ANYTIME FITNESS FRANCHISE DISCLOSURE DOCUMENT

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ANYTIME FITNESS, INC. NOTES TO FINANCIAL STATEMENTS December 3 I, 2008 The Company reviews long. lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future forecasted net undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the discounted cash flows or appraised values, depending upon the nature of the assets. No such impairment charges were recognized for the year ended December 31, 2008. PROPERTY AND EQUIPMENT AND DEPRECIATION METHODS Property and equipment are recorded at cost. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The estimated useful lives for fitness equipment and furniture are from 5 to 7 years. Depreciation of leasehold improvements is computed using the straight-line method over the shorter of the remaining lease term or the estimated useful lives of the improvements. Assets held under capital leases are recorded at the lower of the net present value of the minimum lease payments or the fair market value of the leased assets at the inception of the lease. Depreciation expense is computed using the straight-line method over the shorter of the estimated useful lives of the assets or the period of the related lease. INCOME TAXES The Company has elected under the Internal Revenue Code to be taxed as an S Corporation. In lieu of federal and certain state corporate income taxes, the stockholders ofan S Corporation are taxed on their proportionate share of the Company's taxable income. Accordingly, the Company's financial statements do not reflect a provision for federal and certain state income taxes. The Company has a provision for certain state taxes where applicable. FRANCHISE FEES AND REVENUE RECOGNITION Revenues from the sale of franchise rights for individual franchise businesses are recognized when all of the initial services required by the Company under the terms of its franchise agreement have been performed, including; training, a marketing plan, assistance with opening centers and operations manuals. Under the franchise agreement, the first $5,000 of the initial franchise fee is deferred for the first 60 days after a franchisee has signed the franchise agreement until a location has been formally approved. The remaining portion of the initial franchise fee is recognized when training has occurred or been offered to franchisees, whichever happens first. Direct costs associated with a specific franchise business are expressed when the related revenue is recognized. Revenues from continuing royalties are recognized monthly based on monthly dues. Receipts from the advertising portion of the franchise agreement are recorded as a liability on the balance sheet and subsequent payments for advertising are offset against the liability as incurred. Revenue recognized from franchise sales amounted to approximately $5,000,000 for the year ended December 31,2008. 10
ANYTIME FITNESS, INC. NOTES TO FINANCIAL STATEMENTS December 31, 2008 ADVERTISING COSTS Advertising costs associated with solicitation of new franchisees are expenses as incurred. Advertising costs totaled $369,088 at December 31, 2008. Note 2 FRANCHISE INFORMATION As of December 31,2008, the Company had sold approximately 1,800 territories, of which 463 were sold in 2008. Of the territories sold, 958 total fitness centers are open with 375 opened in 2008. Note 3 CORPORATE OWNED FITNESS CENTERS The Company is the owner/operator of9 fitness centers. Revenue and expenses for the corporate owned fitness clubs was $2,561,123 and $2,410,540, respectively, for the year ended December 31, 2008. Note 4 RELATED PARTY TRANSACTIONS The Company rents office space on a monthly basis from a Company related by common ownership. Rent expense paid to related parties was $351,646 for the year ended December 31, 2008. The lease calls for monthly payments in the amount of $18,264 per month, adjusted annually to meet the cash flow needs of North em Funding, LLP. The lease expires December 31, 2009 and contains four options to extend the term for five years each. See Note 10 for future minimum obligations under this lease. The Company receives referral fees from Companies with common ownership. These fees represent a portion of monthly fees collected by the related entities from franchisees for services such as; security monitoring, software support and web hosting. Referral fees collected from these entities are $269,720 for the year ended December 31, 2008. At December 31,2008, the Company has a receivable from a shareholder in the amount of$52,108. The amount is due on demand. At December 31, 2008, the Company has receivables from entities related by common ownership in the amount of $543,280. Note 5 NOTE RECEIVABLE The Company has a note receivable from a former franchisee. In exchange for which the rights to run the fitness club under another name, the former franchisee owes the Company $52,500. The agreement calls for eight quarterly installments of$5,000 starting January 1,2009, due October 2010. If the first eight payments are received timely the payee shall reduce the amount owed to $40,000, and as such any additional principle and interest owed will be waived. The Company has deferred the revenue associated with the contingent lump sum payment that is due if the payee does not pay the first eight payments timely. 11
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ANYTIME FITNESS FRANCHISE DISCLOSUR
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ANYTIME FITNESS, LLC FRANCmSE DISCL
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operations and licenses. Many state
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1. Anytime Fitness, Inc. v. Reserve
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If you are an existing franchisee t
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Type of Fee (Note 1) Amount (Note 2
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AMOUNT TYPE OF ANYTIME METHOD TO WH
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(7) We require you have an automate
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We may negotiate preferred vendor c
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Section in Franchise Section in Dev
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Under the personal guaranty, which
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$150,000 per location. Gaia will ty
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ITEM 11. FRANCmSOR'S ASSISTANCE, AD
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Name Subjects Taught Background Deb
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the initial training, will provide
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services to the fund. We will not s
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ITEM 13. TRADEMARKS The Franchise A
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Provision b. Renewal or extension o
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Section in Franchise or Provision O
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Section in Franchise or Provision O
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ACCOUNTANT HAS AUDITED THESE FIGURE
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the third (800 members) column. Bec
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State Year Number of Transfers 2006
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Reacquired Ceased Outlets by the Op
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Outlets Outlets at Reacquired Outle
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Name l City and State Telephone Num
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Name l City and State Telephone Num
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FDD EXHIBIT A LIST OF STATE AGENCIE
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Virginia State Corporation Commissi
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FDD EXHIBITB TABLE OF CONTENTS OF O
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150 -151 152 153 153 154 -160 161 -
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FDD EXHIBITC LIST OF FRANCmSEES AS
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Name Scott & Shelby Mitteer Shane M
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Name Address Telephone GymDay Corp.
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Name Address Telephone Full of Life
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Name Address Telephone Colorado 534
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Name Address Telephone Good Life Ve
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Name Address Telephone H-I02 Inc. 1
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Name Address Telephone Chris Naples
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Name Address Telephone Bill Taylor
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Name Address Telephone Make It Happ
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Name Address Telephone Joe Koeppl 1
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Name Address Telephone Temple Keepe
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Name Address Telephone 7350 West St
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Name Address Telephone 24 Fitness,
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Name Address Telephone Dana Cates H
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Name Address Telephone Metairie Fit
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Name Address Telephone Ultimate Sec
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Name Address Telephone NK Fitness,
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Name Address Telephone FIF, Inc. 65
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Name Address Telephone J Abernethy,
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Name Address Telephone Kenneth & Kr
Page 107 and 108: Name Miranda Hills Miranda Hills Mi
Page 109 and 110: Name Address Telephone Kenny Stubbl
Page 111 and 112: Name Address Telephone West-Am Fitn
Page 113 and 114: Name Address Telephone 24 Fitness,
Page 115 and 116: Name Address Telephone Clifford Pie
Page 117 and 118: Name Address Telephone Rick Whittin
Page 119 and 120: Name Address Telephone Effects Pers
Page 121 and 122: Name Address Telepbone RL W Enterpr
Page 123 and 124: Name Address Telephone Silent Owl,
Page 125 and 126: Name Address Telephone 2101 Broadwa
Page 127 and 128: Name Address Telephone Dennis Rudni
Page 129 and 130: Name Address Telephone Fitness 180,
Page 131 and 132: Name Address Telephone 1604 N Calab
Page 133 and 134: Name Address Telephone Jerry Greger
Page 135 and 136: Name Address Telephone CM Fitness,
Page 137 and 138: Name Address Telephone Erik Recende
Page 139: Name Address Telephone Helen Wada 1
Page 142: Name Address Telephone Scott Schimm
Page 145 and 146: FDD EXHIBITD FINANCIAL STATEMENTS
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Page 173: SUPPLEMENTAL DISCLOSURES OF CASH FL
Page 182 and 183: FA 12/09 FRANCHISE AGREEMENT ANYTIM
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Page 186 and 187: fees and a modification to the Prot
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provisions relating to assignment.
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L. Patriot Act. You represent and w
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1. Effective Date: ________ _ FRANC
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PERSONAL GUARANTY AND AGREEMENT TO
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STATE SPECIFIC ADDENDUM TO FRANCHIS
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IN WITNESS WHEREOF, the undersigned
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STATE SPECIFIC ADDENDUM AS REQUIRED
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ADA 12/09 AREA DEVELOPMENT AGREEMEN
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ANYTIME FITNESS® AREA DEVELOPMENT
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provided, however, that you will no
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1. Effective Date: _______ _ AREA D
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PERSONAL GUARANTY AND AGREEMENT TO
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STATE SPECIFIC ADDENDUM TO DEVELOPM
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FDD EXHIBITG STATE SPECIFIC ADDENDA
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5. The Franchise Agreement contains
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TOGETHER WITH A COPY OF ALL PROPOSE
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exercising a right of first refusal
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6. The following is added in Item 1
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Financing Consultant Agreement You,
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FDD EXHffiITI-l US BANK FINANCE DOC
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FDD AMERIFUND FINANCE DOCUMENTS
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SCBEDULE"A" COLLATERAL For the Fina
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FDD ExmBIT 1-3-2
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REQUEST FOR DRIVER'S LICENSE Please
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FDD EXHIBIT 1-3-3
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(9) Lessee shall have no remedy for
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Purchase Option Lease #: _____ _ Fo
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FDD EXHIBIT 1-4 KLC FINANCIAL, INC.
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GAIA Leasing LLC 50 South Sixth Str
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11. Location, Ownership and Use The
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(b) The failure of Lessee to perfor
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EXHIBIT A EARLY TERMINATION SCHEDUL
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FDD EXHIBIT 1-6 LIFE FITNESS FINANC
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Re: "Obligor" Personal Guaranty To
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EQUIPMENT LEASE AGREEMENT THIS AGRE
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and Lessor. At Lessor's option, all
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(b) Lessee shall fail to make any o
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this Lease inures to the benefit of
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IF LESSEE IS OTHER THAN AN INDIVIDU
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EXHIBIT A AGREEMENT OF UNCONDITIONA
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FDD EXHIBIT J PROVISION SECURITY SO
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e. ProVision Materia/s. In connecti
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Hosting Services Fee = $19.99 Monit
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9. General a. Independent Contracto
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ITEM 23. RECEIPT This Disclosure Do
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ITEM 23. RECEIPT This Disclosure Do
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