CLUBTable LOCATIONof ---- -------- The Andover Athletic Club 307 Lowell Street, Andover, MA 01810 The Colonial Club 425 Walnut Street, Lynnfield, MA 01940 The Ferncroft Club 50 Ferncroft Road, Danvers, MA 01923 The Framingham Club 1657 Worcester Road, Framingham, MA 01701 The Franklin Club 750 Union Street, Franklin, MA 02038 The Lexington Club 475 Bedford Street, Lexington, MA 02420 The Royal Ridge Club 11 Tara Boulevard, Suite #2, Nashua, NH 03062 The Sky Club One Devonshire Place, Boston, MA 02109 The Wellesley Center 140 Great Plain Avenue, Wellesley, MA 02482Contents

~~1999~~SECURITIES ~~1998~~AND ~~-----------~~EXCHANGE ----------- ASSETS Current Assets: Cash and cash equivalents $ 846,300 $ 1,841,509 Accounts receivable, net of allowance for doubtful accounts of $8,719 and $6,000 at December 31,1999 and 1998, respectively 228,004 150,870 Inventories 19,939 27,652 Refundable and current deferred income taxes 437,038 36,966 Prepaid expenses and other current assets 97,501 56,108 Current portion of deferred acquisition costs 77,694 83,870 ----------- ----------- Total current assets 1,706,476 2,196,975 ----------- ----------- Property and Equipment: Land 1,760,963 -- Building and building improvements 8,155,553 -- Leasehold improvements 3,055,431 2,519,583 Machinery and equipment 2,000,376 1,563,181 Furniture and fixtures 916,038 961,606 Capitalized leased equipment 86,446 123,763 Construction-in-progress 113,146 282,418 ----------- ----------- 16,087,953 5,450,551 Less--Accumulated depreciation and amortization 3,529,551 2,963,856 ----------- ----------- Net property and equipment 12,558,402 2,486,695 ----------- ----------- Other Assets: Membership lists, deferred financing costs and lease acquisition costs, net of accumulated amortization of $371,699 and $305,005 at December 31,1999 and 1998, respectively 640,534 149,666 Deposits 117,056 61,056 Cash surrender value of life insurance 22,367 19,353 Deferred acquisition costs, net of current portion 30,179 24,003 Deferred income taxes 185,206 395,735 ----------- ----------- Total other assets 995,342 649,813 ----------- ----------- $15,260,220 $ 5,333,483 =========== ===========COMMISSION

~~1999 1998 ----------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 272~~WASHINGTON,~~960~~ $DC 99,451 Accounts payable 202,195 113,210 Income taxes payable -- 67,992 Accrued expenses 1,126,919 1,108,947 Current portion of unearned income 2,498,411 1,889,456 Current portion of deferred rent 80,382 38,716 ----------- ----------- Total current liabilities 4,180,867 3,317,772 ----------- ----------- Long-term Liabilities: Long-term debt, net of current portion 8,124,308 631,221 Subordinated notes payable--Related parties 960,000 -- Unearned income, net of current portion 66,406 89,325 Deferred rent, net of current portion 613,333 682,050 ----------- ----------- Total long-term liabilities 9,764,047 1,402,596 ----------- ----------- Total liabilities 13,944,914 4,720,368 ----------- ----------- Commitments and Contingencies (Note 7) Stockholders' Equity: Preferred stock, $100 par value- Authorized--4,960 shares Issued and outstanding--0 shares and 2,000 shares at December 31,1999 and 1998, respectively -- 200,000 Common stock, $0.01 par value- Authorized--3,000,000 shares Issued and outstanding--882,096 shares and 870,096 shares at December 31,1999 and 1998, respectively 8,821 8,701 Additional paid-in capital 729,648 717,768 Retained earnings (accumulated deficit) 576,837 (313,354) ----------- ----------- Total stockholders' equity 1,315,306 613,115 ----------- ----------- $15,260,220 $ 5,333,483 =========== ===========20549

~~1999~~FORM 1998 ------------ ------------ Revenues: Membership revenue $ 12,052,899 $ 10,802,642 Ancillary revenue 3,568,769 3,194,856 Corporate revenue 579,868 498,753 ------------ ------------ Total revenues 16,201,536 14,496,251 ------------ ------------ Expenses: Club operating expenses 8~~,404,085 8,339,080 Selling, general, and administrative 4,863,028 4,432,061 Depreciation and amortization 960,956 628,979~~ ------------ ------------ Total expenses 14,228,069 13,400,120 ------------ ------------ Operating income 1,973,467 1,096,131 Interest (Expense) Income, net (433,475) 36,635 ------------ ------------ Income before provision for income taxes 1,539,992 1,132,766 Provision for Income Taxes 643,336 465,969 ------------ ------------ Net income $ 896,656 $ 666,797 ============ ============K

~~COMMON~~CURRENT STOCK PREFERRED STOCK NUMBER OF $0.01 PAR NUMBER OF $5 PAR SHARES VALUE SHARES VALUE ------------- ------------- ------------- ------------- Balance, December 31, 1997 842,554 $ 8,426 100,000 $ 500,000 Preferred stock redemption - - (72,458) (362,290) Preferred stock dividend - - - - Conversion of preferred stock to common stock 27,542 275 (27,542) (137,710) Issuance of common stock options to a nonemployee - - - - Net income - - - - ------------- ------------- ------------- ------------- Balance, December 31, 1998 870,096 8,701 - - Preferred stock redemption - - - - Preferred stock dividend - - - - Stock options exercised 12,000 120 - - Net income - - - - ------------- ------------- ------------- ------------- Balance, December 31, 1999 882,096 $ 8,821 - $ - ============= ============= ============= =============REPORT

~~RETAINED~~Pursuant ~~PREFERRED~~to ~~STOCK~~Section 13 ~~ADDITIONAL~~or ~~EARNINGS NUMBER OF $100 PAR PAID-IN~~ 15(~~ACCUMULATED SHARES VALUE CAPITAL DEFICIT~~d) TOTAL ------------- ------------- ------------- ------------- ------------- Balance, December 31, 1997 3,000 $ 300,000 $ 572,370 $ (930,151) $ 450,645 Preferred stock redemption (1,000) (100,000) - - (462,290) Preferred stock dividend - - - (50,000) (50,000) Conversion of ~~preferred~~the ~~stock~~Securities toExchange ~~common~~Act ~~stock - - 137,435 - - Issuance~~ of common stock options to a nonemployee - - 7,963 - 7,963 Net income - - - 666,797 666,797 ------------- ------------- ------------- ------------- ------------- Balance, December 31, 1998 2,000 200,000 717,768 (313,354) 613,115 Preferred stock redemption (2,000) (200,000) - - (200,000) Preferred stock dividend - - - (6,465) (6,465) Stock options exercised - - 11,880 - 12,000 Net income - - - 896,656 896,656 ------------- ------------- ------------- ------------- ------------- Balance, December 31, 1999 - $ - $ 729,648 $ 576,837 $ 1,315,306 ============= ============= ============= ============= =============1934

~~1999~~Date ~~1998 ------------ ------------ Cash Flows from Operating Activities: Net income $ 896,656 $ 666,797 Adjustments to reconcile net income to net cash provided by operating activities- Issuance~~ of ~~common~~report ~~stock options to a nonemployee -- 7,963 Depreciation and amortization 960,956 681,784 Gain on sale of equipment~~ (~~1,157)~~Date ~~-- Deferred income taxes (4,551) (190,674) Change in assets and liabilities, net~~ of ~~acquisition-~~earliest ~~Accounts~~event ~~receivable (76,180~~reported) 14,460 Inventories 10,451 319 Refundable income taxes (184,992) -- Prepaid expenses and other current assets (41,394) 1,763 Deposits (56,000) (14,756) Accounts payable 88,985 16,695 Income taxes payable (67,992) (11,517) Accrued expenses and other current liabilities 17,972 253,530 Other assets (151,562) 29,845 Unearned income 467,431 375,583 Deferred rent (27,052) 3,784 ------------ ------------ Net cash provided by operating activities 1,831,571 1,835,576 ------------ ------------ Cash Flows from Investing Activities: ~~Acquisition~~November 4, net of cash acquired (2,731,395) -- Purchase of property and equipment (8,597,103) (1,156,807) Proceeds from sale of equipment 42,701 8,757 Increase in cash surrender value of life insurance (3,014) (3,014) ------------ ------------ Net cash used in investing activities (11,288,811) (1,151,064) ------------ ------------ Cash Flows from Financing Activities: Proceeds from mortgage loans 7,922,400 -- Principal payments on mortgage loans (131,106) -- Proceeds from issuance of subordinated notes payable 960,000 -- Principal payments on notes payable -- (50,000) Proceeds from term loan -- 700,000 Principal payments on term loan (87,500) (122,882) Principal payments on capital lease obligations (7,298) (10,853) Preferred stock dividends (6,465) (50,000) Preferred stock redemption (200,000) (462,290) Proceeds from issuance of common stock 12,000 -- ------------ ------------ Net cash provided by financing activities 8,462,031 3,975 ------------ ------------ Net (Decrease) Increase in Cash and Cash Equivalents (995,209) 688,487 Cash and Cash Equivalents, beginning of year 1,841,509 1,153,022 ------------ ------------ Cash and Cash Equivalents, end of year $ 846,300 $ 1,841,509 ============ ============ Supplemental Disclosures of Cash Flow Information: Cash paid during the year for- Interest $ 468,788 $ 28,963 ============ ============ Income taxes $ 885,350 $ 496,500 ============ ============ The Company purchased certain net assets of Silver's for $2,731,395. In connection with the acquisition, liabilities were assumed as follows- Fair value of assets acquired $ 2,850,000 $ -- Cash paid for net assets 2,731,395 -- ------------ ------------ Liabilities assumed $ 118,605 $ -- ============ ============ Supplemental Disclosures of Noncash Investing and Financing Activities: Conversion of $5 Preferred Stock to common stock $ -- $ 137,435 ============ ============2003

~~ASSET~~TOWN ~~CLASSIFICATION~~SPORTS ~~ESTIMATED~~INTERNATIONAL, ~~USEFUL LIFE -------------------- --------------------- Building 35-39~~INC.5 (EXACT ~~years~~NAME ~~Building~~OF ~~improvements~~REGISTRANT ~~5-15~~AS ~~years~~SPECIFIED ~~Machinery~~IN ~~and~~ITS equipment 3-5 years Furniture and fixtures 5 years Leasehold Improvements Life of lease or life of asset, whichever is shorter Capitalized lease equipment Life of lease or life of asset, whichever is shorterCHARTER)

~~ASSET~~New ~~DESCRIPTION~~York ~~ESTIMATED~~(State ~~USEFUL~~or ~~LIFE~~other ~~-----------------~~jurisdiction ~~--------------------- Membership lists 10 to 15 years Deferred financing costs Term~~ of ~~related~~incorporation) ~~debt~~333-40907 ~~Deferred~~(Commission ~~lease~~File ~~acquisition~~Number) ~~costs~~13-2749906 ~~Life~~(IRS ofEmployer ~~lease~~Identification ~~Goodwill 15 years~~No.)

~~1999~~888 ~~1998~~Seventh ~~----------~~Avenue ~~----------~~New ~~Term loan $ 597~~York,~~917~~ $New ~~685,415~~York ~~Mortgage loan~~ 10106 (~~Lexington)~~Address 5,408,202 -- Mortgage loan (Franklin) 1,984,287 -- Mortgage loan (Franklin) 398,805 -- Subordinated notes payable--Related parties 960,000 -- Equipment capital leases, bearing interest at 10%, payable in monthly installments ranging from $620 to $709 through February 2004, guaranteed by the related equipment (see Note 7(b)) 8,057 45,257 ---------- ---------- 9,357,268 730,672 Less--Current portion 272,960 99,451 ---------- ---------- Long-term debt, net of ~~current~~Principal ~~portion~~Executive $9Offices,~~084,308~~ $including ~~631,221~~Zip ~~========== ==========~~Code)

~~AMOUNT~~(212) 246-6700 (Registrant’s ~~Year~~Telephone ~~Ending December 31~~Number, ~~2000~~Including $Area ~~272,960 2001 269,292 2002 279,824 2003 1,258,349 2004 318,659 Thereafter 6,958,184 --------------- $ 9,357,268 ===============~~Code)

~~FEDERAL~~Not ~~STATE TOTAL 1999- Current $ 497,156 $ 150,731 $ 647,887 Deferred~~ applicable (~~3,413)~~Former ~~(1,138)~~Name ~~(4,551)~~or ~~---------------~~Former ~~--------------- --------------- $ 493~~Address,~~743~~ $if ~~149,593~~Changed $Since ~~643,336~~Last ~~=============== =============== =============== 1998- Current $ 501,736 $ 154,907 $ 656,643 Deferred (145,692~~Report) ~~(44,982) (190,674) --------------- --------------- --------------- $ 356,044 $ 109,925 $ 465,969 =============== =============== ===============~~

~~DECEMBER~~TABLE ~~31,~~OF 1999 1998 Deferred Tax Assets- Depreciation of property and equipment $ 155,896 $ 233,125 Deferred rent 219,053 169,635 Deferred revenue 108,814 106,712 Accrued expenses 42,364 - Other 23,664 10,223 --------------- --------------- 549,791 519,695 Deferred Tax Liabilities- Deferred costs (43,440) (43,440) Other (69,099) (43,554) ---------------- ---------------- (112,539) (86,994) ---------------- ---------------- Net deferred tax assets $ 437,252 $ 432,701 =============== ===============CONTENTS

DECEMBER 31, 1999 1998 Federal statutory tax rate $ 523,597 $ 385,140 State income taxes, net of federal benefit 91,476 67,286 Other 28,263 13,543 --------------- --------------- $ 643,336 $ 465,969 =============== ===============


	Item 7. Financial Statements and Exhibits.
	Item 12. Results of Operations
SIGNATURES
PRESS RELEASE

WEIGHTEDTable NUMBERof OF AVERAGE OPTIONS OPTION PRICE OPTION PRICE INCENTIVE STOCK OPTIONS Outstanding, December 31, 1997 95,000 $ 1.00-$2.58 $ 1.18 Granted 96,500 2.81 2.81 Exercised - - - Expired - - - ------------- -------------- -------------- Outstanding, December 31, 1998 191,500 1.00-2.81 1.88 Granted - - - Exercised - - - Expired - - - ------------- -------------- -------------- Outstanding, December 31, 1999 191,500 $ 1.00-$2.81 $ 1.88 ============= ============== ============== Exercisable, December 31, 1999 140,000 $ 1.00-$2.81 $ 1.71 ============= ============== ============== Available for future grant, December 31, 1999 12,000 $ - $ - ============= ============== ==============Contents

~~WEIGHTED NUMBER OF AVERAGE OPTIONS OPTION PRICE OPTION PRICE NONQUALIFIED STOCK OPTIONS Outstanding, December 31, 1997 54,000 $ 1~~Item 7.~~00-$2.58~~ $Financial ~~1.26~~Statements ~~Granted~~and ~~75,000 2~~Exhibits.81 2.81 Exercised - - - Expired - - - ------------- -------------- -------------- Outstanding, December 31, 1998 129,000 1.00-2.81 2.16 Granted - - - Exercised (12,000) 1.00 1.00 Expired - - - ------------- -------------- -------------- Outstanding, December 31, 1999 117,000 $ 1.00-$2.81 2.28 ============= ============== ============== Exercisable, December 31, 1999 107,000 $ 1.00-$2.81 $ 2.03 ============= ============== ============== Available for future grant, December 31, 1999 - $ - $ - ============= ============== ==============

DECEMBER 31, 1999 1998 Average risk-free interest rate 4.72% 4.72% Expected dividend yield - - Expected lives 6.37 years 6.25 years Expected volatility - - Weighed average fair value of grants $0.73 $0.72 Weighted average remaining contractual life of options outstanding 7 years 8 years (c) Exhibits

~~1999~~99.1 ~~1998~~Press ~~Net~~release ~~income~~dated asNovember ~~reported $896~~4,~~656~~ ~~$666,797 Pro forma 873,761 628,326~~2003

~~TOTAL~~Item 12. ~~Year~~Results ~~ending~~of ~~December 31, 2000 $ 1,784,000 2001 1,446,000 2002 1,458,000 2003 1,491,000 2004 1,290,000 Thereafter 1,791,000 --------------- $ 9,260,000 ===============~~Operations

~~AMOUNT~~ On ~~Year~~November 4, ~~ending~~2003, ~~December~~Town 31Sports International, ~~2000~~Inc. $announced ~~8,500~~its consolidated ~~Less--Amount~~financial ~~representing~~results ~~interest~~for ~~443~~the ~~---------------~~quarter ~~Present~~ended ~~value~~September 30, 2003. A copy of ~~minimum~~the ~~lease~~press ~~payments~~release $is ~~8,057~~furnished ~~===============~~with this report as Exhibit 99.1 to this current report on Form 8-K.

~~FOR~~ The ~~THE~~information ~~YEAR~~in ~~ENDED~~this ~~DECEMBER~~Form ~~31,~~8-K ~~1999~~and ~~1998~~the ~~(unaudited)~~attached ~~(unaudited)~~exhibit ~~Revenues~~shall ~~$17,630,000~~not ~~$16,012,000~~be ~~Pro~~deemed ~~forma~~filed for ~~net~~purposes ~~income~~of 1Section 18 of the Securities Exchange Act of 1934,~~022,000~~ ~~668~~nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933,~~000~~ except as shall be expressly set forth by specific reference in such filing.

MarchTable 31, 2000 -------------- CURRENT ASSETS: Cash and cash equivalents $ 1,346,753 Accounts receivable, net of allowance for doubtful accounts of $8,784 at March 31, 2000 315,972 Inventories 20,703 Current portion of deferred acquisition costs 83,870 Refundable and current deferred income taxes 487,825 Prepaid expenses and other current assets 412,676 ------------ Total current assets 2,667,799 ------------ PROPERTY AND EQUIPMENT: Land 1,760,963 Building and building improvements 8,167,886 Leasehold improvements 3,132,516 Machinery and equipment 2,069,124 Furniture and fixtures 871,942 Capitalized leased equipment 38,598 Construction-in-progress 121,136 ------------ 16,162,165 Less--Accumulated depreciation and amortization (3,642,826) ------------ Net property and equipment 12,519,339 ------------ OTHER ASSETS: Membership lists, deferred financing costs and lease-acquisition costs, net of accumulated amortization of $398,871 at March 31, 2000 621,304 Deposits 76,938 Cash surrender value of life insurance 23,120 Deferred acquisition costs, net of current portion 24,003 Deferred income taxes 185,206 ------------ Total other assets 930,571 ------------ $ 16,117,709 ============Contents

March 31, 2000 March 31, 1999 -------------- -------------- Revenues: Membership revenue $ 3,386,136 $ 2,744,811 Ancillary revenue 983,188 895,530 Corporate revenue 120,483 140,357 ----------- ----------- Total revenues 4,489,807 3,780,698 ----------- ----------- Expenses: Club operating expenses 2,378,670 2,091,366 Selling, general and administrative 1,433,320 1,139,895 Depreciation and amortization 291,987 220,676 ----------- ----------- Total expenses 4,103,977 3,451,937 Operating income 385,830 328,761 INTEREST INCOME (EXPENSE), NET (216,900) 5,442 ----------- ----------- Income before provision for income taxes 168,930 334,203 PROVISION FOR INCOME TAXES 71,967 147,469 ----------- ----------- Net income $ 96,963 $ 186,734 =========== ===========SIGNATURES

~~March~~ Pursuant ~~31, 2000 March 31, 1999 -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 96,963 $ 186,734 Adj~~ to ~~reconcile~~the ~~net~~requirements ~~income to net cash provided by operating activities-- Depreciation and amortization 265,459 192,686 Loss on sale~~ of ~~equipment~~the ~~8,406~~Securities ~~Change~~Exchange inAct ~~assets and liabilities, net~~ of ~~acquisition-- Accounts receivable (87~~1934,~~968)~~ ~~28,811~~the registrant ~~Inventories~~has ~~(764)~~duly ~~5,216~~caused ~~Prepaid~~this ~~expenses~~report ~~and~~to ~~other~~be ~~current~~signed ~~assets~~on ~~(365,962)~~its ~~(205,428)~~behalf Deposits 40,118 (6,250) Accounts payable 66,669 73,814 Accrued expenses and other current liabilities (271,853) (56,093) Other assets 19,230 13,201 Unearned income 1,056,227 714,431 Deferred rent (13,428) ----------- ----------- Net cash provided by operating activities 813,097 947,122 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (234,802) (371,021) Increase in cash surrender value of life insurance (753) ----------- ----------- Net cash used in investing activities (235,555) (371,021) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on mortgage loans (53,272) 0 Principal payments on term loan (21,875) (24,749) Principal payments on capital lease obligations (1,942) ----------- ----------- Net cash used in financing activities (77,089) (24,749) ----------- ----------- NET INCREASE IN CASH AND CASH EQUIVALENTS 500,453 551,352 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 846,300 1,841,509 ----------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,346,753 $ 2,392,861 =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the undersigned ~~period~~hereunto ~~for--~~duly ~~Interest $ 215,244 $ 5,442 Income taxes $ 341,191 $ 220,500~~authorized.

~~2000~~/s/Richard ~~-----------~~Pyle ~~Term~~Date: ~~loan~~November ~~$ 576~~4,~~043~~ ~~Mortgage~~2003 ~~loan~~By: ~~(Lexington)~~Richard ~~5,377,069~~Pyle ~~Mortgage~~Its: ~~loan~~Chief ~~(Franklin)~~Financial 1,971,655 Mortgage loan (Franklin) 389,296 Subordinated notes payable--Related parties 960,000 Equipment capital leases, bearing interest at 10%, payable in monthly installments ranging from $620 to $708 through December, 2000, guaranteed by the related equipment 6,116 ----------- 9,280,179 Less--Current portion 266,854 ----------- Long-term debt, net of current portion $9,013,325 ===========Officer

The Company HDC Pro Forma The Company Historical Historical Adjustments Note Pro Forma --------- ---------- ----------- ----- ----------- ASSETS Current assets: Cash and cash equivalents $ 24,854 $ 1,347 $(13,400) (3) $ 12,801 Accounts receivable 848 316 - 1,164 Inventory 968 21 - 989 Current portion of deferred membership costs - 84 (84) (4) - Refundable and current deferred income taxes - 488 1,300 (5) 1,788 Prepaid expenses and other current assets 1,494 412 1,906 --------- ------- -------- --------- Total current assets $ 28,164 $ 2,668 $(12,184) $ 18,648 Fixed assets, net 133,154 12,519 (8,686) (4) 136,987 Intangible assets, net 39,902 621 15,430 (6) 55,953 Deferred tax asset 12,511 185 (211) (5) 12,485 Deferred membership costs 11,713 24 (24) (4) 11,713 Other assets 1,326 101 (23) (4) 1,404 --------- ------- -------- --------- Total assets $ 226,770 $16,118 $ (5,698) $ 237,190 ========= ======= ======== ========= LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Current portion of long term debt and capital lease obligations $ 2,617 $ 267 $ (267) (4) $ 2,617 Credit Facility - - 6,000 (3) 6,000 Accounts payable 2,419 269 - 2,688 Accrued expenses 15,751 855 - 16,606 Corporate income taxes payable - - - - Current portion of lease liabilities - 80 (80) (4) - Deferred revenue 19,478 3,556 (330) (4) 22,704 --------- ------- -------- --------- Total Current Liabilities 40,265 5,027 5,323 50,615 Long-term debt and capital lease obligations 130,005 9,013 (9,013) (4) 130,005 Deferred lease liabilities 14,878 600 (600) (4) 14,878 Deferred revenue 2,418 65 5 (4) 2,488 Other liabilities 2,090 - 2,090 --------- ------- -------- --------- Total liabilities 189,656 14,705 (4,285) 200,076 --------- ------- -------- --------- Redeemable senior preferred stock 43,503 - - 43,503 --------- ------- -------- --------- Preferred stock 24,238 - 24,238 Common 1 9 (9) (4) 1 Paid-in capital 8,377 730 (730) (4) 8,377 Unearned compensation (1,240) - - (1,240) Accumulated deficit (37,765) 674 (674) (4) (37,765) --------- ------- -------- --------- Total stockholders' deficit (6,389) 1,413 (1,413) (6,389) --------- ------- -------- --------- Total liabilities & stockholders' deficit $ 226,770 $16,118 $ (5,698) $ 237,190 ========= ======= ======== =========

The Company HDC Pro Forma The Company Historical Historical Adjustments Note Pro Forma ---------- ---------- ----------- ---- ----------- Revenues: Club operations $ 157,440 $ 15,622 $ 173,062 Fees & other 2,339 580 2,919 --------- --------- --------- -------- 159,779 16,202 175,981 Operating expenses: Payroll & related 62,412 0 $ 6,952 (7) 69,364 Club operating 52,619 8,405 (5,028) (8) 55,996 General & administrative 10,908 4,863 (1,608) (7) 14,163 Depreciation & amortization 20,935 961 2,023 (9) 23,919 Compensation expense incurred in connection with stock options 2,042 - - 2,042 --------- --------- --------- -------- 148,916 14,229 2,339 165,484 --------- --------- --------- -------- Operating income 10,863 1,973 (2,339) 10,497 Interest expense 11,527 473 82 (10) 12,082 Interest income (1,284) (40) 581 (10) (743) --------- --------- --------- -------- Income (loss) before corporate income taxes 620 1,540 (3,002) (842) Provision (benefit) for corporate income taxes 571 643 (799) 415 --------- --------- --------- -------- Net income (loss) 49 897 (2,203) (1,257) Accreted dividends on preferred stock (7,880) - - (7,880) --------- --------- --------- -------- Net (loss) income attributable to common stockholders $ (7,831) $ 897 $ (2,203) $ (9,137) ========= ========= ========= ========

The Company HDC Pro Forma The Company Historical Historical Adjustments Note Pro Forma ---------- ---------- ----------- ---- ----------- Revenues: Club operations $ 48,724 $ 4,369 $ 53,093 Fees & other 545 121 $ 666 -------- -------- -------- 49,269 4,490 53,759 Operating expenses: Payroll & related 19,811 - $ 2,029 (7) $ 21,840 Club operating 15,332 2,379 (1,461) (8) $ 16,250 General & administrative 3,222 1,433 (382) (7) $ 4,273 Depreciation & amortization 6,026 292 474 (9) $ 6,792 Compensation expense incurred in connection with stock options 209 - - $ 209 -------- -------- -------- -------- 44,600 4,104 660 49,364 -------- -------- -------- -------- Operating income 4,669 386 (660) 4,395 Interest expense 3,614 221 (82) (10) $ 3,753 Interest income (556) (4) 145 (10) $ (415) -------- -------- -------- -------- Income (loss) before corporate income taxes 1,611 169 (723) 1,057 Provision (benefit) for taxes 784 72 (188) (11) $ 668 -------- -------- -------- -------- Net income 827 97 (535) 389 Accreted dividends on preferred stock (2,170) - - $(2,170) -------- -------- -------- -------- Net (loss) income attributable to common stockholders $ (1,343) $ 97 $ (535) $(1,781) ======== ======== ======== ========

Computation of the purchase price: (in thousands) -------------- Cash and cash equivalents $12,900 Borrowings under the Credit Facility 6,000 Transaction costs 500 ------- $19,400 ======= Estimated allocation of the purchase price: Tangible net assets acquired, including cash of $1,347 3,343 Membership lists 2,300 Goodwill 13,757 ------- $19,400 =======

Summary of Tax Adjustments: --------------------------- i) Tax assets generated by the transaction $1,779 ii) Tax liabilities related to the membership list intangible asset recorded (940) iii) Tax liability related to deferred lease liabilities not assumed 250 ------ Total tax adjustment 1,089 Tax assets in i) above expected to generate a tax refund 1,300 ------ Net adjustment to long term deferred tax asset $ (211) ======

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