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FORM 10-Q

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).   Yes:   X      No:        

As of April 30, 2004, there were 34,072,114 shares of the registrant’s common stock outstanding.

TABLE OF ADDITIONAL REGISTRANTS

           The address for service of each of the additional registrants is c/o Bally Total Fitness Holding Corporation, 8700 West Bryn Mawr Avenue, 2^nd Floor, Chicago, Illinois  60631, telephone 773-380-3000. The primary industrial classification number for each of the additional registrants is 7991.

BALLY TOTAL FITNESS HOLDING CORPORATION

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PART I.   FINANCIAL INFORMATION

Item 1.   Financial Statements

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Basis of presentation

           The accompanying condensed consolidated financial statements include the accounts of Bally Total Fitness Holding Corporation (the “Company”) and the subsidiaries that it controls. The Company, through its subsidiaries, is a commercial operator of 418 fitness centers at March 31, 2004 concentrated in 29 states and Canada. Additionally, as of April 30, 2004, 23 clubs were operated pursuant to franchise and joint venture agreements in the United States, Asia, Mexico, and the Caribbean. The Company operates in one industry segment, and all significant revenues arise from the commercial operation of fitness centers, primarily in major metropolitan markets in the United States and Canada. Unless otherwise specified in the text, references to the Company include the Company and its subsidiaries. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2003.

           All adjustments have been recorded which are, in the opinion of management, necessary for a fair presentation of the condensed consolidated balance sheet of the Company at March 31, 2004, its consolidated statement of operations for the three months ended March 31, 2004 and 2003, its consolidated statement of stockholders’ equity for the three months ended March 31, 2004, and its consolidated statement of cash flows for the three months ended March 31, 2004 and 2003. With the exception of changes made to the Consolidated Statement of Cash Flows for the three month period ended March 31, 2003, to effect changes in accounting fully described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003, all such adjustments were of a normal and recurring nature.

           The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which require the Company’s management to make estimates and assumptions that affect the amounts reported therein. Actual results could vary from such estimates. In addition, certain reclassifications have been made to prior period financial statements to conform with the 2004 presentation.

Seasonal factors

           The Company’s operations are subject to seasonal factors and, therefore, the results of operations for the three months ended March 31, 2004 and 2003 are not necessarily indicative of the results of operations for the full year.

Market risk

           The Company is exposed to market risk from changes in the interest rates on certain of its outstanding debt. The outstanding loan balance under its bank credit facility and the Series 2001-1 accounts receivable-backed variable funding certificates bear interest at variable rates based upon prevailing short-term interest rates in the United States and Europe.

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           On $100 million of the Series 2001-1 accounts receivable-backed variable funding certificates, the Company has purchased a 7.75% rate cap extending through the refinanced period of July 2005. The Company has also entered into interest rate swap agreements whereby the fixed interest commitment on $200 million of outstanding principal on the Company’s 9.875% Senior Subordinated Notes, due 2007, was swapped for a variable rate commitment based on the London Interbank Offered Rate (LIBOR), plus 6.01% (7.245% at March 31, 2004).

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Earnings per common share

           Basic loss per common share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding of 32,717,502 and 32,574,990 for the three months ended March 31, 2004 and 2003, respectively. The weighted-average number of shares of common stock and common stock equivalents were 33,416,834 and 32,911,773 for the three months ended March 31, 2004 and 2003, respectively. Diluted loss per share for the three months ended March 31, 2004 and 2003 do not include the effect of common stock equivalents of 699,332 and 336,783, respectively, because the effect would be anti-dilutive. Options outstanding to purchase 3,533,406 and 3,047,206 shares of common stock at March 31, 2004 and 2003, respectively, were not included in the computation of diluted loss per share because the exercise prices of the options were greater than the average market prices of the Company’s common shares. The range of exercise prices per share for these options was between $7.00 and $36.00 and $6.55 and $36.00 at March 31, 2004 and 2003, respectively.

Income taxes

           At March 31, 2004, for accounting purposes, the Company had approximately $469,766 of unrecognized federal net operating loss carryforwards, alternative minimum tax (“AMT”) credit carryforwards of approximately $5,896 and AMT net operating loss carryforwards of approximately $329,811. The AMT credits can be carried forward indefinitely, while the tax loss carryforwards begin to expire in 2011 and fully expire in 2024. In addition, the Company has substantial state tax loss carryforwards which began to expire in 2003 and fully expire in 2024. Based upon the Company’s past performance and the expiration dates of its carryforwards, the ultimate realization of all of the Company’s deferred tax assets cannot be assured. Accordingly, a valuation allowance has been recorded to reduce deferred tax assets to a level which, more likely than not, will be realized. The Company will continue to review and evaluate the valuation allowance.

           In accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes,” the Company reviews the likelihood of realizing the future benefits of tax loss carryforwards. As a result of this review, the Company decided in 2003 to increase the valuation allowance, which resulted in non-cash federal income tax expense. Also due to the valuation allowance there was no tax benefit attributable to the 2003 charge for the cumulative effect of changes in accounting principles.

Stock Plans

           The Company accounts for its stock-based compensation plans, described in the Company’s 2003 Annual Report on Form 10-K/A, using the intrinsic value method and in accordance with the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations. No stock-based employee compensation cost related to option plans was reflected in net income, as all options granted under those plans had an exercise price equal to the fair market value of the underlying common stock on the date of grant. The Company has recorded compensation expense related to the restricted stock grants which vest over time. The following table illustrates, in accordance with the provisions of Statement of Financial Accounting Standards No. 148, Accounting for Stock–Based Compensation–Transition and Disclosure, the effect on net loss and loss per share if the Company had applied the fair value recognition provisions of Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.

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           The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the Company’s stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its stock options.

Guarantees

           The Company guarantees the lease on one fitness center, as part of a joint venture with Holmes Place, Plc. The lease has a 15 year term which began in May 2002, with current annual rental (subject to escalation) of $611. The Company believes that it does not have any obligation to perform under the guarantee as of March 31, 2004.

Condensed Consolidating Financial Statements

           Condensed consolidating financial statements present the accounts of Bally Total Fitness Holding Corporation (“Parent”), and its Guarantor and Non-Guarantor subsidiaries, as defined in the indenture to the Bally Total Fitness Holding Corporation 10 ½% Senior Notes due 2011 (“the Notes”) issued in July 2003. The Notes are unconditionally guaranteed, on a joint and several basis, by the Guarantor subsidiaries including substantially all domestic subsidiaries of Bally Total Fitness Holding Corporation. Non-Guarantor subsidiaries include Canadian operations and special purpose entities for accounts receivable and real estate finance programs.

           As defined in the indenture to the Bally Total Fitness Holding Corporation 10½% Senior Notes due 2011, guarantor subsidiaries include:

           59^th Street Gym LLC; 708 Gym LLC; Ace LLC; Bally Fitness Franchising, Inc.; Bally Franchise RSC, Inc.; Bally Franchising Holdings, Inc.; Bally Total Fitness Clinics, Inc.; Bally Total Fitness Corporation; Bally Total Fitness International, Inc.; Bally Total Fitness of Missouri, Inc.; Bally Total Fitness of Toledo, Inc.; Bally’s Fitness and Racquet Clubs, Inc.; BFIT Rehab of West Palm Beach, Inc.; Connecticut Coast Fitness Centers, Inc.; Connecticut Valley Fitness Centers, Inc.; Crunch LA LLC; Crunch World LLC; Flambe LLC; Greater Philly No. 1 Holding Company;

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Greater Philly No. 2 Holding Company; Health & Tennis Corporation of New York; Holiday Health Clubs of the East Coast, Inc.; Holiday Health & Fitness Centers of New York, Inc.; Holiday Health Clubs and Fitness Centers, Inc.; Holiday Health Clubs of the Southeast, Inc.; Holiday/Southeast Holding Corp.; Holiday Spa Health Clubs of California; Holiday Universal, Inc.; Crunch Fitness International, Inc.; Jack La Lanne Fitness Centers, Inc.; Jack La Lanne Holding Corp.; Manhattan Sports Club, Inc.; Mission Impossible, LLC; New Fitness Holding Co., Inc.; Nycon Holding Co., Inc.; Physical Fitness Centers of Philadelphia, Inc.; Providence Fitness Centers, Inc.; Rhode Island Holding Company; Scandinavian Health Spa, Inc.; Scandinavian US Swim & Fitness, Inc.; Soho Ho LLC; Sportslife, Inc.; Sportslife Gwinnett, Inc.; Sportslife Roswell, Inc.; Sportslife Stone Mountain, Inc.; Sportslife Town Center II, Inc.; Tidelands Holiday Health Clubs, Inc.; U.S. Health, Inc.; and West Village Gym at the Archives LLC.

           The following tables present the condensed consolidating balance sheet at March 31, 2004 and December 31, 2003, the condensed consolidating statements of operations for the three months ended March 31, 2004 and 2003, and the condensed consolidating statements of cash flows for the three months ended March 31, 2004 and 2003.

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