Exhibit 1Income Statement for Health Development Corporation

Year Ended December 31,

1994 1995 1996 1997 1998 1999

Total Revenue 8,316 9,957 12,584 13,636 14,549 16,162

Club Operating Expenses 5,779 6,990 8,837 9,337 9,877 10,885
Gross Profit 2,537 2,967 3,747 4,299 4,672 5,277
Rent and Other Expensesb 1,831 2,226 2,869 2,842 2,771 2,299
Depreciation and Amortization 363 426 517 619 682 1,058
Operating Income 343 315 361 838 1,219 1,920
Net Interest Expense 17 3 (22) (28) (36) 480
Non-Recurring Expensesc 0 36 52 186 40 (6)
Pre-Tax Income 325 279 331 680 1,216 1,445
Income Taxes 146 126 158 333 499 660
Net Income 179 153 173 347 716 785

Expense Adjustments
Non-Recurring Items 0 36 52 -3 40 -6
Directors Wages and Fees 42 40 83 78 64 74
Professional Fees 24 44 68 140 143 123
Terminated Operations 0 0 0 236 41 0
Contributions and Other Items 0 2 3 4 41 28
Adjusted Pre-Tax Income 391 400 537 1,135 1,544 1,665

Adjusted EBITDAd 771 830 1,032 1,726 2,190 3,202e

EBITDA Margin 9.30% 8.30% 8.20% 12.70% 15.10% 19.80%

a Projections include only current HDC properties, and include no assumptions regarding additional future acquisitions.
b Includes Rent, Insurance, Real Estate Taxes, and other Tax Expenses.
c Includes $50,000 in claim settlement in 1996; $189,000 in losses on a club termination in 1997; $40,000 in purchase financin
d Figure includes $80,000 and $528,000 of losses for the company’s new Andover facility for 1999 and 2000, respectively.
e Does not reflect a full year of ownership of HDC’s Lexington facility, which would result in an additional $200,000 of EBITDA
ber 31,
2000a 2001a 2002a

19,324 21,311 22,809

13,130 14,313 15,092
6,194 6,998 7,717
2,275 2,375 2,510
1,233 1,466 1,452
2,687 3,157 3,755
975 1094 1061
0 0 0
1,712 2,062 2,694
729 798 1,032
982 1,264 1,662

0 0 0
91 96 102
126 130 130
0 0 0
17 19 22
1,946 2,307 2,948

4,152 4,867 5,460

21.50% 22.80% 23.90%

future acquisitions.

0,000 in purchase financing costs in 1998.

nd 2000, respectively.
onal $200,000 of EBITDA if annualized.
Exhibit 2 Balance Sheets for Health Development Corporation

As of
September 30, 1999
Assets
Current assets
Cash and Marketable Securities 997
Accounts receivable 226
Inventory 21
Prepaid and Other Current Items 127
Total Current Assets 1,371
Property, Plant and Equipment
Property and Equipment 12,047
Construction in Progress 1,320
Total Property, Plant and Equipment 13,367
Less: Accumulated Depreciation (3,349)
Net Property and Equipment 10,018
Other Assets 716
Total Assets 12,105

Liabilities and Shareholders' Equity

Current Liabilities
Accounts Payable 135
Accrued Expenses 1,250
Prepaid Membership Fees 1,888
Current Portion of Long Term Debt 210
Other Current Liabilities 39
Total Current Liabilities 3,522
Long-Term Debt 6,704
Other Long-Term Liabilities 682
Total Liabilities 7,386
Shareholders' Equity
Common and Preferred Stock 9
Paid In Capital 718
Retained Earnings 470
Total Shareholders' Equity 1,197
Total Liabilities and Equity 12,105
Exhibit 3 Value of HDC with Owned and Leased Lexington Real Estate

Lexington Real Estate

Owning Leasing

Adjusted Pre-tax Income

(excluding Lexington Real Estate) 2,612 2,612

Cost of Lexington Real Estate

Interest 504 0
Depreciation 162 0
Lease cost 0 925

Adjusted Pre-tax Income 1,946 1,687

Interest (excluding Lexington) 471 471

Depreciation (excluding Lexington) 1,071 1,071
Lexington real estate interest 504 0
Lexington real estate depreciation 162 0

EBITDA 4,154 3,229 925

Multiple 5 5

Operations Value 20,770 16,145

Plus:
Excess Cash 750

Total Enterprise Value 20,770 16,895

Less:
Corporate debt (excluding Lexington) 1,917 1,917
Lexington real estate debt 5,750 0

Equity Value 13,103 14,978

Cost of purshase of Lexington Club
Price of purchase 6,500,000.00
Mode Of purchase
Cash 750,000.00
Mortgage 5,750,000.00

Assumptions Considered
Discount rate 10.00%
Marginal tax rate 40.00%
Life of Lexington real estate(assumed)in Years 25.00
Lexington real estate depreciation(Straight line Method) 260,000.00
 Leasing
Lease payment 925,000.00
Expected growth in lease payments 5.00%

at 8.75%

Years (assuming straight-line depreciation)

NPV Approach
Owing (Tax shield due to depreciation as depreciation is deductible in tax calculati
Year 1 2 3
Depreciation 260000.00 260000.00 260000.00
Tax shield @ 40% 104000.00 104000.00 104000.00
Present value of tax shield 94545.45 85950.41 78136.74
Present value of cash flow 944,012.16
Net Present value (5,555,987.84)

Leasing
Leasing Expense 925,000.00
Tax @ 40% 370,000.00
Incremental cash flow 555,000.00
Net Present value (11,100,000.00)

NPV Leasing (11,100,000.00)

NPV Owing (5,555,987.84)

Advatange of owing 5,544,012.16

Due to NPV approach, the purchase was a value increasing decision.
deductible in tax calculations)
4 5 6 7 8 9
260000.00 260000.00 260000.00 260000.00 260000.00 260000.00
104000.00 104000.00 104000.00 104000.00 104000.00 104000.00
71033.40 64575.82 58705.29 53368.44 48516.77 44106.15
 10 11 12 13 14 15
260000.00 260000.00 260000.00 260000.00 260000.00 260000.00
104000.00 104000.00 104000.00 104000.00 104000.00 104000.00
40096.50 36451.37 33137.61 30125.10 27386.45 24896.77
 16 17 18 19 20 21
260000.00 260000.00 260000.00 260000.00 260000.00 260000.00
104000.00 104000.00 104000.00 104000.00 104000.00 104000.00
22633.43 20575.85 18705.31 17004.83 15458.94 14053.58
 22 23 24 25
260000.00 260000.00 260000.00 260000.00
104000.00 104000.00 104000.00 104000.00
12775.98 11614.53 10558.66 9598.78
 1 2 3 4 5 6
260000 260000 260000 260000 260000 260000
104000 104000 104000 104000 104000 104000
94545.45455 85950.413223 78136.7392937641 71033.39935797 64575.8176 58705.28873

Year Depreciation Tax shield @ 40% PV of tax shield Year Depreciation

1 260000 104000 94545.45454545 9 260000
2 260000 104000 85950.41322314 10 260000
3 260000 104000 78136.73929376 11 260000
4 260000 104000 71033.39935797 12 260000
5 260000 104000 64575.81759815 13 260000
6 260000 104000 58705.28872559 14 260000
7 260000 104000 53368.44429599 15 260000
8 260000 104000 48516.76754181 16 260000
 9 10 11 12
260000 260000 260000 260000
104000 104000 104000 104000
44106.15231 40096.5021 36451.3655460648 33137.60504188

7 8
260000 260000
104000 104000
53368.4442959935 48516.76754181

Tax shield @ 40% PV of tax shield Year Depreciation Tax shield @ 40% PV of tax shield
104000 44106.15231074 17 260000 104000 20575.84556561
104000 40096.50210067 18 260000 104000 18705.31415056
104000 36451.36554606 19 260000 104000 17004.83104596
104000 33137.60504188 20 260000 104000 15458.93731451
104000 30125.09549262 21 260000 104000 14053.57937683
104000 27386.45044783 22 260000 104000 12775.98125166
104000 24896.77313439 23 260000 104000 11614.5284106
104000 22633.43012218 24 260000 104000 10558.66219146
25 260000 104000 9598.783810415
 13 14 15 16 17 18 19
260000 260000 260000 260000 260000 260000 260000
104000 104000 104000 104000 104000 104000 104000
30125.09549 27386.45045 24896.77313 22633.43012 20575.84557 18705.31415 17004.83105
 20 21 22 23 24 25
260000 260000 260000 260000 260000 260000
104000 104000 104000 104000 104000 104000
15458.93731 14053.57938 12775.98125 11614.52841 10558.66219 9598.78381
Multiple Approach
Owing Leasing
Revenue 3,900,000.00 3,900,000.00
Expenses 0.00 925,000.00
EBITDA 3,900,000.00 2,975,000.00
Multiple 5 5
Project value 19,500,000.00 14,875,000.00
Debt 5,750,000.00 0.00
Excess cash 0.00 750,000.00
Equity Value 13,750,000.00 15,625,000.00

Equity Value Owing 13,750,000.00

Equity Value Leasing 15,625,000.00
Disadvatange of owing (1,875,000.00)

Result The purchase decision is not value additon method by multiple approach
ultiple approach
Proposed Solution (in Case)
Lease Payments must exceed repayments by 110%
Lease Payments 525,000.00 (Assumption: bank repayment
Annual bank repayment 477,272.73
Amount of bank loan 3,131,552.48

EBITDA before purcahse of Lexington before deal 3,229,000.00

Leasing expense before deal 925,000.00
leasing expense after deal 525,000.00
EBITDA after deal 3,629,000.00
Multiple 5
Value of project after deal 18,145,000.00
Loan for purchase of lexington 5,750,000.00
Money they got for purchasing Lexington 6,500,000.00
Value of equity after deal 18,895,000.00

Equity Value Owing before deal 13,750,000.00

Equity Value Leasing before deal 15,625,000.00

Value for shareholder

Money they paid for purchasing Lexington 6,500,000.00
Loan for purchase of Lexington 3,131,552.48
Additional equity the shareholder had to pay in the holding 3,368,447.52

Advantage for shareholder of owing 5,544,012.16

Additional equity the shareholder had to pay in the holding 3,368,447.52
Remaining advantage for shareholder of owing 2,175,564.64
ssumption: bank repayment consists of interest and principal)