<PAGE>

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

                                   FORM 10-KSB

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

For the Fiscal Year Ended: April 1, 2000

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

For the Transition Period from _______________ to _______________

Commission File Number: 1-11064

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

                 UTAH                                    87-0410364
----------------------------------------       -------------------------------
      (State or other jurisdiction                      (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 $.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-B 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-KSB or any
amendment to this Form 10-KSB. [_]

Issuer's net revenues for the fiscal year ended April 1, 2000 were $8,044,129.

The aggregate market value of the registrant's Common Stock held by
non-affiliates as of June 19, 2000 was approximately $31,355,722, based on the
closing sale price of the issuer's stock as reported by the NASDAQ NMS on such
date.

The number of shares of common stock of the Registrant outstanding as of June
19, 2000 was 23,970,685. Transitional Small Business Disclosure Format (Check
one): Yes     No X
         ---    ---
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                        BRITESMILE, INC. AND SUBSIDIARIES

                                TABLE OF CONTENTS


PART I.
-------

Item 1.   Description of Business.............................................3

Item 2.   Description of Property.............................................9

Item 3.   Legal Proceedings..................................................10

Item 4.   Submission of Matters to a Vote of Security Holders................10


PART II.
--------

Item 5.   Market for Common Equity and Related Stockholder Matters...........11

Item 6.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations..........................................13

Item 7.   Financial Statements...............................................19

Item 8.   Changes in and Disagreements with Accountants on Accounting
          and Financial Disclosure...........................................19


PART III.
---------

Item 9.   Directors, Executive Officers, Promoters and Control Persons;
          Compliance with Section 16(a) of the Exchange Act..................20

Item 10.  Executive Compensation.............................................25

Item 11.  Security Ownership of Certain Beneficial Owners and Management.....28

Item 12.  Certain Relationships and Related Transactions.....................31

Item 13.  Exhibits and Reports on Form 8-K...................................32

                                       2
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PART I

ITEM 1.    DESCRIPTION OF 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. 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 leases its technology to existing cosmetic
dental offices known as BriteSmile Professional Teeth Whitening Associated
Centers ("Associated Centers").

BriteSmile offers consumers a new, simple and safe way to return their teeth to
their optimal natural whiteness in just over a one and one-half hour visit to a
Center or Associated Center.

Consumers may choose to visit a Center or Associated Center. These Centers are
located in major metropolitan areas nationwide. BriteSmile Centers offer clients
a salon-like environment dedicated solely to the business of teeth whitening and
are staffed by licensed dentists and trained dental assistants. Alternatively,
consumers can visit a BriteSmile Associated Center, where a local dentist
administers the BriteSmile procedure in the dentist's established office.

The BriteSmile Center provides the anchor in each market, with the
geographically contiguous Associated Centers providing consumers with multiple
location options. This "cluster" of Associated Centers surrounding a Center
allows BriteSmile to have maximum impact in a market, while at the same time
leveraging marketing and support dollars, and optimizing consumer exposure to
the BriteSmile brand.

The Company developed its current tooth whitening technology (the "BriteSmile
2000 Light Activated Teeth Whitening System", "BS2000" or "LATW") in the fiscal
year ended March 31, 1999 ("Fiscal 1999") and began distribution in the fourth
fiscal quarter of Fiscal 1999. In November 1999 the Company introduced its new
BriteSmile 3000 LATW keycard system (the "BS3000") into Associated Centers. The
BS3000, a mobile version of the BS2000, can be installed more quickly and
provides the flexibility and mobility required in dental offices.

The BS2000 and BS3000 teeth whitening devices utilize a gas plasma light
technology. The power level is well below levels used in other bleaching
systems. BriteSmile's unique fiberoptic delivery arm permits blue green light to
reach all 16 front teeth simultaneously, whitening the teeth by activating
BriteSmile's wavelength specific gel during three consecutive twenty-minute
sessions.

In 1998 under the direction of Dr. John Warner, the Company pursued an
accelerated program to develop the LATW device and method. In connection with
this development effort, the Company engaged two nationally recognized firms to
provide the Company with product design and electrical engineering technology
and know how. Chemical products and reagents for use with the new LATW device
were developed under an agreement with OraCeutical LLC of Lee, Massachusetts.
Dr. Anthony Cipolla, D.D.S. provided technical support and clinical direction in
combining the device and chemical products to achieve an effective and safe LATW
system. The Company conducted clinical trials during the fall of 1998 and began
to secure leased space for Centers, recruit staff and prepare advertising for
the new LATW product.

On February 15, 1999, the Company introduced its new LATW system in Centers
located in Walnut Creek, California. Subsequently, the Company has opened 13
additional Centers and over 500 Associated Centers throughout the U.S. and in
Argentina, Belgium, France, Holland, Italy, Japan, Singapore, and Switzerland.
The Company's Centers are currently operating in Beverly Hills, Irvine,
Pasadena, Walnut Creek, Palo Alto and La Jolla, CA; Coral Gables, Ft. Lauderdale
and Boca Raton, FL; Honolulu, HI; Atlanta, GA; Houston, TX; Denver, CO; and
Boston, MA.

At June 19, 2000 the Company had 14 Centers in operation located in 9 major U.S.
cities. Additionally, the Company had contracted with dentists to operate over
700 Associated Centers, of which, over 500 were in operation in locations
throughout the United States and around the world in countries including
Switzerland, Argentina, Japan, Belgium,

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Singapore and Italy. The Company plans to open additional Centers and Associated
Centers throughout the United States and in select additional foreign countries.
The Company is committed to providing superior teeth whitening through
leading-edge technology and products.

Recent Business Developments

Expansion and Revenue Growth
----------------------------

Through Fiscal 2000 the Company continued to aggressively execute its business
strategy of expanding the number of Centers and Associated Centers in major
metropolitan centers in the U.S. In addition to the 14 Center locations
currently in operation, the Company has recently leased property and is
preparing to open 4 additional Centers in New York, Chicago, Phoenix, San
Francisco, and is in the process of obtaining leases for 2 additional Centers in
Dallas and Seattle, all to be opened in the fiscal year ending March 31, 2001
("Fiscal 2001"). The Company also continues to aggressively identify and recruit
dentists practicing in geographic areas surrounding Centers to establish
complementary Associated Centers in their offices.

Center and Associated Center operations for the fiscal year ended April 1, 2000
("Fiscal 2000") have resulted in record revenues for the Company in Fiscal 2000
of $8,044,000 compared to $547,000 for the fiscal year ended March 31, 1999. Of
the total Fiscal 2000 revenues, $5,838,000 was attributable to Center
operations, and $1,970,000 was attributable to the Associated Centers.

On June 3, 1999, the Company and Orthodontic Centers of America, Inc. ("OCA"),
the leading provider of orthodontic practice management services in the U.S.,
announced an agreement to provide BriteSmile LATW in certain OCA facilities.
During February 2000, BriteSmile and OCA expanded this relationship resulting in
contracts to place LATW systems in approximately 80 OCA locations in the United
States. As of June 16, 2000, OCA has 346 affiliated orthodontists and 537
orthodontic centers in 43 states, Japan, Mexico and Puerto Rico. The strategic
relationship between OCA and BriteSmile provides BriteSmile with access to an
existing customer base and provides OCA with the best in teeth whitening
technology to complement its orthodontic services.

The Company is aggressively executing its strategic plan of expanding
distribution via Associated Centers. This plan includes the expansion of
strategic partnerships like the OCA relationship and other "special dental
groups", identifying and expanding the international distributor base, and
expanding domestic direct selling teams while enhancing the support to new and
existing Associated Centers. Additionally, the Company has planned openings
(combined domestic and international) of approximately 1,200 additional
Associated Centers over the next twelve months. There can be no guarantee that
the Company will be successful in executing its business plan, including opening
the total additional Associated Centers described above.

During May 1999 the Company established BriteSmile International, a Dublin
Ireland-based subsidiary, to facilitate international distribution of LATW.
BriteSmile International has since introduced the proprietary LATW system to
markets in Argentina, Belgium, France, Holland, Italy, Japan, Singapore, and
Switzerland. BriteSmile International is continuing to explore additional
international opportunities for distribution of the Company's technology in
Europe, Latin America, Asia and Canada.

In addition to external expansion, the Company is actively building its internal
infrastructure to provide the finest consumer experience in teeth whitening. A
Call Center was established in February 1999 and was later moved to the
Company's corporate headquarters in Walnut Creek, California to handle incoming
consumer inquiries and to book appointments via the Company's proprietary
web-based scheduling system (the "Scheduler"). The Call Center 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 telephone calls through customer
treatment and payment. The Scheduler provides the Call Center, each Center and
Associated Center with the capability of viewing and interacting on a real-time
basis with customer schedules while allowing management has the ability to
closely monitor performance of advertising campaigns, sales agents, and the
operations and financial results of Centers and Associated Centers.

                                       4
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Management
----------

In an effort to provide consumers with widespread access to the BriteSmile LATW
system and support the planned growth of the business, since June 1999 the
Company has hired additional key management personnel.

Paul A. Boyer was named the Company's Executive Vice President and Chief
Financial Officer in October 1999. Prior to joining BriteSmile, Mr. Boyer was
Senior Vice President and Chief Financial Officer of Dynatec International,
Inc., a manufacturer and marketer of consumer products. Mr. Boyer also served as
Director of Finance at Mrs. Field's Original Cookies, Inc., and Chief Financial
Officer of Wasatch Education Systems.

In May 2000, Michael P. Whan joined BriteSmile as its President of World Wide
Marketing. Prior to joining BriteSmile, Mr. Whan had served as Vice President,
General Manager of Taylor Made Golf from 1996 to 2000. From 1987 to 1995 Mr.
Whan held various posts at Proctor & Gamble Company, including Director of
Marketing, Oral Care and Brand Manager of Crest toothpaste.

June 1999 Equity Financing
--------------------------

Effective June 4, 1999, the Company issued and sold in a private placement
1,355,555 shares of its Common Stock, par value $.001 per share, for aggregate
proceeds of $15,000,000. 1,004,043 shares were issued to nine private investors
including LCO Investments Limited ("LCO"), the Company's largest shareholder,
for $11,120,000. The remaining 351,512 shares were sold to a group of 18 members
of senior management, the Company's Board of Directors and a key consultant
(collectively, "Management Purchasers") for aggregate consideration of
$3,880,000. The purchase price of the shares was $10.95 per share, representing
a 5% discount to the average closing price of the Company's Common Stock during
the 10-day period immediately prior to June 4, 1999. However, four of the
purchasers, including three non-employee directors of the Company and LCO,
purchased the shares without a discount to the 10-day average closing price, or
at $11.525 per share.

CAP Advisers Limited ("CAP"), an entity affiliated with LCO, provided financing
for the Management Purchasers in the full amount of the Management Purchasers'
purchase price. Terms of the promissory notes signed by Management Purchasers in
favor of CAP provide for full recourse, interest free loans due June 3, 2004.

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

LCO is a corporation organized under the laws of Guernsey, Channel Islands, and
is wholly owned by The ERSE Trust. The sole trustee of The ERSE Trust is CAP, a
company organized under the laws of the United Kingdom. Anthony M. Pilaro, a
director of the Company, is a director of LCO and Chairman of CAP.

October 1999 LCO Warrant Exercise
---------------------------------

On October 29, 1999, LCO, the principal shareholder of the Company, exercised
options to purchase 1,173,334 shares of common stock of the Company, resulting
in proceeds of $5,280,000 to the Company. The Company granted the options to LCO
in April 1996 and May 1997 in connection with private placements of the
Company's common stock.

January 2000 Pequot Financing
-----------------------------

On January 18, 2000, the Company sold in a private placement 3,333,333 shares of
its Common Stock, par value $.001 per share, for aggregate proceeds of
$20,000,000. The purchase price was $6.00 per share. The shares were issued to
three private investors, Pequot Private Equity Fund II, L.P. (1,666,667 shares),
Pequot Partners Fund, L.P. (833,333 shares), and Pequot International Fund, Inc.
(833,333 shares)(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 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

                                       5
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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. Recently, the Pequot Investors appointed Mr. Gerald Poch to serve as
their designee on the Company's Board of Directors.

June 2000 Note Purchase Financing
---------------------------------

Effective June 27, 2000, the Company signed a Securities Purchase Agreement with
seven investors (the "Investors"), pursuant to which the Company has sold in a
private placement (the "Note Offering") its 5% Subordinated Convertible Notes
due June 29, 2005 in the aggregate principal amount of $12,083,332 (the
"Notes").

The Notes are convertible into shares of the Company's Common Stock, par value
$.001 per share ("Common Stock"), at a per share conversion price of $6.18,
which is 120% of the average of the closing bid price of the Common Stock during
the ten-trading day period immediately prior to June 27, 2000, the date the
transaction documents were signed. The Company will also issue to the Investors,
pro rata, warrants (the "Warrants") to purchase a total of 977,616 shares of
Common Stock, which have a term of five years and an exercise price of $7.21.
The number of shares underlying the Notes and the exercise price of the Warrants
are subject to a reset and penalty provision as set forth in the transaction
documents.

The Investors are presently affiliates of the Company, and include LCO
(shareholder and affiliated with director Anthony Pilaro), John Reed
(shareholder, CEO and director), Gasper Lazzara, Jr. (director), Pequot Private
Equity Fund II, L.P., Pequot Partners Fund, L.P., and Pequot International Fund,
Inc. (shareholders and affiliated with director Gerald Poch), and Andrew
McKelvey (shareholder and affiliated with director Bradford Peters).

Pursuant to a Registration Rights Agreement between the Investors and the
Company, the Company agreed to register with the Securities and Exchange
Commission ("SEC"), within 120 days from the closing date, the shares of Common
Stock underlying the Notes and Warrants for offer and sale under the Securities
Act of 1933, as amended.

The Company is actively negotiating to sell up to an additional $13 million of
the Notes to third parties on substantially similar terms.  In addition, the
Company has received a commitment from 4 directors and shareholders to purchase
an additional $9.09 million of the Notes on or before July 31, 2000 if the
Company does not sell such amount of Notes to third parties.

Products and Services

Teeth Whitening Services
------------------------

During the fourth fiscal quarter of Fiscal 1999, the Company began offering the
LATW system directly to consumers at Centers and on a limited basis through
Associated Centers. The BriteSmile LATW service is currently the only service
offered by the Company. Management is implementing plans to sell BriteSmile
brand post-whitening maintenance products, including toothpaste, mouthwash, and
breath mints, to consumers in Centers, Associated Centers and on an E-Commerce
site beginning in the fall of 2000. There can be no assurance that the Company
will introduce such products or that its customers would favorably receive them.

Market - The estimated $1 billion spent annually in the U.S. for dental
bleaching products and services, including in-dental office and take-home
bleaching systems, over-the-counter whitening products and whitening
toothpastes, currently involves inconvenient and time consuming methods that
generally yield mediocre results. The BriteSmile LATW system safely provides
maximum whitening results in one and one-half hours. The Company believes that
the concept of teeth whitening is becoming increasingly accepted in developed
nations around the world. Accordingly, the Company believes that the market for
the Company's services includes consumers in the United States and abroad that
are inclined to whiten their teeth and have sufficient disposable income to pay
the suggested retail price of $500 for the LATW process.

Marketing and Distribution - The Company's services are marketed primarily via
consumer advertising. The Company uses radio, newsprint, magazine, website and
television to market its LATW procedure. The Company tailors such advertising to
the particular local market. The advertisements include a toll free telephone
number, which routes incoming calls to the Company's Call Center where the LATW
procedure is further described, and a consultation appointment can be scheduled.
The Company has retained the services of various advertising agencies to assist
in the

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production and placement of advertising as well as evaluation of its
effectiveness. The Company has also retained a nationally recognized firm to
assist it in implementing its public relations strategy, which consists
principally of building public awareness and establishing brand recognition of
its LATW system in areas where Centers and Associated Centers are located.

The Company's LATW services are distributed through retail locations known as
"BriteSmile Professional Tooth Whitening Centers" and "BriteSmile Professional
Tooth Whitening Associated Centers." Licensed dentists and trained dental
assistants provide the LATW service directly to consumers at Centers. Other
staff members at Centers are responsible for sales and administrative functions.
Associated Centers are located within existing dental offices. The dentist who
operates the Associated Center and his staff provide the BriteSmile LATW
services at that location. No customer accounted for more than 10% of net sales
of the Company in Fiscal 1999 and Fiscal 2000.

Prior to the end of calendar year 1999 the Company marketed and sold its
laser-based systems and bleaching chemicals directly to dentists through the
Company's internal sales staff, domestic and foreign independent representatives
and dental dealers. Sales to consumers were made through dentists who prescribed
and administered tooth-whitening treatments. The Company used trade journal
advertising, brochures, mailings, trade shows, and high profile dentists to
promote its products.

Competition - The Company's LATW process competes with all teeth whitening
products and services. Generally, competing products consist of bleaching
treatments performed within dental offices, take-home bleaching systems offered
by dentists, and over-the-counter bleaching products, including pastes and gels.
The Company believes that the LATW system produces superior whitening results in
a shorter period of time than any current available system known to the Company.
Clinical studies conducted at the University of Medicine and Dentistry of New
Jersey, and confirmed by researchers at New York University, indicate that the
Company's LATW system, featuring the neutral pH and lower levels of hydrogen
peroxide in the Company's proprietary whitening gel, will not soften tooth
enamel or damage existing fillings, and is neither caustic nor corrosive. The
Company has established a selling price within the range of most professionally
administered whitening processes. The Company`s Centers offers whitening service
in uniform and attractive salon-type settings intended to differentiate and
brand the Company's whitening service as well as create a more enjoyable
experience for the consumer. Additionally, the Company is continuing research
and development efforts to improve and expand its current LATW system in order
to maintain and improve competitive advantages.

Competition from dentist-prescribed home bleaching products is from Opalescence
(Ultradent), Nite White (Discus Dental), Platinum (Colgate), NuProGold
(Dentsply), Perfecta (American Dental Hygienics), and Rembrandt (DenMat). There
continue to be numerous entrants into the in-office tooth whitening market,
including Dental/Medical Diagnostic Systems Inc., Kreative, Shafu and DenMat,
which also offer both curing light-activated devices and gels. Competition for
over-the-counter whitening kits is from Natural White and DenMat, as well as
whitening toothpaste producers. Some of the Company's current and potential
competitors may have greater financial and marketing resources available to them
than the Company.

Sources of Supply - The Company subcontracts the manufacturing of the LATW
system and produces its own proprietary disposable goods used in the whitening
process. The Company maintains a minimum of two geographically separated sources
of supply for proprietary disposable products (i.e., tooth whitening gel) as
well as non-proprietary disposable goods. 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.

Organizational Structure of Centers - A Licensed dentist and licensed dental
assistants administer the Company's LATW process at Centers. Generally, the
dentist creates a professional corporation (the "PC"), which enters into various
agreements with the Company relating to the Center. Pursuant to such agreements,
the licensed dentist has exclusive authority regarding dental matters, inlcuding
administering of the LATW. A Deficit Funding Agreement between the Company and
the PC obligates the Company to fund any Center 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 manages the business

                                       7
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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 dental offices pursuant to a single Technology Lease (the "Lease
Agreement") between the Company and a dentist (the "Associated Center Dentist").
The Lease Agreement specifies the number of systems to be located at the
Associated Center; the compensation to be paid to the Company by the Associated
Center Dentist; the marketing and promotional activities of the parties; 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 are currently 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.

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 of the Company are required to enter into confidentiality
and 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 incurred $1,748,000 and $3,201,000 of
research and development expenses in Fiscal 2000, and 1999, respectively.

The Company owns the rights to the registered trademarks and service marks
"BriteSmile" (name and logo).

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.

Regulation of Dental Practices and Practitioners Generally
----------------------------------------------------------

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, and
there is no assurance that such approvals will be obtained. If such approvals
cannot be obtained, the Company will be limited to offering its LATW procedure
through Associated 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

                                       8
<PAGE>

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. 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. Product liability insurance for Fiscal 2000
and Fiscal 1999 cost the Company approximately $16,238 and $25,000,
respectively.

Employees
---------

As of June 19, 2000, the Company had 124 full-time employees and 57 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.

Prior Business History
----------------------

The Company began as Ion Laser Technology, a laser manufacturing concern for
industrial applications and was incorporated in the state of Utah in June 1984.
In 1989 the Company began to focus research and development efforts on the
dental market, and by 1996 had commenced commercial introduction to the dental
market of a proprietary laser-based tooth whitening system, marketed under the
trademark "BriteSmile(R)."

In 1998 the Company abandoned further development, production and sale of the
laser-based teeth whitening system and began to focus on the development of a
superior method of teeth whitening. The Company's goal was to develop a
whitening system that would whiten teeth safely, quickly and effectively in a
convenient and comfortable manner. In order to focus on this objective the
Company also discontinued the production and sale of lasers and its take-home
and in-office whitening reagents and chemical kits.


ITEM 2. DESCRIPTION OF PROPERTY

In November 1999 the Company relocated its corporate offices from Lester,
Pennsylvania to Walnut Creek, California. As of September 27, 1999, the Company
entered into a lease agreement through April 2007 for its 13,746 square foot
corporate office facility in Walnut Creek, California. Approximately 11,246
square feet of the building are used for administration, Call Center and office
space, and 2,500 square feet are used for product assembly and warehousing.
Aggregate lease payments under the Walnut Creek lease through 2007 would be
$1,654,188.

The Company's facilities in Walnut Creek, California are in good repair.

At present the Company has fourteen 14 existing and 3-to-be opened Centers
operating under lease agreements in the following locations:

                                       9
<PAGE>

         Lease Site                 Lease Term        Aggregate Lease Payments
         ----------                 ----------        ------------------------

         Boca Raton, FL                   5               $   925,605
         Atlanta, GA                      5                   687,076
         Pasadena, CA                     5                   393,000
         Honolulu, HI                     5                   482,310
         Palo Alto, CA                    5                   468,000
         Coral Gables, FL                 5                   277,000
         Boston, MA                       5                 1,075,000
         Atlanta, GA                      5                   687,076
         Phoenix, AZ                      6                   900,000
         Ft. Lauderdale, FL               7                   592,000
         Irvine, CA                      10                   870,000
         Beverly Hills, CA               10                 1,500,000
         LaJolla, CA                     10                 1,018,000
         Walnut Creek, CA                10                 1,580,000
         Denver, CO                      10                 1,551,325
         Chicago, IL                     10                 2,017,020
         New York, NY                    10                 4,753,922

Each Center lease covers prime street level, retail spaces, approximately
3,000-7,000 square feet each, 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.

ITEM 3. LEGAL PROCEEDINGS

In April 2000, Natural White, Inc. and its affiliated corporations filed suit
against the Company in the Supreme Court of the State of New York, Erie County.
Also named as a defendant in the action was R. Eric Montgomery, a director of
the Company and the principal owner of IDEX Dental Sciences. BriteSmile has
removed the case to the United States District Court for the Western District of
New York. Based upon counsel's opinion, BriteSmile has filed an answer rejecting
all claims alleged by the plaintiff.

IDEX licensed certain dental products and technology to Natural White for use
outside the professional field. Through Montgomery, BriteSmile was granted a
separate license to use tooth whitening products and technology in the
professional field. The complaint filed by Natural White alleges that the
defendants misappropriated proprietary rights and trade secrets of Natural
White, that they interfered with the contract between IDEX and Natural White,
and that they have been unjustly enriched as a result of this conduct. The
Complaint asserts compensatory damages in excess of $6 million, and also seeks
punitive damages and a permanent injunction enjoining the Company from using the
IDEX technology licensed to Natural White.

After BriteSmile removed the case to the Federal Court in Buffalo, it filed a
motion to transfer venue to Boston, Massachusetts where there is an arbitration
and patent infringement claim pending between IDEX and Natural White.
Alternatively, BriteSmile filed a motion to dismiss the claims against it on the
ground that each of them was legally insufficient as a matter of law. The
motions are currently scheduled to be argued in Buffalo on July 26, 2000.

Based upon the opinion of counsel, the Company believes that the suit will be
dismissed against BriteSmile. The Company maintains that its LATW Gel is
proprietary and unique to the Company, and that it is formulated to be used in
conjunction with the Company's proprietary BriteSmile BS2000 and BS3000 gas
plasma devices.

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


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

On January 31, 2000 the Company held a Special Meeting of Shareholders at its
corporate headquarters in Walnut Creek, California. At the meeting the
shareholders voted on a proposal to amend and restate in one document the
Articles of Incorporation of the Company. The Company proposed the amendments to
take advantage of certain corporate law changes adopted in the Revised Utah
Business Corporation Act, to simplify and clarify the Company's charter, to
facilitate future financings of the Company in general, and in particular, to
satisfy a condition precedent to closing the Company's private placement with
the Pequot Funds described in Item 1 above -- "Recent Business Developments,
January 2000 Pequot Financing." The proposal to adopt the new Amended and
Restated Articles of Incorporation was approved by the shareholders by a vote of
14,932,014 shares in favor, 36,951 against, and 9,333 abstaining.

                                       10
<PAGE>

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 the past two fiscal years, and
subsequent interim periods for which financial statements are presented in this
report, if any, high and low sales price information as reported by AMEX or
other electronic services, as the case may be.

                                      High             Low
                                      ----             ---
         1998
         ----
         March 31                   $ 3.625          $ 2.500
         June 30                    $ 3.000          $ 1.000
         September 30               $ 3.375          $ 0.6875
         December 31                $ 3.000          $ 0.875

         1999
         ----
         March 31                   $ 7.375          $ 2.0625
         June 30                    $17.250          $ 4.125
         September 30               $12.000          $ 8.625
         December 31                $11.1875         $ 5.625

         2000
         ----
         April 1                    $13.625          $ 7.125

As of June 19, 2000, there were 281 holders of record of the Company's 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.

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 1998 and 1999

On May 8, 1997, the Company sold 428,572 shares of restricted Common Stock and
options to purchase 500,000 additional shares of Common Stock to LCO Investments
Limited ("LCO") and Richard Braddock for $3,000,000. The options were
exercisable at $9.00 per share through May 1, 2007. In addition, the Company
repriced certain of the options granted in the March 31, 1996 private placement
held by these same investors, so that such options also became exercisable at
$9.00 per share.

On May 5, 1998, the Company sold 1,860,465 shares of restricted Common Stock to
LCO for $5,000,000. In connection with the sale, the Company also agreed to
reprice options to purchase up to 1,173,334 shares of Common Stock previously
granted to LCO, such that the purchase price of the shares underlying the
then-existing options was changed from $9.00 per share to $4.50 per share.
773,334 of said options are exercisable through March 31, 2006. 400,000 of said
options are exercisable through May 1, 2007.

On December 7, 1998, the Company sold 9,302,326 shares of restricted Common
Stock to LCO in a private placement for $10,000,000. Under an amendment to a
prior registration agreement, LCO acquired certain registration rights with
respect to these shares.

                                       11
<PAGE>

Fiscal 2000

Effective June 4, 1999, the Company sold 1,355,555 shares of restricted Common
Stock in a private placement for $15,000,000. 1,004,043 of the shares were sold
to nine private investors, including LCO, for $11,120,000. The remaining 351,512
shares were sold to a group of 18 individuals, including members of senior
management, the Company's Board of Directors, and key consultants ("Management
Purchasers") for $3,880,000. The purchase price was $10.95 per share. However,
four of the purchasers, including three non-employee directors of the Company
and LCO, purchased at $11.525 per share. CAP Advisers Limited, an entity
affiliated with LCO, provided financing for the Management Purchasers. All
purchasers acquired certain registration rights.

Effective January 12, 2000, the Company sold in a private placement 77,318
shares of Common Stock to Andrew J. McKelvey for cash proceeds of $463,908, or
$6.00 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. See
"Certain Relationships and Related Transactions," Item 13, below.

Effective January 12, 2000, the Company sold in a private placement a total of
30,927 shares of Common Stock to Quota Rabbicco II, Ltd., Argonaut Partnership,
L.P., and David E. Gerstenhaber for $185,562, or $6.00 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 3,333,333 shares of
its Common Stock, representing 14.2 percent of the Company's total shares
outstanding, for aggregate proceeds of $20,000,000. The purchase price was $6.00
per share. The shares were issued to three private investors, Pequot Private
Equity Fund II, L.P. (1,666,667 shares), Pequot Partners Fund, L.P. (833,333
shares), and Pequot International Fund, Inc. (833,333 shares)(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 new 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 LOC, 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. Recently,
the Pequot Investors appointed Mr. Gerald Poch to serve as their designee on the
Company's Board of Directors.

Fiscal 2001

On June 27, 2000, the Company signed a Securities Purchase Agreement with ten
investors, pursuant to which the Company agreed to issue and sell in a private
placement its 5% Subordinated Convertible Notes due June 29, 2005 in the
aggregate principal amount of $25,000,000. Closing of the Note Offering is
scheduled to occur June 29, 2000, subject to the satisfaction of certain
customary conditions. See Item 1- Description of Business, Recent Business
Developments, June 2000 Note Purchase, above.

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 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,
have not been 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.

                                       12
<PAGE>

Stock Options and Warrants

Since March 31, 1998, the Company has granted options, some of which have been
subsequently forfeited, to purchase up to 4,159,000 shares to approximately 100
employees, directors, or key consultants pursuant to the Company's 1997 Stock
Option and Incentive Plan (the "1997 Plan"). Additional options or warrants for
approximately 1,685,000 shares have been granted to certain vendors and
consultants outside the 1997 Plan. The exercise price of the options granted
during that period ranges from $1.00 to $13.75 per share. Most of the options
vest and become exercisable in increments over time.

The Company has registered with the Securities and Exchange Commission, on Form
S-8, up to 4,000,000 million 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 675,000 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 any additional options granted or to
be granted under the Company's 1997 Plan.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS

Results of Operations

THIS ANNUAL REPORT ON FORM 10-KSB 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.

The following table sets forth, for the periods indicated, certain information
relating to the operations of the Company. During the fourth quarter of Fiscal
2000, the Company adopted a 52/53-week (4 week - 4 week - 5 week) fiscal
calendar. This change necessitated adding one day to the Fiscal 2000 year. Data
in the table reflects the consolidated results of the Company for the 52 weeks
ended April 1,2000 and March 31, 1999, respectively. All amounts, except share
data, in the following table and discussion are in thousands.

                                                 For the 52 Weeks Ended
                                          -------------------------------------
                                                                        % OF
                                                                         CHG
                                                                        FROM
                                           APRIL 1,    MARCH 31,       1999 TO
                                             2000        1999           2000
                                           --------   ---------       ---------
      Statement of Operations Data:
          Center whitening fees, net..     $ 5,838    $     46        12,591.8%
          Associated Center whitening
            fees, net....................    1,970           -           100.0
          Product sales..................      236         501           (52.9)
                                          --------    --------
              Total revenues, net........    8,044         547         1,369.3
                                          --------    --------

      Operating Costs and Expenses:
          Center selling and
            occupancy costs..............   13,849         946         1,364.2
          Selling, general and
            administrative...............   14,498       4,627           213.2
          Research and development
            expenses.....................    1,748       3,201           (45.4)
          Depreciation and amortization..    1,457         123         1,080.0
          Termination benefits,
            impairment charges and
            write-down of assets.........      472       3,555           (86.7)
                                          --------    --------
              Total operating costs and
                Expenses.................   32,024      12,452           157.2
                                          --------    --------

      Other Income (Expense), net:
          Interest expense...............      (26)       (102)          (74.9)
                                          --------    --------
          Interest income................      500         240           108.6
                                          --------    --------
          Income tax expense.............      (11)          -               -
                                          --------    --------
              Net income (loss).......... $(23,516)   $(11,767)           99.7%
                                          =========   ========

                                       13
<PAGE>

The following are explanations of significant period-to-period changes for the
52 weeks ended April 1, 2000 and March 31, 1999:

Revenues

Total Revenues, net. Total net revenues increased by $7,497, or 1,369.3%, to
$8,044 for the 52 weeks ended April 1, 2000 from $547 for the 52 weeks ended
March 31, 1999.

Center Whitening Fees, net. Center whitening fees, net, increased by $5,792 or
12,591.8% to $5,838 for the 52 weeks ended April 1, 2000 from $46 for the 52
weeks ended March 31, 1999. During the 52 weeks ended April 1, 2000, the Company
opened a total of 13 Centers for a total of 14 compared to 1 Center opened
during the fourth quarter of the 52 weeks ended March 31, 1999. Center whitening
fees are expected to increase during the next twelve months as a result of the
planned opening of 6 additional Centers as well as full year operating
experience over the next twelve months at existing Centers. Additionally, the
Company will continue to refine its marketing strategy to expand consumer
awareness within each respective market for which a Center or Centers exist. As
a result, management anticipates that the number of procedures performed at each
Center will also increase. However, there can be no guarantee that the Company
will be successful in executing its marketing strategy or that Center
performance would be enhanced. During the 52 weeks ended March 31, 1999, the
Company discontinued its laser-based teeth whitening device business. As a
result, there were no sales of these devices during the 52 weeks ended March 31,
1999.

Associated Center Whitening Fees. Associated Center whitening fees for the 52
weeks ended April 1, 2000 totaled $1,970. During the 52 weeks ended April 1,
2000, the Company executed contracts with 490 Associated Center locations of
which 235 were in operation at April 1, 2000. There are generally 45 days of
lead-time between signing an Associated Center Dentist and the performance of
paid procedures by the Dentists due to training and shipping requirements. The
Company had no Associated Center locations sold or open during the 52 weeks
ended March 31, 1999.

The Company is aggressively executing its strategic plan of expanding
distribution utilizing its Associated Center model. This plan includes the
expansion of strategic partnerships like the Orthodontic Centers of America
("OCA") relationship and other "special dental groups", identifying and
expanding the international distributor base, and expanding domestic direct
selling teams while enhancing the support of new and existing Associated
Centers. Additionally, the Company has planned openings (combined domestic and
international) of approximately 1,200 additional Associated Centers over the
next twelve months. As a result, Associated Center whitening fees are expected
to increase during the next twelve months. Additionally, the Company will
continue to refine its marketing strategy to expand consumer awareness within
each respective market for which Associated Centers exist. As with the Centers,
management anticipates that enhanced consumer awareness will lead to more
procedures performed at Associated Centers. Again, there can be no guarantee
that the Company will be successful in executing its marketing strategy or that
Associated Center performance will be enhanced.

Product Sales. Product sales decreased $265, or 52.9% to $236 for the 52 weeks
ended April 1, 2000 from $501 for the 52 weeks ended March 31, 1999. Product
sales for the 52 weeks ended April 1, 2000 represent the Company's toothpaste
and newly introduced Sonicare toothbrush products sold at Centers. Product sales
are expected to increase during the next twelve months as a result of the
anticipated introduction of additional oral care products to be sold at Centers,
Associated Centers and through an E-Commerce website (to be introduced in fiscal
year 2001). Product sales for the 52 weeks ended March 31, 1999 represent
chemical products related to laser-based teeth whitening devices that are no
longer sold by the Company.


Operating Costs and Expenses

Center Selling and Occupancy Costs. Center selling and occupancy costs increased
$12,903, or 1,364.2% to $13,849 for the 52 weeks ended April 1, 2000 from $946
for the 52 weeks ended March 31, 1999. The increase was primarily the result of
the Company opening 13 Centers during the 52 weeks ended April 1, 2000, for a
total of 14 Centers compared to 1 Center opened during the fourth quarter of the
52 weeks ended March 31, 1999. Of this increase, $7,625 was advertising and
promotional costs directed to increase consumer awareness, $3,251 related to
Center salaries and benefits and $1,259 related to rent at the 14 existing
Centers. Center selling and occupancy costs, as a percentage of Center whitening
fees was 228.2% for the 52 weeks ended April 1, 2000 compared to 1,085.4% for 52
weeks ended March 31, 1999. The low operating margins represent newly opened
Centers and partial year results from existing Centers. Center selling and
occupancy costs are expected to increase during the next twelve months as a
result of the planned opening of 6 additional Centers as well as full year
operating experience over the next twelve months at existing Centers. However,
Center

                                       14
<PAGE>

selling and occupancy costs as a percentage of Center whitening fees are
expected to continue to decrease as marketing expenditures in each market is
leveraged more effectively across a greater number of Centers. Product cost of
sales as a percentage of product sales was 33.8% for the 52 weeks ended April 1,
2000. Product cost of sales consisted primarily of the Company's toothpaste and
Sonicare toothbrush products. For the 52 weeks ended March 31, 1999, product
cost of sales, represent the chemical products related to the old laser-based
teeth whitening devices that are no longer sold by the Company.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $9,871, or 213.2%, to $14,498 for the 52 weeks
ended April 1, 2000 from $4,627 for the 52 weeks ended March 31, 1999. The
Company added 53 additional executive, selling and administrative personnel
during Fiscal 2000 to effectively execute the Company's business strategy.
Additionally, the Company introduced 13 new Centers, 490 Associated Centers, and
incurred costs related to the opening of future Centers and Associated Centers.

Included in the selling, general and administrative expenses for the 52 weeks
ended April 1, 2000 were $3,505 of advertising, promotional, and call center
costs directed to increase consumer awareness, and sales of the whitening
service to prospective Associated Center dentists. The Company also incurred
$7,649 of professional service costs during the 52 weeks ended April 1, 2000,
related to public relations, executing Center and Associated Center agreements,
executing leases, intellectual property protection, legal fees, employee
recruitment and general corporate matters. Included in professional service
costs are non-cash charges totaling $1,765 for the fair value of stock options
granted to various consultants to the Company. The Company expects to issue
options to consultants in the future at or above fair market value. The Company
also incurred $746 related to the development and expansion of international
Associated Centers in Japan, Argentina, Switzerland, Italy, Holland, France,
Singapore and Belgium.

During the 52 weeks ended April 1, 2000, the Company consolidated its Call
Center operations from Los Angeles and its general and administrative operations
from Lester, Pennsylvania, to its headquarters facility in Walnut Creek. The
Company expects to realize savings of approximately $1,000 during the next
twelve months as a result of this consolidation. Management expects selling,
general and administrative expenses to be leveraged more efficiently as sales
from Centers and Associated Centers increase in the future.

Research and Development Expenses. Research and development expenses decreased
by $1,453, or 45.4%, to $1,748 for the 52 weeks ended April 1, 2000 from $3,201
for the 52 weeks ended March 31, 1999. This decrease was primarily attributable
to the development of the BS3000 LATW system and keycard that was introduced
into Associated Centers during the three months ended December 31, 1999.
Research and development expenses incurred during the 52 weeks ended March 31,
1999 related to the development of the BS2000 system, which was introduced at
the Company's first Center in Walnut Creek, California in February 1999. The
Company also incurred expenses related to clinical and efficacy studies, and to
develop the Company's next generation of light activated device.

Depreciation and Amortization. Depreciation and amortization increased by
$1,334, or 1,080.0% to $1,457 for the 52 weeks ended April 1, 2000 from $123 for
the 52 weeks ended March 31, 1999. This increase was primarily attributable to
the 14 Centers, and the introduction of the BS3000 system into 235 Associated
Centers in operation during the 52 weeks ended April 1, 2000. The Company only
had 1 Center in operation during the fourth quarter of the 52 weeks ended March
31, 1999.

Termination Benefits, Impairment Charges and Write-Down of Assets. Termination
of benefits, impairment charges and write-down of assets decreased by $3,083, or
86.7% to $472 for the 52 weeks ended April 1, 2000 from $3,555 for the 52 weeks
ended March 31, 1999. During the 52 weeks ended April 1, 2000, the Company
recorded a $472 charge related to the relocation of its Lester, Pennsylvania
office to California. These costs consisted primarily of lease termination
accruals and employee severance.

During the 52 weeks ended March 31, 1999, the Company's Board of Directors and
management decided to close its Utah operating facility, discontinue all
activities related to the industrial and scientific laser lines of business,
discontinue development and sales of its laser-based device, and move its
headquarters to Pennsylvania. As a result of the Company's decision to relocate
its operations to Pennsylvania and to focus exclusively on the tooth whitening
market, nearly all of the Company's 63 employees located in Utah were scheduled
for termination. A termination benefits liability of $200 was established and
charged to expense during the three-month period ended June 30, 1998. At
September 30, 1998, the Company completed its termination plan and paid benefits
of approximately $200 to former employees. In October

                                       15
<PAGE>

1998, the Company discontinued sales of take-home and in-office tooth whitening
chemical products as a result of management's shift in focus to the LATW
technology to be distributed at Centers and Associated Centers.

In addition to employee termination costs, the Company recorded other charges of
$2,927 in the 52 weeks ended March 31, 1999. These charges include the
write-down of $418 of inventories classified as cost of products sold, the
impairment and write-down of patents and a joint venture related to discontinued
technology (assets which will provide limited or no future benefit to the
Company) for $657, settlement of canceled purchase commitments for $402,
write-down on assets available for sale at fair value for $367, property
write-downs and losses on sale of properties for $425, and $658 of charges
related to uncollectable accounts receivable and accrued expenses associated
with discontinued product lines.

Total Operating Costs and Expenses. Total operating costs and expenses increased
by $19,572, or 157.2%, to $32,024 for the 52 weeks ended April 1, 2000 from
$12,452 for the 52 weeks ended March 31, 1999, for the reasons discussed above.

Interest Expense. Interest expense decreased $76, or 74.9%, to $26 for the 52
weeks ended April 1, 2000 from $102 for the 52 weeks ended March 31, 1999.
Interest expense consisted primarily of mortgage interest paid on the Company's
former headquarters facility.

Interest Income. Interest income increased $260, or 108.6%, to $500 for the 52
weeks ended April 1, 2000 from $240 for the 52 weeks ended March 31, 1999. This
increase was primarily related to increased average available cash on-hand to
invest.

Net Loss. The net loss increased by $11,749, or 99.7%, to $23,516 for the 52
weeks ended April 1, 2000 from $11,676 for the 52 weeks ended March 31, 1999,
due to a combination of the factors described above.


Liquidity and Capital Resources

General

The Company's principal sources of liquidity have been issuances of common
stock. At April 1, 2000, the Company had $10,969 of cash and cash equivalents.
The Company is in the early stages of opening Centers and Associated Centers. As
of April 1, 2000, the Company has opened 14 Centers and has planned openings of
6 additional Centers. As of April 1, 2000, the Company has executed contracts
with 490 Associated Centers with 235 Associated Centers in operation. The
Company expects to open additional Centers and sign contract for additional
Associated Centers during the next twelve months. This expansion is contingent
upon several factors, including available cash resources, ability to secure
leases for its Centers and acceptance by the consumer and Associated Center
Dentists of the Company's LATW services. Currently, the Centers and Associated
Centers that are open are operating at a loss. The Company expects that
operating losses will continue through the fiscal year ending March 31, 2001.
The Company expects capital expenditures to be approximately $15,578 during the
next twelve months. It is expected that the Company's principal uses of cash
will be to provide working capital, finance capital expenditures and for other
general corporate purposes. In particular, the Company plans to use its cash to
finance its marketing strategy, to build out 6 additional BriteSmile Centers and
to fund the production of additional BS3000 devices for Associated Centers as a
result of the Company's planned expansion of its business platform.

Effective June 27, 2000, the Company signed a Securities Purchase Agreement with
seven investors pursuant to which the Company has sold $12,083,332 of its 5%
Subordinated Convertible Notes due June 29, 2005. See below, and in Item 1,
"Recent Business Developments  -- June 2000 Note Purchase Financing"
herein. the Company is actively negotiating to sell up to an additional $13
million of the Notes to third parties on substantially similar terms. In
addition, the Company has received a commitment from 4 directors and
shareholders to purchase an additional $9.09 million of the Notes on or before
July 31, 2000 if the Company does not sell such amount of Notes to third
parties. Accordingly, in the  opinion of management, the Company will have
adequate debt and equity capital resources to pursue its goals in the next
twelve months. While management believes that the Company can continue its
current operating strategy without additional funding, cash flows are difficult
to forecast accurately. Therefore, there can be no assurance that additional
capital will not be required, or that it will be available on terms that are
acceptable to the Company. Additionally, there can be no assurance that the
Company's business will generate cash flows at or above current levels or that
cost savings from consolidation efforts can be achieved. Accordingly, the
Company may choose to defer capital expenditure plans and extend vendor payments
for additional cash flow flexibility.

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

                                       16
<PAGE>

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

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

On January 18, 2000, the Company issued and sold in a private placement
3,333,333 shares of its common stock for aggregate proceeds of $20,000. The
purchase price was $6.00 per share. The shares were issued to three private
investors, Pequot Private Equity Fund II, L.P. (1,666,667 shares), Pequot
Partners Fund, L.P. (833,333 shares), and Pequot International Fund, Inc.
(833,333 shares).

Effective February 1, 2000, the Company issued an aggregate 30,927 shares of
restricted common stock to three affiliated purchasers (Quota Rabbicco II, Ltd.,
Argonaut Partnership, L.P. and David E. Gerstenhaber), in a private placement
for cash proceeds to the Company of $186.

Effective February 1, 2000, the Company issued an aggregate 77,318 shares of
restricted common stock to Andrew J. McKelvey, an affiliated purchaser, in a
private placement for cash proceeds to the Company of $464.

On May 26, 2000, the Company entered into a Revolving Credit Line Agreement (the
"Credit Facility") with Bank of Hawaii. Under the Credit Facility, the Company
may borrow from time to time through May 25, 2001 up to $2 million outstanding
at any one time. Loan proceeds must be used for working capital, capital
expenditures, and general corporate purposes only, and are secured by a Letter
of Credit from Scotiabank facilitated by an entity affiliated with the Company.
The Credit Facility requires monthly payments to the Bank of interest only, with
all principal and accrued interest due May 25, 2001. To date, the Company has no
borrowings under the Credit Facility.

Effective June 27, 2000, the Company signed a Securities Purchase Agreement with
seven investors (the "Investors"), pursuant to which the Company sold in a
private placement (the "Note Offering") its 5% Subordinated Convertible Notes
due June 29, 2005 in the aggregate principal amount of $12,083 (the "Notes").

The Notes are convertible into shares of the Company's Common Stock, par value
$.001 per share ("Common Stock"), at a per share conversion price of $6.18,
which is 120% of the average of the closing bid price of the Common Stock during
the ten-trading day period immediately prior to June 27, 2000, the date the
transaction documents were signed. The Company will also issue to the Investors,
pro rata, warrants (the "Warrants") to purchase a total of 977,616 shares of
Common Stock, which have a term of five years and an exercise price of $7.21.
The number of shares underlying the Notes and the exercise price of the Warrants
are subject to a reset and penalty provision as set forth in the transaction
documents.

The Investors are presently affiliates of the Company and include LCO
(shareholder and affiliated with director Anthony Pilaro), John Reed
(shareholder, CEO and director), Gasper Lazzara, Jr. (director), Pequot Private
Equity Fund II, L.P., Pequot Partners Fund, L.P., and Pequot International Fund,
Inc. (shareholders and affiliated with director Gerald Poch), and Andrew
McKelvey (shareholder and affiliated with director Bradford Peters).

Pursuant to a Registration Rights Agreement between the Investors and the
Company, the Company agreed to register with the SEC, within 120 days from the
closing date, the shares of Common Stock underlying the Notes and Warrants for
offer and sale under the Securities Act of 1933, as amended.

The Company is actively negotiating to sell up to an additional $13 million of
the Notes to third parties on substantially similar terms.  In addition, the
Company has received a commitment from 4 directors and shareholders to purchase
an additional $9.09 million of the Notes on or before July 31, 2000 if the
Company does not sell such amount of Notes to third parties.


                                       17
<PAGE>

April 1, 2000 Compared to March 31, 1999

As of April 1, 2000, the Company had liquid assets (cash and cash equivalents
and trade accounts receivable) of $12,150, an increase of 93.6%, or $5,875, from
March 31, 1999 when liquid assets were $6,275. Cash increased $4,496, or 76.9%,
to $10,696 at April 1, 2000 from $6,200 at March 31, 1999. This increase in cash
was primarily the result of the recent $20,000 equity contribution received in
January 2000. Trade accounts receivable increased $1,106, or 1,475.4%, to $1,181
at April 1, 2000 from $75 at March 31, 1999. This increase is primarily the
result of the introduction of the BS3000 system and keycard to Associated
Centers, the increased number of Associated Centers in operation during the 52
weeks ended April 1, 2000 and the increased key card re-orders received during
the period.

Current assets increased by $7,148, or 90.8%, to $15,018 at April 1, 2000 from
$7,870 at March 31, 1999. This increase was primarily the result of an increase
in cash of $4,496 and accounts receivable of $1,106, described above, as well as
an increase in inventory of $1,175 resulting from increased production of the
BS3000 device being shipped into Associated Center locations. This increase was
offset in part by a decrease in assets held for sale of $1,260.

Long-term assets increased $14,810, or 578.0%, to $17,372 at April 1, 2000 from
$2,562 at March 31, 1999. This increase was primarily the result of leasehold
improvements at the 14 Centers in operation and additional Centers under
construction, the shipment of 235 BS3000 devices and the purchase of computer
and related equipment during the 52 weeks ended April 1, 2000.

Current liabilities decreased by $224, or 5.1%, to $4,149 at April 1, 2000 from
$4,372 at March 31, 1999. This decrease was primarily the result of a decrease
in trade accounts payable of $168 and a decrease of $797 in current portion of
long-term debt as a result of the repayment of outstanding mortgages on the
property held for sale which was previously the Company's corporate headquarters
in Salt Lake City, Utah. These decreases were offset in part by increases in
accrued legal fees of $97, accrued gift certificate liability of $123 and
accrued sales tax liability of $161.

The Company's working capital increased by $7,371, or 210.7% to $10,869 at April
1, 2000 from $3,498 at March 31, 1999, for the reasons described above.

The Company used net cash of $23,754 in operating activities during the fiscal
year ended April 1, 2000, primarily as a result of the net loss incurred during
the period.

The Company used net cash of $13,578 in investing activities during the fiscal
year ended April 1, 2000, primarily for capital expenditures relating to the
Company's expansion efforts in Centers and Associated Centers.

The Company provided net cash of $42,101 from financing activities during the 52
weeks ended April 1, 2000, primarily due to the successful completion of several
private placements of an aggregate of 5,862,222 shares of its common stock for
proceeds of $40,285. Additionally, the Company issued an aggregate 108,245
shares of restricted common stock for cash proceeds of $650.

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 does not believe that its business follows seasonal trends. However,
because certain of the Company's Centers are located within a mall or retail
environment, the potential for seasonality exists. The Company does believe that
its business is, to a limited extent, impacted on or around Holidays. As a
result, the Company's sales performance could potentially be affected by
seasonal trends.

                                       18
<PAGE>

Forward Looking Statements

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

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

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

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

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

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

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

         o        Lack of product diversity.

ITEM 7. FINANCIAL STATEMENTS

The Company's consolidated financial statements and associated notes are set
forth on pages F-1 through F-19.


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

None

                                       19
<PAGE>

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(A) OF THE EXCHANGE ACT

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/
----                        ---    ----------------------

John Reed                   59     Chief Executive Officer and Director
Paul Dawson                 44     Chief Executive Officer of BriteSmile
                                   International Limited, a subsidiary of the
                                   Company
Linda S. Oubre              41     President, Chief Administrative Officer and
                                   Director
Andrew Hofmeister           40     President, Associated Center Division
Michael Whan                35     President Worldwide Marketing
Paul A. Boyer               36     Executive Vice-President, Chief Financial
                                   Officer and Secretary
Stephen Miller              52     Executive Vice-President, Real Estate
                                   and Construction
Anthony M. Pilaro           64     Chairman of the Board
R. Eric Montgomery          45     Director since May, 1998
Jennifer Scott              36     Director since November, 1998
Peter Schecter              40     Director since June, 1999
Bradford G. Peters          32     Director since December, 1999
Harry Thompson              70     Director since December, 1999
Gerald Poch                 53     Director since May, 2000
Dr. Gasper Lazzara, Jr.     58     Director since May 2000

----------
/1/  All directors serve for one year and until their successors are elected
     and qualified and, unless otherwise noted, have served as a director during
     the entire fiscal year ended April 1, 2000 through the date of this report.
     All officers serve at the pleasure of the Board of Directors. There are no
     family relationships between any of the officers and directors.

John Reed

Prior to joining the Company 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 Departments
Stores and John Wanamaker.

Paul A. Boyer

Paul Boyer was named the Company's Executive Vice President and Chief Financial
Officer in October 1999. Prior to joining BriteSmile, Mr. Boyer was Senior Vice
President and Chief Financial Officer of Dynatec International, Inc., a
manufacturer and marketer of consumer products. While at Dynatec, he was
directly responsible for all financing, accounting and operations of that
company, including manufacturing, purchasing, production and information
systems. Mr. Boyer also served as Director of Finance at Mrs. Field's Original
Cookies, Inc., where his responsibilities included that company's merger and
acquisition activity, treasury functions, financial forecasting, budgeting,
planning and analysis. Previously, Mr. Boyer was Chief Financial Officer of
Wasatch Education Systems. During his six and one half tenure at Wasatch, he
handled all accounting and financial activities and steered the company though a
successful public offering. Mr. Boyer received his BS degree and an MBA in
Accountancy from San Diego State University.

                                       20
<PAGE>

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.

Linda S. Oubre

Linda S. Oubre commenced serving as a director of the Company in May 1998. In
July 1998, she was named to the position of President, Chief Administrative
Officer of the Company. In August 1998 she has also functioned as President of
the Company's Whitening Center Division. Prior to joining the Company, Ms. Oubre
served for 3 years as President of Tri Com Ventures in Walnut Creek, California.
Tri Com specialized in new venture planning and implementation consulting. At
Tri Com, Ms. Oubre's clients included McGraw Hill's Business Week Magazine,
Prodigy Online Service, and the United Nations Business Development Project in
the Republic of Belarus. Prior to starting Tri Com Ventures in 1996, Ms. Oubre
was General Manager, New Business Development, for the Los Angeles Times, and
also served as Director of Operations for Walt Disney's Consumer Products
Division and Manager of Financial Planning for the Times Mirror Company. She has
also been a visiting instructor at the Wharton Business School. Ms. Oubre' is a
graduate of the University of California, Los Angeles and received her MBA from
the Harvard Business School.

Andrew Hofmeister

Mr. Hofmeister joined BriteSmile in August 1998. He currently serves as
President of BriteSmile's Associated Center Division. Prior to joining
BriteSmile, Mr. Hofmeister was Chief Executive Officer of Excimer Vision Leasing
L.P., a partnership engaged in the business of leasing Excimer laser systems,
and a former director of the Company prior to its relocation from Salt Lake City
to Lester, Pennsylvania. From 1989 to 1995 he was a consultant for McKinsey &
Company, specializing in retail and consumer products. Mr. Hofmeister is a
graduate of St. Olaf College and the Stanford Graduate School of Business.

Stephen Miller

Prior to joining BriteSmile in May 1999 as it 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.

Michael P. Whan

Mr. Whan joined BriteSmile as its President of World Wide Marketing in May 2000.
Prior to joining BriteSmile, Mr. Whan had served as Vice President, General
Manager of Taylor Made Golf from 1996 to 2000. From 1987 to 1995 Mr. Whan held
various posts at Proctor & Gamble Company, including Director of Marketing, oral
care and Brand Manager of Crest toothpaste. Mr. Whan is a graduate of Miami
(Ohio) University.

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, principal owner 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.

                                       21
<PAGE>

Gerald Poch

Mr. Poch is currently serving as Managing Director of Pequot Capital Management,
Inc. He joined the Pequot family of funds as a Principal in 1998. Mr. Poch was
the former Chairman, President and CEO of GE Capital Information Technology
Solutions ("ITS"), and before ITS, founder, Co-Chairman and Co-President of
AmeriData Technologies, Inc. (NYSE:ADA) until its acquisition by GE Capital in
1996. From 1979 until 1983 he was Senior Vice President of TIE/Communications,
Inc. and President of Technicom, Inc., two public telecommunications companies.
Mr. Poch graduated Cum Laude from Boston University School of Law where he was
Managing Editor of the Law Review. He is admitted to practice law in the
District of Columbia, New York, and Massachusetts.

Dr. Gasper Lazzara, Jr.

Dr. Gasper Lazzara, Jr. has served as Chairman of the Board and a director of
the Orthodontic Centers of America, Inc. ("OCA") since its inception in July
1994. 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 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.

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 next generation products for use in the professional dental
office. Oraceutical is currently under contract with the Company to provide
technology development services. Mr. Montgomery's organizations have developed
products for companies including The Dial Corporation, Natural White, Virbac SA,
ProHealth Laboratories, OPI Products, American Dental Hygienics, 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.

Brad 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.

Harry Thompson

Mr. Thompson has served as a director of the Company since December 1999. Mr.
Thompson 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.
Currently, Mr. Thompson is a director of Schwinn/GT Corp.

                                       22
<PAGE>

Peter Schecter

Mr. Schecter 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. Schecter 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. Schecter has lived in Europe and Latin
America and has extensive experience in the area of governmental relations. He
is fluent in six languages.

Jennifer Scott

Ms. Scott was appointed a director of the Company in November 1998. In her
current position at Applied Research and Consulting LLC in New York City, Ms.
Scott conducts public opinion research for clients that have included Liz
Claiborne, the Disney Channel, and Ameritech. She has also served as Senior Vice
President at Shepardson, Stern and Kaminsky, and Senior Vice President at KRC
Research and Consulting. Her areas of expertise include issues communications,
corporate positioning, branding, educational media development and advertising.
Ms. Scott holds a BA in Political Science and Psychology (summa cum laude) and a
BA Honors in Political Science (summa cum laude) from the University of Natal in
South Africa. She received her Ph.D. in Political Science from Oxford University
in England.

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 at
research and development facilities established by the Company in Evanston,
Illinois. 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.

Salim A. Nathoo, D.D.S.

Dr. Nathoo was formerly employed by Colgate-Palmolive Co. as a Senior Researcher
from 1990 to 1998 and was a key member in the successful worldwide launch of the
Colgate Whitening program during his tenure there. Dr. Nathoo has lectured
globally on both the clinical and scientific aspects of teeth whitening, and he
is recognized as one of the leading authorities on the subject. Dr. Nathoo is
one of the founders of Oral Health Clinical Services, LLC ("Oral Health"). The
Company has entered into a consulting agreement with Oral Health in order to
assist the Company in obtaining an American Dental Association ("ADA") seal of
approval for its LATW system. Dr. Nathoo holds both a PhD and DDS from New York
University, and has published over 40 papers in major scientific journals.

                                       23
<PAGE>

Section 16(a) Beneficial Ownership Reporting Compliance

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 April 1, 2000, 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
(all such transactions have since been reported to the SEC on Form 5 reports
filed in May and June, 2000): Form 4 report of A. Hofmeister for reporting
transaction in June 1999; Form 3 report of H. Thompson for reporting transaction
in August 1999; Form 3 and two Form 4 reports of S. Miller for reporting
transactions in February, March, June and October 1999; Form 3 report of A.
Flint for reporting transactions in August and November 1999; Form 3 report of
P. Schecter for reporting transactions in April and July 1999; Form 3 report of
B. Peters for reporting transactions in June 1999 and January 2000.

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 April 1, 2000, that has not been filed with
the Securities and Exchange Commission.

                                       24
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION

The following Summary Compensation Table shows compensation paid by the Company
for services rendered during the past three fiscal years to each person who
served as the Company's Chief Executive Officer during the fiscal year ended
March 31, 2000, and to the Company's four most highly compensated executive
officers in fiscal 2000 other than the CEO. The Company appointed Richard V.
Trefz as President and CEO, effective June 1, 1998. Mr. Trefz served as CEO
through December 1998. Effective June 1999, the Company appointed John L. Reed
as its new President and CEO.

                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                                              Long Term
                                                                            Compensation
                                                                            ------------
                                                           Annual
                                                        Compensation           Awards
                                                        ------------        ------------

                                                                             Securities
                                                                             Underlying
                Name and                  Fiscal                              Options/
                Principal Position         Year          Salary ($)           SARs (#)
                ------------------        ------        ------------        ------------
                <S>                       <C>           <C>                 <C>
                John L. Reed               2000            $201,923         250,000/(1)/
                  President and CEO        1999                 -0-/(1)/    750,000/(2)/

                Paul Dawson                2000            $167,723         200,000/(3)/
                  CEO, BriteSmile          1999                 -0-/(3)/        -0-/(4)/
                  International, Ltd.

                Richard V. Trefz           2000             250,000          20,000/(5)/
                  President,               1999             157,635         225,000/(6)/
                  Manufacturing

                Linda S. Oubre             2000             176,058          25,000/(7)/
                  President, Chief         1999             117,883         200,000/(8)/
                  Administrative Officer

                Andrew J. Hofmeister       2000             157,500          75,000/(9)/
                  President, Associated    1999              97,464         150,000/(10)/
                  Center Division
</TABLE>
----------

/1/      83,333 of which are vested, 83,333 of which vest on March 24, 2001, and
         83,334 of which vest on March 24, 2002.

/2/      Mr. Reed received no cash compensation from the Company in fiscal 1999.
         Prior to commencing full-time work for the Company at the Company's
         offices, Mr. Reed performed occasional services for the Company
         beginning January 1999. Mr. Reed's employment contract with the Company
         provides for an annual salary of $250,000, commencing June 1999, and
         options to purchase 750,000 shares granted January 1999, 250,000 of
         which are vested, the remainder of which vest 100,000 per year
         beginning July 22, 2000.

/3/      All of which options vest and become exercisable on November 1, 2000.

/4/      Mr. Dawson received no compensation from the Company in fiscal 1999.
         Mr. Dawson's employment contract with the Company, effective April 19,
         1999, provides for an annual salary of $200,000, and options to
         purchase 300,000 shares, 140,000 of which are vested, the balance of
         which vest 40,000 per year beginning April 19, 2001.

/5/      Mr. Trefz' employment with the Company terminated as of May 31, 2000.
         In connection therewith the 20,000 options granted to Mr. Trefz in
         fiscal year 2000 were cancelled.

/6/      Mr. Trefz' employment with the Company terminated as of May 31, 2000.
         Of the 225,000 options granted in 1999, 105,000 are vested and are
         exercisable until May 7, 2008. The balance were cancelled in connection
         with Mr. Trefz' termination of employment.

                                       25
<PAGE>

/7/      All of which options vest and become exercisable on November 1, 2000.

/8/      80,000 of which are vested, the balance of which vest 30,000 per year
         beginning July 1, 2000.

/9/      18,000 of which are vested, 32,000 of which vest 8,000 per year
         beginning May 19, 2001, and 25,000 of which vest on November 1, 2000.

/10/     58,000 of which are vested, 60,000 of which vest in increments of
         15,000 each year beginning August 1, 2000; 32,000 of which vest in
         increments of 8,000 each year beginning March 2, 2001.

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:

                     OPTION / SAR GRANTS IN LAST FISCAL YEAR
                                INDIVIDUAL GRANTS

<TABLE>
<CAPTION>

                                       Number of         % of Total
                                       Securities       Options/SARs
                                       Underlying        Granted to     Exercise or
                                      Options/SARs      Employees in     Base Price     Expiration
                Name                   Granted (#)      Fiscal Year(1)   ($/Share)         Date
          --------------------        ------------      --------------  ------------    ----------
<S>                                   <C>               <C>             <C>             <C>
          John L. Reed                250,000(2)           13.2%          $ 9.250        03-24-10
          Paul Dawson                  20,000(3)            1.2%          $ 5.875        11-01-09
          Richard V. Trefz             20,000(3)            1.2%          $ 5.875        11-01-09
          Linda S. Oubre               25,000(3)            1.5%          $ 5.875        11-01-09
          Andrew J. Hofmeister         25,000(3)            1.5%          $ 5.875        11-01-09
          Andrew J. Hofmeister         50,000(4)            3.0%          $13.395        05-19-09
</TABLE>

----------
(1)  Based upon options to purchase a total of 1,890,500 shares granted by the
     Company to employees of the Company during the fiscal year ended April 1,
     2000.

(2)  83,333 of which are vested, 83,333 of which vest on March 24, 2001, and
     83,334 of which vest on March 24, 2002.

(3)  These options vest and become exercisable on November 1, 2000 (after one
     year from the date of grant), conditioned on continued employment with the
     Company.

(4)  18,000 of which are vested, the balance to vest 8,000 per year beginning
     5-19-01, conditioned on continued employment with the Company.

                 AGGREGATED OPTION EXERCISES IN FISCAL YEAR 2000
                         AND APRIL 1, 2000 OPTION VALUES

<TABLE>
<CAPTION>
                                                              Number of Securities
                                                             Underlying Unexercised         Value of Unexercised
                                  Shares        Value              Options at              In-the-Money Options at
                                Acquired on   Realized          April 1, 2000/1/                April 1, 2000/1/
          Name                 Exercise (#)     ($)         Exercisable/Unexercisable     Exercisable/Unexercisable
   --------------------       ------------    --------      -------------------------     -------------------------
<S>                           <C>             <C>           <C>                           <C>
   John L. Reed                     0             0               350,000/650,000            $2,471,875/$2,903,125
   Paul Dawson                      0             0               140,000/180,000              $498,750/$643,750
   Richard V. Trefz                 0             0               105,000/120,000(2)           $820,312/0
   Linda S. Oubre                   0             0                80,000/145,000              $625,000/$1,029,687
   Andrew J. Hofmeister             0             0                86,000/149,000              $451,699/$778,937
</TABLE>

--------------

                                       26
<PAGE>

/1/      Potential unrealized value is calculated as the fair market value at
         March 31, 2000 ($9.5625 per share), less the option exercise price,
         times the number of shares.

/2/      Mr. Trefz' employment with the Company terminated effective May 31,
         2000. In connection with the termination, Mr. Trefz retained options to
         purchase 105,000 shares of the Company. All other unvested options held
         by Mr. Trefz were canceled.

Compensation of Directors

Outside directors of the Company (non-employees, non-consultants) receive
options to purchase 20,000 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.

Certain directors of the Company have been granted Units of Company equity
participation by LCO. As of May 11, 1998, LCO adopted an Incentive Compensation
Plan (the "LCO Plan"). Under the LCO Plan, certain key employees, consultants or
directors of the Company may be given the opportunity to benefit from the
appreciation in the value of the LCO's present equity holdings in the Company.
Such appreciation rights are granted by way of incentive compensation units
("Units"), whose value is determined by the increase in value of LCO's present
holdings of Company Common Stock above a prescribed base value of $4.75 per
share. Each Unit represents a percentage interest (determined by the total
number of Units granted under the LCO Plan) in such increase in value of LCO's
holdings. LCO has granted Units to the following directors or former directors
of the Company as incentive compensation: John Reed, Richard Trefz, Brian
Delaney, and Linda Oubre. Rich Trefz interest in the LCO plan has been paid out
and Mr. Trefz has no further interest in the LCO plan or rights thereunder.

Pursuant to an agreement in effect from November, 1997 through May 1998, Richard
Trefz received compensation from a Company affiliate, CAP Advisers Limited
("CAP"), related to Mr. Trefz' service as a director of the Company. During the
period the agreement was in force, Mr. Trefz received a consulting fee paid by
CAP of $25,000.

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 750,000 shares of the
Company's common stock at the closing price on the date of the agreement. Mr.
Reed's employment began full-time and on location on June 2, 1999. On March 24,
2000, Mr. Reed was granted options to purchase 250,000 shares of the Company's
common stock at the closing price on that date.

Linda Oubre
-----------

The Company entered into an employment agreement with Linda Oubre on January 22,
1999. Under the terms of the agreement, Ms. Oubre currently serves as President,
Chief Administrative Officer. The initial term of the agreement is from January
22, 1999 through June 30, 2000. Her employment with the Company will continue on
an at-will basis thereafter. The Company paid Ms. Oubre $165,000 per annum from
January 22, 1999 through June 30,1999 and $175,000 per annum from July 1, 1999
through June 30, 2000. On July 1, 2000, Ms. Oubre's salary will increase to
$200,000 per annum. Ms. Oubre is eligible to receive bonus compensation under
such cash bonus plan as the Company may adopt for its key executives. If no such
plan is adopted, Ms. Oubre will be eligible for bonus compensation based on the
attainment of annual profitability and management objectives relating to the
Company's Center Division as agreed upon by Ms. Oubre and the Company. Ms. Oubre
was also granted options to purchase 200,000 shares of the Company's common
stock at $1.75 per share. Options to purchase 80,000 of the 200,000 shares have
vested and are currently exercisable; the right to purchase an additional 30,000
of such shares will vest each of July 1, 2000, July 1, 2001, July 1, 2002 and
July 1, 2003 if Ms. Oubre has remained in the employ of the Company from the
date of the agreement to such date.

                                       27
<PAGE>

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 300,000 shares of the Company's common stock at the
closing price on the date of the agreement. Options to purchase 100,000 shares
vested on the date of the agreement. The remaining 200,000 options vest in equal
installments over the next five years.

Richard V. Trefz
----------------

The Company entered into an employment agreement with Richard Trefz in May 1998,
initially as President and CEO of the Company. The term of the agreement was
from May 1998 to May 31, 2000. The Company did not renew Mr. Trefz' employment
at May 31, 2000 and the employment agreement terminated. The employment
agreement provided for a salary of $250,000 per year and options to purchase
225,000 shares of the Company's common stock at $1.75 per share. Mr. Trefz was
entitled to participate in all employee insurance and other fringe benefit
programs.

In connection with his termination of employment as of May 31, 2000, Mr. Trefz
retained the right to exercise 105,000 of the 225,000 options granted in May
1998. The balance of Mr. Trefz' options were cancelled.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information as of June 19, 2000 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; (ii) each
director or director nominee, and any other executive officer of the Company
whose compensation is required to be reported in Item 10 of this Report, 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.

<TABLE>
<CAPTION>
Name and Address                                             Number of Shares      Percent of Outstanding
                                                               Beneficially               Shares/(2)/
                                                                 Owned/(1)/
<S>                                                            <C>                   <C>
                      Executive Officers and Directors

Paul Dawson                                                        367,397/(3)/               1.5%
36 Fitzwilliam Place
Dublin 2, Ireland

Andrew J. Hofmeister                                               123,397/(4)/                 *
490 North Wiget Lane
Walnut Creek, CA 94598

Dr. Gasper Lazzara, Jr.                                                  0                      *
Orthodontic Centers of America
500 Sawgrass Village Circle
Ponte Verdra Beach, Florida 32082

R. Eric Montgomery                                                 265,957                    1.1%
29 Fairview Road
P. O. Box 487
Monterey, MA  01245

</TABLE>

                                       28
<PAGE>

<TABLE>
<CAPTION>
<S>                                                            <C>                   <C>

Linda S. Oubre                                                     105,331/(5)/                 *
490 North Wiget Lane
Walnut Creek, CA  94598

Bradford Peters                                                    533,939/(6)/               2.2%
Blackfin Capital
1633 Broadway, 33rd Floor
New York, New York 10019

Anthony M. Pilaro                                               12,429,438/(7)/              51.9
36 Fitzwilliam Place
Dublin 2, IRELAND

Gerald Poch                                                      3,333,333/(8)/              13.9%
Pequot Capital Management, Inc.
500 Nyala Farm Road
Westport, CT 06880

John L. Reed                                                     1,175,900/(9)/               4.9%
490 North Wiget Lane
Walnut Creek, CA 94598

Peter Schecter                                                      22,000/(10)/                *
Chlopak Leonard Schecter & Assoc.
1850 M Street, N.W., #550
Washington, D.C. 20036

Jennifer Scott                                                      40,423/(11)/                *
Applied Research & Consulting LLC
295 Lafayette Street, 5th Floor
New York, NY 10012

Harry Thompson                                                     100,000/(12)/                *
169 E. 78th Street
New York, New York 10021

Richard V. Trefz                                                   152,831/(13)/                *
Airport Business Center
200 Diplomat Drive, Bay 204
Lester, PA  19113

All Officers and Directors as a Group (17 persons)              18,954,742/(14)/             74.4%

</TABLE>

                                       29
<PAGE>

<TABLE>
<CAPTION>
<S>                                                            <C>                   <C>

                              5% Beneficial Owners

LCO Investments Limited                                         12,429,438/(15)/             51.9%
Canada Court
Upland Road
St. Peter Port
Guernsey
Channel Islands

Pequot Capital Funds                                             3,333,333/(9)/              13.9%
c/o Pequot Capital Management, Inc.
500 Nyala Farm Road
Westport, CT 06880
</TABLE>

-----------------

*        Constitutes less than 1%.

/1/      Includes any options or warrants to purchase share which are presently
         exercisable or exercisable within 60 days.

/2/      All percentages are calculated based upon a total number of shares
         outstanding which includes 23,970,685 shares of the Company issued and
         outstanding as of June 19, 2000, plus that number of options presently
         exercisable or exercisable within 60 days by the named security holder.

/3/      Includes 227,397 shares owned beneficially, and 140,000 shares which
         Mr. Dawson has the right to acquire upon the exercise of vested options
         at $6.00 per share.

/4/      Includes 37,397 shares owned beneficially, options to purchase 5,000
         shares exercisable at $9.00 per share, options to purchase 5,000 shares
         exercisable at 6.81 per share, options to purchase 40,000 shares
         presently exercisable at $1.75 per share, options to purchase 18,000
         shares presently exercisable at $2.75 per share and options to purchase
         18,000 shares presently exercisable at $13.375 per share.

/5/      Includes 25,331 shares owned beneficially, and options to purchase
         80,000 shares presently exercisable at $1.75 per share.

/6/      Represents shares held of record by Andrew J. McKelvey. Mr. Peters has
         an economic interest in any appreciation with respect to the shares,
         and shares control over disposition of the shares.

/7/      Represents 11,429,438 shares owned of record and beneficially by LCO,
         and 1,000,000 shares held indirectly through PdeP Tech Limited, a
         subsidiary of LCO Investments Limited. Mr. Pilaro is Chairman of CAP.
         CAP is the sole trustee of the ERSE Trust, of which LCO is a wholly
         owned subsidiary.

/8/      Represents 1,666,667 shares held of record by Pequot Private Equity
         Fund II, L.P. 833,333 shares held of record by Pequot Partners Fund,
         L.P., and 833,333 shares held of record by Pequot International Fund,
         Inc.

/9/      Includes 575,900 shares owned beneficially, options to purchase 350,000
         shares at $2.50 per share, and options to purchase 250,000 shares at
         $9.25 per share.

/10/     Includes 2,000 shares owned beneficially in a Revocable Living Trust,
         and options to purchase 20,000 shares presently exercisable at $11.25
         per share.

/11/     Includes 20,423 shares owned beneficially, and options to purchase
         20,000 shares presently exercisable at $1.0625 per share.

                                       30
<PAGE>

/12/     Options to purchase from LCO 100,000 shares presently exercisable at
         $1.50 per share.

/13/     Includes 47,831 shares owned beneficially, and options to purchase
         105,000 shares presently exercisable at $1.75 per share.

/14/     Includes presently exercisable options to purchase 1,176,000 shares.

/15/     Represents 11,429,438 shares owned of record and beneficially by LCO,
         and 1,000,000 shares held indirectly through PdeP Tech Limited, a
         subsidiary of LCO. LCO is a wholly owned subsidiary of the ERSE Trust.
         The sole trustee of the ERSE Trust is CAP. Mr. Pilaro, a director of
         the Company, is Chairman of CAP.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Effective January 12, 2000, the Company sold 77,318 shares of Common Stock in a
private placement to Andrew J. McKelvey for cash proceeds of $463,908. 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.

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. 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 $401,500 per year, subject to increase in the event of
increases in the rent payable under the parent lease for the property between
LCO and its lessor.

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 100,000 shares of Common Stock of the
Company at a price of $1.50 per share. The option to purchase from LCO expires
on August 31, 2004.

Effective June 4, 1999, the Company sold 1,355,555 shares of Common Stock in a
private placement for of $15,000,000. 1,004,043 of the shares were sold to nine
private investors for $11,120,000, including LCO. The remaining 351,512 shares
were sold to a group of up to 18 members of senior management of the Company,
including directors and executive officers, for $3,880,000. The purchase price
was $10.95 per share. However, four of the purchasers, including three
non-employee directors of the Company and LCO, purchased at $11.525 per share.
CAP Advisers Limited, an entity affiliated with LCO, provided financing for the
management purchasers. All purchasers acquired certain registration rights. See
the Company's Current Report on Form 8-K filed June 21, 1999.

On April 7, 1999, the Company entered into a Letter Agreement with Chlopak,
Leonard, Schechter and Associates ("CLS") Washington, D.C. Pursuant to the
agreement, CLS provides public relations advice and serves as communications
counselors to the Company for consideration of $22,500 per month, plus expenses.
The agreement was entered into for a minimum of six months, and remains in
force. Peter Schecter, a director of the Company, is a one-third co-owner and
Secretary of CLS.

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 Dr. Nathoo will devote their services to obtaining
American Dental Association ("ADA") Certification for the BS2000 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 75,000 stock
options to Dr. Nathoo which are vested. The Company will grant up to 225,000
additional stock options, of which the number and exercise price is dependent
upon obtaining ADA Certification, at the date the Certification is obtained.

                                      31
<PAGE>

On December 7, 1998, the Company sold 9,302,326 shares of Common Stock to LCO in
a private placement for $10,000,000. Under an amendment to a prior registration
agreement, LCO acquired certain registration rights with respect to these
shares.

On May 17, 1998, 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. The Company and
Oraceutical are currently negotiating an extension of their agreement beyond its
original term. In consideration for its services, Oraceutical has been paid
$35,000 a month, plus options to purchase 200,000 shares of Common Stock,
subject to vesting provisions, exercisable at $1.75 per share.

On May 5, 1998, the Company sold 1,860,465 shares of its Common Stock to LCO,
for $5,000,000 pursuant to a Stock Purchase Agreement dated as of May 4, 1998.

Effective June 27, 2000, the Company signed a Securities Purchase Agreement with
seven investors (the "Investors"), pursuant to which the sold Company sold in a
private placement (the "Note Offering") its 5% Subordinated Convertible Notes
due June 29, 2005 in the aggregate principal amount of $12,083,332 (the
"Notes").

The Notes are convertible into shares of the Company's Common Stock, par value
$.001 per share ("Common Stock"), at a per share conversion price of $6.18,
which is 120% of the average of the closing bid price of the Common Stock during
the ten-trading day period immediately prior to June 27, 2000, the date the
transaction documents were signed. The Company will also issue to the Investors,
pro rata, warrants (the "Warrants") to purchase a total of 977,616 shares of
Common Stock, which have a term of five years and an exercise price of $7.21.
The number of shares underlying the Notes and the exercise price of the Warrants
are subject to a reset and penalty provision as set forth in the transaction
documents.

The Investors are presently affiliates of the Company and include LCO
(shareholder and affiliated with director Anthony Pilaro), John Reed
(shareholder, CEO and director), Gasper Lazzara, Jr. (director), Pequot Private
Equity Fund II, L.P., Pequot Partners Fund, L.P., and Pequot International Fund,
Inc. (shareholders and affiliated with director Gerald Poch), and Andrew
McKelvey (shareholder and affiliated with director Bradford Peters).

Pursuant to a Registration Rights Agreement between the Investors and the
Company, the Company agreed to register with the SEC, within 120 days from the
closing date, the shares of Common Stock underlying the Notes and Warrants for
offer and sale under the Securities Act of 1933, as amended.

The Company is actively negotiating to sell up to an additional $13 million of
the Notes to third parties on substantially similar terms. In addition,
the Company has received a commitment from 4 directors and shareholders to
purchase an additional $9.09 million of the Notes on or before July 31, 2000 if
the Company does not sell such amount of Notes to third parties.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

The following exhibits are filed herewith or are incorporated by reference to
exhibits previously filed with the Commission:

(a)      Exhibits

Exhibit Number    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 Incorporation and Amendments thereto (incorporated
                  by reference to the Company's Registration Statement and
                  Amendments thereto on Form 10 initially filed August 8, 1990).

                                       32
<PAGE>

     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 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        Consulting Agreement dated November 1997 between CAP Advisers
                  Limited and Richard Trefz (incorporated by reference to the
                  Company's Annual Report on Form 10-KSB for the fiscal year
                  ended March 31, 1998).

     10.09        Lease Agreement dated June 3, 1998 between the Company and
                  Ambassador II Joint Venture regarding the Lester, Pennsylvania
                  facility (incorporated by reference to the Company's Quarterly
                  Report on Form 10-QSB for the quarter ended June 30, 1998).

     10.10        Employment Agreement dated as of June 1, 1998 between the
                  Company and David Bruhin (incorporated by reference to the
                  Company's Quarterly Report on Form 10-QSB for the quarter
                  ended June 30, 1998).

     10.11        Revised 1997 Stock Option and Incentive Plan of the Company
                  (incorporated by reference to Exhibit B to the Company's
                  Preliminary Proxy Statement on Schedule 14A as filed with the
                  Commission on July 6, 1998).

     10.12        Office Lease dated June 23, 1998 between the Company and
                  Mortgage One Corporation, regarding Evanston, Illinois
                  facility (incorporated by reference to the Company's Quarterly
                  Report on Form 10-QSB for the quarter ended June 30, 1998).

                                       33
<PAGE>

     10.13        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).

     10.14        Employment Agreement dated as of May 30, 1998 between the
                  Company and Richard Trefz (incorporated by reference to the
                  Company's Quarterly Report on Form 10-QSB for the quarter
                  ended June 30, 1998).

     10.15        LCO Investments Limited Incentive Compensation Plan, dated as
                  of May 11, 1998 (incorporated by reference to the Company's
                  Quarterly Report on Form 10-QSB for the quarter ended June 30,
                  1998).

     10.16        Form of Units Agreement between the Company and certain
                  directors or executive officers of the Company (incorporated
                  by reference to the Company's Quarterly Report on Form 10-QSB
                  for the quarter ended June 30, 1998).

     10.17        Employment Agreement dated as of January 22, 1999 between the
                  Company and Linda Oubre, Vice President and President-Center
                  Division of the Company (incorporated by reference to the
                  Company's Quarterly Report on Form 10-QSB for the quarter
                  ended December 31, 1998).

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

     10.19        Revised 1997 Stock Option and Incentive Plan of the Company,
                  as amended on January 22, 1999 (incorporated by reference to
                  the Company's Annual Report on Form 10-KSB for the year ended
                  March 31, 1999).

     10.20        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).

     10.21        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).

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

     10.23        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).

     10.24        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).

     10.25        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).

                                       34
<PAGE>

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

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

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

     10.29        Employment letter dated September 27, 1999 between the Company
                  and Paul A. Boyer, (filed herewith).

     10.30        Employment letter dated August 2, 1999 between the Company and
                  Adam Flint, (filed herewith).

     10.31        Revolving Line of Credit Agreement dated as of May 26, 2000
                  between the Company and Bank of Hawaii (filed herewith).

     10.32        Agreement of Sublease dated December , 1999 between the
                  Company and LCO Properties, Inc., (filed herewith).

     21           Subsidiaries of the Company (filed herewith).

     27           Financial Data Schedule (filed herewith).


(b)      Reports on Form 8-K

The Company filed a Current Report on Form 8-K dated January 18, 2000 for the
purpose of reporting under Item 5 thereof the purchase of 3,333,333 shares of
Company Common Stock by certain Pequot Capital investment funds. See Item 5,
"Recent Sales of Unregistered Securities."

                                       35
<PAGE>

                                   SIGNATURES

In accordance with Section 13 and/or 15(d) of the Securities Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                        BriteSmile, Inc.


                                        By:   /s/ Paul A. Boyer
                                           -------------------------------------
                                           Paul A. Boyer
                                           Chief Financial Officer and Secretary

                                           Dated June 27, 2000

In accordance with the Exchange Act, 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>
Signature                               Title                                           Date
---------                               -----                                           ----
<S>                                     <C>                                          <C>
/s/ Anthony M. Pilaro                   Chairman of the Board of Directors           June 27, 2000
------------------------------------
Anthony M. Pilaro

/s/ John L. Reed                        Chief Executive Officer                      June 27, 2000
------------------------------------    and Director (Principal Executive Officer)
John L. Reed

/s/ Linda S. Oubre                      Director                                     June 27, 2000
------------------------------------
Linda S. Oubre

/s/ R. Eric Montgomery                  Director                                     June 27, 2000
------------------------------------
R. Eric Montgomery

/s/ Jennifer A. Scott                   Director                                     June 27, 2000
------------------------------------
Jennifer A. Scott

/s/ Gerald Poch                         Director                                     June 27, 2000
------------------------------------
Gerald Poch

/s/ Dr. Gasper Lazzara, Jr.             Director                                     June 27, 2000
------------------------------------
Dr. Gasper Lazzara, Jr.

/s/ Bradford Peters                     Director                                     June 27, 2000
------------------------------------
Brad Peters

/s/ Harry Thompson                      Director                                     June 27, 2000
------------------------------------
Harry Thompson

/s/ Peter Schecter                      Director                                     June 27, 2000
------------------------------------
Peter Schecter
</TABLE>

                                       36
<PAGE>

               Report of Ernst & Young LLP, Independent Auditors


The Board of Directors and Shareholders
BriteSmile, Inc.

We have audited the accompanying consolidated balance sheets of BriteSmile, Inc.
(the "Company") as of April 1, 2000 and March 31, 1999, and the related
statements of operations, shareholders' equity, and cash flows for each of the
52-week periods then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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 April 1, 2000 and March 31, 1999, and the consolidated results of its
operations and its cash flows for each of the 52-week periods then ended, in
conformity with accounting principles generally accepted in the United States.


                                                 /s/ Ernst & Young LLP


May 5, 2000, except for Note 12,
as to which the date is June 27, 2000

<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


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

<TABLE>
<CAPTION>
                                                                           April 1,    March 31,
                                                                             2000        1999
                                                                           --------    ---------
<S>                                                                        <C>         <C>
CURRENT ASSETS:
    Cash and cash equivalents ..........................................   $ 10,969    $  6,200
    Cash, restricted as to use .........................................        843        --
    Trade accounts receivable, net of allowance for doubtful accounts of
       $83 and $486, respectively ......................................      1,181          75
    Inventories ........................................................      1,191          16
    Prepaid expenses and other .........................................        834         319
    Assets held for sale ...............................................       --         1,260
                                                                           --------    --------

                Total current assets ...................................     15,018       7,870
                                                                           --------    --------

PROPERTY, EQUIPMENT AND IMPROVEMENTS, at cost:
    Furniture, fixtures and equipment ..................................      7,153         813
    Leasehold improvements .............................................      7,605         686
                                                                           --------    --------
                                                                             14,758       1,499

    Less accumulated depreciation and amortization .....................     (1,700)       (246)
                                                                           --------    --------

                                                                             13,058       1,253
    Construction in progress ...........................................      2,845       1,269
                                                                           --------    --------

                Net property, equipment and  improvements, at cost .....     15,903       2,522
                                                                           --------    --------

OTHER ASSETS ...........................................................      1,469          40
                                                                           --------    --------

                                                                           $ 32,390    $ 10,432
                                                                           ========    ========
</TABLE>

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

                                      F-2
<PAGE>

                                BRITESMILE, INC.
                     CONSOLIDATED BALANCE SHEETS (continued)

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

<TABLE>
<CAPTION>
                                                                    April 1,    March 31,
                                                                      2000        1999
                                                                    --------    ---------
<S>                                                                  <C>         <C>
CURRENT LIABILITIES:
    Current portion of long-term debt ...........................   $   --      $    797
    Accounts payable ............................................      1,864       2,032
    Accrued expenses ............................................      2,162       1,474
    Accrued gift certificate liability ..........................        123        --
     Other current liabilities ..................................       --            69
                                                                    --------    --------

              Total current liabilities .........................      4,149       4,372

OTHER LONG-TERM LIABILITIES .....................................        122        --
                                                                    --------    --------

              Total liabilities .................................      4,271       4,372
                                                                    --------    --------

SHAREHOLDERS' EQUITY (see Note 9):
    Common stock, $.001 par value; 50,000,000 shares authorized
       23,860,683 and 17,137,854 shares outstanding, respectively         24          17
    Additional paid-in capital ..................................     73,389      27,821
    Accumulated deficit .........................................    (45,294)    (21,778)
                                                                    --------    --------

              Total Shareholders' equity ........................     28,119       6,060
                                                                    --------    --------

                                                                    $ 32,390    $ 10,432
                                                                    ========    ========
</TABLE>

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

                                      F-3
<PAGE>

                                BRITESMILE, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                             52 Weeks Ended   52 Weeks Ended
                                                              April 1, 2000   March 31, 1999
                                                             --------------   --------------
<S>                                                          <C>              <C>
REVENUES:
    Center whitening fees, net ............................   $      5,838    $         46
    Associated Center whitening fees, net .................          1,970            --
    Product sales .........................................            236             501
                                                              ------------    ------------

       Total revenues, net ................................          8,044             547
                                                              ------------    ------------

OPERATING COSTS AND EXPENSES:
    Center selling and occupancy costs ....................         13,849             946
    Selling, General and administrative expenses ..........         14,498           4,627
    Research and development expenses .....................          1,748           3,201
    Depreciation and amortization .........................          1,457             123
    Termination benefits, impairment charges and write-down
        of assets .........................................            472           3,555
                                                              ------------    ------------

       Total operating costs and expenses .................         32,024          12,452
                                                              ------------    ------------

          Loss from operations ............................        (23,980)        (11,905)
                                                              ------------    ------------

OTHER INCOME (EXPENSE), net:
    Interest expense ......................................            (26)           (102)
    Interest income .......................................            501             240
                                                              ------------    ------------

       Total other income (expense), net ..................            475             138
                                                              ------------    ------------

          Loss before income tax provision ................        (23,505)        (11,767)

INCOME TAX PROVISION ......................................             11            --
                                                              ------------    ------------

          Net loss ........................................   $    (23,516)   $    (11,767)
                                                              ============    ============

BASIC AND DILUTED NET LOSS PER SHARE ......................   $      (1.18)   $      (1.13)
                                                              ============    ============

WEIGHTED AVERAGE SHARES - BASIC AND DILUTED ...............     19,995,796      10,409,212
                                                              ============    ============
</TABLE>

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

                                      F-4
<PAGE>

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

<TABLE>
<CAPTION>
                                                                  52 Weeks Ended   52 Weeks Ended
                                                                   April 1, 2000   March 31, 1999
                                                                  --------------   --------------
<S>                                                               <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss ......................................................   $(23,516)         $(11,767)
   Adjustments to reconcile net loss to net cash used in operating
      activities:
         Depreciation and amortization ...........................      1,457               171
         Termination benefits, impairment charges and
            write-down of assets .................................        472             2,297
         Cost recognized for issuance of stock and stock options..      1,765               734
         Gain on sale of assets ..................................       --                 101
         Changes in assets and liabilities:
               Trade accounts receivable .........................     (1,106)              312
               Inventories .......................................     (1,175)             (113)
               Prepaid expenses and other ........................       (515)             (270)
               Other assets ......................................         45              --
               Accounts payable ..................................       (168)              722
               Accrued expenses & other current liabilities ......        216               143
               Gift certificate liability ........................        123              --
               Other long term liabilities .......................        122              --
                                                                     --------          --------

                  Net cash used in operating activities ..........    (22,280)           (7,670)
                                                                     --------          --------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from assets held for sale, net ........................      1,260               146
  Purchase of property and equipment .............................    (14,838)           (1,564)
                                                                     --------          --------

                  Net cash used in investing activities ..........    (13,578)           (1,418)
                                                                     --------          --------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Principal payments on long-term debt ...........................       (866)             (228)
  Payments under Letters of Credit ...............................       (843)             --
  Proceeds from common stock offering ............................     40,935            14,982
  Proceeds from exercise of stock option .........................      1,401                31
                                                                     --------          --------

                  Net cash provided by financing activities ......     40,627            14,785
                                                                     --------          --------

NET  INCREASE IN CASH AND CASH EQUIVALENTS .......................      4,769             5,697

CASH AND CASH EQUIVALENTS AT BEGINNING
    OF THE PERIOD ................................................      6,200               503
                                                                     --------          --------

CASH AND CASH EQUIVALENTS AT END OF THE PERIOD ...................   $ 10,969          $  6,200
                                                                     ========          ========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

    Cash paid for interest .......................................   $     26          $    101
                                                                     ========          ========

    Cash paid for income taxes ...................................   $     11          $   --
                                                                     ========          ========
    Stock Options issued to consultants, the fair value of which
        was capitalized as other assets...........................   $  1,474              --
                                                                     ========          ========
</TABLE>

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

                                      F-5
<PAGE>

                        BRITESMILE, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                 52 Weeks Ended April 1, 2000 and March 31, 1999
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                                                  Accumulated
                                                               Additional                          Other             Total
                                           Common Shares        Paid-In        Accumulated     Comprehensive     Shareholders'
                                         Shares     Amount      Capital          Deficit            Loss            Equity
                                        --------   --------    ----------      -----------     -------------     -------------
<S>                                      <C>       <C>         <C>             <C>             <C>               <C>
Balance at March  31, 1998                 5,809   $      6     $ 11,902         $(10,011)        $    (50)        $  1,847

  Comprehensive Loss:
     Reclassification adjustment for
     amount included in net loss            --         --           --               --                 50               50
     Net loss                               --         --           --            (11,767)            --            (11,767)
                                                                                                                   --------

        Net loss and comprehensive loss     --            6         --            (11,767)              50          (11,717)

    Exercise of Stock Options                 28       --             31             --               --                 31
    Stock option compensation cost          --         --            734             --               --                734
    Private Placement of common stock     11,163         11       14,971             --               --             14,982
    Other issuance of common stock           138       --            183             --               --                183
                                        --------   --------     --------         --------         --------         --------
Balance at March 31, 1999                 17,138         17       27,821          (21,778)            --              6,060
                                        --------   --------     --------         --------         --------         --------

    Exercise of Stock Options                753          1        1,400             --               --              1,401
    Income Tax benefit on exercise
     of stock options                                              3,005                                              3,005
    Valuation allowance for income
     tax benefit on exercise of
     stock options                                                (3,005)                                            (3,005)
    Stock option compensation cost          --         --          3,239             --               --              3,239
    Private Placement of common stock      5,970          6       40,929             --               --             40,935
    Net loss and comprehensive loss         --         --           --            (23,516)            --            (23,516)
                                        --------   --------     --------         --------         --------         --------
Balance at April 1, 2000                  23,861   $     24     $ 73,389         $(45,294)        $   --           $ 23,861
                                        ========   ========     ========         ========         ========         ========
</TABLE>

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

                                      F-6
<PAGE>

                                BriteSmile, Inc.
                   Notes to Consolidated Financial Statements
                        (In thousands, except share data)


1. Description of Business

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

In February 1999 the LATW was introduced in the Company's first Center in Walnut
Creek, California. In March 1999, the Company opened its first Associated Center
in Louisville, Kentucky. As of February 11, 2000, the Company continued to open
Centers and Associated Centers. As of April 1, 2000, the Company had 14 Centers
and 235 Associated Centers in operation.

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

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

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


2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation
-----------------------------------------------------

The accompanying consolidated financial statements include the accounts of the
Company, its subsidiaries, and entities in which the Company has a controlling
financial interest. All intercompany balances and transactions have been
eliminated in consolidation. During the fourth quarter of fiscal 2000, the
company adopted a 52/53-week (4 week - 4 week - 5 week) fiscal calendar. This
change necessitated adding one day to the fiscal 2000 year.

Use of Estimates
----------------

The preparation of financial statements in conformity with generally accepted
accounting principles 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 from those estimates. BriteSmile, Inc. Notes to
Consolidated Financial Statements (continued) (In thousands, except share data)

                                      F-7
<PAGE>

                                BriteSmile, Inc.
             Notes to Consolidated Financial Statements (continued)
                        (In thousands, except share data)


2. Summary of Significant Accounting Policies (continued)

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.

Restricted Cash
---------------

At April 1, 2000, $843 of the Company's cash was used to collateralize letters
of credit and is restricted as to use until September 2008.

Revenue Recognition
-------------------

The Company recognizes procedure revenue when the procedures have been
performed. The Company recognizes revenue at Associated Centers revenue when the
key card for the BS3000 device is shipped. Amounts reported are net of
discounts. Additionally, Associated Center revenue for the 52 weeks ended April
1, 2000, is decreased by $163 due to charges related to warrants issued to
Orthopedic Centers of America ("OCA").

Inventories
-----------

Inventories are stated at the lower of cost (first-in, first-out) or market.
Inventories at April 1, 2000 consist primarily of dental supplies and component
parts for the manufacturing of teeth whitening systems.

Advertising
-----------

Costs incurred to produce advertising are expensed the first time the
advertising takes place. Costs incurred for communicating advertising are
expensed in the period the advertising reaches the market. Advertising costs
were $10,218 and $1,361 for years ended April 1, 2000 and March 31, 1999
respectively, and are included in Center selling and occupancy cost and in
selling and administrative expenses.

Assets Held for Sale
--------------------

Assets held for sale for the year ended March 31, 1999 consist of land and an
office building that the Company sold in April 1999. These assets are stated at
fair market value less cost to sell. The write-down of these assets to fair
value of $418 is included in Impairment charges and write-down of assets in the
statement of operations.

Property and Equipment
----------------------

Property and equipment is stated at cost or at fair market value as determined
by undiscounted future cash flows. Expenditures for maintenance and repairs are
charged to expense as incurred and expenditures for additions and betterments
are capitalized. The cost of assets sold or otherwise disposed of and the
related accumulated depreciation are eliminated from the accounts and any
resulting gain or loss is reflected in the statements of operations. Equipment,
furniture and fixtures are depreciated for financial reporting purposes over
their 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 life of the
asset or the remaining term of the lease. Accelerated depreciation methods are
used for income tax purposes.

                                      F-8
<PAGE>

                                BriteSmile, Inc.
             Notes to Consolidated Financial Statements (continued)
                        (In thousands, except share data)

2. Summary of Significant Accounting Policies (continued)

Patents
-------

The cost of establishing patents are capitalized and amortized over their
estimated useful lives using the straight-line method. The cost of maintaining
patents are expensed as incurred.

Warranties
----------

Warranty expense is accrued at the time of sale based upon actual claims
experience. Actual warranty costs incurred are charged against the accrual when
paid.

Stock-Based Compensation
------------------------

The Company follows Accounting Principle Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations in accounting for its
stock-based compensation. (see note 9)

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 on the consolidated statements of operations.

Center Opening Costs
--------------------

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

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.

Loss Per Common Share
---------------------

The Company computes loss per common share in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings Per Share." Because the
Company reported a net loss for the 52 weeks ended April 1, 2000 and March 31,
1999, all common stock equivalents outstanding are considered anti-dilutive and,
accordingly, have been excluded from the earnings per share computation. As a
result, the numerator or net loss and the denominator or weighted average number
of common shares is the same for both basic and diluted earnings per share
computations.

Comprehensive Income
--------------------

In 1999, the Company adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("SFAS 130"). This statement establishes
rules for the reporting of

                                      F-9
<PAGE>

                                BriteSmile, Inc.
             Notes to Consolidated Financial Statements (continued)
                        (In thousands, except share data)


2. Summary of Significant Accounting Policies (continued)

comprehensive income and its components. Comprehensive income consists of net
loss and foreign currency translation adjustments and is presented in the
Consolidated Statements of Shareholders' Equity. The adoption of SFAS 130 had no
impact on total shareholders' equity. Prior year financial statements have been
reclassified to conform to the SFAS 130 requirements.

Reclassifications
-----------------

Certain amounts in the 1999 consolidated financial statements have been
reclassified to conform to the 2000 presentation.


3. Impairment Charges and Write-down of Assets

During the fiscal year ended March 31, 1999, the Company's Board of Directors
and management decided to close its Utah operating facility, discontinue all
activities related to the industrial and scientific laser lines of business,
discontinue development and sales of its laser-based device, and move its
headquarters to Pennsylvania. As a result of the Company's decision to relocate
its operations to Pennsylvania and to focus exclusively on the tooth whitening
market, nearly all of the Company's 63 employees located in Utah were scheduled
for termination. A termination benefits liability of $200 was established and
charged to expense during the three-month period ended June 30, 1998. At
September 30, 1998, the Company completed its termination plan and paid benefits
of approximately $200 to former employees. In October 1998, the Company
discontinued sales of take-home and in-office tooth whitening chemical products
as a result of management's shift in focus to the BriteSmile Light-Activated
Teeth Whitening ("LATW") technology as well as the BriteSmile Professional Teeth
Whitening Centers and Associated Centers.

In addition to employee termination costs, the Company recorded other charges of
$2,927 in the 52 weeks ended March 31, 1999. These charges include the
write-down of $418 of inventories classified as cost of products sold, the
impairment and write-down of patents and a joint venture related to discontinued
technology (assets which will provide limited or no future benefit to the
Company) for $657, settlement of canceled purchase commitments for $402,
write-down on assets available for sale at fair value for $367, property
write-downs and losses on sale of properties for $425, and $658 of charges
related to uncollectable accounts receivable and accrued expenses associated
with discontinued product lines.

During the 52 weeks ended April 1, 2000, the company incurred termination
expenses of $472 related to the closure of the facility in Lester, PA.

                                      F-10
<PAGE>

                                BriteSmile, Inc.
             Notes to Consolidated Financial Statements (continued)
                        (In thousands, except share data)


4. Accrued Liabilities

Accrued liabilities consists of the following at April 1, 2000 and March 31,
1999, respectively:

                                                  2000              1999
                                             ---------------------------------

      Accrued salaries and benefits..........    $   672           $   212
      Accrued incentive......................        266                 -
      Accrued professional services..........        572               414
      Accrued Advertising....................        277                 -
      Other accrued expenses.................        375               848
                                             ---------------------------------
              Total .........................    $ 2,162           $ 1,474
                                             =================================

5. Operating Leases

The Company 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 lease payments under these agreements as of April 1, 2000, for
future fiscal years are:

         2001                                         $ 2,350
         2002                                           2,532
         2003                                           2,615
         2004                                           2,586
         2005                                           2,209
         Thereafter                                     6,571

Rent expense for the years ended April 1, 2000 and March 31, 1999 was $1,420 and
$149, respectively.

6. Mortgage obligations and other debt

Mortgage obligations and other debt consists of the following at April 1 and
March 31, respectively:

<TABLE>
<CAPTION>
                                                                        April 1,     March 31,
                                                                          2000         1999
                                                                    ----------------------------
<S>                                                                     <C>          <C>
Debt payable to a bank with interest at 1.5% over the prime
   rate, (9.25% at March 31, 1999) payable in monthly
   installments of $4, including interest. This note is
   collateralized by a first mortgage on the Company's building
   and improvements.                                                       $ -         $ 422

Debt payable to the Small Business Administration with
   interest at 7.6% per annum and payable in monthly installments
   of $4, including interest. This note is collateralized by a
   second mortgage on the Company's building and improvements.               -           375
                                                                    ----------------------------
   Mortgage Obligations and Other Debt                                     $ -         $ 797
                                                                    ============================
</TABLE>

                                      F-11
<PAGE>

                                BriteSmile, Inc.
             Notes to Consolidated Financial Statements (continued)
                        (In thousands, except share data)


6. Mortgage obligations and other debt (continued)

At March 31, 1999, the estimated fair value of long-term debt described above
was approximately the same as the carrying amount of such debt on the
Consolidated Balance Sheets.

On April 23, 1999 the Company sold its building and improvements that were
classified as assets held for sale in the consolidated balance sheets.
Accordingly, the debt collateralized by this property was repaid.

7. Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and for income tax purposes. Significant components of the Company's
deferred tax liabilities and assets at April 1 and March 31, are as follows:

                                                         2000          1999
                                                    --------------------------
  Deferred tax assets
    Allowance for bad debt.........................    $     50      $     194
    Inventory reserve..............................           5             77
    Property and equipment.........................         (17)           505
    Equity method investment.......................         116            116
    Write off of Patents & Other Assets............         348            221
    Accrued liabilities............................         237            164
    Stock option compensation......................       1,440            294
    Net operating loss carryforwards...............      15,451          4,156
    Tax credit carryforwards.......................         378            217
    Other..........................................          31              -
                                                    --------------------------
             Total deferred tax asset..............      18,039          5,944

  Valuation allowance for deferred tax asset.......     (18,039)        (5,944)
                                                    --------------------------
             Net deferred tax asset................    $      -      $       -
                                                    ==========================

Significant components of the income tax expense at April 1 and March 31 are as
follows:

                                                       2000         1999
                                                     -------------------------
    Current:
       Federal...................................    $      -        $    -
       State.....................................          11             -
                                                     -------------------------
           Total current.........................    $      -        $    -
                                                     -------------------------
    Deferred:
       Federal...................................    $      -        $    -
       State.....................................           -             -
                                                     -------------------------
           Total deferred........................           -             -
                                                     -------------------------
    Total current and deferred...................    $     11        $    -
                                                     =========================

                                      F-12
<PAGE>

                                BriteSmile, Inc.
             Notes to Consolidated Financial Statements (continued)
                        (In thousands, except share data)


7. Income taxes (continued)

The provision for income taxes reconciles to the amounts computed by applying
the statutory federal rate to earnings (loss) before taxes as follows:

                                                     2000           1999
                                                   ------------- ----------
    Tax expense (benefit) at U.S. statutory rates..$(7,995)       $(4,001)
    State income taxes (benefit), net of Federal
     benefit.......................................  (1,411)         (706)
    Non-deductible items...........................  (2,995)            -
    Loss carryforward limitation...................       -         2,892
    Change in valuation allowance..................  12,095         2,248
    Other, net.....................................     317           433
                                                   ------------------------
                                                   $     11       $    88
                                                   ========================

The Company has approximately $378 of tax credits that under current tax law can
be used to offset future income tax liabilities. These credits will begin
expiring March 31, 2005 if not utilized. The Company also has approximately
$45,819 of federal and state net operating loss carryforwards that begin to
expire March 31, 2010 for federal income tax purposes and March 31, 2002 for
state income tax purposes. As a result of limitations imposed by the Internal
Revenue Code and certain state income tax regulations, approximately $7,192 of
these net operating losses are expected to expire unutilized. The utilization of
the remaining $38,627 balance is principally dependent upon levels of future
taxable income. The net change in the valuation allowance for fiscal 2000 was
$12,095.

8. Shareholder' Equity

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

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

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

                                      F-13
<PAGE>

                                BriteSmile, Inc.
             Notes to Consolidated Financial Statements (continued)
                        (In thousands, except share data)


8. Shareholders' Equity (continued)

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

Effective February 1, 2000, the Company issued an aggregate 30,927 shares of
restricted common stock to three affiliated purchasers (Quota Rabbicco II, Ltd.,
Argonaut Partnership, L.P. and David E. Gerstenhaber), in a private placement
for cash proceeds to the Company of $186.

Effective February 1, 2000, the Company issued an aggregate 77,318 shares of
restricted common stock to Andrew J. McKelvey, an affiliated purchaser, in a
private placement for cash proceeds to the Company of $464.

During 1990, the Company adopted an employee stock option plan, which was
approved by the shareholders on September 5, 1990 (the "1990 Plan"). In January
1997, the Company adopted the 1997 Stock Option and Incentive Plan ("1997
Plan"), which was subsequently amended by the Board of Directors of the Company
in January 1999 to increase the total number of shares available for issuance
under the plan from 2 million to 5 million (the "Revised 1997 Plan").
Substantially all of the employee stock options outstanding at March 31, 1999
have been issued pursuant to the Revised 1997 Plan. Only 30,000 of all stock
options outstanding at March 31, 1999 were granted under the 1990 Plan. No
additional options will be granted under the 1990 Plan. Under the Revised 1997
Plan, the Company's stock to be offered shall be common stock and the aggregate
number of shares of stock to be delivered upon the exercise of all options
granted shall not exceed four million shares. Previously, the shareholders of
the Company approved the issuance of up to two million shares of common stock
under the Company's 1997 Plan as originally adopted in 1997. Selected option
grants to consultants pursuant to consulting agreements have been issued outside
the Revised 1997 Plan. The option price per share is determined by the board of
directors, but shall be no less than the fair market value on the date of the
grant. Options granted under the Revised 1997 Plan generally vest at various
intervals up to five years and expire after ten years.

A summary of the Company's stock option activity and related information for the
52-weeks ended April 1, 2000 and March 31, 1999 as follows:

<TABLE>
<CAPTION>

                                                      2000                           1999 (Restated)
                                       ----------------------------------- ------------------------------------
                                                        Weighted-Average                     Weighted-Average
                                                         Exercise Price                       Exercise Price
                                            Options        Per Share           Options          Per Share
                                       ----------------------------------- ------------------------------------

<S>                                         <C>              <C>                  <C>            <C>
     Outstanding at beginning of year       5,423,267        $  2.90              1,781,667      $  4.63
     Granted                                2,186,500        $  8.25              3,657,600      $  1.98
     Exercised                             (1,925,334)       $  3.44                (16,000)     $  1.25
     Forfeited/expired                       (252,250)       $  4.77                      -      $     -
                                       ------------------                  -------------------
     Outstanding at end of year             5,432,183        $  4.78              5,423,267      $  2.90
                                       ==================                  ===================
</TABLE>

                                      F-14
<PAGE>

                                BriteSmile, Inc.
             Notes to Consolidated Financial Statements (continued)
                        (In thousands, except share data)

8. Shareholders' Equity (continued)

Exercise prices for outstanding options as of year end ranged from $1.00 to
$13.75 and the weighted-average remaining contractual life of those options is
7.87 years. The weighted average fair market value of options granted in fiscal
years 2000 and 1999 were $8.25 and $1.48, respectively.

A summary of the status of options outstanding at April 1, 2000 follows:

<TABLE>
<CAPTION>
                              Outstanding Option                                  Exercisable Options
     ---------------------------------------------------------------------  ---------------------------------
                                        Weighted
                                        Average
                                       Remaining      Weighted Average                       Weighted Average
      Exercise Price                  Contractual      Exercise Price                         Exercise Price
      Range Per Share     Number     Life in Years          Per Share              Number        Per Share
     ---------------------------------------------------------------------  ---------------------------------
<S>                       <C>        <C>             <C>                       <C>        <C>
       $ 1.00 - $1.50       628,000       6.04              $ 1.24                258,000         $ 1.36

         1.69 -  2.50     2,136,350       6.70                2.09              1,114,498           2.06

         2.63 -  2.94       397,000       8.84                2.74                114,000           2.74

         4.25 -  6.38       752,500       9.28                5.97                112,500           6.02

         6.63 -  9.69       748,333       8.04                8.58                473,333           8.61

        10.00 - 13.75       770,000       8.15               11.35                385,000          11.15
</TABLE>

The Company's pro forma compensation expense under the fair value method,
utilizing the Black-Scholes option valuation model for employee stock options in
2000 and 1999, was $2,473 and $1,129, respectively. The pro forma net loss would
have been $25,989 and $12,896 in 2000 and 1999, respectively and the pro forma
basic and diluted loss per share would have been $1.30 for 2000 and $1.24 per
share for 1999. No compensation costs for employee's options has been recognized
in 2000 or 1999.

The fair value for these options was estimated at the date of grant assuming no
dividend yield and an average expected volatility of 128% and 99% for options
granted during fiscal 2000 and 1999, respectively. Other assumptions for 2000
and 1999 are as follows: an average risk-free interest rate of 5.35% and 5.30%,
respectively, and an average option life of five years.

The Black-Scholes option valuation model was 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 stock price volatility. 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 fair value of its employee stock options.

Because the fair value method of accounting for stock-based compensation has not
been applied to options granted prior to April 1, 1995, the preceding pro forma
compensation cost may not be representative of that to be expected in future
years.

                                      F-15
<PAGE>

                                BriteSmile, Inc.
             Notes to Consolidated Financial Statements (continued)
                        (In thousands, except share data)


8. Shareholders' Equity (continued)

As of April 1, 2000, options granted to employees and directors for 1,420,998
shares of common stock are exercisable.

During 2000, the Company recognizes expense of $1,765 related to stock options
granted to non-employees. These options generally vested upon meeting certain
performance goals and have contractual terms up to ten years. As of April 1,
2000, options granted to non-employees for 1,036,333 shares of common stock are
exercisable.

9. Warrants

On June 2, 1999, the company issued warrants for 300,000 shares of the Company's
common stock to Orthodontic Centers of America, Inc. ("OCA") in consideration
for OCA entering into an agreement to install BS 3000 machines in OCA Centers.
The warrants are exercisable at $11.0625 per share and expire on June 2, 2000.
The fair market valve of these warrants utilizing the Black-Scholes valuation
model is $1,632 and is being amortized over the life of the agreement, which is
ten years. The remaining fair market value is reflected in other assets on the
balance sheet. The compensation expense for the warrants issued to OCA is taken
against Associated Center Revenue.

10. Commitments and Contingencies

Litigation

In April 2000, Natural White, Inc. and its affiliated corporations filed suit
against the Company in the Supreme Court of the State of New York, Erie County.
Also named as a defendant in the action was R. Eric Montgomery, a director of
the Company and the principal owner of IDEX Dental Sciences. BriteSmile has
removed the case to the United States District Court for the Western District of
New York. Based upon counsel's opinion, BriteSmile rejects all claims alleged by
the plaintiff.

IDEX had licensed certain dental products and technology to Natural White for
use outside the professional field. Through Montgomery, BriteSmile was granted
seaprate license to use tooth whitening products and technology in the
professional field. The complaint filed by Natural White alleges that the
defendants misappropriated proprietary rights and trade secrets of Natural
White, that they interfered with the contract between IDEX and Natural White,
and that they have been unjustly enriched as a result of this conduct. The
Complaint asserts compensatory damages in excess of $6 million, and also seeks
punitive damages and a permanent injunction enjoining the Company from using the
IDEX technology licensed to Natural White.

Based upon the opinion of counsel, the Company believes that the suit will be
dismissed against BriteSmile. The Company maintains that its Light Activated
Tooth Whitening Gel is proprietary and unique to the Company, and that it is
formulated to be used in conjunction with the Company's proprietary BriteSmile
BS-2000 and BS-3000 Gas Plasma Light Activated Systems.

The Company is party to other litigation and claims arising in the normal course
of business. Management believes that such matters will not have a material
impact on the Company's financial position or results of operations. (See note
12)

11. Related Party Transactions

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 100,000 shares of Common Stock of the
Company at a price of $1.50 per share. The option to purchase from LCO expires
on August 31, 2004.

Effective June 4, 1999, the Company sold 1,355,555 shares of Common Stock in a
private placement for of $15,000. 1,004,043 of the shares were sold to nine
private investors for $11,120 including LCO Investments Limited ("LCO"), the
Company's largest shareholder. The remaining 351,512 shares were sold to a group
of up to 18 members of senior management of the Company, including directors and
executive officers, for $3,880. The purchase price was $10.95 per share.
However, four of the purchasers, including three non-employee directors of the
Company and LCO, purchased at $11.525 per share. CAP Advisers Limited, an entity
affiliated with LCO, provided financing for the management purchasers. All
purchasers acquired certain registration rights. See the Company's Current
Report on Form 8-K filed June 21, 1999.

                                     F-16
<PAGE>

                                BriteSmile, Inc.
             Notes to Consolidated Financial Statements (continued)
                        (In thousands, except share data)


11. Related Party Transactions (continued)

On March 24, 1999, the Company entered into a Consulting Agreement with Oral
Health Clinical Services, LLC, Salim A. Nathoo and R. Eric Montgomery. Mr.
Montgomery is a director of the Company. Pursuant to the agreement, Oral Health,
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 75,000 stock options to Dr.
Nathoo which are vested. The Company will grant up to 225,000 additional stock
options, of which the number and exercise price is dependent upon obtaining ADA
Certification, at the date the Certification is obtained.

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. 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 $401,500 per year, subject to increase in the event of
increases in the rent payable under the parent lease for the property between
LCO and its lessor.

On April 7, 1999, the Company entered into a Letter Agreement with Chlopak,
Leonard, Schechter and Associates ("CLS") Washington, D.C. Pursuant to the
agreement, CLS provides public relations advice and serves as communications
counselors to the Company for consideration of $22,500 per month, plus expenses.
The agreement was entered into for a minimum of six months, and remains in
force. Peter Schecter, a director of the Company, is a one-third co-owner and
Secretary of CLS.

On December 7, 1998, the Company sold 9,302,326 shares of Common Stock to LCO in
a private placement for $10,000. Under an amendment to a prior registration
agreement, LCO acquired certain registration rights with respect to these
shares.

On May 17, 1998, the Company entered into a Consulting Agreement with
Oraceutical, LLC. 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. The Company and
Oraceutical are currently negotiating an extension of their agreement beyond its
original term. In consideration for its services, Oraceutical has been paid $35
a month, plus options to purchase 200,000 shares of Common Stock, subject to
vesting provisions, exercisable at $1.75 per share.

On May 5, 1998, the Company sold 1,860,465 shares of its Common Stock to its
major shareholder, LCO, for $5,000 pursuant to a Stock Purchase Agreement dated
as of May 4, 1998.

Effective January 12, 2000, the Company sold in a private placement 77,318
shares of Common Stock to Andrew J. McKelvey for cash proceeds of $464, or $6.00
per share. Mr. McKelvey also acquired certain registration rights with respect
to the shares. Brad 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.

                                     F-17
<PAGE>

                                BriteSmile, Inc.
             Notes to Consolidated Financial Statements (continued)
                        (In thousands, except share data)

12. 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, and
will commence on May 1, 2000.

13. Subsequent Events

On May 26, 2000, the Company entered into a Revolving Credit Line Agreement (the
"Credit Facility") with Bank of Hawaii. Under the Credit Facility, the Company
may borrow from time to time through May 25, 2001 up to $2 million outstanding
at any one time. Loan proceeds must be used for working capital, capital
expenditures, and general corporate purposes only, and are secured by a Letter
of Credit from Scotiabank facilitated by an entity affiliated with the Company.
The Credit Facility requires monthly payments to the Bank of interest only, with
all principal and accrued interest due May 25, 2001. To date, the Company has no
borrowings under the Credit Facility.

On June 27, 2000, the Company signed a Securities Purchase Agreement with
thirteen investors (the "Investors"), pursuant to which the Company sold in a
private placement (the "Note Offering") its 5% Subordinated Convertible Notes
due June 29, 2005 in the aggregate principal amount of $12,083,332 (the
"Notes").

The Notes are convertible into shares of the Company's Common Stock, par value
$.001 per share ("Common Stock"), at a per share conversion price of $6.18,
which is 120% of the average of the closing bid price of the Common Stock during
the ten-trading day period immediately prior to June 27, 2000, the date the
transaction documents were signed. The Company will also issue to the Investors,
pro rata, warrants (the "Warrants") to purchase a total of 977,616 shares of
Common Stock, which have a term of five years and an exercise price of $7.21.
The number of shares underlying the Notes and the exercise price of the Warrants
are subject to a reset and penalty provision as set forth in the transaction
documents.

The investors are presently affiliates of the Company and include LCO
(shareholder and affiliated with director Anthony Pilaro), John Reed
(shareholder, CEO and director), Gasper Lazzara, Jr. (director), Pequot Private
Equity Fund II, L.P., Pequot Partners Fund, L.P., and Pequot International Fund,
Inc. (shareholders and affiliated with director Gerald Poch), and Andrew
McKelvey (shareholder and affiliated with director Bradford Peters).

Pursuant to a Registration Rights Agreement between the Investors and the
Company, the Company agreed to register with the Securities and Exchange
Commission ("SEC"), within 120 days from the closing date, the shares of Common
Stock underlying the Notes and Warrants for offer and sale under the Securities
Act of 1933, as amended.

The Company is actively negotiating to sell up to an additional $13 million of
the Notes to third parties on substantially similar terms. In addition, the
Company has received a commitment from 4 directors and shareholders to purchase
an additional $9.09 million of the Notes on or before July 31, 2000 if the
Company does not sell such amount of Notes to third parties.


                                     F-18