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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                           --------------------------
                                    FORM 10-K

[X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                                       OR

[ ]     TRANSITION REPORT PURSUANT TO SECTON 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT

             FOR THE TRANSITION PERIOD FROM ___________TO __________

                         COMMISSION FILE NUMBER: 1-13290

                          THE SPORTS CLUB COMPANY, INC.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                     <C>
                      DELAWARE                                     95-4479735
  (State or other jurisdiction of incorporation or      (I.R.S. Employer Identification No.)
                    organization)
</TABLE>

<TABLE>
<S>                                                                <C>
         11100 SANTA MONICA BLVD., SUITE 300
               LOS ANGELES, CALIFORNIA                               90025
(Address of registrant's principal executive offices)              (Zip Code)
</TABLE>

 Registrant's telephone number, including area code:
                   (310) 479-5200

<TABLE>
<S>                                                      <C>
 Securities registered pursuant to Section 12(b) of      Name of each exchange on which
                      the Act:                                     registered
                 Title of each class
</TABLE>

<TABLE>
<S>                                                         <C>
             Common Stock $.01 par value                    American Stock Exchange
</TABLE>

 Securities registered pursuant to Section 12(g) of the Act:                None


                        --------------------------------

        Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

        Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

        The aggregate market value of the voting stock held by non-affiliates of
the registrant on March 15, 2001 was $15,372,402. The number of shares of the
Common Stock, par value $ .01 per share,outstanding (the only class of Common
Stock of the registrant outstanding) was 17,896,643 on March 15, 2001.

                       DOCUMENTS INCORPORATED BY REFERENCE

        The information called for by Part III is incorporated by reference to
specified portions of the Registrant's definitive Proxy Statement to be issued
in connection with the Registrant's 2001 Annual Meeting of Stockholders, which
is expected to be filed not later than 120 days after the Registrant's fiscal
year ended December 31, 2000.

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                                     PART I

ITEM 1. BUSINESS

GENERAL

        We were organized in 1994 to consolidate the ownership of several sports
and fitness clubs ("Clubs"). We currently operate four Clubs under "The Sports
Club/LA" name in Los Angeles, Washington D.C. and at Rockefeller Center and the
Upper East Side in New York City. We also operate the Sports Club/Irvine, The
Sports Club/Las Vegas and Reebok Sports Club/NY. Our Clubs offer a wide range of
fitness and recreation options and amenities, and are marketed to affluent,
health conscious individuals who desire a service-oriented, state-of-the-art
club. Our Clubs are widely recognized as being among the finest sports and
fitness clubs in the country.

        Our Clubs are conveniently located in spacious, modern facilities that
typically include fitness centers, swimming pools and basketball courts. Our
Clubs are designed as "urban country clubs," and range in size from 90,000 to
140,000 square feet. Initiation fees and monthly membership dues at Sports Clubs
are higher than those charged by most other sports and fitness clubs, which we
believe do not provide comparable services. Income from ancillary services and
products, including private training, food and beverages, spa services and
sports boutiques, also constitutes a significant portion of our revenues. Our
subsidiary, The SportsMed Company ("SportsMed"), operates physical therapy
facilities in some Clubs.

        Our strategy is to expand The Sports Club/LA brand in major metropolitan
markets and to increase revenues and profitability at existing Clubs, through
regular increases in monthly membership dues and expanded ancillary services and
products. There are currently two The Sports Club/LA Clubs under development in
San Francisco and Boston. We expect to open these Clubs in the third quarter of
2001. We will continue to investigate other sites for new Club developments and
acquisitions.

        According to the International Health, Racquet & Sportsclub Association
("IHRSA"), the industry's leading trade organization, 22.9 million Americans
were members of more than 15,300 sports and fitness clubs in 1999. Revenues
generated by the United States sports and fitness club industry increased at a
compound annual rate of 8.6% from $5.5 billion in 1991 to $10.6 billion in 1999.
The industry has benefited from the general public's increasing awareness of the
importance of physical exercise. Among other groups, we target members age 35
and older who, according to IHRSA, represent 52% of all memberships and are the
fastest growing segment of the industry.

THE SPORTS CLUBS

        Sports Clubs are 90,000 to 140,000 square foot multi-purpose facilities,
which generally include the following features:

        -       large, fully equipped gyms with state-of-the-art fitness
                equipment, including weight training, cardio-y vascular
                equipment and flexibility/balance centers,

        -       basketball, volleyball, racquetball, squash and paddle tennis
                courts and, in the case of The Sports Club/Las Vegas, indoor and
                outdoor tennis courts,

        -       aerobics/group exercise studios featuring classes throughout the
                day and evening, seven days a week, including aerobics, dance,
                muscle conditioning, boxing, martial arts and bodymind,

        -       group cycling studios,

        -       rock climbing walls,

        -       swimming pools, sundecks, golf practice nets and running tracks,


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        -       destination city spa offering massage, facials and full body
                treatments,

        -       men's and women's locker rooms featuring wood lockers,

        -       steam rooms, saunas and jacuzzis,

        -       restaurants, sports bars, private dining/conference rooms and
                media centers,

        -       valet parking, pro shops, hair salons and childcare services,

        -       sports medicine and physical therapy facilities,

        -       personal trainers to develop and supervise members' exercise
                routines,

        -       registered dietitians for nutritional consultations,

        -       Fitlab assessment center,

        -       PTS Private Training System nutritional programs and products,

        -       interactive children's classes, as well as supervised
                age-specific junior recreational rooms and junior programs such
                as gymnastics,

        -       instruction in racquet sports, golf, swimming, boxing, martial
                arts and rock climbing,

        -       full-time activities directors responsible for social and media
                events for members, including organizing trips, lectures and
                charity events,

        -       full-time sports managers who organize sports tournaments,
                leagues and classes, and

        -       wellness protocols such as exercise regimens designed for
                specific groups of members.

        We currently have seven Sports Clubs in operation. The original Sports
Club/LA opened in 1987 in west Los Angeles, California, near the affluent
communities of Santa Monica, Brentwood, Beverly Hills, Pacific Palisades,
Westwood and Century City. The Sports Club/Irvine opened in 1990 near Newport
Beach in Orange County, California. Reebok Sports Club/NY opened in 1995 in
Manhattan's upper west side, and was developed in partnership with a subsidiary
of Reebok International, Ltd. ("Reebok") and Lincoln Metrocenter Partners, L.P.
(collectively with its affiliates "Millennium"). We manage the operations of
this Club and own a controlling 60% interest in the partnership that owns this
Club. Reebok and Millennium have each retained an interest in the partnership.
We acquired a club in Henderson, Nevada and converted it to The Sports Club/Las
Vegas in August 1997. The Sports Club/Las Vegas services the rapidly growing Las
Vegas market and is situated approximately three miles east of the Las Vegas
airport.

        We opened The Sports Club/LA at three new locations in 2000. The Sports
Club/LA - Rockefeller Center was opened in February 2000. This Club was designed
to service the executive business community in midtown Manhattan. The Sports
Club/LA - Upper East Side in New York City was opened in September 2000. This
site is the location of the former Vertical Club, which was closed in February
1999 for major renovation and conversion to The Sports Club/LA. Our newest Club,
The Sports Club/LA - Washington D.C., opened in October 2000. This 100,000
square foot Club is located at 22nd and M Streets between Washington D.C.'s
business district and Georgetown.


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THE SPORTSMED COMPANY, INC.

        Our SportsMed subsidiary operates physical therapy facilities within The
Sports Club/LA in Los Angeles, The Sports Club/Irvine, the Spectrum Club -
Agoura Hills, the Spectrum Club - Valencia and the Spectrum Club - Thousand
Oaks. SportsMed also operates in a stand-alone facility in Calabasas,
California. The clinics are staffed by exercise physiologists, physical
therapists and registered dietitians who provide services to members and others.
We believe that SportsMed provides valuable services, which are complementary to
the other services provided by the Clubs, and are considering expanding the
SportsMed concept to other Clubs in the future.

DEVELOPMENT OF ADDITIONAL CLUBS

         Current Sports Club Developments. We are developing The Sports Club/LA
in Boston and San Francisco with Millennium, with whom we developed Reebok
Sports Club/NY and The Sports Club/LA - Washington D.C. Millennium is a
developer of premier multi-use projects and is funded by Quantum Realty Fund, a
member of the Quantum Group of Funds, which are off-shore investment funds
managed by Soros Fund Management, a management firm headed by George Soros; and,
Millennium Entertainment Partners LP, a consortium of German insurance
companies. These Clubs will be located in projects developed by Millennium in
prime, metropolitan locations which, like Reebok Sports Club/NY, include
commercial, retail, entertainment and residential space. In addition, each of
these developments will include either a Ritz Carlton or Four Seasons five star
hotel. These Clubs will be approximately 100,000 square feet and will offer
services typically found at our other Sports Club sites. We expect to open these
Clubs in the third quarter of 2001. We believe that such projects offer ideal
locations for The Sports Club/LA and intend to investigate additional Sports
Club developments with Millennium or other developers in other major
metropolitan areas.

        Other Developments. We currently believe that our resources can be best
used to develop The Sports Club/LA in additional locations, but we may consider
the acquisition and conversion of an existing sports and fitness club to The
Sports Club/LA if a suitable opportunity arises. We believe that, because of our
established reputation and the prestige associated with The Sports Club/LA,
developers view The Sports Club/LA as a valuable component to multi-use
developments.

        Performance of Newly Developed and Acquired Clubs. Based on our
experience, a newly developed Club tends to achieve significant increases in
revenues until a mature membership level is reached. In the past, recently
opened Clubs which have not yet achieved mature membership levels have operated
at a loss or at only a slight profit during the first eighteen months of
operation as a result of fixed expenses that, together with variable operating
expenses, approximate or exceed membership fees and other revenues. We expect
this trend to continue at the five Clubs we opened or will open in 2000 and 2001
as the membership levels are currently below the amount required to reach a
break even operating level. We believe that our revenues from these Clubs will
significantly increase as membership levels mature.

        The physical layout, decor, age of equipment, staff training, marketing
programs, membership fees, ancillary services offered and other characteristics
of Clubs we may acquire vary, and, as a result, acquired Clubs may have lower
operating income than a typical Sports Club. We generally will renovate an
acquired Club, upgrade equipment, fitness programs and exercise protocols,
install experienced employees, implement marketing and training programs, and
introduce new services and products to enhance ancillary revenues. We will also
implement membership fees consistent with other Sports Clubs. Newly acquired
Clubs undergoing such improvements may perform at lower margins during the
period of implementation of new policies and programs.

SALES AND MARKETING

Strategy. The Sports Clubs are marketed as "urban country clubs" offering
personalized attention and multiple amenities and services. We believe that the
image of The Sports Clubs as the leader in the sports and fitness industry
justifies charging a premium. Our members include professionals, sports and
entertainment personalities and business people. Our Sports Clubs emphasize
personalized service and instruction and the creation of an "urban country club"
atmosphere in which members can relax and


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socialize. Our marketing efforts at older, more seasoned Sports Clubs emphasize
maintaining existing members, replacing members who leave with new members and
increasing ancillary revenues such as private training, spa services and retail
sales. Our focus at the newer Sports Clubs is on attracting additional members.

        Referrals, Endorsements and Advertising. Word-of-mouth referrals and
endorsements by existing members are the Sports Clubs' most important source of
new members. In addition, all Sports Clubs utilize targeted marketing programs
which include advertisements, promotions, public relations and community events.
The principal marketing media for the Clubs are direct mail with use of print
advertisements. Special events and special membership programs supplement the
print advertisements. The Sports Clubs host corporate parties and charity
benefits and often donate free or discounted memberships to charitable
organizations. We also conduct periodic membership drives whereby referring
members are entitled to receive special gifts and other incentives. We believe
that we will be able to continue to utilize these marketing strategies in the
promotion of new Clubs.

        Targeted Members. The largest segment of the membership base for the
Sports Clubs consists of health-conscious individuals. We target four other
groups in order to expand membership: corporate members, medical referrals,
families, and seniors. Each of these groups requires specialized
exercise/fitness programs, and we have developed specific programs to attract
members of these groups.

        Corporate Programs. We believe the corporate market is a significant
source of new members, due to the proximity of the Sports Clubs to business
centers and the use of the Clubs to conduct business and to develop and maintain
business contacts. We employ several Corporate Membership Directors whose
principal responsibilities are to solicit corporate memberships from businesses
operating in the vicinity of our Clubs. The Sports Clubs offer corporate
group-discounted initiation fees depending upon the number of new members
involved. Our SportsMed subsidiary has developed several corporate wellness
programs to fit the needs of this particular market. We believe that
corporations are favorably disposed to Sports Clubs and the SportsMed programs
because of the positive impact regular exercise and overall fitness can have on
employee absenteeism, morale and productivity.

        Medical Referrals. We target members from the medical referral market
through our SportsMed subsidiary by offering specific rehabilitation and
exercise protocols to complement other forms of physical therapy recommended by
a physician or medical group. We also offer a "next-step" program for SportsMed
patients who complete their physical therapy programs and are looking for an
option to complete their rehabilitations.

        Family Programs. We believe that the children/family market has
considerable potential, as younger members grow older, marry and have children,
and seek recreational activities in which the entire family can participate. To
attract the family market, we have implemented "Fun-N-Fit" programs which target
children between the ages of 6 months and 15 years and involve youth sports
camps and clinics, fitness programs, art classes and birthday parties. The
Clubs' weight-training, basketball and swimming pool facilities are made
available to children and their parents during family day, and
specially-designed movement classes utilizing a variety of fitness equipment are
offered to younger children. The Clubs offer a summer sports camp, provide
individualized sports instruction and offer multiple fitness activities such as
gymnastics, martial arts and dance that are age appropriate.

        Senior Programs. We anticipate that as the current core membership group
ages, we will meet the changing fitness needs of seniors and attract additional
members from the senior population. We maintain training and exercise protocol
manuals for the senior market (which we generally define as members who are over
60 years old) which include a description of exercise and fitness programs
specifically designed for seniors. These manuals also contain discussions of the
biological, psychological and medical aspects of aging and the benefits of
regular exercise. We believe this market will expand as the "baby boomers"
mature.


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EMPLOYEE TRAINING

        We believe that a key component of our operating strategy is a
well-trained and knowledgeable staff. We have comprehensive training programs to
enhance the effectiveness of our personnel. All newly hired employees are
required to attend an orientation seminar, which is led by members of our
management and a personnel instructor. Topics include member service and member
interaction skills, our history and philosophy, and safety issues. These
orientation seminars are held throughout the year.

        To aid in the development and continuing education of management
employees, we offer a workshop entitled "Introduction to Management," for newly
hired management personnel and other employees demonstrating management skills.
The workshop is intended to educate participants in the areas of people and time
management; hiring, developing, training and evaluating employees; sales and
marketing strategies; and safety concerns. Topics are added periodically to
reflect new management techniques or operating issues. These seminars, generally
consisting of five three-hour sessions, are held six times a year or as needed
for new employees, and our management personnel are required to attend
periodically to maintain their skills.

         We provide additional seminars specifically designed for targeted
employee groups. Seminars providing specialized instruction for program
directors, private trainers, aerobics teachers and sales/marketing personnel are
offered at various times during the year, for which attendance on the part of
newly-hired personnel within the applicable employee group is mandatory. We
place particular emphasis on sales/marketing training seminars, which are given
once every two months by a personnel instructor and in which all new membership
directors complete 20 hours of participation and all other membership directors
are expected to complete four hours of participation every two months. Our
fitness instructors are trained to assist in the sales function and to implement
fitness testing and individually-tailored exercise programs. Most instructors
are college-educated. Our aerobics instructors hold nationally recognized
certifications and must have at least one year of teaching experience before
they are permitted to teach at the Clubs. They are also required to participate
in ongoing training and periodic re-evaluation.

MEMBERSHIP PROGRAMS

        Sports Club memberships require an initiation fee plus monthly
membership dues. Unlike many other clubs, we do not offer financing for
memberships. Members are currently required to pay their dues on a monthly basis
by "Electronic Funds Transfer (EFT)", by which each member is automatically
debited each month for dues either through a checking account or credit card. At
established Sports Clubs, the average life of a membership is four to five
years.

        Sports Clubs offer three types of memberships: executive, health and
racquet. Sports Club initiation fees and monthly membership dues vary depending
on the location of the Club. The Sports Clubs' initiation fees range from $400
to $2,500 and monthly membership dues range from $90 to $225. Corporate,
bicoastal and spousal memberships are also available.

        Executive Membership. Executive membership offers the greatest number of
amenities and services, including unlimited use of all facilities, racquet
sports privileges, personal locker assignments within an executive locker room,
laundry service, free valet parking and charge privileges for dining and other
Club services. Executive membership entitles a member to use all Sports Clubs.

        Health Membership. Health membership is the basic membership offering
unlimited use of the facility excluding those privileges associated with a
racquet membership; courts are available to holders of health memberships for an
additional fee. We also offer a bi-coastal membership that entitles a member to
use all Sports Clubs throughout the country.

       Racquet Membership. Racquet memberships are currently offered at The
Sports Club/Irvine, The Sports Club/Las Vegas and The Sports Club/LA -
Washington D.C. In addition to use of the Club's facilities, this membership
includes the unlimited use of racquetball, squash, paddle tennis and tennis
courts, depending upon the individual Club's facilities.


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COMPETITION

        Although the sports and fitness industry is still fragmented, the
industry has experienced significant consolidation in recent years and certain
of our competitors are significantly larger and have greater financial and
operating resources than we do. In addition, a number of individual and regional
operators compete with us in our existing and targeted markets. Many of these
sports and fitness clubs attract the same types of members we target. We also
compete with recreational facilities established by governments and businesses,
the YMCA and YWCA, country clubs and weight- reducing salons, as well as
products and services that can be used in the home. As the general public
becomes increasingly aware of the benefits of regular exercise, we expect that
additional sports and fitness businesses will emerge. We believe that there will
continue to exist a market for our Clubs and that our operating experience, our
highly visible image, the professionalism of our staff and our state-of-the-art
equipment and exercise facilities afford us an advantage over our competitors.
However, we may be unable to maintain our membership fees or membership levels
in areas where another sports and fitness club offers competitive facilities and
services at a lower cost to members.

TRADEMARKS AND TRADENAMES

        The "Sports Club" name is generally not protectable under federal or
state trademark laws. We have registered our "flying lady" logo as a stand-alone
design and in combination with "The Sports Club/LA" and "The Sports Club/Irvine"
names under federal trademark laws. Internationally, we have registered "The
Sports Club/LA" name and logo in Japan, Australia and throughout Europe under a
joint "European Community" trademark.

        We have also obtained federal protection for our food and nutritional
products which are marketed under the tradenames of Private Trainer System and
PTS.

        Additionally, we are awaiting final trademark approval for our SportsMed
subsidiary name and several of our fitness programs, including For Kids Only,
BodyArt, REV, and others.

GOVERNMENT REGULATION

        Our operations and business practices are subject to regulation at the
federal, state and, in some cases, local levels. State and local consumer
protection laws and regulations govern our advertising, sales and other trade
practices.

        Statutes and regulations affecting the fitness industry have been
enacted or proposed in California, New York and Nevada, the states in which we
currently operate Clubs. Many other states into which we may expand have or
likely will adopt similar legislation. Typically, these statutes and regulations
prescribe certain forms and provisions of membership contracts, limit the amount
of prepaid revenues we can collect, afford members the right to cancel the
contract within a specified time period after signing, require an escrow of
funds received from pre-opening sales or the posting of a bond or proof of
financial responsibility, and may impose numerous limitations on the terms of
membership contracts. In addition, we are subject to numerous other types of
federal and state regulations governing the sale of memberships. These laws and
regulations are subject to varying interpretations by a number of state and
federal enforcement agencies and courts. We maintain internal review procedures
in order to comply with these requirements, and subject to the matters described
in "Item 3 - Legal Proceedings," believe that our activities are in substantial
compliance with all applicable statutes, rules and decisions.

Under so-called state "cooling-off" statutes, a member has the right to cancel
his or her membership for a period of three to ten days (depending on the
applicable state law) and, in such event, is entitled to a refund of any down
payment. In addition, our membership contracts provide that a member may cancel
his or her membership at any time upon death, disability or relocation beyond a
certain distance from our nearest Club. The specific procedures for cancellation
in these circumstances vary due to differing state laws. In each instance, the
canceling member is entitled to a refund of prepaid amounts only.


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Furthermore, where permitted by law, a cancellation fee is due to us upon
cancellation and we may offset such amount against any refunds owed.

EMPLOYEES

        At February 28, 2001, we had 2,022 employees, most of whom are employed
on a part-time basis in Club operating activities such as aerobics, private
training and food and beverage services. At February 28, 2001 we employed 898
full-time employees, 818 of whom were sales personnel or supervisory personnel
involved in Club operations, and 80 of whom were in general and administrative
functions. We are not a party to any collective bargaining agreement with our
employees. Although we experience high turnover of non-management personnel, we
have never experienced any labor shortages nor had any difficulty in obtaining
adequate replacements for departing employees. We consider our relations with
our employees to be good.

ITEM 2. PROPERTIES

        We own the real estate at The Sports Club/Irvine, The Sports Club/LA in
Los Angeles (subject to a minority interest held by our Co-Chief Executive
Officer D. Michael Talla) and The Sports Club/Las Vegas. We own land in Houston,
Texas on which we had planned to develop a Sports Club. The Houston property is
currently listed for sale and in the year 2000 we recorded a non-recurring
charge of $749,000 to adjust the carrying value of the property to its estimated
current fair value. All other premises on which the Clubs are located are
leased.

        The following table provides certain information concerning our Clubs:


<TABLE>
<CAPTION>
                                                     APPROXIMATE    OPEN DATE    OWN OR LEASE
                CLUB                                 SQUARE FEET       (1)       EXPIRATION DATE       RENEWAL OPTION
                ----                                 -----------       ---       ---------------       --------------
<S>                                                    <C>            <C>        <C>                 <C>
The Sports Club/LA-Los Angeles(2) ............         100,000        1994 A             Own                        N/A
The Sports Club/Irvine .......................         130,000        1994 A             Own                        N/A
Reebok Sports Club/NY(3) .....................         140,000        1995 O         4/17/15              Three 14-year
                                                                                                                options
The Sports Club/Las Vegas ....................         136,000        1997 A             Own                        N/A
The Sports Club/LA - Rockefeller Center ......          90,000        2000 O         1/31/13         Two 5-year options
The Sports Club/LA - Upper East Side .........         140,000        2000 O        12/31/20         Two 5-year options
The Sports Club/LA - Washington D.C.(4) ......         100,000        2000 O        10/31/20              Three 14-year
                                                                                                                options
The Sports Club/LA - Boston(4) ...............         100,000        2001 E            2021(6)           Three 14-year
                                                                                                                options
The Sports Club/LA - San Francisco(5) ........          90,000        2001 E            2021(6)           Three 14-year
                                                                                                                options
</TABLE>

-------------

(1)     Date of acquisition ("A"), opening ("O") or anticipated opening date
        ("E").

(2)     D. Michael Talla, our Chairman and Co-CEO, has the right to 49.9% of the
        first $300,000 of annual operating income from the partnership which
        owns The Sports Club/LA in Los Angeles.

(3)     We have entered into a lease agreement with Millennium Entertainment
        Partners and/or its affiliates (collectively "Millennium") with respect
        to this property. We are entitled to certain priority distributions from
        the partnership that owns this Club. After payment of such priority
        distributions, we are entitled to 60% of all additional profits.

(4)     We have entered into a lease agreement with Millennium for this Club.
        The lease provides that Millennium is to receive 25% of cash flows as
        additional rent after we earn certain priority distributions.

(5)     We have entered into a lease agreement with Millennium for this Club.
        The lease provides that Millennium is to receive 60% of cash flows as
        additional rent after we earn certain priority distributions.


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(6)     The initial term for each lease expires 20 years after the rent
        commencement date, as defined in the lease.

        We remain obligated under lease agreements for seven of our former
Spectrum Club locations. We have subleased each of these properties to the buyer
of these Clubs under sublease agreements which provide that all operating costs
of these facilities be assumed by the new owners.

        All of the Clubs maintain comprehensive casualty, liability and business
interruption insurance and Clubs located in California maintain a blanket $40
million earthquake insurance policy. We believe that our insurance coverage is
in accordance with or above industry standards. There are, however, certain
types of losses which may be either uninsurable or not economically insurable,
and insurance proceeds may not adequately compensate for all economic
consequences of any loss. Should a loss occur, we could lose both our invested
capital and our anticipated profits from the affected Clubs. Any such event
could have a material adverse effect on our operations.

ITEM 3. LEGAL PROCEEDINGS

        Lyudmirsky and those similarly situated v. Sports Club, Inc. of
California; L.A./Irvine Sports Club, Ltd. (Los Angeles Superior Court). On June
25, 1999, Ilya Lyudmirsky ("Lyudmirsky") filed a class action lawsuit against us
alleging, among other things, violations of California Civil Code Section
1812.80, et seq., claiming our membership fee structure and membership contracts
for The Sports Club/LA in Los Angeles violate certain provisions of the Health
Studio Services Act. The parties reached a settlement agreement on May 1, 2000,
and the Court gave final approval of the settlement on October 11, 2000. The
charge of $1,476,000 that was recorded in the first quarter of 2000 is adequate
to cover the costs of defending and settling this action.

        Park Place Entertainment Corporation v. The Sports Club Company, Inc.
(Los Angeles Superior Court). On December 23, 1999, Park Place Entertainment
Corporation ("Park Place") filed an action against us for money due on a
promissory note. Park Place is the current holder of a purchase money promissory
note in the amount of $2,666,667 (the "Note") given to Hilton Hotels Corporation
("Hilton") in connection with our 1998 acquisition of the site for The Sports
Club/LA - Upper East Side in New York City (the "Club"). We believe that we have
various claims in connection with the repair and refurbishing of the Club which
offset the money owed on the Note. Park Place alleges that no basis exists which
excuses us from the timely payment of installments on the Note and is seeking
damages in the amount of $2,666,667 plus interest, attorneys' fees and costs of
the suit. On February 25, 2000, we filed an answer raising offsets and a
cross-complaint against Hilton seeking damages in the amount of $14,415,000 for
alleged breach of contract, fraud and negligent misrepresentation, plus
interest, attorneys' fees and costs of suit. Hilton has answered the cross-claim
with a general denial and three generic affirmative defenses. We are in the
discovery phase of the litigation and intend to vigorously pursue our defenses
and cross-claims. The trial date for this matter has been set for April 23,
2001. The parties have begun settlement discussions. However, we are unable at
this time to estimate the likelihood that Park Place will prevail in its claims
against us, or that we will prevail in our claims against them.

        Garrick-Aug Associates Store Leasing, Inc. v. Hirschfeld Realty Club
Corporation, 328 E. 61 Corp., The Sports Club Company, Inc. and Elie Hirschfeld,
Index No. 601276/99 (New York Supreme Court, County of New York). On March 15,
1999, Garrick-Aug Associates Store Leasing, Inc. ("Plaintiff") filed a Summons
and Complaint ("Original Complaint") commencing an action to recover brokerage
commissions in the Supreme Court of the State of New York, against Hirschfeld
Realty Club Corporation and 328 E. 61 Corp. (collectively referred to as
"Owner"). Under the Original Complaint, Plaintiff sought damages in excess of
$3,625,000 for breach of contract, declaratory relief, quantum meruit and unjust
enrichment. On February 1, 2000, Plaintiff filed and served an Amended Complaint
containing the same causes of action in the Original Complaint and adding
additional claims against us and Elie Hirschfeld. Under the Amended Complaint,
Plaintiff seeks damages from us in excess of $3,625,000 for tortious
interference with contract and conspiracy. We plan to vigorously contest all
aspects of this case. On November 21, 2000, we filed a motion to dismiss
Plaintiff's two causes of action against us. The motion is


                                       9
<PAGE>   10

still pending before the Court. As a result, we are unable, at this time, to
estimate the likelihood that Plaintiff will prevail in this matter.

        336 Spa Park Inc. v. Abraham Hirschfeld, Hirschfeld Realty Club Corp.,
328 E. 61 Club Corp. and The Sports Club Company, Inc., Index No. 602609/00 (New
York Supreme Court, County of New York). On June 20, 2000, 336 Spa Park Inc.
("Plaintiff") filed a Summons and Complaint ("Complaint") commencing an action
against us for tortious interference with a contract for the lease of parking
facilities entered into between Plaintiff and Hirschfeld Realty Club Corp. and
328 E. 61 Club Corp. On January 2, 2001, Plaintiff filed and served its Second
Amended Complaint. The Plaintiff is seeking damages against us in an amount to
be determined at trial, but not less than $100,000. We intend to contest this
action vigorously. On February 9, 2001, we filed a motion to dismiss the cause
of action against us. The motion is still pending before the Court. As a result,
we are unable, at this time, to estimate the likelihood that Plaintiff will
prevail in this matter.

        Other. We are involved in various claims and lawsuits incidental to our
business, including claims arising from accidents. However, in the opinion of
management, we are adequately insured against such claims and lawsuits involving
personal injuries, and any ultimate liability arising out of any such
proceedings will not have a material adverse effect on our financial condition,
cash flow or results of operations.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

        Not applicable


                                       10
<PAGE>   11

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

        Our executive officers and their ages as of March 1, 2001 are as
follows:

<TABLE>
<CAPTION>
NAME                                AGE  POSITION
----                                ---  --------
<S>                                 <C>  <C>
D. Michael Talla................    54   Chairman of the Board and Co-Chief Executive
                                         Officer
Rex A. Licklider................    57   Vice Chairman of the Board and Co-Chief Executive
                                         Officer
Nanette Pattee Francini.........    52   Executive Vice President and Director
Timothy M. O'Brien..............    49   Chief Financial Officer and Assistant Secretary
Philip J. Swain.................    43   Sr. Vice President of Operations
Mark S. Spino...................    46   Sr. Vice President of Development
</TABLE>

        The following information summarizes the business experience during at
least the past five years of each of our executive officers.

        D. Michael Talla began developing sports and fitness clubs in 1977. He
has served as Chairman of the Board since our inception in 1994 and served until
July 1999 as our Chief Executive Officer. Mr. Talla assumed the position of
Co-Chief Executive Officer with Mr. Licklider in February 2000. Mr. Talla holds
a Bachelor of Arts Degree in Business Administration from the University of
Arizona.

        Rex A. Licklider has served as Vice Chairman of the Board since 1994 and
was appointed Co-Chief Executive Officer in February 2000. Previously, Mr.
Licklider has been a consultant to us for strategic and financial planning. He
founded Com Systems, Inc., a publicly-traded long-distance telecommunications
company, and at various times between 1975 and April 1992 served as its
Chairman, President and Chief Executive Officer. Mr. Licklider is a founder and
director of Pentium Investments, Inc. and a director of The Learning Network,
Inc. and Deckers Outdoor Corporation. He also serves on the Board of Directors
of The Children's Bureau of Southern California, Los Angeles Youth Programs,
Inc., The Achievable Foundation and Marymount High School in Los Angeles,
California. Mr. Licklider holds a Bachelor of Arts Degree in Business
Administration from the University of Arizona and a Masters in Business
Administration from the University of California at Los Angeles.

        Nanette Pattee Francini began developing sports and fitness clubs in
1977 and has served as our Executive Vice President and has been principally
responsible for overseeing all imaging/marketing activities since our inception
in 1994. She has been one of our directors since 1994. Ms. Pattee Francini holds
a Bachelor of Arts Degree from the University of Arizona.

        Timothy M. O'Brien was appointed as our Chief Financial Officer in
February 1995 and since June 1995 has also served as Assistant Secretary. Mr.
O'Brien has a Bachelor of Business Administration degree from the University of
Wisconsin-Madison and is a Certified Public Accountant.

        Philip J. Swain was appointed Senior Vice President of Operations in
February 2000, having served as Vice President of Operations since our inception
in 1994.

        Mark S. Spino was appointed Senior Vice President of Development in
February 2000, having served as our Vice President of Development since our
inception in 1994. Mr. Spino holds a Bachelor of Arts and a Master of Arts
degree in physical education from the University of Southern California.


                                       11
<PAGE>   12
                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED MATTERS

        Our Common Stock is traded on the American Stock Exchange ("AMEX") under
the symbol "SCY". The following table sets forth the quarterly high and low sale
prices for the Common Stock for the periods indicated, as reported by the AMEX.

<TABLE>
<CAPTION>
CALENDAR QUARTER                                                 PRICE RANGE OF COMMON STOCK
----------------                                                 ---------------------------
                                                                  HIGH                 LOW
                                                                 ------               ------
<S>                                                              <C>                  <C>
Year Ended December 31, 1999:
    First Quarter ..........................................     $5.250               $3.750
    Second Quarter .........................................      5.125                3.812
    Third Quarter ..........................................      6.000                3.937
    Fourth Quarter .........................................      5.000                3.125

Year Ended December 31, 2000:
    First Quarter ..........................................      4.500                3.375
    Second Quarter .........................................      3.750                2.750
    Third Quarter ..........................................      4.000                3.125
    Fourth Quarter .........................................      4.500                2.813

Year Ended December 31, 2001:
    First Quarter (through February 28, 2001) ..............      3.188                2.550
</TABLE>

        As of February 28, 2001 we had 61 stockholders of record and
approximately 600 beneficial owners. The closing price of our Common Stock
as reported by the AMEX on February 28, 2001, was $2.85.

DIVIDEND POLICY

        We have never declared or paid any dividends on our Common Stock and we
do not anticipate doing so in the foreseeable future. It is our present policy
to retain earnings for use in our operations and the expansion of our business.
In addition, our ability to pay cash dividends is limited by our current
financing agreements and may be similarly limited by future financing
agreements.


                                       12
<PAGE>   13

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

        The following table presents our summary financial and operating data
for the fiscal years ended December 31, 1996 through 2000 and have been derived
from our consolidated financial statements, which have been audited by KPMG LLP,
independent certified public accountants. The summary financial and operating
data should be read in conjunction with, and is qualified in its entirety by
reference to, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and our consolidated financial statements and the notes
thereto appearing elsewhere in this Form 10-K.

<TABLE>
<CAPTION>
                                                                                      FISCAL YEAR ENDED DECEMBER 31,
                                                               --------------------------------------------------------------------
                                                                 1996           1997           1998           1999           2000
                                                               --------       --------       --------       --------       --------
                                                                              (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                            <C>            <C>            <C>            <C>            <C>
STATEMENT OF INCOME DATA:
  Revenues .................................................   $ 36,918       $ 61,154       $ 81,923       $ 87,325       $ 76,869
  Operating expenses:
    Direct .................................................     22,989         43,517         56,746         60,528         59,116
    Selling, general and administrative ....................      6,052          6,607          8,556          9,234         10,213
    Depreciation and amortization ..........................      2,490          3,919          5,282          6,147          7,408
  Pre-opening expenses .....................................         --             --             --          3,090          9,589
                                                               --------       --------       --------       --------       --------
         Total operating expenses ..........................     31,531         54,043         70,584         78,999         86,326
                                                               --------       --------       --------       --------       --------
         Income (loss) from operations .....................      5,387          7,111         11,339          8,326         (9,457)
  Other income (expense):
    Interest ...............................................     (2,682)        (3,206)        (1,629)        (5,991)        (6,478)
    Minority interests .....................................       (150)           (22)          (150)          (150)          (150)
    Equity interest in net income of
     unconsolidated subsidiary .............................        631            696            880            931             --
    Non-recurring items ....................................       (300)        (2,025)          (314)           553         (3,242)
                                                               --------       --------       --------       --------       --------
         Total other income (expense) ......................     (2,501)        (4,557)        (1,213)        (4,657)        (9,870)
                                                               --------       --------       --------       --------       --------
         Income (loss) before income taxes,
          extraordinary charge and cumulative effect of
          change in accounting principle ...................      2,886          2,554         10,126          3,669        (19,327)
  Provision (benefit) for income taxes .....................      1,183          1,014          3,971          1,460         (6,940)
                                                               --------       --------       --------       --------       --------
         Income(loss) before extraordinary
          charge and cumulative effect of change
          in accounting principle ..........................      1,703          1,540          6,155          2,209        (12,387)

  Extraordinary charge from early
    extinguishment of debt, net of income
    tax benefit of $1,331 ..................................         --             --          2,173             --             --
  Cumulative effect of change in accounting
    principle, net of income tax benefit of $600 ...........         --             --             --            899             --
                                                               --------       --------       --------       --------       --------
         Net income (loss) .................................   $  1,703       $  1,540       $  3,982       $  1,310       $(12,387)
                                                               ========       ========       ========       ========       ========

  Net income (loss) per share:
    Basic ..................................................   $   0.15       $   0.12       $   0.21       $   0.07       $  (0.70)
                                                               ========       ========       ========       ========       ========
    Diluted ................................................   $   0.15       $   0.12       $   0.21       $   0.07       $  (0.70)
                                                               ========       ========       ========       ========       ========

  Weighted average number of common shares outstanding:
    Basic ..................................................     11,355         12,524         18,603         18,114         17,773
                                                               ========       ========       ========       ========       ========
    Diluted ................................................     11,360         12,683         18,829         18,290         17,773
                                                               ========       ========       ========       ========       ========
</TABLE>

<TABLE>
<CAPTION>
                                                                      AT DECEMBER 31,
                                              -----------------------------------------------------------
                                               1996         1997         1998         1999         2000
                                              -------      -------      -------      -------      -------
                                                                   (DOLLARS IN THOUSANDS)
<S>                                           <C>         <C>          <C>          <C>          <C>
BALANCE SHEET DATA:
  Cash and cash equivalents ............      $ 4,146     $  1,581     $  2,233     $ 36,107     $ 11,059
  Current assets .......................        7,341        4,926        7,043       41,952       20,819
  Restricted cash ......................           --           --           --       41,389        6,996
  Property and equipment, net ..........       72,736      106,791      135,269      118,959      169,927
  Total assets .........................       95,697      131,561      163,757      223,553      222,000
  Deferred membership revenue ..........        7,481        9,936        9,953        9,712       12,019
  Current liabilities ..................       14,159       26,844       26,199       23,833       27,736
  Long-term debt including current
   installments ........................       38,497       50,798       37,441      103,887      110,331
  Stockholders' equity .................       41,202       58,477      104,539       97,687       85,791
</TABLE>


                                       13
<PAGE>   14

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

OVERVIEW

        The following discussion should be read in conjunction with our
consolidated financial statements and notes thereto appearing elsewhere herein.
The Spectrum Club - Manhattan Beach was accounted for under the equity method of
accounting until December 1999, when we sold all of our Spectrum Clubs.

        In November 1998 we closed the Spectrum Club - Santa Monica. In January
1999 the Spectrum Club -- Fountain Valley was leased to another health and
fitness operator and in April 1999 the Spectrum Club -- Santa Ana was sold. The
remaining Spectrum Clubs were sold in December 1999. The Sports Club/LA at
Rockefeller Center, The Sports Club/LA on the Upper East Side in New York and
The Sports Club/LA in Washington D.C., opened in February 2000, September 2000
and October 2000 respectively. Seasonal factors have not had a significant
effect on our operating results.

        As a result of the sale of the Spectrum Clubs in 1999, the opening of
The Sports Club/LA at three new locations in 2000 and the high level of
pre-opening expenses incurred for The Sports Clubs/LA opened this year and
currently being developed, results for the year ended December 31, 2000 and
December 31, 1999, are not necessarily indicative of results we expect in future
periods.


RESULTS OF OPERATIONS

        Fiscal 2000. Our revenues for the year ended December 31, 2000, were
$76.9 million, compared to $87.3 million in 1999, a decrease of $10.4 million or
12.0%. Revenue decreased by $25.2 million as a result of the sale of the
Spectrum Clubs and increased by $9.4 million as a result of the opening of The
Sports Club/LA - Rockefeller Center, The Sports Club/LA - Upper East Side and
The Sports Club/LA - Washington D.C. Revenue increased by $5.4 million at our
existing Sports Clubs and SportsMed due to increases in membership dues and
ancillary services, and to the increase of the membership base at Reebok Sports
Club/NY.

        Our direct operating expenses decreased by $1.4 million to $59.1 million
in the year ended December 31, 2000, versus $60.5 million for the year ended
December 31, 1999. Direct operating expenses decreased by $18.8 million as a
result of the sale of the Spectrum Clubs and increased by $13.9 million as a
result of the opening of The Sports Club/LA - Rockefeller Center, The Sports
Club/LA - Upper East Side and The Sports Club/LA - Washington D.C. Direct
operating expenses increased by $3.5 million at our existing Sports Clubs and
SportsMed primarily due to variable expenses associated with the revenue
increase at these Clubs and our SportsMed subsidiary. Direct operating expenses
as a percent of revenue for the year ended December 31, 2000 increased to 76.9%
from 69.3% for the year ended December 31, 1999. The increase in the direct
operating expense percentage was due to significant fixed costs at our new Clubs
and the lower membership levels at opening. As revenue ramps up at the three new
Sports Clubs/LA opened in 2000, the direct operating expense percentage at these
Clubs should decrease. Direct operating expenses as a percent of revenue on a
same store basis for the year ended December 31, 2000 was 67.4%, compared to
67.6% for the year ended December 31, 1999.

        Our selling, general and administrative expenses were $10.2 million in
the year ended December 31, 2000, compared to $9.2 million for the year ended
December 31, 1999, an increase of $1.0 million or 10.6%. Selling costs increased
by $307,000 and our general and administrative costs increased by $672,000.
There was a $1.2 million decrease in selling expenses as a result of the sale of
the Spectrum Clubs and a $1.1 million increase in selling expenses associated
with the opening of The Sports Club/LA - Rockefeller Center, The Sports Club/LA
- Upper East Side and The Sports Club/LA - Washington D.C. Selling expenses
increased by $400,000 at our existing Sports Clubs and SportsMed due to
increased marketing efforts. The $672,000 increase in general and administrative
expenses is associated with the opening of The Sports Club/LA - Rockefeller
Center, The Sports Club/LA - Upper East Side, The Sports Club/LA - Washington
D.C. and to increases in our corporate infrastructure related to our planned


                                       14
<PAGE>   15

expansion of The Sports Clubs/LA in 2000 and in 2001. Selling, general and
administrative costs increased as a percentage of revenue to 13.3% in 2000 from
10.6% in 1999. We believe these costs should decrease as a percentage of future
revenues as we expand and achieve economies of scale. There is no assurance,
however, that said expansion or economies of scale will be achieved.

        Our depreciation and amortization expenses were $7.4 million for the
year ended December 31, 2000, versus $6.1 million for the year ended December
31, 1999. A decrease of $2.0 million resulted from the sale of the Spectrum
Clubs and an increase of $3.0 million resulted from the opening of The Sports
Club/LA - Rockefeller Center, The Sports Club/LA - Upper East Side and The
Sports Club/LA - Washington D.C. An increase of $242,000 occurred at our other
Sports Clubs and SportsMed as a result of capital additions made at these
facilities in 1999 and 2000.

        Pre-opening expenses were $9.6 million for the year ended December 31,
2000, versus $3.1 million for the year ended December 31, 1999. Pre-opening
expenses by Club during the year ended December 31, 2000 were $1.8 million at
The Sports Club/LA - Rockefeller Center, $3.6 million at The Sports Club/LA -
Upper East Side, $3.2 million at The Sports Club/LA - Washington D.C., $725,000
at The Sports Club/LA - Boston, $155,000 at The Sports Club/LA - San Francisco
and $125,000 at other possible Sports Clubs in the pre-development stage.
Pre-opening expenses by Club during the year ended December 31, 1999 were, $1.3
million at The Sports Club/LA - Upper East Side, $1.1 million at The Sports
Club/LA - Rockefeller Center and $724,000 at Spectrum Clubs in the pre-opening
stage.

        We incurred net interest expense of $6.5 million in the year ended
December 31, 2000, versus $6.0 million in the year ended December 31, 1999, an
increase of $487,000. Net interest expense increased by $3.1 million as a result
of the issuance of $100.0 million of Senior Secured Notes on April 1, 1999. Net
interest expense decreased by $1.1 million due to interest capitalized on Sports
Clubs under development and by $672,000 due to interest earned on cash balances.
Net interest expense also decreased by $818,000 due to the retirement of debt
with a portion of the proceeds from the issuance of the Senior Secured Notes and
the sale of the Spectrum Clubs.

        Equity interest in net income of an unconsolidated subsidiary was
$931,000 in the year ended December 31, 1999. This amount reflected our
investment in the Spectrum Club-Manhattan Beach, which was sold in December
1999.

        We incurred non-recurring charges of $3.2 million in the year ended
December 31, 2000, versus a non-recurring gain of $553,000 for the year ended
December 31, 1999. The non-recurring charges in 2000 consisted of a $1.5 million
charge for attorney's fees and settlement costs related to a class action
lawsuit against The Sports Club/LA in Los Angeles (See Note 7, "Commitments and
Contingencies", to consolidated financial statements), a $1.0 million charge to
reflect the loss on the sale of the former Spectrum Club - Fountain Valley real
estate and a $749,000 charge to adjust the carrying value of our real estate
located in Houston, Texas that is currently for sale. The non-recurring gain in
1999 relates to the disposition of the Spectrum Clubs.

        In the year ended December 31, 1999, we incurred a charge from a
cumulative effect of change in accounting principle, net of applicable taxes, of
$899,000. This charge is associated with the write-off of pre-opening expenses
incurred and capitalized prior to January 1, 1999.

        Our effective federal and state income tax rate was 35.9% for the year
ended December 31, 2000 and 39.8% for the year ended December 31, 1999,
resulting in a net loss of $12.4 million for the year ended December 31, 2000,
and in net income of $1.3 million for the year ended December 31, 1999. Basic
and diluted net income/(loss) per share was ($0.70) in 2000 and $.07 in 1999.

Pro forma fiscal 2000. During the fiscal year ended December 31, 1999, we sold
or disposed of all of our Spectrum Clubs (See Note 3 to Consolidated Financial
Statements). Below is a discussion of the results of operations for the year
ended December 31, 2000, versus the unaudited pro forma results of operations
for the year ended December 31, 1999, assuming the sale of the Spectrum Clubs
occurred on January 1, 1999. The purpose of the pro forma condensed consolidated
statement of operations is to


                                       15
<PAGE>   16

present what our operating results might have been for the year ended December
31, 1999, had the sale of the Spectrum Clubs occurred on January 1, 1999.
However, the pro forma condensed consolidated statement of operations for the
year ended December 31, 1999, does not purport to and does not represent what
our actual results of operations would have been had the Spectrum Club sale been
completed on January 1, 1999. Moreover, the pro forma consolidated condensed
statement of operations for the year ended December 31, 1999, does not purport
to be a projection of our results of operations either for the current period or
for any future periods and therefore should not be relied upon to project future
operating results. Operating results can be affected by a number of
circumstances the nature and effect of which cannot be predicted.

        Our revenues for the year ended December 31, 2000, were $76.9 million
compared to pro forma revenues of $62.2 million for the year ended December 31,
1999, an increase of $14.7 million. Revenue for the year ended December 31, 2000
increased by $9.4 million due to the opening of The Sports Club/LA - Rockefeller
Center in February 2000, The Sports Club/LA - Upper East Side in September 2000
and The Sports Club/LA - Washington D.C. in October 2000. The remaining increase
in revenue for the year ended December 31, 2000 is due to increases in
membership dues and ancillary services at the other Sports Clubs and SportsMed,
and the maturation of the membership base at Reebok Sports Club/NY.

        Operating expenses for the year ended December 31, 2000, were $86.3
million compared to pro forma operating expenses of $56.0 million for the year
ended December 31, 1999, an increase of $30.3 million. Operating expenses for
the year ended December 31, 2000 increased by $18.0 million due to the opening
of The Sports Club/LA - Rockefeller Center in February 2000, the opening of The
Sports Club/LA - Upper East Side in September 2000 and the opening of The Sports
Club/LA - Washington D.C. in October 2000; $7.2 million due to the recognition
of pre-opening expenses at The Sports Club/LA Clubs under development at several
locations; $4.4 million due to increased operating expenses associated with our
increased revenues at existing Sports Clubs and SportsMed; and $700,000 as a
result of increased selling, general and administrative expenses associated with
the necessary increase in our corporate infrastructure related to our planned
development of additional The Sports Club/LA Clubs in 2000 and 2001.

        Other expenses for the year ended December 31, 2000 were $9.9 million
compared to pro forma other expenses of $2.3 million for the year ended December
31, 1999. The increase in other expenses of $7.6 million was due to increased
net interest expense of $4.3 million, mainly associated with our $100.0 million
Senior Secured Notes issued in April 1999, and to non-recurring charges of $3.3
million. The non-recurring charges in 2000 consisted of a $1.5 million charge
for attorney's fees and settlement costs related to a class action lawsuit
against The Sports Club/LA - Los Angeles (See Note 7, "Commitments and
Contingencies", to Consolidated Financial Statements), a $1.0 million charge to
reflect the loss on the sale of the former Spectrum Club - Fountain Valley real
estate and a $749,000 charge to adjust the carrying value of our real estate
located in Houston, Texas that is currently for sale.

        In the year ended December 31, 1999, we incurred a pro forma charge from
a cumulative effect of change in accounting principle, net of applicable taxes,
of $221,000. This charge is associated with the write off of pre-opening
expenses incurred and capitalized prior to January 1, 1999. Our net loss for the
year ended December 31, 2000 was $12.4 million, or $.70 per diluted share,
compared to pro forma net income of $2.0 million, or $.11 per diluted share for
the year ended December 31, 1999.

        Fiscal 1999. Our revenues for the year ended December 31, 1999, were
$87.3 million, compared to $81.9 million for 1998, an increase of $5.4 million
or 6.6%. Revenue increased at the Spectrum Clubs by $1.4 million. Revenue
increased by $4.0 million at The Sports Clubs and SportsMed. The revenue
increase at The Sports Clubs was primarily due to increases in membership dues
and ancilliary services fees and the maturation of the membership base at Reebok
Sports Club/NY.

        Our direct operating expenses increased to $60.5 million for the year
ended December 31, 1999, compared to $56.7 million for 1998. Direct expenses
increased primarily due to the opening of two new Spectrum Clubs in 1999 and to
direct expenses related to increased revenues at The Sports Clubs. Direct
operating expenses as a percentage of revenues were 69.3% in both 1999 and 1998


                                       16
<PAGE>   17

        Selling, general and administrative expenses were $9.2 million for the
year ended December 31, 1999, compared to $8.6 million for 1998, an increase of
$600,000 or 7.9%. Selling costs increased approximately $70,000. General and
administrative costs increased by approximately $600,000. General and
administrative costs increased primarily due to legal expenses associated with
litigation (See "Item 3 - Legal Proceedings") and the increase in our corporate
infrastructure related to our planned expansion. Selling, general and
administrative costs slightly increased as a percentage of revenue to 10.6% in
1999 from 10.4% in 1998.

        Depreciation and amortization expenses were $6.1 million for the year
ended December 31, 1999, compared to $5.3 million for 1998. Depreciation expense
increased primarily due to the opening of two new Spectrum Clubs in 1999 and to
additional depreciation related to improvements made at other Clubs in 1998 and
1999.

        Pre-opening expenses incurred in 1999 were $3.1 million. We adopted
Statement of Position 98-5, "Accounting for Start-Up Costs" ("SOP 98-5")
effective January 1, 1999. SOP 98-5 provides that all costs related to the
development of new fitness clubs, except for real estate acquisition related
costs, be expensed as incurred. This is a change from our previous accounting
policy, whereby many of these costs were capitalized and charged to expense upon
the Club's opening. In 1999, we incurred start up costs at two Spectrum Clubs
and two Sports Clubs.

        Interest expense was $6.0 million for the year ended December 31, 1999,
compared to $1.6 million for 1998. Interest expense increased primarily due to
the interest expense associated with our $100.0 million Senior Secured Notes
issued in April 1999.

        Equity interest in net income of an unconsolidated subsidiary was
$931,000 for the year ended December 31, 1999, compared to $880,000 for 1998, an
increase of $51,000 or 5.8%. These amounts are associated with improved profits
at the Spectrum Club - Manhattan Beach, which we sold in December 1999.

        In the year ended December 31, 1999, we had a non-recurring gain of
$553,000 compared to a non-recurring charge of $314,000 for the year ended
December 31, 1998. The non-recurring gain in 1999 is associated with the sale of
the Spectrum Club - Fountain Valley in January 1999 and the sale of the
remaining Spectrum Clubs in December 1999. The non-recurring item in 1998 is
associated with our closing of the Spectrum Club - Santa Monica in November
1998.

        Our net income before income taxes, non-recurring items, extraordinary
charge and cumulative effect of change in accounting principle was $3.1 million
for the year ended December 31, 1999, compared to $10.4 million for 1998. In
1999, we incurred a charge from a cumulative effect of change in accounting
principle, net of applicable taxes, of $899,000. This charge is associated with
the write off of pre-opening expenses incurred and capitalized prior to January
1, 1999. In 1998, we incurred a loss from early extinguishment of debt, net of
applicable taxes, of $2.2 million, which was recorded as an extraordinary
charge.

        Our estimated income tax rate was 39.8% and 39.2% for the year ended
December 31, 1999 and 1998 respectively, resulting in net income of $1.3 million
for 1999 and $4.0 million for 1998. Basic and diluted net income per share was
$.07 in 1999 and $.21 in 1998.

        Pro forma fiscal 1999. During the fiscal year ended December 31, 1999,
we sold or disposed of all of our Spectrum Clubs (See Note 3 to Consolidated
Financial Statements). Below is a discussion of the unaudited pro forma results
of operations for the fiscal years ended December 31, 1999 and 1998 assuming the
sale of the Spectrum Clubs occurred on January 1, 1998. The purpose of the pro
forma condensed consolidated statements of operations are to present what our
operating results might have been for the years ended December 31, 1998 and
1999, had the sale of the Spectrum Clubs occurred on January 1, 1998. However,
the pro forma condensed consolidated statements of operations do not purport to
and do not represent what our actual results of operations would have been had
the Spectrum Club sale been


                                       17
<PAGE>   18

completed on January 1, 1998. Moreover, the pro forma condensed consolidated
statements of operations do not purport to be projections of our results of
operations either for the current period or for any future periods and therefore
should not be relied upon to project future operating results. Operating results
can be affected by a number of circumstances the nature and effect of which
cannot be predicted.

        Our revenues for the year ended December 31, 1999, were $62.2 million,
compared to $57.9 million for 1998, an increase of $4.3 million or 7.4%. Revenue
increased primarily due to increases in membership dues and ancilliary services
fees and the final maturation of the membership base at the Reebok Sports
Club/NY.

        Operating expenses for the year ended December 31, 1999, were $56.0
million, compared to $49.0 million for 1998, an increase of $7.0 million or
14.1%. Operating expenses increased primarily due to additional direct expenses
associated with the increased revenues, increased general and administrative
expenses and the recognition of pre-opening costs. General and administrative
expenses increased primarily due to legal expenses associated with litigation
and the increase in corporate infrastructure related to our planned expansion.
Pre-opening expenses incurred in 1999 were $2.4 million. Effective January 1,
1999, we adopted SOP 98-5 which provides that all costs related to the
development of new fitness clubs, except for real estate related costs, be
expensed as incurred. This is a change from our previous accounting policy,
whereby many of these costs were capitalized and charged to expense upon the
Clubs opening.

        Other expenses for the year ended December 31, 1999, were $2.3 million,
compared to other income of $2.3 million for 1998. The change in other income
and expense is primarily due to increased interest expense associated with our
$100.0 million Senior Secured Notes issued in April 1999.

        Our pro forma net income for the year ended December 31, 1999 was $2.0
million, or $0.11 per basic and diluted share, compared to net income of $4.6
million in 1998, or $0.25 per basic and diluted share. In 1999, we incurred a
charge from a cumulative effect of change in accounting principle, net of
applicable taxes, of $221,000. This charge is associated with the write off of
pre-opening expenses incurred and capitalized prior to January 1, 1999. In 1998,
we incurred a loss from early extinguishment of debt, net of applicable taxes of
$2.2 million, which was recorded as an extraordinary charge.

LIQUIDITY AND CAPITAL RESOURCES

        Cash and Credit Availability. On April 1, 1999, we issued in a private
placement $100 million of 11 3/8% Senior Secured Notes due in March 2006 (the
"Senior Secured Notes"), with interest due semi-annually. We used $37.6 million
of the proceeds to repay existing indebtedness. The balance is being used to
develop new Clubs and for general corporate purposes. Pursuant to the terms of
the indenture dated April 1, 1999 (the "Indenture") entered into in connection
with the issuance of the Senior Secured Notes, there is currently $7.0 million
segregated into a disbursement escrow account which is specifically restricted
to funding the development of new Clubs. The Senior Secured Notes are secured by
substantially all of our assets, other than certain excluded assets. The
Indenture includes certain covenants which as of December 31, 2000, restrict our
ability to: (i) incur additional indebtedness; (ii) pay dividends or other
distributions, or repurchase capital stock or other equity interests or
subordinated indebtedness; and (iii) make certain investments. The Indenture
also limits our ability to: (i) enter into transactions with affiliates; (ii)
create liens or sell certain assets; and (iii) enter into mergers and
consolidations.

         Our bank credit facility provides us $15.0 million of financing with a
maturity date of May 31, 2001. Advances under our credit facility bear interest
at a variable rate of LIBOR plus 2-1/4% or the bank's prime rate. At December
31, 2000, no borrowings were outstanding under the credit facility but $6.2
million was utilized in the form of letters of credit, leaving $8.8 million
available for future borrowings. Under the terms of the Indenture, we are
currently allowed to increase our existing bank facility by $5.0 million and to
incur an additional $2.3 million in equipment financing obligations.  At
December 31, 2000 we did not meet certain financial covenants required by the
credit agreement.  The Bank has waived these defaults.  We are currently
reviewing the loan covenants in connection with the annual renewal of the credit
facility.

        On December 31, 2000, our balance of cash, including Restricted Cash,
was $18.0 million. Of this amount, $7.0 million has been segregated into a
disbursement escrow account and is specifically restricted to funding the
development of new Clubs.


                                       18
<PAGE>   19
        We currently own real estate in Houston, Texas. The Houston property was
acquired in 1998 with intentions of building The Sports Club/LA-Houston on the
site. We have decided to sell the Houston property. The carrying value of this
property is $2.8 million as of December 31, 2000.

        Operating Cash Flow. During the year ended December 31, 2000, we used
$7.5 million of cash for operating activities. This included the payment of our
semi-annual interest under the Senior Secured Notes that aggregated $11.4
million and $9.6 million for the payment of pre-opening expenses at several The
Sports Club/LA locations.

        All our mature Sports Clubs are profitable and generate positive cash
flow from operations. Newly developed Clubs tend to achieve significant
increases in revenues until a mature membership level is reached. In the past,
recently opened Clubs that have not yet achieved mature membership levels have
operated at a loss or at only a slight profit as a result of fixed expenses
that, together with variable operating expenses, approximate or exceed
membership fees and other revenue. We expect this trend to continue at the five
Clubs we have opened or will open in 2000 and 2001. Our ability to generate
positive cash flow from operating activities is dependent upon increasing
membership levels at our new Clubs.

        New Club Development. In 2000 we completed construction of The Sports
Club/LA at three new sites, which opened in February, September and October of
2000. As of December 31, 2000, approximately $5.0 million of construction and
equipment costs remain unpaid on these developments.

        In connection with our acquisition of the rights to develop The Sports
Club/LA in Manhattan's Upper East Side, we issued a note for $2.7 million to the
seller. The note required two equal principal payments in April 1999 and April
2000. We have not made these payments because we believe that we have various
claims against the seller relating to the purchase of the property, which offset
the money owed on the note, and we are currently in litigation regarding this
matter (See Note 7, "Commitments and Contingencies", to Consolidated Financial
Statements).

        We have entered into lease agreements with Millennium Entertainment
Partners and/or its affiliates (collectively "Millennium") with respect to the
development of The Sports Club/LA in San Francisco and Boston. In March 2001, we
amended those leases to provide for additional landlord contributions of $11.5
million towards the construction of these facilities, and a $5.0 million general
landlord contribution. Millennium owns approximately 29.6% of our outstanding
Common Stock. Millennium began construction on each of these projects in 1998.
Our portion of the remaining aggregate development costs for these Clubs is
currently estimated to be approximately $5.4 million. Equipping these Clubs will
require an additional $6.5 million. The Sports Club/LA in Boston and San
Francisco are expected to open in the third quarter of 2001.

        Excess Proceeds Offer. Our net proceeds from the sale of the Spectrum
Clubs were approximately $38.0 million. To the extent the net proceeds were not
reinvested in assets related to our business before December 3, 2000, the
Indenture requires us to make an excess proceeds offer and apply the unused net
proceeds to retire Senior Secured Notes, unless the remaining net proceeds are
less than $10.0 million. At December 31, 2000, the remaining excess proceeds
were below the $10.0 million threshold and therefore no excess proceeds offer
under the Indenture is required or will be made.

        Future Capital Requirements. In addition to the development projects
described above, we incur capital expenditures for normal replacement of fitness
equipment and remodeling of Clubs. Equipment financing and operating cash flow
have historically funded these expenditures. While capital expenditures may
fluctuate from time to time, we generally expect to spend approximately 4% of
revenues on facility and equipment upgrades and replacements. We also expect to
spend approximately $2.0 million during the next 12 months to upgrade our
management information systems.

        To fund anticipated operating losses and complete the development
projects under construction, we expect to use our cash and short-term investment
balances, available equipment financing and a portion of our bank credit
facility.


                                       19
<PAGE>   20
However, if costs at our Clubs under development exceed our construction
budgets; operating losses exceed current estimates; membership levels at newly
opened Clubs do not increase as projected; we are unable to renew our bank
credit facility (or are able to renew it but on terms and conditions less
favorable to us than presently exist); or there are other adverse developments,
we may be required to sell assets, restructure or limit our current development
plans and/or raise additional funds. Further, there is no assurance that we will
be able to renew our current bank arrangement with acceptable terms. We
anticipate that increased cash flows from recently opened clubs and clubs under
development, along with cash flows from our mature clubs, will in the future
enable us to fund our continuing operations.

        Additional funds will be required to undertake any future acquisitions
or the development of more new Clubs. The Indenture Agreement currently
prohibits us from incurring any additional indebtedness other than the amounts
permitted under our bank credit agreement and equipment financing limits. We may
seek to raise funds through an offering of equity securities, asset sales or
other means subject to the restrictions in the Indenture. We may also consider
entering into joint venture or partnership agreements (subject to the
restrictions of the Indenture) for the purpose of developing new Clubs. There
can be no assurance that we will be able to raise additional funds through an
equity offering or other transaction, or that restructuring or limiting our
current development plans would not have a material adverse effect on us.

FORWARD LOOKING STATEMENTS

        From time to time we make "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements include the words "may,"
"will," "estimate," "continue," "believe," "expect" or "anticipate" and other
similar words. The forward-looking statements generally appear in the material
set forth under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations" but may be found in other locations as
well. Forward-looking statements may also be found in our other reports filed
with the Securities and Exchange Commission and in our press releases and other
statements. These forward-looking statements generally relate to our plans and
objectives for future operations and are based upon management's reasonable
estimates of future results or trends. Although we believe that our plans and
objectives reflected in or suggested by such forward-looking statements are
reasonable, such plans or objectives may not be achieved. Actual results may
differ from projected results due to unforeseen developments, including
developments relating to the following:


        -       the availability and adequacy of our cash flow and financing
                facilities for our requirements, including payment of the Senior
                Secured Notes,

        -       our ability to attract and retain members, which depends on
                competition, market acceptance of new and existing sports and
                fitness clubs and services, demand for sports and fitness club
                services generally and competitive pricing trends in the sports
                and fitness market,

        -       our ability to successfully develop new sports and fitness
                clubs,

        -       disputes or other problems arising with our development partners
                or landlords,

        -       changes in economic, competitive, demographic and other
                conditions in the geographic areas in which we operate,
                including business interruptions resulting from earthquakes or
                other causes,

        -       competition,

        -       changes in personnel or compensation, and

        -       changes in statutes and regulations or legal proceedings and
                rulings.

        We will not update forward-looking statements even though our situation
may change in the future.


                                       20
<PAGE>   21

ITEM 8. FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                                           PAGE
                                                                                           ----
<S>                                                                                        <C>
Independent Auditors' Report........................................................        F-1

Consolidated Balance Sheets as of December 31, 1999 and 2000........................        F-2

Consolidated Statements of Operations for each of the Years in the Three-Year Period
ended December 31, 2000.............................................................        F-3

Consolidated Statements of Stockholders' Equity for each of the Years in the Three-Year
Period                                                                                      F-4
ended December 31, 2000.............................................................

Consolidated Statements of Cash Flows for each of the Years in the Three-Year Period
ended December 31, 2000.............................................................        F-5

Notes to Consolidated Financial Statements..........................................        F-6

                    CONSOLIDATED FINANCIAL STATEMENT SCHEDULE

Valuation and Qualifying Accounts...................................................       F-19
</TABLE>

        All other schedules are omitted because they are not applicable or the
required information is shown in the Company's consolidated financial statements
or notes thereto.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURES

        Not applicable


                                       21

<PAGE>   22




                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
The Sports Club Company, Inc.:

        We have audited the accompanying consolidated financial statements of
The Sports Club Company, Inc. and subsidiaries (the Company) as listed in the
accompanying index. In connection with our audits of the consolidated financial
statements, we have also audited the financial statement schedule as listed in
the accompanying index. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.

        We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The Sports
Club Company, Inc. and subsidiaries as of December 31, 1999 and 2000, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.


                                                                        KPMG LLP


LOS ANGELES, CALIFORNIA
FEBRUARY 23, 2001, EXCEPT FOR
NOTE 15 WHICH IS AS OF
MARCH 27, 2001.


                                      F-1
<PAGE>   23

                          THE SPORTS CLUB COMPANY, INC.
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1999 AND 2000
                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                     ASSETS

                                                                                      1999            2000
                                                                                   ---------       ---------
<S>                                                                                <C>             <C>
Current assets:
   Cash and cash equivalents ................................................      $  36,107       $  11,059
   Accounts receivable, net of allowance for doubtful accounts of $342
     and $671 at December 31, 1999 and 2000, respectively ...................          2,149           3,625
   Inventories ..............................................................          1,355           2,854
   Other current assets .....................................................          2,341           3,281
                                                                                   ---------       ---------
        Total current assets ................................................         41,952          20,819

Property and equipment, net .................................................        118,959         169,927
Costs in excess of net assets acquired, less accumulated amortization of
   $1,588 and $2,037 at December 31, 1999 and 2000, respectively ............         13,890          15,296
Restricted cash .............................................................         41,389           6,996
Other assets, net ...........................................................          7,363           8,962
                                                                                   ---------       ---------
                                                                                   $ 223,553       $ 222,000
                                                                                   =========       =========

                              LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Current installments of notes payable and capitalized lease obligations ..      $   3,520       $   4,742
   Accounts payable .........................................................          2,052           1,926
   Accrued liabilities ......................................................          8,549           9,049
   Deferred membership revenues .............................................          9,712          12,019
                                                                                   ---------       ---------
        Total current liabilities ...........................................         23,833          27,736

Notes payable and capitalized lease obligations, less current installments ..        100,367         105,589
Deferred lease obligations ..................................................          1,066           2,284
Minority interest ...........................................................            600             600
                                                                                   ---------       ---------
        Total liabilities ...................................................        125,866         136,209

Commitments and contingencies

Stockholders' equity:
   Preferred stock, $.01 par value, 1,000,000 shares authorized; no shares
     issued or outstanding ..................................................             --              --
   Common stock, $.01 par value, 40,000,000 shares authorized;
     20,907,289 and 21,052,717 shares issued at
     December 31, 1999 and 2000, respectively ...............................            209             211
   Additional paid-in capital ...............................................        102,403         102,743
   Retained earnings (accumulated deficit) ..................................         10,966          (1,421)
   Treasury stock, at cost, 3,194,536 and 3,156,074 shares at
     December 31, 1999 and 2000, respectively ...............................        (15,891)        (15,742)
                                                                                   ---------       ---------
        Net stockholders' equity ............................................         97,687          85,791
                                                                                   ---------       ---------
                                                                                   $ 223,553       $ 222,000
                                                                                   =========       =========

</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-2
<PAGE>   24

                          THE SPORTS CLUB COMPANY, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    THREE-YEAR PERIOD ENDED DECEMBER 31, 2000
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                         1998           1999           2000
                                                                       --------       --------       --------
<S>                                                                    <C>            <C>            <C>
Revenues .......................................................       $ 81,923       $ 87,325       $ 76,869

Operating expenses:
   Direct ......................................................         56,746         60,528         59,116
   Selling, general and administrative .........................          8,556          9,234         10,213
   Depreciation and amortization ...............................          5,282          6,147          7,408
   Pre-opening expenses ........................................             --          3,090          9,589
                                                                       --------       --------       --------
        Total operating expenses ...............................         70,584         78,999         86,326
                                                                       --------       --------       --------
          Income (loss) from operations ........................         11,339          8,326         (9,457)

Other income (expense):
   Interest, net ...............................................         (1,629)        (5,991)        (6,478)
   Minority interests ..........................................           (150)          (150)          (150)
   Equity interest in net income of unconsolidated subsidiary ..            880            931             --
   Non-recurring items .........................................           (314)           553         (3,242)
                                                                       --------       --------       --------

         Income (loss) before income taxes, extraordinary
         charge and cumulative effect of change in accounting
         principle .............................................         10,126          3,669        (19,327)
Provision (benefit) for income taxes ...........................          3,971          1,460         (6,940)
                                                                       --------       --------       --------

         Income (loss) before extraordinary charge and
         cumulative effect of change in accounting principle ..           6,155          2,209        (12,387)

Extraordinary charge from early extinguishment of debt,
   net of income tax benefit of $1,331 .........................          2,173             --             --
Cumulative effect of change in accounting principle,
   net of income tax benefit of $600 ...........................             --            899             --
                                                                       --------       --------       --------
         Net income (loss) .....................................       $  3,982       $  1,310       $(12,387)
                                                                       ========       ========       ========

Income (loss) per share before extraordinary charge
and cumulative effect of change in accounting principle:
   Basic .......................................................       $   0.33       $   0.12       $  (0.70)
                                                                       ========       ========       ========
   Diluted .....................................................       $   0.33       $   0.12       $  (0.70)
                                                                       ========       ========       ========

Effect of extraordinary charge and cumulative effect
of change in accounting principle:
   Basic .......................................................       $  (0.12)      $  (0.05)      $     --
                                                                       ========       ========       ========
   Diluted .....................................................       $  (0.12)      $  (0.05)      $     --
                                                                       ========       ========       ========

Net income (loss) per share:
   Basic .......................................................       $   0.21       $   0.07       $  (0.70)
                                                                       ========       ========       ========
   Diluted .....................................................       $   0.21       $   0.07       $  (0.70)
                                                                       ========       ========       ========

Weighted average number of common shares outstanding:
   Basic .......................................................         18,603         18,114         17,773
                                                                       ========       ========       ========
   Diluted .....................................................         18,829         18,290         17,773
                                                                       ========       ========       ========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-3
<PAGE>   25

                          THE SPORTS CLUB COMPANY, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                    THREE-YEAR PERIOD ENDED DECEMBER 31, 2000
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                     RETAINED
                                                 COMMON STOCK          ADDITIONAL    EARNINGS             TREASURY STOCK
                                            ----------------------       PAID-IN      (ACCUM.)       -----------------------
                                             SHARES        AMOUNT        CAPITAL     (DEFICIT)        SHARES         AMOUNT
                                            --------      --------     ----------    ---------       --------       --------
<S>                                         <C>           <C>          <C>           <C>             <C>            <C>
Balance, January 1, 1998 .............        14,383      $    144      $ 53,613      $  5,674            164       $   (954)
    Net income .......................            --            --            --         3,982             --             --
    Sale of common stock net
      of issuance cost of $695 .......         6,500            65        48,639            --             --             --
    Treasury stock repurchased .......            --            --            --            --          1,107         (6,800)
    Reissuance of treasury stock
      for employee stock plans .......            --            --            45            --            (12)            67
    Exercise of employee stock options            10            --            26            --             --             --
    Issuance of common stock to
      outside directors ..............             4            --            38            --             --             --
                                            --------      --------      --------      --------       --------       --------
Balance, December 31, 1998 ...........        20,897           209       102,361         9,656          1,259         (7,687)
    Net income .......................            --            --            --         1,310             --             --
    Treasury stock repurchased .......            --            --            --            --          1,975         (8,357)
    Reissuance of treasury stock
      for employee stock plans .......            --            --            --            --            (39)           153
    Exercise of employee stock options             2            --             7            --             --             --
    Issuance of common stock to
      outside directors ..............             8            --            35            --             --             --
                                            --------      --------      --------      --------       --------       --------
Balance, December 31, 1999 ...........        20,907           209       102,403        10,966          3,195        (15,891)
    Net loss .........................            --            --            --       (12,387)            --             --
    Reissuance of treasury stock
      for employee stock plans .......            --            --            --            --            (39)           149
    Exercise of employee stock options            25            --            61            --             --             --
    Issuance of common stock to
      outside directors ..............             6            --            20            --             --             --
    Issuance of common stock for 1997
      business acquisiton ............           115             2           259            --             --             --
                                            --------      --------      --------      --------       --------       --------
Balance, December 31, 2000 ...........        21,053      $    211      $102,743      $ (1,421)         3,156       $(15,742)
                                            ========      ========      ========      ========       ========       ========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-4
<PAGE>   26

                          THE SPORTS CLUB COMPANY, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                    THREE-YEAR PERIOD ENDED DECEMBER 31, 2000
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                            1998           1999           2000
                                                                          --------       --------       --------
<S>                                                                       <C>            <C>            <C>
Cash flows from operating activities:
   Net income (loss) ...............................................      $  3,982       $  1,310       $(12,387)
   Adjustments to reconcile net income (loss) to cash
    provided by (used in) operations:
        Loss on early extinguishment of debt, net of tax ...........         2,173             --             --
        Cumulative effect of change in accounting principle ........            --            899             --
        Gain on sale of Spectrum Clubs .............................            --           (783)            --
        Loss on disposition of real estate .........................            --             --          1,766
        Depreciation and amortization ..............................         5,282          6,147          7,408
        Equity interest in net income of unconsolidated
         subsidiary ................................................          (880)          (931)            --
        Stock issued for employee benefit plan .....................            67            153            149
        Stock issued as directors' fees ............................            38             35             20
        (Increase) decrease in:
          Accounts receivable, net .................................          (408)           (59)        (1,476)
          Inventories ..............................................          (714)          (131)        (1,499)
          Other assets .............................................          (830)        (1,087)        (5,468)
        Increase (decrease) in:
          Accounts payable .........................................         1,325           (285)          (126)
          Accrued liabilities ......................................          (382)         2,836            777
          Deferred membership revenues .............................            17            650          2,307
          Deferred lease obligations ...............................           (93)          (409)         1,015
                                                                          --------       --------       --------
          Net cash provided by (used in) operating activities ......         9,577          8,345         (7,514)
Cash flows from investing activities:
   Capital expenditures ............................................       (28,623)       (45,025)       (62,173)
   Distributions from unconsolidated subsidiary ....................           447          1,106             --
   Business acquisitions, net of cash acquired .....................            --           (902)            --
   (Increase) decrease in due from affiliates ......................          (128)            76            148
   Purchase of other assets ........................................            --           (124)            --
   Proceeds from sale of Spectrum Clubs ............................            --         60,778          3,593
   (Increase) decrease in restricted cash ..........................            --        (41,389)        34,393
   Treasury stock acquired .........................................        (6,800)        (8,357)            --
                                                                          --------       --------       --------
          Net cash used for investing activities ...................       (35,104)       (33,837)       (24,039)
Cash flows from financing activities:
   Exercise of employee stock options ..............................            26              7             61
   Proceeds from Senior Secured Notes - net of costs and discount ..            --         93,713             --
   Proceeds from sale of common stock ..............................        48,704             --             --
   Proceeds from notes payable and equipment financing loans .......        10,940         37,263          7,681
   Repayments of notes payable and equipment financing loans .......       (33,491)       (71,617)        (1,237)
                                                                          --------       --------       --------
          Net cash provided by financing activities ................        26,199         59,366          6,505
                                                                          --------       --------       --------
          Net increase (decrease) in cash and cash equivalents .....           652         33,874        (25,048)

Cash and cash equivalents at beginning of year .....................         1,581          2,233         36,107
                                                                          --------       --------       --------
Cash and cash equivalents at end of year ...........................      $  2,233       $ 36,107       $ 11,059
                                                                          ========       ========       ========

Supplemental disclosure of cash flow information:
   Cash paid during the year for interest ..........................      $  2,636       $  6,389       $ 11,605
                                                                          ========       ========       ========
   Cash paid during the year for income taxes ......................      $  1,881       $  2,010       $    977
                                                                          ========       ========       ========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>   27

                          THE SPORTS CLUB COMPANY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1998, 1999 AND 2000


1.      ORGANIZATION

        The Sports Club Company, Inc. (the "Company") operates sports and
fitness Clubs ("Clubs"), under the "Sports Club" and, until December 1999, the
"Spectrum Club" names. Sports Clubs have been developed as "urban country clubs"
offering a full range of services including numerous fitness and recreation
options, diverse facilities and other amenities. Spectrum Clubs are designed as
smaller-scale Sports Clubs with an extensive range of services. Both Sports
Clubs and Spectrum Clubs are marketed to affluent, health conscience individuals
who desire a premier Club. In December 1999, the Company sold the Spectrum Clubs
to an investment group (See Note 3).

2.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

        The accompanying consolidated financial statements include the accounts
of the Company and its majority owned subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation.

Revenue Recognition

        The Company receives initiation fees and monthly membership dues from
its members. Substantially all of the Company's members join on a month-to-month
basis and can therefore cancel their membership at any time. Initiation fees and
related direct expenses, primarily sales commissions, are deferred and
recognized, on a straight-line basis, over an estimated membership period of
between two and one half and three years. Dues that are received in advance are
recognized on a pro-rata basis over the periods in which services are to be
provided. Reserves are recorded on receivables of the Company's SportsMed
subsidiary at the time the services are provided.

Cash and Cash Equivalents

        The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. At December 31, 1999
and 2000, cash and cash equivalents were $36.1 million and $11.1 million,
respectively. $2.0 million of cash and cash equivalents at December 31, 1999 and
2000, from the proceeds of the sale of the Spectrum Clubs, are held in escrow
accounts and will be released to the Company upon satisfaction of certain
conditions of the sale.


                                      F-6
<PAGE>   28

Inventories

        Inventories are stated at the lower of cost or market using the average
cost method. Inventories consist of retail merchandise, sold at our Players Club
stores and at our spas and salons, PTS products, uniforms and food and beverage
stocks.

Depreciation and Amortization

        Depreciation is computed primarily using the straight-line method over
the estimated useful lives of the assets, ranging from five to seven years for
equipment to forty years for buildings. Leasehold improvements are amortized
using the straight-line method over the shorter of the lease term or the
estimated useful life of the improvements. Loan costs, including the debt
discount on the Senior Notes, are amortized over the terms of the related loans.
Costs in excess of net assets of acquired businesses are being amortized on a
straight-line basis over forty years.

Start-up Costs

        The Company adopted Statement of Position 98-5, "Accounting for Start-Up
Costs" ("SOP 98-5") effective January 1, 1999. SOP 98-5 provides that all costs
related to the development of new sports and fitness clubs, except for real
estate related costs, be expensed as incurred. This is a change from the
Company's previous accounting policy, whereby many of these costs were
capitalized and charged to expense upon the Club opening. As a result, the
Company recorded a one-time charge equal to the unamortized balance of all
capitalized start-up costs as of January 1, 1999. This charge was recorded as a
cumulative effect of a change in accounting principle net of the related income
tax effect. The amount of this charge before income taxes was approximately $1.5
million.

Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

        The Company reviews its long-lived assets and certain identifiable
intangible assets 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 net undiscounted operating 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 exceed the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
costs to sell.

        In June 1998, the Company acquired undeveloped land in Houston, Texas
with the intention of developing a Club on the site. In 2000, the Company
decided not to develop this site and to dispose of the property. An impairment
loss of $749,000 has been recorded to reduce the carrying value of the asset to
its estimated fair value less costs to sell.

Income Taxes

        The Company uses the asset and liability method of accounting for income
taxes. Under this method, deferred income taxes are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted tax rates
expected to be applied to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred
taxes of a change in tax rates is recognized in income in the period that
includes the enactment date.

Earnings per Share

The Company presents Basic and Diluted earnings per share. Basic earnings
reflects the actual weighted average shares of common stock outstanding during
the period. Diluted earnings per share


                                      F-7
<PAGE>   29

includes the effects of all dilutive options, warrants and other securities and
utilizes the treasury stock method.

Use of Estimates

        The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make certain estimates and assumptions. These affect the reporting
of assets and liabilities, the disclosure of any contingent assets and
liabilities and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from these estimates.

Fair Value of Financial Instruments

        The carrying amounts of financial instruments approximate fair value as
of December 31, 2000. The carrying amounts related to cash equivalents,
short-term investments, accounts receivable, other current assets and accounts
payable approximate fair value due to the relatively short maturity of such
instruments. The fair value of long-term debt is estimated by discounting the
future cash flows of each instrument at rates currently available to the Company
for similar debt instruments of comparable maturities by the Company's bankers.

Segment Reporting

        Management has determined that the Company has one principle operating
segment, the operation of sports and fitness Clubs.

3. DISPOSITIONS

Spectrum Clubs Dispositions

        In September of 1999, the Company completed the sale and leaseback of
the real estate at the Spectrum Club - Thousand Oaks for approximately $12.0
million. On December 3, 1999, the Company completed the sale of the Spectrum
Clubs, a group of ten sports and fitness clubs located in Southern California,
to an investment group for approximately $48.4 million. The Company recorded a
pre-tax gain of approximately $783,000 and an after tax gain of approximately
$470,000 ($0.03 per diluted share after tax) on the sale of the Spectrum Clubs.
The 1998 and 1999 consolidated financial statements and accompanying notes
reflect the operating results of the Spectrum Clubs as a continuing operation.
Pro-forma consolidated operating results for the fiscal years ended December 31,
1998 and 1999 are presented below. The pro-forma statements present the
unaudited results of operations as if the Spectrum Clubs had been sold at the
beginning of each period.


                                      F-8
<PAGE>   30

<TABLE>
<CAPTION>
                                                                PRO-FORMA
                                                               YEAR ENDED
                                                               DECEMBER 31,
                                                         ----------------------
                                                           1998          1999
                                                         --------      --------
                                                         (IN THOUSANDS, EXCEPT
                                                             PER SHARE DATA)
<S>                                                      <C>           <C>
Revenues ..........................................      $ 57,944      $ 62,229
Operating expenses ................................        49,037        55,963
                                                         --------      --------
  Income from operations ..........................         8,907         6,266
Other income (expense) ............................         2,288        (2,314)
                                                         --------      --------
  Income before income taxes, extraordinary
    charge and cumulative effect of change
    in accounting principle .......................        11,195         3,952
Income tax provision ..............................         4,390         1,724
                                                         --------      --------
  Income before extraordinary charge and
    cumulative effect of change in accounting
    principle .....................................         6,805         2,228
Extraordinary charge, net of tax ..................         2,173            --
Cumulative effect of change in accounting
  principle, net of tax ...........................            --           221
                                                         --------      --------
Net income ........................................      $  4,632      $  2,007
                                                         ========      ========

Net income per share
  Basic ...........................................      $   0.25      $   0.11
                                                         ========      ========
  Diluted .........................................      $   0.25      $   0.11
                                                         ========      ========
</TABLE>

        On December 28, 2000, the Company completed the sale of the land and
building at the former Spectrum Club - Fountain Valley location for $3,700,000
in cash. The Company recorded a pre-tax loss of approximately $1,017,000 related
to the sale of the Fountain Valley property.

4.      PROPERTY AND EQUIPMENT

        Property and equipment is carried at cost, less accumulated depreciation
and amortization, which is summarized as follows:

<TABLE>
<CAPTION>
                                                        AT DECEMBER 31,
                                                    ----------------------
                                                      1999          2000
                                                    --------      --------
                                                        (IN THOUSANDS)
<S>                                                 <C>           <C>
Land ............................................   $ 18,632      $ 16,082
Building and improvements .......................     98,540       146,911
 Furniture, fixtures and equipment ..............     14,660        26,310
                                                    --------      --------
                                                     131,832       189,303
Less accumulated depreciation and amortization ..     12,873        19,376
                                                    --------      --------
Net property and equipment ......................   $118,959      $169,927
                                                    ========      ========
</TABLE>

        Equipment secured by equipment financing loans was $3,660,000 and
$11,341,000 and related accumulated amortization was $2,440,000 and $3,677,000
at December 31, 1999 and 2000, respectively.


                                      F-9
<PAGE>   31

5.      NOTES PAYABLE AND CAPITALIZED LEASE OBLIGATIONS

        Notes payable and capitalized lease obligations are summarized as
follows:

<TABLE>
<CAPTION>
                                             AT DECEMBER 31,
                                         ----------------------
                                           1999          2000
                                         --------      --------
                                              (IN THOUSANDS)
<S>                                      <C>           <C>
Senior secured notes (a) ..........      $100,000      $100,000
Equipment financing loans (b) .....         1,220         7,664
Other note payable (c) ............         2,667         2,667
                                         --------      --------
                                          103,887       110,331
Less current installments .........         3,520         4,742
                                         --------      --------
                                         $100,367      $105,589
                                         ========      ========
</TABLE>

(a) On April 1, 1999, the Company issued in a private placement $100.0 million
of 11 3/8% Senior Secured Notes due in March 2006 (the "Senior Notes") with
interest due semi-annually. In May 1999, the Senior Notes were exchanged for
registered Series B Senior Secured Notes (the "Senior Secured Notes").

        The Senior Secured Notes are secured by substantially all assets, other
than certain excluded assets. In connection with the issuance of the Senior
Secured Notes, the Company entered into an indenture dated as of April 1, 1999
(the "Indenture") which includes certain covenants which as of December 31,
2000, restrict the Company's ability, subject to certain exceptions, to: (i)
incur additional indebtedness; (ii) pay dividends or other distributions, or
repurchase capital stock or other equity interests or subordinated indebtedness
and; (iii) make certain investments. The Indenture also limits the Company's
ability to: (i) enter into transactions with affiliates; (ii) create liens or
sell certain assets, and (iii) enter into mergers and consolidations. Under the
terms of the Indenture, after March 15, 2003, the Company may, at its option,
redeem all or some of the Senior Secured Notes at a redemption price that will
decrease over time from 105.688% to 100% of their face amount, plus interest.
Prior to March 15, 2002, if the Company publicly offers certain equity
securities, the Company may, at its option, apply certain of the net proceeds
from those transactions to the redemption of up to 35% of the principal amount
of the Senior Secured Notes at 111.375% of their face amount, plus interest. If
the Company undergoes a "change in control", as defined in the Indenture, it
must give holders of the Senior Secured Notes the opportunity to sell their
Senior Secured Notes to the Company at 101% of their face amount, plus interest.
At December 31, 2000, the estimated fair value of the Senior Secured Notes was
$90.0 million.

(b) The equipment financing loans are secured by furniture, fixtures and
equipment. The amounts are generally repayable in monthly payments over four or
five years with effective interest rates between 9% and 10%.


(c) This note was issued in connection with the acquisition of The Sports
Club/LA - Upper East Side. The note agreement provided for two equal principal
payments in April 1999 and April 2000. The Company is currently in default on
this entire note payable and is in litigation regarding its obligation under it.
The Company believes that it has various claims against the seller in connection
with the repair and refurbishing of the Club, which offset the money owed on the
note (see Note 7 Litigation).

        Future minimum annual principal payments at December 31, 2000, are as
follows (in thousands):

<TABLE>
<S>                                                       <C>
        2001...........................................   $   4,742
        2002...........................................       1,854
        2003...........................................       2,031
        2004...........................................       1,680
        2005...........................................          24
        Thereafter.....................................     100,000
                                                          ---------
                                                          $ 110,331
                                                          =========
</TABLE>


                                      F-10
<PAGE>   32
6.      BANK CREDIT FACILITY

         At December 31, 2000, the Company had a $15.0 million bank credit
facility. The facility matures of May 31, 2001 and bears interest at a variable
rate of LIBOR plus 2 1/4% or the bank's prime rate. At December 31, 2000, no
borrowings were outstanding under this credit facility but $6.2 million was
utilized in the form of letters of credit, leaving $8.8 million available for
future borrowings. The loans are secured by all the assets of The Sports
Club/Irvine and The Sports Club/Las Vegas. The agreement also requires the
Company to maintain certain Tangible Net Worth, Interest Coverage, Total
Liabilities to Tangible Net Worth and Current Ratio covenants. At December 31,
2000, the Company did not meet the Total Liabilities to Tangible Net Worth and
Interest Coverage covenants. The Bank has waived these defaults.  The Company
and its Bank are currently reviewing the loan covenants in connection with the
annual renewal of the credit facility.

7.      COMMITMENTS AND CONTINGENCIES

Lease Commitments

        The Company leases certain facilities pursuant to various operating
lease agreements. Club facility leases are generally long-term and noncancelable
triple-net leases (requiring the Company to pay all real estate taxes, insurance
and maintenance expenses), and have an average remaining term of 49 years,
including renewal options, with the earliest Sports Club lease expiration date
of January 31, 2013. Future minimum noncancelable operating lease payments as of
December 31, 2000 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                               NET
                                                               SUBLEASE      RENTAL
                                                COMMITMENTS    RENTALS     COMMITMENTS
                                                -----------    --------    -----------
<S>                                             <C>            <C>         <C>
Year ending December 31:
     2001 .................................      $ 23,675      $  5,400      $ 18,275
     2002 .................................        26,714         5,425        21,289
     2003 .................................        27,268         5,498        21,770
     2004 .................................        27,490         5,712        21,778
     2005 .................................        27,210         5,917        21,293
     Thereafter ...........................       321,978        47,638       274,340
                                                 --------      --------      --------
          Total minimum lease payments ....      $454,335      $ 75,590      $378,745
                                                 ========      ========      ========
</TABLE>


        Rent expense for facilities and equipment aggregated, $8,174,000,
$8,440,000 and $10,675,000 for the years ended December 31, 1998, 1999 and 2000,
respectively.

Litigation

        Lyudmirsky and those similarly situated v. Sports Club, Inc. of
California; L.A./Irvine Sports Club, Ltd. (Los Angeles Superior Court). On June
25, 1999, Ilya Lyudmirsky ("Lyudmirsky") filed a class action lawsuit against
Sports Club, Inc. of California and LA/Irvine Sports Club, Ltd. (collectively,
the "Company") alleging, among other things, violations of California Civil Code
Section 1812.80, et seq., claiming the membership fee structure and membership
contracts for The Sports Club/LA - Los Angeles violate certain provisions of the
Health Studio Services Act. A settlement agreement was reached on May 1, 2000,
and the Court gave final approval of the settlement on October 11, 2000. The
Company recorded a non-recurring charge of $1,476,000 in 2000 to cover the costs
of defending and settling this action.

        Park Place Entertainment Corporation v. The Sports Club Company, Inc.
(Los Angeles Superior Court). On December 23, 1999, Park Place Entertainment
Corporation ("Park Place") filed an action against the Company for money due on
a promissory note. Park Place is the current holder of a purchase money
promissory note in the amount of $2,666,666 (the "Note") given to Hilton Hotels
Corporation ("Hilton") in connection with the 1998 acquisition of the site for
The Sports Club/LA - Upper East Side (the "Club"). The Company believes it has
various claims in connection with the repair and refurbishing of the Club which
offset the money owed on the Note. Park Place alleges that no basis exists which
excuses


                                      F-11
<PAGE>   33

the Company from the timely payment of installments on the Note and is seeking
damages in the amount of $2,666,666 plus interest, attorneys' fees and costs of
the suit. On February 25, 2000, the Company filed an answer raising offsets and
a cross-complaint against Hilton seeking damages in the amount of $14,415,000
for alleged breach of contract, fraud and negligent misrepresentation, plus
interest, attorneys' fees and costs of suit. Hilton has answered the cross-claim
with a general denial and three generic affirmative defenses. The Company is in
the discovery phase of the litigation and intends to vigorously pursue its
defenses and cross-claims. The trial date for this matter has been set for April
23, 2001. The parties have begun settlement discussions. However, the Company is
unable at this time to estimate the likelihood that Park Place will prevail in
its claims against the Company, or that the Company will prevail in its claims
against Hilton.

        Garrick-Aug Associates Store Leasing, Inc. v. Hirschfeld Realty Club
Corporation, 328 E. 61 Corp., The Sports Club Company, Inc. and Elie Hirschfeld,
Index No. 601276/99 (New York Supreme Court, County of New York). On March 15,
1999, Garrick-Aug Associates Store Leasing, Inc. ("Plaintiff") filed a Summons
and Complaint ("Original Complaint") commencing an action to recover brokerage
commissions in the Supreme Court of the State of New York, against Hirschfeld
Realty Club Corporation and 328 E. 61 Corp. Under the Original Complaint,
Plaintiff sought damages in excess of $3,625,000 for breach of contract,
declaratory relief, quantum meruit and unjust enrichment. On February 1, 2000,
Plaintiff filed and served an Amended Complaint containing the same causes of
action in the Original Complaint and adding additional claims against the
Company and Elie Hirschfeld. Under the Amended Complaint, Plaintiff seeks
damages from the Company in excess of $3,625,000 for tortious interference with
contract and conspiracy. The Company plans to vigorously contest all aspects of
this case. On November 21, 2000, the Company filed a motion to dismiss
Plaintiff's two causes of action. The motion is still pending before the Court.
As a result, the Company is unable, at this time, to estimate the likelihood
that Plaintiff will prevail in this matter.

        336 Spa Park Inc. v. Abraham Hirschfeld, Hirschfeld Realty Club Corp.,
328 E. 61 Club Corp. and The Sports Club Company, Inc., Index No. 602609/00 (New
York Supreme Court, County of New York). On June 20, 2000, 336 Spa Park Inc.
("Plaintiff") filed a Summons and Complaint ("Complaint") commencing an action
against the Company for tortious interference with a contract for the lease of
parking facilities entered into between Plaintiff and Hirschfeld Realty Club
Corp. and 328 E. 61 Club Corp. On January 2, 2001, Plaintiff filed and served
its Second Amended Complaint. Plaintiff is seeking damages against the Company
in an amount to be determined at trial, but not less than $100,000. The Company
intends to contest this action vigorously. On February 9, 2001, the Company
filed a motion to dismiss the cause of action against the Company. The motion is
still pending before the Court. As a result, the Company is unable, at this
time, to estimate the likelihood that Plaintiff will prevail in this matter.

        Other. The Company is involved in various claims and lawsuits incidental
to its business, including claims arising from accidents. However, in the
opinion of management, the Company is adequately insured against such claims and
lawsuits involving personal injuries, and any ultimate liability arising out of
any such proceedings will not have a material adverse effect on the financial
condition, cash flow or operations of the Company.

Employment Agreements

        At December 31, 2000, the Company's employment agreements with Michael
Talla, Co-Chief Executive Officer and Nanette Pattee Francini, Executive Vice
President, expired.


                                      F-12
<PAGE>   34

8.      INCOME PER SHARE

        The following is a reconciliation of the basic and diluted income per
share computations for the years 1998, 1999 and 2000:

<TABLE>
<CAPTION>
                                                        YEAR ENDED DECEMBER 31,
                                                ------------------------------------
                                                  1998          1999          2000
                                                --------      --------      --------
                                                (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                             <C>           <C>           <C>
Net income (loss) used for basic and
  diluted income per share ...............      $  3,982      $  1,310      $(12,387)
                                                ========      ========      ========

Shares of Common Stock and
  Common Stock equivalents:
      Weighted average shares used
       in basic computation ..............        18,603        18,114        17,773

      Weighted average stock options .....           226           176             0
                                                --------      --------      --------
      Weighted average shares used in
       dilutive computation ..............        18,829        18,290        17,773
                                                ========      ========      ========

Income (loss) per share:
  Basic ..................................      $   0.21      $   0.07      $  (0.70)
                                                ========      ========      ========
  Diluted ................................      $   0.21      $   0.07      $  (0.70)
                                                ========      ========      ========
</TABLE>

9.      INCOME TAXES

        The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                                               -----------------------------------
                                                                1998          1999          2000
                                                               -------       -------       -------
                                                                           (IN THOUSANDS)
<S>                                                            <C>           <C>           <C>
Current:
     Federal ............................................      $ 2,893       $ 2,126       $(1,701)
     State ..............................................          839           537         1,181
                                                               -------       -------       -------
                                                                 3,732         2,663          (520)
                                                               -------       -------       -------
Deferred:
     Federal ............................................          156          (923)       (2,119)
     State ..............................................           83          (280)       (4,301)
                                                               -------       -------       -------
                                                                   239        (1,203)       (6,420)
                                                               -------       -------       -------
Income tax provision ....................................      $ 3,971       $ 1,460       $(6,940)
                                                               =======       =======       =======

Tax benefit from extraordinary charge and cumulative
effect of change in accounting principle:
     Federal ............................................      $(1,021)      $  (510)      $    --
     State ..............................................         (310)          (90)           --
                                                               -------       -------       -------
Total provision from extraordinary charge and
cumulative effect of change in accounting principle .....      $(1,331)      $  (600)      $    --
                                                               =======       =======       =======
</TABLE>


                                      F-13
<PAGE>   35

        Income tax expense (benefit) as computed differs from the statutory rate
as applied to pre-tax net income (loss) as follows:

<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31
                                                       -----------------------------------
                                                        1998          1999          2000
                                                       -------       -------       -------
                                                                  (IN THOUSANDS)
<S>                                                    <C>           <C>           <C>
Computed "expected" tax expense .................      $ 3,443       $ 1,338       $(6,571)
Increase (decrease) in tax resulting from:
   State taxes -- net of federal benefit ........          609           110        (1,202)
   Meals and entertainment ......................            8            24            65
   Goodwill amortization ........................           80           (52)           --
   Other ........................................         (169)           40           768
                                                       -------       -------       -------
Income tax provision ............................      $ 3,971       $ 1,460       $(6,940)
                                                       =======       =======       =======
</TABLE>

        The effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities are presented as follows.

<TABLE>
<CAPTION>
                                                                  AT DECEMBER 31,
                                                       -----------------------------------
                                                         1998          1999          2000
                                                       -------       -------       -------
                                                                 (IN THOUSANDS)
<S>                                                    <C>           <C>           <C>
Deferred tax assets:
    Deferred initiation fees ....................      $   811       $ 1,245       $ 1,899
    Operating loss carry forwards ...............           --            --         6,860
    Accrued vacation ............................          182           231           207
    Bad debt ....................................           86           133           139
    State taxes .................................          180           492           551
                                                       -------       -------       -------
          Gross deferred tax assets .............        1,259         2,101         9,656
                                                       -------       -------       -------
Deferred tax liabilities:
    Depreciation and amortization ...............       (3,889)       (3,513)       (4,225)
    Other .......................................         (542)       (2,482)       (2,905)
                                                       -------       -------       -------
          Gross deferred tax liabilities ........       (4,431)       (5,995)       (7,130)
                                                       -------       -------       -------
Net deferred tax (liability) asset ..............      $(3,172)      $(3,894)      $ 2,526
                                                       =======       =======       =======
</TABLE>

        As of December 31, 2000, the Company had federal and state net operating
loss carry forwards of $12,265,000 and $21,036,000, respectively, expiring in
the years 2020 and 2005 respectively.

10.     NON-RECURRING ITEMS

        The Company recorded the following income (expense) as non-recurring
items in each of the years in the three-year period ended December 31, 2000:

<TABLE>
<CAPTION>
                                                        1998          1999          2000
                                                       -------       -------       -------
                                                                  (IN THOUSANDS)
<S>                                                    <C>           <C>           <C>
Class action litigation settlement ..............      $    --       $    --       $(1,476)
Loss on sale of Fountain Valley real estate .....           --            --        (1,017)
Impairment of Houston site ......................           --            --          (749)
Gain (loss) on sale or disposition
  of Spectrum Clubs .............................         (314)          553            --
                                                       -------       -------       -------
                                                       $  (314)      $   553       $(3,242)
                                                       =======       =======       =======
</TABLE>

11.     STOCK PLANS

Accounting for Stock Plans

        The Company has elected to measure the impact of its stock options
granted to employees and directors under the provisions of APB No. 25, using the
intrinsic value method. Entities electing to


                                      F-14
<PAGE>   36

continue using the accounting prescribed by APB Opinion No. 25 must make pro
forma disclosures of net income and income per share, as if the fair value based
method of accounting defined in SFAS 123 had been applied.

        The Company has an employee stock option plan which is described below.
The Company applied APB No. 25 in accounting for its plan. In accordance with
APB No. 25, no compensation cost has been recognized. Had compensation cost for
the Company's plan been determined consistent with SFAS 123, the Company's net
income/(loss) and income/(loss) per share would have been reduced to the
pro-forma amounts indicated below:

<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31
                                                ------------------------------------------
                                                   1998            1999            2000
                                                ----------      ----------      ----------
                                                   (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                             <C>             <C>             <C>
Net income/(loss):
        As reported ......................      $    3,982      $    1,310      $  (12,387)
        Pro forma ........................      $    3,504      $      632      $  (13,435)

Basic income/(loss) per share:
        As reported ......................      $      .21      $      .07      $    (0.70)
        Pro forma ........................      $      .19      $      .03      $    (0.76)
</TABLE>

        The fair value of all option grants for the Company's plan are estimated
on the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for all fixed option grants in 1998,
1999 and 2000 respectively: dividend yield of 0%, 0% and 0%; expected volatility
of 79.5%, 100.1% and 111.6%; risk-free interest rates of 6.0%, 6.25% and 6.25%
and expected economic lives of 5.9 years, 6.0 years and 6.0 years.

1994 Stock Incentive Plan

        Initially 1,800,000 shares of Common Stock were reserved under the
Company's Amended and Restated 1994 Stock Incentive Plan (the "Plan"), which
authorizes the issuance of various stock incentives to directors, officers,
employees and consultants including options, stock appreciation rights and
purchase rights.

        Options allow for the purchase of Common Stock at prices determined by
the Company's Compensation Committee. Incentive stock options must be granted at
a price equal to or greater than the fair value of a share of Common Stock on
the date the option is granted. Non-statutory options must have an exercise
price equal to at least 85% of the fair value of the Company's Common Stock at
the date of grant. Options granted under the Plan may, at the election of the
Compensation Committee, become exercisable in installments. Except for the
options granted to D. Michael Talla, Co-Chief Executive Officer, which expire on
the fifth anniversary of the grant date, all options expire on the tenth
anniversary of the grant date.

        A summary of the status of the Company's stock option plans as of
December 31, 1998, 1999 and 2000 and changes during the years then ended are
presented below:

<TABLE>
<CAPTION>
                                                         WEIGHTED
                                                         AVERAGE
                                                         EXERCISE
                                            SHARES        PRICE
                                            -------      --------
<S>                                         <C>          <C>
Outstanding at January 1, 1998 .......      642,500         3.77
Granted ..............................      342,000         7.99
Canceled .............................        2,000         2.56
Exercised ............................       10,002         2.61
                                            -------
Outstanding at December 31, 1998 .....      972,498         5.25
                                            =======
</TABLE>

                                      F-15
<PAGE>   37

<TABLE>
<S>                                                         <C>               <C>
Options excercisable at December 31, 1998 ............        462,696           3.52
                                                            =========
Weighted-average per share fair value of options
  granted during year ended December 31, 1998 ........                          5.43

Outstanding at January 1, 1999 .......................        972,498           5.25
Granted ..............................................        210,000           3.94
Canceled .............................................         10,000           5.59
Exercised ............................................          2,666           2.70
                                                            ---------
Outstanding at December 31, 1999 .....................      1,169,832           5.01
                                                            =========
Options excercisable at December 31, 1999 ............        683,166           4.32
                                                            =========
Weighted-average per share fair value of options
  granted during year ended December 31, 1999 ........                          3.22

Outstanding at January 1, 2000 .......................      1,169,832           5.01
Granted ..............................................        744,499           6.50
Canceled .............................................        355,499           6.67
Exercised ............................................         25,000           2.96
                                                            ---------
Outstanding at December 31, 2000 .....................      1,533,832           5.94
                                                            =========
Options excercisable at December 31, 2000 ............        559,675           5.36
                                                            =========
Weighted-average per share fair value of options
  granted during year ended December 31, 2000 ........                          4.25
</TABLE>

        The following table summarizes information about stock options
outstanding at December 31, 2000:

<TABLE>
<CAPTION>
                                                WEIGHTED
                                                AVERAGE
                                               REMAINING
           EXERCISE            NUMBER         CONTRACTUAL            OPTIONS
            PRICES          OUTSTANDING       LIFE (YEARS)         EXERCISABLE
            ------          -----------       ------------         -----------
<S>                         <C>               <C>                  <C>
           $8.3750             22,000             6.85                22,000
            5.3750             41,000             6.50                41,000
            4.3750             60,000             6.22                60,000
            2.7500             34,000             5.84                34,000
            2.5625             35,333             5.41                35,333
            2.6875             70,000             5.11                70,000
            5.2500             48,000             4.24                48,000
            8.2500             30,000             2.32                20,000
            8.0000            229,000             7.29               152,676
            7.0000             10,000             7.55                 6,666
            3.9375            210,000             8.10                70,000
            8.0000            450,000             9.11                    --
            4.2500            244,499             9.85                    --
            3.9375             50,000             9.11                    --
                          -----------                            -----------
                            1,533,832                                559,675
                          ===========                            ===========
</TABLE>

        Stock appreciation rights ("SAR's") may be granted in combination with
options or on a stand-alone basis. SAR's permit the holder to receive shares of
stock, cash or a combination of shares and cash based upon by the difference
between the option price and the fair value of the Common Stock on the date of
exercise. Upon exercise of a SAR granted in combination with an option, the
related option is canceled. At December 31, 2000, no SAR's had been granted.

        Rights to purchase shares of Common Stock to be offered for direct sale
under the Plan must be at a purchase price equal to not less than 85% of the
fair value of the shares on the day preceding the date of grant. Purchase rights
are generally exercisable for a period of thirty days following the date of
grant. At December 31, 2000, no purchase rights had been granted.


                                      F-16
<PAGE>   38

1994 Stock Compensation Plan

        In July 1994, the Company instituted its 1994 Stock Compensation Plan
(which was amended in July 1999) for the purpose of compensating outside
directors by issuing them shares of the Company's Common Stock as part of their
directors' fees. A total of 50,000 shares are reserved for issuance pursuant to
this plan. A total of 30,000 shares have been issued to outside directors under
the plan.

12.     RELATED PARTY TRANSACTIONS

        Until December 3, 1999, the Company managed the operation of its
unconsolidated subsidiary, the Spectrum Club -- Manhattan Beach, of which it
owned a 46.1% interest. The Company received a fee of $33,322 per month plus
4.5% of the Club's gross revenues for managing this Club. The Company also
manages the operations of the Reebok Sports Club/NY and receives a fee of
approximately 5.87% of the gross monthly collections, as defined. Management
fees of $1.3 million, $1.4 million and $1.5 million relating to Reebok Sports
Club/NY were earned for the years ended December 31, 1998, 1999 and 2000. These
amounts are eliminated from income and expense in the presentation of the
Company's consolidated statement of operations.

        The Reebok Sports Club/NY pays rent to Millennium in the amount of $2.0
million per year, and the partnership agreement provides for a first priority
annual distribution of $3.0 to Millennium. The Company pays rent to Millennium
for The Sports Club/LA - Washington D.C. This Club opened in 2000 and rent paid
for that year was $500,000. All such payments are reflected as rent expense in
the consolidated statement of operations. The Company has entered into leases
with Millennium to develop Sports Clubs in San Francisco and Boston.

13.     CONCENTRATION OF CREDIT RISK

        The Company markets its products principally to customers in Southern
California, New York City, Washington D.C. and Las Vegas. Management performs
regular evaluations concerning the ability of its customers to satisfy their
obligations and records a provision for doubtful accounts based upon these
evaluations. The Company's credit losses for the periods presented are
insignificant and have not exceeded management's estimates.


                                      F-17
<PAGE>   39
14.     QUARTERLY SUMMARY OF INFORMATION (UNAUDITED)

        Summarized unaudited condensed quarterly financial data is as follows:

<TABLE>
<CAPTION>
                                                                                   2000
                                                   ----------------------------------------------------------------
                                                    MARCH 31          JUNE 30        SEPTEMBER 30       DECEMBER 31
                                                   ----------       ----------       ------------       -----------
                                                                               (IN THOUSANDS)
<S>                                                <C>              <C>              <C>                <C>
Net loss from operations:
    Revenues ................................      $   16,847       $   18,279       $     18,596       $    23,147
                                                   ==========       ==========       ============       ===========

    Net loss ................................      $   (2,176)      $   (1,583)      $     (2,214)      $    (6,414)
                                                   ==========       ==========       ============       ===========

Net loss per share:
    Basic ...................................      $    (0.12)      $    (0.09)      $      (0.12)      $     (0.36)
                                                   ==========       ==========       ============       ===========
    Diluted .................................      $    (0.12)      $    (0.09)      $      (0.12)      $     (0.36)
                                                   ==========       ==========       ============       ===========
</TABLE>


<TABLE>
<CAPTION>
                                                                               1999
                                                   ----------------------------------------------------------
                                                    MARCH 31       JUNE 30       SEPTEMBER 30     DECEMBER 31
                                                   ----------      ---------     ------------     -----------
                                                                            (IN THOUSANDS)
<S>                                                <C>             <C>           <C>              <C>
Net income from operations:
    Revenues ................................      $   21,834      $  22,203      $   22,664      $    20,624
                                                   ==========      =========      ==========      ===========

    Net income ..............................      $      551      $     299      $      153      $       307
                                                   ==========      =========      ==========      ===========

Net income per share:
    Basic ...................................      $     0.03      $    0.02      $     0.01      $      0.02
                                                   ==========      =========      ==========      ===========
    Diluted .................................      $     0.03      $    0.02      $     0.01      $      0.02
                                                   ==========      =========      ==========      ===========
</TABLE>

15.     SUBSEQUENT EVENTS

         The Company has entered into leases with Millennium relating to Sports
Clubs to be developed in San Francisco, Washington D.C. and Boston. On March 27,
2001, the leases were amended with Millennium's landlord contribution increasing
by $16.5 million in exchange for additional rent payments. In addition, after
the Company receives a management fee equal to 6% of all revenues, an amount
equal to its investment in the Club and an 11% annual return on the investment,
Millennium is entitled to receive a percentage of all additional cash flows from
each Club as additional rent. Millennium's percentage of the excess cash flow,
as defined, previously was 20% for each of these Clubs. Under the amended lease
agreements, their percentage increases to 25% for the Washington and Boston
Clubs and 60% for the San Francisco Club.

                                      F-18
<PAGE>   40

                          THE SPORTS CLUB COMPANY, INC.
                        VALUATION AND QUALIFYING ACCOUNTS
                    THREE-YEAR PERIOD ENDED DECEMBER 31, 2000
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                       BALANCE
                                          AT                                       BALANCE AT
                                       BEGINNING                                     END OF
DESCRIPTION                            OF PERIOD      ADDITIONS     DELETIONS        PERIOD
-----------                            ---------      ---------     ---------      ----------
<S>                                    <C>            <C>           <C>            <C>
Year ended December 31, 1998:
 Allowance for doubtful accounts       $ 385,000      $ 628,000     $ 798,000       $ 215,000
                                       =========      =========     =========       =========
Year ended December 31, 1999:
 Allowance for doubtful accounts       $ 215,000      $ 934,000     $ 807,000       $ 342,000
                                       =========      =========     =========       =========
Year ended December 31, 2000:
 Allowance for doubtful accounts       $ 342,000      $ 985,000     $ 656,000       $ 671,000
                                       =========      =========     =========       =========
</TABLE>


                                      F-19
<PAGE>   41


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        See the information set forth in the section entitled "Information About
Our Directors and Officers" in the Company's Proxy Statement for the 2001 Annual
Meeting of Stockholders to be filed with the Securities and Exchange Commission
within 120 days after the end of the Company's fiscal year ended December 31,
2000 (the "2001 Proxy Statement"), which is incorporated herein by reference,
and the information set forth in the section entitled "Executive Officers of the
Registrant" in Part I, Item 4A of this Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

        See the information set forth in the section entitled "Information About
Our Directors and Officers" in the 2001 Proxy Statement, which is incorporated
herein by reference.

ITEM 12. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        See the information set forth in the section entitled "Stock Ownership"
in the 2001 Proxy Statement, which is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        See information set forth in the section entitled "Description of
Transactions with Our Directors, Officers and Principal Stockholders" in the
2001 Proxy Statement, which is incorporated herein by reference.


                                       22
<PAGE>   42

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)     (1)     Financial Statements filed as part of this Report are listed in
                Item 8 of this Report.

        (2)     No financial schedules have been included because they are not
                applicable, not required or because required information is
                included in the consolidated financial statements or notes
                thereto.

        (3)     The following exhibits are filed as part of this Report.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER          EXHIBIT
------          -------
<S>             <C>
 3.1            Restated Certificate of Incorporation of the Registrant.*

 3.2            Bylaws of the Registrant.*

 3.3            Amendment to Bylaws dated February 1, 1995.**

 4.1            Specimen Common Stock Certificate.*

 4.2            Rights Agreement by and between the Registrant and American
                Stock Transfer & Trust dated as of October 6, 1998.++

 4.3            First Amendment to Rights Agreement by and between the
                Registrant and American Stock Transfer & Trust entered into as
                of February 18, 1999.+++

 4.4            Indenture by and among Registrant, U.S. Bank Trust National
                Association and the Subsidiary Guarantors referred to therein,
                dated as of April 1, 1999. ++++

 4.5            Registration Rights Agreement by and among the Registrant,
                Jeffries & Company, Inc. and CIBC Oppenheimer Corp., dated as of
                April 1, 1999. ++++

 4.6            Purchase Agreement by and among the Registrant, Jeffries &
                Company, Inc. and CIBC Oppenheimer Corp., dated March 29, 1999.
                ++++

 4.7            Second Amendment to Rights Agreement entered into as of the
                second day of July 1999.*****

 4.8            Third Amendment to Rights Agreement made and entered into as of
                April 27, 2000.

 9.1            Voting Agreement among D. Michael Talla, Nanette Pattee
                Francini, Mark S. Spino, Peter Feinstein, Philip J. Swain and FP
                II.*

10.1            1994 Stock Incentive Plan.*#

10.2            Form of Stock Option Agreement.*#

10.3            Form of Stock Purchase Agreement.*#

10.4            1994 Stock Compensation Plan.*#
</TABLE>


                                       23
<PAGE>   43

<TABLE>
<CAPTION>
EXHIBIT
NUMBER          EXHIBIT
------          -------
<S>             <C>
10.5            Form of Indemnification Agreement between the Registrant and its
                directors and certain officers.

10.6            Indemnification Agreement between the Registrant and D. Michael
                Talla.*

10.7            Indemnification Agreement between Registrant and Rex A.
                Licklider.*

10.8            Employment Agreement between Registrant and D. Michael Talla.*#

10.9            Employment Agreement between the Registrant and Nanette Pattee
                Francini.*#

10.10           Lease of premises for Reebok Sports Club/NY located at 160
                Columbus Avenue, New York 10023 dated June 3, 1992.*

10.11           Joint Venture Agreement for Sports Connection -- ES/MB between
                El Segundo-TDC, Ltd. and Continental El Segundo Corporation
                effective as of January 3, 1986.*

10.12           First Amendment to Joint Venture Agreement for Sports Connection
                -- ES/MB dated January 3, 1986.*

10.13           Restated Agreement of Limited Partnership of El Segundo-TDC,
                Ltd., as amended.*

10.14           Management Agreement effective as of June 3, 1992, between
                R-SC/NY, Ltd. And Pontius Realty, Inc.*

10.15           License Agreement between Reebok Fitness Centers, Inc. and
                R-SC/NY, Ltd. Dated June 3, 1992.*

10.16           Letter Agreement regarding R-SC/NY dated June 3, 1992.*

10.17           Club Management Contract for the Spectrum Club/Manhattan Beach
                dated January 3, 1986, as amended January 3, 1986 and September
                17, 1987 and as assigned June 30, 1992.*

10.18           Memorandum of Agreement between Reebok Fitness Centers, Inc. and
                the Company dated as of June 3, 1992.*

10.19           Seventh Amendment and Restated Agreement of Limited Partnership
                of L.A./Irvine Sports Club, Ltd., a California Limited
                Partnership, dated as of October 12, 1994.*

10.20           First Amendment to Seventh Amended and Restated Agreement of
                Limited Partnership of L.A./Irvine Sports Club, Ltd., a
                California Limited Partnership, dated as of October 12, 1994.*

10.21           Form of Option Agreement by and between D. Michael Talla, an
                individual, TTO Partners, a California Limited Partnership, and
                Sports Club, Ltd., a California Corporation, relating to
                L.A./Irvine Sports Cub, Ltd., a California Limited Partnership.*

10.22           Amended and Restated Agreement of Limited Partnership of TTO
                Partners, a California Limited Partnership, dated June 30, 1992,
                as amended January 1, 1993, January 4, 1993 and February 12,
                1994 and as assigned January 1, 1993.*
</TABLE>


                                       24
<PAGE>   44

<TABLE>
<CAPTION>
EXHIBIT
NUMBER          EXHIBIT
------          -------
<S>             <C>
10.23           First Amended and Restated Agreement of Limited Partnership of
                Reebok-Sports Club/NY, Ltd. Dated as of October 12, 1994.*

10.24           Letter Agreement by and between Reebok Fitness Centers, Inc. and
                the Company dated October 12, 1994.*

10.25           Amendment to First Amended and Restated Agreement of Limited
                Partnership of Reebok-Sports Club/NY, Ltd. dated as of October
                12, 1994.*

10.26           Letter Agreement by and between Reebok Fitness Centers, Inc. and
                the Company, which became effective on October 29, 1994.*

10.27           License Agreement by and between Reebok Fitness Centers, Inc.
                and the Company, which became effective on October 20, 1994.*

10.28           401-K Profit Sharing Plan and related Group Annuity Contract No.
                GA-P K522 and Group Separate Account Annuity contract No. GA-P
                K523, both with Nationwide Life Insurance Company with an
                effective date of February 1, 1996.**

10.29           Agreement by and among Reebok-Sports Club/NY Ltd., Talla New
                York, Inc., RFC, Inc., LMP Health Club Co., Millennium
                Entertainment Partners, L.P. and Registrant dated as of December
                30, 1996.**

10.30           Letter Agreement between Millennium Entertainment Partners, L.P.
                and the Registrant dated as of March 13, 1997.**

10.31           First Amendment to Option Agreement between D. Michael Talla and
                TTO Partners dated May 27, 1997.***

10.32           Modification to the March 13, 1997 letter between Millennium
                Entertainment Partners, L.P. and the Registrant dated June 10,
                1997.***

10.33           Letter Agreement between Millennium Entertainment Partners, L.P.
                and the Registrant dated December 29, 1997.+

10.34           Amendment of Lease between Lincoln Metrocenter Partners, L.P.
                and Reebok-Sports Club/NY Ltd. As of January 31, 1998.***

10.35           Lease Agreement between RCPI Trust and the Registrant as of
                February 27, 1998.****

10.36           Amended and Restated Net Operating Lease among Hirschfeld Realty
                Club Corporation and 328 E. 61 Corp., and Vertical Fitness and
                Racquet Club, Ltd., dated March 26, 1985.****

10.37           Lease Modification Agreement by and among Hirschfeld Realty
                Corporation and 328 E. 61 Corp., and Vertical Fitness and
                Racquet Club, Ltd., dated July 1, 1990.****

10.38           Assignment and Assumption of Lease by and between Vertical
                Fitness and Racquet Club, Ltd., and Bally Entertainment
                Corporation dated January 8, 1996.****

10.39           Assignment of Lease executed by Hilton Hotels Corporation, as
                successor to tenant, and agreed to and accepted by the
                Registrant, dated April 15, 1998.****
</TABLE>


                                       25
<PAGE>   45

<TABLE>
<CAPTION>
EXHIBIT
NUMBER          EXHIBIT
------          -------
<S>             <C>
10.40           Second Amendment to Amended and Restated Net Operating Lease by
                and among Hirschfeld Realty Club Corporation and 328 E. 61
                Corp., and the Registrant dated April 15, 1998.****

10.41           Letter Agreement among the Registrant and Rex A. Licklider and
                D. Michael Talla dated March 31, 1998.****

10.42           Asset Purchase Agreement between Hilton Hotels Corporation and
                RM Sports Club, Inc. dated as of April 1, 1998.****

10.43           Assignment and Assumption of Asset Purchase Agreement between RM
                Sports Club, Inc. and the Registrant entered into as of April 1,
                1998.****

10.44           Note Payable issued by the Registrant to Hilton Hotels
                Corporation dated April 15, 1998.****

10.45           Amended and Restated 1994 Stock Incentive Plan as of June 2,
                1998.#****

10.46           Third Amended and Restated Loan Agreement between the Registrant
                and certain of its subsidiaries and Comerica Bank -- California
                dated as of February 1, 1999.****

10.47           First Amendment to Third Amended and Restated Loan Agreement
                between the Registrant and certain of its subsidiaries and
                Comerica Bank -- California dated as of February 1, 1999.****

10.48           Employment Agreement between the Registrant and John Gibbons
                dated October 16, 1998.#****

10.49           Settlement Agreement and Mutual Release among the Registrant, RM
                Sports Club, Inc. and Bally Total Fitness Holding Corporation
                made as of December 31, 1998.****

10.50           Letter Agreement between the Registrant and Millennium Partners
                LLC dated as of October 27, 1998.****

10.51           Participation Agreement between the Registrant and Millennium
                Partners LLC, dated as of October 27, 1998.****

10.52           First Amendment to Lease between RCPI Trust and the Registrant
                dated October 30, 1998.****

10.53           Second Amendment to Lease between RCPI Trust and the Registrant
                dated March 4, 1999.****

10.54           Lease between CB-1 Entertainment Partners LP and S.F. Sports
                Club, Inc. dated June 1, 1997.****

10.55           Lease between 2200 M Street LLC and Washington D.C. Sports Club,
                Inc. dated March 1999.****

10.56           Fourth Amended and Restated Loan Agreement by and among the
                Registrant, certain of its subsidiaries and Comerica
                Bank-California, dated April 1, 1999. ++++
</TABLE>


                                       26
<PAGE>   46

<TABLE>
<CAPTION>
EXHIBIT
NUMBER          EXHIBIT
------          -------
<S>             <C>
10.57           Intercreditor Agreement by and among the Registrant, certain of
                its subsidiaries, Comerica Bank-California and U.S. Bank Trust
                National Association, dated April 1, 1999. ++++

10.58           Disbursement Agreement between U.S. Bank Trust National
                Association and the Registrant and certain of its subsidiaries
                dated as of April 1, 1999. ++++

10.59           Stock Purchase Agreement dated September 16, 1999 by and among
                Racquetball and Fitness Clubs, Inc., The Spectrum Club Company,
                Inc., Canoga Agoura Spectrum Club, Inc., Spectrum Club, Inc.,
                Spectrum Club Anaheim, El Segundo - TDC, Ltd., TVE, Inc. and the
                Registrant. +++++

10.60           Amendment #1 to the Stock Purchase Agreement dated September 16,
                1999 by and among Racquetball and Fitness Clubs, Inc., The
                Spectrum Club Company, Inc., Canoga Agoura Spectrum Club, Inc.,
                Spectrum Club Anaheim, El Segundo - TDC, Ltd., TVE, Inc. and the
                Registrant. +++++

10.61           Amended and Restated 1994 Stock Compensation Plan. #*****

10.62           Lease Agreement as of September 24, 1999 between The Spectrum
                Club Company, Inc. and West Hollywood Property Limited
                Partnership and 2400 Willow Lane Associates Limited
                Partnership.*****

10.63           Lease Agreement as of November 5, 1999 by and between New
                Commonwealth Center Limited Partnership and Washington D.C.
                Sports Club, Inc.*****

10.64           Separation from Employment Agreement made as of February 11,
                2000 by and between the Registrant and John M. Gibbons. #*****

10.65           Letter Agreement dated March 11, 1999 amending the October 27,
                1998 Letter Agreement between the Registrant and Millennium
                Partners, LLC.*****

10.66           Settlement Agreement and Mutual Release entered November 16,
                1999 between OTR, the Registrant and Spectrum Liquidating
                Corp.*****

10.67           Amendment adopted November 4, 1999 to the Registrant's 1994
                Stock Incentive Plan. #*****

10.68           Amendment adopted February 9, 2000 to the Registrant's 401(k)
                Profit Sharing Plan.*****

10.69           Certificate representing Series "B" Senior Secured Notes.*****

10.70           First Amendment to Fourth Amended and Restated Loan Agreement
                among the Registrant and certain of its subsidiaries and
                Comerica Bank - California as of December 3, 1999.*****

10.71           Form of The Sports Club Membership Agreements.*****

10.72           Transition Services Agreement made as of December 3, 1999 by and
                among the Registrant and Racquetball & Fitness Clubs, Inc.*****

10.73            Second Amendment to Fourth Amended and Restated Loan Agreement
                among the Registrant and certain of its subsidiaries and
                Comerica Bank-California as of August 10, 2000.
</TABLE>


                                       27
<PAGE>   47

<TABLE>
<CAPTION>
EXHIBIT
NUMBER          EXHIBIT
------          -------
<S>             <C>
10.74           Reaffirmation of Intercreditor and Subordination Agreement dated
                as of August 10, 2000 among the Registrant and certain of its
                subsidiaries and U.S. Bank Trust, National Association.

10.75           Amendment to 401(k) Profit Sharing Plan adopted November 6,
                2000.

10.76           First Supplemental Agreement of Lease made as of the 27th day of
                March, 2001 between CB-1 Entertainment Partners, LP and S.F.
                Sports Club, Inc.

10.77           First Supplemental Agreement of Lease made as of the 27th day of
                March 2001 between New Commonwealth Center Limited Partnership
                and Washington D.C. Sports Club, Inc.

10.78           First Supplemental Agreement of Lease made as of the 27th day of
                March 2001 between 2200 M Street LLC and Washington D.C. Sports
                Club, Inc.

21.1            Subsidiaries of the Registrant.

23.1            Consent of KPMG LLP.
</TABLE>

-------------

#       Compensation agreement of plan.

*       Incorporated by reference to the Registrant's Registration Statement of
        Form S-1, declared effective on October 13, 1994 (SEC file No.
        33-79552).

**      Incorporated by reference to the Registrant's Annual Report on Form
        10-K/A, filed with the Securities and Exchange Commission on October 14,
        1997 (SEC file No. 1-13290).

***     Incorporated by reference to the Registrant's Annual Report on Form
        10-K, filed with the Securities and Exchange Commission on February 26,
        1998 (SEC file No. 1-13290).

****    Incorporated by reference to the Registrant's Annual Report on Form
        10-K, filed with the Securities and Exchange Commission on March 25,
        1999 (SEC file No. 1-13290).

*****   Incorporated by reference to the Registrant's Annual Report on Form
        10-K, filed with the Securities and Exchange Commission on March 28,
        2000 (SEC file No 1-13290).

+       Incorporated by reference to the Registrant's Form 8-K, filed with the
        Securities and Exchange Commission on January 15, 1998 (SEC file No.
        1-13290).

++      Incorporated by reference to the Registrant's Form 8-K, filed with the
        Securities and Exchange Commission on October 6, 1998 (SEC file No.
        1-13290).

+++     Incorporated by reference to the Registrant's Form 8-K, filed with the
        Securities and Exchange Commission on March 15, 1999 (SEC file No.
        1-13290).

++++    Incorporated by reference to the Registrant's Form 8-K, filed with the
        Securities and Exchange Commission on April 14, 1999 (SEC file No.
        1-13290).

+++++   Incorporated by reference to the Registrant's Form 8-K, filed with the
        Securities and Exchange Commission on October 5, 1999 (SEC file No.
        1-13290).


                                       28
<PAGE>   48

(b)     Reports on Form 8-K

        The following reports on Form 8-K were filed from October 1, 2000
        through the date of this report: NONE.


(c)     Exhibits

Index to Exhibits


<TABLE>
<CAPTION>
EXHIBIT
NUMBER          EXHIBIT
------          -------
<S>             <C>
4.8             Third Amendment to Rights Agreement made and entered into as of
                April 27, 2000.

10.73           Second Amendment to Fourth Amended and Restated Loan Agreement
                among the Registrant and certain of its subsidiaries and
                Comerica Bank-California as of August 10, 2000.

10.74           Reaffirmation of Intercreditor and Subordination Agreement dated
                as of August 10, 2000 among the Registrant and certain of its
                subsidiaries and U.S. Bank Trust, National Association.

10.75           Amendment to 401(k) Profit Sharing Plan adopted November 6,
                2000.

10.76           First Supplemental Agreement of Lease made as of the 27th day of
                March, 2001 between CB-1 Entertainment Partners, LP and S.F.
                Sports Club, Inc.

10.77           First Supplemental Agreement of Lease made as of the 27th day of
                March 2001 between New Commonwealth Center Limited Partnership
                and Washington D.C. Sports Club, Inc.

10.78           First Supplemental Agreement of Lease made as of the 27th day of
                March, 2001 between 2200 M Street LLC and Washington D.C. Sports
                Club, Inc.

21.1            Subsidiaries of the Registrant.

23.1            Consent of KPMG LLP.
</TABLE>


                                       29
<PAGE>   49

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act
of 1934, the Registrant has duly caused this Annual Report on Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized, on the 30th
day of March, 2001.


                                        THE SPORTS CLUB COMPANY, INC.



                                        /s/ D. Michael Talla
                                        ----------------------------------------
                                        D. Michael Talla,
                                        Co-Chief Executive Officer

                                        /s/ Rex A. Licklider
                                        ----------------------------------------
                                        Rex A. Licklider
                                        Co-Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual
Report on Form 10-K has been signed below by the following persons on behalf of
the Registrant, in the capacities and on the date indicated.


<TABLE>
<CAPTION>
Signature                               Title                              Date
---------                               -----                              ----
<S>                                     <C>                                <C>
/s/ D. Michael Talla                    Chairman of the Board              March 30, 2001
-------------------------------------   and Co-Chief Executive Officer
D. Michael Talla

/s/ Rex A. Licklider                    Vice Chairman of the Board         March 30, 2001
-------------------------------------   and Co-Chief Executive Officer
Rex A. Licklider

/s/ Timothy O'Brien                     Chief Financial Officer            March 30, 2001
-------------------------------------   (Principal Financial and
Timothy M. O'Brien                      Accounting Officer)

/s/ Brian J. Collins                    Director                           March 30, 2001
-------------------------------------
Brian J. Collins

/s/ Nanette Pattee Francini             Director                           March 30, 2001
-------------------------------------
Nanette Pattee Francini

/s/ Andrew L. Turner                    Director                           March 30, 2001
-------------------------------------
Andrew L. Turner

/s/ Dennison Veru                       Director                           March 30, 2001
-------------------------------------
Dennison Veru
</TABLE>

                                     30