BriteSmile Reports First Quarter 2006 Results

WALNUT CREEK, Calif., May 24  /PRNewswire-FirstCall/ -- BriteSmile, Inc. (NASDAQ:BSML), a leading provider of state-of-the-art teeth-whitening systems, today released results for the first quarter ended April 1, 2006.

The first quarter results for BriteSmile (the "Company") are presented in this release in two different formats in light of the following events:

  (1) BriteSmile sold its Associated Center business to Discus Dental in
      March 2006 for approximately $26.3 million. Through the Associated
      Center business, teeth-whitening procedures were performed by
      independent dentists using BriteSmile's teeth-whitening technology in
      approximately 5000 Associated Centers worldwide. The sale also
      included substantially all of BriteSmile's intellectual property,
      consisting of patents, patent applications, trademarks, and
      copyrights.
  (2) At the time of the sale of the Associated Center business in March
      2006, the Company settled its lawsuit with Discus Dental for payment
      to the Company of approximately $8.7 million.
  (3) BriteSmile terminated the Purchase Agreement with Dental Spas, LLC
      of Fairfield, Iowa, related to the sale of our Spa Center business in
      May 2006. Dental Spas LLC had agreed to acquire BriteSmile's Spa
      Center business in January of this year. Through the Spa Centers,
      teeth whitening procedures are performed using the Company's whitening
      technology in 17 Centers throughout the United States.



In the first presentation, the financials are presented on a continued operations basis in the ordinary course of business, reflecting a full operating statement and balance sheet. This presentation represents the business as we have historically presented it. In the second presentation, in order to be consistent with the Form 10-Q recently filed with the Securities and Exchange Commission, the results are presented on a discontinued operations basis. In this format, all revenue and associated operating expenses are condensed into gain or loss from discontinued operations, and the Center and Associated Center assets and liabilities are shown as held for sale on the balance sheet. The Center business was included in discontinued operations for the first quarter because the sale was not terminated until May 2006.  The discontinued operations basis is disclosed and explained fully in the Company's Form 10-Q.

The following paragraphs summarize the results for the first quarter of 2006 on a continued operations basis.  It should be noted that the operating results for the Associated Center business are included in this presentation through March 13, 2006, the date that business was sold.

Total revenue for the first quarter of 2006 was $9.1 million, down 9% compared to $9.9 million in the first quarter of 2005.  The net income in the first quarter of 2006 was $11.7 million or $1.11 per share, as a result of the gain on the sale of the Associated Center business and settlement of the Discus patent claim as shown below. This compares to a loss of $(3.2) million or $(0.30) in the same quarter last year.

The first quarter operating loss before interest, tax, depreciation, and amortization (EBITDA) and before unusual one-time impacts, was $(0.5) million. This compares to an EBITDA of $(3.4) million in the first quarter of 2005. The unusual impacts excluded from this EBITDA measurement (but included in net income) for the first quarter of 2006 were:

                                                                   $ Million
  -- Gain on the sale of the Associated Center business (pre-tax)     $15.1
  -- Gain on the legal settlement with Discus (pre-tax)               $ 5.3
  -- Charge related to the early extinguishment of debt               $(5.0)
  -- Expenses related to the sale of the Spa Center business          $(0.9)
     (terminated)
  -- Employee severance costs after sale of the Associated Center     $(1.0)
     business
        Total unusual impacts (pre-tax)                               $13.5



EBITDA is a non-GAAP financial measure. More information regarding this non-GAAP financial measure, and a reconciliation of EBITDA to net loss, the most directly comparable GAAP measure, is provided below.

"Looking forward, BriteSmile will continue to drive the Spa Center business through advertising, pricing, and other strategies to maximize the performance of the Spas," said BriteSmile CEO John Reed. "At the end of the first quarter, we reduced the price of a whitening procedure at the Spas from $600 before promotions to $399 per procedure. Since this price reduction, the average number of weekly procedures performed in the Spas has approximately doubled compared to the same period last year. In addition, we have decreased our overhead headcount and expenses to help position the Company toward our goal of profitability."

BriteSmile will not have an earnings conference call this quarter. Please consult the Company's Form 10-Q recently filed with the SEC for more information regarding first quarter 2006 results and the recent events related to the sale of the Associated Center business and the termination of the sale of the Center business.

BriteSmile markets the most advanced teeth whitening technology available through 17 state-of-the-art BriteSmile Professional Teeth Whitening Centers. BriteSmile Centers are currently operating in Beverly Hills, Irvine, Palo Alto, Walnut Creek, San Francisco and La Jolla, CA; Houston, TX; Denver, CO; Boston, MA; McLean, VA; Atlanta, GA; New York, NY; Chicago and Schaumburg, IL; and, Phoenix, AZ. For more information about BriteSmile's procedure, call 1-800-BRITESMILE or visit the Company's Website at http://www.britesmile.com/.

This release, other than historical information, consists of forward-looking statements that involve risks and uncertainties such as the Company's ability to successfully and profitably operate the Spa Center business. Readers are referred to the documents filed by BriteSmile with the Securities and Exchange Commission, specifically the Company's most recent reports on Forms 10-K and 10-Q, that identify important risk factors which could cause actual results to differ from those contained in the forward-looking statements. BriteSmile and its affiliates disclaim any intent or obligation to update these forward-looking statements.

Non-GAAP Financial Information

BriteSmile provides non-GAAP EBITDA or earnings before interest, taxes, depreciation and amortization as additional information for its operating results. These measures are not in accordance with, or an alternative for financial measures calculated in accordance with generally accepted accounting principles, including net income or loss, the most directly comparable GAAP measure, and may be different from non-GAAP measures used by other companies. BriteSmile's management believes this non-GAAP measure is useful to investors because of:  (i) the significant amount of non-cash depreciation and amortization historically incurred by the Company in its operating results ($1.6 million in 2005 and $0.1 million in 2006), (ii) a mark-to-market gain in financial instruments relating to the December 2004 convertible debt offering is a significant non-operating and non-cash impact on earnings (mark-to-market gains were $2.7 million in the first quarter of 2005), and (iii) the first quarter results for 2006 included a number of material unusual events such as the sale of the Associated Center business and settlement of a lawsuit and their related gains and costs that significantly impacted the financial results for that quarter.  Investors are cautioned that the items excluded from EBITDA are significant components in understanding and assessing BriteSmile's financial performance.

                             BriteSmile, Inc.
     Condensed Consolidated Statements of Operations Data (Unaudited)
                        Continued Operations Basis
                     (In Thousands Except Share Data)

                                                   13 Weeks       13 Weeks
                                                    Ended           Ended
                                                   April 1,       March 26,
                                                     2006           2005
  REVENUES:
      Center whitening fees, net                    $4,513          $4,432
      Associated Center whitening fees, net          2,770           4,162
      Product and other revenue                      1,796           1,353
          Total revenues, net                        9,079           9,947

  OPERATING COSTS AND EXPENSES:
       Operating and occupancy costs                 3,755           4,201
       Selling, general and administrative expenses  5,760           9,059
       Research and development expenses                45              75
           Total Operating Costs and Expenses,
           excluding depreciation and amortization   9,560          13,335

       Operating income (loss) before depreciation
       and amortization (EBITDA), as adjusted         (481)         (3,388)

       Stock Option Expense                             75              --
        Severance Expense                              950              --
        Depreciation and amortization                  107           1,591
            Income/(Loss) from operations           (1,614)         (4,979)

  OTHER INCOME/(EXPENSES):
       Gain on mark-to-market of convertible note       --           2,730
       Early extinguishment of debt                 (5,039)             --
       Gain on Sale of AC Business                  15,105              --
       Gain on Legal Settlement                      5,335              --
       Amortization of discount on debt               (530)           (637)
       Terminated Spa deal expenses                   (870)             --
       Other income/(expense), net                     (95)           (208)
           Income/(Loss) before income              12,291          (3,094)
           tax provision

  INCOME TAX                                           609              96
          Net Income/(Loss)                        $11,682         $(3,190)

  BASIC AND DILUTED NET INCOME/(LOSS) PER SHARE      $1.11          $(0.30)

  WEIGHTED AVG SHARES - BASIC AND DILUTED       10,549,130      10,491,815

Reconciliation of Non-GAAP financial measures - EBITDA, as adjusted to Net
                              Income/(Loss)

                                                   13 Weeks        13 Weeks
                                                    Ended           Ended
                                                   April 1,        March 26,
                                                     2006            2005

  Net Income/(loss)                               $11,682           $(3,190)
  Less: Gain on Sale of AC Business               (15,105)               --
  Less: Gain on Legal Settlement                   (5,335)               --
  Add back:  Other income/(expense), net               95               208
  Add back:  Income tax expense                       609                96
  Add back:  Depreciation and amortization            107             1,591
  Add back: Discount on Debt                        5,039                --
  Add back: Severance Expense                         950                --
  Add back: Terminated Spa Deal Expense               870                --
  Add back:  Amortization of debt discount            530               637
  Add back: Stock Option Expense                       75                --
  (Gain)/loss from mark-to-market of financial
  instruments related to convertible debt              --            (2,730)
                   EBITDA, as adjusted              $(481)          $(3,388)


                              BriteSmile, Inc.
                         Consolidated Balance Sheet
                         Continued Operations Basis
                               (In Thousands)

                                             April 1, 2006      Dec 31, 2005
                                             (unaudited)

                              ASSETS

  CURRENT ASSETS:
      Cash and cash equivalents                   $9,317           $5,518
      Trade accounts receivable                      955            1,675
      Inventories                                    605              916
      Prepaid expenses and other                     243            1,296
         Total current assets                     11,120            9,405

  PROPERTY AND EQUIPMENT, net                      5,767           10,250

  OTHER ASSETS                                       917            1,649

  INVESTMENTS, RESTRICTED AS TO USE               12,463            1,722

  INTANGIBLES, net                                    --            4,816

  TOTAL ASSETS                                   $30,267          $27,842


                   LIABILITIES AND SHAREHOLDERS' EQUITY

  CURRENT LIABILITIES:
      Accounts payable                            $4,024           $3,693
      Accrued liabilities                         14,116            9,495
      Deferred revenue                             1,199            2,252
      Current portion of long-term debt and
      capital lease obligations                       --           14,585
   Total current liabilities                      19,339           30,025

  LONG-TERM LIABILITIES:
     Long-term debt and capital lease
     obligations                                      --               --
     Other long term liabilities                   1,600              268
     Total long-term liabilities                   1,600              268

     Total liabilities                            20,939           30,293

  STOCKHOLDERS' EQUITY/(DEFICIT):
      Common stock                                    38               38
      Additional paid-in capital                 173,437          173,340
      Accumulated deficit                       (164,147)        (175,829)
      Total shareholders' equity                   9,328           (2,451)

  TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY     $30,267          $27,842


                              BriteSmile, Inc.
            Condensed Consolidated Statements of Operations Data
                        Discontinued Operations Basis
                      (In Thousands Except Share Data)

                                               13 Weeks          13 Weeks
                                                Ended             Ended
                                            April 1, 2006     March 26, 2005

  REVENUES:
      Center whitening fees, net                   $--              $--
      Associated Center whitening fees, net         --               --
      Product and other revenue                     --               --
          Total revenues, net                       --               --

  OPERATING COSTS AND EXPENSES:
      Operating and occupancy costs                 --               --
      Selling, general and administrative
      expenses                                   2,458            2,591
      Research and development expenses             45               75
      Depreciation and amortization                107              210
          Total Operating Costs and Expenses     2,610            2,876

  OTHER INCOME/(EXPENSES):
       Gain (loss) on mark-to-market of
       convertible note instruments                 --            2,730
       Amoritzation of discount on
       convertible note                           (530)            (637)
            Early extinguishment of
             debt                               (5,039)              --
  Other income/(expense), net                     (964)            (208)

  Loss from continuing operations
   before income tax                            (9,143)            (991)

  INCOME TAX                                        35               96

          Net loss from continuing              (9,178)          (1,087)
          operations
  Gain/(Loss) from discontinued
  operations, net of tax                        20,860           (2,103)
  (2006 includes gain from sale of AC
  business, $14,664 and gain from
  lawsuit settlement, $5,202, net of tax)

  NET INCOME/(LOSS) ATTRIBUTABLE
  TO COMMON SHAREHOLDERS                       $11,682          $(3,190)

  BASIC AND DILUTED NET LOSS PER SHARE
  FOR CONTINUING OPERATIONS                     $(0.87)          $(0.10)

  BASIC AND DILUTED NET INCOME/(LOSS)
   PER SHARE FOR DISCONTINUED
   OPERATIONS                                    $1.98           $(0.20)

  BASIC AND DILUTED NET INCOME/(LOSS)
  PER COMMON SHARE                               $1.11           $(0.30)

  WEIGHTED AVERAGE SHARES - BASIC           10,549,130       10,491,815

  WEIGHTED AVERAGE SHARES - DILUTED         10,555,130       10,491,815


                              BriteSmile, Inc.
                         Consolidated Balance Sheet
                        Discontinued Operations Basis
                               (In Thousands)

                                                  April 1,      December 31,
                                                   2006            2005
                                                (unaudited)

                            ASSETS

  CURRENT ASSETS:
     Cash and cash equivalents                    $9,303           $5,504
     Assets held for sale                          7,559           19,213
     Prepaid expenses and other                      373              750
         Total current assets                     17,235           25,467

  PROPERTY AND EQUIPMENT, net                        521              629

  OTHER ASSETS                                        48              280

  INVESTMENTS, RESTRICTED AS TO USE               12,463            1,466

  TOTAL ASSETS                                   $30,267          $27,842


              LIABILITIES AND SHAREHOLDERS' EQUITY

  CURRENT LIABILITIES:
      Accounts payable                            $4,024           $3,598
      Accrued liabilities                         12,662            7,527
      Accrual for store closures                     400              403
      Liabilities held for sale                    3,637            4,678
      Accrued interest due to a related
      party                                           --              264
      Long-term debt with related party -
      current portion                                 --            6,024
      Convertible debt - current portion              --            6,828
      Convertible debt with related party -
      current portion                                 --              621
      Financial instruments related to
      convertible dept - current portion              --                9
      Capital lease obligation with related
      party - current portion                         --               73
          Total current liabilities               20,723           30,025

  LONG-TERM LIABILITIES:
     Long-term debt and capital lease
     obligations                                     190               --
     Other long term liabilities                      26              268
        Total long-term liabilities                  216              268
        Total liabilities                         20,939           30,293

  STOCKHOLDERS' EQUITY/(DEFICIT):
      Common stock                                    38               38
      Additional paid-in capital                 173,437          173,340
      Accumulated deficit                       (164,147)        (175,829)
         Total shareholders' equity                9,328           (2,451)

  TOTAL LIABILITIES AND SHAREHOLDERS'
   EQUITY                                        $30,267          $27,842


DATASOURCE: BriteSmile, Inc.



CONTACT:  Kenneth A. Czaja, CFO of BriteSmile, Inc., [phone]



Web site:  http://www.britesmile.com/

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