<PAGE>

================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

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

                                    FORM 10-Q

               QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2005

                          COMMISSION FILE NO. 000-25064

                                HEALTH FITNESS CORPORATION

             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

               MINNESOTA                                 NO. 41-1580506
    (STATE OR OTHER JURISDICTION OF                      (IRS EMPLOYER
     INCORPORATION OR ORGANIZATION)                     IDENTIFICATION NO.)

           3600 AMERICAN BOULEVARD WEST, BLOOMINGTON, MINNESOTA 55431
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                  REGISTRANT'S TELEPHONE NUMBER (952) 831-6830

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

      Indicate by check mark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the 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 whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).

YES [ ] NO [X]

      The number of shares outstanding of the registrant's common stock as of
August 15, 2005 was: Common Stock, $0.01 par value, 12,839,217 shares

================================================================================

<PAGE>

                           HEALTH FITNESS CORPORATION
                        CONSOLIDATED FINANCIAL STATEMENTS

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                PAGE
<S>                                                                                             <C>
PART I.       FINANCIAL INFORMATION

    Item 1.   Consolidated Financial Statements (unaudited)

                 Consolidated Balance Sheets as of June 30, 2005 and                             3
                 December 31, 2004

                 Consolidated Statements of Earnings for the three and six                       4
                 months ended June 30, 2005 and 2004

                 Consolidated Statements of Cash Flows for the six                               5

                 months ended June 30, 2005 and 2004

                 Notes to Consolidated Financial Statements                                      6

    Item 2.   Management's Discussion and Analysis of Financial Condition                       11
              and Results of Operations

    Item 3.   Quantitative and Qualitative Disclosures About Market Risk                        17

    Item 4.   Controls and Procedures                                                           17

PART II.      OTHER INFORMATION                                                                 18

    Item 1.  Legal Proceedings

    Item 2.      Unregistered Sales of Equity Securities and Use of Proceeds

    Item 3.      Defaults Upon Senior Securities

    Item 4.      Submission of Matters to a Vote of Security Holders

    Item 5       Other Information

    Item 6.      Exhibits

    Signatures                                                                                  19

    Exhibit Index                                                                               20
</TABLE>

                                       2

<PAGE>

                           HEALTH FITNESS CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                        June 30,        December 31,
                                                                                          2005              2004
                                                                                    -------------    ---------------
<S>                                                                                 <C>              <C>
ASSETS
CURRENT ASSETS
    Cash                                                                            $      20,155    $       241,302
    Trade and other accounts receivable, less allowances of $208,500 and                8,092,592          8,147,430
       $210,700
    Prepaid expenses and other                                                            427,353            213,954
    Deferred tax assets                                                                   911,549          1,660,100
                                                                                    -------------    ---------------

           Total current assets                                                         9,451,649         10,262,786

PROPERTY AND EQUIPMENT, net                                                               145,993            150,308

OTHER ASSETS
    Goodwill                                                                            9,022,501          9,022,501
    Customer contracts, less accumulated amortization of $1,279,900 and                   450,139            854,306
       $875,700
    Trademark, less accumulated amortization of $111,000 and $75,800                      246,080            274,167
    Other intangible assets, less accumulated amortization of $84,600 and                  13,448             61,493
       $81,300
    Deferred tax assets                                                                   306,700            221,400
    Other                                                                                  66,307             87,015
                                                                                    -------------    ---------------
                                                                                    $  19,702,817    $    20,933,976
                                                                                    =============    ===============
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Trade accounts payable                                                          $     595,321    $       840,155
    Accrued salaries, wages, and payroll taxes                                          2,356,395          2,768,734
    Other accrued liabilities                                                             550,743            495,770
    Accrued self funded insurance                                                         137,143            225,500
    Deferred revenue                                                                    1,826,490          1,977,093
                                                                                    -------------    ---------------
           Total current liabilities                                                    5,466,092          6,307,252

LONG-TERM OBLIGATIONS                                                                      22,774          1,612,759

COMMITMENTS AND CONTINGENCIES                                                                   -                  -

CUMULATIVE CONVERTIBLE PREFERRED STOCK, 10,000,000 shares
    authorized, 1,093,699 and 1,063,945 issued and outstanding                          1,542,896          1,530,232

STOCKHOLDERS' EQUITY
    Common stock, $0.01 par value; 50,000,000 shares authorized;
       12,652,370 and 12,582,170 shares issued and outstanding                            126,524            125,822
    Additional paid-in capital                                                         17,895,457         17,836,675
    Accumulated comprehensive income                                                        4,180              2,459
    Accumulated deficit                                                                (5,355,106)        (6,481,223)
                                                                                    -------------    ---------------
                                                                                       12,671,055         11,483,733
                                                                                    -------------    ---------------
                                                                                    $  19,702,817    $    20,933,976
                                                                                    =============    ===============
</TABLE>

See notes to consolidated financial statements.

                                       3

<PAGE>

                           HEALTH FITNESS CORPORATION
                       CONSOLIDATED STATEMENTS OF EARNINGS

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                          Three Months Ended                   Six Months Ended
                                                               June 30,                            June 30,
                                                   ------------------------------      ------------------------------
                                                       2005              2004              2005              2004
                                                   ------------      ------------      ------------      ------------
<S>                                                <C>               <C>               <C>               <C>
REVENUE                                            $ 13,678,615      $ 13,129,715      $ 27,143,716      $ 25,796,089

COSTS OF REVENUE                                     10,227,999         9,687,357        20,251,298        19,266,794
                                                   ------------      ------------      ------------      ------------
GROSS PROFIT                                          3,450,616         3,442,358         6,892,418         6,529,295

OPERATING EXPENSES
    Salaries                                          1,406,562         1,429,569         2,794,485         2,772,278
    Other selling, general and administrative           942,631           823,504         1,679,497         1,653,610
    Amortization of acquired intangible assets          219,754           219,583           439,337           439,167
                                                   ------------      ------------      ------------      ------------
           Total operating expenses                   2,568,947         2,472,656         4,913,319         4,865,055
                                                   ------------      ------------      ------------      ------------
OPERATING INCOME                                        881,669           969,702         1,979,099         1,664,240

OTHER INCOME (EXPENSE)
    Interest expense                                    (16,326)         (128,344)          (28,249)         (262,596)
    Other, net                                             (340)              469            (1,990)            1,390
                                                   ------------      ------------      ------------      ------------
EARNINGS BEFORE INCOME TAXES                            865,003           841,827         1,948,860         1,403,034

INCOME TAX EXPENSE                                      345,220           342,873           779,543           552,373
                                                   ------------      ------------      ------------      ------------
NET EARNINGS                                            519,783           498,954         1,169,317           850,661

    Dividend to preferred shareholders                   21,600            28,200            43,200            43,200
                                                   ------------      ------------      -------------     ------------
NET EARNINGS APPLICABLE TO
    COMMON SHAREHOLDERS                            $    498,183      $    470,754      $  1,126,117      $    807,461
                                                   ============      ============      ============      ============
NET EARNINGS PER SHARE:
    Basic                                          $       0.04      $       0.04      $      0.09       $       0.06
    Diluted                                                0.03              0.03             0.07               0.05

WEIGHTED AVERAGE COMMON SHARES:
    Basic                                            12,652,370        12,483,979        12,636,465        12,447,374
    Diluted                                          16,618,997        16,066,003        16,617,853        16,054,047
</TABLE>

See notes to consolidated financial statements.

                                       4

<PAGE>

                           HEALTH FITNESS CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                       Six Months Ended
                                                                                           June 30,
                                                                                   2005              2004
<S>                                                                             <C>               <C>
CASH FLOWS  FROM OPERATING  ACTIVITIES:
   Net earnings                                                                 $  1,169,317      $    850,661
   Adjustments to reconcile net earnings to net cash provided by
     operating activities:
       Depreciation of property and equipment                                         39,066            48,643
       Amortization of intangible assets                                             431,574           497,447
       Deferred taxes                                                                663,251           444,993
       Common stock issued for compensation                                                -            60,600
       Changes in operating assets and liabilities, net of assets acquired:
         Trade and other accounts receivable, net                                     54,838        (2,156,321)
         Prepaid expenses and other                                                 (213,399)         (161,191)
         Other assets                                                                 20,707            18,109
         Trade accounts payable                                                     (243,113)         (226,107)
         Accrued liabilities and other                                              (445,723)          654,281
         Deferred revenue                                                           (150,603)            6,476
                                                                                ------------      ------------
                     Net cash provided by operating activities                     1,325,915            37,591
                                                                                ------------      ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property and equipment                                               (34,749)          (49,612)
   Other                                                                              (7,084)                -
   Acquisition of business                                                                 -          (193,566)
                                                                                ------------      ------------
                Net cash used in investing activities                                (41,833)         (243,178)
                                                                                ------------      ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Borrowings under note payable                                                  12,440,808         6,872,241
   Repayments of note payable                                                    (14,030,793)       (6,996,472)
   Proceeds from issuance of common stock                                             73,328            13,277
   Proceeds from the exercise of stock options                                        11,428            35,247
                                                                                ------------      ------------
                Net cash  (used in) financing activities                          (1,505,229)          (75,707)
                                                                                ------------      ------------
NET DECREASE IN CASH                                                                (221,147)         (281,294)

CASH AT BEGINNING OF PERIOD                                                          241,302           281,294
                                                                                ------------      ------------
CASH AT END OF PERIOD                                                           $     20,155      $          -
                                                                                ============      ============

SUPPLEMENTAL CASH FLOW DISCLOSURES

Supplemental cash flow information

         Cash paid for interest                                                 $     28,876      $    201,985

         Cash paid for taxes                                                         226,750            97,358

Noncash investing and financing activities affecting cash flows:

         Dividend to preferred shareholders                                           43,200            43,200
</TABLE>

See notes to consolidated financial statements.

                                        5

<PAGE>

                           HEALTH FITNESS CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements for the second
quarter ended June 30, 2005 have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial information. Financial information as of December 31, 2004 has been
derived from our audited consolidated financial statements. In accordance with
the rules and regulations of the United States Securities and Exchange
Commission, the Company has omitted footnote disclosures that would
substantially duplicate the disclosures contained in the audited financial
statements of the Company. The unaudited consolidated financial statements
should be read together with the financial statements for the year ended
December 31, 2004, and footnotes thereto included in the Company's Form 10-K as
filed with the United States Securities and Exchange Commission on March 31,
2005.

In the opinion of management, the interim consolidated financial statements
include all adjustments (consisting of normal recurring accruals) necessary for
the fair presentation of the results for interim periods presented. These
financial statements include some amounts that are based on management's best
estimates and judgments. These estimates may be adjusted as more information
becomes available, and any adjustment could be significant. The impact of any
change in estimates is included in the determination of earnings in the period
in which the change in estimate is identified. Operating results for the six
months ended June 30, 2005 are not necessarily indicative of the operating
results that may be expected for the year ended December 31, 2005.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business - Health Fitness Corporation and its wholly owned subsidiaries (the
Company) provide fitness and health management services and programs to
corporations, hospitals, communities and universities located in the United
States and Canada. Fitness and health management services include the
development, marketing and management of corporate, hospital, community and
university based fitness centers, injury prevention and work-injury management
consulting, on-site physical therapy and employee health management services.
Programs include wellness and health programs for individual customers,
including health risk assessments, biometric screenings, nutrition and weight
loss programs, smoking cessation, massage therapy, back care and ergonomic
injury prevention.

Consolidation - The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All intercompany balances and
transactions have been eliminated in consolidation.

Cash - The Company maintains cash balances at several financial institutions,
and at times, such balances exceed insured limits. The Company has not
experienced any losses in such accounts and believes it is not exposed to any
significant credit risk on cash.

Trade and Other Accounts Receivable - Trade and other accounts receivable
represent amounts due from companies and individuals for services and products.
The Company grants credit to customers in the ordinary course of business, but
generally does not require collateral or any other security to support amounts
due. Management performs ongoing credit evaluations of customers. The Company
determines its allowance for discounts and doubtful accounts by considering a
number of factors, including the length of time trade accounts receivable are
past due, the Company's previous loss history, the customer's current ability to
pay its obligation to the Company, and the condition of the general economy and
the industry as a whole. The Company writes off accounts receivable when they
become uncollectible, and payments subsequently received on such

                                        6

<PAGE>

receivable are credited to the allowance. Concentrations of credit risk with
respect to trade receivables are limited due to the large number of customers
and their geographic dispersion.

Property and Equipment - Property and equipment are stated at cost. Depreciation
and amortization are computed using both straight-line and accelerated methods
over the useful lives of the assets.

Goodwill - Goodwill represents the excess of the purchase price and related
costs over the fair value of net assets of businesses acquired. The carrying
value of goodwill is not amortized, but is tested for impairment on an annual
basis or when factors indicating impairment are present. Projected discounted
cash flows are used in assessing these assets.

Intangible Assets - The Company's intangible assets include customer contracts,
trademark, and deferred financing costs and are amortized on a straight-line
basis. Customer contracts represent the fair value assigned to acquired
management contracts and are amortized over the remaining life of the contracts,
of which 7 months remain at June 30, 2005. Trademark represents the value
assigned to an acquired trademark and is amortized over a period of five years.
Deferred financing costs are amortized over the term of the related credit
agreement.

Revenue Recognition - Revenue is recognized at the time the service is provided
to the customer. For annual contracts, monthly amounts are recognized ratably
over the term of the contract. Certain services provided to the customer may
vary on a periodic basis and are invoiced to the customer in arrears. The
revenues relating to theses services are estimated in the month that the service
is performed based the cost of the services.

Amounts received from customers in advance of providing the services of the
contract are treated as deferred revenue and recognized when the services are
provided.

The Company has contracts with third-parties (e.g. janitorial services) to
provide ancillary services in connection with their fitness and wellness
management services and programs. Under such arrangements the third-parties
invoice and receive payments from the Company based on transactions with the
ultimate customer. The Company does not recognize revenues related to such
transactions as the ultimate customer assumes the risk and rewards of the
contract and the amounts billed to the customer are either at cost or with a
fixed markup.

Comprehensive Income - Comprehensive income represents net earnings adjusted for
foreign currency translation adjustments. Total comprehensive income was
$1,127,838 and $804,042 for the six months ended June 30, 2005 and 2004.

Net Earnings Per Share - Basic net earnings per common share is computed by
dividing net earnings applicable to common shareholders by the number of
weighted average common shares outstanding. Diluted net earnings per share is
computed by dividing net earnings applicable to common shareholders plus
dividends to preferred shareholders (net earnings) by the number of weighted
average common shares outstanding, and common share equivalents relating to
stock options and stock warrants, when dilutive.

Common stock options and warrants to purchase 450,000 and 365,100 shares of
common stock were excluded from the calculation for the three months ended June
30, 2005 and 2004, and 375,000 and 365,100 were excluded from the calculation
for the six months ended June 30, 2005 and 2004 because they are anti-dilutive.

Stock-based Compensation - The Company utilizes the intrinsic value method of
accounting for its stock based employee compensation plans. All options granted
had an exercise price equal to the market value of the underlying common stock
on the date of grant and accordingly, no compensation cost is reflected in net
earnings for the three and six months ended June 30, 2005 and 2004. The
following table illustrates the effect on net earnings and earnings per share if
the Company had applied the fair value method of accounting for stock options:

                                        7

<PAGE>

<TABLE>
<CAPTION>
                                                     Three Months ended                 Six Months ended
                                                          June 30,                          June 30,
                                                ----------------------------      ----------------------------
                                                   2005              2004            2005             2004
                                                -----------      -----------      -----------      -----------
<S>                                             <C>              <C>              <C>              <C>
Net earnings, applicable to common
  Shareholders - basic                          $   498,183      $   470,754      $ 1,126,117      $   807,461
Add:  Dividends to preferred shareholders            21,600           28,200           43,200           43,200
                                                -----------      -----------      -----------      -----------
Net earnings - diluted                              519,783          498,954        1,169,317          850,661
                                                -----------      -----------      -----------      -----------
Less: Compensation expense determined under
the fair value method, net of tax                  (100,482)         (90,371)        (137,665)        (113,992)
                                                -----------      -----------      -----------      -----------
Proforma net earnings - basic                   $   397,701      $   380,383      $   988,452      $   693,469
                                                ===========      ===========      ===========      ===========
Proforma net earnings - diluted                 $   419,301      $   408,583      $ 1,031,652      $   736,669
                                                ===========      ===========      ===========      ===========
Earnings per Share:

   Basic, as reported                           $      0.04      $      0.04      $      0.09      $      0.06
                                                ===========      ===========      ===========      ===========
   Basic, proforma                              $      0.03      $      0.03      $      0.08      $      0.06
                                                ===========      ===========      ===========      ===========

   Diluted, as reported                         $      0.03      $      0.03      $      0.07      $      0.05
                                                ===========      ===========      ===========      ===========
   Diluted, proforma                            $      0.03      $      0.03      $      0.06      $      0.05
                                                ===========      ===========      ===========      ===========
</TABLE>

The proforma information above should be read in conjunction with the related
historical information.

The fair value of each option grant is estimated on the grant date using the
Black-Scholes option-pricing model with the following assumptions and results
for the grants:

<TABLE>
<CAPTION>
                                                                  2005                2004
                                                             --------------       -----------
<S>                                                          <C>                  <C>
Dividend yield                                                    None               None
Expected volatility                                             69% - 78%             88%
Expected life of option                                        1 - 4 years        1 - 4 years
Risk-free interest rate                                       2.43% - 2.97%          3.27%
Weighted average fair value of options on grant date              $1.29              $1.02
</TABLE>

In December 2004, the Financial Accounting Standards Board (FASB), issued
Statement 123R, Share-Based Payment. Statement 123R is a revision of FASB
Statement No. 123, Accounting for Stock-Based Compensation, and supercedes
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees. The revision requires all entities to recognize compensation expense
in an amount equal to the fair value of share-based payments granted to
employees.

In April 2005, the United States Securities and Exchange Commission announced
the adoption of a new rule that amended the compliance dates for Statement 123R
as first adopted by the FASB. As a result of this change, the Company is
required to implement Statement 123R beginning with the Company's next fiscal
year starting January 1, 2006. The Company expects that the adoption of
Statement 123R will result in a decrease of net income due to additional
compensation expense attributed to employee stock options.

Fair Values of Financial Instruments - Due to their short-term nature, the
carrying value of the Company's current financial assets and liabilities
approximates their fair values. The fair value of long-term obligations, if
recalculated based on current interest rates, would not significantly differ
from the recorded amounts.

Use of Estimates - Preparing consolidated financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make certain estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

                                        8

<PAGE>

NOTE 3. FINANCING

On August 22, 2003, the Company entered into a $7,500,000 Credit Agreement with
Wells Fargo Bank, N.A. to provide the Company with acquisition financing and
general working capital (the "Wells Loan"). Working capital advances from the
Wells Loan are available on a revolving basis and are based upon a percentage of
the Company's eligible accounts receivable, less any amounts previously drawn.
At the option of the Company, the Wells Loan bears interest at prime or the
one-month LIBOR plus a margin of 2.25% to 2.75% based upon the Company's Senior
Leverage Ratio (effective rate of 6.25% and 5.25% at June 30, 2005 and December
31, 2004). Borrowing capacity under the Wells Loan decreases $250,000 on the
last day of each calendar quarter, beginning September 30, 2003, and matures on
June 30, 2007. The facility provided maximum borrowing capacity of $5,500,000
and $6,000,000 at June 30, 2005 and December 31, 2004. Excluding current
outstanding balances, $4,754,526 and $3,758,851 was available for borrowing on
such respective dates. Borrowings under the Wells Loan are collateralized by
substantially all of the Company's assets. The Company is required to comply
with certain monthly financial covenants, including a fixed charge coverage
ratio, minimum earnings before interest, taxes, depreciation and amortization,
cash flow leverage ratio and a senior leverage ratio. At June 30, 2005, the
Company had $22,774 outstanding under the Wells Loan, and was in compliance with
all of its financial covenants.

On August 25, 2003, the Company entered into a $3,000,000 Securities Purchase
Agreement with Bayview Capital Partners LP ("Bayview") to provide the Company
with acquisition financing and general working capital (the "Bayview
Investment"). The Bayview Investment was initially structured as a bridge note
(the "Bridge Note"), the proceeds of which were placed into escrow to fund a
portion of our purchase of the Health & Fitness Services Division of Johnson &
Johnson Health Care Systems Inc.

On December 8, 2003 (the "Effective Date"), the $3,000,000 Bridge Note issued to
Bayview was converted into a $2,000,000 term note (the "Term Note"), $1,000,000
in Series A Convertible Preferred Stock (the "Preferred Stock") and a warrant to
purchase common stock of the Company (the "Warrant") pursuant to the terms set
forth in the August 25, 2003 Securities Purchase Agreement.

The Preferred Stock was issued to Bayview at a price of $1.00 per share,
resulting in 1,000,000 shares issued on the Effective Date. The Preferred Stock
has a stated dividend rate of 6% per year, computed on a simple interest basis,
paid in kind in the form of additional shares of Preferred Stock using a price
of $1.00 per share ("PIK Dividends"). At the option of the holder, the Preferred
Stock, including any PIK Dividends, may be converted, at any time and from time
to time, into common stock of the Company at a price of $0.50 per share. In
addition, Bayview may require redemption of the Preferred Stock and PIK
Dividends upon a change of control or default (including default under the Term
Note).

The Warrant issued to Bayview on the Effective Date represents the right to
purchase 1,210,320 shares of common stock, which represented 8% of the Company's
common stock outstanding on a fully diluted basis at the Effective Date,
excluding the common stock issuable to Bayview upon conversion of the Preferred
Stock. The Warrant is exercisable at any time for a period of ten years at an
exercise price equal to $0.50 per share, and the shares obtainable upon exercise
of the Warrant may be put to the Company at fair market value (net of the
exercise price) upon a change of control or default.

On December 29, 2004, the Company prepaid its Bayview Term Note by utilizing
funds from the Wells Loan. In connection with the Term Note repayment, the
Company also paid a prepayment penalty of $80,000, which represents 4% of the
face value of the Term Note. In addition, the Company incurred a one-time,
non-cash charge to interest expense of $394,669, representing $345,754 of
unamortized difference between the face value of the Term Note and its assigned
relative fair value, as well as $48,916 of unamortized financing costs related
to the Term Note. At the same time, the Company and Wells Fargo agreed to amend
the Wells Loan to change the senior leverage ratio covenant to reflect the
Company's financial position subsequent to the Term Note repayment. The Company
was in compliance with this change in covenant at June 30, 2005.

                                        9

<PAGE>

Balances of long-term obligations are as follows:

<TABLE>
<CAPTION>
                              June 30,   December 31,
                                2005        2004
                              --------   ------------
<S>                           <C>        <C>
Wells Loan                    $ 22,774   $  1,612,759
</TABLE>

The outstanding principal balance on the Wells Loan matures June 2007.

NOTE 4. INCOME TAXES

The Company records income taxes in accordance with the liability method of
accounting. Deferred income taxes are provided for temporary differences between
the financial reporting and tax basis of assets and liabilities and federal
operating loss carryforwards. Deferred tax assets and liabilities are adjusted
for the effects of changes in tax laws and rates on the date of the enactment.
Income taxes are calculated based on management's estimate of the Company's
effective tax rate, which takes into consideration a federal tax rate of 34% and
an effective state tax rate of 6%.

NOTE 5. STOCK OPTIONS

The Company maintains a stock option plan for the benefit of certain eligible
employees and directors of the Company. A total of 1,181,100 shares of common
stock are reserved for additional grants of options under the plan at June 30,
2005. Generally, the options outstanding (1) are granted at prices equal to the
market value of the stock on the date of grant, (2) vest over various terms and,
(3) expire over a period of five or ten years from the date of grant.

A summary of stock option activity for the six months ended June 30, 2005 is as
follows:

<TABLE>
<CAPTION>
                                                       Weighted
                                     Number of         Average
                                      Shares        Exercise Price
                                     ----------     --------------
<S>                                  <C>            <C>
Outstanding at December 31, 2004      1,921,550        $   1.06
  Granted                               175,000            2.70
  Exercised                             (23,375)           0.49
                                     ----------        --------
Outstanding at March 31, 2005         2,073,175            1.21
  Granted                               150,000            2.48
                                     ----------        --------
  Outstanding at June 30, 2005        2,223,175        $   1.29
                                     ==========        ========
</TABLE>

                                       10

<PAGE>

ITEM  2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and related notes included in Item 1 of Part 1 of this Quarterly
Report and the audited consolidated financial statements and notes thereto and
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2004.

CRITICAL ACCOUNTING POLICIES. Our most critical accounting policies, which are
those that require significant estimates and judgment, include: revenue
recognition, trade and other accounts receivable, goodwill and stock-based
compensation. By their nature, these estimates and judgments are subject to an
inherent degree of uncertainty. Actual results may differ from these estimates
under different assumptions or conditions. A more in-depth description of our
accounting policies can be found in footnote 2 to the interim financial
statements included in this report and in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2004.

RESULTS OF OPERATIONS

The following table sets forth our statement of operations data as a percentage
of total revenues and also sets forth other financial and operating data for the
quarter ended June 30, 2005 and 2004, and for the six months ended June 30, 2005
and 2004:

<TABLE>
<CAPTION>
                                                     Three Months Ended       Six Months Ended
                                                          June 30,                June 30,
                                                     ------------------      ------------------
                                                      2005        2004        2005        2004
                                                     ------      ------      ------      ------
<S>                                                  <C>         <C>         <C>         <C>
REVENUE                                              100.0%      100.0%      100.0%      100.0%

COSTS OF REVENUE                                      74.8        73.8        74.6        74.7
                                                     -----       -----       -----       -----
GROSS PROFIT                                          25.2        26.2        25.4        25.3

OPERATING EXPENSES
    Salaries                                          10.3        10.9        10.3        10.7
    Other selling, general and administrative          6.9         6.2         6.2         6.4
    Amortization of acquired intangible assets         1.6         1.7         1.6         1.7
                                                     -----       -----       -----       -----
           Total operating expenses                   18.8        18.8        18.1        18.8
                                                     -----       -----       -----       -----
OPERATING INCOME                                       6.4         7.4         7.3         6.5

OTHER INCOME (EXPENSE)                                (0.1)       (1.0)       (0.1)       (1.0)
                                                     -----       -----       -----       -----
EARNINGS BEFORE INCOME TAXES                           6.3         6.4         7.2         5.5

INCOME TAX EXPENSE                                     2.5         2.6         2.9         2.1
                                                     -----       -----       -----       -----
NET EARNINGS                                           3.8         3.8         4.3         3.4

    Dividend to preferred shareholders                 0.2         0.2         0.2         0.2
                                                     -----       -----       -----       -----
NET EARNINGS APPLICABLE TO
    COMMON SHAREHOLDERS                                3.6%        3.6%        4.1%        3.2%
                                                     =====       =====       =====       =====
</TABLE>

                                       11

<PAGE>

OTHER FINANCIAL AND OPERATING DATA:

<TABLE>
<CAPTION>
                                      Three Months Ended              Six Months Ended
                                          June 30,                        June 30,
                                 ---------------------------     ---------------------------
                                    2005            2004            2005            2004
                                 -----------     -----------     -----------     -----------
<S>                              <C>             <C>             <C>             <C>
Fitness Management Revenue
Staffing Services                $ 9,671,877     $ 9,892,295     $19,297,301     $19,480,786
Program Services                     875,258         532,520       1,580,660         940,848
Consulting Services                   98,267          63,765         112,717          71,265
                                 -----------     -----------     -----------     -----------
                                  10,645,402      10,488,580      20,990,678      20,492,899
                                 -----------     -----------     -----------     -----------
Health Management Revenue
Staffing Services                  2,868,171       2,581,181       5,846,914       5,200,791
Program Services                     156,650          54,761         291,693          92,918
Consulting Services                    8,392           5,193          14,431           9,481
                                 -----------     -----------     -----------     -----------
                                   3,033,213       2,641,135       6,153,038       5,303,190
                                 -----------     -----------     -----------     -----------
Total Revenue
Staffing Services                 12,540,048      12,473,476      25,144,215      24,681,577
Program Services                   1,031,908         587,281       1,872,353       1,033,766
Consulting Services                  106,659          68,958         127,148          80,746
                                 -----------     -----------     -----------     -----------
                                 $13,678,615     $13,129,715     $27,143,716     $25,796,089
                                 -----------     -----------     -----------     -----------
</TABLE>

RESULTS OF OPERATIONS FOR THE QUARTER ENDED JUNE 30, 2005 AS COMPARED TO THE
QUARTER ENDED JUNE 30, 2004.

REVENUE. Revenues increased $549,000, or 4.2%, to $13,679,000 for the three
months ended June 30, 2005, from $13,130,000 for the three months ended June 30,
2004. This increase is attributable to fitness and health program services
growth of $445,000, staffing services growth of $66,000 and growth from
consulting services of $38,000.

GROSS PROFIT. Gross profit increased $8,000, or 0.2%, to $3,451,000 for the
three months ended June 30, 2005, from $3,443,000 for the three months ended
June 30, 2004. This increase is primarily attributed to a $167,000 increase in
gross profit from program and consulting services revenue growth. These
increases were mostly offset by a decrease in staffing services gross profit of
$159,000, which is primarily due to termination of fitness center staffing
contracts.

As a percent of revenue, gross profit decreased to 25.2%, from 26.2% for the
second quarter of 2004. This decrease is due primarily to contract terminations
and business pricing pressures.

OPERATING EXPENSES AND OPERATING INCOME. Operating expenses increased $96,000,
or 3.9%, to $2,569,000 for the three months ended June 30, 2005 from $2,473,000
for the three months ended June 30, 2004. This increase is primarily attributed
to anticipated expense increases in our contract administration, programs
management, sales and human resource business areas.

OTHER INCOME AND EXPENSE. Interest expense decreased $112,000 to $16,000 for the
three months ended June 30, 2005, compared to $128,000 for the same period in
2004. This decrease is primarily due to the December 2004 repayment of the
Company's $2,000,000 Senior Subordinated Note held by Bayview Capital Partners
LP, the proceeds of which were used to fund an acquisition. The Company's cost
of borrowed funds increased to 6.8% for the second quarter of 2005 from 6.7% for
the second quarter of 2004.

INCOME TAXES. Income tax expense increased $2,000 to $345,000 for the three
months ended June 30, 2005 compared to $343,000 for the same period in 2004. The
increase is primarily due to the $23,000 increase in earnings before taxes.

                                       12

<PAGE>

NET EARNINGS APPLICABLE TO COMMON SHAREHOLDERS. As a result of the above, net
earnings applicable to common shareholders for the three months ended June 30,
2005 increased $27,000, or 5.7%, to $498,000 from $471,000 for the three months
ended June 30, 2004.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2005 AS COMPARED TO THE
SIX MONTHS ENDED JUNE 30, 2004.

REVENUE. Revenues increased $1,348,000, or 5.2%, to $27,144,000 for the six
months ended June 30, 2005, from $25,796,000 for the six months ended June 30,
2004. This increase is attributable to fitness and health program services
growth of $839,000, staffing services growth of $463,000 and growth from
consulting services of $46,000.

GROSS PROFIT. Gross profit increased $363,000, or 5.6%, to $6,892,000 for the
six months ended June 30, 2005, from $6,529,000 for the six months ended June
30, 2004. This increase is due primarily to the revenue growth discussed
previously, as well as lower medical benefit costs for full-time employees.

As a percent of revenue, gross profit increased to 25.4%, from 25.3% for the six
months ended June 30, 2005. This increase is primarily attributed to lower
medical costs for full time employees, which were mostly offset by contract
terminations and business pricing pressures.

OPERATING EXPENSES AND OPERATING INCOME. Operating expenses increased $48,000,
or 1.0%, to $4,913,000 for the six months ended June 30, 2005, from $4,865,000
for the six months ended June 30, 2004. This increase is primarily attributed to
anticipated expense increases in our contract administration, programs
management, sales and human resource business areas.

OTHER INCOME AND EXPENSE. Interest expense decreased $234,000 to $28,000 for the
six months ended June 30, 2005, compared to $262,000 for the same period in
2004. This decrease is primarily due to the December 2004 repayment of the
Company's $2,000,000 Senior Subordinated Note held by Bayview Capital Partners
LP, the proceeds of which were used to fund an acquisition. The Company's cost
of borrowed funds decreased to 6.0% for the six months ended June 30, 2005 from
6.8% for the same period in 2004.

INCOME TAXES. Income tax expense increased $227,000 to $779,000 for the six
months ended June 30, 2005, compared to $552,000 for the same period in 2004.
The increase is primarily due to the $546,000 increase in earnings before taxes.

NET EARNINGS APPLICABLE TO COMMON SHAREHOLDERS. As a result of the above, net
earnings applicable to common shareholders for the six months ended June 30,
2005 increased $319,000, or 39.5%, to $1,126,000, from $807,000 for the six
months ended June 30, 2004.

                                       13

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company's working capital increased $30,000 to $3,986,000 at June 30, 2005,
compared to working capital of $3,956,000 at December 31, 2004. The increase in
working capital is due primarily to an increase in prepaid expense and decreases
in trade accounts payable and accrued expenses, which were offset by decreases
in deferred tax assets and cash.

In addition to cash flows generated from operating activities, the Company's
other source of liquidity and working capital is provided by a $7,500,000 Credit
Agreement with Wells Fargo Bank, N.A. (the "Wells Loan"). The availability of
the Wells Loan decreases $250,000 on the last day of each calendar quarter,
beginning September 30, 2003, and matures on June 30, 2007. Working capital
advances from the Wells Loan are based upon a percentage of the Company's
eligible accounts receivable, less any amounts previously drawn. The facility
provided maximum borrowing capacity of $5,500,000 and $6,000,000 at June 30,
2005 and December 31, 2004. Excluding current outstanding balances, $4,754,526
and $3,758,851 was available for borrowing on such respective dates.

As of June 30, 2005, the Company had no off-balance sheet arrangements or
transactions with unconsolidated, limited purpose entities. Refer to the
footnotes in the Company's Annual Report on Form 10-K for the year ended
December 31, 2004 for disclosure related to the Company's "Commitments and
Contingencies."

The Company believes that sources of capital to meet future obligations over the
next 12 months will be provided by cash generated through operations and the
Company's Wells Loan. Currently, the Company does not have plans to make any
significant investments in capital assets or any other one-time expenses that
may affect our cash flows from investing activities.

The Company does not believe that inflation has had a significant impact on the
results of its operations.

RISK FACTORS / FORWARD-LOOKING STATEMENTS

The foregoing discussion contains various "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking
statements are based on current expectations or beliefs concerning future
events. Any statements that are not based upon historical facts, including the
outcome of events that have not yet occurred and our expectations for future
performance, are forward-looking. Such statements can be identified by the use
of terminology such as "anticipate," "believe," "estimate," "expect," "intend,"
"may," "could," "possible," "plan," "project," "will," "forecast" and similar
words or expressions. The Company's forward-looking statements generally relate
to its growth strategies, recent reorganization, financial results, marketing
efforts, acquisition plans and cash requirements. Although it is not possible to
foresee all of the factors that may cause actual results to differ from the
Company's forward-looking statements, such factors include, among others, the
risk factors that follow. You should not consider the below risks to be the only
ones we may face from time to time. You should take such factors into account
when making investment decisions and are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of the date on which
they are made. We undertake no obligation to update any forward-looking
statements.

THE TIMING OF NEW AND LOST MANAGEMENT SERVICE CONTRACTS MAY NOT BE INDICATIVE OF
TRENDS IN OUR BUSINESS OR OF FUTURE QUARTERLY FINANCIAL RESULTS. The Company
evaluates its business, in part, by reviewing trends in its financial
performance. Management believes an important indicator of the Company's outlook
is revenue to be derived from fitness and health management service contracts
the Company enters into with customers. Fitness and health management service
contracts are often long-term contracts (i.e., 3 - 5 years), contain annual,
automatic renewals and generally require 30 to 60 days notice to terminate, or
to avoid the automatic annual renewal feature. Revenue from new contracts often
is not recognized for a period of 90 to 180 days after

                                       14

<PAGE>

proposal acceptance due to lead times necessary to execute a contract and hire
staff to begin providing services. Since termination notice periods are
considerably less than the time it takes to begin servicing new contracts, the
revenue lost in a reporting period may significantly exceed the revenue gained
from new contracts.

Because of these timing differences, management generally does not view changes
in quarterly revenue, whether sequential or comparable prior quarter changes, to
be indicative of its outlook or trends in the Company's business or to be
reflective of revenue expected in succeeding quarters. Rather, management
generally evaluates revenue trends in the Company's fitness and health
management services business based upon 12- to 18-month periods since it
believes this helps minimize the timing impact from new and terminated
contracts. Management cautions investors not to place undue reliance upon
fluctuations in quarterly revenue viewed in isolation from revenue information
over longer periods of time (e.g., comparative trailing 12-month information),
and to not view quarterly revenue as necessarily being indicative of the
Company's outlook or results to be expected in future quarters.

THE COMPANY MAY EXPERIENCE DIFFICULTY MANAGING GROWTH, INCLUDING ATTRACTING
QUALIFIED STAFF. The Company has experienced substantial growth during the past
few years, both organically and by acquisition. The Company's ability to grow in
the future will depend on a number of factors, including the ability to obtain
new customers, expand existing customer relationships, develop additional
fitness and health improvement programs and services and hire and train
qualified staff. The Company may experience difficulty in attracting and
retaining qualified staff in various markets to meet growth opportunities.
Further, in order to attract qualified staff, the Company may be required to pay
higher salaries and enhance benefits in more competitive markets, which may
result in a material adverse effect on the Company's results of operation and
financial condition. Sustaining growth may require the Company to sell its
services at lower prices to remain competitive, which may result in a material
adverse effect on the Company's results of operation and financial condition.
There can be no assurance that the Company will be able to manage expanding
operations effectively or that it will be able to maintain or accelerate its
growth, and any failure to do so may result in a material adverse effect on the
Company's results of operation and financial condition.

FAILURE TO RENEW EXISTING CUSTOMER CONTRACTS COULD HAVE A NEGATIVE EFFECT ON OUR
FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The Company's growth strategy
depends in part upon continuous development and improvement of attractive and
effective health management programs and services. The Company's failure to
anticipate trends or to successfully develop, improve or implement such programs
or services may have a material adverse effect on the Company's results of
operation and financial condition. The Company currently contracts with third
party partners to provide a portion of such programs and services and
anticipates that this will continue to be the case. If any of such third party
partners no longer made these programs and services available to the Company,
there is no assurance that the Company would be able to replace such third-party
partner programs and services, and if the Company could not do so, the Company's
ability to pursue its growth strategies would be seriously compromised.

THE COMPANY IS DEPENDENT ON MAINTAINING ITS CORPORATE RELATIONSHIPS. The
majority of the Company's contracts are with large corporations regarding the
management of on-site fitness centers. While the specific terms of such
agreements vary, some contracts are subject to early termination by the
corporate customer without cause. Although the Company has a history of
consistent contract renewals, there can be no assurance that future renewals
will be secured. The early termination or non-renewal of corporate contracts may
have a material adverse effect on the Company's results of operation and
financial condition.

THE COMPANY'S CUSTOMERS ARE PRIMARILY CORPORATIONS AND THEREFORE ITS FINANCIAL
RESULTS ARE SUBJECT TO GENERAL ECONOMIC CONDITIONS. The Company's revenue,
expenses and net income are subject to general economic conditions. A
significant portion of the Company's revenue is derived from companies who
historically have reduced their expenditures for on-site fitness management
services during economic downturns. Should the economy weaken, or experience
more significant recessionary pressures, corporate customers may reduce or
eliminate their expenditures for on-site fitness center management services, and

                                       15

<PAGE>

prospective customers may not commit resources to such services. Also, should
the size of a customer's workforce be reduced, the Company may have to reduce
the number of staff assigned to manage a customer's fitness center.
Additionally, the Company's operations in Canada are subject to foreign currency
risk, although these operations currently represent less than 5% of the
Company's overall revenues. These factors may have a material adverse effect on
the Company's results of operation and financial condition.

THE COMPANY IS DEPENDENT ON ITS KEY EMPLOYEES. THE LOSS OF ANY OF THESE
EMPLOYEES COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR PERFORMANCE AND RESULTS OF
OPERATIONS. The success of the Company is highly dependent on the efforts,
abilities and continued services of its executive officers and other key
employees. The loss of any of the executive officers or key employees may have a
material adverse effect on the Company results of operation and financial
condition. The Company believes that its future success will depend on its
ability to attract, motivate and retain highly-skilled corporate, divisional,
regional and site-based personnel. Although historically the Company has been
successful in retaining the services of its senior management, there can be no
assurance that the Company will be able to do so in the future.

THE COMPANY OPERATES WITHIN A HIGHLY COMPETITIVE MARKET AGAINST FORMIDABLE
COMPANIES. The Company competes for new and existing corporate customers in a
highly fragmented and competitive market. Management believes that the Company's
ability to compete successfully depends on a number of factors, including
quality and depth of service, locational convenience and cost. The market for
on-site fitness center management services is price-sensitive. From time to
time, the Company may be at a price disadvantage with respect to the
competition, as such competition may propose a substantially lower price than
the Company. There can be no assurance that the Company will be able to compete
successfully against current and future competitors, or that competitive
pressures faced by the Company will not have a material adverse effect on the
Company's results of operation and financial condition.

THE COMPANY'S RESULTS OF OPERATIONS COULD BE ADVERSELY IMPACTED BY LITIGATION.
Because of the nature of its business, the Company expects that it may be
subject to claims and litigation alleging negligence or other grounds for
liability arising from injuries or other harm to the customers it serves. The
Company has occasionally been named a defendant in claims relating to accidents
that occurred in the fitness centers it manages. There can be no assurance that
additional claims will not be filed, and that the Company's insurance will be
adequate to cover liabilities resulting from any claim.

THE COMPANY COULD EXPERIENCE A POTENTIAL DEPRESSIVE EFFECT ON THE PRICE OF ITS
COMMON STOCK FOLLOWING THE EXERCISE AND SALE OF EXISTING CONVERTIBLE SECURITIES.
At June 30, 2005, the Company had outstanding stock options and warrants to
purchase an aggregate of 3,638,495 shares of common stock. The Company also had
outstanding 1,093,699 shares of preferred stock that are convertible into
2,187,398 shares of common stock. The exercise of such outstanding stock options
and warrants and the sale of the common stock acquired thereby, as well as the
conversion of preferred stock and the sale of common stock acquired thereby, may
have a material adverse effect on the price of the Company's common stock. In
addition, the exercise of such outstanding stock options and warrants and sale
of such shares of the Company's common stock could occur at a time when the
Company might otherwise be able to obtain additional equity capital on terms and
conditions more favorable to the Company.

THE COMPANY HAS IMPLEMENTED, ON A LIMITED BASIS, A BUSINESS MODEL FOR MANAGING
CORPORATE FITNESS CENTERS ON A COST-NEUTRAL OR FOR-PROFIT BASIS. The Company
has, on a limited basis, implemented a model of managing corporate fitness
centers on a cost-neutral or for-profit basis without receiving a management fee
from the corporate owner of such centers. Corporate-owned centers are resistant
to significant membership fees and fee increases, and the Company may not be
successful in sufficiently managing costs and/or in raising service levels and
associated revenues, as required to achieve profit objectives.

FAILURE TO IDENTIFY ACQUISITION OPPORTUNITIES MAY LIMIT OUR GROWTH. An important
part of the Company's growth has been the acquisition of complementary
businesses. The Company may choose to continue this

                                       16

<PAGE>

strategy in the future. Management's identification of suitable acquisition
candidates involves risks inherent in assessing the value, strengths,
weaknesses, overall risks and profitability of acquisition candidates.
Management may be unable to identify suitable acquisition candidates. If the
Company does not make suitable acquisitions, it may find it more difficult to
realize growth objectives and to enhance shareholder value.

In addition, future acquisitions by the Company may be dilutive to shareholders,
cause the Company to incur additional indebtedness and large one-time expenses
or create intangible assets that could result in significant amortization
expense. If the Company spends significant funds or incurs additional debt, the
Company's ability to obtain necessary financing may decline and it may be more
vulnerable to economic downturns and competitive pressures. Management cannot
guarantee that the Company will be able to successfully complete any future
acquisitions, that it will be able to finance acquisitions or that it will
realize any anticipated benefits from completed acquisitions.

RECENTLY PASSED LEGISLATION

HIPPA. The Administrative Simplification provisions of the Health Insurance
Portability and Accountability Act of 1996 ("HIPAA") require group health plans
and health care providers who conduct certain administrative and financial
transactions electronically ("Standard Transactions") to (a) comply with a
certain data format and coding standards when conducting electronic
transactions; (b) use appropriate technologies to protect the security and
integrity of individually identifiable health information transmitted or
maintained in an electronic format; and (c) protect the privacy of patient
health information. The Company's occupational health line of business, which
accounts for approximately five percent of the Company's total revenue, and the
group health plan the Company sponsors for its employees are subject to HIPAA's
requirements. The Company expects to be in compliance with HIPPA requirements
within the timeline specified for the Company's affected business areas. The
Company's corporate, hospital, community and university based fitness center
management lines of business are not subject to the requirements of HIPAA.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risks related to changes in U.S. and
international interest rates. All of the Company's long-term obligations bear
interest at a variable rate. An interest rate increase by one percentage point
would reduce the Company's future annual net income by less than $10,000 at
current debt levels.

The Company has no history of, and does not anticipate in the future, investing
in derivative financial instruments, derivative commodity instruments or other
such financial instruments. Transactions with international customers are
entered into in U.S. dollars, precluding the need for foreign currency hedges.
As a result, the exposure to market risk is not material.

ITEM 4. CONTROLS AND PROCEDURES

The Company's Chief Executive Officer and Chief Financial Officer (collectively,
the "Certifying Officers") are responsible for establishing and maintaining
disclosure controls and procedures for the Company. The Certifying Officers have
concluded (based upon their evaluation of these controls and procedures as of
the end of the period covered by this report) that the Company's disclosure
controls and procedures are effective to ensure that information required to be
disclosed by the Company in reports that it files or submits under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in the rules of the Securities and Exchange Commission. The Certifying
Officers also have indicated that there were no significant changes in the
Company's internal control over financial reporting that occurred during the
period covered by this report that have materially affected, or are reasonably
likely to materially affect, the Company's internal control over financial
reporting.

                                       17

<PAGE>

PART II. - OTHER INFORMATION

Item 1. Legal Proceedings

Refer to Item 3 (Legal Proceedings) in the Company's Annual Report on Form 10-K
for the year ended December 31, 2004.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

(a) The Annual Meeting of the Company's shareholders was held on Tuesday, June
7, 2005.

(b) Proxies for the Annual Meeting were solicited pursuant to Regulation 14A
under the Securities Exchange Act of 1934. There was no solicitation in
opposition to management's nominees, and the shareholders elected the following
persons as directors of the Company to serve until the next annual meeting of
shareholders:

<TABLE>
<CAPTION>
    Nominee                  Number of Votes For    Number of Votes Withheld
-------------------          -------------------    ------------------------
<S>                          <C>                    <C>
James A. Bernards                11,398,856                  38,417
K. James Ehlen, M.D              11,256,292                 180,981
Robert J. Marzec                 11,398,856                  38,417
Cary Musech                      11,397,331                  39,942
Jerry V. Noyce                   11,397,055                  40,218
John C. Penn                     11,398,856                  38,417
Mark W. Sheffert                 11,398,856                  38,417
Linda Hall Whitman               11,399,856                  37,417
Rodney A. Young                  11,398,856                  38,417
</TABLE>

(c) By a vote of 4,888,606 shares in favor, 504,218 shares opposed, 36,109
shares abstaining, and 6,008,340 shares represented by broker nonvotes, the
shareholders approved the 2005 Stock Option Plan

(d) By a vote of 11,355,989 shares in favor, 52,500 shares opposed, 28,784
shares abstaining, and no shares represented by broker nonvotes, the
shareholders ratified the selection of Grant Thornton LLP as the Company's
independent auditors for the current fiscal year.

Item 5. Other Information

None.

Item 6. Exhibits

(a) Exhibits

See Exhibit Index on page following signatures

                                       18

<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized.

Dated: August 15, 2005
HEALTH FITNESS CORPORATION

By /s/ Jerry V. Noyce
   -----------------------------------------
Jerry V. Noyce
Chief Executive Officer
(Principal Executive Officer)

By /s/ Wesley W. Winnekins
   -----------------------------------------
Wesley W. Winnekins
Chief Financial Officer)
(Principal Financial and Accounting Officer)

                                       19

<PAGE>

                                 EXHIBIT INDEX
                           HEALTH FITNESS CORPORATION
                                   FORM 10-Qx

<TABLE>
<CAPTION>
Exhibit No.                                  Description
-----------   -----------------------------------------------------------------------
<S>           <C>
**11.0        Statement re:  Computation of Earnings per Share

**31.1        Certification of Chief Executive Officer Pursuant to Section 302 of the
              Sarbanes-Oxley Act of 2002

**31.2        Certification of Chief Financial Officer Pursuant to Section 302 of the
              Sarbanes-Oxley Act of 2002

**32.1        Certification of Chief Executive Officer Pursuant to Section 906 of the
              Sarbanes-Oxley Act of 2002

**32.2        Certification of Chief Financial Officer Pursuant to Section 906 of the
              Sarbanes-Oxley Act of 2002
</TABLE>

----------------
** Filed herewith

                                       20