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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., +1-925-941-6260 Web site: http://www.britesmile.com/

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