**Exhibit 99.1****Item 9A.*****Controls and Procedures*****(a)** **Evaluation of Disclosure Controls and Procedures**     Management of the Company, with the participation of the principal executive officer and theprincipal financial officer, evaluated the effectiveness of the design and operation of theCompany’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of theExchange Act), as of December 31, 2005. Based upon this evaluation, the principal executive officerand the principal financial officer have concluded that the Company’s disclosure controls andprocedures were not effective as of December 31, 2005 due to the material weaknesses in internalcontrol over financial reporting described below (Item 9A(b)).**(b)** **Management’s Report on Internal Control Over Financial Reporting**     Management of the Company is responsible for establishing and maintaining adequate internalcontrol over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Because ofits inherent limitations, internal control over financial reporting may not prevent or detectmisstatements. Also, projections of any evaluation of effectiveness to future periods are subjectto the risk that controls may become inadequate because of changes in conditions, or that thedegree of compliance with the policies or procedures may deteriorate.     A material weakness represents a significant deficiency (as defined in the Public CompanyAccounting Oversight Board’s Auditing Standard No. 2), or a combination of significantdeficiencies, that results in more than a remote likelihood that a material misstatement of theannual or interim financial statements will not be prevented or detected on a timely basis.     Management conducted an assessment of the effectiveness of the Company’s internal control overfinancial reporting as of December 31, 2005 based on the framework published by the Committee ofSponsoring Organizations of the Treadway Commission, *Internal Control — Integrated Framework.*Management has identified the following material weaknesses in the Company’s internal control overfinancial reporting as of December 31, 2005: 1. *Deficiencies in the Company’s control environment.*The Company did not maintain aneffective control environment as defined in the *Internal Control-Integrated Framework*published by the Committee of Sponsoring Organizations of the Treadway Commission.Specifically, the following control deficiencies were identified: **•** The Company’s finance and accounting resources were insufficient in number,insufficiently trained, and authority and responsibility were not properly
 

 
   delegated as of December 31, 2005. Accordingly, in certain circumstances, accountingcontrol activities were not performed consistently, accurately, and timely, and aneffective review of technical accounting matters was not performed;  **•** Management did not have acceptable and clearly communicated policies reflectingan appropriate management attitude towards financial reporting, and the financialreporting function and did not have sufficient controls in place to ensure theappropriate selection of and modifications to accounting policies;  **•** The Company did not establish effective polices and procedures to address therisk of management override in the financial reporting process; and  **•** Management did not have effective processes to ensure that relevant informationwas communicated in a timely manner from the Company’s regional service center,property management department, information technology group, human resources, salesand marketing, and legal department to the Company’s corporate accounting department.     These deficiencies resulted in material misstatements in the Company’s interim consolidatedfinancial statements for the periods ended March 31, 2005, June 30, 2005, and September 30, 2005,all of which have been restated, and in its preliminary 2005 annual consolidated financialstatements, which were corrected prior to issuance. These deficiencies resulted in more than aremote likelihood that a material misstatement of the Company’s annual or interim financialstatements would not be prevented or detected, and contributed to the development of other materialweaknesses described below.2. *Deficiencies in end-user computing controls.*The Company did not maintain adequate policiesand procedures regarding end-user computing. Specifically, controls over the access to, andcompleteness, accuracy, validity, and review of, certain spreadsheet information that supportsthe financial reporting process were either not designed appropriately or did not operate asdesigned.     These deficiencies resulted in material misstatements in the Company’s interim consolidatedfinancial statements for the periods ended March 31, 2005, June 30, 2005, and September 30, 2005,all of which have been restated, and in its preliminary 2005 annual consolidated financialstatements, which were corrected prior to issuance. These deficiencies resulted in more than aremote likelihood that a material misstatement of the Company’s annual or interim financialstatements would not be prevented or detected.3. *Inadequate controls associated with accounting for revenue.*The Company did not maintaineffective policies and procedures related to its accounting for revenue and did not employpersonnel with the appropriate level of technical knowledge and experience to prepare,document and review its accounting for revenue to ensure that such accounting complied withU.S. generally accepted accounting principles. This lack of
 

 
  effective policies and procedures and lack of knowledge and experience contributed to theCompany’s failure to: **•** Select and implement membership revenue accounting policies in accordance with U.S.generally accepted accounting principles;  **•** Effectively perform and document a periodic evaluation of the reasonableness ofassumptions with respect to the deferral of revenue associated with personal trainingservices;  **•** Establish procedures to identify and periodically assess promotional offers to ensurethat they were accounted for in accordance with U.S. generally accepted accountingprinciples;  **•** Establish procedures to identify and periodically assess changes to the Company’sprincipal member offers to ensure that they were accounted for in accordance with U.S.generally accepted accounting principles;  **•** Establish procedures to identify and assess the operational and accounting supportrequirements necessary to record the effects of new member offers on a timely basis inaccordance with U.S. generally accepted accounting principles;  **•** Establish procedures to identify and periodically assess revenue collections and memberattrition to ensure any changes or adjustments were accounted for in accordance with U.S.generally accepted accounting principles; and  **•** Execute policies and procedures to ensure that the financial reporting and disclosureobligations related to revenue recognition were appropriately understood and considered.     These deficiencies resulted in material misstatements in the Company’s interim consolidatedfinancial statements for the periods ended March 31, 2005, June 30, 2005, and September 30, 2005,all of which have been restated, and in its preliminary 2005 annual consolidated financialstatements, which were corrected prior to issuance. These deficiencies resulted in more than aremote likelihood that a material misstatement of the Company’s annual or interim financialstatements would not be prevented or detected.4. *Inadequate controls associated with accounting for fixed assets.*The Company did notmaintain effective policies and procedures related to its accounting for fixed assets and didnot employ personnel with the appropriate level of knowledge and experience to prepare,document and review its accounting for fixed assets to ensure that such accounting compliedwith U.S. generally accepted accounting principles. This lack of effective policies andprocedures and lack of knowledge and experience contributed to the Company’s failure to:
 

 
 **•** Select and implement fixed asset accounting policies in accordance with U.S. generallyaccepted accounting principles;  **•** Effectively perform and document procedures to periodically assess the valuation offixed assets;  **•** Effectively perform and document controls related to the ongoing monitoring of eventsthat might require interim impairment analysis;  **•** Effectively perform and document procedures to periodically review the valuation ofcapitalized costs incurred prior to the opening of a fitness center;  **•** Effectively perform and document a review of fixed asset depreciation;  **•** Effectively perform and document procedures to review capitalizable labor costs;  **•** Effectively reconcile the subsidiary fixed asset ledger to consolidated fixed assetinformation; and  **•** Execute policies and procedures to ensure that the financial reporting and disclosureobligations related to fixed assets were appropriately understood and considered.     These deficiencies resulted in material misstatements in the Company’s interim consolidatedfinancial statements for the periods ended March 31, 2005, June 30, 2005, and September 30, 2005,all of which have been restated, and in its preliminary 2005 annual consolidated financialstatements, which were corrected prior to issuance. These deficiencies resulted in more than aremote likelihood that a material misstatement of the Company’s annual or interim financialstatements would not be prevented or detected.5. *Inadequate controls associated with accounting for goodwill and other intangible assets.*TheCompany did not maintain effective policies and procedures related to its accounting forgoodwill and other intangible assets and did not employ personnel with the appropriate levelof knowledge and experience to prepare, document and review its accounting for goodwill andother intangible assets to ensure that such accounting complied with U.S. generally acceptedaccounting principles. This lack of effective policies and procedures and lack of knowledgeand experience contributed to the Company’s failure to: **•** Select and implement accounting policies in accordance with U.S. generally acceptedaccounting principles;  **•** Effectively identify, and allocate an appropriate portion of the cost of an acquisitionto, identifiable intangible assets in conjunction with its purchase business combinations;
 

 
 **•** Effectively perform and document procedures to periodically reassess the valuation ofgoodwill; and  **•** Execute policies and procedures to ensure that the financial reporting and disclosureobligations related to goodwill and other intangible assets were appropriately understoodand considered.     As a result of these deficiencies, there were misstatements in the Company’s consolidatedfinancial statements that were corrected prior to the issuance of the 2005 consolidated financialstatements. These deficiencies resulted in more than a remote likelihood that a materialmisstatement of the Company’s annual or interim financial statements would not be prevented ordetected.6. *Inadequate controls associated with accounting for leases.*The Company did not maintaineffective policies and procedures related to its accounting for leases and did not employpersonnel with the appropriate level of knowledge and experience to prepare, document andreview its accounting for leases to ensure that such accounting complied with U.S. generallyaccepted accounting principles. This lack of effective policies and procedures and lack ofknowledge and experience contributed to the Company’s failure to: **•** Perform and document procedures to record rent expense on a straight-line basis overthe lease term, when appropriate, and to record a related deferred rent obligation, inaccordance with U.S. generally accepted accounting principles;  **•** Perform and document procedures to ensure that leasehold improvements were properlydepreciated over the lesser of the economic useful life or the lease term;  **•** Perform and document procedures to ensure leases were appropriately accounted for ascapital or operating leases;  **•** Perform procedures to periodically review the accounting for landlord incentives;  **•** Design and perform policies and procedures relating to the identification, valuation,and disclosure of contingent liabilities related to lease guarantees; and  **•** Execute policies and procedures to ensure that the financial reporting and disclosureobligations related to leases were appropriately understood and considered.     As a result of these deficiencies, there were misstatements in the Company’s consolidatedfinancial statements that were corrected prior to the issuance of the 2005 consolidated financialstatements. These deficiencies resulted in more than a remote likelihood that a materialmisstatement of the Company’s annual or interim financial statements would not be prevented ordetected.
 

 
7. *Inadequate controls associated with accounting for accrued liabilities.*The Company did notmaintain effective policies and procedures related to its accounting for accrued liabilitiesand did not employ personnel with the appropriate level of knowledge and experience toprepare, document and review its accounting for accrued liabilities to ensure that suchaccounting complied with U.S. generally accepted accounting principles. This lack of effectivepolicies and procedures and lack of knowledge and experience contributed to the Company’sfailure to: **•** Effectively perform and document procedures to periodically evaluate the reasonablenessof assumptions used to estimate liabilities associated with workers compensation, healthcare, and other insured arrangements with retained risk;  **•** Perform and document procedures to periodically evaluate items that may meet thedefinition of unclaimed property, in order to properly value the Company’s escheatmentliability;  **•** Perform and document procedures to periodically evaluate liabilities related to theCompany’s obligation to former members to refund member fees in a future period;  **•** Perform and document a periodic assessment of the Company’s risk sharing obligationassociated with its transfers of obligatory member payments to third parties;  **•** Effectively perform and document procedures to reconcile commission and other payrollrelated liabilities to supporting detail;  **•** Effectively perform and document a review of expenses incurred in one period and paidin subsequent periods to ensure that the related accounting is reflected in the appropriateperiod; and  **•** Execute policies and procedures to ensure that the financial reporting and disclosureobligations related to accrued liabilities were appropriately understood and considered.     These deficiencies resulted in material misstatements in the Company’s interim consolidatedfinancial statements for the periods ended March 31, 2005, June 30, 2005, and September 30, 2005,all of which have been restated, and in its preliminary 2005 annual consolidated financialstatements, which were corrected prior to issuance. These deficiencies resulted in more than aremote likelihood that a material misstatement of the Company’s annual or interim financialstatements would not be prevented or detected.8. *Inadequate controls associated with accounting for computer software.*The Company did notmaintain adequate policies and procedures or employ sufficiently knowledgeable and experiencedpersonnel to ensure appropriate application of Statement of Position (“SOP”) 98-1, *Accountingfor the Costs of Computer Software*
 

 
  *Developed or Obtained for Internal Use.*This lack of effective policies and procedures and lackof knowledge and experience contributed to the Company’s failure to select and implement softwareaccounting policies in accordance with U.S. generally accepted accounting principles, andeffectively perform and document procedures to periodically reassess their valuation.     As a result of these deficiencies, there were misstatements in the Company’s consolidatedfinancial statements that were corrected prior to the issuance of the 2005 consolidated financialstatements. These deficiencies resulted in more than a remote likelihood that a materialmisstatement of the Company’s annual or interim financial statements would not be prevented ordetected.9. *Inadequate Information Technology Development and Maintenance Controls.*The Company did notexecute its policies and procedures with respect to program development to ensure that certainfinancial reports that impact the Company’s revenue recognition were developed and maintainedappropriately. Specifically, the Company failed to apply its policies and procedures to ensureeffective migration from a testing environment into a production environment, and as a result,controls over the access to, and completeness, accuracy and validity of, these reports eitherwere not designed appropriately or did not operate as designed.     These deficiencies resulted in material misstatements in the Company’s interim consolidatedfinancial statements for the periods ended March 31, 2005, June 30, 2005, and September 30, 2005,all of which have been restated, and in its preliminary 2005 annual consolidated financialstatements, which were corrected prior to issuance. These deficiencies resulted in more than aremote likelihood that a material misstatement of the Company’s annual or interim financialstatements would not be prevented or detected.10. *Deficiencies in equity compensation monitoring and review procedures.*The Company did notmaintain adequate policies and procedures over the administration of its equity compensationprograms and did not employ personnel with the appropriate level of knowledge and experienceto prepare, document and review its accounting for the equity compensation programs to ensurethat such accounting complied with U.S. generally accepted accounting principles.Specifically, the Company did not have: **•** Adequate policies and procedures to identify, periodically assess, and respond toevents that give rise to changes in the rights or obligations of equity compensationholders; and  **•** Effective policies and procedures to ensure that the financial reporting and disclosureobligations related to the acceleration of vesting and the exercise of expired options wereappropriately understood and considered.     As a result of these deficiencies, there were misstatements in the Company’s consolidatedfinancial statements that were corrected prior to the issuance of the 2005
 

 
consolidated financial statements. These deficiencies resulted in more than a remotelikelihood that a material misstatement of the Company’s annual or interim financial statementswould not be prevented or detected.11. *Inadequate financial statement preparation and review procedures.*The Company did notmaintain effective policies and procedures related to its financial statement preparation andreview procedures and did not employ personnel with the appropriate level of knowledge andexperience to ensure that accurate and reliable interim and annual consolidated financialstatements were prepared and reviewed on a timely basis. Specifically, the Company did nothave: **•** Effective reconciliation of significant balance sheet accounts;  **•** Effective reconciliation of subsidiaries’ accounts to consolidating financialinformation;  **•** Effective reconciliation and conversion of foreign financial statements to consolidatedfinancial information;  **•** Policies and procedures relating to the origination and maintenance of contemporaneousdocumentation to support key judgments made in connection with the selection of significantaccounting policies or the application of judgments within its financial reporting process;  **•** Policies and procedures related to the identification and disclosure of subsequentevents;  **•** Policies and procedures related to the review of complex or unusual transactions;  **•** Adequate policies and procedures related to the review and approval of accountingentries;  **•** Sufficient retention policies with respect to historical documentation that formed thebasis of prior accounting judgments that have continuing relevance; and  **•** Effective review of financial statement information, and related presentation anddisclosure requirements.     These deficiencies resulted in material misstatements in the Company’s interim consolidatedfinancial statements for the periods ended March 31, 2005, June 30, 2005, and September 30, 2005,all of which have been restated, and in its preliminary 2005 annual consolidated financialstatements, which were corrected prior to issuance. These deficiencies resulted in more than aremote likelihood that a material misstatement of the Company’s annual or interim financialstatements would not be prevented or detected.
 

 
     As a result of the aforementioned material weaknesses, management has concluded that theCompany did not maintain effective internal control over financial reporting as of December 31,2005.     KPMG LLP, the Company’s independent registered public accounting firm, has issued an auditreport on management’s assessment of the Company’s internal control over financial reporting, whichis included herein (Item 9A(e)).**(c)** **Changes in Internal Control Over Financial Reporting**     There were no changes in the Company’s internal control over financial reporting that occurredduring the fourth quarter of 2005 that have materially affected, or are reasonably likely tomaterially affect, the Company’s internal control over financial reporting.**(d)** **Remediation Efforts to Address Material Weaknesses in Internal Control Over FinancialReporting**     The Company is developing a formal remediation plan and intends to make notable progress onremediation during 2006 and to complete the remediation of the majority of these weaknesses byDecember 31, 2007. Further, remediation includes the verification through management testing thatthe revised control procedures are operating effectively, which may extend the remediation timelineif these tests indicate that control deficiencies remain.     The following are the more significant factors that impacted our inability to remediate theseweaknesses as of December 31, 2005: **•** The priority assigned to the audit and significant effort involved in completing there-audit of the years ending December 31, 2002 and 2003, and audit of the year endingDecember 31, 2004, completed on November 30, 2005;  **•** The number and severity of the multiple material weaknesses above, which requiredramatic changes in accounting processes, organization, and systems; and  **•** The understaffing of our Accounting Department.     In order to remediate the aforementioned material weaknesses in internal control overfinancial reporting and improve the integrity of financial reporting processes, management hasimplemented or is in the process of implementing the following actions: *1)* *Control Environment*  **•** During 2005 and 2006, the number of personnel positions and expenditures for the IT andAccounting Departments were increased. However, attrition negatively impacted our staffinglevel in the Accounting Department. We continue to evaluate staffing needs andorganizational structure in both areas.
 

 
 **•** The Company plans to complete its Accounting Policies and Procedures Manual (the“Manual”). Although the Manual was improved during 2005, as of December 31, 2005 the Manualwas neither complete nor approved by the appropriate senior financial officers.  **•** The Company plans to establish an accounting training program and conduct formalperformance evaluations of key personnel during 2006.  *2)* *Spreadsheets and End-User Computing*  **•** The Company plans to develop policies and procedures regarding the required controlsover spreadsheets and other end-user applications, including (but not limited to)development, change control, access control, and record retention.  **•** The Company plans to develop an inventory of spreadsheets and other end-userapplications to help determine the scope and priority of the necessary remediation.  **•** The Company plans to conduct an evaluation of specific end-user applications to developand execute specific remediation plans necessary to comply with the above policies andprocedures.
 

 
 *3)* *Revenue Recognition*  **•** The Company plans to further enhance its revenue recognition methodology, specificallyimproving the design and operating effectiveness of certain related controls, including thereconciliation of the deferred revenue liability balance and monitoring of actual versusexpected collection and attrition patterns. *4)* *Fixed Assets*  **•** The Company plans to implement on-going monitoring of fixed assets to identify andassess potential impairment events.  **•** The Company plans to enhance reconciliation procedures and analyses related todepreciation and fixed asset accounts, to ensure accounts are reconciled and analyzed on atimely basis, the reconciliations are independently reviewed, and any reconciling items arecleared on timely basis.  *5)* *Goodwill and Intangible Assets*  **•** The Company intends to conduct a timely review and evaluation of the goodwill andintangible assets accounting policies and procedures.  *6)* *Leases*  **•** The Company plans to further enhance the policies and procedures related to the reviewand approval of deferred rent obligations.  **•** The Company plans to further enhance the policies and procedures related to the reviewand approval of landlord incentives.  *7)* *Accrued Liabilities*  **•** The Company plans to develop a monitoring program to periodically review itsassumptions with respect to workers compensation, health care, and general liability riskexposures.  **•** The Company plans to further enhance the policies and procedures to identify and valueescheatment obligations, including the identification of escheatable property. The Companyengaged a third party to help value the escheatment obligation.  **•** The Company plans to further enhance the supporting analyses regarding obligations torefund certain membership fees in future periods.  **•** The Company plans to establish a periodic assessment of its risk sharing obligationsregarding transfers of obligatory membership payments to third parties.
 

 
 **•** The Company plans to enhance the reconciliation of commission and other payroll-relatedliabilities to supporting detail.  *8)* *Capitalized Software*  **•** The Company plans to further enhance its processes to help ensure that the review andapproval of supporting documentation regarding capitalized expenses are appropriate.  *9)* *Revenue Databases*  **•** Extensive testing of the accuracy and completeness of reporting generated from keysales systems was completed during 2006. These reports are key inputs into the Company’sdeferred revenue model and revenue recognition process. The Company plans to enhance itsreview processes to help ensure that inclusions and exclusions from these revenue reportsare complete and accurate. The Company plans to assess the degree of automation feasiblefor this reporting, which presently requires substantial manual intervention. Based on thisassessment, the degree to which the procedures currently performed in a test environmentcan be migrated to a properly controlled production environment will then be determined.  *10)* *Equity Compensation*  **•** The Company plans to develop a control checklist and additional review procedures withrespect to the equity compensation plans to ensure that any events under the equitycompensation plans are properly recorded.  *11)* *Financial Statement Preparation and Review Procedures*  **•** The Company plans to modify its account reconciliation process to ensure that accountsare reconciled on a timely basis, the reconciliation is independently reviewed, anyreconciling items are cleared on a timely basis, and the accuracy of the underlyingsupporting detail, or sub ledger, has been substantiated and independently reviewed.Additional resources will be deployed and work remains to ensure this process is executedon a consistent and timely basis.  **•** The Company plans to enhance documentation of assumptions and computations of criticalestimates.  **•** The Company plans to develop a more formalized process for the identification ofsubsequent events and complex or unusual transactions. The Disclosure Committee and variousongoing management meetings are presently used to identify and address such topics.  **•** The Company plans to improve its review process for standard journal entries. TheCompany is developing a process to identify and review significant post-closing
 

 
   adjustments and any quarterly or year-end adjustments. Such entries will be specificallyidentified and reported to the principal financial officer and Disclosure Committee forindependent review.  **•** The Company plans to develop a disclosure checklist to help ensure its disclosurerequirements are met.  **•** The Company plans to complete the financial statements on an expedited basis, providingadditional time for the Company’s senior managers, Disclosure Committee and counsel toreview the financial statements to be included in the Company’s Forms 10-K and 10-Q to helpensure appropriate disclosure.     Additionally, in an effort to improve internal control over financial reporting, the Companyis now emphasizing the importance of establishing the appropriate environment in relation toaccounting, financial reporting, and internal control over financial reporting. Management plans toformalize its 2006 remediation plan, including specific executive sponsorship for key deficienciesto help create and implement new policies and procedures where material weaknesses or significantdeficiencies exist. The Audit Committee will be updated at least quarterly on remediation progress,with additional updates as deemed necessary.     It should be noted the Company’s management, including the principal executive officer and theprincipal financial officer, do not expect that the Company’s internal controls will necessarilyprevent all error and all fraud, even after completion of the described remediation efforts. Acontrol system, no matter how well conceived or operated, can provide only reasonable, notabsolute, assurance that the objectives of the control system are met. Further, the design of acontrol system must reflect the fact that there are resource constraints, and the benefits ofcontrols must be considered relative to their costs.     Because of the inherent limitations in all control systems, no evaluation of controls can provideabsolute assurance that all control issues and instances of fraud, if any, within the Company havebeen detected. These inherent limitations include the realities that judgments in decision-makingcan be faulty, and that breakdowns can occur because of simple error or mistake. Additionally,controls can be circumvented by the individual acts of some persons, by collusion of two or morepeople, or by management override of controls. The design of any system of controls is based inpart upon certain assumptions about the likelihood of future events, and there can be no assurancethat any design will succeed in achieving our stated goals under all potential future conditions;over time, controls may become inadequate because of changes in conditions, or the degree ofcompliance with the policies or procedures may deteriorate. Because of the inherent limitations ina cost-effective control system, misstatements due to error or fraud may occur and not be detected.