographically contiguous Associated Centers
providing consumers with multiple location options. This "cluster" of Associated
Centers surrounding a BriteSmile Center allows the Company to have maximum
advertising impact and visibility in a market by leveraging marketing and
advertising dollars, and optimizing consumer exposure to the BriteSmile brand.

As of December 28, 2002, BriteSmile has contracted with dentists to operate
approximately 4,636 Associated Centers throughout the United States and around
the world in 67 countries. BriteSmile plans to open additional Associated
Centers in the United States and in select foreign locations in the future.

The Company also sells BriteSmile brand post-whitening maintenance products,
including toothpaste, mouthwash, whitening chewing gum and electric
toothbrushes, to consumers in Centers, Associated Centers, and on its Internet
site. The Company is currently developing other BriteSmile brand post-whitening
products.

The Company operates in one reportable segment, that of teeth whitening services
and products. The Company's chief operating decision-maker has determined the
operating segment based upon how the business is managed and operated.

Recent Business Developments
Associated Center Expansion

BriteSmile continues to identify and recruit dentists practicing in both Center
and non-Center markets to establish complementary Associated Centers in their
respective markets. To date, BriteSmile has contracted with dentists to operate
approximately 4,636 Associated Centers as of December 28, 2002. This compares to
3,959 Associated Centers in operation at the same time last year.

International Expansion

In May 1999, the Company established BriteSmile International Limited
("BriteSmile International"), a Dublin, Ireland-based subsidiary, to facilitate
international distribution of the Company's LATW systems. BriteSmile
International has since introduced the BS3000 and BS3000PB in 67 countries under
distributorship agreements. As of December 28, 2002, the Company has contracted
with dentists to operate 1,315 Associated Centers outside the United States.
BriteSmile International is continuing to explore additional international
distribution opportunities in Europe, Latin America and Asia. In Fiscal 2002,
International revenue was 12.7% of total revenue.

November 2002 Sale of Convertible Notes

On November 20, 2002, the Company sold to two investors in a private placement
2% convertible notes that are due and payable on November 20, 2005 (the
"November 2002 Notes"). The November 2002 Notes are convertible into shares of
common stock of the Company at a conversion rate of $6.00 per share. The two
investors who purchased the November 2002 Notes, both affiliates of the Company,
are: LCO Investments Limited ($2,500,000) and Bradford G. Peters ($1,000,000).
The CEO of the Company has agreed to fund an additional $500,000 in 2003 under
the same terms. LCO Investments Limited is the Company's major shareholder. LCO
is a wholly owned subsidiary of the ERSE Trust.  CAP Advisers  Limited is a


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co-trustee of the ERSE Trust. Mr. Pilaro, a director of the Company, is Chairman
of CAP.  John L. Reed is a  shareholder,  the  Chief  Executive  Officer,  and a
director  of the  Company.  Brad Peters is a  shareholder  and a director of the
Company.

EVL Lease Agreement

On December 29, 2000, as amended in February 2001, March 2002, September 2002
and January 2003, the Company secured a lease line of credit of up to $15
million from Excimer Vision Leasing L.P. ("EVL"). Anthony Pilaro, the Company's
Chairman, serves as Chairman of EVL.

In addition to providing working capital to the Company, the lease line of
credit enabled the Company to place up to 1,755 new BS3000PB teeth whitening
devices in Associated Centers in the U.S. Pursuant to the lease line agreement,
EVL purchased from the Company 1,245 BS3000 teeth-whitening devices currently
used in various Associated Centers in the United States for $5 million and
immediately leased the assets back to the company. EVL leases all devices to the
Company for a term of five years. The Company pays EVL a monthly rental for each
device consisting of a fixed amount, plus a "variable rent" payment in the
amount of $25 for each right to perform a procedure purchased by the Associated
Center where the corresponding device is located. During Fiscal 2002 and Fiscal
2001, $2,150,000 and $2,680,000 respectively in rent expense was recorded
relative to this lease arrangement. During Fiscal 2001, the Company utilized the
remaining $10 million available on the lease line to purchase BS 3000PB devices
for placement in Associated Centers.

On March 8, 2002, the Company and EVL amended their lease agreement to provide
that the variable rent portion of the monthly rental payments during 2002, in
the amount of $25 for each BriteSmile procedure, will be deferred and paid to
EVL in twelve equal monthly installments beginning January 9, 2003, with
interest payable on the deferred amount at a rate equal to LIBOR as quoted by
The Bank of Nova Scotia for the applicable adjustment dates for deposits in U.S.
Dollars for one month maturities, plus 200 basis points.

On September 18, 2002, the Company and EVL further amended their lease agreement
to provide that all variable rent payments during 2002, in the amount of $25 for
each BriteSmile procedure, will be deferred and paid to EVL on January 1, 2004,
with interest payable on the deferred amount at a rate equal to LIBOR as quoted
by The Bank of Nova Scotia for the applicable adjustment dates for deposits in
U.S. Dollars for one month maturities, plus 200 basis points. All interest
having accrued on Total Deferred 2002 Variable Rent was to be paid on January 9,
2003. Thereafter, accrued interest on account of Total Deferred 2002 Variable
Rent was to continue to be payable on the 9th day of each month through December
9, 2003 and on January 1, 2004.

On January 1, 2003, the Company and EVL again amended their lease agreement to
provide that the variable rent portion of the monthly payment due for payments
during both 2002 and 2003, in the amount of $25 for each BriteSmile procedure,
will be deferred and paid to EVL on January 1, 2004, with interest payable on
the deferred amount at a rate equal to LIBOR as quoted by The Bank of Nova
Scotia for the applicable adjustment dates for deposits in U.S. Dollars for one
month maturities, plus 200 basis points. All such interest that accrued from
March 12, 2002 to January 8, 2003 on account of the Total Deferred 2002 Variable
Rent was paid on January 9, 2003. Thereafter such accrued interest on account of
Total Deferred 2002 Variable Rent will continue to be payable on the 9th day of
each month through December 9, 2003 and on January 1, 2004. All such interest
that accrues on account of Total Deferred 2003 Variable Rent will be paid on the
9th day of each month commencing April 9, 2003 through December 9, 2003 and on
January 1, 2004. In the event the Company is unable to meet its obligation to
EVL on January 1, 2004, EVL has agreed to renegotiate a new repayment schedule,
which would be mutually acceptable to both parties.

CAP Advisers Line of Credit

In December 2001, as amended in March 2002, July 2002 and January 2003
BriteSmile International entered into Credit and Security Agreements (the
"Credit Agreements") with CAP Advisers Limited ("CAP Advisers"). The Credit
Agreements provide for secured loans to the Company of up to $5 million with an
additional $1.5 million for capital equipment. Any principal advanced under the
line of credit bears interest at a fluctuating rate equal to LIBOR plus 200
basis points, payable monthly. Advances under the $5 million portion of the line
may be used for general business purposes. Mr. Pilaro, the Company's Chairman,
is also Chairman of CAP Advisers. CAP Advisers is the sole  trustee of the ERSE


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Trust. The ERSE Trust owns 100% of LCO, the Company's major  shareholder.  As of
December  28,  2002,  the  outstanding  balance  on the line of credit  was $4.7
million.

CAP Advisers Center Loan

In April 2003, the Company's Audit Committee and it's Board of Directors
approved a term sheet from CAP Advisers for a $2.5 million Center Loan (the
"2003 Center Loan") to be used for capital expenditures and other specific
revenue generating initiatives to be agreed and defined by BriteSmile and Cap
Advisers and up to $800,000 for general working capital. Interest is fixed at
6%, payable monthly, with Cap Advisers having the right to reset the interest
rate to 200bps over 1 year LIBOR after giving BriteSmile 30 days notice. A
variable fee payment of $25 per procedure performed on the existing 127 Center
chairs will commence on May 11, 2006, and continue until May 10, 2011. Variable
fees will be payable 40 days after the end of the month in which the procedures
are performed, except for fees due for April/May 2011 which will become payable
on the maturity date. On an annualized basis the first $500,000 of variable fees
will be applied to the principal such that the $2.5M will be fully repaid over 5
years commencing May 11, 2006. Variable payments in excess of the annual
amortization of $500,000 are deemed additional interest to Cap Advisers.

Market for Products and Services

The Company continues to believe that the market for teeth whitening services
and products is large and growing. According to a study conducted by Dental
Products Report, it is estimated that professionally administered bleaching
products and services exceeded $1.3 billion for the year 2000, the last year
data is available. Indications are that this number has increased significantly,
consistent with a proliferation of products and services available
professionally. The retail market for whitening products also continues to grow,
including whitening toothpastes, over-the-counter and direct-to-consumer home
gel and tray systems, as well as strips.

Domestically, various independent surveys have indicated 70%-80% of adults are
not happy with the current color of their teeth. This, combined with the
increasing desire for physical self-improvement and a continuing rise in
"vanity" spending, creates a favorable marketplace for continued long-term
growth, despite the recent economic downturn. Globally, acceptance of teeth
whitening and western trends in physical self-improvement continue to be
encouraging. This perception is supported by the Company's continued growth in
distribution as well as international Associated Center productivity, despite
minimal advertising investment.

No customer accounted for more than 10% of net sales during Fiscal 2002, Fiscal
2001 or the Transition Period.

Marketing and Distribution

BriteSmile's teeth-whitening procedures are marketed primarily via consumer
advertising, a somewhat unique approach within professional dentistry. The
Company employs a strategy of marketing whereby all advertising includes a
toll-free number for consumers to call to make an appointment at Associated
Centers or at a Company-owned Center after seeing or hearing the ads. Core
advertising efforts include TV, radio and print. Historically, the Company
purchased most of its media locally in markets of significant density, and
specifically where Centers are located. However, as the Company achieved
national distribution and associated economies of scale, it switched to national
advertising in the fourth quarter of 2001.

The Company built its internal infrastructure to provide the finest consumer
experience in teeth whitening. In February 1999, BriteSmile established a
national Call Center in order to efficiently handle incoming consumer inquiries
and to book appointments via the Company's proprietary web-based scheduling
system (the "Scheduler"). The Call Center, located at the Company's corporate
headquarters in Walnut Creek, California, is equipped with advanced telephone
and computer equipment to service consumers calling BriteSmile's toll free
telephone numbers. The Scheduler is a custom-developed software solution capable
of tracking incoming calls as well as customer appointments, treatments
performed in Centers, and payments. The Scheduler allows the Call Center, and
each BriteSmile Center and BriteSmile Associated Center, to view and interact on
a real-time basis with dentists' schedules. It also enables management to
closely monitor performance of advertising campaigns and sales agents, and
Center and Associated Center operational and financial results.


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Competition

The Company's LATW procedure competes with all teeth whitening products and
services. These include in-office bleaching systems, professionally administered
take home bleaching systems, and over-the-counter and direct to consumer
products such as pastes, gels and strips. Competition continues to proliferate,
as consumer demand for whitening increases.

Numerous manufacturers and individual brands compete in the various product
arenas. Recently, a number of companies have entered the LATW arena with
products of their own. Some of these companies are also in the professional tray
business. A significant development in 2001 was the launch of Crest WhiteStrips,
a new methodology for at-home whitening. These strips are sold over-the-counter
as well as in dentist's offices. Many competing products have a substantially
longer treatment time (weeks or more) than the BriteSmile 1 hour procedure plus
preparation time.

Virtually all professional whitening systems use some type of peroxide, usually
a hydrogen peroxide for in-office procedures, and a milder carbamide peroxide
for at-home use. BriteSmile's LATW system uses a 15% hydrogen peroxide solution,
a relatively low percentage for an in-office procedure. As a result,
BriteSmile's process has low sensitivity (less than 10%) relative to many
competing procedures.

BriteSmile has performed numerous independent clinical studies on safety and
efficacy. These include studies at the University of Medicine and Dentistry of
New Jersey, Forsyth Institute, Loma Linda University, and New York University.
These studies have not only proven the safety of the BriteSmile process on
teeth, gums and dental work, but have also proven the efficacy of BriteSmile's
LATW. In one of these studies BriteSmile's efficacy was compared against a
leading professional take home tray system, an in-office curing-light process,
and a leading whitening toothpaste. In all instances BriteSmile was proven to
have significantly greater whitening efficacy as measured by the Vita-Pan(R)
shade differential scale.

BriteSmile continues to invest in research and development, and is investigating
advanced gel and light technology to ensure a continued leadership position in
teeth whitening safety, speed and efficacy, however there is no guarantee that
this leadership position will be maintained despite these efforts.

Sources of Supply

The Company has subcontracted the manufacturing of LATW devices with a single
manufacturer, Peak Industries in Longmont, Colorado. The Company leases a
significant number of its LATW systems used in Associated Centers from EVL
pursuant to the $15 million lease line of credit entered into on December 29,
2000. See Item 1--"Business, Recent Business Developments, EVL Lease Agreement,"
above. Goods purchased to produce the LATW device and gel and equip the Centers
and Associated Centers are in some cases unique and purchased from a single
vendor. In those cases the Company believes it could purchase items meeting its
design specifications from other vendors within the industry. Overall, the
Company believes it has access to sufficient quantities of goods and materials
at competitive prices to enable it to operate effectively.

Contractual Relationships with Centers

A licensed dentist, and a dental hygienist or licensed dental assistant,
administer the Company's LATW process at BriteSmile Centers. Regarding the
relationship between the Company and such dentists, the dentists generally
create a professional corporation (the "PC"), which enters into various
agreements with the Company. Pursuant to such agreements, the licensed dentist
has exclusive authority regarding dental matters, including administering of the
LATW. A Deficit Funding Agreement between the Company and the PC obligates the
Company to fund any Center operating losses by lending necessary funds to the PC
which are repayable solely from the assets of the PC, and without recourse
against any officer, director, or shareholder of the PC. Under a Security
Agreement between the Company and the PC, the PC grants to the Company a
security interest in all of the PC's accounts, general intangibles, equipment,
and fixtures to secure the PC's obligations under the Deficit Funding Agreement.
Pursuant to a Management Agreement between the Company and the PC, the Company


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manages the business and marketing aspects of the Center including providing
furnishings, equipment, advertising and office space, and maintaining,
repairing, and replacing furnishings as necessary.

Organizational Structure of Associated Centers

Associated Centers are located within existing independent dental offices
pursuant to a BriteSmile Systems Agreement (the "Systems Agreement") between the
Company and a dentist (the "Associated Center Dentist"). The Systems Agreement
specifies the number of devices to be located at the Associated Center, payment
terms, and the obligations of both parties with respect to use and maintenance
of the LATW equipment.

Patents, Trademarks and Licenses

The Company has filed a number of patent applications related to the LATW system
which have been issued or are pending, including patent applications related to
the composition of the Company's whitening gel, methods of whitening teeth with
light tissue isolation barriers, the Company's business method and the Company's
unique system of delivery of light to all teeth simultaneously through the
Company's gas-plasma light activating device. In addition, the Company has
ongoing research and development efforts to improve and expand the Company's
current technology, and to develop new tooth whitening compositions and light
devices.

As of April 7, 2003, over ten U.S. patents have issued to the Company relating
to methods of LATW, compositions for use in LATW, an adjustable articulated
positioning device, a portable, high power arc lamp system, and a design for a
device that provides light to teeth for whitening procedures. Similar patent
applications have issued or are pending in various countries including the
European Union, Canada, Japan, and Australia.

Although the Company intends to continue to apply for patents as advised by
patent counsel, there can be no assurance that such patents will be issued or
that, when they are issued, they will not be infringed upon by third parties or
that they will cover all aspects of the product or system to which they relate.
Management generally believes that the Company's success depends more on its
ability to maintain state-of-the-art technology and to market its products on a
price-competitive and value-added basis, than on any legal protection that
patents may provide. The Company relies, and will continue to rely, on trade
secrets, know-how and other unpatented proprietary information in its business.
Certain key employees and consultants of the Company are required to enter into
confidentiality and/or non-competition agreements to protect the confidential
information of the Company. However, there is no assurance that these agreements
would be enforceable if they are breached or, if enforced, that they would
adequately protect the Company or provide an adequate remedy for the damage that
may be caused by such a breach.

The Company owns the rights to the  registered  trademarks  and service marks in
the  U.S.  and in  several  foreign  countries  including  but  not  limited  to
"BriteSmile" (name and logo), "BriteSmile Professional Teeth Whitening Centers,"
and "BriteSmile Associated Teeth Whitening Center."

Government Regulation

The Company's business operations are subject to certain federal, state and
local statutes, regulations and ordinances (collectively, "government
regulations"), including those governing health and safety. The LATW system is
categorized as a Class 1 Medical Device as defined by the Food and Drug
Administration ("FDA"). The LATW device is utilized specifically to perform
cosmetic dental procedures (teeth whitening); as such, the Company's LATW device
is not subject to the customary rules, regulations and oversight by the FDA.
There can be no assurance that some or all of the existing government
regulations will not change significantly or adversely in the future, or that
the Company will not become subject to compliance with additional and stricter
government regulations.

In most states the Company's teeth whitening procedure is deemed to be a part of
the practice of dentistry. Generally, states impose licensing and other
requirements on the practice of dentistry. In addition, some states prohibit
general business corporations (such as the Company) from engaging in the
practice of dentistry. In some states the BriteSmile corporate structure and
contractual relationships with PCs that provide LATW services to consumers must
be reviewed by, and require the express approval of, that state's agency
governing the practice of dentistry (such as a Board of Dental Examiners). In
those states, approval is necessary for the Company's operation of Centers.


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The Company has obtained all required government  approvals for its Centers. The
Company  intends to continue to cooperate with state  regulatory  agencies,  and
obtain all necessary governmental approvals.  Even with such approvals there can
be no  assurance  that future  enactments,  amendments,  or  interpretations  of
government  regulations  will  not be  more  stringent,  and  will  not  require
structural,  organizational,  and  operational  modifications  of the  Company's
existing  and  future  contractual  relationships  with PCs which  provide  LATW
services.  However,  management  believes  that  its  present  and  contemplated
operation of Centers is and will be in compliance in all material  respects with
applicable federal, state and local regulations.

The Company regularly monitors developments in government regulations relating
to the practice of dentistry. The Company plans to structure all of its
agreements, operations and marketing in accordance with applicable government
regulations, although there can be no assurance that its arrangements will not
be successfully challenged or that required changes may not have a material
adverse effect on the Company's operations or profitability.

Product Liability

The Company may become subject from time to time to suits alleging negligence,
product liability or related causes of action, although no such action is
currently pending. The Company maintains product liability insurance coverage
for its products and services with coverage limits of $5 million per occurrence
and $5 million per year. While the Company intends to continue to insure against
such actions, there can be no assurance that the Company will be successful in
maintaining such coverage or that the limits of such policies will be adequate
or renewable at prices or on terms that are sufficient for the Company's
business. A successful claim against the Company in excess of any insurance
coverage could have a material adverse effect upon the Company and its financial
condition. Claims against the Company, regardless of the merit or eventual
outcome of such claims, also may have a material adverse effect on the Company's
reputation and business.

Employees

As of March 1, 2003, the Company had 123 full-time employees and 14 part-time
employees. None of the Company's employees are represented by a union and the
Company is not aware of any efforts to unionize any employees. The Company
believes its labor relations are satisfactory.


ITEM 2.           DESCRIPTION OF PROPERTY
The Company leases its 13,746 square foot corporate office facility in Walnut
Creek, California. The lease agreement runs through April 2007. This facility is
used for administration, Call Center and office space. In July 2001, the Company
entered into a lease agreement through July 2003 for a 10,255 square foot
facility for warehousing and distribution located in Walnut Creek, California
next to its corporate office. The Company is currently negotiating an extension
of that lease.

As of the date of this Report, the Company has fourteen Centers operating under
lease agreements expiring starting December 2003 through January 2010.

Each Center lease covers prime street-level retail spaces, consisting of
approximately 1,800 - 5,200 square feet, with improvements to create attractive
salon settings. Equipment available at each Center includes BriteSmile LATW
devices, dental chairs and dental cabinetry and equipment, all in excellent
condition.

During fiscal year 2001 the Company closed three of its less productive Centers.
In December 2001, the Company also terminated plans to open a new Center in San
Francisco. At present, the Company remains obligated under these leases through
2010, and has sub-leased and/or negotiated termination of the leases.

ITEM 3.           LEGAL PROCEEDINGS

BriteSmile, Inc. v. Discus Dental, Inc. and Salim Nathoo, filed in the United
States District Court for the Northern District of California. The Company filed
an initial complaint against Discus Dental, Inc. ("Discus"), Culver City,
California, on July 8, 2002, asserting claims of infringement of the Company's
U.S. Patents No. 6,343,933, issued February 5, 2002,  and U.S.  Patent No.


                                       9

<PAGE>

6,361,320,  issued March 26, 2002. On February 28, 2003, the Company amended its
existing  lawsuit  against  Discus  by  adding  Salim  Nathoo  ("Nathoo")  as  a
defendant.  The complaint,  civil action number  3:C02-CV-03220 JSW, as amended,
further  alleges   misappropriation  of  the  Company's  trade  secrets,   civil
conspiracy, and unfair competition and business practices by Discuss and Nathoo;
breach of contract  and breach of  fiduciary  duty by Mr.  Nathoo,  and tortuous
interference  with  contract by Discus.  The  complaint  alleges that Nathoo and
Discus conspired to  misappropriate  BriteSmile's  trade secrets in violation of
Nathoo's  contractual  obligations to the Company.  The amended  lawsuit alleges
that, as  BriteSmile's  Medical  Director,  Nathoo had and continues to have, an
obligation to keep BriteSmile's trade secrets  confidential.  Beginning in 2001,
Discus Dental and Nathoo  entered into an agreement  whereby  Discus Dental paid
Nathoo at least  $2.5  million  over a less than two year  period  for  Nathoo's
"consulting"  services,  which  included  paying Nathoo to share with Discus the
Company's  trade secrets.  The lawsuit alleges further that in, December 2002, a
third party informed BriteSmile of Nathoo's activities, and that when confronted
by  BriteSmile,  Nathoo  admitted to receiving  $2.5  million  from Discus.  The
Company seeks a permanent  injunction  against both Discus and Nathoo to prevent
further  infringement  of its patents and improper  disclosure  of the Company's
trade  secrets,  lost profits,  treble  damages and  attorneys  fees for willful
patent  infringement,  punitive  damages,  and other relief.  On March 25, 2003,
Discus  filed its Answer to the  Amended  Complaint  and  Counterclaims.  In its
Answer, Discus denies any liability for BriteSmile's claims. Discuss also raises
affirmative  defenses,  including  claims that its products and processes do not
infringe  BriteSmile's  patents,  and that BriteSmile's  patents are invalid and
unenforceable.  Discus asserts  counterclaims  against  BriteSmile,  seeking (i)
judicial declarations that BriteSmile's patents are invalid, unenforceable,  and
have not been infringed,  (ii) tortuous  interference with prospective  economic
advantage and economic business relations, and (iii) unfair competition.  Discus
asks  for   declarations   that  its  products  and  processes  do  not  violate
BriteSmile's  patents,   that  BriteSmile's  patents  are  unenforceable,   that
BriteSmile has no protectable trade secrets,  that  BriteSmile's  contracts with
dentists  which  contain  contractual  restrictions  on the  purchase and use of
competitive  systems are  unenforceable  and should be enjoined,  lost  profits,
treble damages and attorneys fees.

Salim Nathoo v. BriteSmile Leasing. On March 6, 2003, Nathoo filed a lawsuit
against BriteSmile Leasing, a subsidiary of the Company in the New Jersey state
court. In this action, Nathoo alleges that the Company breached its agreement to
pay Nathoo money, and that such failure should result in the reversion of
certain patent rights, which were previously assigned by Nathoo to the Company,
back to Nathoo. Nathoo also seeks the payment of profits derived from the patent
rights. As of March 31, 2003, counsel for the Company is preparing to answer the
complaint.

Smile Inc. Asia Pte. Ltd. v. BriteSmile. On April 23, 2002, Smile Inc. Asia Pte.
Ltd. ("Smile") sued the Company and BriteSmile Management,  Inc., a wholly owned
subsidiary of the Company,  in the Third  Judicial  District  Court in Salt Lake
City, Utah. The Complaint alleges that BriteSmile  Management  breached its 1998
distributor agreement with Smile by failing to fill orders placed and to perform
other  obligations  under  the  agreement.   The  Complaint  also  alleges  that
BriteSmile  Management and the Company  fraudulently induced Smile to enter into
the  distributor  agreement,  and includes  claims for damages  based on alleged
unjust enrichment,  civil conspiracy,  breach of the duty of good faith and fair
dealing,  interference with contractual and economic  relations,  and fraudulent
transfer.  The Company  believes that the claims  asserted by Smile are entirely
without merit and will vigorously defend the lawsuit.  The Company has commenced
discovery with regard to Smile's claims.


BriteSmile v. Discus Dental, filed in Contra Costa County Superior Court,
California. On May 31, 2002, the Company filed a complaint against Discus
Dental, Inc. in Contra Costa County Superior Court, California, case no.
C02-01611, alleging causes of action for Intentional Interference with
Contractual Relationship, Negligent Interference with Contractual Relationship,
Violation of Unfair Business Practice Act - Loss Leader, Violation of Unfair
Business Practice Act, Trade Libel and Injunctive Relief. The complaint alleges
that Discus Dental and other defendants yet to be identified wrongfully
interfered with the Company's contractual relationships with its Associated
Center dentists, in part by writing letters with the purpose of inducing the
Company's Associated Dentists to terminate their contracts with the Company and
switch to Discus' Zoom! system, and by making false and disparaging statements
concerning the Company's system. The Complaint seeks damages for loss of
business, punitive damages, injunctive relief, and costs of suit. On June 27,
2002, Discus filed a demurrer to the Company's complaint, challenging the legal
sufficiency of the complaint. On June 30, 2002, the court ruled that the Company


                                       10

<PAGE>

will be able to pursue its claims as alleged in the complaint except for the
second cause of action alleging Negligent Interference with Contractual
Relationship. This case was stayed on March 11, 2003 and will remain stayed
until a status conference scheduled for September 2003.


                                       11

<PAGE>




ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On December 24, 2002, the Company asked shareholders of approximately 62% of the
common stock of the Company to sign written consents to effect a reverse stock
split for the Company's common stock, which they did. The result was that
fifteen shares of common stock before the effective date of the reverse split
would become one share after the effective date. Because more than a majority of
the shareholders approved this transaction, a vote of all of the shareholders
was not necessary under Utah law. Pursuant to the consents signed by certain
shareholders, the split became effective January 27, 2003. The Company paid the
costs of soliciting certain shareholders for their consent and for printing and
mailing information statements associated therewith.



PART II.


ITEM 5.           MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

On April 7, 2000, the common stock of the Company commenced trading on the
NASDAQ National Market System under the symbol "BSML". Prior to its listing on
NASDAQ, from 1995 to April 2000, the Company's common stock was listed for
trading on the American Stock Exchange (AMEX: BWT). The following table sets
forth, for each full quarterly period during Fiscal 2002 and Fiscal 2001, high
and low sales price information (adjusted for 15 to 1 reverse split) as reported
by NASDAQ or other electronic services, as the case may be.

                                                 High             Low

    Fiscal Year Ended December 28, 2002
    December 28, 2002                         $ 14.100           $  4.500
    September 28, 2002                        $ 31.800           $ 12.000
    June 29, 2002                             $ 89.700           $ 28.650
    March 30, 2002                            $ 93.900           $ 60.000

    Fiscal Year Ended December 29, 2001
    December 29, 2001                         $ 93.750           $ 48.990
    September 29, 2001                        $217.500           $ 78.045
    June 30, 2001                             $180.000           $ 74.070
    March 31, 2001                            $ 93.750           $ 36.570

As of December 28, 2002, there were 298 holders of record of the Company's
common stock. This number excludes any estimate by the Company of the number of
beneficial owners of shares held in street name, the accuracy of which cannot be
guaranteed.

Dividends

The Company has not paid any cash dividends on its common stock since its
inception. The policy of the Board of Directors is to retain earnings to support
growth; therefore, the Company does not anticipate paying any cash dividends on
its common stock in the foreseeable future.

Recent Sales of Unregistered Securities

In addition to the issuance of shares upon exercise of options or otherwise as
reported elsewhere in this Report, within the past three years the Company has
issued securities in transactions summarized below without registration of the
securities under the Securities Act of 1933, as amended (the "1933 Act").

Fiscal Year Ending April 1, 2000

Effective  January 12, 2000,  the Company sold 5,155 shares of restricted
common stock in a private placement to Andrew J. McKelvey  for cash  proceeds of


                                       12

<PAGE>

$464,000,  or $90.00 per share. Mr. McKelvey also acquired certain  registration
rights with respect to the shares.  Bradford  Peters, a director of the Company,
shares in the economic  benefits of any  appreciation  in the shares acquired by
Mr. McKelvey.  Mr. Peters also shares with Mr. McKelvey  authority to dispose of
the shares.

Effective January 12, 2000, the Company sold in a private placement a total of
2,062 shares of restricted common stock to Quota Rabbicco II, Ltd., Argonaut
Partnership, L.P., and David E. Gerstenhaber for $186,000 or $90.00 per share.
The three purchasers also acquired certain registration rights with respect to
the shares.

On January 18, 2000, the Company sold in a private placement 222,222 shares of
its restricted common stock, representing 14.2 percent of the Company's total
shares then outstanding, for aggregate proceeds of $20 million. The purchase
price was $90.00 per share. The shares were issued to three private investors,
Pequot Private Equity Fund II, L.P. (111,111 shares), Pequot Partners Fund, L.P.
(55,556 shares), and Pequot International Fund, Inc. (55,555
shares)(collectively, the "Pequot Investors"). Pursuant to a Registration Rights
Agreement entered into with the Company, the Pequot Investors acquired both
demand and piggyback registration rights to cause the Company to register their
shares for offer and sale under the 1933 Act. Pursuant to a Voting and Co-Sale
Agreement entered into between the Company, the Pequot Investors, and LCO, the
Company granted to the Pequot Investors the right to designate one person to be
appointed to the Board of Directors of the Company, and to be nominated for
election as a director in any shareholders meeting at which directors are
elected. The Pequot Investors appointed Mr. Gerald Poch to serve as their
designee on the Company's Board of Directors.

Transition Period Ended December 30, 2000

On June 29 and August 3, 2000, the Company sold to eleven investors (the "Note
Investors") in a private placement its 5% Subordinated Convertible Notes due
June 29, 2005 (the "August 2000 Notes") in the aggregate principal amount of $20
million.

Initially, the August 2000 Notes were convertible into shares of the Company's
restricted common stock at a per share conversion price of $92.70, which was
120% of the average of the closing bid price of the common stock during the
ten-day trading period immediately prior to June 27, 2000, the date the
transaction documents were signed. The Company also issued to the Investors, pro
rata, warrants (the "Warrants") for the purchase a total of 107,875 shares of
common stock, which have a term of five years and initially had an exercise
price of $108.15 per share. The fair value of the Warrants issued of $2.1
million was recorded as a discount against the August 2000 Notes and was being
amortized over the life of the August 2000 Notes to interest expense.

Pursuant to Registration Rights Agreements between the Note Investors and the
Company, the Company registered with the SEC, effective August 25, 2000, the
shares of common stock underlying the August 2000 Notes and Warrants for resale
under the Securities Act.

Seven of the Note Investors, who purchased an aggregate amount of $15.7 million
of the August 2000 Notes, are affiliates of the Company. The affiliated Note
Investors include LCO (the principal shareholder of the Company and affiliated
with director Anthony Pilaro), John Reed (shareholder, CEO and director), Dr.
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 the Pequot Investors (shareholders and affiliated
with director Gerald Poch).

Four of the Note Investors, who purchased a total of $4.3 million principal
amount of the August 2000 Notes, are unaffiliated with the Company.

On December 5, 2000, the Company sold to LCO in a private placement a
Convertible Promissory Note (the "December 2000 Note") in the aggregate
principal amount of $5 million. This December 2000 Note, together with accrued
interest of $132,644, was converted into 68,435 shares of restricted common
stock of the Company on April 10, 2001, at a conversion price of $75.00 per
share. In conjunction with the issuance of the December 2000 Note, LCO was
granted warrants for 16,667 shares at $75.00 per share. The fair value of the
warrants issued of $253,000 was recorded as a discount against the December 2000
Note and is being amortized over the life of the December 2000 Note to interest
expense. The unamortized fair value of the warrants was recorded as additional
interest expense upon conversion of the Note. All 16,667 warrants granted in


                                       13

<PAGE>


connection with the December 2000 Note Offering remain outstanding and
unexercised.

As a result of the issuance of the December 2000 Note, the conversion price of
the August 2000 Notes, and the exercise price of the Warrants, was automatically
adjusted to $75.00 per share. Additionally, the fair value of the Warrants was
adjusted to $2.3 million based upon the change in conversion price and the
discount of the August 2000 Notes was adjusted accordingly. The new fair value
of the Warrants was amortized on a straight-line basis over the life of the
August 2000 Notes to interest expense.

In December 2000, LCO, the Company's principal shareholder, and John Reed, the
Company's Chief Executive Officer, converted $5.6 million of their August 2000
Notes, together with accrued interest, into an aggregate of 74,822 shares of
common stock. This conversion was effected at the $75.00 conversion price.

Subsequently, effective December 14, 2000, other Note Investors agreed with the
Company to convert an aggregate of $13,642,000 in principal amount of their
August 2000 Notes, together with accrued interest, into 237,904 shares of common
stock at an amended conversion price of $57.938 per share.

Of the original principal amount of $20 million of the August 2000 Notes,
$800,000 in principal amount remains outstanding at December 28, 2002.

Of the original Warrants issued in the August 2000 Note offering, all 100,421
warrants remain outstanding and unexercised.

The conversion price of the remaining August 2000 Notes, and the exercise price
of the Warrants, continues to be subject to additional adjustments from time to
time upon the occurrence of certain other events described in the August 2000
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. At any time after the third
anniversary of the issuance date of the August 2000 Notes, the remaining Note
holders have the right, but not the obligation, to cause the Company to redeem
all or a portion of the August 2000 Notes.

Fiscal Year Ended December 29, 2001

On April 30, 2001, the Company completed a private offering (the "Offering") of
its restricted common stock, par value $0.001 per share ("common stock"). The
Offering involved sales of a total of 358,095 Shares to 17 accredited investors
and their affiliated funds (the "April 2001 Investors"). None of the April 2001
Investors were affiliated with the Company before the completion of the
Offering. The Company sold the Shares for $78.75 per share, yielding gross
proceeds to the Company of $28.2 million.

In connection with the Offering, the Company paid the Placement Agent five
percent of the gross proceeds of the Offering, or $1,410,000, and issued to the
Placement Agent warrants to purchase a total of 35,810 shares of restricted
common stock for a per share purchase price of $78.75. The warrants have a
five-year term. The fees paid to the Placement Agent and the fair value of the
warrants of $704,000 were netted against the Offering proceeds. To date, the
Placement Agent has exercised warrants to purchase 28,603 shares of common
stock.

In connection with the Offering, the Company filed with the SEC a registration
statement covering the Shares and the common stock underlying the warrants
issued to the Placement Agent. The SEC declared the registration statement
effective on June 11, 2001.

With respect to all of the foregoing offers and sales of restricted and
unregistered securities by the Company, the Company relied on the provisions of
Sections 3(b) and 4(2) of the 1933 Act and rules and regulations promulgated
thereunder, and upon Regulation S promulgated by the Securities and Exchange
Commission, including, but not limited to Rules 505 and 506 of Regulation D, in
that such transactions did not involve any public offering of securities and
were exempt from registration under the 1933 Act. The offer and sale of the
securities in each instance was not made by any means of general solicitation;
the securities were acquired by the investors without a view toward
distribution; and all purchasers represented to the Company that they were
sophisticated and experienced in such  transactions  and  investments and able


                                       14

<PAGE>

to bear the  economic  risk of their  investment.  A legend  was  placed  on the
certificates  and instruments  representing  these  securities  stating that the
securities  evidenced by such  certificates or instruments,  as the case may be,
were not  registered  under the 1933 Act and setting forth the  restrictions  on
their  transfer and sale.  Each  investor  also signed a written  agreement,  or
agreed to so sign upon exercise of their options,  that the securities would not
be sold  without  registration  under the 1933 Act or pursuant to an  applicable
exemption from such registration.

Fiscal Year Ended December 28, 2002

On November 20, 2002, the Company sold to two investors in a private placement
2% convertible notes that are due and payable on November 20, 2005 (the
"November 2002 Notes"). The November 2002 Notes are convertible into shares of
common stock of the Company at a conversion rate of $6.00 per share. The two
investors who purchased the November 2002 Notes, both affiliates of the Company,
are: LCO Investments Limited ($2,500,000) and Bradford G. Peters ($1,000,000).
The CEO of the Company has agreed to fund an additional $500,000 in 2003 under
the same terms.

As of December 28, 2002, $800,000 of the original August 2000 Notes remain
outstanding. As a result of the issuance of the November 2002 Notes described
above, the conversion price of these original August 2000 Notes, and the
exercise price of the Warrants, was automatically adjusted to $6.00 per share.
The unamortized discount on these notes is $51,000 as of December 28, 2002 and
is being amortized over the life of the notes to interest expense.

Stock Options

Since March 31, 1998, the Company has granted options to purchase shares of
common stock to employees, directors, or key consultants pursuant to the
Company's 1997 Stock Option and Incentive Plan (the "1997 Plan"). As of December
28, 2002, options for 52,031 shares of common stock have been exercised, 313,794
have been forfeited and 271,936 remain outstanding and unexercised. Additional
options for 110,222 shares have been granted to certain vendors, consultants and
employee outside the 1997 Plan, and 47,733 shares remain outstanding and
unexercised as of the date of this Report. Such vendors and consultants outside
the 1997 Plan have exercised options for 38,955 shares. The exercise price of
the options granted during that period ranges from $4.95 to $206.25 per share.
Most of the options vest and become exercisable in increments over time.

In September 2002, the Company completed a voluntary stock option exchange offer
for its eligible employees. Participating employees had the opportunity to
cancel previously granted options in exchange for an equal number of new options
granted on March 24, 2003, that date which was six months and one day following
the date on which the Company canceled the old options. As a result of this
program, 150,134 options were canceled. Effective March 24, 2003, the Company
granted to the employee participants in the exchange program new options under
the 1997 Plan for 150,134 aggregate shares, at an exercise price of $10.77 per
share, the fair market value of the Company's common stock on that date.

The Company has registered with the SEC, on Form S-8, up to 466,667 shares of
common stock subject to stock options which have been or may in the future be
granted under the Company's 1997 Plan, and up to 45,000 shares of common stock
subject to stock options or warrants which have been granted to consultants or
advisers outside the 1997 Plan. The Company intends to register with the SEC on
Form S-8 such additional shares of common stock as will be necessary to cover
all 500,000 option shares presently authorized to be issued under the Company's
1997 Plan.

ITEM 6.     SELECTED FINANCIAL DATA

The selected consolidated financial data set forth below with respect to the
Company's consolidated statements of earnings and consolidated balance sheets
for the periods indicated are derived from the consolidated financial statements
of the Company. The Statement of Operations data for the year ended December 30,
2000 is derived from unaudited financial statements. The data set forth should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and the audited consolidated financial
statements and related notes thereto.


                                       15

<PAGE>




<TABLE>
<CAPTION>
                                                 Dec 28,           Dec 29,            Dec 30,           April 1,       March 31,
                                                  2002              2001               2000              2000            1999
                                                  ----              ----               ----              ----            ----

                                                                       (in thousands, except per share data)
Consolidated Balance Sheet Data:

<S>                                              <C>               <C>                <C>              <C>           <C>
Cash and cash equivalents                        $ 3,527           $ 7,162            $ 5,701          $10,969       $  6,200
Working capital/(deficit)                         (3,584)            1,357             (4,808)          10,869          3,498
Current assets                                     8,582            14,771             13,257           15,018          7,780
Total assets                                      31,099            39,847             30,131           32,390         10,432
Long-term obligations, less current maturities    13,332             4,120              1,727              122              -
Shareholders' equity                               3,799            20,556              9,519           28,119          6,060
</TABLE>





<PAGE>


<TABLE>
<CAPTION>
                                                                               9-month
                                                                              Transition
                                                                             Period Ended

                                                  Year Ended    Year Ended                  Year Ended     Year Ended  Year Ended
                                                   Dec.28,       Dec.29,       Dec. 30,          Dec 30,    April 1,    March 31
                                                     2002          2001          2000           2000          2000        1999
                                                     ----          ----          ----           ----          ----        ----

Consolidated Statement of Operations data:                                (in thousands, except per share data)

<S>                                                  <C>          <C>            <C>           <C>          <C>           <C>
Center whitening fees, net                           $   12,738   $   14,333     $    9,315    $   11,295   $    5,838    $     46
Associated center whitening fees, net                    22,460       24,048          5,766         6,994        1,970           -
Product sales                                             4,125        4,849          1,223         1,362          236         501
                                               ------------------------------------------------------------------------------------
Net Sales                                                39,323       43,230         16,304        19,651        8,044         547

Operating and occupancy costs                            14,671       16,744          9,462        16,580       13,849         946
Selling, general and administrative                      34,480       43,492         30,556        32,753       14,498       4,627
Research and development                                    923        1,849          1,811         2,280        1,748       3,201
Depreciation and amortization                             6,099        4,715          3,830         4,513        1,457         123
Restructuring expense                                       304          879            778           950          472       1,030
Impairment charges                                            -        1,217          1,254         1,254            -       2,525
Loss on sale/leaseback                                        -            -          7,138         7,138            -           -
                                               ------------------------------------------------------------------------------------

Total operating expenses                                 56,477       68,896         54,829        65,468       32,024      12,452
                                               ------------------------------------------------------------------------------------

Loss from operations                                    (17,154)     (25,666)       (38,525)      (45,817)     (23,980)    (11,905)

Other income (expense), net                              (1,537)        (776)        (5,961)       (5,766)         475         138
                                               ------------------------------------------------------------------------------------

Loss before income tax provision                        (18,691)     (26,442)       (44,486)      (51,583)     (23,505)    (11,767)
Provision for income taxes                                   80           57             26            37           11           -
                                               ------------------------------------------------------------------------------------

Net Loss, before cumulative effect of
change in accounting principle                       $  (18,771)  $  (26,499)    $  (44,512)   $  (51,620)  $  (23,516)   $(11,767)
Cumulative effect of change in accounting
principle                                                     -            -           (272)         (272)           -           -
                                               ------------------------------------------------------------------------------------
</TABLE>


                                       16

<PAGE>


<TABLE>
<CAPTION>
<S>                                                  <C>          <C>            <C>           <C>          <C>           <C>
Net Loss                                             $  (18,771)  $  (26,499)    $  (44,784)   $  (51,892)  $  (23,516)   $(11,767)
                                               ====================================================================================
INCREASED VALUE OF WARRANTS                                 307
                                                                           -                                         -           -
                                               ====================================================================================
NET LOSS ATTRIBUTABLE TO COMMON
SHAREHOLDERS                                         $  (19,078)  $  (26,499)    $  (44,784)   $  (51,892)  $  (23,516)   $(11,767)
                                               ====================================================================================

Basic and Diluted Net Loss per Share:
Before cumulative effect of change in                $    (7.86)  $   (11.85)    $   (27.26)   $   (31.89)  $   (17.64)   $ (16.96)
accounting principle
                                               ====================================================================================
Cumulative effect of change in accounting                     -            -     $    (0.17)   $    (0.17)           -           -
principle
                                               ====================================================================================
Basic and diluted net loss per share                 $    (7.86)  $   (11.85)    $   (27.43)   $   (32.06)  $   (17.64)   $ (16.96)
                                               ====================================================================================

Weighted average shares outstanding-diluted
                                                      2,427,412    2,236,688      1,632,912     1,618,791    1,333,053     693,948
                                               ====================================================================================
</TABLE>


                                       17

<PAGE>



ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS

THIS ANNUAL REPORT ON FORM 10-K 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" AND ELSEWHERE IN THIS ANNUAL REPORT. THE
FOLLOWING DISCUSSION SHOULD BE READ TOGETHER WITH OUR FINANCIAL STATEMENTS AND
RELATED NOTES THERETO INCLUDED ELSEWHERE IN THIS DOCUMENT.

General

The Company's discussion and analysis of its financial condition and results of
operations are based upon the Company's consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these financial statements
requires the Company to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis, the Company evaluates
its estimates, including those related to customer programs and incentives, bad
debts, inventories, income taxes, warranty obligations, financing operations,
restructuring, and contingencies and litigation. The Company bases its estimates
on historical experience and on various other assumptions that are believed to
be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

Critical Accounting Policies And Estimates

The Company believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of its consolidated
financial statements.

Revenue Recognition

BriteSmile recognizes revenue related to retail products at the time such
products are sold to customers.

BriteSmile recognizes revenue at Company operated Centers at the time a
whitening procedure is performed.

BriteSmile records deferred revenue at the time of sale of key cards and access
codes to Associated Centers. Revenue is subsequently recognized over the period
that the whitening procedures, which can be performed via the key cards and
access codes, are performed, currently estimated at 30 days from the date of
shipment. A material change to the estimated time period over which the key
cards and access codes are used could have a significant impact on BriteSmile's
revenue in the period of change as well as future periods.

BriteSmile's policy is not to accept any return of key cards or access codes
during the course of the agreement with an Associated Center; however, it does
provide credits to the ultimate whitening customer for a "whitening guarantee."
BriteSmile recognizes those credits by reducing its revenue.

Bad Debt

BriteSmile maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments. A
considerable amount of judgment is required in assessing the ultimate
realization of accounts receivable including the current credit-worthiness of
each customer. If the financial condition of BriteSmile's customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required.


                                       18

<PAGE>

Inventory

BriteSmile is required to state its inventories at the lower of cost or market.
BriteSmile writes down its inventory for estimated obsolescence or unmarketable
inventory equal to the difference between the cost of inventory and the
estimated market value based upon assumptions about future demand and market
conditions, as well as for damaged goods. If actual market conditions are less
favorable than those projected by management, additional inventory write-downs
may be required.

Property, Equipment and Improvements - Carrying Value Near Recoverability
Estimate

BriteSmile evaluates its property, equipment and improvements for impairment
whenever indicators of impairment exist. Management determined that impairment
indicators did exist in Fiscal 2001 based upon continued operating losses and
negative cash flow. As a result, BriteSmile recorded an impairment charge of
$1.2 million. No impairment charge was recorded during Fiscal 2002.

Store Closures

During Fiscal 2001 and the Transition Period, BriteSmile recorded significant
reserves in connection with store closures. These reserves include estimates
pertaining to employee separation costs and the settlements of contractual
obligations, primarily property leases. Although the Company does not anticipate
significant changes, the actual costs related to the closures may differ from
these estimates.

Legal Contingencies

BriteSmile is currently a party to certain legal action. Management does not
believe that current pending litigation will have a material adverse effect on
BriteSmile's consolidated financial position. This conclusion has been developed
in consultation with outside counsel handling BriteSmile's representation in
these matters. It is possible, however, that future results of operations for
any particular quarterly or annual period could be materially affected by
changes in management's assumptions and the effectiveness of BriteSmile's
strategies related to these legal actions.

BriteSmile recognizes the costs of legal services in the periods incurred.

Results of Operations

The following are explanations of significant period-to-date changes for Fiscal
2002 compared to Fiscal 2001:

Revenues

Total Revenues, net. Total revenues, net decreased by $3.9 million, or 9.0%, to
$39.3 million for Fiscal 2002, from $43.2 million for Fiscal 2001.

Center Whitening Fees, net. Center whitening fees, net decreased by $1.6 million
or 11.2%, to $12.7 million for Fiscal 2002, from $14.3 million for Fiscal 2001.
This was attributable to an 8.8% decrease in comparable store procedures. The
number of procedures performed in the Centers decreased 10.7% to 28,699
procedures for Fiscal 2002, compared to 32,136 Center procedures in Fiscal 2001.

Associated Center Whitening Fees, net. Associated Center whitening fees, net
decreased by $1.6 million, or 6.6%, to $22.5 million for Fiscal 2002, from $24.1
million for Fiscal 2001. This decrease was primarily due to the decrease in
procedures in Domestic Associated Centers. The decrease in revenue was partially
offset by an increase in International Associated Center procedures and
revenues. The number of procedures sold to both domestic and international
Associated Centers increased 6.8% to 127,450 procedures in Fiscal 2002 compared
to 119,380 procedures in Fiscal 2001. The Company pays third party distributors
in connection with sales of procedures to international associated centers. For
that reason, international revenue is less than domestic revenue.

Although the Company does not believe that its business follows seasonal trends,
it has recognized that at various times during the months of July and August and
again during December and January, a substantial number of Associated  Center


                                       19

<PAGE>

Dentists  (both  domestic  and  international)  shut down  their  practices  for
vacation.  As a result,  the frequency of key card and access code  purchases by
Associated Centers during these months can decline as well.

The Company continues to execute its strategic plan of expanding distribution
into the professional dental practice channel through its Associated Centers.
The Company opened 586 new associated centers, net of terminations in Fiscal
2002. Additionally, the Company anticipates opening additional Associated
Centers in domestic and international locations over the next twelve months.
There can be no guarantee that the Company will be successful in executing its
business plan.

Product Sales. Product sales decreased by $700,000, or 14.6%, to $4.1 million
for Fiscal 2002, from $4.8 million for Fiscal 2001. Product sales represent the
Company's toothpaste, mouthwash, whitening gum and Sonicare toothbrush products
sold at Centers, Associated Centers, and through its website. Product sales are
expected to increase during the next twelve months as a result of the
introduction of additional oral care products to be sold at Centers, Associated
Centers, and through the Company's Internet website.

Operating Costs and Expenses

Operating and Occupancy Costs. Operating and occupancy costs decreased as a
percentage of sales to 37% for a total of $14.7 million for Fiscal 2002, from
39% for a total of $16.7 million for Fiscal 2001. This decrease as a percentage
of sales is a reflection of lower sales and other reduced operating expenses.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased as a percentage of sales to 88% for Fiscal
2002 compared to 101% in Fiscal 2001. In dollar terms, total selling, general
and administrative expenses decreased $9.0 million to $34.5 million for Fiscal
2002 compared to $43.5 million for Fiscal 2001. This decrease was primarily
attributable to the expense restructuring that was initiated at the start of the
fourth quarter of 2001. Offset by $265,000 in stock option compensation expense,
discussed in Note 10. The Company was able to streamline its field personnel,
which resulted in lower corporate overhead expenses.

Research and Development Expenses. Research and development expenses decreased
as both a percentage of sales and in dollar terms to $923,000, or 2% of sales,
for Fiscal 2002, compared to $1.8 million or 4% of sales, in Fiscal 2001.
Research and development costs incurred during Fiscal 2002 represent expenses
related to safety and efficacy studies along with various other research studies
to expand the Company's leadership position in the teeth-whitening industry.

Depreciation and Amortization. Depreciation and amortization increased as a
percentage of sales to 16%, or $6.1 million for Fiscal 2002 compared to 11% of
sales, or $4.7 million in Fiscal 2001. This percentage increase, as well as, the
increase in total depreciation dollars is due to the greater number of BS3000
and BS3000PB systems deployed in the Associated Centers.

Restructuring Expense. In Fiscal 2002, the Company revised its estimate of the
Restructuring expense and took a charge of $304,000. Restructuring expense for
Fiscal 2001 was $879,000. In December 2001, the Company's Board of Directors and
management decided to terminate the construction of a Center in San Francisco,
California as a result of the economic downturn and the concentrated effect of
the failure of numerous "Dot-Com" businesses in Northern California. As a result
of the Company's decision to cease construction on this Center, the Company
reserved $987,000 for lease liability obligations. This amount was offset by a
reduction of the Fiscal 2000 restructuring liability of $108,000.

Impairment Charge. The Company recognized no impairment charge in Fiscal 2002.
In Fiscal 2001, the Company recognized a $1.2 million non-cash charge for
impairment of assets related to the aborted construction of the San Francisco
Center, as leasehold improvements were not deemed recoverable. See Restructuring
Expense above.

Interest Expense. Interest expense increased $520,000 to $1.6 million for Fiscal
2002 from $1.1 million for Fiscal 2001. The increase is due to an increase in
expense related to the issuance of warrants as well as an increase in borrowing.


                                       20

<PAGE>


Interest Income. Interest income decreased $241,000 to $66,000 in Fiscal 2002
from $307,000 in Fiscal 2001, as a result of lower average cash balances.

The following are explanations of significant period-to-date changes for Fiscal
2001 and the Company's 52 weeks ended December 30, 2000 ("Fiscal 2000"):

Revenues

Total Revenues, net. Total revenues, net increased by $23.5 million, or 119%, to
$43.2 million for Fiscal 2001, from $19.7 million for Fiscal 2000.

Center Whitening Fees, net. Center whitening fees, net increased by $3 million
or 27%, to $14.3 million for Fiscal 2001, from $11.3 million for Fiscal 2000.
This increase was attributable to a 21% comparable store increase for eleven of
the fourteen Centers. The increase can also be attributed to the fact that three
of the Centers were in operation for only a portion of Fiscal 2000, but operated
for the full 12 months in Fiscal 2001. This overall increase was partially
offset by the closure of three underperforming Centers in the first quarter of
Fiscal 2001 that were open throughout 2000. The number of procedures performed
in the Centers increased 23% to 32,136 procedures for Fiscal 2001, compared to
26,197 Center procedures in Fiscal 2000.

Associated Center Whitening Fees, net. Associated Center whitening fees, net
increased by $17.0 million, or 243%, to $24.0 million for Fiscal 2001, from $7.0
million for Fiscal 2000. This increase was primarily due to the operation of
3,959 Associated Centers at the end of Fiscal 2001 compared to just 1,155
Associated Centers that were in operation at the end of Fiscal 2000. Of the
3,959 Associated Centers in operation at December 29, 2001, 652 were
international locations. The number of procedures sold to the Associated Centers
increased 224% to 119,380 procedures in Fiscal 2001 compared to 36,856
procedures in Fiscal 2000.

Although the Company does not believe that its business follows seasonal trends,
it has recognized that at various times during the months of July and August and
again during December and January, a substantial number of Associated Center
Dentists (both domestic and international) shut down their practices for
vacation. As a result, the frequency of key card and access code purchases by
Associated Centers during these months can decline as well.

The Company continues to execute its strategic plan of expanding distribution
into the professional dental practice channel through its Associated Centers.
Additionally, the Company anticipates opening additional Associated Centers in
domestic and international locations over the next twelve months. There can be
no guarantee that the Company will be successful in executing its business plan.

Product Sales. Product sales increased by $3.4 million, or 243%, to $4.8 million
for Fiscal 2001, from $1.4 million for Fiscal 2000. Product sales represent the
Company's toothpaste, mouthwash, whitening gum and Sonicare toothbrush products
sold at Centers, Associated Centers, and through its website. Product sales are
expected to increase during the next twelve months as a result of the
introduction of additional oral care products to be sold at Centers, Associated
Centers, and through the Company's Internet website.

Operating Costs and Expenses

Operating and Occupancy Costs. Operating and occupancy costs decreased as a
percentage of sales to 39% for a total of $16.7 million for Fiscal 2001, from
82% for a total of $16.6 million for Fiscal 2000. This decrease as a percentage
of sales is a reflection of the lower fixed cost structure of the Associated
Center sales channel and the fact that the cost structure for the 14 Centers is
essentially fixed. Also, in the first quarter of Fiscal 2001, the Company closed
three under performing Centers. The total operating and occupancy costs of these
three closed Centers was $260,000 for the period they were open in Fiscal 2001,
compared to total operating and occupancy costs of $1.8 million for the same
three Centers in Fiscal 2000.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased as a percentage of sales to 101% for Fiscal
2001 compared to 163% in Fiscal 2000. In dollar terms, total selling, general
and administrative expenses increased $10.7 million to $43.5 million for Fiscal
2001 compared to $32.8 million for Fiscal 2000. This increase was primarily
attributable to increased expenses to support the Company's extensive


                                       21

<PAGE>

growth in Fiscal  2001,  including:  (i)  salaries  and benefits and (ii) sales,
training,  marketing and advertising  activities.  As a result of catching up on
the backlog of new customers  which  required  higher than  originally  expected
field  personnel  costs,  at the start of the fourth quarter of 2001 the Company
was able to streamline its field  personnel  which will result in lower costs in
the future, as well as reductions in corporate overhead expenses.

Additionally, in Fiscal 2001 the Company recognized $1,554,000 in non-cash
compensation expense as a result of the issuance of warrants and options to
outside consultants, and the revaluation of previously issued warrants.

Research and Development Expenses. Research and development expenses decreased
as both a percentage of sales and in dollar terms to $1.8 million, or 4% of
sales, for Fiscal 2001, compared to $2.3 million or 11% of sales, in Fiscal
2000. Research and development costs incurred during Fiscal 2001 represent
expenses related to safety and efficacy studies along with various other
research studies to expand the Company's leadership position in the
teeth-whitening industry.

Depreciation and Amortization. Depreciation and amortization decreased as a
percentage of sales to 11%, or $4.7 million for Fiscal 2001 compared to 22% of
sales, or $4.5 million in Fiscal 2000. This percentage decrease is primarily due
to the increase in both Center and Associated Center sales. The increase in
total depreciation dollars is due to the greater number of BS3000 and BS3000PB
systems deployed in the Associated Centers, offset by (i) smaller depreciation
resulting from the closure of three Centers in the first quarter of Fiscal 2001,
and (ii) the leasing of BS3000 and BS3000PB machines under capital leases and
the resulting lower relative amortization expense.

Restructuring Expense. Restructuring expense was $879,000 for Fiscal 2001
compared to $950,000 for Fiscal 2000. In Fiscal 2000, the Company's Board of
Directors and management decided to close its Centers in Pasadena, CA, Ft.
Lauderdale, FL and Coral Gables, FL due to underperformance. The Company took an
initial impairment charge of $950,000. In December 2001, the Company's Board of
Directors and management decided to terminate the construction of a Center in
San Francisco, California as a result of the pending recession and the
concentrated effect of the failure of numerous "Dot-Com" businesses in Northern
California. As a result of the Company's decision to cease construction on this
Center, the Company reserved $987,000 for lease liability obligations. This
amount was offset by a reduction of the Fiscal 2000 restructuring liability of
$108,000.

Impairment Charge. The Company recognized a $1.2 million non-cash charge for
impairment of assets related to the aborted construction of the San Francisco
Center, as leasehold improvements were not deemed recoverable. The Company
incurred a similar charge of $1.3 million in 2000 for three closed Centers. See
Restructuring Expense above.

Interest Expense. Interest expense decreased $4.8 million to $1.1 million for
Fiscal 2001 from $5.9 million for Fiscal 2000. The significant decrease is due
to the fact that the Company recognized $3.4 million of interest expense related
to the beneficial conversion of notes in Fiscal 2000. The $1.1 million of
interest expense is primarily comprised of interest on the EVL lease line and
the EVL working capital loan, together with interest on outstanding August 2000
Notes.

Interest Income. Interest income increased $88,000 to $307,000 in Fiscal 2001
from $219,000 in Fiscal 2000, as a result of higher average cash balances
throughout the fiscal year.

Liquidity and Capital Resources

General

The Company's principal sources of liquidity have been proceeds from issuances
of common stock and debt At December 28, 2002, the Company had $3.5 million of
cash and cash equivalents. The Company anticipates signing contracts for
additional Associated Centers during the next twelve months. This expansion is
contingent upon several factors, including available cash resources and
acceptance by consumers and Associated Center dentists of the Company's LATW
services. The Company expects that its principal uses of cash will be to provide
working capital, to finance capital expenditures, and to satisfy other general
corporate expenses. In particular, the Company plans to use its cash to finance
its marketing strategy.


                                       22

<PAGE>


During the first quarter of 2002, the Company obtained a $2.5 million line of
credit from CAP Advisers, and $4 million in shortfall guarantees. As amended in
March 2002, July 2002 and January 2003, the line of credit was increased to $6.5
million. See "CAP Advisers Line of Credit," and "Additional Working Capital
Guarantees" below. The Company also amended its EVL Lease Agreement to defer
payment of monthly rental on LATW devices to year 2004. See "EVL Lease Line
Amendment" below.


CAP Advisers Line of Credit

In December 2001, as amended in March 2002, July 2002 and January 2003,
BriteSmile International, a wholly-owned subsidiary of the Company, entered into
Credit and Security Agreements with CAP Advisers which provide for a $6.5
million line of credit facility of which, $1.5 million is for the purchase of
capital equipment. As of December 28, 2002, $4.7 million has been drawn on the
line.

EVL Lease Amendment

The Company pays EVL a monthly rental for each LATW device leased, consisting of
a fixed amount, plus a "variable rent" payment in the amount of $125 for each
key card or access code sold to an Associated Center where EVL is the lessor of
the LATW device. Of the 4,636 LATW devices in operation at Associated Centers at
December 28, 2002, 3,000 of such devices were leased to the Company by EVL. Each
key card or access code enables Associated Center dentists to perform 5 teeth
whitening procedures resulting in variable rent of $25 per procedure.

On March 8, 2002, the Company and EVL amended their lease agreement to provide
that the variable rent portion of the monthly rental payments during 2002, in
the amount of $25 for each BriteSmile procedure, will be deferred and paid to
EVL in twelve equal monthly installments beginning January 9, 2003, with
interest payable on the deferred amount at a rate equal to LIBOR, as quoted by
The Bank of Nova Scotia for the applicable adjustment dates for deposits in U.S.
Dollars for one month maturities, plus 200 basis points. A total of $2.1 million
has been deferred for the Fiscal 2002.

In September 2002 and January 2003, the Company and EVL amended their lease
agreement to provide that all variable rent payments during both 2002 and 2003,
in the amount of $25 for each BriteSmile procedure, will be deferred and paid to
EVL on January 1, 2004, with interest payable on the deferred amount at a rate
equal to LIBOR as quoted by The Bank of Nova Scotia for the applicable
adjustment dates for deposits in U.S. Dollars for one month maturities, plus 200
basis points. All such interest that accrued from March 12, 2002 to January 8,
2003 on account of the Total Deferred 2002 Variable Rent was paid on January 9,
2003. Thereafter such accrued interest on account of Total Deferred 2002
Variable Rent will continue to be payable on the 9th day of each month through
December 9, 2003 and on January 1, 2004. All such interest that accrues on
account of Total Deferred 2003 Variable Rent will be paid on the 9th day of each
month commencing April 9, 2003 through December 9, 2003 and on January 1, 2004.
In the event the Company is unable to meet its obligation to EVL on January 1,
2004, EVL has agreed to renegotiate a new repayment schedule, which would be
mutually acceptable to both parties.


Additional Working Capital Guarantees

In March 2002 the Company received Commitment Letters from the Guarantors to
severally purchase, on or before December 31, 2002, up to $4 million of
additional shares of common stock of the Company (or to otherwise secure,
collateralize, or make available such funds to the Company). In consideration
for the Guarantors' commitment, the Company issued to the Guarantors five-year
warrants to purchase an aggregate of 5,333 shares of common stock of the Company
at an exercise price of $70.50 per share.

Pursuant to the Commitment Letters, on November 20, 2002, the Company sold to
two investors in a private placement 2% convertible notes that are due and
payable on November 20, 2005 (the "November 2002 Notes"). The November 2002
Notes are convertible into shares of common stock of the Company at a conversion
rate of $6.00 per share. The two investors, who purchased the November 2002
Notes, both affiliates of the Company, are:


                                       23

<PAGE>

LCO Investments Limited  ($2,500,000) and Bradford G. Peters  ($1,000,000).  The
CEO of the Company has agreed to fund an  additional  $500,000 in 2003 under the
same terms. Accordingly,  as of December 28, 2002, the Company had received $3.5
of the total $4.0 million committed pursuant to the Commitment Letters.


To date, the Company has yet to achieve profitability. The Company does not
expect to be profitable in 2003. The Company has implemented initiatives to
increase sales and decrease expenses to assure its viability for the next 12
months. The Company also has developed a contingency plan in anticipation of
prolonged negative business impact resulting from the War in Iraq.

To date, the Company's principal sources of liquidity have been proceeds from
issuance of common stock and debt. At December 28, 2002, the Company had $3.5
million in cash and borrowing capacity under lines of credit totaling $300,000.

Additionally, as discussed below, subsequent to December 28, 2002, the Company
obtained the following borrowing availability:

      o   $500,000 convertible notes under the same terms as the November 2002
          Notes described in Note 9.
      o   $1.5 million increase in the Credit Agreements with CAP Advisers.  The
          increase is for the international revenue generating initiatives.
      o   $2.5 million Center Loan with CAP Advisers.  This credit facility is
          for general working capital needs  ($800,000) and capital expenditures
          and specific revenue generating initiatives ($1.7 million).

The Company believes that cash on hand along with available borrowing capacity
discussed above will be sufficient to sustain operations through the end of
2003.




<TABLE>
<CAPTION>
                                                                         Payments Due By Period

<S>                                          <C>             <C>               <C>             <C>               <C>
     Contractual Obligations                  Total      Less Than 1 Year     1-3 Years     4-5 Years        After 5 Years
     Long-Term Debt                          12,696             500             7,450          4,746                 -
     Capital Lease Obligations                2,986             956             1,800            230                 -
     Operating Leases                        12,921           2,921             4,497          3,242             2,261
     Lease Obligation  for Closed Centers     1,236             197               410            349               280
                                              -----             ---               ---            ---               ---
     Total Contractual Cash Obligations      29,839           4,574            14,157          8,567             2,541
</TABLE>


                                       24

<PAGE>


Factors that may affect our performance

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

The Company believes that its business follows seasonal trends due to the
closing of some Associated Center dental offices in July and August, and again
in November and December, for vacations. As a result, the Company's sales
performance could potentially be affected.

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 filings with the Securities and Exchange
Commission 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:

We have a limited operating history upon which to evaluate our likelihood of
success.

We have only manufactured and distributed our BS2000 since November 1998, the
BS3000 since November 1999 and the BS3000PB since May 2001. We opened our first
Center in Walnut Creek, California in February 1999, and BriteSmile Associated
Centers began performing LATW procedures in April 1999. Therefore, we have a
limited relevant operating history upon which to evaluate the likelihood of our
success. Investors must evaluate the likelihood of our success in light of the
risks, expenses and difficulties frequently encountered in the operation and
expansion of a new business and the development and marketing of new products.
We cannot be certain that our business strategy will be successful or that we
will successfully address these risks and difficulties. Our failure to address
any of these risks or difficulties could have a material adverse effect on our
business.

We have a history of losses and accumulated deficit and this trend of losses may
continue in the future.

For Fiscal 2002, we had a net loss of $19.1 million, for Fiscal 2001, we had a
net loss of $26.5 million and for the Transition Period ended December 30, 2000
we had a net loss of $44.8 million. As of December 28, 2002, our accumulated
deficit was $135.3 million. Our ability to reach and sustain profitability will
depend, in part, upon the successful marketing of our existing services and
products and the successful and timely introduction of new services and
products. We anticipate that net losses will continue for the foreseeable
future. We can give no assurances that we will achieve profitability or, if
achieved, that we will sustain profitability.


                                       25

<PAGE>


Our success will depend on acceptance of our LATW process and post-whitening
maintenance products.

We derive substantially all of our revenues from our LATW procedures, a
relatively new teeth-whitening concept for consumers. We also market BriteSmile
brand toothpaste, electric toothbrushes, mouthwash, chewing gum and
post-whitening procedure touchup kits through our Centers and Associated
Centers. Our success will depend in large part on our ability to successfully
encourage consumers, dentists and dental office employees to switch from
traditional and less expensive bleaching tray whitening methods to our LATW
system, and on our ability to successfully market our line of post-whitening
maintenance products. There can be no assurance that consumers will accept our
procedure or products. Typically, medical and dental insurance policies do not
cover teeth whitening procedures, including the Company's LATW procedure, or
whitening maintenance products, which may have an adverse impact upon the market
acceptance of our products and services.

Our success will depend on our ability to update our technology to remain
competitive.

The dental device and supply industry is subject to 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. While we are continuing our research and development
efforts to improve our current LATW systems in order to strengthen our
competitive advantage, we cannot assure that we will successfully implement
technological improvements to our LATW systems on a timely basis, or at all. 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 financing our future growth.

Our growth strategy includes investment in and expansion of Associated Centers
throughout the United States and internationally, increasing awareness of the
BriteSmile brand and developing and marketing our brand name and retail
products. To finance our prior growth we have sold debt and equity securities;
however, additional funds are needed in the future for continued expansion. We
cannot assure that additional financing will be available or that, if available,
it will be on terms favorable to our stockholders or us. If needed funds are not
available, we may be required to close existing Centers, and/or limit or forego
the establishment of new Associated Centers and 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 actions that may lessen the value of our common
stock, including borrowing money on terms that are not favorable to us. Raising
the needed funds through the sale of additional shares of our common stock or
securities convertible into shares of common stock 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. Teeth
whitening products and services offered by our competitors include traditional
and often less expensive bleaching tray methods and other forms of heat or light
activated curing methods. We may not be able to compete successfully against
these competitors in developing, marketing and distributing our services and
products, which could result in the loss of customers and could have a material
adverse effect on our business. Competitive pressures may also force prices for
teeth whitening services down and such price reductions may adversely affect our
potential future revenue.


                                       26

<PAGE>


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 no lawsuits have been filed against the Company relating to our
products or services, 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 or
services brought against us, or the negative publicity brought up by such claim,
could have a material adverse effect on our business. We maintain product
liability insurance with coverage limits of $5 million per occurrence and $5
million per year. While we believe that we maintain adequate insurance coverage
that is reasonable and customary for our business, we cannot assure 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 and we may be unable to recruit and retain qualified personnel.

If we grow as expected, a significant strain on our managerial, operational and
financial resources may occur. Further, as the number of Associated Centers,
customers, advertisers and other business partners grows, we will be required to
manage multiple relationships with various Center dentists, Associated Center
dentists, customers, strategic partners and other third parties. Future growth
or increase in the number of our strategic relationships may strain our
managerial, operational and financial resources, thereby 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.

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 LATW systems, and a sufficient supply of teeth whitening gels
and maintenance products. Since our BS2000 was first used commercially, we have
relied upon manufacturing and supply agreements with multiple suppliers and a
single manufacturer of our LATW systems. Effective April, 2001, the Company's
LATW systems are manufactured by Peak Industries, Longmont, Colorado, pursuant
to an agreement between the Company and Peak. 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 and our manufacturer, if we are unable to extend or secure
manufacturing services or to obtain component parts or finished products from
one or more key vendors on a timely basis and on acceptable commercial terms,
our results of operations could be seriously harmed.

We need to successfully manage our growth in order for the addition of any new
Associated Centers to be profitable.

Even though we have grown 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. We currently have 14 Centers in operation.
Our future growth primarily depends upon expansion of the number of our
Associated Centers. We cannot assure that we will be successful in expanding the
number of Associated Centers, or that such Associated Centers will achieve sales
levels satisfactory to us.

BriteSmile has certain debt.

BriteSmile has $15.3 million of debt outstanding as of December 28, 2002. The
degree to which BriteSmile is leveraged could have important consequences to the
shareholders, including the following:


                                       27


<PAGE>


o     BriteSmile's ability to obtain additional financing for working capital,
      capital expenditures, acquisitions or general corporate purposes may be
      impaired;

o     BriteSmile must pay interest on its debt, 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 default on its debt obligations for any reason, there can
be no assurance that any assets will remain for BriteSmile's shareholders after
payment of amounts owed to debt holders.

See Item 7--Management's Discussion of Financial Condition and Results of
Operations, "Liquidity and Capital Resources."

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, it is possible that any debt financing agreements entered into by
BriteSmile in the future may contain restrictions on BriteSmile's ability to
declare dividends.

We cannot guarantee that the patents we have applied for will be granted, or
that even if granted, they will not be infringed by competitors.


The Company has an expansive and growing portfolio of patents to protect its
intellectual property rights. In 2002, a number of patents relating to the LATW
systems were granted, including patents covering the methods of whitening
comprising of a bleaching composition exposed to light to accelerate whitening,
which has been asserted in a patent lawsuit against a major competitor. The
Company also has a number of patent applications related to the composition of
our whitening gel, tissue isolation useful in light-activated teeth whitening,
our business method and our unique system of delivery of light to all teeth
simultaneously. In addition, we have ongoing research and development efforts to
expand and improve our current technology, and to develop new teeth whitening
compositions and light devices. Although the Company intends to continue to
apply for patents as advised by patent counsel, there can be no assurance that
such patents will be issued or that, when they are issued, they will not be
infringed upon by third parties or that they will cover all aspects of the
product or systems to which they relate.

The rights we rely upon to protect our intellectual property underlying our
products and services may not be adequate, which could enable third parties to
use our technology and would reduce our ability to compete in the market.

In addition to patents, we rely on a combination of trade secrets, copyright and
trademark laws, nondisclosure agreements and other contractual provisions and
technical measures to protect our intellectual property rights. Nevertheless,
these measures may not be adequate to safeguard the technology underlying our
products and services. If they do not protect our rights, third parties could
use our technology, and our ability to compete in the market would be reduced.
In addition, employees, consultants and others who participate in the
development of our products and services may breach their agreements with us
regarding our intellectual property, and we may not have adequate remedies for
the breach. We also may not be able to effectively protect our intellectual
property rights in some foreign countries. For a variety of reasons, we may
decide not to file for additional patent, copyright or trademark protection
outside of the United States or in foreign jurisdictions. We also realize that
our trade secrets may become known through other means not currently foreseen by
us. Notwithstanding our efforts to protect our intellectual property, our
competitors may independently develop similar or alternative technologies or
products that are equal or superior to our technology and products without
infringing on any of our intellectual property rights or design around our
proprietary technologies.

Our products or services could infringe on the intellectual property rights of
others, which may cause us to engage in costly  litigation and, if we are not


                                       28

<PAGE>

successful,  could also cause us to pay substantial damages and prohibit us from
selling our products or services.

Third parties may assert infringement or other intellectual property claims
against us. We may have to pay substantial damages, including treble damages,
for past infringement if it is ultimately determined that our products or
services infringe a third party's proprietary rights. Further, we may be
prohibited from selling our products before we obtain a license, which, if
available at all, may require us to pay substantial royalties. Even if these
claims are without merit, defending a lawsuit takes significant time, may be
expensive and may divert management's attention from other business concerns.
Notwithstanding the foregoing, we are not aware of any infringement claims
asserted against us by others.

We are subject to government regulation regarding the corporate practice of
dentistry.

Our corporate structure, operation of Centers and contractual relationships with
the licensed dentists at our Centers are subject to government regulation and
may be reviewed by applicable state agencies governing the practice of dentistry
(such as a Board of Dental Examiners). We believe that our present and
contemplated operation of Centers is and will be in compliance in all material
respects with applicable federal, state and local laws and regulations, and that
favorable review of our corporate structure would be obtained from any state
agency which chooses to review our operational structure. However, we cannot
assure that such favorable review would be obtained in all instances. If we are
unable to obtain favorable review, we may be subject to penalties. Further, if
we are unable to comply with the applicable laws and regulations in any state,
we may be limited in those states to offering our LATW procedure through
Associated Centers. We continue to cooperate with state regulatory agencies to
respond to any requests for information about our business structure and to
obtain any necessary governmental approvals. We cannot assure that future
enactments, amendments or interpretations of government regulations will not be
more stringent, and will not require structural, organizational or operational
modifications to our existing or future contractual relationships with the
licensed dentists at our Centers who provide our services.

We may become subject to government regulation regarding our teeth whitening
services and products.

The light used in the LATW systems is categorized as a Class I Medical Device as
defined by the Food and Drug Administration ("FDA"). As long as the light is
used specifically to perform cosmetic dental procedures (teeth whitening), it is
not subject to pre-market notification requirements, although we are subject to
FDA requirements regarding handling of complaints and other general FDA record
keeping standards. There can be no assurance that some or all of the existing
government regulations will not change significantly or adversely in the future,
or that we will not become subject to compliance with additional and stricter
government regulations which could, in the future, affect our revenue.

Ownership of our common stock is concentrated in a limited number of
shareholders.

Current directors and executive officers of the Company, or their affiliates,
own and control approximately 80% of the Company and, therefore, have ultimate
authority to make all major decisions affecting our business, including the
identity and make-up of the Company's Board of Directors, and any other matters
requiring approval of the shareholders of the Company.

Our efforts to build strong brand identity and customer loyalty may not be
successful.

We believe that establishing and maintaining brand identity and brand loyalty is
critical to attracting customers, dentists and other strategic partners. In
order to attract and retain these groups, and respond to competitive pressures,
we intend to continue substantial spending to create and maintain brand loyalty.
We believe that advertising rates, and the cost of advertising campaigns in
particular, could increase substantially in the future. If our branding efforts
are not successful, our results of operations could be adversely affected.

Promotion and enhancement of the BriteSmile brand will also depend on our
success in consistently providing a high-quality customer experience for our
teeth whitening services and satisfaction with our products. If customers do not
perceive our service and product offerings to be of high quality, or if we
introduce new services and products that are not favorably received by these
groups, the value of the BriteSmile brand could be harmed. Any brand


                                       29

<PAGE>

impairment or dilution could decrease the attractiveness of BriteSmile to one or
more of these groups which could harm our reputation, reduce our net revenue and
cause us to lose customers.

Changes in  required  accounting  practices  may affect our  reported  operating
results and stock price

Any future changes to applicable GAAP standards or additional SEC statements on
relevant accounting policies may require us to further change our practices.
These uncertainties may cause our reported operating results and stock price to
decline.

Failures in our information technology systems or the systems of third parties
could adversely affect our business and result in a loss of customers.

Our Company's web site or our Internet-based Scheduler system may experience
slow response times, decreased capacity to accommodate a large number of
customers or a temporary disruption in service for a variety of reasons.
Additionally, power outages and delays in such service may interrupt or prevent
us from immediately coordinating with the schedules of Centers and Associated
Centers, and may interrupt or prevent customers from arranging for our services
or from ordering our products through our e-Commerce Internet site. Any of these
potential problems could have an adverse effect on business.

Computer hardware and software components to our Scheduler system are located at
our headquarters. In addition, a back-up file server and tape back-ups of the
Scheduler database reside both at our headquarters and off-site. Delays in
scheduling teeth whitening procedures would result if we were required to use
our backup computer hardware and software systems. Nevertheless, natural
disasters such as floods, fires, and power outages, telecommunications failures,
physical or electronic break-ins or vandalism, viruses and other similar events
could damage our hardware and software systems, lead to a loss of data, cause
substantial disruption in our business operations, and have a material adverse
effect on our business.


ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company's consolidated financial statements and associated notes are set
forth on pages F-1 through F-32.


ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
            FINANCIAL DISCLOSURE

None


PART III.

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following sets forth the name, age and position of each director and
executive officer of the Company as of the date of this Report:

NAME                     AGE     CURRENT POSITION(S) (1) (2)
----                     ---     ---------------------------

John Reed                61      Chief Executive Officer and Director
Bruce Fleming            45      President and Director
Paul Dawson              48      Chief Executive Officer of BriteSmile
                                 International Limited, a subsidiary of the
                                 Company
Derek Correia            34      Executive Vice President, Marketing
John Dong                49      Executive Vice President, Chief Financial
                                 Officer and Secretary


                                       30

<PAGE>

Stephen Miller           56      Executive Vice-President, Manufacturing and
                                 Distribution
Anthony M. Pilaro        67      Chairman of the Board
R. Eric Montgomery       47      Director
Peter Schechter          43      Director
Bradford G. Peters       35      Director
L. Tim Pierce            51      Director
Harry Thompson           72      Director
Gerald Poch              56      Director
Dr. Gasper Lazzara, Jr.  59      Director


(1)    All directors serve for one year and until their successors are elected
       and qualified. All officers serve at the pleasure of the Board of
       Directors. There are no family relationships between any of the officers
       and directors.


John L. Reed

Prior to joining the Company in June 1999 as its Chief Executive Officer, Mr.
Reed was Chairman of the Pacific Retailing Division of Duty Free Shoppers Group
Limited ("DFS"), the world's leading specialty retailer catering to
international travelers. At DFS he was responsible for the operations of
multiple retail stores, including the largest single, self-standing retail
operation in the world. During his 21-year career at DFS, prior to being named
Chairman of the Pacific Retail Division in 1997, Mr. Reed was President of DFS
Hawaii. From 1982 to 1988, Mr. Reed was President of the DFS U.S. Mainland
Operation. Mr. Reed has also served as Vice President of Merchandising for both
Federated Department Stores and John Wanamaker.

Bruce Fleming

Mr. Fleming was named President and a director of the Company in June 2002.
Prior to joining the Company, Mr. Fleming served as Senior Vice President Global
Head of OTC for Novartis Consumer Healthcare, Inc. From 1981 through January
2001, Mr. Fleming worked with Johnson & Johnson in several capacities, including
Worldwide Vice President over Consumer Oral and Wound Care Franchises for
Johnson & Johnson Consumer Products Companies (November 1995 to October 1998),
Worldwide Vice President - Wound Care for Johnson & Johnson Consumer Products
Companies (October 1998 through April 1999), and Worldwide Vice President over
Consumer Sector Business Development for Johnson & Johnson Consumer Companies,
Inc. (April 1999 to January 2001). Mr. Fleming received a Master's Degree in
Public and Private Management from the Yale School of Organization and
Management in 1985, and an AB Degree from Harvard College in 1979.

Paul Dawson

Mr. Dawson, prior to joining the Company's subsidiary, BriteSmile International
as its Chief Executive Officer, was Chief Executive Officer of Camus
International, a global marketer of luxury goods. During his nine-year tenure
with Camus, he spearheaded an aggressive worldwide market expansion program of
the company's premium cognac market. Prior to Camus, Mr. Dawson held the
position of Engagement Manager at McKinsey & Company, an international
consulting firm. While at McKinsey, he advised a broad range of multinational
consumer companies on international expansion strategies. Mr. Dawson has lived
and worked in the United States, Europe, Asia and the Middle East. He holds
masters degrees from Cambridge University and UC Berkeley, and an MBA from
Stanford University.


John Dong

Mr. Dong joined the Company as acting Chief Financial Officer in September 2002
and was appointed Chief Financial Officer and Executive Vice President on
December 11, 2003. For 12 of the past 15 years prior to joining BriteSmile,


                                       31

<PAGE>

Mr. Dong  founded  and grew a  consulting  firm  specializing  in  acquisitions;
turnarounds,  IPO's and divestitures.  Mr. Dong's extensive  experience includes
financial  services,  as well as broad knowledge of high tech development firms,
venture  capital,  and high tech  franchising.  Prior to starting his consulting
firm, Mr. Dong spent 7 years as a senior  internal  consultant  with Wells Fargo
Bank and led the IPO effort for San Francisco Federal Savings.  Most recently he
was the Chief Financial Officer and a Board Member of DV Capital,  a diversified
Venture  Capital firm.  Mr. Dong  graduated form the University of California at
Berkeley with a Bachelors Degree in Accounting and Finance.  Mr. Dong also holds
an MBA and earned his CPA credentials with Coopers & Lybrand, Int'l.


Derek Correia

Mr. Correia  initially joined  BriteSmile in September 2000. In January 2002, he
was appointed  Executive Vice  President,  Marketing.  Mr. Correia brings to the
Company  10 years of  experience  in  consumer  marketing  and brand  management
working for Fortune 500 companies with dynamic consumer brands. Prior to joining
BriteSmile,  Mr.  Correia  served as Senior  Vice  President  of  Marketing  for
Renaissance Cruises; Vice-President, Product and Brand Marketing for Burger King
Corporation; and Director, Innovation and Brand Marketing for Pizza Hut, Inc.

Stephen Miller

In October 2000, Stephen Miller was appointed Executive Vice President,
Manufacturing and Distribution. Prior to joining BriteSmile in May 1999 as its
Executive Vice President, Real Estate and Construction, Mr. Miller was for 11
years Vice President of Facility Development for DFS. While at DFS, Mr. Miller
was responsible for the development of the flagship retail gallerias, high-end
boutiques, duty free stores and entertainment complexes in the U.S., Oceania and
the Pacific. Prior to DFS, Mr. Miller was Senior Vice President of Commercial
and Industrial Development for Castle and Cooke, Inc. where for 17 years he was
responsible for commercial, industrial and retail development for Hawaii's
second largest private landowner.

Anthony M. Pilaro

Mr. Pilaro has been a director of the Company since August 1997. Presently, he
serves as Chairman of CAP Advisers Limited, which maintains offices in Dublin,
Ireland. He is also founder and Chairman of Excimer Vision Leasing L.P., a
partnership engaged in the business of leasing Excimer laser systems. Mr. Pilaro
has been involved in private international investment banking. He was a Founding
Director and former Chief Executive Officer of DFS and a founder of the
predecessor of VISX, Inc. A graduate of the University of Virginia `57, and the
University of Virginia Law School `60, Mr. Pilaro practiced law in New York City
through 1964.

R. Eric Montgomery

Mr. Montgomery has been a director of the Company since May 1998. He is an
experienced consultant, researcher and entrepreneur in the oral care and
cosmetic products industries, and has been granted over 65 US and foreign
patents since 1981. Previously, from November 1997 until May 1998, he served as
an independent consultant to the Company through Applied Dental Sciences, Inc.
(Monterey, MA), the oral care products research and development firm of which he
has been President since 1992. Mr. Montgomery is also the Founding Manager and
President of OraCeutical LLC (Lee, MA), an organization dedicated to the
development of innovative products and technologies for dentistry and consumer
oral care. Oraceutical is currently engaged by the Company to provide technology
development services. Mr. Montgomery's organizations have provided consulting
services to and developed products for companies including The Dial Corporation,
Natural White, Virbac SA, Zila Pharmaceuticals, ProHealth Laboratories, OPI
Products, American Dental Hygienics, Premiere Dental, and Boots PLC. Mr.
Montgomery is also President of IDEX Dental Sciences, Inc. (Lee, MA), an
intellectual property holding firm established by Mr. Montgomery in March 1996.

Peter Schechter


                                       32

<PAGE>

Mr.  Schechter  was  appointed  a director  of the  Company  in July  1999.  Mr.
Schechter  is a founder  of  Chlopak,  Leonard,  Schechter  and  Associates,  an
international  communications  consulting  firm.  Previously,  Mr. Schechter was
Managing  Director  in charge of  international  business  at the  Sawyer/Miller
Group,  specializing  in  the  management  of  international  financial  issues,
political  campaigns  and country  image  programs.  A graduate of the School of
Advanced  International  Studies at Johns Hopkins University,  Mr. Schechter has
lived in Europe and Latin  America and has  extensive  experience in the area of
governmental relations. He is fluent in six languages.

Bradford Peters

Mr.  Peters has been a director of the Company  since  December  1999. He is the
President of Blackfin Capital,  a privately held investment company based in New
York.  Prior to  founding  Blackfin  Capital,  from July 1993 to June 1998,  Mr.
Peters was with Morgan Stanley Private Wealth Management Group. Mr. Peters holds
an MBA degree from Duke University.

L. Tim Pierce

Mr.  Pierce was appointed a director in February  2003.  Mr. Pierce is currently
serving as an  Executive  Vice  President  and the Chief  Financial  Officer and
Corporate  Secretary of SBI and Company in Salt Lake City,  Utah.  He joined SBI
and Company in April 1998. Mr. Pierce worked for Mrs. Fields' Original  Cookies,
Inc.,  Salt Lake  City,  Utah,  from 1988  through  1998,  where he served  most
recently as Mrs.  Fields' Senior Vice President,  Chief Financial  Officer,  and
Corporate Secretary. For twelve years from 1976 to 1988, Mr. Pierce served as an
auditor  with  Price  Waterhouse  in New York City,  Salt Lake City and  Newport
Beach, California, and with Deloitte & Touche in Salt Lake City. Mr. Pierce is a
CPA. He  received  his  Bachelor of Science in  Accounting  from  Brigham  Young
University,  Provo,  Utah. Mr. Pierce is a former  director of Mountain  America
Credit  Union,  a former  director  of various  Mrs.  Fields'  entities,  and is
currently a director of Lante  Corporation  and Scient  Japan.  Mr.  Pierce is a
member of the American Institute of Certified Public  Accountants,  and the Utah
Association  of Certified  Public  Accountants.  Mr. Pierce is considered by the
Company to be an audit committee financial expert.

Harry Thompson

Mr.  Thompson has served as a director of the Company since December 1999. He is
currently  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 telecommunication  companies of The Galesi
Group. Mr. Thompson holds an MBA degree from Harvard Business School.

Gerald Poch

Mr. Poch has served as a director of the Company  since May 2000.  He has served
as Managing Director of Pequot Capital Management,  Inc., a venture capital fund
management  company,  since January 2000. From August 1998 through January 2000,
he was a principal of Pequot Capital  Management.  From August 1996 to June 1998
he was the  Chairman,  President  and  Chief  Executive  Officer  of GE  Capital
Information Technology Solutions,  Inc., a technology solutions provider.  Prior
to that,  he was a  founder,  and served as  Co-Chairman  and  Co-President,  of
AmeriData  Technologies,  Inc., a value-added reseller and systems integrator of
hardware  and  software  systems.   Mr.  Poch  is  also  a  director  of  Andrew
Corporation,  a public company. In addition,  Mr. Poch is a director of a number
of private companies.


Dr. Gasper Lazzara, Jr.

Dr. Gasper Lazzara, Jr. has served as a director of the Company since 2000. He
served as Chairman of the Board and a director of the Orthodontic Centers of
America, Inc. ("OCA") since its inception in July 1994 through September 1998.
He has served as Co-Chief Executive Officer of Orthodontic Centers since
September 1998, and he served as Chief Executive Officer of OCA from July 1994
to September 1998. Dr. Lazzara also served as President  of OCA from July 1994


                                       33

<PAGE>

to June 1997.  From 1989 to 1994,  Dr.  Lazzara  served as President or Managing
Partner of certain  predecessor  entities of OCA. He is a licensed  orthodontist
and, prior to founding OCA, maintained a private  orthodontic  practice for over
25 years. He is a member of the American  Association of Orthodontists  and is a
Diplomat of the American Board of Orthodontists.

Significant Employees or Consultants

Dr. John W. Warner

Dr. Warner  accepted the position of Research and  Development  Director for the
Company  in May 1998.  Mr.  Warner is an  experienced  research  and  technology
consultant  and  entrepreneur  who was one of the  leading  contributors  to the
development of ophthalmic applications of laser technology. Dr. Warner leads the
Company's  assessment of existing  products and LATW  development  efforts.  Dr.
Warner has served as a consultant  to  Northwestern  University  in the areas of
technology development and  commercialization.  From March 1986 to December 1990
he was the founder and CEO of Taunton Technologies, Inc., a predecessor of VISX,
Inc.,  engaged in the business of  developing  and  manufacturing  Excimer laser
systems to perform ophthalmic surgery.

                COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors and persons who beneficially own more than 10 percent of a
registered class of the Company's equity securities to file reports of ownership
and changes in ownership with the Securities and Exchange Commission. Officers,
directors and greater than 10 percent shareholders are required by regulation of
the Securities and Exchange Commission to furnish the Company with copies of all
Section 16(a) forms they file.

Based solely upon its review of the copies of such forms furnished to it during
the fiscal year ended December 28, 2002, and representations made by certain
persons subject to this obligation that such filings were not required to be
made, the Company believes that all reports required to be filed by these
individuals and persons under Section 16(a) were filed in a timely manner,
except as follows:

       Form 3 report of CAP Charitable Foundation filed December 20, 2002 to
       report a transaction dated April 16, 2002.

       Form 3 report of CAP Charitable Foundation filed December 20, 2002, to
       report a transaction dated October 9, 2002.

       Form 4 report of LCO Investments Limited filed December 23, 2002, to
       report a transaction dated October 9, 2002.

       Form 4 report of Paul Dawson filed September 25, 2002, to report a
       transaction dated September 20, 2002.

Except as disclosed, the Company is not aware of any transactions in its
outstanding securities by or on behalf of any director, executive officer or 10
percent holder, which would require the filing of any report pursuant to Section
16(a) during the fiscal year ended December 28, 2002, that has not been filed
with the Securities and Exchange Commission.

ITEM 11.          EXECUTIVE COMPENSATION

The following Summary Compensation Table shows compensation paid by the Company
for services rendered during the nine-month transition period ended December 30,
2000 (the "Transition Period"), the fiscal year ended December 29, 2001 ("Fiscal
2001"), and the fiscal year ended December 28, 2002 ("Fiscal 2002") to John
Reed, the Company's Chief Executive Officer, and to the Company's four most
highly compensated executive officers during Fiscal 2002.


                                       34

<PAGE>



<TABLE>
<CAPTION>
                           Summary Compensation Table

                                                                                           Long Term
                                                                                          Compensation
                                                                                     ------------------------
                                                                   Annual
                                                               Compensation                  Awards
                                                             -------------------     ------------------------

                                                                                            Securities
                                                                                            Underlying
Name and                                                                                     Options/
Principal Position                   Period                     Salary ($)                    SARs (#)
-----------------------        -----------------------        ------------------     ------------------------
<S>                                <C>                          <C>                            <C>
John Reed, CEO                     Fiscal 2002                  $ 225,000                      0
                                   Fiscal 2001                    252,600                      0
                                   Transition Period              125,000                      0

Paul Dawson                        Fiscal 2002                  $ 191,667                      0
CEO, BriteSmile                    Fiscal 2001                  $ 210,000                      0
International, Ltd.                Transition Period              133,333                      0

Bruce Fleming                      Fiscal 2002                  $ 175,000                      0
President
Officer
Derek Correia                      Fiscal 2002                  $ 400,079                      0
ExecutiveVP, Marketing             Fiscal 2001                     96,726                      0

Stephen Miller                     Fiscal 2002                  $ 150,000                      0
Executive VP,                      Fiscal 2001                    231,789                      0
Manufacturing and                  Transition Period              143,750                      0
Distribution
</TABLE>


                                       35

<PAGE>


The following table lists individual grants of stock options made during the
Company's last completed fiscal year as compensation for services rendered as an
officer of the Company:


<TABLE>
<CAPTION>
                      OPTION/SAR GRANTS IN FISCAL YEAR 2002


                                                                                        Potential Realizable Value at Assumed
                                                                                             Annual Rates of Stock Price
                                                                                            Appreciation for Option Term
                                                  Individual Grants
                       --------------------------------------------------------------   ----------------------------------------
                           Number of      % of Total
                           Securities     Options/SARs
                           Underlying      Granted to     Exercise or
                          Options/SARs    Employees in     Base Price     Expiration
Name                       Granted (#)       FY 2002       ($/Share)         Date           5%                  10%
---------------------  ----------------------------------------------------------------------------------------------------
<S>                           <C>              <C>            <C>           <C>             <C>                 <C>
John L. Reed                     0              0              N/A            N/A           N/A                 N/A
Paul Dawson                      0              0              N/A            N/A           N/A                 N/A

Bruce Fleming                 66,667           53             58.50         05/31/12         0                   0
Steve Miller                     0              0              N/A            N/A           N/A                 N/A
Derek Correria                 3,333            3             70.50         03/01/12         0                   0
</TABLE>


<TABLE>
<CAPTION>
                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                       AND DECEMBER 28, 2002 OPTION VALUES

                                                                            Number of Securities
                                                                           Underlying Unexercised       Value of Unexercised
                                      Shares                                     Options at           In the Money Options at
                                    Acquired on             Value          December 28, 2002 (1)       December 28, 2002 (1)
Name                               Exercise (#)         Realized ($)     Exercisable/Unexercisable   Exercisable/Unexercisable
----                               ------------         ------------     -------------------------   -------------------------

<S>                                      <C>                  <C>              <C>                             <C>
John L. Reed (2)                         0                    0                36,667 /13,333                  $0/$0

Paul Dawson (2)                          0                    0                     0/0                        $0/$0

                                                                                                               $0/$0

Bruce Fleming                            0                    0                13,333/53,334                   $0/$0

Steve Miller (2)                         0                    0                 8,667/4,666                    $0/$0

Derek Correria (2)                       0                    0                     0/0                        $0/$0
</TABLE>

        (1)   Potential  unrealized value is calculated as the fair market value
              at December 28, 2002 ($5.40 per share),  less the option exercise
              \price, times the number of shares.

        (2)   With respect to Messrs. Reed, Dawson, Miller and Correria, does
              not include an aggregate of 52,333 options voluntarily cancelled
              in September 2002, which have been regranted in March 2003 ($10.77
              per share) in connection with the Company's re-pricing program.


Compensation of Directors


                                       36

<PAGE>


Outside directors of the Company (non-employees) receive options to purchase
1,333 shares of common stock per year for each year during which they serve as a
director. The exercise price of such options is 100% of the fair market price on
the date of grant. Actual expenses incurred by outside directors are reimbursed.

Employment Contracts and Termination of Employment Arrangements

Certain of the Company's executive officers whose compensation is required to be
reported in the Summary Compensation Table are parties to written employment
agreements with the Company as follows:

John Reed

Pursuant to a letter agreement between the Company and John Reed dated January
20, 1999, Mr. Reed agreed to serve as Chief Executive Officer of the Company.
The agreement provides that the Company will pay Mr. Reed $250,000 a year for
his services. Mr. Reed also received options to purchase 50,000 shares of the
Company's common stock at the closing price on the date of the agreement, of
which 43,333 have vested as of March 24, 2003. Mr. Reed's employment began in
June 1999. On March 24, 2000, Mr. Reed was granted options to purchase 16,667
shares of the Company's common stock at the closing price on that date, of which
10,000 vested as of March 24, 2003.

Bruce Fleming

The Company entered into an employment agreement with Bruce Fleming on May 31,
2002. Under the terms of the agreement, Mr. Fleming has served as President of
the Company. The Company pays Mr. Fleming an annual base salary of $350,000. In
addition, Mr. Fleming is eligible for incentive bonuses if certain targets are
met. In addition, Mr. Fleming received options to purchase 66,667 shares of the
Company's common stock. Options to purchase 13,333 shares vested on the date of
the agreement; the remaining 53,334 options vest in equal installments over five
years.

Paul Dawson

BriteSmile International, Ltd. entered into an employment agreement with Paul
Dawson on April 19, 1999. Under the terms of the agreement, Mr. Dawson has
served as Chief Executive Officer of BriteSmile International, a wholly-owned
subsidiary of the Company. The Company pays Mr. Dawson $16,666 per month for his
services. Mr. Dawson is eligible for a bonus based on the number of paid teeth
whitening procedures performed in a designated international area. The bonus
will be paid in cash and Common Stock of the Company. In addition, Mr. Dawson
received options to purchase 20,000 shares of the Company's common stock at the
closing price on the date of the agreement. Options to purchase 6,667 shares
vested on the date of the agreement. The remaining 13,333 options vest in equal
installments over five years.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information as of March 12, 2003 regarding
beneficial stock ownership of (i) all persons known to the Company to be
beneficial owners of more than 5% of the outstanding common stock (the only
class of stock of the Company); (ii) each director, the Chief Executive Officer,
and the four highest paid executives of the Company other than the CEO, and
(iii) all officers and directors of the Company as a group. Each of the persons
in the table below has sole voting power and sole dispositive power as to all of
the shares shown as beneficially owned by them, except as otherwise indicated.


                                       37

<PAGE>




                                               Number of Shares       Percent of
                                                Beneficially         Outstanding
       Name and Address                           Owned (1)            Shares(2)

                               Executive Officers and Directors


       Paul Dawson                                   15,160                *
       36 Fitzwilliam Place
       Dublin 2, Ireland

       John Dong                                      2,667  (3)           *
       490 North Wiget Lane
       Walnut Creek, California 94598

       Dr. Gasper Lazzara, Jr.                       38,609  (4)          1.6%
       5000 Sawgrass Village Circle, Suite 28
       Ponte Verda Beach, Florida 32082

       R. Eric Montgomery                            33,279  (5)          1.4%
       29 Fairview Road
       P. O. Box 487
       Monterey, Massachusetts 01245


       Bradford Peters                              333,376  (6)         12.6%
       Blackfin Capital, LLC
       622 Third Avenue, 38th Floor
       New York, New York 10017

       Anthony M. Pilaro                          1,506,696  (7)         52.1%
       36 Fitzwilliam Place
       Dublin 2, Ireland

       Gerald A. Poch                               324,382  (8)         13.2%
       Pequot Capital Management, Inc.
       500 Nyala Farm Road
       Westport, Connecticut 06880

       John L. Reed                                 180,427  (9)          7.1%
       490 North Wiget Lane
       Walnut Creek, California 94598

       Peter Schechter                                5,383  (10)          *
       Chlopak, Leonard, Schechter & Assoc.
       3021 O Street, N.W.
       Washington, D.C. 20007

       Harry Thompson                                11,464  (11)          *
       169 E. 78th Street
       New York, New York 10021


                                       38

<PAGE>


       Derek Correia                                    160                *
       490 North Wiget Lane
       Walnut Creek, California 94598

       Stephen Miller                                 9,247  (12)          *
       490 North Wiget Lane
       Walnut Creek, California 94598

       Bruce Fleming                                 13,334  (13)          *
       490 North Wiget Lane
       Walnut Creek, California 94598

       All Officers and Directors as a Group       2,474,184  (14)        74.2%
       (13 persons)

                                     5% Beneficial Owners

       LCO Investments Limited                     1,506,696 (7)         52.1%
       7 New Street
       St. Peter Port
       Guernsey, Channel Islands

       Pequot Capital Management, Inc.               320,026 (15)        13.0%
       500 Nyala Farm Road
       Westport, CT 06880

       Brad Peters                                   333,376 (6)         12.6%
       c/o Blackfin Capital, LLC
       622 Third Avenue, 38th Floor
       New York, New York 10017

*           Constitutes less than 1%.

(1)        Include any options or warrants to purchase shares which are
           presently exercisable or exercisable within 60 days.

(2)        All percentages are calculated based upon a total number of shares
           outstanding which includes 2,428,539 shares of the Company issued and
           outstanding as of March 12, 2003, plus that number of options or
           warrants presently exercisable or exercisable within 60 days by the
           named security holder.

(3)        Includes options to purchase 2,667 shares at $6.60 per share.

(4)        Includes 26,160 shares held indirectly through OCAI Two Limited
           Partnership, warrants to purchase 8,091 shares at $75.00 per share,
           options to purchase 1,334 shares at $138.75 per share, options to
           purchase 2,357 shares at $75.00 per share, and options to purchase
           667 shares at $4.95 per share.

(5)        Includes 15,731 shares owned beneficially, options to purchase 2,213
           shares at $66.60 per share, options to purchase 13,334 shares at
           $56.25 per share, options to purchase 1,334 shares at $75.00 per
           share, and options to purchase 667 shares at $4.95 per share.

(6)        Includes 113,639 shares owned of record and beneficially, warrants to
           purchase 49,608 shares at $75.00 per share, the right to convert a
           note payable by the Company into 166,667 shares, options to purchase
           1,462 shares at $37.50 per share, options to purchase 1,333 shares at
           $75.00 per share, and options to purchase 667 shares at $4.95 per
           share.


                                       39

<PAGE>


(7)        Includes 567,593 shares owned of record and beneficially by LCO
           Investments Limited ("LCO"), the right to convert a note payable by
           the Company into 416,667 shares, 99,927 shares held indirectly
           through Pde P Tech Limited, a subsidiary of LCO, 1,800 shares held by
           AMP Trust, of which Mr. Pilaro is a beneficiary, 213,334 shares held
           by LCP II Trust, of which Mr. Pilaro's wife is a beneficiary, 66,667
           shares held by ACP II Trust, of which one of Mr. Pilaro's adult sons
           not living in Mr. Pilaro's household is a beneficiary, 66,667 shares
           held by CAP II Trust, of which one of Mr. Pilaro's adult sons not
           living in Mr. Pilaro's household is a beneficiary, 19,520 shares held
           by various trusts of which CAP is a co-trustee, 45,920 warrants to
           purchase shares at $75.00 per share held by LCO, 1,334 warrants to
           purchase shares held by PdeP, also exercisable at $75.00 per share,
           3,000 shares owned of record by the CAP Charitable Foundation and
           4,267 shares owned of record by CAP Advisers Limited. LCO is a wholly
           owned subsidiary of the ERSE Trust. CAP is a co-trustee of the ERSE
           Trust. Mr. Pilaro, a director of the Company, is Chairman of CAP. Mr.
           Pilaro disclaims beneficial ownership of the shares held by LCO, PdeP
           Tech Limited, AMP Trust, LCP II Trust, ACP II Trust, CAP II Trust,
           the CAP Charitable Foundation, and CAP Advisers Limited and the
           trusts indicated above of which CAP is co-trustee.

(8)        Includes 147,444 shares held of record by Pequot Private Equity Fund
           II, L.P.,  73,723 shares held of record by Pequot  Partners Fund,
           L.P., 73,722 shares held of record by Pequot  International Fund,
           Inc.,  1,333  shares held of record by Pequot  Scout Fund,  L.P.,
           warrants held of record by Pequot Private Equity Fund II, L.P. to
           purchase  11,902  shares at $75.00  per share,  warrants  held of
           record by Pequot  Partners Fund, L.P. to purchase 5,951 shares at
           $75.00 per share, warrants held of record by Pequot International
           Fund, Inc. to purchase 5,951 shares at $75.00 per share,  (Pequot
           Private Equity Fund II, L.P.,  Pequot  Partners  Fund,  L.P., and
           Pequot  International Fund, Inc. are referred to collectively as,
           the "Pequot  Funds")  options held by Mr. Poch to purchase  1,333
           shares at $138.75 per share,  options to purchase 2,356 shares at
           $75.00 per share, and options to purchase 667 shares at $4.95 per
           share.  Mr.  Poch  is  a  Managing  Director  of  Pequot  Capital
           Management,  Inc.,  which holds voting and dispositive  power for
           all shares  held of record by the Pequot  Funds and may be deemed
           to beneficially own the shares held by the Pequot Funds. Mr. Poch
           disclaims  beneficial  ownership  of the shares held of record by
           the Pequot Funds,  except to the extent of his pecuniary interest
           therein.

(9)        Includes 53,698 shares owned beneficially, the right to convert a
           note payable by the Company into 83,334 shares, warrants to purchase
           6,728 shares at $75.00 per share, and options to purchase 36,667
           shares at $37.50 per share.

(10)       Includes 2,048 shares owned beneficially in a Revocable Living Trust,
           options to purchase 1,334 shares at $168.75 per share, options to
           purchase 1,334 shares at $75.00 per share, and options to purchase
           667 shares at $4.95 per share.

(11)       Includes options to purchase from LCO 6,667 shares at $22.50 per
           share, options to purchase 1,334 shares at $140.63 per share, options
           to purchase 1,462 shares at $37.50 per share, options to purchase
           1,334 shares at $75.00 per share, and options to purchase 667 shares
           at $4.95 per share.

(12)       Includes 580 shares owned beneficially and options to purchase 8,667
           shares at $41.25 per share.

(13)       Includes options to purchase 13,334 shares at $58.50 per share.

(14)       Includes exercisable options and warrants to purchase 904,343 shares.

(15)       Includes 147,444 shares held of record by Pequot Private Equity Fund
           II, L.P., 73,723 shares held of record by Pequot Partners Fund, L.P.,
           73,722 shares held of record by Pequot International Fund, Inc. ,
           1,333 shares held of record by Pequot Scout Fund, L.P., warrants held
           of record by Pequot Private Equity Fund II, L.P. to purchase 11,902
           shares at $75.00 per share, warrants held of record by Pequot
           Partners Fund, L.P. to purchase 5,951 shares at $75.00 per share,
           warrants held of record by Pequot International Fund, Inc. to
           purchase 5,951 shares at $75.00 per share.


                                       40


<PAGE>


Equity Compensation Plan Information

See footnote 10, "Shareholder's Equity," to the Financial Statements included
with this Report for a description of securities authorized for issuance under
equity compensation plans of the Company.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

November 2002 Sale of Convertible Notes

On November 20, 2002, the Company sold to two investors in a private placement
2% convertible notes that are due and payable on November 20, 2005 (the
"November 2002 Notes") in a private placement. The November 2002 Notes are
convertible into shares of common stock of the Company at a conversion rate of
$6.00 per share. The two investors who purchased the November 2002 Notes, both
affiliates of the Company, are: LCO Investments Limited ($2,500,000) and
Bradford G. Peters ($1,000,000). The CEO of the Company has agreed to fund an
additional $500,000 in 2003 under the same terms. LCO Investments Limited is the
Company's major shareholder. LCO is a wholly owned subsidiary of the ERSE Trust.
CAP Advisers Limited is a co-trustee of the ERSE Trust. Mr. Pilaro, a director
of the Company, is Chairman of CAP. John L. Reed is a shareholder, the Chief
Executive Officer, and a director of the Company. Brad Peters is a shareholder
and a director of the Company.

LCO Properties Sublease

On December 1, 1999 the Company, as lessee, entered into an Agreement of
Sublease with LCO Properties, Inc., a Delaware corporation, as lessor. LCO
Properties, Inc. is affiliated with the Company's principal shareholder, LCO
Investments Limited ("LCO"). The Sublease covers approximately 4,821 square feet
of space located in the building known as 16-18 West 57th Street in the Borough
of Manhattan, New York City. The sublease term is for ten years and calls for
initial lease payments of $402,000 per year, subject to increase in the event of
increases in the rent payable under the parent lease for the property between
LCO Properties, Inc., and its lessor.

Harry Thompson Consulting Agreement

In August 1999, Harry Thompson, a director of the Company, agreed to provide
marketing consulting services to the Company. In consideration for Mr.
Thompson's services to the Company, and pursuant to a letter agreement dated
August 17, 1999, the Company's principal shareholder, LCO, granted Mr. Thompson
the right to purchase from LCO up to 6,667 shares of common stock of the Company
at a price of $33.75 per share. The option to purchase from LCO expires on
August 31, 2004.

Public Relations Services Agreement

On April 7, 1999, the Company entered into a Letter Agreement with Chlopak,
Leonard, Schechter and Associates ("CLS"), a public relations firm in
Washington, D.C. Pursuant to the agreement, CLS provides public relations advice
and serves as communications counselors to the Company for consideration of
$18,000 per month, plus expenses. The agreement was entered into for a minimum
of six months, and remains in force. Peter Schechter, a director of the Company,
is one of three managing partners of CLS.

Oral Health Clinical Services Agreement

On March 24, 1999, the Company entered into a Consulting Agreement with Oral
Health Clinical Services, LLC, ("Oral Health") Salim A. Nathoo, and R. Eric
Montgomery. Mr. Montgomery is a director of the Company. Pursuant to the
agreement, Oral Health and Nathoo will devote their services to obtaining
American Dental Association (ADA) Certification for the BriteSmile 2000 Tooth
Whitening Procedure. The term of the contract is for two years or until ADA
Certification, whichever is earlier. In consideration for the services, the
Company granted 5,000 stock options to Dr. Nathoo, which have vested. The
Company will grant up to 15,000 additional stock options, of which the number
and exercise price is dependent upon obtaining ADA Certification, at the date
the Certification is obtained. Certification has not been obtained and no
payments were made by the Company under the contract during Fiscal 2002.


                                       41

<PAGE>


Oraceutical Agreement

On November 27, 2000, the Company entered into a Consulting Agreement with
Oraceutical, LLC. R. Eric Montgomery, a director of the Company, is the founding
Manager and President of Oraceutical. Pursuant to the agreement, Oraceutical
provides technology development services to the Company for various
light-activated teeth whitening products and procedures. In consideration for
its services, Oraceutical has been paid $25,000 a month, plus options to
purchase 13,333 shares of common stock, subject to vesting provisions,
exercisable at $56.25 per share.

EVL Lease Agreement

On December 29, 2000, as amended in February 2001, March 2002, September 2002,
and January 2003, the Company secured a lease line of credit of up to $15
million from Excimer Vision Leasing L.P. ("EVL"). Anthony Pilaro, the Company's
Chairman, serves as Chairman of EVL. An affiliate of LCO Investments Inc., the
Company's largest shareholder, owns 70% of EVL.
EVL Loan Agreement

On March 1, 2001, the Company borrowed $2.5 million from EVL for general working
capital. The loan matures on May 10, 2006 and may be prepaid at any time without
penalty. Payments under the loan consist of "fixed payments" of interest,
"variable payments" of principal and interest and a "final payment" of
principal. An initial fixed payment of $10,417 was paid on April 1, 2001.
Additional fixed monthly payments of $12,500 are due during the loan period.
Variable payments are $25 for each LATW procedure performed at the Company's 14
Centers. For Fiscal 2002, Fiscal 2001 and the Transition Period variable
payments totaled $717,000, $664,000 and $0, respectively, and the unpaid balance
of the loan was $1,583,000 at December 28, 2002. The final payment, due at
maturity will be the amount by which the aggregate of variable payments paid
during the term of the loan is less than the original $2.5 million principal
amount of the loan.

CAP Advisers Line of Credit

In December 2001, as amended in March, July 2002 and January 2003, BriteSmile
International, a wholly-owned subsidiary of the Company, entered into Credit and
Security Agreements with CAP Advisers which provide for a $6.5 million line of
credit facility of which, $1.5 million is for the purchase of capital equipment.
As of December 28, 2002, $4.7 million has been drawn on the line.  Mr. Pilaro,
the Company's Chairman, is also Chairman of CAP Advisers.  Cap Advisers is the
sole trustee of the ERSE Trust.  The ERSE Trust owns 100% of LCO, the Company's
major shareholder.

CAP Advisers Center Loan

In April 2003, the Company's Audit Committee and it's Board of Directors
approved a term sheet from CAP Advisers for a $2.5 million Center Loan (the
"2003 Center Loan") to be used for capital expenditures and other specific
revenue generating initiatives to be agreed and defined by BriteSmile and Cap
Advisers and up to $800,000 for general working capital. Interest is fixed at
6%, payable monthly, with Cap Advisers having the right to reset the interest
rate to 200bps over 1 year LIBOR after giving BriteSmile 30 days notice. A
variable fee payment of $25 per procedure performed on the existing 127 Center
chairs will commence on May 11, 2006, and continue until May 10, 2011. Variable
fees will be payable 40 days after the end of the month in which the procedures
are performed, except for fees due for April/May 2011 which will become payable
on the maturity date. On an annualized basis the first $500,000 of variable fees
will be applied to the principal such that the $2.5M will be fully repaid over 5
years commencing May 11, 2006. Variable payments in excess of the annual
amortization of $500,000 are deemed additional interest to Cap Advisers.


ITEM 14.     CONTROLS AND PROCEDURES


Explanation of Disclosure Controls and Procedures
Our chief executive officer and our chief financial officer, after evaluating
the effectiveness of the Company's "disclosure controls and procedures" (as
defined in Exchange Act Rules 13a-14(c) and 15d-14(c)) as of a date (the
"Evaluation Date") within 90 days of the filing date of this annual report, have
concluded that as of the Evaluation Date, our disclosure controls and procedures
were adequate and effective and designed to ensure that material information
relating to us and our consolidated subsidiaries would be made known to them by
others within those entities.

Changes in Internal Controls

There were no significant changes in our internal controls or in other factors
that could significantly affect our internal controls subsequent to the
Evaluation Date, including any corrective actions with regard to significant
deficiencies and material weaknesses.

PART IV.


ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K


                                       42

<PAGE>


<TABLE>
<CAPTION>
<S>                                                                                <C>
(a)         The following documents are filed as a part of this Report:
                1.          Financial Statements
            Report of Independent Auditors                                         F-2

            Report of Independent Auditors                                         F-3

            Consolidated Balance Sheets for the 52-week periods
             ended December 28, 2002 and December 29, 2001.                        F-4

            Consolidated Statements of Operations for the
            52-week periods ended December 28, 2002
            and December 29, 2001 and the 39-week period ended December 30, 2000.  F-6

            Consolidated Statements of Cashflows for the 52-week periods ended
             December 28, 2002 and December 29, 2001 and the 39-week period
             ended December 30, 2000.                                              F-8

            Consolidated Statements of Shareholders' Equity for the 52-week
             periods ended December 28, 2002 and December 29, 2001 and the
             39-week period
            ended December 30, 2000.                                               F-9

            Notes to Consolidated Financial Statements.                            F-10

                2.          Financial Statement Schedules                          F-33
            Schedule of Valuation and Qualifying Accounts for the 52-week
            periods ended December 28, 2002 and December 29, 2001 and the
            39-week period ended December 30, 2000.

                3.          Exhibits
</TABLE>


Exhibit Number
Per Item 601 of
Regulation S-K               Title of Document

        2           Asset Purchase  Agreement and Plan of Reorganization by
                    and  among   BriteSmile,   Inc.,  an  Alabama   corporation,
                    BriteSmile,   Inc.,  a  Utah   corporation,   and  David  K.
                    Yarborough, together with the exhibits and schedules forming
                    part  of  the  Asset  Purchase  Agreement  (incorporated  by
                    reference to the Company's  Current Report on Form 8-K dated
                    March 7, 1996).

        3.01        Articles of Restatement of the Articles of  Incorporation
                    of  the   Company  as  filed  with  the  Utah   Division  of
                    Corporations  and Commercial Code on January 17, 2003 (filed
                    herewith).

        3.02        Bylaws adopted May 2, 1996,  (incorporated  by reference to
                    the  Company's  Annual  Report on Form 10-KSB for the fiscal
                    year ended March 31, 1996).

        3.03        Amendment to Bylaws  adopted July 23, 1999  (incorporated
                    by  reference  to the  Company's  Quarterly  Report  on Form
                    10-QSB for the quarter ended June 30, 1999).

        10.01       1990 Stock Option Plan for  Employees of the Company
                    (incorporated by reference to the Company's Annual Report on
                    Form 10-KSB for the fiscal year ended March 31, 1996).

        10.02       Securities  Purchase  Agreement  dated April 1, 1996 for
                    300,000  shares of  common  stock and


                                       43

<PAGE>

                    Options to Purchase  1,000,000 shares of common stock at $20
                    per share,  between the Company,  LCO  Investments  Limited,
                    Pinnacle Fund L.P., and Richard S. Braddock (incorporated by
                    reference  to the Current  Report on Form 8-K of the Company
                    dated April 1, 1996).

        10.03       Registration Rights Agreement dated April 1, 1996 between
                    the Company, LCO Investments  Limited,  Richard S. Braddock,
                    and Pinnacle Fund,  L.P.  (incorporated  by reference to the
                    Current  Report on Form 8-K of the  Company  dated  April 1,
                    1996).

        10.04       Securities Purchase Agreement dated May 8, 1997 for
                    428,572  shares of  common  stock and  Options  to  Purchase
                    500,000 shares of common stock at $9.00 per share, among the
                    Company,  LCO Investments  Limited,  and Richard S. Braddock
                    (incorporated by reference to the Company's Annual Report on
                    Form 10-KSB for the fiscal year ended March 31, 1997).

        10.05       Registration  Rights  Agreement  dated May 8, 1997 among the
                    Company,  LCO Investments  Limited,  and Richard S. Braddock
                    (incorporated by reference to the Company's Annual Report on
                    Form 10-KSB for the fiscal year ended March 31, 1997).

        10.06       Stock  Purchase  Agreement  dated as of May 4, 1998 for
                    1,860,465  shares of common  stock,  between the Company and
                    LCO Investments  Limited  (incorporated  by reference to the
                    Company's  Annual  Report on Form 10-KSB for the fiscal year
                    ended March 31, 1998).

        10.07       Registration  Rights  Agreement dated as of May 4, 1998

                    between   the   Company   and   LCO   Investments    Limited
                    (incorporated by reference to the Company's Annual Report on
                    Form 10-KSB for the fiscal year ended March 31, 1998).

        10.08       Employment  Letter dated January 20, 1999 (effective June 2,
                    1999) between the Company and John L. Reed  (incorporated by
                    reference to the Company's  Annual Report on Form 10-KSB for
                    the year ended March 31, 1999).

        10.09       Employment Letter dated April 19, 1999 between the
                    Company's subsidiary, BriteSmile International, Limited, and
                    Paul Dawson  (incorporated  by  reference  to the  Company's
                    Annual  Report on Form  10-KSB for the year ended  March 31,
                    1999).

        10.10       Revised 1997 Stock Option and Incentive Plan of the Company,
                    as amended through June 20, 2001  (incorporated by reference
                    to the Company's Annual Report on Form 10-K for the 52 weeks
                    ended December 29, 2001).

        10.11       Form of Option  Agreement  between the Company and certain
                    directors of the Company  (incorporated  by reference to the
                    Company's  Annual Report on Form 10-K for the 52 weeks ended
                    December 29, 2001).

        10.12       Form of Option  Agreement  between the Company and certain
                    employees of the Company  (incorporated  by reference to the
                    Company's  Annual Report on Form 10-K for the 52 weeks ended
                    December 29, 2001).

        10.13       Form of Stock Purchase  Agreement  dated as of June 3, 1999,
                    between the Company and purchasers who acquired  shares at a
                    5% discount to the 10-day  average  market  price  preceding
                    closing  (incorporated by reference to the Company's Current
                    Report on Form 8-K as filed June 21, 1999).

        10.14       Registration  Rights  Agreement  dated  as of  June 3,  1999
                    between  the  Company  and  the  non-management   purchasers
                    (incorporated  by reference to the Company's  Current Report
                    on Form 8-K as filed June 21, 1999).

        10.15       Amended and  Restated  Registration  Rights  Agreement dated
                    as of June 3, 1999  between the


                                       44

<PAGE>

                    Company  and  the  management  purchasers  (incorporated  by
                    reference  to the  Company's  Current  Report on Form 8-K as
                    filed June 21, 1999).

        10.16       Form of Stock  Purchase  Agreement  dated as of June 3, 1999
                    between the Company and  purchasers  who acquired  shares of
                    common  stock of the  Company at a 5% discount to the 10-day
                    average  market price  preceding  closing  (incorporated  by
                    reference to the Company's  Current Report on Form 8-K dated
                    June 4, 1999).

        10.17       Registration Rights Agreement dated as of June 3, 1999
                    between the Company and certain non-management purchasers in
                    the June 1999 Private  Placement  (incorporated by reference
                    to the  Company's  Current  Report on Form 8-K dated June 4,
                    1999).

        10.18       Amended and Restated Registration Rights Agreement
                    dated as of June 3, 1999  between  the  Company  and certain
                    management  purchasers  (incorporated  by  reference  to the
                    Company's Current Report on Form 8-K as filed June 4, 1999).

        10.19       Stock  Purchase  Agreement  dated as of January 12, 1999
                    between the Company and the Pequot investment funds ("Pequot
                    Funds")  (incorporated by reference to the Company's Current
                    Report on Form 8-K dated January 18, 2000).

        10.20       Registration  Rights Agreement  dated as of January 18, 2000
                    between the Company and the Pequot  Funds  (incorporated  by
                    reference to the Company's  Current Report on Form 8-K dated
                    January 18, 2000).

        10.21       Voting and Co-sale  Agreement dated as of January 18, 2000
                    between the Company,  the Pequot  Funds and LCO  Investments
                    Ltd.  (incorporated  by reference to the  Company's  Current
                    Report on Form 8-K dated January 18, 2000).

        10.22       Agreement of Sublease dated December 1999 between the
                    Company and LCO Properties,  Inc. (incorporated by reference
                    to the Company's Annual Report on Form 10-KSB for the fiscal
                    year ended April 1, 2000).

        10.23       Securities  Purchase  Agreement  dated as of June 27, 2000
                    between the Company and certain purchasers of 5% Convertible
                    Subordinated   Notes   (incorporated  by  reference  to  the
                    Company's  Transition Report on Form 10-K for the Nine-month
                    Transition Period ended December 30, 2000).

        10.24       Form of Convertible  Notes issued pursuant to the Securities
                    Purchase  Agreement dated as of June 27, 2000  (incorporated
                    by reference to the Company's Transition Report on Form 10-K
                    for the  Nine-month  Transition  Period  ended  December 30,
                    2000).

        10.25       Form of Warrants  granted to note  purchasers  pursuant to
                    the Securities  Purchase Agreement dated as of June 27, 2000
                    (incorporated  by  reference  to  the  Company's  Transition
                    Report on Form  10-K for the  Nine-month  Transition  Period
                    ended December 30. 2000).

        10.26       Form of Registration Rights Agreement between the Company of
                    the purchasers of Notes pursuant to the Securities  Purchase
                    Agreement  dated  as  of  June  27,  2000  (incorporated  by
                    reference to the  Company's  Transition  Report on Form 10-K
                    for the  Nine-month  Transition  Period  ended  December 30,
                    2000).

        10.27       Amendment Agreement dated as of August 3, 2000 between the
                    Company  and the  purchasers  of  notes  identified  therein
                    (incorporated  by  reference  to  the  Company's  Transition
                    Report on Form  10-K for the  Nine-month  Transition  Period
                    ended December 30, 2000).

        10.28       Note Purchase Agreement dated December 5, 2000  between the
                    Company  and  LCO  Investments   Limited   (incorporated  by
                    reference to the Company's  Current Report on Form 8-K


                                       45

<PAGE>

                    dated December 5, 2000).

        10.29       Convertible  Promissory  Note dated  December 5, 2000 in the
                    principal amount of $5,000,000 (incorporated by reference to
                    the Company's  Current  Report on Form 8-K dated December 5,
                    2000).

        10.30       Warrant to Purchase  250,000  Shares of common stock of the
                    Company dated December 5, 2000 (incorporated by reference to
                    the Company's  Current  Report on Form 8-K dated December 5,
                    2000).

        10.31       Amended and Restated  Agreement  between Excimer Vision
                    Leasing   L.P.   and  the  Company   dated   February   2001
                    (incorporated  by  reference  to  the  Company's  Transition
                    Report on Form  10-K for the  Nine-month  Transition  Period
                    ended December 30, 2000).

        10.32       Amendment  dated  September 18, 2002 to Amended and Restated
                    Agreement  between  Excimer  Vision  Leasing  L.P.  and  the
                    Company dated February 2001 (filed herewith).

        10.33       Amendment dated January 1, 2003 to Amended and Restated
                    Agreement  between  Excimer  Vision  Leasing  L.P.  and  the
                    Company dated February 2001 (filed herewith).

        10.34       Loan Agreement  between Excimer Vision Leasing L.P. and the
                    Company dated as of March 1, 2001 (incorporated by reference
                    to the  Company's  Transition  Report  on Form  10-K for the
                    Nine-month Transition Period ended December 30, 2000).

        10.35       Unsecured Credit Agreement between  BriteSmile International
                    and CAP Advisers  Limited dated March 2002  (incorporated by
                    reference to the  Company's  Annual  Report on Form 10-K for
                    the 52 weeks ended December 29, 2001).

        10.36       Credit and Security Agreement dated December 13, 2001
                    between  BriteSmile  International  and CAP Advisers Limited
                    (incorporated by reference to the Company's Annual Report on
                    Form 10-K for the 52 weeks ended December 29, 2001).

        10.37       Supplemental  Agreement  dated March 2002 to Credit and
                    Security   Agreement   dated   December   13,  2001  between
                    BriteSmile    International   and   CAP   Advisers   Limited
                    (incorporated by reference to the Company's Annual Report on
                    Form 10-K for the 52 weeks ended December 29, 2001).

        10.38       Supplemental  Agreement dated July 19, 2002 to Credit and
                    Security Agreement dated December 13, 2001, as amended,  and
                    to   Unsecured   Credit   Agreement   dated  March  8,  2002
                    (incorporated  by reference to the Quarterly  Report on Form
                    10-Q of the Company for the 13 weeks ended June 29, 2002).

        10.39       Supplemental Agreement dated January 9, 2003 to Credit and
                    Security Agreement dated March 2002 (filed herewith).

        10.40       Amendment to Lease  Agreement  between  Excimer Vision
                    Leasing   L.P.   and  the   Company   dated  March  8,  2002
                    (incorporated by reference to the Company's Annual Report on
                    Form 10-K for the 52 weeks ended December 29, 2001).

        10.41       Form of Guaranty of Fiscal 2002 Shortfall Summary of Terms
                    dated March 2002 in connection with commitments from certain
                    shareholders and/or directors of the Company to secure up to
                    $4 million of additional  working capital  (incorporated  by
                    reference to the  Company's  Annual  Report on Form 10-K for
                    the 52 weeks ended December 29, 2001).

        10.42       Form of Convertible Note Purchase Agreement used in
                    connection with November 20, 2002  convertible note offering
                    (incorporated by reference to the Current Report on Form 8-K
                    of the


                                       46

<PAGE>

                    Company filed on November 25, 2002).

        10.43       Form of Convertible  Promissory Note issued in connection
                    with   November   20,   2002   convertible   note   offering
                    (incorporated by reference to the Current Report on Form 8-K
                    of the Company filed on November 25, 2002).

        10.44       Employment  Agreement  dated May 31, 2002  between  the
                    Company and Bruce Fleming  (incorporated by reference to the
                    Quarterly  Report  on Form  10-Q of the  Company  for the 13
                    weeks ended June 29, 2002).

        21          Subsidiaries of the Company (filed herewith).

        23.1        Consent of Independent Auditors (filed herewith).

        23.2        Consent of Independent Auditors, Ernst & Young, LLP
                    (filed herewith).

        99.1        Certification of John L. Reed pursuant to Section 906 of the
                    Sarbanes Oxley Act of 2002 (filed herewith).

        99.2        Certification of John C. Dong pursuant to Section 906 of the
                    Sarbanes Oxley Act of 2002 (filed herewith).

(b)         Reports on Form 8-K

The Company filed a Current Report on Form 8-K on November 25, 2002 for the
purpose of reporting the sale of the Company's 2% convertible notes that are due
and payable on November 20, 2005.


                                       47

<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

                                        By:   /s/ John L. Reed
                                            ------------------------
                                                John  L. Reed
                                                Chief Executive Officer

                                        By:   /s/ John C. Dong
                                            ------------------------
                                                John C. Dong
                                                EVP, Chief Financial Officer

                                        Date:   April 9, 2003

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
<S>                              <C>                                            <C>
Signature                        Title                                          Date

/s/ A.M. Pilaro                  Chairman of the Board of Directors             April 9, 2003
----------------------------
Anthony M. Pilaro

/s/ John L. Reed                 Chief Executive Officer                        April 9, 2003
----------------------------     and Director (Principal Executive Officer)
John L. Reed

/s/Bruce Fleming                 Director                                       April 9, 2003
----------------------------
Bruce Fleming

/s/ R. Eric Montgomery           Director                                       April 9, 2003
----------------------------
R. Eric Montgomery

/s/ Gerald Poch                  Director                                       April 9, 2003
----------------------------
Gerald Poch

/s/ Dr. Gasper Lazzara, Jr.      Director                                       April 10, 2003
----------------------------
Dr. Gasper Lazzara, Jr.

/s/ Brad Peters                  Director                                       April 10, 2003
----------------------------
Brad Peters

/s/ Harry Thompson               Director                                       April 10, 2003
----------------------------
Harry Thompson

/s/ Peter Schechter              Director                                       April 10, 2003
----------------------------
Peter Schechter

/s/ Tim Pierce                   Director                                       April 10, 2003
----------------------------
Tim Pierce
</TABLE>


                                       48

<PAGE>



                      CHIEF EXECUTIVE OFFICER CERTIFICATION


I, John L. Reed, Chief Executive Officer of BriteSmile, Inc., certify that:

 1.          I have reviewed this Annual Report on Form 10-K of BriteSmile, Inc.
             (the "Registrant");

 2.          Based on my knowledge, this Annual Report does not contain any
             untrue statement of a material fact or omit to state a material
             fact necessary to make the statements made, in light of the
             circumstances under which such statements were made, not misleading
             with respect to the period covered by this Annual Report;

  3.         Based on my knowledge, the financial statements, and other
             financial information included in this Annual Report, fairly
             present in all material respects the financial condition, results
             of operations and cash flows of the Registrant as of, and for, the
             periods presented in this Annual Report;

  4.         The Registrant's other certifying officers and I are responsible
             for establishing and maintaining disclosure controls and procedures
             (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
             Registrant and have:

                a)        designed such disclosure controls and procedures to
                          ensure that material information relating to the
                          Registrant, including its consolidated subsidiaries,
                          is made known to us by others within those entities,
                          particularly during the period in which this Annual
                          Report is being prepared;

                b)        evaluated the  effectiveness  of the  Registrant's
                          disclosure  controls and procedures as of a date
                          within 90 days prior to the filing date of
                          this Annual Report (the "Evaluation Date"); and

                c)        presented in this Annual Report our conclusions  about
                          the  effectiveness of the disclosure  controls and
                          procedures based on our evaluation as  of the
                          Evaluation Date;

 5.          The Registrant's other certifying officers and I have disclosed,
             based on our most recent evaluation, to the Registrant's auditors
             and the audit committee of Registrant's board of directors (or
             persons performing the equivalent functions):

                a)        all significant deficiencies in the design or
                          operation of internal controls which could adversely
                          affect the Registrant's ability to record, process,
                          summarize and report financial data and have
                          identified for the Registrant's auditors any material
                          weaknesses in internal controls; and

                b)        any fraud,  whether or not material,  that involves
                          management or other  employees who have a significant
                          role in the  Registrant's  internal controls; and

6.           The Registrant's other certifying officers and I have indicated in
             this Annual Report whether or not there were significant changes in
             internal controls or in other factors that could significantly
             affect internal controls subsequent to the date of our most recent
             evaluation, including any corrective actions with regard to
             significant deficiencies and material weaknesses.



             Date: April 9, 2003
                          ------             /s/ John L. Reed
                                           -----------------------------
                                           John L. Reed
                                           Chief Executive Officer
                                           (Principal Executive Officer)

                                       49

<PAGE>



                      CHIEF FINANCIAL OFFICER CERTIFICATION


I, John C. Dong, Chief Financial Officer of BriteSmile, Inc., certify that:

 1.          I have reviewed this Annual Report on Form 10-K of BriteSmile, Inc.
             (the "Registrant");

 2.          Based on my knowledge, this Annual Report does not contain any
             untrue statement of a material fact or omit to state a material
             fact necessary to make the statements made, in light of the
             circumstances under which such statements were made, not misleading
             with respect to the period covered by this Annual Report;

  3.          Based on my knowledge, the financial statements, and other
              financial information included in this Annual Report, fairly
              present in all material respects the financial condition, results
              of operations and cash flows of the Registrant as of, and for, the
              periods presented in this Annual Report;

  4.          The Registrant's other certifying officers and I are responsible
              for establishing and maintaining disclosure controls and
              procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
              for the Registrant and have:

                  a)      designed such disclosure controls and procedures to
                          ensure that material information relating to the
                          Registrant, including its consolidated subsidiaries,
                          is made known to us by others within those entities,
                          particularly during the period in which this Annual
                          Report is being prepared;

                  b)      evaluated the  effectiveness  of the  Registrant's
                          disclosure  controls and procedures as of a date
                          within 90 days prior to the filing date of
                          this Annual Report (the "Evaluation Date"); and

                  c)      presented in this Annual Report our conclusions about
                          the  effectiveness of the disclosure  controls and
                          procedures based on our evaluation as of the
                          Evaluation Date;

     5.      The Registrant's other certifying officers and I have disclosed,
             based on our most recent evaluation, to the Registrant's auditors
             and the audit committee of Registrant's board of directors (or
             persons performing the equivalent functions):

                  a)     all significant deficiencies in the design or operation
                         of internal controls which could adversely affect the
                         Registrant's ability to record, process, summarize and
                         report financial data and have identified for the
                         Registrant's auditors any material weaknesses in
                         internal controls; and

                  b)     any fraud,  whether or not material,  that involves
                         management or other  employees  who have a significant
                         role in the  Registrant's  internal controls; and

      6.     The Registrant's other certifying officers and I have indicated in
             this Annual Report whether or not there were significant changes in
             internal controls or in other factors that could significantly
             affect internal controls subsequent to the date of our most recent
             evaluation, including any corrective actions with regard to
             significant deficiencies and material weaknesses.



             Date:  April 9, 2003         /s/ John C. Dong
                                          --------------------------------------
                                          John C. Dong
                                          Chief Financial Officer
                                          (Principal Financial and
                                            Accounting Officer)

                                       50

<PAGE>



PART I.  FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS


                                BRITESMILE, INC.
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Report of Independent Auditors............................................ F-2

Report of Independent Auditors............................................ F-3

Consolidated Balance Sheets................................................F-4

Consolidated Statements of Operations......................................F-6

Consolidated Statements of Cash Flows......................................F-8

Consolidated Statements of Shareholders' Equity............................F-9

Notes to Consolidated Financial Statements.................................F-10


                                      F-1


<PAGE>


                         Report of Independent Auditors


The Board of Directors and Shareholders,
BriteSmile, Inc.

We have audited the accompanying consolidated balance sheet of BriteSmile, Inc.
and subsidiaries as of December 28, 2002 and the related consolidated statements
of operations, shareholders' equity, and cash flows for the 52 week period ended
December 28, 2002. Our audit also included the financial statement schedule for
such period listed in the Index at Item 15(a). These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the 2002 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of BriteSmile,
Inc. and subsidiaries at December 28, 2002 and the consolidated results of their
operations and their cash flows for the 52 week period ended December 28, 2002,
in conformity with accounting principles generally accepted in the United
States. Also, in our opinion, the related financial statement schedule for such
period, when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.



/s/ Deloitte & Touche, LLP


March 7, 2003 (April 7, 2003 as to paragraphs 7,8 and 9 of Note 1)
Oakland, California



                                      F-2

<PAGE>


               Report of Ernst & Young, LLP, Independent Auditors

The Board of Directors and Shareholders
BriteSmile, Inc.

We have audited the accompanying consolidated balance sheet of BriteSmile,  Inc.
as of December 29, 2001 and the related  consolidated  statements of operations,
shareholders'  equity,  and cash flows for the 52 weeks ended  December 29, 2001
and the 39 weeks ended December 30, 2000. Our audits also included the financial
statement schedule listed in the Index at Item 15(a). These financial statements
and  schedule  are  the   responsibility  of  the  Company's   management.   Our
responsibility  is to  express  an opinion  on these  financial  statements  and
schedule based on our audit.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the consolidated  financial position of BriteSmile,  Inc.
at December 29, 2001 and the consolidated results of its operations and its cash
flows for the 52 weeks ended  December 29, 2001 and the 39 weeks ended  December
30, 2000, in conformity with  accounting  principles  generally  accepted in the
United States.  Also, in our opinion,  the related financial statement schedule,
when considered in relation to the basic financial  statements taken as a whole,
presents fairly in all material respects the information set forth therein.




                                                      /s/Ernst & Young LLP

March 8, 2002, except for Note 1 as to
which the date is March 28, 2002
Walnut Creek, California


                                      F-3

<PAGE>


PART I - FINANCIAL INFORMATION


ITEM 1.    FINANCIAL STATEMENTS

                                BRITESMILE, INC.
                           CONSOLIDATED BALANCE SHEETS
                                     ASSETS
                        (In Thousands, except share data)

<TABLE>
<CAPTION>
                                                                           December 28,              December 29,
                                                                              2002                      2001
                                                                         --------------           ----------------

  CURRENT ASSETS:
<S>                                                                      <C>                      <C>
       Cash and cash equivalents                                         $        3,527           $          7,162
       Trade accounts receivable, net of allowances of $506 and
          $615, respectively                                                      2,364                      4,311
       Inventories                                                                2,502                      2,540
       Prepaid expenses and other                                                   189                        423
       Notes receivable-current portion                                               -                        335
                                                                         --------------           ----------------

                       Total current assets                                       8,582                     14,771

  PROPERTY, EQUIPMENT AND IMPROVEMENTS:
       Furniture, fixtures and equipment                                          7,600                      7,690
       Teeth whitening equipment                                                 16,682                     13,160
       Leasehold improvements                                                    10,171                     10,491
                                                                         --------------           ----------------
                                                                                 34,453                     31,341

       Less accumulated depreciation and amortization                           (14,164)                    (8,827)
                                                                         --------------           ----------------

                       Net property, equipment and improvements                  20,289                     22,514

  INVESTMENTS, RESTRICTED AS TO USE                                                 843                        843

  OTHER ASSETS                                                                    1,385                      1,719
                                                                         --------------           ----------------

  TOTAL ASSETS                                                           $       31,099           $         39,847
                                                                         ==============           ================
                                                                                                         Continued
</TABLE>








          See accompanying notes to consolidated financial statements.



                                   F-4


<PAGE>


                                BRITESMILE, INC.
                     CONSOLIDATED BALANCE SHEETS (continued)

                      LIABILITIES AND SHAREHOLDERS' EQUITY
                        (In Thousands, except share data)


<TABLE>
<CAPTION>
                                                                                     December 28,              December 29,
                                                                                        2002                      2001
                                                                                 ---------------------     --------------------

   CURRENT LIABILITIES:
<S>                                                                                 <C>                        <C>
        Accounts payable                                                            $       4,793              $       5,512
        Accrued liabilities                                                                 4,403                      4,959
        Deferred revenue                                                                      819                        763
        Accrual for store closures                                                            201                        310
        Note payable to related party                                                         500                        500
         Subordinated convertible debenture, net of discount                                  749                        729
        Capital lease obligation with related party- current portion                          701                        641
                                                                                    -------------              -------------

                     Total current liabilities                                             12,166                     13,414
                                                                                    -------------              -------------

   LONG TERM LIABILITIES
          Capital lease obligations with related party -
                less current portion                                                        1,885                      2,537
          Accrual for store closure                                                         1,035                        900
          Note payable to related party, less current portion                               1,083                      1,583
        Line of credit borrowings                                                           4,714                          -
        Accrued variable rent payable to EVL                                                2,150                          -
          Convertible debenture 2%                                                          3,500                          -
          Other long term liabilities                                                         767                        857
                                                                                    -------------              -------------

                       Total long term liabilities                                         15,134                      5,877
                                                                                    -------------              -------------

                     Total liabilities                                                     27,300                     19,291
                                                                                    -------------              -------------

   COMMITMENTS AND CONTINGENCIES

   SHAREHOLDERS' EQUITY:
        Common stock, $.001 par value; 50,000,000 shares authorized; 2,428,464
            and 2,415,131 shares issued and outstanding as of December 28,
            2002 and December 29, 2001, respectively                                           36                         36
        Additional paid-in capital                                                        139,418                    137,097
        Accumulated deficit                                                              (135,655)                  (116,577)
                                                                                    -------------              -------------

                     Total shareholders' equity                                             3,799                     20,556
                                                                                    -------------              -------------

   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                       $      31,099              $      39,847
                                                                                    =============              =============
</TABLE>







          See accompanying notes to consolidated financial statements.


                                      F-5

<PAGE>


                                BRITESMILE, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                        (In Thousands, except share data)
<TABLE>
<CAPTION>
                                                                 52 Weeks Ended        52 Weeks Ended        39 Weeks Ended
                                                                  December 28,          December 29,          December 30,
                                                                      2002                  2001                  2000
                                                                ------------------    ------------------    ------------------
                                                                ------------------    ------------------    ------------------

   REVENUES:
<S>                                                                   <C>                   <C>                  <C>
        Center whitening fees, net                                    $   12,738            $   14,333           $     9,315
        Associated center whitening fees, net                             22,460                24,048                 5,766
        Product sales                                                      4,125                 4,849                 1,223
                                                                      -----------           -----------          ------------

            Total revenues, net                                           39,323                43,230                16,304

   OPERATING COSTS AND EXPENSES:
        Operating and occupancy costs                                     14,671                16,744                 9,462
        Selling, general and administrative expenses                      34,480                43,492                30,556
        Research and development expenses                                    923                 1,849                 1,811
        Depreciation and amortization                                      6,099                 4,715                 3,830
        Restructuring expense                                                304                   879                   778
        Impairment charges on leasehold improvements                           -                 1,217                 1,254
        Loss on sale/leaseback transaction
                                                                               -                     -                 7,138
                                                                      -----------           -----------          ------------

            Total operating costs and expenses                            56,477                68,896                54,829
                                                                      -----------           -----------          ------------

                 Loss from operations                                    (17,154)              (25,666)              (38,525)
                                                                      -----------           -----------          ------------

        Interest expense                                                  (1,603)               (1,083)               (6,153)
        Interest income                                                       66                   307                   192
                                                                      -----------           -----------          ------------

               Loss before income tax provision and
                  cumulative effect of change in accounting
                  principle                                             (18,691)              (26,442)              (44,486)

   Income tax provision
                                                                              80                    57                    26
                                                                      -----------           -----------          ------------

   Net loss before cumulative effect of change in accounting
        principle                                                        (18,771)              (26,499)              (44,512)
   Cumulative effect of change in accounting principle
        (Note 3)                                                               -                     -                 (272)
                                                                      -----------           -----------          ------------

               Net loss                                               $  (18,771)           $  (26,499)          $   (44,784)

   DEEMED DIVIDEND RELATED TO WARRANTS                                       307                     -                     -
                                                                      -----------           -----------          ------------

   NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS                       $  (19,078)           $  (26,499)          $   (44,784)
                                                                      ===========           ===========          ============

   Basic and diluted net loss per share before cumulative
       effect of change in accounting principle                       $    (7.86)           $   (11.85)               (27.26)
                                                                      ===========           ===========          ============

   Cumulative effect of change in accounting principle                         -                     -           $     (0.17)
                                                                      ===========           ===========          ============

   Basic and diluted net loss per share                               $    (7.86)           $   (11.85)          $    (27.43)
                                                                      ===========           ===========          ===========

   Weighted average shares - basic and diluted
                                                                       2,427,412             2,236,688             1,632,912
                                                                      ===========           ===========          ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       F-6


<PAGE>


                        BRITESMILE, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In Thousands)



<TABLE>
<CAPTION>
                                                                       52 Weeks              52 Weeks              39 Weeks
                                                                        Ended                 Ended                 Ended
                                                                     December 28,          December 29,          December 30,
                                                                         2002                  2001                 2000
                                                                    -----------------    ------------------    ------------------

CASH FLOWS USED IN OPERATING ACTIVITIES:
<S>                                                                    <C>                   <C>                   <C>
   Net loss                                                            $   (18,771)          $   (26,499)          $   (44,784)
   Adjustments to reconcile net loss to net cash used in operating
      activities:
            Depreciation and amortization                                    6,099                 4,715                 3,830
            Write off of property and equipment                                 76
            Amortization of discount on debt                                    20                    20                   198
            Loss on sale/leaseback transaction                                   -                     -                 7,138
            Impairment charges on leasehold improvements                         -                 1,217                 1,254
            Debt conversion expense, including accrued interest
                converted to equity                                            724                   385                 5,736
            Costs recognized for issuance of stock and stock options         1,013                 1,554                   313
            Changes in assets and liabilities:
                    Trade accounts receivable                                1,947                (1,516)               (2,061)
                    Inventories                                                 38                  (175)               (1,174)
                    Prepaid expenses and other                                 234                   460                   (49)
                    Other assets                                               113                  (150)                 (726)
                    Accounts payable                                          (719)               (2,917)                6,565
                    Accrued liabilities                                      1,594                 1,853                 2,031
                    Deferred revenue                                            56                   (13)                  776
                    Other long-term liabilities                                (64)                  421                   314
                                                                       ------------          ------------          ------------

                        Net cash used in operating activities               (7,640)              (20,645)              (20,639)
                                                                       ------------          ------------          ------------

CASH FLOWS USED IN INVESTING ACTIVITIES:
   Proceeds from sales of assets                                                 -                     -                 5,000
   Repayment of notes receivable                                               391                   335                   112
   Purchase of property and equipment                                       (3,948)              (11,225)              (14,968)
                                                                       ------------          ------------          ------------

                        Net cash used in investing activities               (3,557)              (10,890)               (9,856)
                                                                       ------------          ------------          ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Payments of capital lease obligation                                       (592)                 (394)                    -
   Principal payments on long-term debt                                       (500)                 (417)                    -
   Proceeds from issuance of debt                                            3,500                 2,500                25,000
   Borrowings from line of credit                                            4,714                     -                     -
   Proceeds from common stock offerings                                          -                26,623                     -
   Proceeds from exercise of stock options and warrants                        440                 4,684                   227
                                                                       ------------          ------------          ------------

                        Net cash provided by financing activities            7,562                32,996                25,227
                                                                       ------------          ------------          ------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                        (3,635)                1,461                (5,268)

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD                         7,162                 5,701                10,969
                                                                       ------------          ------------          ------------

CASH AND CASH EQUIVALENTS AT END OF THE PERIOD                         $     3,527           $     7,162           $     5,701
                                                                       ============          ============          ============
</TABLE>







           See accompanying notes to consolidated financial statements
                                                                           .


                                      F-7

<PAGE>


                        BRITESMILE, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
                                 (In Thousands)


<TABLE>
<CAPTION>
                                                                 52 Weeks              52 Weeks              39 Weeks
                                                                  Ended                 Ended                 Ended
                                                               December 28,          December 29,          December 30,
                                                                   2002                  2001                  2000
                                                                   ----                  ----                  ----

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
<S>                                                          <C>                    <C>                 <C>
     Cash paid for interest                                  $        617           $        291        $        232
                                                             =============          =============       =============

     Cash paid for income taxes                              $         80           $         57        $         26
                                                             =============          =============       =============

SUPPLEMENTAL DISCLOSURE OF NON CASH ITEMS:
     Conversion of debt, including accrued
         interest of $132  equity                            $          -           $      5,132        $     19,395
                                                             =============          =============       =============

     Fair value of stock options and warrants issued
         to consultants                                      $          -           $          -        $        352

     Fair value of warrants issued in debt financing
         arrangements                                        $        158           $          -        $      2,787
                                                             =============          =============       =============
     Equipment acquired under capital lease obligations      $          -           $      2,373        $      1,199
                                                             =============          =============       =============
</TABLE>


















           See accompanying notes to consolidated financial statements
                                                                           .

                                      F-8

<PAGE>


                        BRITESMILE, INC. AND SUBSIDIARIES
                 Consolidated Statements of Shareholders' Equity
                                 (In Thousands)


<TABLE>
<CAPTION>
                                                                          Additional                                 Total
                                            Common           Shares        Paid-In           Accumulated          Shareholder's
                                            Shares           Amount        Capital             Deficit               Equity
                                           ------------- ------------------------------   ------------------   --------------------

<S>              <C>                           <C>           <C>          <C>                <C>                   <C>
Balance at April 1, 2000                       1,591         $   24       $ 73,389           $ (45,294)            $   28,119
Exercise of stock options                         10              -            227                   -                    227
Beneficial conversion related
   to debt financing                               -              -          3,378                   -                  3,378
Income tax benefit on exercise
   of stock options                                -              -          3,253                   -                  3,253
Valuation allowance for income
   tax benefit on exercise of
   stock options                                   -              -         (3,253)                  -                 (3,253)
 Stock option compensation cost                    -              -            479                   -                    479
Conversion of long-term debt to
   common stock                                  316              5         19,390                   -                 19,395
Issuance of warrants in connection
   with financing agreement                        -              -          2,705                   -                  2,705
 Net loss and comprehensive loss                   -              -              -             (44,784)               (44,784)
                                           ----------        -------      ---------          ----------            -----------
Balance at December 30, 2000                   1,917             29         99,568             (90,078)                 9,519
Exercise of stock options                         65              1          4,124                   -                  4,125
Stock option compensation cost                     -              -          1,097                   -                  1,097
Conversion of long-term debt to
   common stock                                   68              1          5,131                   -                  5,132
Exercise of warrants                               7              -            559                   -                    559
Private placement of common stock, net of
   placement fees of $1,400 and fair
   value of  warrants issued to placement
    agent                                        358              5         26,618                   -                 26,623
Net loss and comprehensive loss
                                                   -              -              -             (26,499)               (26,499)
                                           ----------        -------      ---------          ----------            -----------
Balance at December 29, 2001                   2,415             36        137,097            (116,577)                20,556
Deemed dividend related to warrants                -              -            307                (307)                     -
Exercise of stock options                         13              -            440                   -                    440
Stock option compensation and warrant cost         -              -          1,574                   -                  1,574
Net loss and comprehensive loss                    -              -              -             (18,771)               (18,771)
                                           ----------        -------      ---------          ----------            -----------
Balance at December 28, 2002                   2,428         $   36       $139,418           $(135,655)            $    3,799
                                           ==========        =======      =========          ==========            ===========
</TABLE>








           See accompanying notes to consolidated financial statements
                                                                           .

                                      F-9


<PAGE>


                                BriteSmile, Inc.
                   Notes to Consolidated Financial Statements





<PAGE>


1.  Description of Business and Liquidity

BriteSmile, Inc., a Utah corporation ("BriteSmile" or the "Company"), and its
affiliates develop, and sell advanced teeth whitening products, services and
technology. The Company'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").
The Company also offers its products and technologies through arrangements with
existing independent dental offices known as BriteSmile Professional Teeth
Whitening Associated Centers ("Associated Centers").

Centers are located in major metropolitan areas nationwide and offer clients a
salon-like environment dedicated solely to the business of teeth whitening.
Centers are staffed by licensed dentists and trained dental assistants. As of
the date of this report, the Company has 14 Centers in operation. As an
alternative to the Company-owned Centers, consumers can visit an Associated
Center, where a local dentist administers the BriteSmile procedure in the
dentist's established office. To date, the Company has entered into contracts
with 4,636 Associated Centers, including 3,321 in the United States, and 1,315
in 67 countries outside the United States. 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 developed its current teeth whitening technology (the "BriteSmile
Light Activated Teeth Whitening System," "BS2000" or "LATW") and began
distribution in 1999. In November 1999 the Company introduced its new BriteSmile
3000 LATW keycard system (the "BS3000") to Associated Centers. The BS3000, a
mobile version of the BS2000, can be installed quickly and provides improved
flexibility and mobility in dental offices. In May 2001, the Company introduced
its more versatile mobile device, the BS3000PB, which is the device currently
shipped to Associated Centers. The BS2000, BS3000, and BS3000PB teeth whitening
devices utilize a light technology. The unique delivery arm of these devices
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.

Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and related Information," ("SFAS No. 131") established
standards for reporting information about operating segments in financial
statements. Operating segments are defined as components of an enterprise about
which separate financial information is available that is evaluated regularly by
the chief decision maker, or chief decision-making group, in deciding how to
allocate resources and in assessing performance. Our President and CEO is our
chief decision maker. Our business is focused on one industry segment, products
and procedures to whiten teeth. All of our revenues and profits are generated
through the sale, licensing, and service of products for this one segment.
Revenue from outside the United States of America in Fiscal 2002 was $5 million,
12.7% of total revenue, and long-term assets outside the United States of
America, net were $5.2 million, 25.9% of total long-term assets, net.

Liquidity

To date, the Company has yet to achieve profitability. The Company does not
expect to be profitable in 2003. The Company has implemented initiatives to
increase sales and decrease expenses to assure its viability for the next 12
months. The Company also has developed a contingency plan in anticipation of
prolonged negative business impact resulting from the War in Iraq.

To date, the Company's principal sources of liquidity have been proceeds from
issuance of common stock and debt. At December 28, 2002. the Company had $3.5
million in cash and borrowing capacity under lines of credit totaling $300,000.

Additionally, as discussed below, subsequent to December 28, 2002, the Company
obtained the following borrowing availability:


                                      F-10

<PAGE>


        o    $500,000 convertible notes under the same terms as the  November
             2002 Notes described in Note 9.
        o    $1.5 million increase in the Credit Agreements with CAP Advisers.
             The increase is for international revenue  generating initiatives.
        o    $2.5 million Center Loan with CAP Advisers, as described below.

In April 2003, the Company obtained a commitment from CAP Advisers for a $2.5
million Center Loan (the "2003 Center Loan") to be used for capital expenditures
and other specific revenue generating initiatives to be agreed and defined by
BriteSmile and Cap Advisers and up to $800,000 for general working capital.
Interest is fixed at 6%, payable monthly, with Cap Advisers having the right to
reset the interest rate to 200bps over 1 year LIBOR after giving BriteSmile 30
days notice. A variable fee payment of $25 per procedure performed on the
existing 127 Center chairs will commence on May 11, 2006, and continue until May
10, 2011. Variable fees will be payable 40 days after the end of the month in
which the procedures are performed, except for fees due for April/May 2011,
which will become payable on the maturity date. On an annualized basis the first
$500,000 of variable fees will be applied to the principal such that the $2.5M
will be fully repaid over 5 years commencing May 11, 2006. Variable payments in
excess of the annual amortization of $500,000 are deemed additional interest to
Cap Advisers.

The Company believes that cash on hand along with available borrowing capacity
discussed above will be sufficient to sustain operations through the end of
2003.

2.  Summary of Significant Accounting Policies

Year-End

In 2000, the Company changed its fiscal year-end to a 52/53-week period ending
on the last Saturday in December of each year. Consequently, the accompanying
financial statements reflect the audited financial position and results of
operations of the Company for the 52 weeks ended December 28, 2002 and December
29, 2001, and the 39 weeks ended December 30, 2000.

Stock Split

Effective January 27, 2003, the Company's shareholders approved a 15 to 1
reverse stock split. All share and per share amounts in the accompanying
consolidated financial statements have been restated to reflect the reverse
stock split.

Consolidation

The accompanying consolidated financial statements include the accounts of the
Company, its subsidiaries, and entities (Centers) in which the Company has a
controlling interest. The Company consolidates the Centers for financial
reporting because the Company has a controlling financial interest in the
Centers. The agreements with the Centers are 30 year, non-terminable agreements
that provide the Company a financial interest in the PPM (Physician Practice
Management Entities) and exclusive authority over all decision-making other than
the dispensing of medical services. All inter-company balances and transactions
have been eliminated upon consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ materially from those
estimates.


                                      F-11

<PAGE>


Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. Cash and cash
equivalents are recorded at cost at the date of purchase, which approximates
fair value.

Cash and Short-Term Investments, Restricted as to Use

At December 28, 2002 and December 29, 2001, $843,000 of the Company's cash and
short-term investments was used to collateralize letters of credit and is
restricted as to use until September 2008.

Concentrations of Credit Risk

Credit Risk

Financial instruments that potentially subject the Company to a significant
concentration of credit risk consist principally of cash, cash equivalents and
trade accounts receivable.

The Company maintains cash and cash equivalents with various financial
institutions. These financial institutions are located throughout the United
States of America and the Republic of Ireland. The Company's policy is designed
to limit exposure to any one institution. The Company has not experienced any
significant losses on its cash and cash equivalents. The Company performs
periodic evaluations of the relative credit standing of those financial
institutions that are considered in the Company's investment strategy. The
Company does not require collateral on these financial instruments.

Concentration of credit risk with respect to trade accounts receivable are
limited due to the large number of entities comprising the Company's customer
base. No one customer accounted for 10% or more of revenue during any of the
fiscal years covered in this report.

The Company performs ongoing credit evaluations of its associated centers and
generally does not require collateral.

Supply Risk

Goods purchased to produce the LATW system and equip the Centers and Associated
Centers are in some cases unique and purchased from a single vendor. In those
cases the Company believes it could purchase items meeting its design
specifications from other vendors within the industry. Overall, the Company
believes it has access to sufficient quantities of goods and materials at
competitive prices to enable it to operate effectively.

Revenue Recognition

The Company recognizes revenue related to retail products at the time such
products are sold to customers.

The Company recognizes revenue from teeth whitening procedures performed at its
Centers and Associated Centers when the procedures have been performed. The
Company defers the revenue generated on the sale of key cards and activation
codes to Associated Centers and recognizes the income over the estimated
performance period, which the Company has calculated to be 30 days. Revenue is
reported net of discounts and allowances. Additionally, Associated Center
revenue for the year ended December 28, 2002, December 29, 2001 and the
Transition Period, has been reduced by $163,000, $163,000 and 122,000,
respectively, due to charges related to warrants issued to Orthodontic Centers
of America ("OCA").


                                      F-12

<PAGE>


Inventories

Inventories are stated at the lower of cost (first-in, first-out) or market.
Inventories at December 28, 2002 and December 29, 2001 consist primarily of
dental supplies, marketing materials and displays and replacement component
parts for the teeth whitening systems, as follows:

                              December 28, 2002      December 29, 2001
                              -------------------    -------------------
        Supplies                        $ 2,240                $ 1,765
        Marketing displays                  262                    775
                                        -------                -------

        Total Inventory                 $ 2,502                $ 2,540
                                        =======                =======

Other Assets

During 1999, the Company granted warrants to OCA in consideration of OCA
installing BS3000 machines in OCA centers. The value of the warrants was
capitalized and is being amortized as a reduction of revenue over the life of
the agreement (10 years). Other assets were $1.1 million and $1.2 million at
December 28, 2002 and December 29, 2001, respectively, representing the
unamortized cost of the warrants.

Capital Leases

The Company leases certain equipment from a related party (see notes 5 and 7).
Under the terms of these leases, the Company pays (i) a fixed monthly payment of
principal and interest of $75,000 per month and (iii) variable rent payments
equal to $25 per LATW procedure. The variable rent payments are recorded as an
operating cost.

Advertising

Costs of advertising are expensed the first time the advertising takes place.
Advertising costs were $17.1 million, $19.1 million and $16.3 million for the 52
weeks ended December 28, 2002 and December 29, 2001, and the 39 weeks ended
December 30, 2000, respectively, and are included in "Selling, general and
administrative expenses" in the accompanying consolidated statements of
operations.

Property and Equipment

Property and equipment is stated at cost, or in the case of property and
equipment under capital lease, at fair market value, at the date of inception.
Expenditures for maintenance and repairs are charged to expense as incurred, and
expenditures for additions and betterments are capitalized. Furniture and
fixtures and equipment are depreciated for financial reporting purposes over
their estimated useful lives, ranging from three to ten years, using the
straight-line method. Leasehold improvements are amortized for financial
reporting purposes using the straight-line method over the shorter of the
estimated useful life of the asset or the remaining term of the lease.
Amortization expense related to assets under capitalized lease obligations is
included in depreciation.

Stock-Based Compensation

The Company accounts for employee stock options using the intrinsic value method
in accordance with Accounting Principles Board Opinion No. 25. Compensation
expense based on the difference, if any, on the date of grant, between the
estimated fair value of the Company's stock and the exercise price of options to
purchase that stock is amortized over the vesting period of the related option.

The alternative fair value accounting provided for under Financial Accounting
Standards Board Statement No. 123, "Accounting for Stock-Based Compensation"
("FAS 123"), requires use of option valuation models that were not developed for
use in valuing employee stock options. Under APB 25, when the exercise  price of


                                      F-13

<PAGE>

the Company's  employee  stock options equals the market price of the underlying
stock on the date of grant, no compensation expense is recognized.

The fair value of the Company's options was estimated at the date of grant using
a Black-Scholes option pricing valuation model with the following
weighted-average assumptions: volatility of 1.09, 1.13 and 1.31 for the 52 weeks
ended December 28, 2002, the 52 weeks ended December 29, 2001 and the 39 weeks
ended December 30, 2000, respectively; an average risk-free interest rate of
4.25%, 4.75% and 5.72% for the 52 weeks ended December 28, 2002, for the 52
weeks ended December 29, 2001 and the 39 weeks ended December 30, 2000,
respectively; dividend yield of 0%; and a weighted-average expected life of the
option of 10 years.

Option valuation models were developed for use in estimating the fair value of
traded options that have no vesting restrictions and are fully transferable. In
addition, option valuation models require the input of highly subjective
assumptions, including the expected life of the option. Because the Company's
employee stock options have characteristics significantly different from those
of traded options and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of the fair value of
its employee stock options.

Had compensation cost for the Company's stock-based compensation plans been
determined using fair value at the grant award dates using the Black-Scholes
option pricing valuation model, the Company's reported net loss applicable to
common shareholders and basic and diluted net loss per share would have been
increased to the pro forma amounts indicated below (in thousands, except per
share data):

<TABLE>
<CAPTION>
                                                           52 Weeks Ended        52 Weeks Ended December          39 Weeks Ended
                                                            December 28,                   29,                     December 30,
                                                                2002                      2001                         2000
                                                       --------------------     -----------------------      --------------------

<S>                                                           <C>                       <C>                          <C>
Loss as reported                                              $ 19,078                  $ 26,499                     $ 44,784
Compensation expense reported under
APB25                                                         $   (265)                 $      -                    $       -
Compensation expense computed using
fair value method                                             $  3,562                  $  2,595                     $  1,449
                                                       --------------------     -----------------------      --------------------
Pro forma loss                                                $ 22,375                  $ 29,094                     $ 46,233
                                                       ====================     =======================      ====================
Pro forma basic and diluted
   loss per share                                             $   9.22                  $  13.01                     $  28.31
                                                       ====================     =======================      ====================
</TABLE>

Product Development Cost

Costs associated with the development of new products or services are charged to
operations as incurred. These costs are included in "Research and development
expenses" in the accompanying consolidated statements of operations.

Shipping and Handling Costs

Shipping and handling charges billed to customers are recorded in revenue and
the related expenses are classified in operating and occupancy costs.

Center Opening Costs

Non-capital expenditures incurred in opening a new BriteSmile Professional Teeth
Whitening Center are expensed as incurred.


                                      F-14

<PAGE>


Income Taxes

The Company uses the liability method of accounting for income taxes pursuant to
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." Under the liability method, deferred tax assets and liabilities are
provided on differences between the financial reporting and taxable loss, using
the enacted tax rates.

Impairment of Long-Lived Assets

The Company evaluates its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. The Company does not perform a periodic assessment of assets for
impairment in the absence of such information or indicators. Conditions that
would necessitate an impairment assessment include a significant decline in the
observable market value of an asset, a significant change in the extent or
manner in which an asset is used, or a significant adverse change that would
indicate that the carrying amount of an asset or group of assets is not
recoverable. For long-lived assets to be held and used, the Company measures
fair value based on quoted market prices or based on discounted estimates of
future cash flows. Long-lived assets to be disposed of are carried at fair value
less costs to sell.

Fair Value of Financial Instruments

The following methods and assumptions were used by the Company in establishing
its fair value disclosures for financial instruments:

Cash and cash equivalents: The carrying amount reported in the balance sheet for
cash and cash equivalents approximates its fair value.

Accounts receivable, accounts payable, and accrued liabilities: The carrying
amount reported in the balance sheet for accounts receivable, accounts payable,
accrued liabilities and other current liabilities approximates its fair value.

Long and short-term debt: The carrying amounts of the Company's borrowings under
its short-term revolving credit arrangements approximate their fair value. The
fair values of the Company's long-term debt are estimated using discounted cash
flow analyses, based on the Company's current incremental borrowing rates for
similar types of borrowing arrangements. The carrying amounts of the Company's
long-term debt approximate their fair value.

Loss Per Common Share

Basic net loss per share is calculated as net loss divided by the
weighted-average number of common shares outstanding. For all periods presented,
diluted net loss per share is equal to basic net loss per share. Common
equivalent shares from stock options and warrants (using the treasury stock
method) and convertible notes payable is anti-dilutive.

Recent Accounting Pronouncements

In August 2001, the FASB issued Statement of Financial Accounting Standards No.
144, "Accounting for the Impairment or Disposal of Long-lived Assets" ("SFAS
144"). SFAS 144 amends existing accounting guidance on asset impairment and
provides a single accounting model for long-lived assets to be disposed of.
Among other provisions, the new rules change the criteria for classifying an
asset as held-for-sale. The standard also broadens the scope of businesses to be
disposed of that qualify for reporting as discontinued operations, and changes
the timing of recognizing losses on such operations. The Company adopted this


                                      F-15

<PAGE>

statement at the beginning of 2002 and adoption did not have a material impact
on its consolidated financial statements.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with
Exit or Disposal Activities, which addresses accounting for restructuring and
similar costs. SFAS 146 supersedes previous accounting guidance, principally
Emerging Issues Task Force Issue No. 94-3. The Company will adopt the provisions
of SFAS 146 for restructuring activities initiated after December 28, 2002. SFAS
146 requires that the liability for costs associated with an exit or disposal
activity be recognized when the liability is incurred. Under Issue 94-3, a
liability for an exit cost was recognized at the date of the Company's
commitment to an exit plan. SFAS 146 also establishes that the liability should
initially be measured and recorded at fair value. Accordingly, SFAS 146 may
affect the timing of recognizing future restructuring costs as well as the
amounts recognized.

Reclassifications

Certain prior year balances have been reclassified to conform to the current
year presentation.

3. Change in Accounting Principle

During the last quarter of the Transition Period ended December 30, 2000, and
retroactive to April 1, 2000, the Company has changed its method of accounting
to recognize revenue from Associated Centers ratably over the estimated period
in which the Associated Centers perform the procedures, commencing when the key
card is shipped or the activation code is provided. Previously, the Company
recognized revenues from Associated Centers when the keycard to activate the
machine was shipped or the activation code is provided. The effect of the change
of implementing SAB 101 for the Transition Period ended December 30, 2000 was to
record a loss of $272,000 ($0.17 per share) as a cumulative effect of a change
in accounting principle. The $272,000, which represented deferred revenue at
April 2, 2000, was recognized as revenue during the 39 weeks ended December 30,
2000. The pro forma effect of adopting SAB 101 was an increase in net loss of
$272,000 ($0.17 per share) for the 39 weeks ended December 30, 2000.

4.  Restructuring and Impairment Charges

During the 52 weeks ended December 28, 2002, the Company recorded additional
$304,000 charge related to leases obligations..

During the 52 weeks ended December 29, 2001, the Company decided not to continue
the construction of a Center in San Francisco, California. As a result of this
decision, the Company recorded a non-cash impairment charge of $1.2 million
related to leasehold improvements to be abandoned, whose fair value, based on
estimates of recovery on sub-leases, was determined to be $0. The Company also
recorded an accrual to reserve for an estimated $934,000 related to the
remaining lease obligation for closed stores.

During the 39 weeks ended December 30, 2000, the Company's Board of Directors
and management decided to close three of its less productive Centers. These
Centers were located in Pasadena, California, Ft. Lauderdale, Florida, and Coral
Gables, Florida. As a result of the decision to close these locations, the
Company recorded a non-cash impairment charge of $1.3 million related to
leasehold improvements to be abandoned, whose fair value, based on estimates of
recovery on sub-leases, was determined to be $0. The Company also recorded an
accrual of $161,000 related to severance costs for 12 employees, and an accrual
of $617,000 related to lease termination costs for the closed Centers.


                                      F-16

<PAGE>


The following table sets forth the restructuring activity during the years ended
(in thousands):

<TABLE>
<CAPTION>
                             Accrual for                                                  Accrual for
                           Store  Closures                                              Store Closures
                           at December 29,        Restructuring                         at December 28,
                                2001                 Charges            Cash Paid            2002
                          -------------------    ----------------     --------------  -------------------

<S>                       <C>                    <C>                  <C>             <C>
Restructuring expense     $            1,210     $             -      $        (278)  $              932
Revision of December 29,
  2001 estimate                            -                 304                  -                  304
                          -------------------    ----------------     --------------  -------------------
Total                     $            1,210     $           304      $        (278)  $            1,236
                          ===================    ================     ==============  ===================
</TABLE>




<TABLE>
<CAPTION>
                           Accrual for Store                                           Accrual for Store
                              Closures at         Restructuring                          Closures at
                           December 30, 2000         Charges            Cash Paid      December 29, 2001       Asset Write-Offs
                          -------------------    ----------------     --------------  -------------------  ---------------------

<S>                       <C>                    <C>                  <C>             <C>                  <C>
Restructuring expense     $              617     $           934      $        (286)  $            1,318

Severance                                161                   -               (161)                   -
Revision of December 30,
    2000 estimate                          -                  (55)                 -                (108)
                          -------------------    ----------------     --------------  -------------------
Total                     $              778     $           879      $        (447)  $            1,210
                          ===================    ================     ==============  ===================

Impairment charges                                                                                         $             1,217
                                                                                                           =====================
</TABLE>

5.  Sale/Leaseback Transaction

Effective December 29, 2000, as amended in February 2001, the Company secured a
lease line of up to $15 million from Excimer Vision Leasing L.P. ("EVL"), a
related party. Under this agreement, the Company entered into a sale-leaseback
arrangement. During the period ended December 30, 2000, the Company sold 1,245
of its BS3000PB whitening devices for $5 million and leased them back for a
period of 5 years. The leaseback has been accounted for as a capital lease. A
loss of $7.1 million on this transaction has been recognized in the period ended
December 30, 2000 as the fair market value of the equipment sold was less than
its carrying value. The decline in fair value was the result of a decision to
change to a new model of machine and to outsourcing the manufacturing, which
contributed to a significant decline in the cost to purchase new machines. The
Company will pay EVL a monthly rental for each device consisting of a fixed
amount (ranging from twenty dollars to thirty dollars) plus one hundred
twenty-five dollars for each key card.

The agreement further provided that EVL would spend up to an additional $10
million towards the purchase of 1,755 BS3000PB devices to be leased to the
Company under the same terms described above. To the extent the purchase price
of the additional 1,755 devices exceeded $10 million, the Company was obligated
to pay the difference. As of December 29, 2001, the Company had fully utilized
the lease line made available by EVL.


                                      F-17

<PAGE>


On March 8, 2002, the Company and EVL amended their lease agreement to provide
that the variable rent portion of the monthly rental payments due during 2002,
in the amount of twenty-five dollars for each BriteSmile procedure, will be
deferred and paid to EVL in twelve equal monthly installments beginning January
9, 2003, with interest payable on the deferred amount ($2.1 million at December
28, 2002) at a rate equal to LIBOR as quoted by The Bank of Nova Scotia for the
applicable adjustment dates for deposits in U.S. Dollars for one month
maturities, plus 200 basis points.

On January 1, 2003, the Company and EVL amended their lease agreement to provide
that the variable rent portion of the monthly rental payments due for 2002 and
2003 be deferred until January 1, 2004. In addition, interest payable on the
deferred amount, due on the 9th of each month, is calculated at a rate equal to
LIBOR as quoted by The Bank of Nova Scotia for the applicable adjustment dates
for deposits in U.S. Dollars for one month maturities, plus 200 basis points.

6.    Accrued Liabilities

Accrued liabilities consist of the following (in thousands):

                                             December 28,     December 29,
                                                 2002             2001
                                                 ----             ----

    Accrued salaries and benefits              $   840         $  1,183
    Accrued professional services                  728              369
    Accrued advertising                          1,064              930
    Other accrued expenses                       1,771            2,477
                                               --------        ---------

    Total                                      $ 4,403         $  4,959
                                               ==-======       =========

7.     Leases

The Company leases certain equipment under capital leases. The leases for
equipment require the payment of certain fixed payments and contingent variable
rentals based on usage. Payments related to variable rent were $2,150,000,
$2,680,000, and $0 for the 52 weeks ended December 28, 2002 and December 29,
2001 and the 39 weeks ended December 30, 2000, respectively.

The cost of assets under capital lease obligations was $3.6million at December
28, 2002 and December 29, 2001. Accumulated amortization related to assets under
capital lease obligations at December 28, 2002 and December 29, 2001 was $1.2
million and $516,000.

The Company recorded amortization expense of $717,000, $516,000, and $0 under
capital leases for the 52 weeks ended December 28, 2002, 52 weeks ended December
29, 2001 and the 39 weeks ended December 30, 2000, respectively.

 The Company also leases office and retail space under non-cancelable operating
leases with initial terms of five to ten years, including various renewal
options and escalation clauses. Future minimum payments under capital leases and
non-cancelable operating leases with initial terms of one year or more consisted
of the following at December 28, 2002 (in thousands):

                                                  Capital           Operating
                                                   Leases             Leases

         2003                                 $ 956                  $2,921
         2004                                   900                   2,523
         2005                                   900                   1,974


                                      F-18

<PAGE>

         2006                                   230                   1,786
         2007                                     -                   1,456
         Thereafter                               -                   2,261
                                             -------               ---------
         Total minimum lease payments         2,986                 $12,921
                                                                    ========
         Amount representing interest           400
                                             -------
         Present value of net minimum
            lease payments                    2,586
         Less current portion                  (701)
                                              -------
         Long-term capital lease obligations $1,885
                                              =======

Rent expense was $3.3 million, $3.7 million and $2.6 million for the 52 weeks
ended December 28, 2002 and December 29, 2001,and the 39 weeks ended December
30, 2000, respectively.

8.   Income Taxes

The Company accounts for income taxes using the asset and liability method under
SFAS No. 109, "Accounting for Income Taxes". The Company provides a deferred tax
expense or benefit for differences between financial accounting and tax
reporting. Deferred income taxes represent future net effects of temporary
differences between the financial statement and tax basis of assets and
liabilities, using enacted tax rates in effect for the year in which the
differences are expected to reverse.

The income tax expense (benefit) consisted of (in thousands):

<TABLE>
<CAPTION>
                                         52 weeks          52 weeks            39 weeks
                                          ended              ended               ended
                                       December 28,       December 29,        December 30,
                                           2002               2001                2000
                                           ----               ----                ----
   Current:
<S>                                     <C>              <C>                   <C>
       Federal                          $       -        $         -           $       -
       State                                   80                 57                  26
                                        ----------       -------------         -----------
   Total current                               80                 57                  26
                                        -----------      -------------         -----------

   Deferred:
       Federal                          $       -        $         -           $       -
       State                                    -                  -                   -
                                        -----------      -------------         -----------
   Total deferred                               -                  -                   -
                                        -----------      -------------         -----------
       Total current and deferred       $       80       $         57          $       26
                                        ===========      =============         ===========
</TABLE>




                                      F-19


<PAGE>


Significant components of the Company's deferred tax balances at December 28,
2002 are as follows (in thousands):


<TABLE>
<CAPTION>
                                                              December 28,              December 29,
   Current deferred tax assets:                                   2002                      2001
                                                                  ----                      ----
<S>                                                          <C>                         <C>
         Reserves and accruals                               $      1,432                $       433
         Other, net                                                   916                        605
                                                          ---------------------     ----------------------
               Current deferred tax asset                           2,348                      1,038
                                                          ---------------------     ----------------------

   Long-term deferred tax asset
         Net operating loss carryforwards                          45,632                     38,542
         Property and equipment                                     1,343                      2,687
         Tax       credit carryforwards                                         .
                                                                      441                        378
                                                          ---------------------     ----------------------
               Long-term deferred income tax assets                47,416                     41,607
                                                          ---------------------     ----------------------
   Total deferred income tax asset                                 49,764                     42,645
                                                          ---------------------     ----------------------
   Valuation allowance                                            (49,764)                   (42,645)
                                                          ---------------------     ----------------------
   Net deferred tax assets                                   $          -                $         -
                                                          =====================     ======================
</TABLE>

A reconciliation of the federal statutory tax rate to our effective state rate
is as follows:

<TABLE>
<CAPTION>
                                                              52 Weeks          52 Weeks         39 Weeks
                                                               ended             ended           ended
                                                            December 28,      December 29,     December 30,
                                                                2002               2001            2000
                                                                ----               ----            ----

<S>                                                               <C>             <C>             <C>
   Provision at statutory tax rate                               -34.00%         -34.00%         -34.00%
   State income tax benefits, net
      of Federal benefit                                          -3.90%          -6.00%          -5.90%
   Non-deductible items                                            0.17%          -7.04%           5.31%
   Tax on  foreign  earnings  at less  than U.S.
   Rates                                                          -2.21%               -            -
   Valuation allowance                                            40.11%          47.26%          34.60%
                                                                  ------          ------          ------
   Total                                                           0.17%           0.22%           0.01%
                                                                ========         ========         =======
</TABLE>

A valuation allowance is provided when it is more likely than not that some
portion of the deferred tax asset will not be realized. The Company established
a valuation allowance at December 28, 2002 due to the uncertainty of realizing
tax benefits from certain of its net operating loss ("NOL") carryforwards and
credits.

As of December 28, 2002, the Company had federal and state net operating loss
carryforwards of approximately $117.4 million and $93.4 million, respectively.
These net operating loss carryforwards will expire in years 2010 through 2022
for federal income tax expense purposes and years 2004 through 2012 for state
income tax purposes. Additionally, the Company has approximately $660,000 of net
operating losses from the Republic of Ireland that may be carried forward
indefinitely. A portion of the federal and state losses is attributable to
professional corporations formed to comply with the corporate practice of
medicine statutes in the jurisdictions where the Company has operations. These
professional corporations are not consolidated for income tax purposes. Net
operating loss carryforwards may be limited in the event of a change in control.

The Company has approximately $378,000 of tax credits that under current tax law
can be used to offset future income tax liabilities. These credits will begin to
expire in 2005 if not utilized.


                                      F-20

<PAGE>


9.     Financing Arrangements

Following is a summary of the Company's long and short-term debt financing
arrangements (in thousands):

<TABLE>
<CAPTION>
                                                  December 28,           December 29,
                                                      2002                   2001
                                                      ----                   ----

         Note Payable to EVL, a related party,
<S>                 <C> <C>                               <C>                    <C>
            due May 10, 2006                              $ 1,583                $ 2,083
         Line of credit                                     4,714                      -
         2% Convertible Promissory Note                     3,500                      -
         EVL variable rent                                  2,150                      -
         5%  Subordinated  Convertible  Notes
          (net of  discount of $51 and $71)                   749                    729
                                                  ------------------ ----------------------
                                                         $ 12,696                $ 2,812
                                                  ================== ======================
</TABLE>

The following table presents the approximate annual maturities of debt, net of
discounts, for the 52 weeks ended December (in thousands):

                    2003          $      500
                    2004               2,650
                    2005               4,749
                    2006               4,797
                                ---------------
                    Total         $   12,696
                                ===============


On June 29 and August 3, 2000, the Company sold to eleven investors (the
"Investors"), in a private placement, its 5% Subordinated Convertible Notes due
June 29, 2005 (the "August 2000 Notes") in the aggregate principal amount $20
million.

Initially, the August 2000 Notes were convertible into shares of the Company's
common stock at a per share conversion price of $92.70. The Company also issued
to the Investors, pro rata, warrants (the "Warrants") to purchase a total of
107,875 shares of common stock, which have a term of five years and initially
had an exercise price of $108.15 per share. The fair value of the warrants
issued of $2.1 million was recorded as a discount of the August 2000 Notes and
was being amortized over the life of the notes to interest expense. Seven of the
Investors, who purchased an aggregate amount of $15.7 million of the August 2000
Notes, are affiliates of the Company.

On December 5, 2000, the Company sold to LCO Investments Ltd in a private
placement a Convertible Promissory Note (the "December 2000 Note") in the
aggregate principal amount of $5 million. In conjunction with the issuance of
the December 2000 Note, warrants to purchase 16,667 shares of common stock were
issued at an exercise price of $75.00 per share. The warrants have a contractual
life of 5 years and remain outstanding and unexercised. The fair value of the
warrants issued of $253,000 was recorded as a discount of the December 2000 Note
and was being amortized over the life of the note to interest expense. The
December 2000 Note was convertible into shares of common stock of the Company at
a conversion price of $75.00 per share. On April 10, 2001, LCO Investments Ltd.
converted its Promissory Note in the original principal amount of $5 million,
together with accrued interest of $132,644, into 68,435 shares of restricted
common stock. The unamortized fair value of the warrants was recorded as
interest expense upon conversion of the Note.

As a result of the issuance of the December 2000 Note, the conversion price of
the August 2000 Notes, and the exercise price of the warrants, was automatically
adjusted to $75.00 per share. Additionally, the fair value of the  Warrants  was


                                      F-21

<PAGE>

adjusted  to $2.3  million  based  upon the change in  conversion  price and the
discount of the August 2000 Notes was adjusted  accordingly.  The new fair value
of the warrants  was  amortized  on a  straight-line  basis over the life of the
notes to interest expense.

In December 2000, two investors converted $5.6 million of their original August
2000 Notes, together with accrued interest, into an aggregate of 74,822 shares
of common stock. This conversion was effected at the $75.00 conversion price.

Effective December 14, 2000, certain of the other original Investors agreed with
the Company to convert an aggregate of $13.6 million in principal amount of
their August 2000 Notes, together with interest, into 237,904 shares of common
stock at an amended conversion price of $57.938 per share.

Upon conversion of the notes, the related unamortized discount of $2.2 million
arising from the fair value of the Warrants was recorded as interest expense.

The Company also recorded $314,000 of additional interest expense related to the
$75.00 per share beneficial conversion rate offered the Investors, and $3.1
million of additional interest expense related to the $57.938 per share
inducement to convert offered to Investors as noted above. The amounts represent
the difference between the stated conversion rates of the August 2000 Notes and
the effective conversion rates considering the relative fair value attributed to
the notes and the related warrants.

As of December 28, 2002, $800,000 of the original August 2000 Notes remain
outstanding. As a result of the issuance of the November 2002 Notes described
below, the conversion price of these original August 2000 Notes, and the
exercise price of the Warrants, was automatically adjusted to $6.00 per share.
The unamortized discount on these notes is $51,000 as of December 28, 2002 and
is being amortized over the life of the notes to interest expense. As a result
of the change in the exercise price of the warrants, the Company recorded a
deemed dividend of $307,000 representing the change in the value of warrants.

Of the original Warrants issued in the August 2000 Note Offering, 100,421
Warrants remain outstanding and unexercised.

The conversion price of the remaining August 2000 Notes, and the exercise price
of the outstanding Warrants, continues to be subject to additional adjustments
from time to time upon the occurrence of certain other events described in the
August 2000 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.

At any time after August 2003, the holders of the August 2000 Notes have the
right, but not the obligation, to elect to cause the Company to redeem all or a
portion of their August 2000 Notes.

Effective March 1, 2001, the Company borrowed $2.5 million from EVL for general
working capital. The loan matures on May 10, 2006. In October 2001, this loan
was amended to allow for early prepayments without penalty. Payments under the
loan consist of "fixed payments" of interest, "variable payments" of principal,
and a "final payment" of principal. An initial fixed payment of $10,417 was paid
on April 1, 2001. Additional monthly payments of $12,500 are due during the loan
period. Variable payments are twenty-five dollars for each BriteSmile teeth
whitening procedure performed at the Company's 14 whitening Centers. Variable
payments totaled $717,000 and $664,000 for the year ended December 28, 2002 and
December 29, 2001, respectively. The final payment, due at maturity, will be the
amount by which the aggregate of variable payments paid during the term of the
loan is less than the original $2.5 million principal amount of the loan.


                                      F-22

<PAGE>


In December 2001, as amended in March 2002, July 2002 and January 2003
BriteSmile International entered into Credit and Security Agreements (the
"Credit Agreements") with CAP Advisers Limited ("CAP Advisers"). The Credit
Agreements provide for secured loans to the Company of up to $5 million with an
additional $1.5 million for capital equipment. Any principal advanced under the
line of credit bears interest at a fluctuating rate equal to LIBOR plus 200
basis points, payable monthly. Advances under the $5 million line may be used
for general business purposes. The line of credit expires in December 2006. As
of December 28, 2002, the Company had $4.7 million outstanding on the line of
credit. Mr. Pilaro, the Company's Chairman, is also Chairman of CAP Advisers.
CAP Advisers is the sole trustee of the ERSE Trust. The ERSE Trust owns 100% of
LCO, the Company's major shareholder.

On November 20, 2002, the Company sold to two investors in a private placement
2% convertible notes that are due and payable on November 20, 2005 (the
"November 2002 Notes"). The November 2002 Notes are convertible into shares of
common stock of the Company at a conversion rate of $6.00 per share. The two
investors who purchased the November 2002 Notes, both affiliates of the Company,
are: LCO Investments Limited ($2,500,000) and Bradford G. Peters ($1,000,000).
The CEO of the Company has agreed to fund an additional $500,000 in 2003 under
the same terms.

10. Shareholder's Equity

On April 30, 2001, the Company completed a private offering (the "Offering") of
its restricted common stock, par value $0.001 per share ("common stock"). The
Offering involved sales of a total of 358,095 shares of restricted common stock
to 17 accredited investors and their affiliated funds (the "Investors"). None of
the Investors was affiliated with the Company before the completion of the
Offering. The Company sold the shares of common stock issued in connection with
the Offering for $78.75 per share, yielding net proceeds to the Company of $26.6
million.

In connection with the Offering, the Company engaged Stonegate Securities, Inc.,
Dallas, Texas (the "Placement Agent"), to act as placement agent for the
Offering. For its services, the Company agreed to pay the Placement Agent five
percent of the gross proceeds of the Offering, or $1.4 million and issue to the
Placement Agent warrants to purchase a total of 35,809 shares of restricted
common stock for a per share purchase price of $78.75. The warrants have a
five-year term.

In connection with the Offering, on March 14, 2001, the Company issued warrants
to purchase 6,667 shares of common stock for a per share price of $75.00 to
Pequot Partners Fund, L.P., Pequot Private Equity Fund II, L.P., Pequot
International Fund, Inc., LCO Investment Limited, P de P Tech Limited, John Reed
and Brad Peters, in exchange for agreeing to cover any cash shortfall in the
Offering up to $5 million. The warrants have a five-year term. The fair value of
the warrants of $225,000 was netted against the Offering proceeds.

Stock Option Plans

In January 1997, the Company adopted the 1997 Stock Option and Incentive Plan
("1997 Plan"). Under the terms of the 1997 Plan, as amended to date, and as
approved by the Company's shareholders, 500,000 shares are available for
issuance. Options may be granted at exercise prices of no less than the fair
market value on the date of the grant, as determined by the Board of Directors
and quoted market prices. Options generally vest over a five-year period and
have a maximum term of ten years.

A summary of the Company's stock option activity and related information for the
52 weeks ended December 28, 2002, the 52 weeks ended December 29, 2001 and the
39 weeks ended December 30, 2000 is as follows:


                                      F-23

<PAGE>



<TABLE>
<CAPTION>
                                    52 weeks ended                52 weeks ended              39 weeks ended
                                   December 28, 2002             December 29, 2001            December 30, 2000
                                   ------------------           -------------------           ------------------
                                             Weighted-                     Weighted-                  Weighted-
                                              Average                      Average                    Average
                                             Exercise                      Exercise                   Exercise
                                               Price                        Price                      Price
                             Options         Per Share         Options    Per Share      Options     Per Share
                            ---------      ------------       ---------- ------------   ----------  -------------
  Outstanding at beginning
<S>                             <C>           <C>             <C>           <C>          <C>           <C>
     Of year                    405,768       $78.30          424,728       $82.50       409,512       $71.70
  Granted                       125,712        62.88           90,183        79.01        77,200        88.95
  Exercised                     (13,333)       29.49          (30,736)       43.06       (10,917)       22.65
  Forfeited/expired            (200,478)       96.04          (78,407)       93.13       (51,067)       99.60
                               ---------                      --------                   --------
  Outstanding at end of year    317,669        75.90          405,768        78.30       424,728        82.50
                               =========                      ========                   ========
</TABLE>

Exercise prices for outstanding options as of December 28, 2002 ranged from
$4.95 to $206.25 per share and the weighted-average remaining contractual life
of those options outstanding at December 28, 2002 and December 29, 2001 was 8.39
years and 6.30 years, respectively. The weighted average fair market value of
options granted during the 52 weeks ended December 28, 2002 and the 52 weeks
ended December 29, 2001 and the 39 weeks ended December 30, 2000 was $57.90,
$79.05, and $88.95, respectively.

A summary of the status of options outstanding at December 28, 2002 is as
follows:

<TABLE>
<CAPTION>
                       Outstanding Options                             Exercisable Options

                                           Weighted
                                            Average          Weighted
   Range of Exercise                       Remaining          Average                               Weighted
       Price Per         Number           Contractual      Exercise Price Per       Number       Average Exercise
         Share         Outstanding      Life (in Years)        Share             Exercisable     Price Per Share
-------------------  ---------------  ------------------- --------------------  --------------- --------------------

<S>                     <C>                 <C>              <C>                  <C>              <C>

$4.95 - 12.75           14,800              10.00               5.76                6,667             5.61
15.00 - 28.80           54,400               8.10              22.06               51,133            22.89
31.20 - 44.10           78,356               8.87              38.21               58,556            37.85
45.00 - 58.50           75,822               9.19              57.55               20,922            56.40
61.95 - 74.10           27,757               8.26              68.10               17,702            68.18
75.00 - 106.95          27,312               8.58              84.56               23,546            83.88
120.00-206.25           39,222               8.37             152.16               36,689           145.35
                       --------                                                   --------
Total                  317,669                                                     215,215
                       ========                                                   ========
</TABLE>

Shares Reserved for Future Issuance

The Company has reserved shares of common stock for future issuance as follows:

                                               December 28, 2002
Employee stock options outstanding                  296,269
Non-employee stock options outstanding               21,400
Stock options, available for grant                  182,331
Warrants outstanding                                144,794

Options/Warrants Granted Outside 1997 Plan

Options or warrants for 110,222 shares have been granted to certain vendors,
consultants and employee outside the 1997 Plan. Of the shares granted, 47,733
remain outstanding and unexercised as of the date of


                                      F-24

<PAGE>

this Report. The weighted average exercise price of such outstanding  options or
warrants is $73.00 per share.

Acceleration of Employee Stock Options

In March 2002, options to purchase 2,667 shares of common stock were accelerated
for two employees. As a result, the Company recognized, in selling, general and
administrative expense, a non-cash expense of $265,000.

Impact of  Options/Warrants on Fiscal 2002 Financials Statement

In November 1998, the Company issued options to purchase 20,000 shares of common
stock at $17.8125 to Oral Health Clinical Services. Five thousand (5,000)
options vested immediately and on October 31, 2001, another 5,000 options vested
as a result of submission of clinical data to the American Dental Association
(ADA), which resulted in a non cash expense of $305,000. The balance of 10,000
shares vested in July 2002. As a result of the final 10,000 shares vesting in
July 2002, the Company recognized a non-cash expense of $217,000 during 2002.

Warrants

On September 21, 2001, the Company issued warrants to purchase 6,667 shares of
the Company's common stock to Dr. Salim Nathoo and Dr. John Warner as
compensation for consulting services to the Company for the period October 1,
2001 to December 31, 2002. During 2001, the Company recorded a non cash charge
of $154,000 related to these warrants. The warrants are exercisable at $83.25
per share and expire September 21, 2003.

11.    Net Loss Per Share of Common Stock

The calculation of basic and diluted net loss per share is as follows (in
thousands, except share data):



<TABLE>
<CAPTION>
                                                                52 Weeks Ended          52 Weeks Ended        39 Weeks Ended
                                                                  December 28,            December 29,          December 30,
                                                                      2002                   2001                   2000
                                                                      -----                  -----                  -----

Net loss before cumulative effect of change in accounting
<S>                                                                 <C>                   <C>                   <C>
principle                                                           $  (18,771)           $   (26,499)          $   (44,512)
Cumulative effect of change in accounting principle                          -                      -                  (272)
Deemed dividend related to warrants                                        307                      -                     -
                                                                   --------------      ----------------       ----------------
Net loss attributable to common shareholders                        $  (19,078)           $   (26,499)          $   (44,784)
                                                                    ===========            ===========           ===========
Weighted-average  shares of common stock outstanding
   used in computing basic and diluted net loss per share            2,427,412              2,236,688             1,632,912

Basic and  diluted net loss per common  share  before
   cumulative effect of change in accounting principle              $    (7.86)           $    (11.85)          $    (27.26)
                                                                    ===========           ============          ============
Cumulative effect of change in accounting principle                 $        -            $         -           $     (0.17)
                                                                    ===========           ============          ============
Basic and diluted net loss per common share                         $    (7.86)           $    (11.85)          $    (27.43)
                                                                    ===========           ============          ============
</TABLE>


                                      F-25


<PAGE>


12.    Commitments and Contingencies

Litigation

BriteSmile, Inc. v. Discus Dental, Inc. and Salim Nathoo, filed in the United
States District Court for the Northern District of California. The Company filed
an initial complaint against Discus Dental, Inc. ("Discus"), Culver City,
California, on July 8, 2002, asserting claims of infringement of the Company's
U.S. Patents No. 6,343,933, issued February 5, 2002, and U.S. Patent No.
6,361,320, issued March 26, 2002. On February 28, 2003, the Company amended its
existing lawsuit against Discus by adding Salim Nathoo ("Nathoo") as a
defendant. The complaint, civil action number 3:C02-CV-03220 JSW, as amended,
further alleges misappropriation of the Company's trade secrets, civil
conspiracy, and unfair competition and business practices by Discuss and Nathoo;
breach of contract and breach of fiduciary duty by Mr. Nathoo, and tortuous
interference with contract by Discus. The complaint alleges that Nathoo and
Discus conspired to misappropriate BriteSmile's trade secrets in violation of
Nathoo's contractual obligations to the Company. The amended lawsuit alleges
that, as BriteSmile's Medical Director, Nathoo had and continues to have, an
obligation to keep BriteSmile's trade secrets confidential. Beginning in 2001,
Discus Dental and Nathoo entered into an agreement whereby Discus Dental paid
Nathoo at least $2.5 million over a less than two year period for Nathoo's
"consulting" services, which included paying Nathoo to share with Discus the
Company's trade secrets. The lawsuit alleges further that in, December 2002, a
third party informed BriteSmile of Nathoo's activities, and that when confronted
by BriteSmile, Nathoo admitted to receiving $2.5 million from Discus. The
Company seeks a permanent injunction against both Discus and Nathoo to prevent
further infringement of its patents and improper disclosure of the Company's
trade secrets, lost profits, treble damages and attorneys fees for willful
patent infringement, punitive damages, and other relief.

On March 25, 2003, Discus filed its Answer to the Amended Complaint and
Counterclaims. In its Answer, Discus denies any liability for BriteSmile's
claims. Discuss also raises affirmative defenses, including claims that its
products and processes do not infringe BriteSmile's patents, and that
BriteSmile's patents are invalid and unenforceable. Discus asserts counterclaims
against BriteSmile, seeking (i) judicial declarations that BriteSmile's patents
are invalid, unenforceable, and have not been infringed, (ii) tortuous
interference with prospective economic advantage and economic business
relations, and (iii) unfair competition. Discus asks for declarations that its
products and processes to not violate BriteSmile's patents, that BriteSmile's
patents are unenforceable, that BriteSmile has no protectable trade secrets,
that BriteSmile's contracts with dentists which contain contractual restrictions
on the purchase and use of competitive systems are unenforceable and should be
enjoined, lost profits, treble damages and attorneys fees.

Salim Nathoo v. BriteSmile Leasing. On March 6, 2003, Nathoo filed a lawsuit
against BriteSmile Leasing, a subsidiary of the Company, in the New Jersey state
court. In this action, Nathoo alleges that the Company breached its agreement to
pay Nathoo money, and that such failure should result in the reversion of
certain patent rights, which were previously assigned by Nathoo to the Company,
back to Nathoo. As of March 31, 2003, counsel for the Company is preparing to
answer to the amended complaint.

Smile Inc. Asia Pte. Ltd. v. BriteSmile. On April 23, 2002, Smile Inc. Asia Pte.
Ltd. ("Smile") sued the Company and BriteSmile Management,  Inc., a wholly owned
subsidiary of the Company,  in the Third  Judicial  District  Court in Salt Lake
City, Utah. The Complaint alleges that BriteSmile  Management  breached its 1998
distributor agreement with Smile by failing to fill orders placed and to perform
other  obligations  under  the  agreement.   The  Complaint  also  alleges  that
BriteSmile  Management and the Company  fraudulently induced Smile to enter into
the  distributor  agreement,  and includes  claims for damages based on alleged


                                      F-26

<PAGE>

unjust enrichment,  civil conspiracy,  breach of the duty of good faith and fair
dealing,  interference with contractual and economic  relations,  and fraudulent
transfer.  The Company  believes that the claims  asserted by Smile are entirely
without merit and will vigorously defend the lawsuit.  The Company has commenced
discovery with regard to Smile's claims.


BriteSmile v. Discus Dental, filed in Contra Costa County Superior Court,
California. On May 31, 2002, the Company filed a complaint against Discus
Dental, Inc. in Contra Costa County Superior Court, California, case no.
C02-01611, alleging causes of action for Intentional Interference with
Contractual Relationship, Negligent Interference with Contractual Relationship,
Violation of Unfair Business Practice Act - Loss Leader, Violation of Unfair
Business Practice Act, Trade Libel and Injunctive Relief. The complaint alleges
that Discus Dental and other defendants yet to be identified wrongfully
interfered with the Company's contractual relationships with its Associated
Center dentists, in part by writing letters with the purpose of inducing the
Company's Associated Dentists to terminate their contracts with the Company and
switch to Discus' Zoom! system, and by making false and disparaging statements
concerning the Company's system. The Complaint seeks damages for loss of
business, punitive damages, injunctive relief, and costs of suit. On June 27,
2002, Discus filed a demurrer to the Company's complaint, challenging the legal
sufficiency of the complaint. On June 30, 2002, the court ruled that the Company
will be able to pursue its claims as alleged in the complaint except for the
second cause of action alleging Negligent Interference with Contractual
Relationship. This case was stayed on March 11, 2003 and will remain stayed
until a status conference scheduled for September 2003.

The Company is also subject to legal proceeding and claims in the ordinary
course of business, including claims of alleged infringement of trademarks and
other intellectual property rights.

The Company is not aware of any legal proceeding or claims that it believes will
have individually or in the aggregate, a material adverse effect on its
financial position or results of operations.

13.    Related Party Transactions

November 2002 Sale of Convertible Notes

On November 20, 2002, the Company sold to two investors in a private placement
2% convertible notes that are due and payable on November 20, 2005 (the
"November 2002 Notes") in a private placement. The November 2002 Notes are
convertible into shares of common stock of the Company at a conversion rate of
$6.00 per share. The two investors who purchased the November 2002 Notes, both
affiliates of the Company, are: LCO Investments Limited ($2,500,000) and
Bradford G. Peters ($1,000,000). The CEO of the Company has agreed to fund an
additional $500,000 in 2003 under the same terms. LCO Investments Limited is the
Company's major shareholder. LCO is a wholly owned subsidiary of the ERSE Trust.
CAP Advisers Limited is a co-trustee of the ERSE Trust. Mr. Pilaro, a director
of the Company, is Chairman of CAP. John L. Reed is a shareholder, the Chief
Executive Officer, and a director of the Company. Brad Peters is a shareholder
and a director of the Company.

LCO Properties Sublease

On December 1, 1999 the Company, as lessee, entered into an Agreement of
Sublease with LCO Properties, Inc., a Delaware corporation, as lessor. LCO
Properties, Inc. is affiliated with the Company's principal shareholder, LCO
Investments Limited ("LCO"). The Sublease covers approximately 4,821 square feet
of space located in New York City for a Center. The sublease term is for ten
years and calls for initial lease payments of $402,000 per year, subject to
increase in the event of increases in the rent payable under the parent lease
for the property between LCO Properties, Inc., and its lessor.

Public Relations Services Agreement


                                      F-27

<PAGE>


On April 7, 1999, the Company entered into a Letter Agreement with Chlopak,
Leonard, Schechter and Associates ("CLS"), a public relations firm in
Washington, D.C. Pursuant to the agreement, CLS provides public relations advice
and serves as communications counselors to the Company for consideration of
$18,000 per month, plus expenses. The agreement was entered into for a minimum
of six months, and remains in force. Peter Schechter, a director of the Company,
is one of three managing partners of CLS.

Oral Health Clinical Services Agreement

On March 24, 1999,  the Company  entered into a Consulting  Agreement  with Oral
Health Clinical  Services,  LLC,  ("Oral  Health") Salim A. Nathoo,  and R. Eric
Montgomery.  Mr.  Montgomery  is a  director  of the  Company.  Pursuant  to the
agreement,  Oral  Health and Nathoo  will devote  their  services  to  obtaining
American Dental  Association  (ADA)  Certification for the BriteSmile 2000 Tooth
Whitening  Procedure.  The term of the  contract  is for two  years or until ADA
Certification,  whichever  is earlier.  The Company  issued  options to purchase
20,000 shares of common stock at $17.8125 to Oral Health Clinical Services. Five
Thousand  (5,000) options vested  immediately  and on October 31, 2001,  another
5,000  options  vested  as a result  of a  submission  of  clinical  data to the
American  Dental  Association  (ADA),  which  resulted in a non cash  expense of
$305,000.  The balance of 10,000  shares vested in July 2002. As a result of the
final  10,000  shares  vesting in July 2002,  the Company  recognized a non-cash
expense of $217,000 during 2002.

Oraceutical Agreement

On November 27, 2000, the Company entered into a Consulting Agreement with
Oraceutical, LLC. R. Eric Montgomery, a director of the Company, is the founding
Manager and President of Oraceutical. Pursuant to the agreement, Oraceutical
provides technology development services to the Company for various
light-activated teeth whitening products and procedures. In consideration for
its services, Oraceutical, or its affiliates, have been paid $25,000 a month,
plus options to purchase 13,333 shares of common stock, which are fully vested
and remain outstanding and unexercised, exercisable at $56.25 per share.

EVL Lease Agreement

On December 29, 2000, as amended through January 2003, the Company secured a
lease line of credit of up to $15 million from Excimer Vision Leasing L.P.
("EVL"). Anthony Pilaro, the Company's Chairman, serves as Chairman of EVL. An
affiliate of LCO Investments Inc., the Company's largest shareholder, owns 70%
of EVL.

EVL Loan Agreement

On March 1, 2001, the Company borrowed $2.5 million from EVL for general working
capital. The loan matures on May 10, 2006 and may be prepaid at any time without
penalty. Payments under the loan consist of "fixed payments" of interest,
"variable payments" of principal and interest and a "final payment" of
principal. An initial fixed payment of $10,417 was paid on April 1, 2001.
Additional fixed monthly payments of $12,500 are due during the loan period.
Variable payments are $25 for each LATW procedure performed at the Company's 14
Centers. For Fiscal 2002, Fiscal 2001 and the Transition Period variable
payments totaled $717,000, $664,000 and $0, respectively, and the unpaid balance
of the loan was $1,583,000 at December 28, 2002. The final payment, due at
maturity will be the amount by which the aggregate of variable payments paid
during the term of the loan is less than the original $2.5 million principal
amount of the loan.

CAP Advisers Line of Credit

In December 2001, as amended in March, July 2002 and January 2003, BriteSmile
International, a wholly-owned subsidiary of the Company, entered into Credit and
Security Agreements with CAP Advisers which provide for a $6.5 million line of
credit facility of which $1.5 million is for the purchase of capital equipment.
As of December 28, 2002, $4.7 million has been drawn on the line. LCO
Investments Limited is the Company's major shareholder. LCO is a wholly owned


                                      F-28

<PAGE>

subsidiary of the ERSE Trust.  CAP Advisers  Limited is a co-trustee of the ERSE
Trust. Mr. Pilaro, a director of the Company, is Chairman of CAP.

14.   Benefit Plans

In March 2000, the Company adopted a 401(k) defined contribution plan covering
substantially all employees. Employees become eligible to participate in the
plan beginning the first month following their hire date. The plan contains
provisions for an employer contribution at the discretion of management. To
date, the Company has made no contributions to the plan.



                                      F-29

<PAGE>


15. Unaudited Quarterly Financial Data


                                      F-30


<PAGE>


The Company has included the following information below to demonstrate the
effect on Q1 through Q4 of the 52 weeks ended December 28, 2002 and Q1 through
Q4 of the 52 weeks ended December 29, 2001 (unaudited),:


<TABLE>
<CAPTION>
                                                March 30,     June 29,     September      December
                                                  2002         2002        28, 2002      28, 2002
                                               ---------      -------      ---------     ---------

<S>                                            <C>          <C>            <C>           <C>
Revenue                                        $  9,333     $ 11,013       $  9,946      $  9,031
Total operating costs and expenses               13,080       13,878         14,383        15,135
Loss from operations                             (3,747)      (2,865)        (4,437)       (6,104)

Net loss                                       $ (4,132)    $ (2,986)      $ (4,603)     $ (7,050)

Basic and diluted net loss per share           $  (1.65)    $  (1.20)      $  (1.95)     $  (2.90)



                                                March 31,    June 30,      September      December
                                                 2001         2001         29, 2001      29, 2001
                                               ---------    ---------      ---------     ---------

Revenue                                        $  8,917     $ 11,570       $ 13,359      $  9,384
Total operating costs and expenses               14,792       16,724         17,444        19,936
Loss from operations                             (5,875)      (5,154)        (4,085)      (10,552)

Net loss                                       $ (6,143)    $ (5,473)      $ (4,132)     $(10,751)

Basic and diluted net loss per share           $  (3.15)    $  (2.40)      $  (1.80)     $  (4.50)

</TABLE>





                                      F-31


<PAGE>





                                                 Financial Statement Schedule II


Schedule II--Valuation and Qualifying Accounts for the three fiscal periods
ended December 28, 2002.

All other schedules are omitted as the required information is not applicable or
the information is presented in the consolidated financial statements and notes
thereto in Item 8 above.

                                                                     Schedule II
                                BriteSmile, Inc.
                        Valuation and Qualifying Accounts

<TABLE>
<CAPTION>
                                               52 Weeks Ended December   52 Weeks Ended December   39 Weeks Ended December
                                                       28, 2002                  29, 2001                  30, 2000
                                               ------------------------- ------------------------- -------------------------
                                                                              (in thousands)
Allowance for doubtful accounts - trade
  accounts receivable:
<S>                                               <C>                       <C>                       <C>
      Balance, beginning of period                $         615             $         163             $          83
      Additions to allowance                                276                       676                       137
      Write-offs, net of recoveries                        (385)                     (224)                      (57)
                                               ------------------------- ------------------------- -------------------------
      Balance, end of period                      $         506             $         615             $         163
                                               ========================= ========================= =========================
</TABLE>



                                      F-32