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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>As filed with the Securities and Exchange Commission on
    April&#160;2, 2010</B>
</DIV>

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    <B><!-- /XBRL,dc -->Registration
    <FONT style="white-space: nowrap">No.&#160;333-&#160;&#160;&#160;&#160;&#160;&#160;</FONT></B>
</DIV>

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    <B><FONT style="font-size: 14pt">UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 12pt">Washington,&#160;D.C.
    20549</FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 18pt">
    <FONT style="white-space: nowrap">Form&#160;S-1</FONT></FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 12pt">REGISTRATION
    STATEMENT</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 12pt">UNDER</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 12pt">THE SECURITIES ACT OF
    1933</FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 15%; border-bottom: 1pt solid #000000"></CENTER>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 23pt">PLANET BEACH FRANCHISING
    CORPORATION</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I><FONT style="font-size: 8pt">(Exact name of registrant as
    specified in its charter)</FONT></I>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

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<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

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    <TD width="32%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
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    <TD width="32%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
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<TD nowrap align="center" valign="top">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B> Delaware</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    <B>7299</B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    <B>72-1343492</B>
</TD>
</TR>
<TR valign="bottom">
<TD align="center" valign="top">
    <I>(State or other jurisdiction of<BR>
    incorporation or organization)</I>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    <I>(Primary Standard Industrial<BR>
    Classification Code Number)</I>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    <I>(I.R.S. Employer<BR>
    Identification No.) </I>
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 15%; border-bottom: 1pt solid #000000"></CENTER>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 8pt"> 5145 Taravella Road</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 8pt">Marrero, Louisiana
    70072</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 8pt">(504)&#160;361-5550</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I><FONT style="font-size: 8pt">(Address, including zip code,
    and telephone number, including area code, of registrant&#146;s
    principal executive offices)</FONT></I>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

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<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 8pt"> Stephen P. Smith</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 8pt">Planet Beach Franchising
    Corporation</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 8pt">5145 Taravella Road</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 8pt">Marrero, Louisiana
    70072</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 8pt">(504)&#160;361-5550</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I><FONT style="font-size: 8pt">(Name, address, including zip
    code, and telephone number, including area code, of agent for
    service)</FONT></I>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><I><FONT style="font-size: 9pt">Copies to:</FONT></I></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
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    <TD width="49%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
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<TD align="center" valign="top">
    <B>Louis Y. Fishman<BR>
    Maureen Brennan Gershanik<BR>
    Fishman Haygood Phelps<BR>
    Walmsley Willis&#160;&#038; Swanson, L.L.P.<BR>
    201 St. Charles Avenue, Suite&#160;4600<BR>
    New Orleans, Louisiana 70170<BR>
    <FONT style="white-space: nowrap">(504)&#160;586-5252</FONT></B>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    <B>Michael A. Hedge<BR>
    Joshua A. Lane<BR>
    K&#038;L Gates LLP<BR>
    1900 Main Street, Suite&#160;600<BR>
    Irvine, California 92614<BR>
    (949) 253-0900</B>
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 15%; border-bottom: 1pt solid #000000"></CENTER>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Approximate date of commencement of proposed sale to the
    public:</B>&#160;&#160;As soon as practicable after this
    Registration Statement becomes effective.
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If any of the securities being registered on this Form are to be
    offered on a delayed or continuous basis pursuant to
    Rule&#160;415 under the Securities Act of 1933, check the
    following
    box.&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#254;
    </FONT>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If this Form is filed to register additional securities for an
    offering pursuant to Rule&#160;462(b) under the Securities Act,
    please check the following box and list the Securities Act
    registration statement number of the earlier effective
    registration statement for the same
    offering.&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If this Form is a post-effective amendment filed pursuant to
    Rule&#160;462(c) under the Securities Act, check the following
    box and list the Securities Act registration statement number of
    the earlier effective registration statement for the same
    offering.&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If this Form is a post-effective amendment filed pursuant to
    Rule&#160;462(d) under the Securities Act, check the following
    box and list the Securities Act registration statement number of
    the earlier effective registration statement for the same
    offering.&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Indicate by check mark whether the registrant is a large
    accelerated filer, an accelerated filer, a non-accelerated
    filer, or a smaller reporting company. See the definitions of
    &#147;large accelerated filer,&#148; &#147;accelerated
    filer&#148; and &#147;smaller reporting company&#148; in
    Rule&#160;12b2 of the Exchange Act.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="18%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="14%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="45%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="18%">&nbsp;</TD>	<!-- colindex=04 type=maindata -->
</TR>
<!-- Table Width Row END -->
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<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Large accelerated
    filer&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    &#160;&#160;&#160;&#160;&#160;Accelerated
    filer&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    <FONT style="white-space: nowrap">Non-accelerated</FONT>
    filer&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Smaller reporting
    company&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#254;
    </FONT>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="5" align="center" valign="top">
    (Do not check if a smaller reporting
    company)&#160;&#160;&#160;&#160;&#160;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 9pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CALCULATION
    OF REGISTRATION FEE</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="60%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutterleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutterright -->
    <TD width="18%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutterleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutterright -->
    <TD width="18%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom" style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 3px double #000000">
    <B>Proposed Maximum<BR>
    </B>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 3px double #000000">
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B>Aggregate Offering<BR>
    </B>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B> Amount of<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
    <B>Title of Securities to be Registered</B>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B>Price(1)(2)</B>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B>Registration Fee</B>
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD align="left" valign="top" style="border-top: 1px solid #000000">
<DIV style="text-indent: -8pt; margin-left: 8pt">
     Units, each unit consisting of:
</DIV>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 1px solid #000000">
    $11,500,000
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 1px solid #000000">
    $820
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top" style="border-top: 1px solid #000000">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    One share of common stock, $0.0001&#160;par value
</DIV>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 1px solid #000000">
    &#151;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 1px solid #000000">
    &#151;(5)
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top" style="border-top: 1px solid #000000">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    One warrant to purchase one share of common stock
</DIV>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 1px solid #000000">
    &#151;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 1px solid #000000">
    &#151;(5)
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top" style="border-top: 1px solid #000000">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Representative&#146;s warrants to purchase shares of common
    stock, $0.0001&#160;par value per share (3)
</DIV>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 1px solid #000000">
    $1,000,000
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 1px solid #000000">
    $71.30
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top" style="border-top: 1px solid #000000">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Shares of common stock issuable upon exercise of warrants
    included in the units, and upon exercise of the
    representative&#146;s warrants
</DIV>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 1px solid #000000">
    $15,575,000(4)
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 1px solid #000000">
    $1,110.50
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top" style="border-top: 1px solid #000000">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    TOTAL
</DIV>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 1px solid #000000">
    $28,075,000
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-top: 1px solid #000000">
    $2,002
</TD>
</TR>
<TR style="font-size: 1pt">
<TD nowrap align="left" valign="bottom" style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 3px double #000000">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>    (1)&#160;
</TD>
    <TD align="left">    Estimated solely for the purpose of calculating the registration
    fee pursuant to Rule&#160;457(o) under the Securities Act of
    1933, as amended.
</TD>
</TR>
    <FONT style="font-size: 8pt">
    </FONT>




<TR valign="top" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>    (2)&#160;
</TD>
    <TD align="left">    Includes the aggregate offering price of the units that may be
    issued upon exercise of the underwriters&#146; over-allotment
    option and the shares of common stock underlying the warrants
    included in those over-allotment units.
</TD>
</TR>
    <FONT style="font-size: 8pt">
    </FONT>




<TR valign="top" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>    (3)&#160;
</TD>
    <TD align="left">    In connection with the sale of the units, the registrant will
    issue to the representative of the underwriters warrants to
    purchase up
    to&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock, par value $0.0001 per share.
</TD>
</TR>





<TR valign="top" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>    (4)&#160;
</TD>
    <TD align="left">    Determined in accordance with Rule&#160;457(i) based upon the
    estimated exercise price of the warrants.
</TD>
</TR>





<TR valign="top" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>    (5)&#160;
</TD>
    <TD align="left">    No fee required pursuant to Rule&#160;457(g).
</TD>
</TR>

</TABLE>



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>The registrant hereby amends this registration statement on
    such date or dates as may be necessary to delay its effective
    date until the registrant shall file a further amendment which
    specifically states that this registration statement shall
    thereafter become effective in accordance with Section&#160;8(a)
    of the Securities Act of 1933 or until the registration
    statement shall become effective on such date as the Commission,
    acting pursuant to said Section&#160;8(a), may determine.</B>
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 100%; border-bottom: 1pt solid #000000"></CENTER>

<CENTER style="font-size: 1pt; width: 100%; border-bottom: 2pt solid #000000"></CENTER>
<!-- XBRL Pagebreak Begin -->

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 94%; margin-left: 3%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<TABLE style="color: #FF0000" width="100%" border="1" cellpadding="5"><TR><TD style=text-align:justify>
<FONT style="font-size: 8pt; font-family: Arial, Helvetica; color: #E8112D">The
information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not
permitted.<BR>
</FONT>
</TD></TR></TABLE>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>
</DIV><!-- END PAGE WIDTH -->
<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="color: #E8112D">SUBJECT TO COMPLETION, DATED
    APRIL&#160;2, 2010</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>PRELIMINARY PROSPECTUS</B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 14pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    Units</FONT></B>
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 14pt">Units each consisting of one
    Share of Common Stock and</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 14pt">one Common Stock Purchase
    Warrant</FONT></B>
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="h69192h6919207.gif" alt="(PLANET BEACH LOGO)"><B><FONT style="font-size: 14pt">
    </FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 18%; border-bottom: 1pt solid #000000"></CENTER>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This is the initial public offering of Planet Beach Franchising
    Corporation. We are
    offering&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    units, each consisting of one share of our common stock and one
    redeemable common stock purchase warrant. The estimated initial
    offering price is between $&#160;&#160;&#160;&#160;&#160; and
    $&#160;&#160;&#160;&#160;&#160; per unit. The common stock and
    warrants will trade as a unit for 35&#160;days following the
    date of this prospectus, after which the warrants will be
    exercisable and the common stock and the warrants will trade
    separately. For a more detailed description of our common stock,
    see the section entitled &#147;Description of
    Securities&#160;&#151; Common Stock&#148; on page&#160;65 of
    this prospectus, and for a more detailed description of the
    warrants, see the section entitled &#147;Description of
    Securities&#160;&#151; Warrants&#148; beginning on page&#160;65
    of this prospectus.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We will apply to list the units for trading on the NYSE Amex
    under the symbol &#147;PBFCU&#148; beginning on or promptly
    after the date of this prospectus. Once the shares and warrants
    begin separate trading, we anticipate that the shares will be
    listed on the NYSE Amex under the symbol &#147;PBFC&#148; and
    the warrants will be listed on the NYSE Amex under the symbol
    &#147;PBFCW,&#148; but we cannot assure you that any of the
    securities offered by this prospectus will be so listed or, if
    listed, will continue to be listed. Currently, there is no
    public market for the units, our common stock or the warrants.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 5%; font-size: 12pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>This investment involves a high degree of risk.&#160;&#160;We
    urge you to read carefully the &#147;Risk Factors&#148; section
    beginning on page&#160;10 of this prospectus.</B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="81%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="2%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Per Unit</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Total</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Public Offering Price
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Underwriting Discount
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Proceeds, Before Expenses, to Us
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have granted the underwriters an option for a period of
    30&#160;days from the date of this prospectus to purchase up
    to&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;additional
    units on the same terms and conditions set forth above to cover
    over-allotments.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Please see &#147;Underwriting&#148; beginning on page&#160;72 of
    this prospectus for more information regarding our arrangements
    with the underwriters.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Neither the Securities and Exchange Commission nor any state
    securities commission nor any other regulatory body has approved
    or disapproved of these securities or passed on the accuracy or
    adequacy of this prospectus. Any representation to the contrary
    is a criminal offense.</B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The underwriters expect to deliver the units to purchasers on or
    about&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2010.
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="h69192h6919210.gif" alt="C. K. Cooper and Company">
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The date of this prospectus
    is&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2010.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="h69192h69192a.gif" alt="">
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">TABLE OF
    CONTENTS</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>
<DIV align="left">
<!-- TOC -->
</DIV>

<DIV align="left">
<A name="tocpage"></A>
</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="92%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=quadleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=quadright -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Page No.</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#101'>SUMMARY</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#102'>RISK FACTORS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#103'>SPECIAL NOTE&#160;REGARDING FORWARD-LOOKING
    STATEMENTS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    20
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#104'>USE OF PROCEEDS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    20
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#105'>DETERMINATION OF OFFERING PRICE</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    21
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#106'>CAPITALIZATION</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    23
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#107'>DILUTION</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    24
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#108'>DIVIDEND POLICY</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    25
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#109'>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#110'>OUR BUSINESS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    43
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#111'>MANAGEMENT</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    57
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#112'>EXECUTIVE COMPENSATION</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    60
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#113'>TRANSACTIONS WITH RELATED PERSONS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    62
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#114'>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
    AND MANAGEMENT</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    64
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#115'>DESCRIPTION OF SECURITIES</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    65
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#116'>SHARES ELIGIBLE FOR FUTURE SALE</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    69
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#117'>UNDERWRITING</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    72
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#118'>INTERESTS OF CERTAIN PERSONS IN THE OFFERING</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    74
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#119'>LEGAL MATTERS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    75
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#120'>EXPERTS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    75
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#121'>WHERE YOU CAN FIND MORE INFORMATION</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    75
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#122'>FINANCIAL STATEMENTS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-1
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h69192exv3w2.htm">EX-3.2</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h69192exv4w2.htm">EX-4.2</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h69192exv4w5.htm">EX-4.5</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h69192exv10w1.htm">EX-10.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h69192exv10w2.htm">EX-10.2</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h69192exv10w3.htm">EX-10.3</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h69192exv10w4.htm">EX-10.4</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h69192exv10w5.htm">EX-10.5</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h69192exv10w8.htm">EX-10.8</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h69192exv10w9.htm">EX-10.9</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h69192exv10w10.htm">EX-10.10</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h69192exv21w1.htm">EX-21.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h69192exv23w2.htm">EX-23.2</A></FONT></TD></TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 18%; border-bottom: 1pt solid #000000"></CENTER>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>You should only rely on the information contained in this
    prospectus. We have not, and the underwriters have not,
    authorized anyone to provide you with additional information or
    information different from that contained in this prospectus. We
    are not, and the underwriters are not, making an offer to sell
    these securities in any jurisdiction where an offer or sale is
    not permitted. You should assume that the information appearing
    in this prospectus is accurate as of the date on the front cover
    of this prospectus only, regardless of the time of delivery of
    this prospectus or of any sale of our securities. Our business,
    prospects, financial condition and results of operations may
    have changed since that date.</B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This document may only be used where it is legal to sell these
    securities. Certain jurisdictions may restrict the distribution
    of these documents and the offering of these securities. We
    require persons receiving these documents to inform themselves
    about and to observe any such restrictions. We have not taken
    any action that would permit an offering of these securities or
    the distribution of these documents in any jurisdiction that
    requires such action.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Planet
    Beach<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>

    name and logo and the Contempo
    Spa<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>

    name are registered trademarks of Planet Beach Brands, L.L.C.
    All rights reserved.
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 18%; border-bottom: 1pt solid #000000"></CENTER>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>
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    <BR>
    i
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Industry
    and Market Data</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Unless otherwise indicated, the market data and certain other
    statistical information used throughout this prospectus are
    based on independent industry publications, government
    publications, reports by market research firms or other
    published independent sources. Although we believe these
    third-party sources are reliable, we have not independently
    verified the information. None of the sources cited in this
    prospectus has consented to the inclusion of any data from its
    reports, nor have we sought their consent. In addition, some
    data are based on our good faith estimates. Such estimates are
    derived from publicly available information released by
    independent industry analysts and third-party sources, as well
    as our own management&#146;s experience in the industry, and are
    based on assumptions we made based on such data and our
    knowledge of the industry and markets, which we believe to be
    reasonable. However, none of our estimates has been verified by
    any independent source. Our estimates and assumptions involve
    risks and uncertainties and are subject to change based on
    various factors, including those discussed in the &#147;Risk
    Factors&#148; section of this prospectus and the other
    information contained in this prospectus. These and other
    factors could cause our actual results to differ materially from
    those expressed in the estimates and assumptions.
</DIV>
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    ii
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->

<A name='101'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SUMMARY</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>The items in the following summary are described in more
    detail later in this prospectus. This summary provides an
    overview of selected information and does not contain all the
    information you should consider before investing in our
    securities. Therefore, you should read this entire prospectus
    carefully, especially the matters set forth under &#147;Risk
    Factors,&#148; the consolidated financial statements and the
    notes to those consolidated financial statements before making
    an investment decision.</I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>In this prospectus, unless indicated otherwise, references to
    &#147;Planet Beach,&#148; &#147;the company,&#148;
    &#147;we,&#148; &#147;us,&#148; or &#147;our,&#148; are
    references to Planet Beach Franchising Corporation and its
    wholly-owned subsidiaries, but do not include the stockholders
    of Planet Beach Franchising Corporation.
    &#147;U.S.&#160;dollars,&#148; &#147;dollars,&#148;
    &#147;USD&#148; and &#147;$&#148; refer to the legal currency of
    the United States.</I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Overview</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe we are the largest, full-service automated day spa
    franchisor in the United States. We grant franchises for stores
    operating under the Planet Beach name. As of January&#160;15,
    2010, we had 345 franchises located in 38 U.S.&#160;states,
    Canada, Ireland, South Africa and Australia. We also had at that
    date 20 additional franchises under development, including
    proposed locations in one new state as well as in Egypt, Saudi
    Arabia and Kuwait. In addition, at that date we had candidates
    interested in
    <FONT style="white-space: nowrap">re-opening</FONT>
    16 previously closed locations, including one in an additional
    state.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Contempo Spas offer our customers a unique experience by
    providing high quality automated day spa services. These
    services include automated massages and facials, ultra violet or
    &#147;U-V&#148; light therapy and sunless tanning. We provide
    automated spa services through equipment such as hydro massage
    and facial machines that do not require a therapist or
    aesthetician. Instead, a spa employee programs individual spa or
    U-V sessions and sets the desired time of the session through
    the store&#146;s point of sale software. The customer activates
    the session by pressing a start button in the treatment room and
    may adjust the settings according to his or her preferences on
    certain equipment such as hydro massage units.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our spas also offer a variety of skin care, U-V and nutritional
    products, as well as an on-line nutritional service.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We establish most of our domestic franchises through
    intermediaries whom we call &#147;area representatives.&#148; We
    grant development territories to area representatives in return
    for a territory development fee. These development territories
    are geographic regions within which area representatives are
    entitled to market franchises and are obligated to train,
    support and provide guidance to franchisees in the territory.
    Our area representatives are entitled to a percentage of the
    fees we earn when we sell a new franchise or transfer an
    existing franchise to a new franchisee in the area
    representative&#146;s territory. In some circumstances, we also
    pay a percentage of those fees for new or transferred franchises
    outside the area representative&#146;s territory obtained as a
    result of the area representative&#146;s efforts. Additionally,
    our area representatives are entitled to a percentage of
    collected royalties that we receive from our franchisees in
    their territories.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We establish most of our international franchises through
    persons we refer to as &#147;master franchisors.&#148; Our
    agreements with our master franchisors give them the right to
    grant Planet Beach franchises in their assigned geographic
    region. The master franchisors develop their own franchise
    system in their areas. For example, the master franchisors are
    required directly, or through area representatives whom they
    appoint, to sell, train, support and provide guidance to
    franchisees in their areas. The master franchisors owe us a
    master franchise fee when we appoint them as a master
    franchisor, additional fees or royalties upon the sale of
    franchises and a percentage of the revenues generated by
    franchise outlets in the assigned area.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We require our franchisees and master franchisors to purchase
    U-V and spa equipment, as well as certain U-V, skin care and
    nutritional products, from us or from suppliers we designate. We
    receive a royalty for equipment and products sold to our
    franchisees and master franchisors directly by the designated
    supplier. All of the equipment, and approximately 53% of the
    products, are sold under the Planet Beach private label.
</DIV>
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    <BR>
    1
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Contempo Spa Concept</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We were founded in 1996 as a U-V tanning franchise business.
    However, in 2005, we substantially revised our business model to
    adopt our Contempo Spa concept in response to the general
    slowdown of sales in the tanning salon industry.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Contempo Spas offer U-V services along with traditional day
    spa services such as facials, steam baths, and massages. These
    spa services are performed by automated equipment such as
    massage units or light therapy equipment, which reduces the
    staffing that is required compared with a traditional day spa
    operation. Reducing the number of trained and certified
    employees required to operate a Planet Beach franchise results
    in reduced operating costs and a greater return on investment.
    The automated equipment at our Contempo Spas allows our
    customers to take advantage of more services in less time and at
    a lower cost than at a traditional day spa. Additionally, we
    believe that the quality of individual services offered at each
    repeat visit is more consistent than at a traditional day spa
    where services are provided by a therapist or aesthetician.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We do not own any long-term exclusive rights to use the
    equipment featured in our Contempo Spas, some of which is also
    used in malls, airports, massage therapist offices, and some
    tanning franchises. However, we are not aware of any significant
    competitor that employs the same automated day spa concept that
    we have developed, using the same type and quantity of equipment
    that we do.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Contempo Spas include some, or all, of the following
    automated equipment:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    aqua and hydro massage units that use heat and water pressure to
    decrease muscle tension, and therasage and cyber-relax units
    that reproduce the therapeutic benefits of a traditional
    pressure massage;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    hydro-derma fusion stations that combine infrared heat and
    nutrient-rich steam to moisturize the skin;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    luminous facial and hand units that use light therapy to improve
    skin texture and tone, lighten age spots and diminish wrinkles;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    misting spa units that use a cool mist spray which prompts
    cellular skin renewal to diminish fine lines and wrinkles and
    improve skin elasticity;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    sunless tanning equipment that uses a tanning mist which is
    sprayed onto the skin&#146;s surface to create an artificial tan;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    teeth whitening equipment designed to restore teeth color;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    units that use infrared heating to deep heat the body and
    aromatherapy for relaxation;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    equipment that leads customers through guided meditation and
    relaxation sessions to reduce stress, improve mental clarity or
    promote lifestyle changes, such as weight loss or smoking
    cessation; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <FONT style="white-space: nowrap">U-V</FONT> light
    beds.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition to our spa services, our locations offer an array of
    retail products and specialty items that enhance the Contempo
    Spa experience, including U-V lotions, spa accessories, spa
    hydration products, nutritional products, holistic and skincare
    products, and promotional merchandise.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our Sales
    Platform and Customers</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our franchisees charge a monthly membership fee to customers for
    different service offerings. Members can choose from different
    service levels, some of which include only U-V services, while
    others include U-V services, automated spa treatments and access
    to our on-line NutritionSpa.com service, which provides
    nutrition, skin wellness, and weight control information. At the
    higher service levels, members receive reciprocation rights that
    allow them to visit any of our spa locations without paying an
    additional fee, and they have unlimited access to all of our
    services at a monthly cost that is comparable to or lower than
    the cost of a single visit at a traditional day spa. Our monthly
    membership fees program results in a stable revenue stream for
    our franchisees. Our locations also offer services on an
    individual, non-membership basis, and an array of retail U-V,
    skincare and nutritional products.
</DIV>
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    <BR>
    2
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In fiscal 2009, our locations served approximately 561,000
    customers. Of those customers, approximately 162,000 were Planet
    Beach members. Membership data indicates that the average age of
    those members was 31, and approximately 88% were female. We also
    have a system-wide database of all current and former Planet
    Beach customers, which contained approximately 2.1&#160;million
    people at December&#160;31, 2009.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Industry</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    According to the International SPA Association, or ISPA, the spa
    industry recognized $12.8&#160;billion and $10.9&#160;billion of
    revenue in 2008 and 2007, respectively, an increase of
    approximately 17.5%. Spa visits increased from 138&#160;million
    visits in 2007 to 160&#160;million visits in 2008, or 16%. ISPA
    reports that at the end of 2008 there were 21,300 spas in the
    U.S., a 19% increase since the end of 2007, when there were
    17,900 U.S.&#160;spas. The number of spa locations in the
    U.S.&#160;has increased at a five year average growth rate of
    17%.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    With the introduction of our nutritional and holistic skin care
    lines, as well as our success at converting to the Contempo Spa
    model, we have aimed to place ourselves in the wellness
    industry, an industry that, according to Natural Marketing
    Institute, experienced $200&#160;billion in revenue through 2008.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Competitive Strengths</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that we have the following competitive strengths:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Brand Market Differentiation and Brand
    Loyalty.</I>&#160;&#160;We are not aware of any other
    significant franchise in the U.S.&#160;that uses our business
    model. We believe that our position as the first company to
    market the Contempo Spa concept has the potential to create
    significant market share for us that will solidify our presence
    as the industry leader when other companies begin to compete
    with us in this sector. Our membership reciprocation rights that
    allow members to visit any of our spa locations without paying
    an additional fee is an important part of our strategy to build
    brand loyalty. We believe we can attract customers of our
    tanning salon competitors by introducing them to our spa
    services.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Use of Automated Spa Equipment Reduces our Labor Costs and
    Has Customer Appeal.</I>&#160;&#160;Through the use of
    automated, non-attended spa equipment, our franchisees are able
    to reduce labor costs because no staff members need be present
    during spa treatments. This format also allows franchisees to
    offer customers competitive and value-oriented pricing. In
    addition, we believe that the use of automated equipment is
    attractive to an expanded client base that desires spa services
    provided in less time and at comparable or lower cost than a
    single visit to a traditional day spa. We believe this model
    also has significant appeal in countries where social customs
    emphasize greater personal modesty. Furthermore, we believe that
    customers find the services provided by automated equipment are
    more consistent in quality from visit to visit than services
    provided by a therapist or aesthetician.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Capacity for Expansion.</I>&#160;&#160;We intend to add
    customers by increasing our sales network and increasing the
    number of our outlets both domestically and internationally. In
    2010, we believe our growth in open locations will primarily
    occur internationally. At the end of 2010, we expect that we
    will have approximately 28 locations outside the U.S., which
    would be an increase of approximately 22% in international
    locations from December&#160;31, 2009. We expect to return to a
    more rapid growth rate domestically after we expand our
    franchise marketing efforts using the proceeds of this offering.
    We believe we have developed an infrastructure that we can now
    leverage to increase our outlet base domestically and serve as a
    model for our international outlet growth. We expect this
    infrastructure will help us to accommodate our rapid growth
    effectively without the need to hire a significant number of
    additional employees.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Our Membership-Based Revenue Model Provides us with a
    Consistent Revenue Stream.</I>&#160;&#160;We are in significant
    part a membership-based service business. This membership model
    creates a recurring, stable revenue stream for our franchisees
    and, ultimately, for us, as compared to some of our competitors
    who charge for their services on an individual basis.
</TD>
</TR>

</TABLE>
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    <BR>
    3
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<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
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<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Experienced Management Team.</I>&#160;&#160;Our management
    team has substantial experience in franchising, as well as the
    spa and U-V industries, and also has significant experience in
    growing brands and in the retail environment.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Our Convenient Locations Help to Increase Our Customer
    Base</I>.&#160;&#160;We desire to become the &#147;neighborhood
    spa&#148; for our customer base by positioning our outlets
    mainly in larger urban area shopping centers. We believe our
    outlets are well positioned to attract our target demographic.
    Based on our customer surveys, we believe our primary target
    market consists of women ranging from 25 to 35&#160;years old,
    with annual incomes of between $50,000 and $100,000 per
    household, and who have attended college. We believe our
    secondary target market consists of women ranging from 36 to
    50&#160;years old, and men ranging from 30 to 50&#160;years old,
    with annual incomes of $50,000 to $100,000 per household, and
    who have attended college.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Growth Strategy</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are committed to achieving our growth plan by pursuing the
    following strategies:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Increasing Overall Franchise Sales.</I>&#160;&#160;Our
    primary growth strategy is to increase the overall number of our
    franchise locations. We intend to accomplish this through
    increased marketing, including attending trade shows, as well as
    brand development and increased advertising. In addition, we
    intend to maintain a strong balance sheet, which will provide
    potential franchisees with a certain level of confidence in our
    financial position. To this end, we will use a portion of the
    proceeds from this offering to reduce up to $1.8&#160;million of
    our current debt. Finally, we are continually exploring methods
    to assist our franchisees in obtaining financing, which we
    believe would remove the primary obstacle we have faced in
    increasing our franchise sales since the third quarter of 2008.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Conversion of Tanning Salons.</I>&#160;&#160;The amount of
    sales generated by a retail chain&#146;s existing outlets over a
    period of time is referred to as &#147;same store sales.&#148;
    Same store sales are an important statistic because they
    indicate what portion of our total revenue has been generated by
    sales growth and what portion has been generated by the opening
    of new stores. Our operating data suggests to us that our
    Contempo Spa concept results in increased same store sales. At
    January&#160;15, 2010, 141, or 41%, of our franchise locations
    had not yet converted to our Contempo Spa format, which includes
    automated spa services, sunless tanning equipment and U-V
    therapy services. Of these 141 locations, 25 provide only U-V
    therapy services. We believe that the conversion of these 141
    locations into our Contempo Spa concept should result in higher
    per unit sales.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>International Expansion.</I>&#160;&#160;We currently have
    operating locations in Canada, Ireland, South Africa, and
    Australia. We have sold a franchise in Egypt and expect a
    location to open there in the Spring of 2010. We have entered
    into master franchisor agreements, but do not yet have operating
    locations, in Northern Ireland, the United Kingdom, Kuwait, and
    Saudi Arabia. In addition, we are currently negotiating a master
    franchisor agreement in the United Arab Emirates. We plan to
    expand our brand further to other countries in Europe, New
    Zealand, South America, Central America, the Middle East, and
    Asia. In most cases, we enter into agreements and have
    relationships only with our master franchisors, rather than the
    individual franchisees. This arrangement reduces our costs and
    therefore may result in higher profits for us over the long term.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Product Development.</I>&#160;&#160;We continue to evaluate
    additional services that our franchisees might offer within our
    Contempo Spa concept. The addition of new services at our
    locations has historically resulted in new equipment sales and
    improvement in same store sales. For example, we are currently
    considering various sunless tanning services that would
    complement our current products and services. In addition, we
    periodically evaluate new franchise concepts that would
    complement our core Contempo Spa business. We are now evaluating
    a concept that would overlap with our existing customer base
    without competing with the Planet Beach brand. In addition, it
    would require a smaller initial investment by the franchisee
    than is required for a Planet Beach franchise. We plan to begin
    testing this concept in the late Spring and early Summer of
    2010. We do not know when this testing will be
</TD>
</TR>
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    <BR>
    4
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
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    <TD width="92%"></TD>
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    <TD>&nbsp;</TD>
    <TD>
</TD>
    <TD align="left">
    complete, whether it will be successful, or, if it is
    successful, when we might begin recruiting franchisees.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Risks
    Associated with Our Business</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our business is subject to numerous risks. Please see the
    &#147;Risk Factors&#148; section beginning on page 10 of the
    prospectus.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Corporate
    Information</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We were initially incorporated on September&#160;26, 1996, under
    the laws of the State of Louisiana. On March&#160;25, 2008, we
    reincorporated under the laws of the State of Nevada by merging
    our predecessor Louisiana corporation into its newly-formed,
    wholly-owned Nevada subsidiary. On March&#160;18, 2010, we
    changed our state of incorporation to Delaware by merging into
    our newly-formed, wholly-owned Delaware subsidiary.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The address of our principal executive office is 5145 Taravella
    Road, Marrero, Louisiana 70072, and our telephone number is
    <FONT style="white-space: nowrap">(504)&#160;361-5550.</FONT>
    We maintain a website at <U>www.planetbeach.com</U>. The
    information on, or that can be accessed through, our website is
    not incorporated by reference into this prospectus and should
    not be considered to be a part of this prospectus.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We conduct some of our operations through our wholly-owned
    subsidiaries, principally Planet Beach International, LLC.
</DIV>
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    <BR>
    5
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    <B><FONT style="font-family: 'Times New Roman', Times">The
    Offering</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Units:</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="36%"></TD>
    <TD width="1%"></TD>
    <TD width="63%"></TD>
</TR>

<TR>
    <TD valign="top">
<DIV style="text-indent: -5%; margin-left: 5%">
    &#160;&#160;Units offered by us</DIV>
</TD>
    <TD></TD>
    <TD valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;units.
    Each unit consists of one share of our common stock and one
    redeemable common stock purchase warrant.</TD>
</TR>

<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    &#160;&#160;Public offering price of units</TD>
    <TD></TD>
    <TD valign="bottom">
    $&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    per unit.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    &#160;&#160;Proposed NYSE Amex Symbol</TD>
    <TD></TD>
    <TD valign="bottom">
    PBFCU <BR>
    <BR>
    The units are expected to be listed for trading on the NYSE Amex
    as of the date of this prospectus.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    <B>Common Stock:</B> </TD>
    <TD></TD>
    <TD valign="bottom">
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
<DIV style="text-indent: -11%; margin-left: 11%">
    &#160;&#160;Common stock included in the units offered by us</DIV>
</TD>
    <TD></TD>
    <TD valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
<DIV style="text-indent: -11%; margin-left: 11%">
    &#160;&#160;Common stock outstanding before the offering</DIV>
</TD>
    <TD></TD>
    <TD valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
<DIV style="text-indent: -11%; margin-left: 11%">
    &#160;&#160;Common stock outstanding after the offering, before
    exercise of any warrants</DIV>
</TD>
    <TD></TD>
    <TD valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
<DIV style="text-indent: -11%; margin-left: 11%">
    &#160;&#160;Proposed NYSE Amex Symbol</DIV>
</TD>
    <TD></TD>
    <TD valign="bottom">
    PBFC</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    The common stock included in the units is expected to be
    separately listed on the NYSE Amex 35&#160;days from the date of
    this prospectus.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    <B>Warrants:</B> </TD>
    <TD></TD>
    <TD valign="bottom">
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
<DIV style="text-indent: -11%; margin-left: 11%">
    &#160;&#160;Common stock underlying warrants included in the
    units offered by us</DIV>
</TD>
    <TD></TD>
    <TD valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
<DIV style="text-indent: -11%; margin-left: 11%">
    &#160;&#160;Common stock outstanding after the offering,
    assuming all warrants are exercised</DIV>
</TD>
    <TD></TD>
    <TD valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
<DIV style="text-indent: -11%; margin-left: 11%">
    &#160;&#160;Proposed NYSE Amex symbol</DIV>
</TD>
    <TD></TD>
    <TD valign="bottom">
    PBFCW</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    The warrants are expected to be separately listed on the NYSE
    Amex 35&#160;days from the date of this prospectus.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    &#160;&#160;Exercisability</TD>
    <TD></TD>
    <TD valign="bottom">
    Each warrant is exercisable for one share of common stock.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    &#160;&#160;Exercise price</TD>
    <TD></TD>
    <TD valign="bottom">
    $&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    &#160;&#160;Exercise period</TD>
    <TD></TD>
    <TD valign="bottom">
    The warrants become exercisable 35&#160;days from the date of
    this prospectus and will expire at 5:00&#160;p.m., New York
    time,
    on&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2013, or upon earlier redemption.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    &#160;&#160;Redemption</TD>
    <TD></TD>
    <TD valign="bottom">
    We may redeem the outstanding warrants at a price of
    $&#160;&#160;&#160;&#160;&#160; per warrant upon
    15&#160;days&#146; prior written notice if the closing price of
    our common stock equals or exceeds
    $&#160;&#160;&#160;&#160;&#160; per share for a period of ten
    consecutive trading days.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Representative&#146;s warrants</TD>
    <TD></TD>
    <TD valign="bottom">
    We have agreed to issue to the representative of the
    underwriters warrants to purchase a total
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of our common stock at a price per share equal to 120% of the
    initial offering </TD>
</TR>
<!-- XBRL Paragraph Pagebreak -->

</TABLE>
<!-- XBRL Pagebreak Begin -->
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    6
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
<!-- XBRL Pagebreak End -->

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="36%"></TD>
    <TD width="1%"></TD>
    <TD width="63%"></TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    price, exercisable for a period beginning six months from the
    date of this prospectus until the fifth anniversary of that date.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Over-allotment option</TD>
    <TD></TD>
    <TD valign="bottom">
    We have granted the underwriters an option for a period of
    30&#160;days to purchase up
    to&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    additional units to cover over-allotments. </TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    If the underwriters exercise their over-allotment option in
    full, we will
    have&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    outstanding after this offering, before any warrants are
    exercised,
    and&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares,
    assuming all warrants, other than the representative&#146;s
    warrants, are exercised.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Proceeds to us</TD>
    <TD></TD>
    <TD valign="bottom">
    We estimate the net proceeds from this offering, after deducting
    underwriting discounts and commissions and estimated offering
    expenses, would be approximately
    $&#160;&#160;&#160;&#160;&#160;&#160;million, or approximately
    $&#160;&#160;&#160;&#160;&#160;&#160;million if the underwriters
    exercise their over-allotment option in full. </TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    We expect to use the net proceeds from this offering:</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;for the purchase of up to 25 existing or recently
    closed Planet Beach locations from our franchisees that we plan
    to operate as company stores or resell as franchises;</DIV>
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;to repay outstanding indebtedness of up to
    $1.8&#160;million;</DIV>
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;for advertising and marketing to increase franchise
    sales;</DIV>
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;to develop new skincare and nutritional products;</DIV>
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;to improve our corporate headquarters, which we use
    as our primary training facility for new and existing
    franchisees;</DIV>
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;for working capital;</DIV>
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;to develop new franchise concepts;</DIV>
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;to purchase intellectual property rights; and</DIV>
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    &#149;&#160;for general corporate purposes.</DIV>
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    See the more detailed description of our expected use of the
    proceeds of this offering under the heading &#147;Use of
    Proceeds&#148; on page&#160;[&#160;&#160;] of this prospectus.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Dividend policy</TD>
    <TD></TD>
    <TD valign="bottom">
    We do not expect to pay dividends in the foreseeable future.</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Risk factors</TD>
    <TD></TD>
    <TD valign="bottom">
    Investing in our common stock involves certain risks. You should
    read &#147;Risk Factors&#148; beginning on
    page&#160;[&#160;&#160;] for a discussion of factors that you
    should consider carefully before deciding whether to purchase
    the units.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The number of shares of our common stock that will be
    outstanding after this offering is based on
    3,713,925&#160;shares of our common stock outstanding as of
    March&#160;18, 2010, and excludes:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    552,571&#160;shares of our common stock issuable upon the
    exercise of outstanding options under our 2005 Stock Option
    Plan, all at an exercise price of $3.50 per share;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    shares subject to an option held by one of our vendors to
    convert balances due under our note payable within
    12&#160;months of this offering at a conversion price equal to
    the initial public offering price; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a number of shares issuable to one of our executive officers and
    one employee in lieu of $13,632 of deferred cash compensation,
    to be determined using the closing price of our common stock on
    the
</TD>
</TR>
<!-- XBRL Paragraph Pagebreak -->

</TABLE>
<!-- XBRL Pagebreak Begin -->
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    7
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
<!-- XBRL Pagebreak End -->

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>
</TD>
    <TD align="left">
    NYSE Amex on the first day that the warrants and shares we are
    offering begin trading separately, and to be issued on that date.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Unless otherwise indicated, all information in this prospectus
    assumes:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    no exercise of the underwriters&#146; option to purchase
    additional units;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    no exercise of the warrants underlying the units sold in this
    offering;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    no exercise of the representative&#146;s warrants; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a 1 for 3.5 reverse stock split of our common stock that we
    effected when we changed our state of incorporation to Delaware.
</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    8
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Summary
    Consolidated Financial Information</FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table summarizes selected financial data regarding
    our business and should be read in conjunction with our
    consolidated financial statements and related notes contained
    elsewhere in this prospectus and the information under
    &#147;Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations.&#148; The as adjusted
    balance sheet data gives effect to this offering and the
    application of the offering proceeds as described in &#147;Use
    of Proceeds.&#148; The financial statement data as of and for
    each of the fiscal years ended December&#160;31, 2009, 2008 and
    2007 have been derived from our audited consolidated financial
    statements included elsewhere in this prospectus. The historical
    results presented below are not necessarily indicative of
    results to be expected in any future periods, and do not reflect
    our 1 for 3.5 reverse stock split effected March&#160;18, 2010.
</DIV>



<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="56%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom">
    <B>(In thousands, except share data)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Statement of Operations</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Operating Revenues</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Sales of spa equipment and products
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,920
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    14,706
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    17,586
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Franchise fees
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,257
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,067
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,745
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Royalties and related fees
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,883
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,833
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,585
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Other
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    209
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    400
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    540
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Total Operating Revenue
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,269
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    25,006
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26,456
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Operating Expenses</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Cost of goods sold
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,693
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11,132
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,369
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Operating expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,950
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,630
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,633
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Salaries and bonuses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,280
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,791
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,634
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Commissions
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,580
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,013
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,012
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Total operating expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,503
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    25,566
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26,648
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Income (Loss) From Operations</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (234
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (560
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (192
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Other Income (Expense)</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Interest and other income
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    35
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Interest expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (256
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (219
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (174
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Realized gain (loss)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (253
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    23
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Total other income (expense)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (474
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (198
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (138
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Income (Loss) Before Provision For Income Taxes</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (708
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (758
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (330
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Provision (benefit) for income taxes (benefit)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Net Income (Loss)</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (708
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (758
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (325
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Loss Per Common Share</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    <B>Basic and Diluted</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.05
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.06
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.03
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Weighted Average Shares</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    <B>Outstanding Basic and Diluted</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12,998,739
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12,971,046
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12,961,815
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>



<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="63%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="2%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="2%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="15" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>As of December&#160;31,</B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="11" align="center" valign="bottom">
    <B>Actual </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>As Adjusted</B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="11" align="center" valign="bottom">
    <B>(In thousands)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Consolidated Balance Sheet Data:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Working capital(1)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (705
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (617
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    238
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Current assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,926
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,944
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,166
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,934
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,966
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,517
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Current liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,631
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,561
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,935
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,239
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,900
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,533
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Stockholders&#146; equity (deficit)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,305
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (934
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (16
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    Working capital is defined as current assets minus current
    liabilities.</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    9
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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    <B><FONT style="font-family: 'Times New Roman', Times">RISK
    FACTORS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>An investment in our securities involves a high degree of
    risk. You should carefully consider the risks described below,
    together with all of the other information included in this
    prospectus, before making an investment decision. If any of the
    following risks actually occur, our business, financial
    condition or results of operations could suffer. In that case,
    the value of our units, common stock and warrants could decline,
    and you may lose all or part of your investment. The risks
    described below are not the only ones we face. Additional risks
    that we currently do not know about or that we currently believe
    to be immaterial may also impair our operations and business
    results.</I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Risks
    Related To Our Business</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">If we
    are unable to sell new franchises, or open new spas on time, our
    revenue growth rate and profits may decline.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To expand our business, we must constantly identify new
    franchise opportunities. In addition, our franchisees must open
    new spas on schedule and in a profitable manner. In the past,
    our franchisees have experienced delays in spa openings due
    primarily to the difficulty in obtaining financing, and they may
    experience similar delays in the future. Delays or failures in
    opening new franchises could hurt our ability to meet our growth
    objectives, which may affect the expectations of securities
    analysts and others and thus the trading price of our
    securities. We or our franchisees may not be able to achieve our
    expansion goals and our new spas may not be operated profitably.
    Further, any spas that our franchisees open may not obtain
    operating results similar to those of our existing spas. Our
    ability to expand successfully will depend on a number of
    factors, many of which are beyond our control. Among other
    things, we must:
</DIV>

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    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    attract and retain qualified franchisees;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    recruit, train and retain qualified corporate personnel and
    management;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    create customer awareness of our spas in new markets;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    compete in our markets; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    adjust to general economic conditions.
</TD>
</TR>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, our franchisees must:
</DIV>

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    <TD width="2%"></TD>
    <TD width="94%"></TD>
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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    locate suitable spa sites in new and existing markets;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    obtain acceptable financing for construction of new spas or
    negotiate acceptable lease terms;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    plan, design and build out spas in a cost-effective and timely
    manner; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    obtain and maintain required local and state governmental
    approvals and permits related to the construction and operation
    of the sites.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If we fail to identify new franchise opportunities, or our
    franchisees fail to open new spas on time, our future revenues
    may be adversely impacted.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Deteriorating
    national and global economic conditions have negatively impacted
    the demand for our products and services and the ability of our
    franchisees to obtain financing for new franchises, and these
    conditions may worsen.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our business has been adversely affected by deteriorating
    national and global economic conditions, including unemployment
    levels, unfavorable interest rates, the lack of availability of
    credit on reasonable terms, changes in consumer spending rates
    and habits, and rising energy costs. These conditions have
    negatively impacted consumer demand for personal care products
    and services, consumers&#146; ability to afford our products and
    services, and consumer habits with respect to how they spend
    their disposable income. Our business could be further
    negatively impacted if conditions deteriorate or efforts and
    initiatives of the
</DIV>
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    governments of the United States and other countries to manage
    and stimulate the economy fail or result in worsening economic
    conditions.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, the disruptions in credit and other financial
    markets caused by deteriorating national and international
    economic conditions have caused our franchisees to experience
    great difficulty over the past 18&#160;months in obtaining new
    credit on reasonable terms, and extensions of existing credit.
    As a result, we have had difficulty maintaining open locations,
    selling additional franchises and expanding our business. If
    these conditions continue, they could further impair the
    financial condition of our company and that of our franchisees,
    as well as our suppliers, making it difficult or impossible for
    us to meet our respective obligations and to grow our company.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We are
    dependent on franchisees and their success.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our performance depends upon our ability to attract and retain
    qualified franchisees and the franchisees&#146; ability to
    execute our concept and capitalize upon our brand recognition
    and marketing. Our inability to recruit franchisees who have the
    business skill, experience and financial resources necessary to
    open spas on schedule, and who will conduct operations in a
    manner consistent with our concept and standards, will have an
    adverse effect on our business and results of operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    franchisees may take actions that could harm our
    business.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Franchisees are independent contractors and are not our
    employees. We provide training and support to franchisees, but
    the quality of franchised spa operations may be diminished by
    any number of factors beyond our control. Our franchisees may
    not have the business acumen or financial resources necessary to
    operate successful franchises in their franchise areas.
    Consequently, franchisees may not operate spas in a manner
    consistent with our standards and requirements, or may not hire
    and train qualified managers and other spa personnel. If
    franchisees do not adequately manage their spas, our image and
    reputation, and the image and reputation of other franchisees,
    may suffer materially, and system-wide sales could significantly
    decline. The interests of franchisees may conflict with our
    interests. For example, whereas franchisees are concerned with
    individual business strategies and objectives, we are
    responsible for ensuring the success of the entire range of our
    products and services. In addition, we may also face potential
    claims and liabilities due to the acts of our franchisees based
    on agency or vicarious liability theories.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We may
    require additional capital and we may not be able to obtain it
    on acceptable terms or at all.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have had net losses of $708,000, $758,000 and $325,000 for
    the 2009, 2008 and 2007 fiscal years, respectively. Future
    operating losses would have an adverse effect on our
    stockholders&#146; equity and working capital. As of
    December&#160;31, 2009, we had cash and cash equivalents of
    $53,810, including escrow cash. We may need additional capital,
    and our needs may increase due to a change in business
    conditions, our inability to achieve our targeted growth
    milestones, a decline in same store sales or other future
    developments that negatively affect our cash flows from
    operations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If our resources are insufficient to satisfy our cash
    requirements, we may seek to sell additional equity or debt
    securities or obtain additional credit facilities. The sale of
    additional equity securities could result in dilution to our
    stockholders. The incurrence of indebtedness would result in
    increased debt service obligations and could require us to agree
    to operating and financing covenants that would restrict our
    operations. Our ability to obtain additional capital on
    acceptable terms is subject to a variety of uncertainties,
    including:
</DIV>

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</TD>
    <TD align="left">
    investors&#146; perception of, and demand for, securities of
    United States-based companies involved in the franchise
    distribution business;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


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</TD>
    <TD align="left">
    conditions of the U.S.&#160;and other capital markets in which
    we may seek to raise funds;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


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    <TD>&nbsp;</TD>
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</TD>
    <TD align="left">
    our future results of operations, financial condition and cash
    flows;&#160;and
</TD>
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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    economic, political and other conditions in United States and
    other international markets where we may seek to establish a
    presence.
</TD>
</TR>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Financing may not be available in amounts or on terms acceptable
    to us, if at all. If we fail to raise additional funds on terms
    favorable to us, or at all, our business, financial condition
    and results of operations could be materially adversely affected.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    industry is highly competitive, and if we are unable to compete
    effectively and gain market share, our financial condition could
    be negatively affected.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our market is fragmented with few barriers to entry, and we face
    intense competition for customers and suitable store locations.
    We compete with both tanning salons and day spas, whether
    independently owned or franchised. At the franchise level, we
    compete with other franchisors for potential franchisees, and
    the primary competitive factor at this level is the amount of
    the investment the franchisee must make. If we fail to maintain
    or improve our market position and respond successfully to
    changes in the competitive landscape, our business and results
    of operations may suffer.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We may
    not be able to respond to changing trends in a timely manner,
    which could have a material adverse effect on us.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We operate in a market characterized by possible rapid changes
    in consumer patterns and buying power. Buying power with respect
    to personal care products and services is driven by general
    economic factors, such as personal income levels, inflation and
    interest rates. We design our sales and marketing strategy to
    respond to changes in consumer patterns relating to general
    trends for shopping locations. There is a risk that we may lose
    some of our popularity among customers. If we cannot respond
    rapidly to changes in our industry, then we may lose market
    share to our competitors who are able to respond more rapidly
    and our financial condition and results of operation would be
    negatively affected. Additionally, even though we may respond to
    changing consumer trends, we may not be able to convince our
    franchisees to adopt our recommendations in a timely manner or
    at all.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">The
    infringement of our trademarks and other intellectual property,
    or the erosion of our brand, could substantially harm our
    business.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Planet Beach and Contempo Spa trademarks and other marks are
    vital to maintaining our brand awareness and competitive
    position. Protecting our intellectual property rights and
    combating unlicensed copying of our marks and other intellectual
    property can be difficult and costly. This is because we may be
    required to initiate litigation or other action to enforce our
    rights or establish their validity. As we expand our brand
    globally, protecting our intellectual property rights may be
    more challenging, because we may expand to countries where laws
    are less protective of these rights. We devote substantial
    resources to the establishment and protection of these
    trademarks and other proprietary rights. However, these measures
    may be inadequate to prevent imitation of our products and
    concepts by others. If we are unable to protect our marks and
    our brand, or if our brand becomes confused with the business of
    our competitors, our business could suffer substantially.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We
    have operated as a private company and have no experience
    attempting to comply with public company obligations. Attempting
    to comply with these requirements will increase our costs and
    require additional management resources, and we still may fail
    to comply.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have operated as a private company and have not been subject
    to many of the requirements applicable to public companies. Laws
    and regulations affecting public companies, including the
    provisions of the Sarbanes-Oxley Act of 2002 and the rules
    related to corporate governance and other matters subsequently
    adopted by the Securities and Exchange Commission, or SEC, and
    the NYSE Amex, will result in increased administrative, legal
    and accounting costs to us. The impact of these events and
    heightened corporate governance standards could also make it
    more difficult for us to attract and retain qualified persons to
    serve on our board of directors, our board committees or as
    executive officers. If we fail to comply with these
    requirements, the trading market for our securities may be
    negatively impacted and the trading price for our stock may
    decrease.
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    <B><I><FONT style="font-family: 'Times New Roman', Times">We may
    be exposed to potential risks relating to our internal controls
    over financial reporting and our ability to have the operating
    effectiveness of our internal controls attested to by our
    independent auditors.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As directed by Section&#160;404 of the Sarbanes-Oxley Act of
    2002, the SEC adopted rules requiring public companies to
    include a report from management on the company&#146;s internal
    controls over financial reporting in their annual reports,
    including annual reports on
    <FONT style="white-space: nowrap">Form&#160;10-K.</FONT>
    In addition, the independent registered public accounting firm
    auditing a company&#146;s financial statements must attest to
    and report on the operating effectiveness of a company&#146;s
    internal controls. These rules will apply to us beginning with
    our annual Report on
    <FONT style="white-space: nowrap">Form&#160;10-K</FONT>
    for our 2010 fiscal year. Our independent registered public
    accounting firm may issue an adverse opinion on our internal
    controls over financial reporting if one or more material
    weaknesses are identified. We have no prior experience with
    internal control audits and we may not be able to comply with
    all of the requirements imposed by Section&#160;404 or we may
    not receive a positive attestation from our independent
    auditors. If we identify significant deficiencies or material
    weaknesses in our internal controls that we cannot correct in a
    timely manner or we are unable to receive the required
    attestation from our independent auditors with respect to our
    internal controls, investors and others may lose confidence in
    the reliability of our financial statements. A significant
    financial reporting failure could cause an immediate loss of
    investor confidence in our company and a sharp decline in the
    market price of our common stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We
    experience fluctuations in operating results which may
    negatively affect our financial condition.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our annual and quarterly operating results have fluctuated and
    are expected to continue to fluctuate. Among the factors that
    may cause our operating results to fluctuate are customers&#146;
    response to product and service offerings, the timing of the
    rollout of new sales outlets, seasonal variations in sales, the
    timing of merchandise receipts, the level of merchandise
    returns, changes in service and merchandise mix and
    presentation, our cost of service and merchandise, unanticipated
    operating costs, and other factors beyond our control, such as
    general economic conditions and actions of competitors. As a
    result of these factors, we believe that period-to-period
    comparisons of historical and future results will not
    necessarily be meaningful and should not be relied on as an
    indication of future performance.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Complaints
    or litigation by our franchisees may harm our
    business.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We occasionally have disputes with our franchisees, and some of
    these disputes result in litigation against us. These actions
    arise in the ordinary course of our business. Regardless of
    whether any claims against us are valid or whether we are
    liable, claims may be expensive to defend and may divert time
    and money away from our operations and hurt our performance. In
    addition, various state and federal laws govern our relationship
    with our franchisees and potential sales of our franchised spas.
    If we fail to comply with these laws, we could be liable for
    damages to franchisees and fines or other penalties. Any
    uninsured judgments or judgments significantly in excess of our
    insurance coverage for any claims could materially adversely
    affect our financial condition or results of operations.
    Further, adverse publicity resulting from these allegations may
    materially adversely affect us and our franchisees.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Lawsuits
    by customers alleging injuries sustained while using our
    services could harm our business.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our customers must sign a form indicating they understand the
    potential dangers of U-V beds, which include eye and skin
    injury, allergic reactions, premature aging of the skin and skin
    cancer. Nevertheless, it is possible that a customer may be
    injured or have other health problems related to overexposure to
    U-V equipment, malfunctioning equipment or the effects of our
    products, or allege such claims, and seek redress from us. Any
    insurance we might obtain for these types of claims will be
    subject to deductibles and coverage limitations. In addition,
    the coverages may not be adequate to protect us against future
    claims. Any claim with respect to uninsured liabilities or for
    amounts in excess of insured liabilities could have an adverse
    effect on our business, operating results and prospects.
    Defending a suit, regardless of merit, could be costly, could
    divert management&#146;s attention from our business and might
    result in adverse publicity, which could result in the
    withdrawal of, or inability to recruit, prospective franchisees
    or result in brand deterioration. In addition to adversely
    impacting our business and prospects, such adverse publicity
    could materially adversely affect our stock price.
</DIV>
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    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    current insurance may not provide adequate levels of coverage
    against claims.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We currently maintain insurance customary for businesses of our
    size and type. However, in many cases, such insurance is
    expensive and some coverages are difficult to obtain. We cannot
    assure you that we can maintain, on reasonable terms, sufficient
    coverage to protect us against all the losses we might incur.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Adverse
    public or medical opinions about the health effects of our
    services could harm our business or could lead to additional
    regulation that could harm our business.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Medical opinions and opinions of commentators in the general
    public regarding negative health effects of some of our products
    and services, such as our U-V services, could adversely impact
    our future revenue. Although our industry is highly regulated by
    federal and state government agencies, negative publicity
    regarding the health effects of some of the products and
    services we offer could lead to adverse legislation or further
    regulation of the industry, which could have a negative impact
    on our profit margins as well as the trading price of our
    securities.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Although we have shifted our business model away from emphasis
    on U-V tanning, we still offer U-V services, and despite our
    warnings, some of our customers may continue to use our U-V
    equipment for tanning. The continuation of our U-V services is
    dependent upon the consuming public&#146;s sustained belief that
    the benefits of U-V treatments outweigh the risks of exposure to
    ultraviolet light. Any significant change in public perception
    of U-V equipment caused by scientific studies, government
    reports, rumors or otherwise that link U-V equipment to a
    significant increase in the likelihood of skin cancer or other
    skin diseases, could have a material adverse effect on our
    business, financial condition and results of operations. For
    example, the federal health care bill signed into law in March
    2010 contains a 10% tax on U-V tanning services that will take
    effect on July&#160;1, 2010. We have not yet determined whether
    this tax will be imposed on our spa memberships, but we believe
    it would apply to sales of individual U-V therapy sessions and
    could have a chilling effect on demand for U-V services
    generally.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, a Food and Drug Administration advisory panel
    recently recommended that the agency consider actions such as
    requiring that teenagers get parental consent before using a
    tanning bed or even banning the use of tanning beds among teens.
    The panel also recommended reclassifying tanning lamps from
    Class&#160;I medical devices&#160;&#151; a category that
    includes tongue depressors and elastic bandages&#160;&#151; to a
    Class&#160;II or Class&#160;III device, which would permit the
    agency to impose greater restrictions. According to the
    International Agency for Research on Cancer, which is affiliated
    with the World Health Organization, or WHO, people under 30 who
    use tanning machines increase their risk of skin cancer by 75%.
    The WHO last July listed ultraviolet radiation-emitting beds as
    &#147;carcinogenic to humans,&#148; its highest category of
    cancer risk.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    earnings and business growth strategy depends in large part on
    the success of our suppliers and franchisees, and our reputation
    may be harmed by actions taken by these parties that are outside
    of our control.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our growth strategy, including our plans for new stores, new
    products and services, branded products built to our
    specifications and other initiatives, relies significantly on
    our relationships with our suppliers and franchisees. For
    example, we sell several products under the Planet Beach
    trademark that are manufactured by third parties and we require
    our franchisees to use U-V and spa equipment manufactured by
    third parties that have relationships with us. We provide
    specifications to these suppliers, but the product quality they
    deliver to our franchisees may be diminished by any number of
    factors beyond our control. We believe that customers expect
    high quality products and services from our franchisees at a
    competitive price, and that any shortcoming of our franchisees
    or suppliers, particularly an issue regarding the quality of the
    service provided or the safety of products sold, may be
    attributed by customers to our company, thus damaging our
    reputation and brand value and potentially affecting our results
    of operations.
</DIV>
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We
    must identify and obtain a sufficient number of suitable new spa
    sites for us to sustain our revenue growth rate.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We require that all proposed spa sites meet site-selection
    criteria established by us. We and our franchisees may not be
    able to find sufficient new sites to support our planned
    expansion in future periods. We face significant competition
    from other spa companies and retailers for sites that meet our
    criteria and the supply of sites may be limited in some markets.
    As a result of these factors, our franchisees&#146; costs to
    obtain and lease sites may increase, or they may not be able to
    obtain certain sites at a cost they can afford. This may, in
    turn, reduce our growth rate.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    spas may not achieve market acceptance in the new geographic
    regions we enter.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our expansion plans include opening spas in new markets where we
    or our franchisees have little or no experience. The success of
    these new spas will be affected by the different competitive
    conditions, consumer preferences, discretionary spending
    patterns, and social customs in the new markets as well as our
    ability to generate market awareness of the Planet Beach brand.
    Sales at spas opening in new markets may take longer to reach
    average annual spa sales, if at all, thereby affecting the
    profitability of these franchises and ultimately our
    profitability.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Because
    we do business internationally, our business could be harmed if
    changes in political or economic stability, laws, exchange rates
    or foreign trade policies should occur.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Sales of our franchises in foreign markets and our relationships
    with our foreign suppliers will subject us to the risks of doing
    business abroad. Longer lead times may be required for the
    manufacture of equipment according to foreign specifications for
    our international locations, which could reduce our flexibility.
    Other risks of doing business internationally include political
    or economic instability, any significant fluctuations in the
    value of the dollar against foreign currencies, terrorist
    activities and restrictions on the transfer of funds. Any
    material disruption to our operations caused by such events may
    have an adverse affect on our business.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Because
    of our international operations, we are subject to the Foreign
    Corrupt Practices Act. A determination that we violated this act
    may affect our business and operations adversely.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As a U.S.&#160;corporation, we are subject to the regulations
    imposed by the U.S.&#160;Foreign Corrupt Practices Act, or the
    FCPA, which generally prohibits U.S.&#160;companies and their
    intermediaries from making improper payments to foreign
    officials for the purpose of obtaining or keeping business. Any
    determination that we have violated the FCPA could have a
    material adverse effect on our financial position, operating
    results and cash flows.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">The
    loss of key personnel or difficulties recruiting and retaining
    qualified personnel could jeopardize our ability to meet our
    growth targets.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our future growth depends substantially on the contributions by
    and abilities of key executives and other employees. We must
    continue to recruit, retain and motivate management and other
    employees sufficient to maintain our current business and
    support our projected growth. A loss or significant shortage of
    high quality employees could jeopardize our ability to meet our
    growth plan.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Stephen Smith has been very important to our success.
    Mr.&#160;Smith is one of our founders, our principal stockholder
    and our Chairman, President and Chief Executive Officer. The
    loss of Mr.&#160;Smith&#146;s services could have a significant
    negative effect on us.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Implementing
    our expansion strategy may strain our resources.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our expansion strategy may strain our management, financial and
    other resources. We must attract and retain talented franchisees
    to maintain the quality and service levels at our existing and
    future spas. Additionally, we must continue to enhance our
    operational, financial and management systems. We may not
</DIV>
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    be able to manage these or other aspects of our expansion
    effectively. If we fail to do so, our business, financial
    condition, operating results and cash flows could suffer.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Further, our anticipated growth could place additional strain on
    our third party suppliers, resulting in increased need for us to
    monitor carefully our relationships with these suppliers. Any
    failure by us to manage these relationships effectively could
    have an adverse effect on our ability to expand.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    franchises may not be able to obtain and maintain licenses and
    permits necessary to operate our spas.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our industry is subject to various state and local government
    regulations, including state regulations requiring a license to
    operate U-V light beds or obtain industry certifications. Such
    regulations are subject to change from time to time. The failure
    of our franchisees to obtain and maintain these licenses,
    permits and approvals could adversely affect our operating
    results. Difficulties or failure to obtain the required licenses
    and approvals could delay or result in our decision to cancel
    the opening of new franchises. Local authorities may revoke,
    suspend or deny renewal of required licenses if they determine
    that our franchisees&#146; conduct violates applicable
    regulations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Risks
    Related to This Offering and the Market for Our Equity
    Securities Generally</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">No
    market currently exists for the trading of our securities and no
    market may ever develop. Accordingly, you may not have any means
    of trading the units you acquire in this offering or the
    underlying shares or warrants.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A market does not currently exist for our securities and an
    active market may never develop or be sustained. Consequently,
    you may not be able to liquidate your investment in our
    securities for an emergency or at any time, and the securities
    will not be readily acceptable as collateral for loans. Although
    we will try to establish an active trading market for our
    securities on the NYSE Amex, the market may not be sufficiently
    liquid to enable an investor to liquidate his or her investment
    in us at a time and at a price he or she feels are fair or
    appropriate.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Furthermore, the market price of our units, and ultimately our
    common stock and warrants, may decline below the initial public
    offering price of the units. The initial public offering price
    will be determined through negotiations between us and the
    representative of the underwriters and may not be indicative of
    the market price of our securities following this offering.
    Among the factors considered in such negotiations are prevailing
    market conditions, certain of our financial information, market
    valuations of other companies that we and the representative of
    the underwriters believe are comparable to us, estimates of our
    business potential and the present state of our business. See
    &#147;Underwriting&#148; for additional information.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The NYSE Amex will require that we meet minimum criteria to
    continue listing our securities for trading. Among the criteria
    are a minimum stock price. If we fail to meet the listing
    criteria, our securities could be delisted, and as a result,
    there may not be a liquid trading market for the securities you
    purchase in this offering.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">You
    will experience immediate and substantial dilution if you invest
    in this offering, and you may experience additional dilution in
    the future.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If you purchase securities in this offering, you will experience
    immediate and substantial dilution because the public offering
    price of a unit will be substantially greater than the tangible
    book value attributable to the shares of our common stock
    included in a unit after giving effect to this offering. In the
    past, we have issued options to acquire shares of common stock
    at prices significantly below the public offering price of a
    share of our common stock (assuming no value is attributed to
    the redeemable warrants included in the units). To the extent
    these options are ultimately exercised, you will incur further
    dilution.
</DIV>
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<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">The
    price of our securities may be volatile.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The market price of our securities could be subject to wide
    fluctuations in response to factors such as the following, many
    of which are beyond our control:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    quarterly variations in our operating results, or results that
    vary from the expectations of the investment community;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    changes in investor perceptions of the our industry in general,
    including our competitors; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    general economic and competitive conditions.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, purchases or sales of large quantities of our stock
    could have an unusual effect on our market price.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We may
    be subject to penny stock regulations and restrictions and you
    may have difficulty selling shares of our common
    stock.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The SEC has adopted regulations defining and governing so-called
    &#147;penny stocks,&#148; which are equity securities of small
    companies that have a market price of less than $5.00 per share
    or an exercise price of less than $5.00 per share, subject to
    certain exemptions. If our securities become &#147;penny
    stocks&#148;, we may become subject to these rules. The rules
    impose additional sales practice requirements on broker-dealers
    that sell penny stocks to persons who are not established
    customers or &#147;accredited investors&#148; (generally,
    individuals with a net worth in excess of $1,000,000 or annual
    income exceeding $200,000, or $300,000 together with their
    spouses). In addition, the broker-dealer must make a special
    suitability determination for the purchaser and receive the
    purchaser&#146;s written consent to the transaction prior to
    sale. As a result, this rule may affect the ability of
    broker-dealers to sell our securities and may affect the ability
    of purchasers to sell any of our securities in the secondary
    market.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For any transaction involving a penny stock, unless exempt, the
    rules require delivery, prior to any transaction in a penny
    stock, of a disclosure schedule prepared by the SEC relating to
    the penny stock market. Disclosure is also required to be made
    about sales commissions payable to both the broker-dealer and
    the registered representative and current quotations for the
    securities. Finally, monthly statements are required to be sent
    disclosing recent price information for the penny stock held in
    the account and information on the limited market in penny stock.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our common stock may not qualify for exemption from the penny
    stock rules. In any event, even if our common stock were exempt
    from the penny stock rules, we would remain subject to
    Section&#160;15(b)(6) of the Exchange Act, which gives the SEC
    the authority to restrict any person from participating in a
    distribution of penny stock if the SEC finds that such a
    restriction would be in the public interest. If our securities
    are subject to the penny stock rules, it could negatively impact
    the trading market and trading price of our securities.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">The
    concentration of our capital stock ownership with our founders
    will limit your ability to influence corporate
    matters.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each share of our common stock has one vote per share on matters
    coming before our stockholders. After this offering, assuming
    the exercise of all outstanding options, but before the exercise
    of any warrants, our three founders will still own approximately
    54.5% of our outstanding common stock. Therefore, our founders
    will be able to control our company, including our ability to
    engage in a merger, sale of our assets, liquidation or
    dissolution or similar fundamental transactions. As a result,
    your ability to influence corporate matters will be limited and
    we may take actions that our stockholders do not view as
    beneficial. The market price of our units, common stock and
    warrants could also be adversely affected by this structure.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Following
    this offering, members of our management team may enter into an
    agreement providing, among other things, that they will vote
    their shares together.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    After this offering, members of our senior management may enter
    into an agreement providing that they will vote their shares in
    accordance with the majority in interest of the total shares
    held by all of the parties to
</DIV>
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    <BR>
    17
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    the agreement. The agreement may have other terms, such as a
    right of first refusal in the other parties to the agreement if
    any party desires to sell his or her shares of the company. The
    effect of this agreement may be to concentrate a measure of
    control of our company in a small group of executives.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We may
    invest or spend the proceeds of this offering in ways with which
    you may not agree or in ways which may not yield a significant
    return, if any.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of directors and management will have broad discretion
    over the use of proceeds from this offering. The net proceeds
    from this offering will be used to fund the acquisition of
    existing or recently closed franchise locations, repay debt, and
    for other purposes more fully described in this prospectus under
    &#147;Use of Proceeds.&#148; Our board of directors and
    management will have considerable discretion in the application
    of the net proceeds, and you will not have the opportunity, as
    part of your investment decision, to assess whether the proceeds
    are being used appropriately. The net proceeds may be used for
    corporate purposes that do not increase our operating results or
    market value. Until the net proceeds are used, they may be
    placed in investments that do not produce significant income or
    investments that lose value.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We do
    not anticipate paying any cash dividends in the foreseeable
    future.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We currently intend to retain any future earnings to fund the
    development and growth of our business. We do not anticipate
    paying any cash dividends on our common stock in the foreseeable
    future. As a result, capital appreciation, if any, of our common
    stock will be your sole source of gain for the foreseeable
    future.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Shares
    eligible for future sale may cause the market price of our
    securities to decline, even if our business is doing
    well.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Based on shares outstanding as of March&#160;18, 2010, we will
    have&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock outstanding upon the completion of this offering
    and before the exercise of any warrants. Upon completion of this
    offering, approximately 3,428,955&#160;shares and 444,282
    additional shares subject to options held by our directors and
    executive officers and greater than one percent stock or option
    holders will be subject to
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements with the underwriters, restricting the sale of such
    shares for one year after the date of this prospectus, although
    these
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements may be extended for up to an additional 34&#160;days
    under certain circumstances. These
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements are subject to a number of exceptions and holders may
    be released from these agreements without prior notice at the
    discretion of the underwriters. After the
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements expire, these shares will be eligible for sale in the
    public market, and are subject to volume limitations under
    Rule&#160;144 under the Securities Act of 1933, as amended, or
    the Securities Act. In addition, the 552,571&#160;shares of our
    common stock that are subject to outstanding options under our
    Stock Option Plan as of March&#160;18, 2010 will be eligible for
    sale in the public market to the extent permitted by the
    provisions of the various vesting agreements, the
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements and Rules&#160;144 and 701 under the Securities Act.
    Further, we will also have outstanding unexercised warrants
    included in the units we are offering in this prospectus and the
    representative&#146;s warrants that will be exercisable
    for&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    shares of our common stock. If any of these additional shares
    are sold, or it is perceived they will be sold, the trading
    price of our common stock could decline. These sales also might
    make it more difficult for us to sell equity or equity-related
    securities in the future at a time and price that we deem
    reasonable or appropriate.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">If
    securities or industry analysts do not publish research or
    reports about our business, if they change their recommendations
    regarding our securities adversely or if our operating results
    do not meet their expectations, our stock price and trading
    volume could decline.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The trading market for our securities could be influenced by the
    research and reports that industry or securities analysts
    publish about us or our business. If we have such coverage and
    one or more analysts cease coverage of us or fail to publish
    reports on us regularly, we could lose visibility in the
    financial markets, which in turn could cause our stock price or
    trading volume to decline. Moreover, if one or more of the
    analysts who cover us downgrade our stock or if our operating
    results do not meet their expectations, our stock price could
    decline.
</DIV>
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    <BR>
    18
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    charter and bylaws contain certain provisions that may
    discourage a takeover of our company and our board of directors
    may adopt additional anti-takeover measures after we complete
    this offering.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our charter and bylaws contain measures that may impede or
    discourage attempts to acquire control of our company without
    the approval of our board of directors. These include a
    classified board of directors, advance notification requirements
    for stockholders to nominate persons for election as directors
    and to make stockholder proposals and the inability of
    stockholders to call special meetings of stockholders. After
    this offering, our board of directors may adopt other measures
    to discourage a takeover of our company, as described under
    &#147;Description of Our Securities.&#148; These measures, if
    adopted, would permit our board to choose not to entertain
    offers to purchase our company, even offers that are at a
    substantial premium to the market price of our stock. As a
    result, our stockholders may be deprived of opportunities to
    profit from a sale of control. This could, in turn, reduce the
    market price of our securities. See the section entitled
    &#147;Description of Our Securities&#148; elsewhere in this
    prospectus.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We
    have the right to redeem the warrants issued as part of the
    units, which could impact the trading price of the
    warrants.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We may redeem the warrants issued as part of the units for
    $&#160;&#160;&#160;&#160;&#160; per warrant upon
    15&#160;days&#146; prior written notice, provided that the
    closing price of our common stock equals or exceeds
    $&#160;&#160;&#160;&#160;&#160; (subject to adjustment), for ten
    consecutive trading days. If we redeem the warrants, you will
    lose your right to exercise the warrants except during the
    <FONT style="white-space: nowrap">15-day</FONT>
    redemption period. Redemption of the warrants could force you to
    exercise the warrants at a time when it may be disadvantageous
    for you to do so or to sell the warrants at the then market
    price or accept the redemption price, which likely would be
    substantially less than the market value of the warrants at the
    time of redemption.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">If you
    purchase or hold the warrants, you will not be entitled to any
    rights as a stockholder on the common stock underlying the
    warrants, but you will be subject to all changes made with
    respect to our common stock.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If you purchase or hold the warrants, you will not be entitled
    to any rights as a stockholder (including, without limitation,
    voting rights and rights to receive any dividends or other
    distributions on our common stock) on the common stock
    underlying the warrants, other than the right to adjustments in
    the exercise price of the warrants upon certain events, but such
    shares will be subject to all changes to our charter and bylaws
    affecting the common stock. You will only be entitled to rights
    as a stockholder on the common stock underlying the warrants if
    and when we deliver shares of common stock to you upon the
    exercise of your warrants. For example, in the event that an
    amendment is proposed to our certificate of incorporation or
    bylaws requiring stockholder approval and the record date for
    determining stockholders of record entitled to vote on the
    amendment occurs prior to the exercise of your warrants, you
    will not be entitled to vote the shares of common stock
    underlying your warrant on the amendment, although the common
    stock you receive upon exercise of your warrant will
    nevertheless be subject to any changes in the powers,
    preferences or special rights of our common stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Certain
    warrant holders are unlikely to receive direct notice of
    redemption of our warrants.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We expect some holders of our warrants will hold their
    securities through one or more intermediaries, and consequently
    they are unlikely to receive notice directly from us that the
    warrants are being redeemed. If you fail to receive notice of
    redemption from a third party and your warrants are redeemed for
    nominal value, you will not have recourse against us.
</DIV>
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    <BR>
    19
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='103'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SPECIAL
    NOTE&#160;REGARDING FORWARD-LOOKING STATEMENTS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This prospectus contains forward-looking statements intended to
    qualify for the safe harbors from liability established by the
    Private Securities Litigation Reform Act of 1995, as amended.
    These forward-looking statements are subject to a number of
    risks and uncertainties, many of which are beyond our control.
    All statements, other than statements of historical fact,
    contained in this prospectus, including statements regarding
    future events, our future financial performance, business
    strategy and plans and objectives of management for future
    operations, are forward-looking statements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have attempted to identify forward-looking statements by
    terminology including &#147;anticipates,&#148;
    &#147;believes,&#148; &#147;can,&#148; &#147;continue,&#148;
    &#147;could,&#148; &#147;estimates,&#148; &#147;expects,&#148;
    &#147;intends,&#148; &#147;may,&#148; &#147;plans,&#148;
    &#147;potential,&#148; &#147;predicts,&#148; &#147;should&#148;
    or &#147;will&#148; or the negative of these terms or other
    comparable terminology. Although we do not make forward-looking
    statements unless we believe we have a reasonable basis for
    doing so, we cannot guarantee their accuracy. These statements
    are only predictions and involve known and unknown risks,
    uncertainties and other factors, including the risks outlined
    under &#147;Risk Factors&#148; or elsewhere in this prospectus,
    which may cause our or our industry&#146;s actual results,
    levels of activity, performance or achievements to be materially
    different from any future results, levels of activity,
    performance or achievements expressed or implied by these
    forward-looking statements. Moreover, we operate in a very
    competitive and rapidly changing environment. New risks emerge
    from time to time and it is not possible for us to predict all
    risk factors, nor can we predict the impact of all factors on
    our business or the extent to which any factor, or combination
    of factors, may cause our actual results to differ materially
    from those contained in any forward-looking statements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The factors that could cause actual results to differ include,
    but are not limited to, those risks that are outlined under the
    &#147;Risk Factors&#148; section beginning on page&#160;10 of
    this prospectus.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    You should not place undue reliance on any forward-looking
    statement, each of which applies only as of the date of this
    prospectus. Before you invest in our securities, you should be
    aware that the occurrence of the events described in the section
    entitled &#147;Risk Factors&#148; and elsewhere in this
    prospectus could negatively affect our business, operating
    results, financial condition and price of our securities. Except
    as required by law, we undertake no obligation to update or
    revise publicly any of the forward-looking statements after the
    date of this prospectus to conform our statements to actual
    results or changed expectations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<A name='104'>
<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">USE OF
    PROCEEDS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We estimate that the net proceeds to us from the sale
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    units that we are selling in this offering will be approximately
    $&#160;&#160;&#160;&#160;&#160;&#160;million, after deducting
    the underwriting discounts and commissions and estimated
    offering expenses payable by us, assuming an initial public
    offering price of $&#160;&#160;&#160;&#160;&#160; per unit. If
    the underwriters exercise their over-allotment option in full,
    we estimate that our net proceeds would increase to
    approximately $&#160;&#160;&#160;&#160;&#160;&#160;million.
    Except as described below, the additional proceeds would be used
    to fund our working capital needs and other general corporate
    purposes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Of the net proceeds from this offering, we expect to use
    approximately:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    $&#160;&#160;&#160;&#160;&#160; (or
    $&#160;&#160;&#160;&#160;&#160;if the underwriters exercise
    their overallotment option in full) for the purchase of up to 25
    existing or recently closed Planet Beach locations in the
    U.S.&#160;from our franchisees and operate them as company
    stores or resell them as franchises. As of the date of this
    prospectus, we have no understandings, commitments or agreements
    to acquire any stores.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    $&#160;&#160;&#160;&#160;&#160;, plus accrued interest, to repay
    our 8.25% promissory note due July&#160;19, 2012. We issued this
    note to Whitney National Bank to refinance an existing line of
    credit and fund operations.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    $&#160;&#160;&#160;&#160;&#160;, plus accrued interest, to repay
    our 7% promissory note due April&#160;10, 2012 to New Sunshine,
    LLC. We issued this note when we converted $750,000 of accounts
    payable we owed to New Sunshine, which is our primary supplier
    of U-V equipment and U-V products.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    $&#160;&#160;&#160;&#160;&#160;, plus accrued interest, to repay
    our 7% promissory note due March&#160;10, 2013 to JTL
    Enterprises, Inc. We issued this note when we converted $22,350
    of accounts payable we owed to JTL for purchases of equipment.
</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    20
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    $&#160;&#160;&#160;&#160;&#160;, plus accrued interest, to repay
    our 7% promissory note due March&#160;10, 2013 to MT Industries,
    Inc. We issued this note when we converted $92,500 of accounts
    payable we owed to MT Industries for equipment purchases.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    $&#160;&#160;&#160;&#160;&#160;, plus accrued interest, to repay
    our 7% promissory note due January&#160;1, 2013 to OL Products,
    Inc. We issued this note when we converted $59,800 of accounts
    payable we owed to OL for the purchase of body lotions.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    $50,000, plus accrued interest, to repay our 5% promissory note
    to our president and chief executive officer. We borrowed these
    funds to pay expenses of this offering. See &#147;Transactions
    with Related Persons&#148; on page&#160;62.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    $&#160;&#160;&#160;&#160;&#160; for advertising and marketing
    activities over a two year period designed to increase overall
    franchise sales.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    $&#160;&#160;&#160;&#160;&#160; to develop new skincare and
    nutritional products to be offered at our locations.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    $&#160;&#160;&#160;&#160;&#160; for capital improvements to our
    corporate headquarters, which we use as our primary training
    center for new and existing franchisees.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    $&#160;&#160;&#160;&#160;&#160; for the development of new
    franchise concepts.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    $375,00 to purchase certain intellectual property rights from
    Planet Beach Brands, LLC, which is wholly owned by our
    president, chief executive officer, chairman and principal
    stockholder. See &#147;Transactions with Related Persons&#148;
    on page&#160;62 of this prospectus.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to use the remaining $&#160;&#160;&#160;&#160;&#160;
    of the net proceeds from this offering for working capital and
    general corporate purposes. The amounts actually spent for these
    purposes may vary significantly and will depend on a number of
    factors, including our operating costs and other factors
    described under the section of this prospectus entitled
    &#147;Risk Factors.&#148; While we have no present
    understandings, commitments or agreements to enter into any
    material acquisitions, we may use a portion of the net proceeds
    to acquire property or equipment that complements our business.
    Accordingly, management will retain broad discretion as to the
    allocation of the net proceeds of this offering.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Pending the uses described above, we will invest the net
    proceeds of this offering in short-term, interest-bearing,
    investment-grade securities. We cannot predict whether the
    proceeds will yield a favorable investment return.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<A name='105'>
<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">DETERMINATION
    OF OFFERING PRICE</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Before this offering, there has been no trading market for the
    units, our common stock or the warrants. The initial public
    offering price of the units being offered by this prospectus
    will be determined by negotiation by us and the representative
    of the underwriters. The principal factors considered in
    determining the initial public offering price include:
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the information set forth in this prospectus and otherwise
    available to the representative;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    our history and prospects and the history of, and prospects for,
    the industry in which we compete;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    our past and present financial performance and the
    representative&#146;s assessment of our management;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    our prospects for future earnings and the present state of our
    development;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the general condition of the securities markets at the time of
    this offering;&#160;and
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the recent market prices of, and the demand for, publicly traded
    equity securities of generally comparable companies.
</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    21
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of March&#160;18, 2010, there were approximately 44
    stockholders of record of our common stock. There are no
    outstanding options, warrants or other rights to acquire our
    common stock other than:
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    options to acquire 552,571&#160;shares of our common stock under
    our 2005 Stock Option Plan, all at an exercise price of $3.50
    per share;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    shares subject to an option held by one of our vendors to
    convert balances due under our note payable within
    12&#160;months of this offering at a conversion price equal to
    the initial public offering price;&#160;and
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a number of shares issuable to one of our executive officers and
    one employee in lieu of $13,632 of deferred cash compensation,
    to be determined using the closing price of our common stock on
    the NYSE Amex on the first day that the warrants and shares we
    are offering begin trading separately, and to be issued on that
    date.
</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    22
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='106'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CAPITALIZATION</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth our cash and cash equivalents and
    capitalization as of December&#160;31, 2009&#160;on:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    an actual basis;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a pro forma as adjusted basis to give effect to the sale
    of&#160;&#160;&#160;&#160;&#160;units in this offering at the
    initial public offering price of $&#160;&#160;&#160;&#160;&#160;
    per unit (after deducting estimated underwriting discounts and
    commissions and estimated offering costs payable by us), the
    application of the net proceeds of this offering as described
    under &#147;Use of Proceeds,&#148; and the 1 for 3.5 reverse
    stock split of our common stock that was effected when we
    changed our state of incorporation to Delaware on March&#160;18,
    2010.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This table should be read in conjunction with &#147;Use of
    Proceeds,&#148; &#147;Management&#146;s Discussion and Analysis
    of Financial Condition and Results of Operations&#148; and our
    financial statements and the related notes included elsewhere in
    this prospectus.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="74%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>As of December&#160;31, 2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Actual</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>As Adjusted</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cash and cash equivalents
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    53,810
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Debt:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Current maturities of long-term debt
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    448,742
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Long-term debt, less current maturities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,773,919
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Total debt
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,222,661
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Stockholders&#146; equity (deficit):
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Preferred Stock, $0.0001&#160;par value per share:
    10,000,000&#160;shares authorized, none issued
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Common Stock, $0.0001&#160;par value per share:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    100,000,000&#160;shares authorized, 13,428,139&#160;shares
    issued and 12,998,739&#160;shares outstanding,
    actual,&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    issued
    and&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    outstanding, as adjusted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,343
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Additional paid-in capital
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    348,802
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Retained earnings (deficit)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,480,120
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Treasury stock, at cost
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (175,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total stockholders&#146; equity (deficit):
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,304,975
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total capitalization:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,917,686
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The information in the table above excludes:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    1,794,000&#160;shares (512,571&#160;shares, as adjusted) of our
    common stock issuable upon exercise of options outstanding at
    December&#160;31, 2009 under our 2005 Stock Option Plan, all at
    an exercise price of $3.50 per share;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    shares subject to an option held by one of our vendors to
    convert balances due under our note payable within
    12&#160;months of this offering at a conversion price equal to
    the initial public offering price;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a number of shares issuable to one of our executive officers and
    one employee in lieu of $13,632 of deferred cash compensation,
    to be determined using the closing price of our common stock on
    the NYSE amex on the first day that the warrants and shares we
    are offering begin trading separately, and to be issued on that
    date.
</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    23
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='107'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">DILUTION</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Dilution represents the difference between the public offering
    price per unit paid by investors in this offering, assuming no
    value is attributed to the warrants included in the units, and
    the pro forma net tangible book value per share of common stock
    immediately after the offering. This calculation does not
    reflect any dilution associated with the sale and exercise of
    the warrants. Net tangible book value per share as of
    December&#160;31, 2009 represented the amount of our total
    tangible assets less the amount of our total liabilities,
    divided by the number of shares of common stock deemed to be
    outstanding under U.S.&#160;generally accepted accounting
    principles at December&#160;31, 2009. Our net tangible book
    value (unaudited) as of December&#160;31, 2009 based on
    3,713,925&#160;shares of common stock outstanding was $(.351)
    per share.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    After giving effect to the sale
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock included in the units we are offering in this
    prospectus, assuming an initial public offering price of
    $&#160;&#160;&#160;&#160;&#160; per unit, which is the midpoint
    of the range listed on the cover page of this prospectus, and
    after deducting estimated underwriting discounts and commissions
    and estimated offering expenses payable by us, our pro forma net
    tangible book value as of December&#160;31, 2009 would have been
    approximately $&#160;&#160;&#160;&#160;&#160;, or
    $&#160;&#160;&#160;&#160;&#160; per common share. This
    represents an immediate increase in net tangible book value to
    our existing stockholders of $&#160;&#160;&#160;&#160;&#160; per
    share and an immediate dilution to new investors in this
    offering of $&#160;&#160;&#160;&#160;&#160; per share. The
    following table illustrates this per share dilution in net
    tangible book value to new investors, assuming no value is
    attributed to the warrants included in the units:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="83%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Assumed initial public offering price per unit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net tangible book value per share as of December&#160;31, 2009
    (unaudited)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (.351
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Increase in net tangible book value per share attributable to
    new investors
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Pro forma net tangible book value per share after this offering
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Dilution per share to new investors
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If the underwriters exercise their over-allotment option in full
    in this offering, the pro forma net tangible book value would be
    $&#160;&#160;&#160;&#160;&#160; per share, the increase in pro
    forma net tangible book value per share to existing stockholders
    would be $&#160;&#160;&#160;&#160;&#160; and the dilution per
    share to new investors would be $&#160;&#160;&#160;&#160;&#160;
    per share, in each case assuming an initial public offering
    price of $&#160;&#160;&#160;&#160;&#160; per unit.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table summarizes, as of December&#160;31, 2009 on
    a pro forma as adjusted basis, the total number of shares of
    common stock purchased from us, the aggregate cash consideration
    paid to us and the average price per share paid by existing
    stockholders and by new investors in this offering before
    deducting estimated offering expenses. The calculation below is
    based on the offering price of $&#160;&#160;&#160;&#160;&#160;
    per unit, before deducting underwriting discounts and
    commissions and estimated offering expenses, and assumes no
    value is attributed to the warrants included in the units:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="51%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="2%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="2%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="2%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="5%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="7" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Shares Purchased</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="7" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Total Consideration</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Average Price<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Number</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Percent</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Percent</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>per Share</B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>%</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>$</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>%</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>$</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Existing stockholders
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,713,925
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    New investors
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If the over-allotment option is exercised in full, the number of
    shares of common stock held by existing stockholders will be
    reduced to approximately&#160;&#160;&#160;&#160;&#160;% of the
    total number of shares of common stock outstanding after this
    offering, and the number of shares of common stock held by new
    investors will be&#160;&#160;&#160;&#160;&#160;, or
    approximately&#160;&#160;&#160;&#160;&#160;% of the total number
    of shares of common stock outstanding after this offering,
    assuming no exercise of outstanding options or warrants.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    24
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='108'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">DIVIDEND
    POLICY</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of directors will make any future decisions regarding
    dividends. We currently intend to retain and use any future
    earnings for the development and expansion of our business and
    do not anticipate paying any cash dividends in the foreseeable
    future.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of directors has complete discretion on whether to pay
    dividends, subject to the approval of our stockholders. Even if
    our board of directors decides to pay dividends, the form,
    frequency and amount will depend upon our future operations and
    earnings, capital requirements and surplus, general financial
    condition, contractual restrictions and other factors that the
    board of directors may deem relevant. We paid $8,055 in
    dividends in 2007. We did not pay dividends in 2008 or 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The payment of dividends may be restricted by agreements
    relating to our future indebtedness.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    25
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='109'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">MANAGEMENT&#146;S
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION<BR>
    AND RESULTS OF OPERATIONS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Overview</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe we are the largest, full-service automated day spa
    franchisor in the United States. We grant franchises for stores
    operating under the Planet Beach name. As of January&#160;15,
    2010, we had 345 franchises located in 38 U.S.&#160;states,
    Canada, Ireland, South Africa and Australia. We also had at that
    date 20 additional franchises under development, including
    proposed locations in one new state as well as in Egypt, Saudi
    Arabia and Kuwait. In addition, at that date we had candidates
    interested in re-opening 16 previously closed locations,
    including one in an additional state.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We establish most of our domestic franchises through
    intermediaries whom we refer to as &#147;area
    representatives.&#148; We grant development territories to area
    representatives in exchange for a territory development fee.
    These development territories are geographic regions within
    which area representatives are entitled to market franchises and
    are obligated to train, support and provide guidance to
    franchisees in the territory. Our area representatives are
    entitled to:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    50% of the initial franchise fee we earn from franchisees who
    establish franchises in the area representative&#146;s
    territory, if we sell the franchise as a result of the area
    representative&#146;s efforts;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    50% of the fee we earn when we transfer an existing franchise to
    a new franchisee in the area representative&#146;s territory as
    a result of the area representative&#146;s efforts;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    50% of the fee we earn when a franchise broker facilitates a
    sale or a transfer of a franchise in the area
    representative&#146;s territory;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    20% of the fee we earn when we sell a new franchise or transfer
    an existing franchise in the area representative&#146;s
    territory, but not as a result of his or her efforts or those of
    a broker;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    20% of the applicable fee we earn for sales of new franchises or
    transfers of franchises outside the area representative&#146;s
    territory, made as a result of the area representative&#146;s
    efforts, if the territory has not been granted to another area
    representative; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    40% of collected royalties that we receive from our franchisees
    in their territories.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We establish most of our international franchises through
    persons we refer to as &#147;master franchisors.&#148; Our
    agreements with our master franchisors give them the right to
    grant Planet Beach franchises in their assigned geographic
    region. The master franchisors develop their own franchise
    system in their areas. For example, the master franchisors are
    required directly, or through area representatives that they
    appoint, to sell, train, support and provide guidance to
    franchisees in their areas. The master franchisors owe us a
    master franchise fee when we appoint them as a master
    franchisor, additional fees or royalties upon the sale of
    franchises and a percentage of the revenues generated by
    franchise outlets in the assigned area.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We require our franchisees and master franchisors to purchase
    U-V and spa equipment, as well as certain U-V, skin care and
    nutritional products, from us or from suppliers we designate.
    All of the equipment, and approximately 53% of the products, are
    sold under the Planet Beach private label. For our foreign
    locations, we sell equipment directly to franchisees and pay a
    portion of our profits to the master franchisor, if any, for the
    applicable territory. We require our master franchisors to own
    or control the first location in their territories, which we
    call &#147;flagship&#148; locations. We sell equipment and
    products to these flagship locations at a discount to our
    domestic rates.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Currently, we sell our private label products at a profit to an
    international distributor, who resells them to our foreign
    franchisees. The distributor also sells other national branded
    products to our foreign franchises, and pays us a royalty from
    those sales. We share 60% of our royalties with the master
    franchisor for the applicable territory. However, we expect that
    in the future we will sell our private label products to our
    master franchisors for resale to foreign franchisees. We would
    earn a profit at the time of sale to the master franchisor and
    would have no royalties on resales to the franchisees.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    26
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have equipment and product suppliers who sell directly to our
    franchisees and master franchisors, and we receive royalties on
    these sales.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We generate revenues through:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Sales of spa equipment and products to our franchisees and
    master franchisors;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Franchise fees, consisting of:
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="2%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    initial franchise fees;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    area representative fees for domestic territories and master
    franchise fees for international territories that are licensed
    to our area representatives and master franchisors who sell and
    profit from franchise outlets within the territory;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    transfer fees payable by franchisees who desire to exit our
    system upon the sale of their franchise to a new franchisee, to
    offset administrative and retraining costs;
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Royalties and related fees, including fees paid by our domestic
    franchisees for our national advertising program, which we
    recognize for accounting purposes to the extent we incur
    national advertising expenses, and for brand development; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Other fees, consisting of:
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="2%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    tenant placement and site design fees earned from securing a spa
    location for our franchisees and coordinating the location
    build-out;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    company-operated spa revenues; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    convention revenues, which consist of registration fees and
    vendor sponsorships for our annual convention for our
    franchisees.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our primary focus since 2005 has been to increase sales of
    franchises through the development of our Contempo Spa concept.
    All of our locations worldwide earned a total of
    $79.2&#160;million in spa sales for 2009, consisting of
    $54.4&#160;million in membership fees, $12.3&#160;million in
    fees for one-time services and $12.5&#160;million in product
    sales. For 2008, total worldwide spa revenues were
    $82.9&#160;million, consisting of $51.7&#160;million in
    membership fees, $16.9&#160;million in one-time services and
    $14.3&#160;million in product sales.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Principal
    Factors Affecting Our Financial Performance</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We experienced challenging operating conditions in fiscal years
    2007, 2008 and 2009. Fiscal year 2006 was our last profitable
    year, when we earned $113,000 of net income. During that year,
    we had a net increase of 66 operating locations, with 335 total
    operating locations at December&#160;31, 2006 compared with 269
    operating locations at December&#160;31, 2005, or an increase of
    25%. Partially as a result of this growth in the number of our
    operating locations, our equipment sales increased. The increase
    in equipment sales was also attributable to the roll out in 2005
    of our Contempo Spa format, which required franchisees to
    purchase spa equipment for the first time. Credit and financing
    was also readily available to franchisees throughout fiscal 2006.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To plan for the possibility that this high growth rate might
    continue into fiscal 2007, we increased our staff by
    11&#160;employees during 2007 to support the growth in
    locations. However, location growth in 2007 returned to the more
    normal levels we experienced in fiscal 2005, resulting in a net
    increase of 36 new locations in 2007. The decrease in location
    openings resulted in a decrease in equipment sales from 2006
    levels, but was offset by an increase in royalty revenue from
    the greater total number of open locations. Ultimately, revenues
    remained constant at approximately $26.4&#160;million in both
    fiscal 2006 and 2007. However, the increase in staff caused our
    total compensation expense to increase to $6.6&#160;million in
    fiscal 2007, compared with $5.4&#160;million in fiscal 2006, and
    we incurred a net loss of $325,000 in 2007. We did not take
    significant steps to correct this overstaffing until November
    2008 when we began to make staff reductions in response to the
    economic recession.
</DIV>
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    <BR>
    27
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our results for fiscal 2008 were driven by several factors.
    First, equipment sales slowed as the number of new locations
    opening during the year decreased, and as the number of our
    locations that had not converted to our Contempo Spa format
    decreased. Second, in the second half of 2008, our franchise
    sales began to be affected by the global recession and
    tightening of the credit market, and we had a net increase of
    only 14 stores for the year, compared with the net&#160;36 new
    stores in 2007. Finally, we did not make meaningful reductions
    in staff and compensation expense until the end of the 2008
    fiscal year.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In fiscal year 2009, ongoing global economic challenges and
    uncertainties had a significant impact on our business. For the
    first time in our 14&#160;year history, the number of our stores
    decreased. We began the year with 385 spa locations worldwide,
    and ended the year with 347 locations. This decrease of 38 spas,
    or 9.9%, was the net result of 28 new or reopened locations and
    66 closures. Although the U.S.&#160;economy has shown some signs
    of improvement, management recognizes that the difficult
    situations many of our franchisees and customers are
    experiencing will not be resolved completely in 2010.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Management responded to this decrease in operating locations,
    and the resulting decline in revenue, by reducing our operating
    costs, mainly payroll. Management&#146;s goal was to rely less
    on new location sales and openings by bringing recurring revenue
    in line with recurring costs. Through attrition and staff
    reductions, we reduced payroll expense by 37% in 2009 versus
    2008. We consolidated job responsibilities and departments,
    automated services, and cut personnel whose job duties were
    largely intended for rapid location growth. On March&#160;1,
    2010, management further reduced personnel by six&#160;employees
    in five&#160;departments with 2009 payroll and benefits expense
    of approximately $544,000. However, we have maintained our
    commitment to assist our franchisees with revenue growth, and
    have avoided any reductions in our spa performance department,
    which is responsible for increasing revenues at the franchisee
    level.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The spas that closed in 2009 were largely underperforming
    locations that were not able to sustain a membership base
    necessary to weather the economic downturn. Spa and U-V services
    and related product purchases are non-essential consumer
    expenditures, and we believe the current recession has curtailed
    consumer discretionary spending. However, our locations that we
    classify as Contempo Spas (spas that include our key automated
    spa services, as well as sunless-tanning services and U-V
    therapy services) experienced average same store sales increases
    of 4% in 2009 versus 2008. We believe our Contempo Spa customers
    consider our membership program to be a good value because it
    entitles them to a wide variety of spa services.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The lack of available credit to businesses has significantly
    affected our existing and potential franchisees. Existing
    franchisees who do not have operating lines of credit struggle
    to manage cash flow, which increases their likelihood of
    failure. Franchisees wanting to upgrade their businesses with
    new equipment to attract and retain members are unable to do so
    because equipment financing is also more limited than in the
    past. Potential franchisees applying for
    <FONT style="white-space: nowrap">start-up</FONT>
    loans are still being denied credit by lenders, including the
    Small Business Administration, or SBA.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In order to provide more cash to new franchisees entering our
    system, we have focused significant efforts on assisting these
    franchisees in pre-selling memberships months before opening,
    which increases the likelihood of generating a positive cash
    flow for the location&#146;s opening month. We have also worked
    with our equipment manufacturers to reduce franchisee equipment
    costs and offer trade-in programs that assist our franchisees in
    upgrading their location&#146;s equipment. We have worked to
    reduce the average
    <FONT style="white-space: nowrap">start-up</FONT>
    costs for a new location to below $300,000. We will continue to
    assist franchisees in trying to obtain bank financing, including
    SBA loans, by providing them with a model business plan and pro
    forma financial statements that they use to determine their
    financing and seek a lender.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that our franchisees&#146; difficulty in obtaining
    financing is one of the most challenging conditions we face in
    fiscal year 2010. Deteriorating economic conditions have
    negatively impacted our franchisees&#146; ability to obtain
    credit, and therefore, our ability to sell additional
    franchises. Moreover, this disruption in the credit markets has
    negatively affected existing franchisees who are struggling to
    manage cash, as well as credit terms extended by our suppliers.
</DIV>
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    <BR>
    28
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In December 2009, the International Franchise Association, the
    oldest and largest organization representing franchising
    businesses with more than 1,250 franchise system members,
    predicted a slow recovery for franchise businesses in 2010, with
    marginal increases in the number of jobs, economic output and
    the number of franchise establishments. The continuing credit
    crisis will likely limit the level of growth that franchise
    businesses will experience as compared with prior recoveries.
    Despite this likely slow recovery, a PricewaterhouseCoopers
    report predicts that the franchise sector that will experience
    the most growth in 2010 is the personal services sector in which
    we participate, with growth forecasted at 4.4%.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The United States personal and skin care services market has
    grown significantly in recent years. According to Cognis, a
    specialty chemical company that focuses on wellness, the skin
    care services market maintained a strong growth rate with sales
    rising by 6.8% from 2004 to 2006. We believe this growth will
    result in increased sales of franchises and patronage of the
    resulting and existing spas, positively affecting our overall
    revenue.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Part of our growth strategy is to expand sales of franchises to
    foreign markets. As of January&#160;15, 2010, 22 of our
    locations were outside the United States. While we continue to
    grow domestically, we are seeking to establish a network of
    sales avenues for our franchises in other developed countries
    where we believe there is a strong demand for our products and
    services. We have operating locations in Canada, Ireland, South
    Africa, and Australia. We have sold a franchise in Egypt and
    expect a location to open there in the Spring of 2010. We have
    entered into master franchisor agreements but do not yet have
    operating locations in Northern Ireland, the United Kingdom,
    Kuwait, and Saudi Arabia. We believe we have found a niche
    market in the Middle East where consumers desire more modesty
    and privacy in spa services, especially for female customers. We
    also plan to expand our brand to other countries in Europe, New
    Zealand, South America, Central America, and Asia.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Critical
    Accounting Policies</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The preparation of financial statements in conformity with
    accounting principles generally accepted in the United States
    requires our management to make assumptions, estimates and
    judgments that affect the amounts reported in the financial
    statements, including the related notes and disclosures of
    commitments and contingencies, if any. We consider our critical
    accounting policies to be those that require the more
    significant judgments and estimates in the preparation of
    financial statements, including the following:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Allowances
    for Accounts and Notes Receivable</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Accounts receivable consist primarily of amounts due for
    franchise royalties and product sales, which are carried at
    original invoice amount less an estimate made for doubtful
    receivables based on a review of all outstanding amounts.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Management determines the allowance for doubtful accounts by
    identifying overdue accounts and by reserving a percentage of
    the account&#146;s outstanding balance as uncollectible based on
    historical experience with collections in general or based on
    the account&#146;s specific circumstance. Accounts receivable
    are written off when deemed uncollectible. Recoveries of
    accounts receivable previously written off are recorded when
    received.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Notes receivable consist principally of area developer fees,
    equipment vendor receivables, and spa purchase fees we finance.
    The allowance for doubtful accounts is our best estimate of the
    amount of credit losses in our existing notes. We determine the
    allowance on an individual note basis upon review of any note
    that has a payment past due for over 60&#160;days. A note is
    considered impaired if it is probable that we will not collect
    all principal and interest contractually due. The impairment is
    measured based on the present value of expected future cash
    flows discounted at the note&#146;s effective interest rate.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We do not accrue interest when a note is considered impaired.
    When ultimate collectability of the principal balance of the
    impaired note is in doubt, all cash receipts on impaired notes
    are applied to reduce the principal amount of such notes until
    the principal has been recovered and are recognized as interest
    income thereafter. Impairment losses are charged against the
    allowance and increases in the allowance are charged to bad debt
    expense. Notes are written off against the allowance when all
    possible means of collection have been exhausted and the
    potential for recovery is considered remote.
</DIV>
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    <BR>
    29
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The notes have interest rates ranging from non-interest bearing
    to 7.0&#160;percent and will mature upon sale of related
    franchises, or in accordance with scheduled maturities through
    September 2016.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">National
    Advertising and Brand Development</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We collect a national advertising and brand development royalty
    from our franchisees. Franchises that were established before
    April&#160;1, 2008 are required to contribute 1% of gross sales
    to our National Advertising Fund as a royalty for the
    development and distribution of national marketing efforts for
    the benefit of all franchisees within the Planet Beach system.
    We carry forward national advertising royalties that are not
    spent in the fiscal year collected to the following year, and
    record them as a deposit on the consolidated balance sheet. At
    December&#160;31, 2009 and 2008, there were no carry forward
    deposits. We recognize national advertising expenditures in the
    consolidated statements of operations as incurred.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Beginning April&#160;1, 2008, franchisees entering the system
    must contribute 2% of gross sales for brand development. We have
    no obligation to carry forward any unspent brand development
    royalties for these franchisees to the following year. We
    recognize brand development royalties in our consolidated
    statements of income in full as we accrue them, along with the
    brand development expenses.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Property,
    Plant and Equipment</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Property, plant and equipment are stated at cost. Depreciation
    on plant and equipment is calculated using the straight line
    method over the estimated useful lives of the related assets.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Maintenance and repairs are charged to expenses as incurred.
    Improvements and renewals are capitalized and depreciated over
    the remaining estimated useful life. When property, plant, and
    equipment are sold or otherwise disposed of, the asset account
    and related accumulated depreciation are relieved, and any gain
    or loss is included in income.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The useful lives of property, plant, and equipment for purposes
    of computing depreciation are:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="86%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Buildings and leasehold improvements
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7 &#150; 39&#160;Years
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Spa equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7&#160;Years
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Computer equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3 &#150; 5&#160;Years
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Furniture, fixtures, and equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3 &#150; 7&#160;Years
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Software
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5&#160;Years
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Revenue
    Recognition</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have entered into franchise agreements that grant franchisees
    the right to operate individual Planet Beach Contempo Spas in
    return for an initial franchise fee and ongoing development fees
    (royalties). In addition, we have entered into area developer
    agreements, including international master franchisor
    agreements, under which we grant the right to sell individual
    Planet Beach Contempo Spas in designated territories.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We recognize revenue from individual franchise sales when we
    have substantially performed or satisfied all material services
    or conditions relating to the sale.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Area developer fees, which include international master
    franchise fees, are recognized as revenue on the cash basis
    until 50% of the purchase price is collected; the uncollected
    purchase price is deferred. All payments received for these area
    agreements are non-refundable. We estimate that once 50% of the
    purchase price has been collected, and no further significant
    obligations remain, it is probable that the remaining area
    development fee will be collectible. Therefore, we fully
    recognize area development fees once 50% of the purchase price
    is collected.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Most of these area agreements have promissory notes structured
    requiring payment of at least 50% of the purchase price within
    12&#160;months of agreement execution. The remaining purchase
    price will normally be collected over 3-6&#160;years amortized
    monthly with principal and interest payments.
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    30
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    All payments received for these area agreements are
    non-refundable.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We accrue royalties based upon the contractual royalty rate,
    currently 6% of total franchise revenue, as defined in the
    respective franchise agreements. Royalties are recorded as
    revenue when the related franchise revenue is reported to us.
    Sales of spa equipment and products are recognized as revenue,
    when the items are shipped, collection is probable, and no
    further significant obligations remain.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Income
    Tax</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We account for income taxes under the liability method. Deferred
    tax assets and liabilities are recognized for the future tax
    consequences attributable to differences between the financial
    statement carrying amounts of existing assets and liabilities
    and their respective tax bases and operating loss and tax credit
    carryforwards. Deferred tax assets and liabilities are measured
    using enacted tax rates expected to apply to taxable income in
    the years in which those temporary differences are expected to
    be recovered or settled.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The effect on deferred tax assets and liabilities of a change in
    tax rates is recognized in income in the period that includes
    the enactment date. We include any estimated interest and
    penalties on tax related matters in income taxes payable.
    Valuation allowances are established when necessary to reduce
    net deferred income tax assets to the amount expected to be
    realized.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Effective January&#160;1, 2009, we recognize the effect of
    income tax positions only if those positions are more likely
    than not being sustained. Recognized income tax positions are
    measured at the largest amount that is greater than 50% likely
    of being realized. Changes in recognition or measurement are
    reflected in the period in which the change in judgment occurs.
    Prior to the adoption of ASC 740-10 Income Tax Uncertainties, we
    recognized the effect of income tax positions only if such
    positions were probable of being sustained. The effect of the
    adoption of this standard was not material.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We record interest related to unrecognized tax benefits in
    interest expense and penalties in selling, general, and
    administrative expenses.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Stock-Based
    Compensation</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We account for our stock-based compensation using the modified
    prospective adjustment method of measuring share-based payments.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Results
    of Operations</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following tables set forth key components of our results of
    operations for the periods indicated.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="63%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom">
    <B>(All amounts are in thousands of U.S. dollars)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Operating revenues
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    13,269
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    25,006
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    26,456
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Operating expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Cost of goods sold
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,693
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11,132
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,369
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Operating expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,950
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,630
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,633
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Salaries and bonuses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,280
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,791
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,634
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Commissions
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,580
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,013
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,012
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total operating expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,503
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    25,566
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26,648
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total other income (expense)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (474
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (198
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (138
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Income (loss) before provision for income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (708
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (758
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (330
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Provision (benefit) for income tax
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net income (loss)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (708
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (758
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (325
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    31
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="59%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="5%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="5%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="5%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="11" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="11" align="center" valign="bottom">
    <B>(All amounts are in thousands of U.S. dollars)</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Operating revenues
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Operating expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Cost of goods sold
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    28
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    45
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    51
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Operating expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    30
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    23
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    18
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Salaries and bonuses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    32
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    25
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Commissions
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total operating expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    102
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    102
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    101
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total other income (expense)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (4
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Income (loss) before provision for income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (3
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Provision (benefit) for income tax
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net income (loss)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (3
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="58%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="7%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="7%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="7%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom">
    <B>(All amounts are in thousands of U.S. dollars)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Sales of spa equipment and products
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,920
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    14,706
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    17,586
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Franchise fees
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,257
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,067
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,745
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Royalties and related fees
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,883
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,833
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,585
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Other
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    209
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    400
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    540
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Totaling Operating Revenues
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    13,269
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    25,006
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    26,456
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Fiscal
    Years Ended December&#160;31, 2009 and 2008</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Operating
    Revenues</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our total operating revenues in fiscal 2009 were
    $13.3&#160;million, which is a decrease of $11.7&#160;million,
    or 47%, from total operating revenues in fiscal 2008, during
    which we had revenues of $25.0&#160;million. The decline in
    revenue is attributable to decreases in spa equipment and
    product sales, initial franchise fees, area developer fees, and
    national advertising fees recognized, offset by an increase in
    royalties. Other revenues remained steady year over year.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Spa equipment sales are driven by new location openings and by
    purchases of add-on or upgraded equipment by existing
    franchisees. We had 28 new locations open in fiscal 2009,
    compared with 54 for fiscal 2008, or a decrease of 48%. Our
    equipment sales were $2.6&#160;million and $9.3&#160;million,
    respectively, for fiscal 2009 versus 2008. The decline in new
    locations accounted for approximately $5.6&#160;million of this
    $6.7&#160;million or 72% decrease, with the remaining
    $1.1&#160;million of the decline attributable to a decrease in
    sales of additional equipment to existing franchisees. New
    location equipment sales accounted for $1.5&#160;million and
    $7.2&#160;million in 2009 and 2008, respectively. Add-on
    equipment sales accounted for $1.1&#160;million and
    $2.1&#160;million in 2009 and 2008, respectively. The decrease
    in domestic franchise sales in 2008 versus 2007 of 35% resulted
    in the 48% decline in the number of new location openings in
    2009 versus 2008. Franchise locations typically take from six to
    twelve months to open, so equipment sales for new openings lag
    and typically cross over fiscal years. In addition, there were
    further delays in the opening of locations in 2009 due to the
    lack of available equipment financing. Add-on equipment sales
    were also negatively affected by the lack of available credit
    for small business throughout 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Product sales are driven by the number of our open locations
    purchasing directly from our warehouse. We have several product
    vendors who sell directly to our franchise locations. The vendor
    remits us a percentage of those sales and we record those
    amounts as royalties. Product sales in fiscal 2009 were
    $2.3&#160;million, which is a decrease of $3.1&#160;million, or
    57%, from product sales in fiscal 2008 of $5.4&#160;million. The
    decline in product
</DIV>
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    revenue is attributable to two factors. First, in the first
    quarter of fiscal 2009, our primary supplier of U-V lotions, New
    Sunshine LLC, began shipping products directly to franchisees.
    With this shift, we began recording a royalty on these sales.
    Total direct sales to our franchises from New Sunshine, LLC were
    $1.4&#160;million in 2009, and we recorded $403,000 as royalty
    and related fees in 2009 related to these sales. Second, the
    average number of franchise locations opened during the year
    decreased from 378 in fiscal 2008 to 366 in fiscal 2009. At year
    end 2009 and 2008, we had 347 and 385 locations open,
    respectively, a net decrease of 38 locations. This decrease in
    average locations opened in 2009 versus 2008, and locations
    purchasing and selling less expensive products in 2009,
    accounted for the remaining $1.7&#160;million reduction in
    product sales.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Franchise fees, totaled $1.3&#160;million, for fiscal year 2009,
    a decrease of $1.8&#160;million, or 60%, from fiscal year 2008,
    during which we had franchise fees of $3.0&#160;million. Of this
    decrease, $0.7&#160;million resulted from decreased
    international master franchisor fees and $1.1&#160;million
    resulted from lower initial franchise and area representative
    fees. While international master franchisor fees fell in 2009,
    we added three new countries and one new territory. However, the
    countries and territory added were at a lower fee than in 2008
    due to the size of the population in each. Initial franchise
    fees and area representative fees continued to decline in 2009
    in response to the on-going recession and lack of credit
    available to small businesses.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Royalties and related fees mainly include the royalty of 6% of
    franchisees&#146; total revenue which we collect on a monthly
    basis, but also include technology, education and nutrition
    fees, along with royalties received from equipment, product and
    construction vendors who sell directly to our franchisees. Also
    included are fees paid for our national advertising and brand
    development programs. At December&#160;31, 2009, we had 16
    locations that were operated under an older version of our
    franchise agreement or other arrangements that require them to
    pay us a flat monthly royalty fee ranging from $250 to $975 per
    month, or no fee as described under &#147;Transactions with
    Related Persons.&#148; Royalties and related fees for fiscal
    2009 and 2008 were consistent at $6.8&#160;million. Royalties
    earned from vendors selling products to or servicing our
    franchisees totaled $0.9&#160;million and $0.6&#160;million in
    2009 and 2008, respectively, an increase of $0.3&#160;million.
    This increase was largely the result of shifting the fulfillment
    responsibilities for our U-V products to New Sunshine, LLC in
    the first quarter of 2009. New value-added services, such as
    access to our on-line service, NutritionSpa.com, and nutrition
    products in 2009 increased royalties by $0.1&#160;million versus
    2008. The decrease in average locations opened in 2009 versus
    2008 did not have a significant effect on the franchisee
    royalties we earned as we experienced a 4% increase in same
    store sales for our Contempo Spa locations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For franchises established before April&#160;1, 2008, national
    advertising fees are billed at a rate of 1% of total franchisee
    gross sales. We recognize these fees to the extent we incur
    expenses for national advertising. We defer any remaining fees
    to the subsequent year. Beginning April&#160;1, 2008,
    franchisees entering the system must contribute 2% of gross
    sales for brand development. We have no obligation to carry
    forward any unspent brand development fees for these franchisees
    to the following year. These brand development fees totaled
    approximately $110,000 and $10,000 in 2009 and 2008,
    respectively. National advertising and brand development fees
    are largely spent on our annual, nationally televised
    Ms.&#160;Planet Beach Spokesmodel Search, which has become the
    primary method of increasing brand awareness domestically and
    internationally for our franchise locations. National
    advertising expenses and recognized revenue totaled
    $0.7&#160;million and $1.1&#160;million, respectively, in fiscal
    2009 and 2008. This $0.4&#160;million decrease was due to
    decreased costs incurred for the competition&#146;s planning,
    production and television syndication in 2009 compared with 2008.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Total
    Operating Expenses</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our total operating expenses for fiscal 2009 were
    $13.5&#160;million, which is $12.0&#160;million less than in
    fiscal 2008, during which we had operating expenses of
    $25.5&#160;million, a decrease of 47%. Decreases occurred in all
    categories of expenses, including cost of goods sold, operating
    expenses, salaries and bonuses, and commissions.
</DIV>
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    <I><FONT style="font-family: 'Times New Roman', Times">Cost of
    Goods Sold</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our cost of goods sold in fiscal 2009 amounted to
    $3.7&#160;million, which is $7.4&#160;million, or 67%, less than
    in fiscal 2008, during which our cost of goods sold was
    $11.1&#160;million. The decrease in our total cost of goods sold
    resulted from a decrease in sales of spa equipment and products
    and from the change in our relationship with certain suppliers.
    In the first quarter of 2009, certain suppliers shipped and
    billed our franchisees directly for products and began paying us
    royalties based on these sales. Combined sales of spa equipment
    and products were $4.9&#160;million and $14.7&#160;million in
    2009 and 2008, respectively, a decrease of $9.8&#160;million or
    67%. As noted above, sales of spa equipment and products
    decreased sharply in 2009 from 2008 as the result of fewer new
    open locations, a decrease in the average number of open
    locations, the lack of available credit for small businesses to
    expand, and the tendency for franchisees to purchase and sell
    less expensive products in 2009.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Operating
    Expenses</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our operating expenses for fiscal 2009 were $3.9&#160;million,
    which is $1.7&#160;million less than in fiscal 2008, during
    which we had operating expenses of $5.6&#160;million, a decrease
    of 30%. Decreases in 2009 occurred in several categories
    including: a decrease of $0.1&#160;million in consulting and
    contract labor; a decrease of $0.1&#160;million in credit card
    fees; a decrease of $0.1&#160;million in legal expenses; a
    decline in freight of $0.1&#160;million; the elimination of
    $0.1&#160;million in travel-related expenses as a reward for our
    top ten performing franchisees; and a $0.3&#160;million decline
    in advertising and marketing costs; a decrease in travel costs
    of $0.3&#160;million; and decreased costs for our annual
    convention of $0.1; and a decrease in national advertising and
    brand development expenses of $0.4&#160;million; offset by
    increases in lawsuit settlement cost of $0.4&#160;million.
    Decreases in these expenses were necessary to offset declining
    revenues and cash flow. In addition, franchise lawsuits
    increased as troubled franchisees filed suit seeking damages for
    alleged breaches of their contracts. In all cases, management
    agreed to settlements, some through mediation, to avoid lengthy
    and costly legal battles.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our national advertising and brand development expenses in
    fiscal 2009 were $0.7&#160;million, a decrease of
    $0.4&#160;million from fiscal 2008, during which we had expenses
    of $1.1&#160;million. These expenses are largely for the annual,
    nationally televised Ms.&#160;Planet Beach Spokesmodel Search,
    which has become the primary method of increasing brand
    awareness domestically and internationally for our franchise
    locations. The $0.4&#160;million decrease was due to decreased
    costs incurred for the competition&#146;s planning, production
    and television syndication in 2009 compared with 2008. The 2009
    competition will air during 2010.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Salaries
    and Bonuses</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our salaries and bonuses in fiscal 2009 were $4.3&#160;million,
    a decrease of $2.5&#160;million, or 37%, from fiscal 2008,
    during which we had salaries and bonuses of $6.8&#160;million.
    The average number of employees decreased from 73 in fiscal 2008
    to 50 in fiscal year 2009, a decrease of 23&#160;employees or
    32%. We had a total of 65 and 47&#160;employees on staff at the
    end of 2008 and 2009, respectively. In response to declining
    revenues and a slowdown in the number of franchise locations
    sold, opening and opened, we began to reduce our staff and
    consolidate departmental operations in the middle of 2008. We
    had layoffs in the third and fourth quarters of 2008 and the
    first quarter of 2009 to adjust our staffing to an efficient
    level based on the current economic climate. In addition to
    staff reductions and department consolidation, we also
    restructured our internal sales commissions, reduced our base
    pay, suspended matching contributions to our 401(k) plan, and
    allocated more of the cost of our health insurance plan to our
    employees.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Commissions</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Commissions were $1.6&#160;million and $2.0&#160;million in
    fiscal 2009 and 2008, respectively, a decrease of
    $0.4&#160;million, or 20%. The monthly, recurring fee paid to
    area representatives for their 40% of collected royalties
    totaled $1.2&#160;million and $1.3&#160;million in fiscal 2009
    and 2008, respectively, a decrease of $0.1&#160;million, which
    reflects the total decrease in locations opened in 2009 from
    2008. The remaining $0.3&#160;million decrease is attributable
    to lower commissions paid to external brokers and area
    representatives pursuant to franchise sales or transfers, which
    reflects the decline in franchise sales in 2009 from 2008.
</DIV>
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    <I><FONT style="font-family: 'Times New Roman', Times">Other
    Income (Expense)</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Other income (expense) includes interest and other income,
    interest expense paid on long-term debt, and realized gains
    (losses). Total other income (expense) was ($0.5)&#160;million
    and ($0.2)&#160;million in fiscal years 2009 and 2008,
    respectively. The increase is the result of realized losses in
    2009 totaling ($0.3) associated with the liquidation of our
    available-for-sale securities in 2009.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Income
    Taxes</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The company recorded no provision for income tax for fiscal 2009
    and 2008 due to net loss incurred in both years.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Fiscal
    Years Ended December&#160;31, 2008 and 2007</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Operating
    Revenues</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our total operating revenues in fiscal 2008 were
    $25.0&#160;million, which is a decrease of $1.5&#160;million, or
    5.7%, from total operating revenues in fiscal 2007, during which
    we had revenues of $26.5&#160;million. The decline in revenue is
    attributable to a decrease in equipment sales, offset by an
    increase in initial franchise fees, area representative and
    master franchisor territory fees, royalties, and national
    advertising and brand development fees recognized.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Equipment sales are driven by new location openings and by
    purchases of additional or upgraded equipment by existing
    franchisees. We had 54 new locations open in fiscal 2008, versus
    58 for fiscal 2007, or a decrease of 7%. Our equipment sales
    were $9.3&#160;million and $12.0&#160;million, respectively, for
    fiscal 2008 versus 2007. The decline in new locations opening,
    and existing locations purchasing fewer U-V light beds accounted
    for approximately $2.3&#160;million of this $2.7&#160;million
    decrease, as we continued to promote our spa concept. Purchases
    of U-V light beds in fiscal 2008 year totaled $3.8&#160;million,
    a decrease of $2.3&#160;million from fiscal year 2007, when we
    had U-V light bed purchases totaling $6.1&#160;million. The
    remaining $0.4&#160;million of the decline was attributable to a
    decrease in sales of additional equipment to existing franchises
    struggling with the credit crisis. With the inception of our
    Contempo Spa concept in 2005, add-on equipment sales increased
    in fiscal years 2006 and 2007 as existing locations converted to
    the Contempo Spa format and purchased hydration stations, aqua
    massage, facial, and sunless tanning equipment. However,
    beginning in 2008, these add-on sales started to taper off as
    the number of locations that had not converted to the Contempo
    Spa format decreased.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Franchise fees for fiscal 2008 totaled $3.1&#160;million, which
    is an increase of $0.4&#160;million, or 14.8%, from fiscal 2007,
    during which we had franchise fees of $2.7&#160;million. Fiscal
    2008 was our first full year of international expansion, which
    provided an additional $1.0&#160;million in master franchise
    sales versus fiscal 2007. Initial franchise fees declined
    $0.7&#160;million as domestic franchise sales slowed in response
    to the growing national recession. For 2008, international
    master franchisor sales were $1.1&#160;million, versus
    $0.1&#160;million for 2007. Domestic location and territory
    sales totaled $1.8&#160;million for 2008, versus
    $2.3&#160;million for 2007.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Royalties and related fees mainly include the royalty of 6% of
    franchisees&#146; total revenue which we collect on a monthly
    basis, but also include technology, education and nutrition
    fees, along with royalties received from equipment, product and
    construction vendors who sell directly to our franchisees. Also
    included are fees paid for our national advertising and brand
    development programs. At December&#160;31, 2008, we had 15
    locations that were operated under an older version of our
    franchise agreement or other arrangements that require them to
    pay us a flat monthly royalty fee ranging from $250 to $975 per
    month, or no fee as described under &#147;Transactions with
    Related Persons.&#148; Royalties and related fees for fiscal
    2008 totaled $6.8&#160;million, which is an increase of
    $1.2&#160;million or 21.4% from fiscal year 2007, during which
    we had royalties of $5.6&#160;million. Our average open
    locations for fiscal 2008 totaled 378, versus 353 for fiscal
    year 2007. This increase in average locations of 25, or 7%,
    accounted for some of the increase in royalties.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For franchises established before April&#160;1, 2008, national
    advertising fees are billed at a rate of 1% of total franchisee
    gross sales. We recognize these fees to the extent we incur
    expenses for national advertising. We defer any remaining fees
    to the subsequent year. Beginning April&#160;1, 2008,
    franchisees entering the system
</DIV>
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    must contribute 2% of gross sales for brand development. We have
    no obligation to carry forward any unspent brand development
    fees for these franchisees to the following year. These brand
    development fees totaled approximately $10,000 in 2008. National
    advertising expenses and recognized revenue totaled
    $1.1&#160;million and $0.6&#160;million, respectively, in fiscal
    2008 and 2007. This $0.5&#160;million increase was due largely
    to costs incurred to record and distribute via television
    syndication the Ms.&#160;Planet Beach Spokesmodel Search. The
    2008 competition, which aired in 2009, aired in markets that
    represented 64.7% of U.S.&#160;households. This competition has
    become the primary method of increasing brand awareness
    domestically and internationally for our franchise locations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Total
    Operating Expenses</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our total operating expenses for fiscal 2008 amounted to
    $25.6&#160;million, which is $1.0&#160;million less than in
    fiscal 2007, during which we had operating expenses of
    $26.6&#160;million. As described below, the decrease was mainly
    due to declines in cost of goods sold, offset by an increase in
    national advertising and brand development expenses. All other
    expense categories remained steady.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Cost of
    Goods Sold</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our cost of goods sold in fiscal 2008 amounted to
    $11.1&#160;million, which is $2.2&#160;million or 16.5% less
    than in fiscal 2007, during which our cost of goods sold was
    $13.3&#160;million. The decrease in our total cost of goods sold
    resulted from a decrease in cost of goods sold for spa
    equipment. Sales of spa equipment declined $2.7&#160;million, or
    22.5%, from $12.0&#160;million in fiscal 2007 to
    $9.3&#160;million in fiscal 2008 due to lower add-on equipment
    sales and fewer new location openings.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Operating
    Expenses</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our operating expenses in fiscal 2008 amounted to
    $5.6&#160;million, which is $1.0&#160;million or 21.7% greater
    than in fiscal year 2007, during which our operating expenses
    were $4.6&#160;million. An increase in bad debt expense of
    $0.4&#160;million year over year accounted for some of this
    increase. In addition our national advertising and brand
    development expenses in fiscal 2008 amounted to
    $1.1&#160;million, an increase of $0.5&#160;million over fiscal
    2007, during which we had expenses of $0.6&#160;million. This
    $0.5&#160;million increase was due largely to costs incurred to
    record and distribute via television syndication the
    Ms.&#160;Planet Beach Spokesmodel Search. The 2008 competition
    aired in 2009 in markets that represented 64.7% of
    U.S.&#160;households. This competition has become a key method
    of increasing brand awareness domestically and internationally
    for our franchise locations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Salaries
    and Bonuses</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our salaries and bonuses were consistent at $6.8&#160;million
    and $6.6&#160;million for fiscal years 2008 and 2007,
    respectively. Our average number of employees remained stable at
    73 positions for each year, but base salaries increased
    $0.2&#160;million, or 6%, from fiscal 2007 to fiscal 2008, due
    to an increase in management personnel needed to staff our
    growth plan. Employee health plan costs also increased
    $0.1&#160;million in fiscal 2008, or 5%, keeping pace with the
    national average. These increases were offset by
    $0.2&#160;million decrease in internal sales commissions and
    profit bonuses due to a decline in product and equipment sales
    and franchise sales in 2008 compared to 2007.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Commissions</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Commission expenses were consistent at $2.0&#160;million in both
    fiscal 2008 and 2007. The monthly, recurring fee paid to area
    representatives for their 40% of collected royalties increased
    by $0.1&#160;million due to an overall increase in company
    royalty revenue, offset by a $0.1&#160;million decrease in
    external broker and area representative commissions paid on new
    franchise sales. Increased royalties of $0.5&#160;million in
    2008 from the national advertising fees recognized do not affect
    commission expense.
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    36
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Other
    Income (Expense)</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Other income (expense) includes interest and other income,
    interest expense paid on long-term debt and realized gains
    (losses). Total other income (expense) was ($0.2)&#160;million
    and ($0.1)&#160;million, respectively, for the 2008 and 2007
    fiscal years. The increase was the result of increased interest
    expenses associated with an increase in interest-bearing, long
    term debt.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><FONT style="font-family: 'Times New Roman', Times">Income
    Taxes</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The company recorded no provision for income tax for fiscal
    2008; a small benefit was recorded in 2007.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Liquidity
    and Capital Resources</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of December&#160;31, 2009, we had cash and cash equivalents
    of $53,810. The following table provides detailed information
    about our net cash flow for all financial statement periods
    presented in this prospectus.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="67%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="5%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="5%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="11" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="11" nowrap align="center" valign="bottom">
    <B>(All amounts are in thousands <BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="11" nowrap align="center" valign="bottom">
    <B>of U.S. dollars)</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Components of Operating Revenues</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net cash provided by operating activities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    66
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    265
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    58
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net cash provided by (used in) investing activities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    140
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (858
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (170
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net cash provided by (used in) financing activities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (212
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (256
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    379
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net increase (decrease) in cash and cash equivalents
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (6
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (849
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    267
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Operating
    Activities</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Net cash provided by operating activities was approximately
    $66,000 and $265,000, respectively, for the fiscal years ended
    December&#160;31, 2009 and December&#160;31, 2008, reflecting a
    decrease of $199,000. Cash flow from operating activities
    decreased period over period due to lower levels of inventory as
    a result of our new product fulfillment agreement with New
    Sunshine, LLC and a significant decrease in accounts payable,
    offset by a decrease in national advertising expense, a decrease
    in accounts receivable, and an increase in cash from customer
    deposits.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We spent less on the Ms.&#160;Planet Beach Spokesmodel Search in
    2009 than 2008 for production and television syndication, which
    resulted in the expenditure of fewer national advertising
    deposits. Better management of accounts receivable in 2009
    resulted in a minor increase of $80,000 in accounts receivable
    compared with an increase of $319,000 in 2008, thus more cash
    was available from revenues in 2009 than 2008. Customer deposits
    on hand at December&#160;31, 2008 compared with
    December&#160;31, 2007 were lower due to lower add-on and new
    equipment sales at our annual convention, held every October.
    Thus, cash from customer deposits we remitted to equipment
    vendors were lower by $1.1&#160;million from fiscal year 2009
    compared with fiscal year 2008. Fewer new locations and a lack
    of available financing contributed to a decline in purchases by
    existing franchisees of additional pieces of equipment during
    the last quarter of fiscal 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Net cash provided by operating activities was approximately
    $265,000 and $58,000, respectively, for fiscal years 2008 and
    2007, reflecting an increase of $207,000.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Cash flow from operating activities increased period over period
    due to lower levels of inventory and a decrease in accounts
    payable, offset by a decrease in national advertising deposits
    and a decrease in customer deposits.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A large inventory balance on hand at December&#160;31, 2007 of
    $1.3&#160;million resulted in a source of cash from inventory
    balance reductions for fiscal year 2008 compared with fiscal
    year 2007. We delayed payments on accounts payable to offset
    other operating shortfalls, which caused an increase of
    $1.4&#160;million in accounts payable for fiscal year 2008.
</DIV>
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    <BR>
    37
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Negative effects on cash flow included increased spending for
    production and television syndication costs of the
    Ms.&#160;Planet Beach Spokesmodel Search in 2008 from 2007,
    resulting in a drawdown of national advertising deposits in
    fiscal 2008. We received substantial customer deposits in 2007,
    which were used to purchase equipment for sales in 2008.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Investing
    Activities</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our main uses of cash for investing activities are for purchases
    of fixed assets, purchases of investments, and notes receivable
    from franchisees, equipment vendors, domestic area
    representatives, and international master franchisors.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Net cash provided by (used in) investing activities was
    approximately $140,000 and ($858,000) for the years ended
    December&#160;31, 2009 and December&#160;31, 2008, respectively,
    an increase of approximately $998,000. Purchases of fixed assets
    were consistent year over year. We liquidated all our
    available-for-sale securities during the first quarter of fiscal
    2009 to forego any further market loss and to improve our cash
    position. For the year ended December&#160;31, 2009, notes
    receivable decreased by a net $17,000 due to payments for
    international and domestic territories, compared with a net
    increase of approximately $717,000 in 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Net cash used in investing activities was approximately $858,000
    and $170,000 for the years ended December&#160;31, 2008 and
    2007, respectively, an increase of $687,000. For the year ended
    December&#160;31, 2008, notes receivable increased by $717,000,
    which included adding notes for domestic territories totaling
    $312,000 and adding notes for international territories totaling
    $427,000, net of initial fees collected for each territory. Cash
    paid for fixed assets was higher in fiscal year 2007 than in
    fiscal 2008 due to increased building improvements costs.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Financing
    Activities</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Cash flow from financing activities mainly includes our net
    borrowings in line of credit, and proceeds and payments on
    long-term debt. Our debt ratio (the ratio of total long-term
    debt to total assets) was 65% and 52% at December&#160;31, 2009
    and December&#160;31, 2008, respectively.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Net cash used in financing activities was approximately $212,000
    and $256,000 for the years ended December&#160;31, 2009 and
    December&#160;31, 2008, respectively, a decrease of $44,000. For
    the year ended December&#160;31, 2009, we liquidated all
    available-for-sale securities held by our investment broker,
    which secured our line of credit, and in turn paid off our
    outstanding line of credit of $192,000 in full. During the same
    period, we borrowed a total of $313,000 against credit
    facilities from two of our equipment and product vendors. For
    the same period in 2008, we borrowed a total of $59,000 against
    these vendor credit facilities. Principal payments on long term
    debt were $384,000 for the year ended December&#160;31, 2009.
    For the same period in 2008, principal payments on long term
    debt were $301,000. The increase is attributable to payments on
    the credit facilities from our vendors, all established in late
    2008 as described below.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Net cash (used in) provided by financing activities was
    approximately ($256,000) and $379,000 for fiscal years 2008 and
    2007, respectively, a decrease of $635,000. For fiscal 2008, we
    had payments on long term debt totaling $301,000. For the same
    period in 2007, we had debt payments of $134,000. For fiscal
    2007, we had proceeds from long term debt of $499,000, which
    included a borrowing of $408,000 on our Whitney National Bank
    note described below.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have incurred losses of approximately $708,000, $758,000 and
    $325,000 for our years ended December&#160;31, 2009, 2008 and
    2007, respectively. The losses have occurred due to the global
    economic downturn that began in 2007. We and our franchisees
    have struggled to obtain credit on reasonable terms or at all.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are confident that we can continue to operate in a manner to
    generate net cash from operating activities by reducing
    operating and salary costs, improving operating profitability,
    controlling inventory levels, working with vendors and other
    creditors to accept more favorable payment terms, and through
    seeking additional capital for our operations. As described
    above, we implemented many operating expense reductions in
    fiscal year 2009 and will continue to do so into 2010.
</DIV>
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    <BR>
    38
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Over the past 18 months, we have reduced payroll expense to
    counter the decline in revenues and to adjust staff levels for
    current locations and activity. We reduced payroll expense in
    fiscal 2009 by 37% or $2.5&#160;million as compared to fiscal
    year 2008. In the first quarter of 2010, we again reduced
    personnel by six employees in five departments with 2009 annual
    payroll and benefits of $544,000, avoiding reductions in spa
    performance departments, which assist franchisees with growth.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have incurred higher than normal bad debt expense for fiscal
    years 2009 and 2008 of $554,000 and $495,000, respectively, due
    to location closures and struggling franchises. However, we
    achieved same store sales growth of 4% in 2009 as compared to
    2008 for our Contempo Spa locations. Also, we experienced an
    increase in franchise litigation in 2009 with lawsuits filed by
    troubled franchisees seeking damages for alleged breaches of
    their contracts. In fiscal 2009, we recorded as operating
    expense $523,000 in settlement expenses and $189,000 in external
    legal fees as a result of the franchise lawsuits. Management
    does not expect this level of litigation in 2010.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Through this credit crisis and recession, many of our vendors
    have been able to assist us with cash flow by establishing
    payment plans and/or deferring payments. We have a recurring
    revenue stream from royalties and related fees totaling
    $6.8&#160;million in fiscal year 2009 from our 345 locations, as
    of January&#160;15, 2010. We have taken measures to become less
    dependent on spa equipment sales and franchise fees through
    operating and payroll expense reductions.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Loan
    Facilities</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table details our long-term debt outstanding as of
    December&#160;31, 2009:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF"><!-- TABLE 01 -->
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="61%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="15%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Principal<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B>Maturity<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Lender</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount</B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Date</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Interest Rate</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Capital One Bank
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    840,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    March 2027
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6.54
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    SBA
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    591,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    June 2027
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5.79
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Whitney National Bank
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    619,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    July 2012
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8.25
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Former Stockholder
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    46,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    November 2011
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.00
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    New Sunshine LLC
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    516,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    April 2012
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7.00
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    JTL Enterprises, Inc.&#160;
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    42,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    March 2013
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7.00
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    MT Industries, Inc.&#160;
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    174,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    March 2013
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7.00
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    OL Products, Inc.&#160;
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    234,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    January 2013
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7.00
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Leaf Funding, Inc.&#160;
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    94,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    July 2012
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3.47
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Irvine Company LLC
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    17,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    August 2011
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7.00
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Stephen P. Smith
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    50,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    June 2010
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5.00
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Capital One loan for $840,000 and the SBA loan for $591,000
    were used to purchase and improve our principal place of
    business; both loans are secured by the buildings and building
    improvements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Whitney National Bank loan was used to refinance an existing
    line of credit balance and fund operations, and is secured by
    accounts receivable and inventory.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The loan from the former stockholder was used to buy back the
    individual&#146;s shares of our common stock.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The New Sunshine, LLC loan was used to refinance accounts
    payable and is secured by 85,714&#160;shares of our common stock
    owned and pledged by Stephen Smith, our Chairman and Chief
    Executive Officer. New Sunshine, LLC is the parent company of
    ETS, Inc. and Australian Gold, our exclusive suppliers of all
    U-V equipment and parts, and national branded U-V lotions, used
    or sold in our spas. On February&#160;29, 2008, we converted
    $750,000 of accounts payable we owed to New Sunshine, LLC for
    U-V product purchases into a four-year note payable.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    JTL Enterprises is one of our suppliers of water massage
    machines. On September&#160;30, 2008, we converted $22,350 of
    accounts payable we owed to JTL for equipment purchases into a
    four-year, unsecured note payable. The note provided additional
    borrowing capacity of up to $27,650. Upon execution of the note,
</DIV>
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    <BR>
    39
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    we awarded JTL 879&#160;shares of our common stock and the
    option to convert the balance owed into additional shares of
    common stock within 12&#160;months. This option expired on
    September&#160;30, 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    MT Industries, Inc. is a supplier of U-V equipment and related
    products. On October&#160;3, 2008, we converted $92,483 of
    accounts payable we owed to MT Industries for equipment
    purchases into a four-year, unsecured note payable. The note
    provided additional borrowing capacity of up to $157,517. Upon
    execution of the note, we awarded MT Industries
    4,396&#160;shares of common stock and the option to convert the
    balance owed into additional shares of common stock within
    12&#160;months. This option to convert expired October&#160;3,
    2009. On September&#160;17, 2009, we terminated any additional
    borrowing and capped the note at $173,787, with a
    <FONT style="white-space: nowrap">37-month</FONT>
    term.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    OL Products, Inc. is one of our suppliers of body lotions. On
    October&#160;31, 2008, we converted $59,775 of accounts payable
    we owed to OL for body lotions into a four-year, unsecured note
    payable. The note provided additional borrowing capacity of up
    to $240,225. Upon execution of the note, we awarded OL
    5,275&#160;shares of common stock and the option to convert any
    outstanding balance owed into additional shares of common stock
    within the first 12&#160;months after our initial public
    offering at the initial public offering stock price. This option
    to convert remains outstanding.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In October 2009, we took control of our franchise location in
    Irvine, CA and now operate it as a company store. In conjunction
    with that transaction, we assumed the equipment financing note
    from Leaf Funding, Inc., for approximately $94,000 outstanding
    at the time. In addition, we assumed the location lease with
    Irvine Company LLC and established a promissory note for half of
    the overdue rent at that time totaling $17,000. We have recently
    extended the lease term through August 2011.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On November&#160;18, 2009, our President, Chief Executive
    Officer and Chairman, Stephen Smith, loaned us $50,000 for the
    payment of expenses related to this offering. The note is to be
    repaid with 5% interest for a total repayment amount of $52,500
    upon completion of this offering.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On February&#160;26, 2010, we borrowed $250,000 under our June
    2003 agreement with ETS, LLC, for the development and
    construction of a prototype salon. We intend to use these funds
    for renovation and expansion of our company store in Irvine, CA,
    which will showcase ETS&#146;s U-V and sunless tanning
    equipment, along with our spa equipment. The Prototype Salon
    Note we executed is due and payable on February&#160;26, 2011.
    The note bears interest at an annual rate equal to the prime
    rate most recently quoted by J.P.&#160;Morgan Chase prior to the
    issue date, plus 1%. If we sell the prototype salon before the
    due date of the note, the amount borrowed plus accrued interest
    will become due upon the sale.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Obligations
    under Material Contracts</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In October 2002, we entered into a product purchase agreement
    with ETS for the purchase of U-V equipment and supplies, whereby
    we agreed to purchase exclusively from ETS all U-V equipment and
    all lamps, parts, accessories, lotions, skin and hair care
    products, cleaning equipment and other U-V related products used
    or sold in spas owned, operated, or franchised by us. In
    addition, we agreed to designate ETS as our exclusive supplier
    of U-V equipment and supplies in existing and future franchise
    agreements. This purchase agreement is in effect through 2017.
    Under this arrangement, we purchased approximately $2,981,000,
    $4,860,000 and $7,219,000 of our spa equipment and products from
    ETS in 2009, 2008, and 2007, respectively. In 2009 ETS began
    shipping products directly to our franchisees and remits to us a
    royalty on these sales based on the profit margin we were
    earning on the sales previously. As part of the agreement, cash
    proceeds from the profits we earned were to be used to repay an
    outstanding accounts payable balance with the vendor. As of
    December&#160;31, 2009 and 2008, the amounts of accounts payable
    due to the vendor subject to the agreement were approximately
    $118,000 and $836,000, respectively.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our contracts with our franchisees, area representatives and
    master franchisors are described under &#147;Our Business.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    At December&#160;31, 2009, we had 23 area representatives for 27
    territories, covering approximately 64% of our total domestic
    franchise locations and approximately 10% of the total
    U.S.&#160;geographic land area. Each territory is governed by a
    separate agreement. Of the 27 agreements, four will expire in
    five years or less, 21
</DIV>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    will expire in six to ten years, and two will expire in 11 to
    15&#160;years. At December&#160;31, 2009, we had eight master
    franchisor agreements in place, one of which will expire in
    2020, five will expire in 2023, and two will expire in 2024.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Seasonality</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Like most other retail businesses, our business is seasonal.
    Traditionally, spa patronage and sales of our products and
    services are higher beginning in the early Spring through late
    Summer. Because of the seasonality of our business, results for
    any quarter are not necessarily indicative of the results that
    we may achieve for the full year. In addition, fluctuations in
    sales and operating income in any fiscal quarter may be impacted
    by other events affecting retail sales.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Inflation</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Inflationary factors, such as increases in our product and
    overhead costs, could impair our operating results. Although we
    do not believe that inflation has had a material impact on our
    financial position or results of operations to date, a high rate
    of inflation in the future may have an adverse effect on our
    ability to maintain current levels of gross margin and selling,
    general and administrative expenses as a percentage of sales
    revenue if the selling prices of our products and services do
    not increase with these increased costs.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Recently
    Issued Accounting Pronouncements</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In June 2009, the FASB issued authoritative guidance for the
    FASB accounting standards codification (Codification) and the
    hierarchy of generally accepted accounting principles
    (U.S.&#160;GAAP). The guidance establishes that the Codification
    is the source of authoritative U.S.&#160;GAAP recognized by the
    FASB to be applied by nongovernmental entities. Rules and
    interpretive releases of the Securities and Exchange Commission
    (SEC) under authority of federal securities laws are also
    sources of authoritative U.S.&#160;GAAP for SEC registrants. The
    guidance and the Codification are effective for financial
    statements issued for interim and annual periods ending after
    September&#160;15, 2009. We adopted the provisions of the
    guidance, as required, and determined that the impact to our
    financial condition or results of operations was immaterial.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In June 2009, the FASB issued new accounting guidance that
    requires additional information regarding transfers of financial
    assets, including securitization transactions, and companies
    that have continuing exposure to the risks related to
    transferred financial assets. The guidance eliminates the
    concept of a &#147;qualifying special-purpose entity,&#148;
    changes the requirements for derecognizing financial assets, and
    requires additional disclosures. We became subject to the
    guidance on January&#160;1, 2010, and we are currently
    evaluating the impact that the guidance will have on our
    financial condition and results of operations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In June 2009, the FASB issued new accounting guidance which
    modifies how a company determines when an entity that is
    insufficiently capitalized or is not controlled through voting
    (or similar rights) should be consolidated. The guidance
    clarifies that the determination of whether a company is
    required to consolidate an entity is based on, among other
    things, an entity&#146;s purpose and design and a company&#146;s
    ability to direct the activities of the entity that most
    significantly impact the entity&#146;s economic performance. The
    guidance requires an ongoing reassessment of whether a company
    is the primary beneficiary of a variable interest entity. The
    guidance also requires additional disclosures about a
    company&#146;s involvement in variable interest entities and any
    significant changes in risk exposure due to that involvement. We
    became subject to the guidance on January&#160;1, 2010, and are
    currently evaluating the impact that the guidance will have on
    our financial condition and results of operations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The FASB issued an update that all entities are required to make
    disclosures about recurring and nonrecurring fair value
    measurements under Fair Value Measurements. The guidance
    requires certain new disclosures and clarifies two existing
    disclosure requirements. The new disclosures and clarifications
    of existing disclosures are effective for interim and annual
    reporting periods beginning after December&#160;15, 2009, except
    for the disclosures about purchases, sales, issuances, and
    settlements in the roll forward of activity in Level&#160;3 fair
    value measurements. Those disclosures are effective for fiscal
    years beginning after December&#160;15, 2010, and for interim
    periods within those fiscal years.
</DIV>
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    <BR>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We do not believe that any other recently issued, but not yet
    effective, accounting standards will have a significant effect
    on its consolidated financial condition or results of operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Off
    Balance Sheet Arrangements</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We do not have any obligations that are not reflected on our
    balance sheet.
</DIV>
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    <BR>
    42
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<A name='110'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">OUR
    BUSINESS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Overview</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe we are the largest, full-service automated day spa
    franchisor in the United States. We grant franchises for stores
    operating under the Planet Beach name. As of January&#160;15,
    2010, we had 345 franchises located in 38 U.S.&#160;states,
    Canada, Ireland, South Africa and Australia. We also had at that
    date 20 additional franchises under development, including
    proposed locations in one new state as well as in Egypt, Saudi
    Arabia and Kuwait. In addition, at that date we had candidates
    interested in re-opening 16&#160;previously closed locations,
    including one in an additional state.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Contempo Spas offer our customers a unique experience by
    providing high quality automated day spa services. These
    services include automated massages and facials, ultra violet or
    &#147;U-V&#148; light therapy and sunless tanning. We provide
    automated spa services through equipment such as hydro massage
    and facial machines that do not require a therapist or
    aesthetician. Instead, a spa employee programs individual spa or
    U-V sessions and sets the desired time of the session through
    the store&#146;s point of sale software. The customer activates
    the session by pressing a start button in the treatment room and
    may adjust the settings according to his or her preferences on
    certain equipment such as hydro massage units.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our spas also offer a variety of skin care, U-V and nutritional
    products, as well as an on-line nutritional service.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We establish most of our domestic franchises through
    intermediaries whom we call &#147;area representatives.&#148; We
    grant development territories to area representatives in return
    for a territory development fee. These development territories
    are geographic regions within which area representatives are
    entitled to market franchises and are obligated to train,
    support and provide guidance to franchisees in the territory.
    Our area representatives are entitled to a percentage of the
    fees we earn when we sell a new franchise or transfer an
    existing franchise to a new franchisee in the area
    representative&#146;s territory. In some circumstances, we also
    pay a percentage of those fees for new or transferred franchises
    outside the area representative&#146;s territory obtained as a
    result of the area representative&#146;s efforts. Additionally,
    our area representatives are entitled to a percentage of
    collected royalties that we receive from our franchisees in
    their territories.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We establish most of our international franchises through
    persons we refer to as &#147;master franchisors.&#148; Our
    agreements with our master franchisors give them the right to
    grant Planet Beach franchises in their assigned geographic
    region. The master franchisors develop their own franchise
    system in their areas. For example, the master franchisors are
    required directly, or through area representatives whom they
    appoint, to sell, train, support and provide guidance to
    franchisees in their areas. The master franchisors owe us a
    master franchise fee when we appoint them as a master
    franchisor, additional fees or royalties upon the sale of
    franchises and a percentage of the revenues generated by
    franchise outlets in the assigned area.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We require our franchisees and master franchisors to purchase
    U-V and spa equipment, as well as certain U-V, skin care and
    nutritional products, from us or from suppliers we designate. We
    receive a royalty for equipment and products sold to our
    franchisees and master franchisors directly by the designated
    supplier. All of the equipment, and approximately 53% of the
    products, are sold under the Planet Beach private label.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to grow our company significantly over the next ten
    years, both domestically and internationally.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Contempo Spa Concept</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We were founded in 1996 as a U-V tanning franchise business.
    However, in 2005, we substantially revised our business model to
    adopt our Contempo Spa concept in response to the general
    slowdown of sales in the tanning salon industry.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Contempo Spas offer U-V services along with traditional day
    spa services such as facials, steam baths, and massages. These
    spa services are performed by automated equipment such as
    massage units or light therapy equipment, which reduces the
    staffing that is required compared with a traditional day spa
    operation.
</DIV>
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    <BR>
    43
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Reducing the number of trained and certified employees required
    to operate a Planet Beach franchise results in reduced operating
    costs and a greater return on investment. The automated
    equipment at our Contempo Spas allows our customers to take
    advantage of more services in less time and at a lower cost than
    at a traditional day spa. Additionally, we believe that the
    quality of individual services offered at each repeat visit is
    more consistent than at a traditional day spa where services are
    provided by a therapist or aesthetician.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We do not own any long-term exclusive rights to use the
    equipment featured in our Contempo Spas, some of which is also
    used in malls, airports, massage therapist offices, and some
    tanning franchises. However, we are not aware of any significant
    competitor that employs the same automated day spa concept that
    we have developed, using the same type and quantity of equipment
    that we do.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Contempo Spas include some, or all, of the following
    automated equipment:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    aqua and hydro massage units that use heat and water pressure to
    decrease muscle tension, and therasage and cyber-relax units
    that reproduce the therapeutic benefits of a traditional
    pressure massage;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    hydro-derma fusion stations that combine infrared heat and
    nutrient-rich steam to moisturize the skin;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    luminous facial and hand units that use light therapy to improve
    skin texture and tone, lighten age spots and diminish wrinkles;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    misting spa units that use a cool mist spray which prompts
    cellular skin renewal to diminish fine lines and wrinkles and
    improve skin elasticity;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    sunless tanning equipment that uses a tanning mist which is
    sprayed onto the skin&#146;s surface to create an artificial tan;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    teeth whitening equipment designed to restore teeth color;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    units that use infrared heating to deep heat the body and
    aromatherapy for relaxation;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    equipment that leads customers through guided meditation and
    relaxation sessions to reduce stress, improve mental clarity or
    promote lifestyle changes, such as weight loss or smoking
    cessation; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    U-V light beds.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

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    A spa employee programs individual spa or U-V sessions and sets
    the desired time of the session through the store&#146;s point
    of sale software. The equipment is then regulated by a
    centralized management program which communicates with the timer
    on each individual piece of equipment. The customer activates
    the session by pressing a start button in the treatment room and
    may terminate a session at any time using a stop button.
    Customers may adjust the settings according to their preferences
    on certain equipment such as hydro massage units.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition to our spa services, our locations offer an array of
    retail products and specialty items that enhance the Contempo
    Spa experience, including U-V lotions, spa accessories, spa
    hydration products, nutritional products, holistic and skincare
    products, and promotional merchandise.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We internally classify a Contempo Spa as a location that
    includes our three key automated spa services (massage, facial
    and hydration), a sunless tanning service and U-V therapy
    services. At January&#160;15, 2010, 204, or 59%, of our total
    345 operating franchises had initially opened or converted to
    the Contempo Spa format. Of the remaining 141 locations, 116, or
    34%, provided some basic spa services in addition to U-V therapy
    services, and 25, or 7%, provided only U-V therapy services. In
    fiscal 2009, our Contempo Spas generally produced an average of
    $5,300 more in monthly sales than the locations that provide
    basic spa services, and an average of over $11,000 more in
    monthly sales than locations that offer U-V services only. In
    addition, same store sales at our Contempo Spas increased by an
    average of 4% in 2009 over 2008, while same store sales for
    basic spa and U-V only locations decreased by an average of 8%
    in 2009 over 2008. Therefore, we are working vigorously to
    convince our franchisees to convert to the Contempo Spa format.
</DIV>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Since 2007, we have required that all of our new locations open
    as Contempo Spas. As of the date of this prospectus, our new
    locations must open with approximately ten pieces of equipment
    in total, of which at least 50% must be automated spa equipment.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NutritionSpa.com</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Planet Beach customers who purchase a higher level of Contempo
    Spa membership also have access to our web-based
    NutritionSpa.com service. This service provides nutrition, skin
    wellness, and weight control information, applications and
    education. It also offers downloadable, customized meal plans,
    corresponding recipes and a message portal to send and receive
    messages to and from Planet Beach&#146;s team of experts in
    nutrition and skincare. In the near future, we expect to add
    features including an application that will formulate a
    customized Planet Beach product and service regime.
    NutritionSpa.com is intended for healthy adults and does not
    give medical advice or opinions. We urge our customers to seek
    the advice of a physician before beginning any weight loss
    effort or regimen.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our Sales
    Platform and Customers</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our franchisees charge a monthly membership fee to customers for
    different service offerings. Members can choose from different
    service levels, some of which include only U-V services, while
    others include U-V services, automated spa treatments and access
    to our on-line NutritionSpa.com service. At the higher service
    levels, members receive reciprocation rights that allow them to
    visit any of our spa locations without paying an additional fee,
    and they have unlimited access to all of our services at a
    monthly cost that is comparable to or lower than the cost of a
    single visit at a traditional day spa. Our monthly membership
    fees program results in a stable revenue stream for our
    franchisees. Our locations also offer services on an individual,
    non-membership basis, and an array of retail U-V, skincare and
    nutritional products.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In fiscal 2009, our locations served approximately 561,000
    customers. Of those customers, approximately 162,000 were Planet
    Beach members. Membership data indicates that the average age of
    those members was 31, and approximately 88% were female. We also
    have a system-wide database of all current and former Planet
    Beach customers, which contained approximately 2.1&#160;million
    people at December&#160;31, 2009.
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Industry</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    According to the International SPA Association, or ISPA, the spa
    industry recognized $12.8&#160;billion and $10.9&#160;billion of
    revenue in 2008 and 2007, respectively, an increase of
    approximately&#160;17.5%. Spa visits increased from
    138&#160;million visits in 2007 to 160&#160;million visits in
    2008, or 16%. According to ISPA, one in four Americans have been
    to a spa. ISPA reports that at the end of 2008 there were 21,300
    spas in the U.S., a 19% increase since the end of 2007, when
    there were 17,900 U.S.&#160;spas. The number of spa locations in
    the U.S.&#160;has increased at a five year average growth rate
    of 17%. The spa industry can be divided into six categories: day
    spas, resort and hotel spas, medical spas, club spas, mineral
    spas, and cruise ship or destination spas. At the end of 2008,
    approximately 79% of all spas in the U.S.&#160;were considered
    to be day spas, which are spas in which patrons pay for
    massages, facials or body treatments, and then leave the
    premises following the services. Our franchises are part of this
    day spa sector.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    According to the U.S.&#160;Department of Commerce, sales of
    health and personal care products such as the products we sell
    in our franchises increased 3.3% from January 2009 to January
    2010. In addition, Natural Marketing Institute, a market
    research firm, reports that U.S.&#160;retail sales for the
    consumer packaged goods health and wellness industry reached
    more than $112&#160;billion in 2008, representing growth of 9%
    over 2007.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Mintel, a market research firm, reports that U.S.&#160;sales of
    anti-aging skincare products, which are also a part of our
    offerings, rose 13% to $1.6&#160;billion between 2006 and 2008,
    outpacing the general skincare segment, which was up 11% over
    the same period.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The ICIS Chemical Business Report, published in November 2009,
    reports that the fastest growing segment in the beauty industry
    currently is &#147;nutraceuticals,&#148; with a projected 7.4%
    compound growth rate through 2013. This market consists of
    so-called &#147;beauty beverages&#148; such as beverages that
    promote digestive health with probiotics and skin health with
    antioxidants and superfoods, both of which we offer in our
    nutritional product line.
</DIV>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have also introduced a line of products at our franchises
    called &#147;nutricosmetics.&#148; Also sometimes referred to as
    &#147;beauty foods,&#148; these products include nutritional
    supplements, instant protein shakes, fruit bars, acai packets
    and other foods that are designed to improve and tone the skin,
    boost the metabolism, encourage fat burning, improve circulation
    and enhance beauty systemically. Kline Group, a consulting and
    market research firm, indicates the global market for
    nutricosmetics was valued at $1.5&#160;billion in 2007, and the
    industry is expected to reach $2.5&#160;billion in sales by 2012.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    With the introduction of our nutritional and holistic skin care
    lines, as well as our success at converting to the Contempo Spa
    model, we have aimed to place ourselves in the wellness
    industry, an industry that, according to Natural Marketing
    Institute, experienced $200&#160;billion in revenue through 2008.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Competition</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As discussed above, we have developed the Contempo Spa concept
    to distinguish our spas from traditional day spas and tanning
    salons. However, our franchisees compete mostly with
    independently owned tanning salons and day spas. We are not
    aware of any significant competitor that has created a concept
    that is similar to our Contempo Spa.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Competitive Strengths</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that we have the following competitive strengths:
</DIV>

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    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Brand Market Differentiation and Brand
    Loyalty.</I>&#160;&#160;We are not aware of any other
    significant franchise in the U.S.&#160;that uses our business
    model. We believe that our position as the first company to
    market the Contempo Spa concept has the potential to create
    significant market share for us that will solidify our presence
    as the industry leader when other companies begin to compete
    with us in this sector. Our membership reciprocation rights that
    allow members to visit any of our spa locations without paying
    an additional fee is an important part of our strategy to build
    brand loyalty. We believe we can attract customers of our
    tanning salon competitors by introducing them to our spa
    services.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Use of Automated Spa Equipment Reduces our Labor Costs and
    Has Customer Appeal. </I>Through the use of automated,
    non-attended spa equipment, our franchisees are able to reduce
    labor costs because no staff members need be present during spa
    treatments. This format also allows franchisees to offer
    customers competitive and value-oriented pricing. In addition,
    we believe that the use of automated equipment is attractive to
    an expanded client base that desires spa services provided in
    less time and at comparable or lower cost than a single visit to
    a traditional day spa. We believe this model also has
    significant appeal in countries where social customs emphasize
    greater personal modesty. Furthermore, we believe that customers
    find the services provided by automated equipment are more
    consistent in quality from visit to visit than services provided
    by a therapist or aesthetician.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Capacity for Expansion.</I>&#160;&#160;We intend to add
    customers by increasing our sales network and increasing the
    number of our outlets both domestically and internationally. In
    2010, we believe our growth in open locations will primarily
    occur internationally. At the end of 2010, we expect that we
    will have approximately 28 locations outside the U.S., which
    would be an increase of approximately 22% in international
    locations from December&#160;31, 2009. We expect to return to a
    more rapid growth rate domestically after we expand our
    franchise marketing efforts using the proceeds of this offering.
    We believe we have developed an infrastructure that we can now
    leverage to increase our outlet base domestically and serve as a
    model for our international outlet growth. We expect this
    infrastructure will help us to accommodate our rapid growth
    effectively without the need to hire a significant number of
    additional employees.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Our Membership-Based Revenue Model Provides us with a
    Consistent Revenue Stream. </I>We are in significant part a
    membership-based service business. This membership model creates
    a recurring, stable revenue stream for our franchisees and,
    ultimately, for us, as compared to some of our competitors who
    charge for their services on an individual basis.
</TD>
</TR>

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<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

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<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Experienced Management Team.</I>&#160;&#160;Our management
    team has substantial experience in franchising, as well as the
    spa and U-V industries, and also has significant experience in
    growing brands and in the retail environment.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Our Convenient Locations Help to Increase Our Customer
    Base</I>.&#160;&#160;We desire to become the &#147;neighborhood
    spa&#148; for our customer base by positioning our outlets
    mainly in larger urban area shopping centers. We believe our
    outlets are well positioned to attract our target demographic.
    Based on our customer surveys, we believe our primary target
    market consists of women ranging from 25 to 35&#160;years old,
    with annual incomes of between $50,000 and $100,000 per
    household, and who have attended college. We believe our
    secondary target market consists of women ranging from of 36 to
    50&#160;years old, and men ranging from 30 to 50&#160;years old,
    with annual incomes of $50,000 to $100,000 per household, and
    who have attended college.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Growth Strategy</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are committed to achieving our growth plan by pursuing the
    following strategies:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Increasing Overall Franchise Sales.</I>&#160;&#160;Our
    primary growth strategy is to increase the overall number of our
    franchise locations. We intend to accomplish this through
    increased marketing, including attending trade shows, as well as
    brand development and increased advertising. In addition, we
    intend to maintain a strong balance sheet, which will provide
    potential franchisees with a certain level of confidence in our
    financial position. To this end, we will use a portion of the
    proceeds from this offering to reduce up to $1.8&#160;million of
    our current debt. Finally, we are continually exploring methods
    to assist our franchisees in obtaining financing, which we
    believe would remove the primary obstacle we have faced in
    increasing our franchise sales since the third quarter of 2008.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Conversion of Tanning Salons.</I>&#160;&#160;The amount of
    sales generated by a retail chain&#146;s existing outlets over a
    period of time is referred to as &#147;same store sales.&#148;
    Same store sales are an important statistic because they
    indicate what portion of our total revenue has been generated by
    sales growth and what portion has been generated by the opening
    of new stores. Our operating data suggests to us that our
    Contempo Spa concept results in increased same store sales. At
    January&#160;15, 2010, 141, or 41%, of our franchise locations
    had not yet converted to our Contempo Spa format, which includes
    automated spa services, sunless tanning equipment and U-V
    therapy services. Of these 141 locations, 25 provide only U-V
    therapy services. We believe that the conversion of these 141
    locations into our Contempo Spa concept should result in higher
    per unit sales.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>International Expansion.</I>&#160;&#160;We currently have
    operating locations in Canada, Ireland, South Africa, and
    Australia. We have sold a franchise in Egypt and expect a
    location to open there in the Spring of 2010. We have entered
    into master franchisor agreements, but do not yet have operating
    locations, in Northern Ireland, the United Kingdom, Kuwait, and
    Saudi Arabia. In addition, we are currently negotiating a master
    franchisor agreement in the United Arab Emirates. We plan to
    expand our brand further to other countries in Europe, New
    Zealand, South America, Central America, the Middle East, and
    Asia. In most cases, we enter into agreements and have
    relationships only with our master franchisors, rather than the
    individual franchisees. This arrangement reduces our costs and
    therefore may result in higher profits for us over the long term.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Product Development.</I>&#160;&#160;We continue to evaluate
    additional services that our franchisees might offer within our
    Contempo Spa concept. The addition of new services at our
    locations has historically resulted in new equipment sales and
    improvement in same store sales. For example, we are currently
    considering various sunless tanning services that would
    complement our current products and services. In addition, we
    periodically evaluate new franchise concepts that would
    complement our core Contempo Spa business. We are now evaluating
    a concept that would overlap with our existing customer base
    without competing with the Planet Beach brand. In addition, it
    would require a smaller initial investment by the franchisee
    than is required for a Planet Beach franchise. We plan to begin
    testing this concept in the late Spring and early Summer of
    2010. We do not know when this testing will be complete, whether
    it will be successful, or, if it is successful, when we might
    begin recruiting franchisees.
</TD>
</TR>

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<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Franchises</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of January&#160;15, 2010, we had 345 franchise outlets in the
    United States, Canada, Ireland, South Africa and Australia, down
    from 385 locations worldwide at the end of 2008. The following
    table sets forth the location, by state and country, of these
    outlets.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="16%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="14%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="14%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="14%">&nbsp;</TD>	<!-- colindex=04 type=maindata -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="14%">&nbsp;</TD>	<!-- colindex=05 type=maindata -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="14%">&nbsp;</TD>	<!-- colindex=06 type=maindata -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>State</B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Outlets</B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>State</B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Outlets</B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>State</B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Outlets</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD nowrap align="center" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    AL
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    4
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    MA
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    2
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    OR
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    1
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="center" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    AK
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    1
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    MD
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    1
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    PA
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    6
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="center" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    AZ
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    18
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    MI
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    6
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    SC
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    4
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="center" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    CA
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    31
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    MN
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    17
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    TN
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    2
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="center" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    CO
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    6
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    MO
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    1
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    TX
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    33
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="center" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    CT
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    1
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    MS
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    3
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    UT
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    2
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="center" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    DE
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    1
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    MT
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    5
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    WA
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    2
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="center" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    FL
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    51
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    NC
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    18
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    WI
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    1
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="center" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    GA
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    10
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    NE
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    1
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    Canada
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    18
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="center" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    IA
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    6
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    NH
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    1
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    Australia
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    2
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="center" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    ID
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    8
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    NJ
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    9
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    Ireland
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    1
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="center" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    IL
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    5
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    NM
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    2
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    South Africa
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    1
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="center" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    IN
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    4
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    NV
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    6
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="center" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    KS
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    2
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    NY
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    2
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="center" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    LA
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    49
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    OK
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    1
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B>TOTAL</B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B>345</B>
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Also at January&#160;15, 2010, we had 20 additional spas under
    development and another 16&#160;potential re-openings of
    previously closed locations. We also have agreements with some
    of our domestic franchisees under which they have an option to
    open one or more additional locations, for which they have
    already paid us the initial franchise fee. These fees are not
    refundable.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We do not depend on any one or group of individual franchisees.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Franchise
    Agreements</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To be eligible to be our franchisee, an individual must have a
    minimum net worth of $350,000, access to at least $90,000 in
    capital, and pass a background and credit check. He or she must
    also show an enthusiasm for our brand and the discipline to
    follow our business model, among other qualities.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our minimum location size is generally 1,200&#160;square feet.
    We approve the proposed site for a franchise location and
    consider factors such as the median household income for the
    area, the cost of living and level of average disposable income
    per household, population density and the attitude of the local
    population concerning required travel times to a location.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Franchisees typically obtain bank financing, which may involve a
    Small Business Administration loan, to fund their franchises. We
    provide them a model business plan and pro forma financial
    statements that they use to determine their financing and seek a
    lender. We suggest financing alternatives based on our
    experience with existing, similarly situated franchisees. We
    typically award a franchise and accept the initial franchise fee
    before the franchisee secures financing. The reason is that
    lenders generally require proprietary information regarding the
    franchise concept and a business plan before considering a loan.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under our current form of agreement, our domestic franchisees
    are required to pay us a $30,000 initial franchise fee, a
    $21,000 fee if they purchased two additional unit locations, a
    $35,000 fee if they purchased four additional unit locations,
    and a $69,000 fee if they purchased nine additional unit
    locations. In addition, the franchisees are required to purchase
    all U-V and spa equipment and products from us, from master
    franchisors who purchase the items from us, or from suppliers we
    designate. We are entitled to a royalty of 6% per month of the
    total sales at their spa locations and collect these royalties
    mainly through AutoDraft drafts or credit card. In addition,
    franchisees must pay us a percentage of their total monthly spa
    sales for our
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    48
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    marketing and advertising programs. We obtain location sales
    data via spa management software that we use under a license. At
    December&#160;31, 2009, we had 16 locations that are operated
    under an older version of our franchise agreement or other
    arrangements that require them to pay us a flat fee for
    royalties ranging from $250 to $975 per month, or no fee as
    described under &#147;Transactions with Related Persons.&#148;
    Franchisees agree to indemnify us for all fines, suits, claims,
    demands or obligations arising out of the obligations in the
    franchise agreement, including training, construction or
    operation of each spa. We may terminate the franchise agreement
    without notice, without penalty and without giving the
    franchisee any right to cure a default upon the occurrence of
    various events, including, among other things, the
    representative&#146;s filing a petition for bankruptcy under
    federal or state bankruptcy laws, assigning the franchise
    agreements without our prior written consent, defaults under the
    lease or sublease for the spa location, and failing to comply
    with the training requirements of the franchise agreement.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our domestic franchisees are required to open their spa
    locations within 275&#160;days after entering into a franchise
    agreement with us. If the domestic franchisee has purchased
    additional units, the second and third unit is required to open
    within 24 and 36&#160;months, respectively, from the date of the
    original franchise agreement. They are required to operate the
    spas in accordance with our operations manual and to comply with
    all applicable laws and regulations. The current version of our
    franchise agreement has a term of fifteen years and can be
    renewed by the franchisee for an additional five year term upon
    expiration of the original term, as long as the franchisee is in
    compliance with the terms and conditions of the franchise
    agreement.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The terms and conditions of any future franchise agreements may
    be different than those described above. We must file an annual
    disclosure document in certain of the U.S.&#160;states in which
    we have locations under state franchise law. We are required to
    file the current version of our agreements with that document,
    and if we make material changes to our agreements, we must amend
    our state disclosure document at the time of the change.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table shows the number of franchise agreements
    that will expire each year until 2024.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="81%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="8%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Number of Franchise<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Year</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Agreements Expiring</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2010
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2011
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2012
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    29
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2013
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    79
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2014
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    49
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2015
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2016
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
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<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2017
</DIV>
</TD>
<TD>
&nbsp;
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<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
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</TR>
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<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2018
</DIV>
</TD>
<TD>
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<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
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<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2019
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
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<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2020
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    50
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
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<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2021
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    38
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
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</TR>
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<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2022
</DIV>
</TD>
<TD>
&nbsp;
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<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    38
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
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<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2023
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27
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<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2024
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
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</TR>
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<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
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<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    345
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
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</TD>
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&nbsp;
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<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

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</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Area
    Representative Agreements</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    At December&#160;10, 2009, we had 23 area representatives for 27
    territories, covering approximately 64% of our total domestic
    locations and approximately 10% of the total
    U.S.&#160;geographic land area. Each territory is governed by a
    separate agreement. Of the 27 agreements, four will expire in
    five years or less, 21 will expire in six to ten years, and two
    will expire in 11 to 15&#160;years.
</DIV>
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    <BR>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To be eligible to become an area representative, an individual
    must have a net worth of $500,000, access to at least $200,000
    in capital, have business and management experience and pass a
    credit and background check. He or she must also have the
    qualities we look for in a franchisee.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Area representatives sign an agreement with us that entitles
    them to represent us in developing franchises within a defined
    geographic territory. The term of the agreement is ten years,
    with the option to renew for additional five year terms. They
    must also execute a separate franchise agreement with us. The
    area representative agreement requires an area representative to
    market successfully one spa for every 40,000&#160;people within
    the area representative&#146;s territory. We reserve the right
    to re-market territory of any area representative who does not
    achieve this goal within one calendar year of becoming an area
    representative.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We agree to provide training and support to area representatives
    to assist them in performing their duties. Area representatives
    must attend or participate in three separate training sessions
    we provide, as well as our annual conventions. The area
    representative is responsible for recruiting potential
    franchisees whom they refer to us for evaluation, and to assist
    the franchisee in opening a new franchise and providing ongoing
    supervision, training, and support. We have a corporate
    department dedicated to supervising and assisting our area
    representatives. Area representatives are responsible for
    attending bi-weekly training calls and are required to spend
    $1,000 per month in their markets on franchise opportunity
    marketing. We provide tools such as virtual seminars to assist
    area representatives in their marketing efforts.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Area representatives are entitled to 50% of the initial
    franchise fee we earn for sales of franchises in the area
    representative&#146;s territory, if the franchise is sold or
    when an existing franchise is transferred to a new franchisee in
    the area representative&#146;s territory as a result of the area
    representative&#146;s efforts. For sales of new franchises or
    transfers of existing franchises in the area
    representative&#146;s territory, but not as a result of his or
    her efforts, the area representative is entitled to 20% of the
    applicable fee. For sales of new franchises or transfers of
    franchises outside the area representative&#146;s territory made
    as a result of the area representative&#146;s efforts, the area
    representative is entitled to 20% of the applicable fee as long
    as the territory is not assigned to another area representative.
    When a broker facilitates a transaction, we pay the area
    representative for that territory 50% of the net fee after we
    pay the broker&#146;s commission and our internal commissions.
    Our area representatives are also entitled to 40% of collected
    royalties that we receive from our franchisees in their
    territories. We may terminate the area representative agreement
    without penalty upon the occurrence of various events,
    including, among other things, the representative&#146;s filing
    a petition for bankruptcy under federal or state bankruptcy laws
    or failing to comply with a mandatory development schedule
    within the first calendar year after the execution of the area
    representative agreement.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Master
    Franchisor Agreements</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    At December&#160;31, 2009, we had eight master franchisor
    agreements in place, of which one will expire in 2020, five will
    expire in 2023, and two will expire in 2024.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Potential master franchisors must have past business and
    management experience, preferably with an emphasis in franchise
    management. They must be committed to our brand and our overall
    growth beyond the opportunity to profit from their individual
    investment. They must also have a minimum net worth equal to
    their entire investment, which includes the amount of their
    territory fee and the cost of developing the first location in
    their territory, which we call a flagship location.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under our master franchisor agreements, we grant exclusive
    rights to the master franchisor to grant international
    franchises within a defined territory for a term of fifteen
    years. The master franchisor must open at least one flagship
    location controlled by the master franchisor within one year of
    signing the agreement with us. The master franchisor is
    responsible for marketing, selling and supervising franchises
    located within that territory. He or she agrees to award
    franchises according to a schedule negotiated with us, and
    failure by the master franchisor to achieve the
    <FONT style="white-space: nowrap">agreed-upon</FONT>
    goals would allow us to declare a default of the master
    franchisor agreement.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We provide guidance and support for the master franchisor&#146;s
    development responsibilities, including providing personnel to
    train employees of the master franchisor and franchisees within
    the territory. Master
</DIV>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    franchisors pay us a territory fee based on the size of the
    population in the territory at the execution of the master
    franchisor agreement, a fee of $9,000 upon the signing of each
    new franchise agreement, a 1.8% royalty on each location&#146;s
    total monthly sales, an optional monthly technology fee of $190
    and an optional monthly education fee of $69. Master franchisors
    may terminate the master franchise agreement by giving
    60&#160;days&#146; written notice of a material breach of the
    master franchise agreement by us and provided we do not cure the
    default within the 60&#160;days. We may terminate the master
    franchise agreement, effective immediately upon notice to the
    master franchiser upon the occurrence of various events,
    including, among other things, filing a petition for bankruptcy
    under federal or state bankruptcy laws or the failure to comply
    with a mandatory development schedule and such failure continues
    for a period of 30&#160;days.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We sell equipment directly to foreign franchisees and pay a
    portion of our profits to the master franchisor. If we manage
    the relationship for the transaction with the equipment vendor,
    we pay the master franchisor 40% of our profit on the sale. If
    the master franchisor performs this role, we pay him or her 60%
    of the profit. For flagship locations owned or controlled
    directly by master franchisors, we sell them equipment and
    products at discounts ranging from 15% to 25% of our domestic
    rates. We also have equipment suppliers who sell directly to
    foreign franchisees, and we receive royalties on these sales. We
    share 60% of the royalty with the master franchisor.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Currently, we sell our private label products at a profit to an
    international distributor, who resells them to our foreign
    franchisees. The distributor also sells other national branded
    products to our foreign franchises, and pays us a royalty from
    those sales. We share 60% of our royalties with the master
    franchisor for the applicable territory. However, we expect that
    in the future we will sell our private label products to our
    master franchisors for resale to foreign franchisees. We would
    earn a profit at the time of sale to the master franchisor and
    would have no further royalties on resales to the franchisees.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Australian locations are, and our proposed Egyptian location
    will be, operated under a franchise agreement without a master
    franchisor. The franchise agreements for those locations are
    substantially similar to our agreement with our domestic
    franchisees, with some exceptions. For example, the franchisee
    is not required to pay us fees for brand development or
    marketing and we will not perform those activities. We expect
    that we may use the same or a similar arrangement in the future
    for smaller countries where a master franchise structure is not
    necessary.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Franchisee
    Recruitment</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have two primary marketing channels for the recruitment of
    prospective franchisees in the United States. Approximately 60%
    of our U.S.&#160;franchisees are recruited by our area
    representatives, who receive a commission for new franchise
    sales and share franchise fees and royalties with us for the
    franchises in their territory. We identify the remaining 40% of
    our franchisees though internal marketing tools such as our
    website and internet-based advertising. Occasionally we also
    receive franchisee referrals from independent brokers, to whom
    we pay a commission for referrals that ultimately result in an
    award of a franchise.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For our international franchise operations, we identify master
    franchisors primarily through trade shows and internet-based
    advertising. In addition, we have also on occasion retained
    <FONT style="white-space: nowrap">U.S.-based</FONT>
    commercial services that specialize in facilitating partnerships
    between U.S.&#160;and foreign businesses.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Equipment and Suppliers</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have formed relationships with several equipment
    manufacturers and other suppliers to maximize our buying power
    over our U-V and spa equipment and products and to associate our
    brand prominently with the equipment and products. We have
    assisted with the design of most of the equipment and products
    that our franchises offer and enjoy short-term exclusive rights
    on certain of the offered equipment. In addition, we believe the
    agreements that we have negotiated with these suppliers allow
    our franchisees and master franchisors to purchase equipment at
    an advantageous price compared to normal retail prices available
    to individual business owners.
</DIV>
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    51
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are not dependent on any single supplier. If any supplier
    became unable to meet its obligations to us, we believe we could
    readily replace it without difficulty.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition to carrying a thorough private label line of U-V,
    skincare and nutritional products, which accounts for
    approximately 53% of the products sold at our franchises, we
    also carry Australian Gold and Swedish Beauty products. Our
    private label products can only be purchased at Planet Beach
    locations, but Australian Gold and Swedish Beauty products are
    available at indoor tanning establishments.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We sell equipment and products directly to franchisees and
    equipment directly to master franchisors and earn a profit on
    those sales. We also have product suppliers or distributors who
    sell directly to franchisees and master franchisors, and we earn
    royalties on those sales.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Some of our equipment suppliers have agreed to indemnify us
    against claims caused by the design or malfunction of their
    equipment and we are listed as a co-insured on some equipment
    suppliers&#146; liability policies.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Marketing</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We engage in marketing and advertising activities for the
    benefit of our domestic franchisees. Our master franchisors do
    the same for our foreign locations. This section describes our
    activities for domestic franchisees.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We strive to achieve the greatest possible national exposure
    through our marketing programs. We believe we have formulated
    our national marketing and advertising strategies in a manner
    that achieves the maximum value for our marketing budget.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Ms.&#160;Planet Beach Spokesmodel Search has been our most
    significant and successful marketing initiative since 2002. In
    2009, the competition accounted for 70% of our national
    marketing expense. Currently, the competition is produced for
    television and syndicated throughout the United States. The
    television show can also be viewed in some parts of Canada. The
    2009 television show was aired across the U.S.&#160;beginning on
    February&#160;1, 2009 through June&#160;1, 2009. The show was
    ultimately aired in markets that represented a total of 64.7% of
    U.S.&#160;households.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Also during the syndication period, our website traffic
    increased by over 127,000 hits for the 12&#160;month period
    ending March&#160;31, 2009 versus the prior year period. The
    Ms.&#160;Planet Beach website also had an increase of hits from
    671 beginning in the second quarter of 2008 to 15,271 hits as of
    the end of the first quarter of 2009. The television show
    directs viewers to our website for membership and franchise
    information.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Domestic franchisees who entered into agreements with us before
    April&#160;1, 2008 are required to contribute 1% of gross sales
    for our marketing and advertising programs. Domestic franchisees
    who entered into agreements with us on or after April&#160;1,
    2008 contribute 2% of gross sales for this purpose. The funds
    collected are used for the development and distribution of
    national, regional and local marketing for the benefit of all
    domestic franchisees within the Planet Beach system. In
    addition, funds are used to create marketing materials and
    public relations campaigns which promote the products and
    services offered by our franchisees. Our marketing consists of
    television, radio and print media advertisements. We are not
    obligated under our franchise agreements or any other agreement
    to spend any particular amount of fund contributions on the
    placement of marketing in a particular territory or geographic
    area.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We encourage our franchisees to form regional marketing
    cooperatives for the benefit of our franchisees located within
    the same geographic areas. Franchisees are required in their
    franchise agreement with us to belong to the cooperative for
    their area, if any. From time to time, we determine whether a
    regional marketing cooperative is appropriate in a geographical
    area, define the geographic area relevant to each regional
    marketing cooperative, and determine the percentage of gross
    sales each franchisee must contribute for each regional
    marketing cooperative (which contribution may vary among
    cooperatives, depending on marketing costs and requirements in
    the region). Although we provide operating guidelines to
    cooperatives, each cooperative is self-governing. We may change,
    merge or dissolve any regional marketing cooperatives at our
    discretion.
</DIV>
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    <BR>
    52
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our individual franchisees market their spas in the local
    telephone directory or directories covering the area from which
    the spa is likely to draw customers. Such marketing is placed in
    accordance with size and content formulas we provide to the
    franchisees. The cost of marketing in local telephone
    directories is borne by the individual franchisee.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Intellectual Property</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Trademarks</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Planet Beach Brands, L.L.C., a limited liability company that is
    wholly-owned by Stephen Smith, our Chairman, President, Chief
    Executive Officer and principal stockholder, has registered the
    following proprietary trademarks on the Principal Register of
    the United States Patent and Trademark Office, except for the
    trademark Bronzen, which we registered.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="59%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="19%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="8%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Trademark</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Date Registered</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Registration Number</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Planet Beach
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    June 10, 1997
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2070046
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Planet Beach
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    June 25, 2002
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2585483
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Planet Beach Tanning Spa &#151; Our Solar System Revolves Around
    You
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    January 2, 2007
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3195152
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Planet Beach
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    September 6, 2005
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2991967
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Bronzen
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    January 10, 2006
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3038872
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Contempo Spa
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    September 25, 2007
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3299750
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Luminous Facial
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    October 30, 2007
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3327379
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Planet Beach
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    August 26, 2008
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3491120
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have filed all required affidavits, and the registrations are
    not yet due for renewal. Once registered, and assuming all
    required affidavits are filed timely, the marks listed above
    have a ten year term, and may be renewed for an additional ten
    year term. We have also registered certain of our trademarks, or
    have applications pending, in several foreign jurisdictions. We
    do not own any state trademark registrations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    There are currently no effective determinations of the
    U.S.&#160;Patent and Trademark Office, Trademark Trial and
    Appeal Board, the trademark administrator of any state or any
    court, no pending interference, opposition or cancellation
    proceedings, nor any pending material litigation involving any
    of the proprietary trademarks listed above.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have entered into an agreement with Planet Beach Brands that
    will become effective upon the consummation of this offering,
    under which we will purchase the trademarks listed above and
    other intellectual property from Planet Beach Brands, except for
    the trademark &#147;Bronzen,&#148; which we already owned. We
    will purchase the intellectual property in exchange for a
    promissory note in the amount of $375,000, which we will repay
    with the net proceeds of this offering. We also agreed to pay
    Planet Beach Brands a monthly royalty equal to 0.5% of the
    royalties we collect from our franchisees (excluding marketing
    and other fees) in any month when those collected royalties
    exceed $400,000. In addition, in the event that we terminate
    Stephen Smith&#146;s employment without cause, if he resigns for
    good reason, or if there is a change in control of our company,
    Planet Beach Brands will be entitled to a royalty of 10% of our
    collected royalties (excluding marketing fees) per month,
    regardless of the amount of our collections. In all events, the
    royalty payments will cease once they have totaled
    $10&#160;million.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Patents,
    Copyrights and Proprietary Information</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We do not own any registered patents or copyrights that are
    material to our business. However, we claim common law copyright
    and trade secret protection for several aspects of our franchise
    system including our Operations Manual and our marketing and
    business materials. There are no current determinations,
    proceedings or litigation involving any of our copyrighted
    materials.
</DIV>
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    <BR>
    53
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Property</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our corporate headquarters is located at 5145 Taravella Road,
    Marrero, LA 70072. We own two buildings at that location, each
    with office and warehouse space having a combined total of
    30,000&#160;square feet. One of the buildings is subject to a
    lien filed by the Internal Revenue Service for $30,361 related
    mainly to taxes, penalties and interest stemming from our
    Form&#160;1120 tax return for 2003. This matter has been
    resolved. We believe that these premises are adequate, suitable
    and of sufficient capacity to support our current needs.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We operate one Planet Beach company store in Irvine, California
    having a total of 1,876&#160;square feet. We recently renewed
    the location lease through August&#160;31, 2011 and believe such
    facility will be sufficient to meet our needs at that location
    through at least that time.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    From 2002 through 2005, our wholly-owned subsidiary Planet Beach
    Real Estate, LLC entered into leases for various franchise
    locations and sublet the premises to our franchisees. We have
    discontinued this practice. However, at January&#160;1, 2010,
    Planet Beach Real Estate remained the sublessor or guarantor for
    approximately three franchise locations, excluding our Irvine
    store. These three leases are expected to be renewed by the
    existing franchisee upon the expiration of the original lease
    without Planet Beach Real Estate as a guarantor. All of these
    leases are scheduled to expire on or before 2013.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Regulation</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The U-V industry is regulated at both the state and federal
    levels. Most of the applicable federal laws and regulations do
    not affect us directly. Instead, those regulations primarily
    govern manufacturers of U-V booths, beds and other devices that
    we and our franchisees use. The principal federal laws
    regulating the manufacture of U-V devices are the federal Food,
    Drug and Cosmetic Act administered by the federal Food and Drug
    Administration, or the FDA, the Public Health Service Act and
    the Radiation Control for Health and Safety Act.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Because of the potential for injury and misuse of U-V devices,
    the FDA has issued stringent rules and regulations governing the
    manufacture and use of those devices. These regulations include
    limits on the ultraviolet light emitted by U-V devices, safe
    operation of such devices, timers, warning labels and the like.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We only purchase, and only permit our franchisees and master
    franchisors to purchase, U-V devices that meet or exceed the
    standards required by the FDA. For the personal safety of our
    customers, we require our franchisees to monitor the use of U-V
    beds and booths to assure compliance with the FDA guidelines.
    The U-V beds and booths used by our franchisees are installed,
    maintained and repaired by qualified employees or contractors in
    accordance with manufacturer&#146;s specifications.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The federal health care bill signed into law in March 2010
    contains a 10% tax on U-V tanning services that will take effect
    on July&#160;1, 2010. We have not yet determined whether this
    tax will be imposed on our spa memberships, but we believe it
    would apply to sales of individual U-V therapy sessions and
    could have a chilling effect on demand for U-V services
    generally.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    State regulation of the U-V industry varies from state to state.
    Many states have no laws or regulations governing U-V services.
    Currently, 31&#160;states have either adopted or are in the
    process of adopting laws and regulations dealing with the U-V
    industry. State laws primarily regulate the health and safety
    aspects of U-V facilities rather than regulating the U-V devices
    used. Typically, states require a minimum customer age and
    parental consent and supervision in some cases, use of
    protective eyewear during any U-V session, maintenance of proper
    exposure distance and maximum exposure time as recommended by
    the manufacturer and availability of suitable physical aids such
    as handrails.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, a Food and Drug Administration advisory panel
    recently recommended that the agency consider actions such as
    requiring that teenagers get parental consent before using a
    tanning bed or even banning the use of tanning beds among teens.
    The panel also recommended reclassifying tanning lamps from
    Class&#160;I medical devices&#160;&#151; a category that
    includes tongue depressors and elastic bandages&#160;&#151; to a
    Class&#160;II or Class&#160;III device, which would permit the
    agency to impose greater restrictions. According to the
    International Agency for Research on Cancer, which is affiliated
    with the World Health Organization, or WHO, people
</DIV>
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    <BR>
    54
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    under 30 who use tanning machines increase their risk of skin
    cancer by 75%. The WHO last July listed ultraviolet
    radiation-emitting beds as &#147;carcinogenic to humans,&#148;
    its highest category of cancer risk.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Violation of the federal or state laws or regulations could
    result in criminal or civil penalties.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are subject to stringent federal and state franchise laws
    requiring extensive disclosures by franchisors to current and
    prospective franchisees. State laws also prohibit fraud in the
    sale of franchises. We believe we are in compliance with all
    material federal and state franchise laws and regulations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Employees</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Excluding contract labor, as of March&#160;2, 2010, we employed
    42&#160;full-time employees and 1&#160;part-time employee. The
    following table sets forth the number of our employees by
    function as of that date.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="83%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="7%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Functions</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>As of March&#160;2, 2010</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Franchise sales
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Product and equipment sales
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Customer and franchisee support
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Information technology and marketing
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Administration, accounting, and legal
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Executive management
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>TOTAL</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    <B>43</B>
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that our future success will depend in part on our
    continued ability to attract, hire and retain qualified
    personnel. None of our employees are represented by a labor
    union, and we believe our employee relations are good.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Insurance</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We maintain property insurance for our administrative office
    buildings. The combined limits of our commercial property,
    commercial wind and hail, and flood policies total
    $7.5&#160;million. We also have other coverages, including
    general liability insurance, business income insurance under our
    commercial property policy, employment practices liability
    insurance, errors and omissions insurance, directors and
    officers liability insurance, workman&#146;s compensation
    insurance, key-man life insurance and professional liability
    insurance for our in-house lawyers. We also have commercial
    insurance for our company store in Irvine, California. We
    require each of our franchise locations to have a minimum of
    $1&#160;million in commercial general liability coverage and
    certain other coverages. Our franchisees are also required under
    their franchise agreements to maintain products liability
    coverage and to name us as an additional insured. We believe our
    insurance coverage is customary and standard for companies of
    comparable size in comparable industries in the United States.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Litigation</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    From time to time, we become involved in various lawsuits and
    legal proceedings that arise in the ordinary course of our
    business. Almost all of these matters arise in connection with
    business disputes between us and our franchisees, but on
    occasion we have been a party to lawsuits by customers alleging
    they were injured while using our spas. We require all of our
    locations to have customers sign a form acknowledging the risks
    of U-V and other services.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of December&#160;31, 2009, management, with the advice of
    counsel, has determined that the likelihood of loss in any
    pending matter is not reasonably probable or estimable.
    Accordingly, we have not accrued any reserves in our
    consolidated statements of operations in connection with these
    lawsuits. However, litigation is subject to inherent
    uncertainties, and future reserves may be required if losses are
    deemed reasonably probable and estimable due to changes in our
    assumptions, the effectiveness of legal strategies or other
    factors beyond our control. An adverse result in these or other
    matters or the creation of or changes to reserves could have a
    material adverse effect on our business, financial condition or
    operating results. We are vigorously defending
</DIV>
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    <BR>
    55
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    our position on all claims and proceedings pending as of
    December&#160;31, 2009. Moreover, we do not believe that any
    pending actions or proceedings, either individually or in the
    aggregate, will have a material adverse effect on our financial
    condition, results of operations or cash flows.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Corporate Structure</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We were initially incorporated on September&#160;26, 1996, under
    the laws of the State of Louisiana. On March&#160;25, 2008, we
    reincorporated under the laws of the State of Nevada by merging
    our predecessor Louisiana corporation into its newly-formed,
    wholly-owned Nevada subsidiary. On March&#160;18, 2010, we
    changed our state of incorporation to Delaware by merging into
    our newly-formed, wholly-owned Delaware subsidiary. As part of
    the merger, we effected a 1 for 3.5 reverse stock split of our
    common stock.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We conduct some of our operations through our wholly-owned
    subsidiaries, principally Planet Beach International, LLC,
    through which we conduct our international operations.
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    56
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='111'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">MANAGEMENT</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Directors,
    Executive Officers and Key Employees</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following sets forth the name and position of each of our
    current executive officers and directors. With respect to our
    directors, we have provided in their biographical information
    below the experience and qualifications that led to the
    conclusion that they should serve as a director.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="43%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadright -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="52%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Age</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Position</B>
</DIV>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Stephen P. Smith
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    47
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    President, Chief Executive Officer and Chairman of the Board of
    Directors
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Richard L. Juka
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    51
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Senior Vice President, Chief Operating Officer, Secretary,
    Treasurer and Director
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Nancy M. Price
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    42
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Senior Vice President of Sales
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Tiffany Lassiegne
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    29
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    President of Domestic Operations
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Craig M. Berner
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    47
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Chief Financial Officer
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Eric E. Bosch
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    42
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    Director
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Gary N. Solomon
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    53
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    Director
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Ronald Warner
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    65
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    Director
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Stephen P. Smith.</I>&#160;&#160;Mr.&#160;Smith is the
    co-founder of the company and has served as President, Chief
    Executive Officer and Chairman of the Board of Directors since
    April 1996. He received a B.A. in Political Science from the
    University of Mississippi, a Masters in Organizational
    Management from the University of Phoenix, and the distinguished
    Certified Franchise Executive designation from the International
    Franchise Association for his work and study in the franchise
    industry.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Mr.&#160;Smith has an extensive business background, which
    includes being an entrepreneur since 1986. He opened and
    operated Bodyplex Fitness Center from 1986 through 1989, Bay
    Street Tanning Boutique from 1988 through 1989, and was a
    licensee of three Gold&#146;s Gym locations from 1989 through
    1995. Mr.&#160;Smith also opened the original Planet Beach
    location in New Orleans, Louisiana in 1995, which was first
    called Electric Beach; he still owns this store today. In 1996,
    Mr.&#160;Smith founded Planet Beach Franchising Corporation and
    began franchising that same year.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Richard L. Juka.</I>&#160;&#160;Mr.&#160;Juka is one of our
    co-founders has served as our Senior Vice President, Chief
    Operating Officer, Secretary, Treasurer and Director since July
    1996. He has 25 years of management experience in retail,
    wholesale and franchising businesses. Prior to joining Planet
    Beach Franchising Corporation, Mr.&#160;Juka served as Store
    Director and Field Operator for Pet Smart from 1991 until 1996.
    He was with Pet Smart during their 1993 initial public offering.
    Additionally, Mr.&#160;Juka worked for two publicly traded
    companies in the home improvement industry. In 2002,
    Mr.&#160;Juka received the designation of Certified Franchise
    Executive from the International Franchise Association for his
    work and study in the franchise industry. He has been a Planet
    Beach franchisee since November&#160;2, 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Nancy M. Price.</I>&#160;&#160;Ms.&#160;Price co-founded our
    company with Messrs.&#160;Smith and Juka and has served as our
    Senior Vice President of Sales since 1996. She was a member of
    our board of directors from 1996 to 2010. She received the
    designation of Certified Franchise Executive from the
    International Franchise Association for her work and study in
    the franchise industry.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Ms.&#160;Price studied health and physical education while
    attending Southeastern Louisiana University at Hammond from 1986
    through 1990. She has 13&#160;years experience in the health
    club industry and a total of 24&#160;years experience in
    membership sales. Additionally, Ms.&#160;Price acted as the
    National Marketing Representative for Sydney Frank Importing
    Company, Inc. from 1988 through 1992 and also acted in the role
    of Corporate Trainer for the outside field staff of models and
    promoters. She has been a Planet Beach franchisee since December
    1996.
</DIV>
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    <BR>
    57
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Tiffany Lassiegne.</I>&#160;&#160;Ms.&#160;Lassiegne became
    our President of Domestic Operations on January&#160;1, 2010.
    Until that time, she was our Vice President of Entertainment and
    Media, a position she was promoted to in January 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    She began her career with Planet Beach in 2000 as the general
    manager of a New Orleans area franchise location and has been
    promoted into numerous positions within the company, including:
    Franchise Relations Consultant from June 2003 until August 2005,
    Franchise Relations Manager from August 2005 to December 2006,
    Director of Franchise Relations from December 2006 until June
    2007 and Senior Director of our Spa Tempo Media Department from
    June 2007 to January 2008. She and her husband were also Planet
    Beach franchisees from 2001 to 2003.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Ms.&#160;Lassiegne was previously employed as the Executive
    Producer of the Early Morning News at WWL-870 am radio, an
    Entercom Communications station in New Orleans, while attending
    Loyola University working toward her undergraduate degree in
    Business Management. In 2007, she earned her M.B.A. from the
    University of Phoenix.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Craig M. Berner.</I>&#160;&#160;Mr.&#160;Berner has served as
    our Chief Financial Officer since August 2007. Prior to that
    time, Mr.&#160;Berner served as Associate Controller and
    Director of Accounting for Tulane University from October 1999
    to August 2007, where his primary responsibilities included
    overseeing all financial reporting, developing and monitoring
    internal controls, managing the operations of the accounting
    office, and preparing cash forecasts and capital budgets. He was
    also Manager of Budgeting and Financial Reporting for Tidewater
    Inc. from March 1998 to October 1999, and was responsible in
    that position chiefly for all budgeting and financial reporting,
    preparing quarterly and annual SEC filings, supervision of
    accounting staff, and custody of corporation and insurance
    reserve general ledger accounts. Mr.&#160;Berner, who is a
    Certified Public Accountant, has a B.S. in Accounting from the
    University of New Orleans and a M.B.A. from the A.B. Freeman
    School of Business at Tulane University, with a concentration in
    finance and management.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Eric E. Bosch.</I>&#160;&#160;Mr.&#160;Bosch was elected to
    our board of directors in 2010. He is a Certified Public
    Accountant, licensed in both Louisiana and Mississippi. He has
    been an equity director of the public accounting firm LaPorte
    Sehrt Romig Hand since December 2008. He joined the firm in
    January 1990 after graduating from the University of New Orleans
    in 1989 with a B.S. in accounting. Mr.&#160;Bosch serves as the
    engagement director for the accounting and assurance services
    provided by the firm to a number of clients in several different
    industries, as well as for clients that are public reporting
    companies. He has assisted several of these clients with the
    filings required for their initial public offerings, as well as
    the subsequent filings required by the SEC.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Gary N. Solomon.</I>&#160;&#160;Mr.&#160;Solomon was elected
    to our board of directors in 2010. He has been the Chairman of
    the Board and Chief Executive Officer of Crescent Bank and Trust
    in New Orleans since 1991. He has also been an active venture
    capitalist for the past 20&#160;years, and currently has
    investments in a shipping franchise, several restaurant
    franchises and various real estate developments. He holds a B.S.
    in Business Administration from the University of New Orleans.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Ronald Warner.</I>&#160;&#160;Mr.&#160;Warner was elected to
    our board of directors in 2010. He has been in the private
    practice of law since 1968. Since July 2003, he has been a
    senior corporate partner in the law firm of Locke Lord
    Bissell&#160;&#038; Liddell, where he heads the Corporate
    Practice Group in the Los Angeles office of the firm.
    Mr.&#160;Warner&#146;s practice concentrates on
    mergers&#160;&#038; acquisitions, financings (from emerging
    growth financing through larger multi-national public offerings)
    and compliance with federal and state securities laws and
    Foreign Corrupt Practices Act matters. Mr.&#160;Warner currently
    serves on the Boards of Directors of Senetas Corporation
    Limited, an Australian public company that designs and
    distributes encryption products world-wide, and Elite
    Interactive Solutions, Inc., a privately held company located in
    Los Angeles, California, that offers software monitoring
    products and services for facilities. He also serves on the
    Advisory Boards of a number of technology and services companies
    in the United States and other countries. Mr.&#160;Warner
    received his Juris Doctorate degree with honors from the New
    York University School of Law, where he was appointed as an
    editor of the Law Review, after receiving his Bachelor of Arts
    degree from Tulane University.
</DIV>
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    <BR>
    58
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Board of
    Directors</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of directors is composed of five members, divided into
    three classes. This classification of the board of directors may
    delay or prevent a change in control of our company or our
    management. See &#147;Description of Securities&#160;&#151;
    Certain Charter, Bylaw and Statutory Provisions.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Director
    Independence</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of directors has affirmatively determined that
    Messrs.&#160;Bosch, Solomon and Warner meet the definition of
    &#147;independent director&#148; under the rules of the NYSE
    Amex.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Board
    Committees</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of directors has two standing committees: an audit
    committee and a governance, compensation and nominating
    committee. Each of those committees has the composition and
    responsibilities set forth below.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Audit
    Committee</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The members of the audit committee are Messrs.&#160;Bosch
    (Chair), Solomon and Warner. None of the members of the audit
    committee are, or have been, our officers or employees, and each
    member qualifies as an independent director as defined by the
    rules of the NYSE Amex, Section&#160;10A(m) of the Securities
    Exchange Act of 1934, and SEC rules. The board of directors has
    determined that Mr.&#160;Bosch meets the definition of an
    &#147;audit committee financial expert&#148; as that term is
    used in Item&#160;401(h) of
    <FONT style="white-space: nowrap">Regulation&#160;S-K</FONT>
    under the Securities Exchange Act.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under its written charter, the audit committee&#146;s purpose is
    to oversee the integrity of our financial statements and
    internal controls, our compliance with applicable legal and
    regulatory requirements and the qualifications and independence
    of our independent registered public accounting firm. To further
    this purpose, the audit committee has the sole authority to
    appoint and, when deemed appropriate, replace our independent
    registered public accounting firm, and has established a policy
    of pre-approving all audit and permissible non-audit services
    provided by our independent registered public accounting firm.
    The audit committee has, among other things, the responsibility
    to evaluate the qualifications and independence of our
    independent registered public accounting firm; to review and
    approve the scope and results of the annual audit; to review and
    discuss with management and the independent registered public
    accounting firm the content of our financial statements before
    the filing of our quarterly reports and annual reports; to
    review the content and clarity of our proposed communications
    with investors regarding our operating results and other
    financial matters; to review significant changes in our
    accounting policies; to establish procedures for receiving,
    retaining, and investigating reports of illegal acts involving
    us or complaints or concerns regarding questionable accounting
    or auditing matters, and to supervise the investigation of any
    such reports, complaints or concerns; to establish procedures
    for the confidential, anonymous submission by our employees of
    concerns or complaints regarding questionable accounting or
    auditing matters; and to provide sufficient opportunity for the
    independent auditors to meet with the committee without
    management present.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Corporate
    Governance, Compensation and Nominating Committee</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The corporate governance, compensation and nominating committee
    is comprised of Messrs.&#160;Bosch, Solomon and Warner (Chair),
    each of whom has been determined by our board of directors to
    qualify as independent director as defined by the rules of the
    NYSE Amex, Section&#160;10A(m) of the Securities Exchange Act of
    1934, and SEC rules.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    With respect to compensation, the committee discharges the
    responsibilities of our board of directors relating to
    compensation of our chief executive officer and other officers,
    including reviewing and approving the performance goals and
    objectives of our chief executive officer and other officers,
    evaluating the performance of those persons in light of the
    goals and objectives and ensuring that compensation of our
    executives reasonably relates to achieving the goals and
    objectives. The committee has, among other things, the
    responsibility to administer our stock plans, including granting
    options and awards under the stock plans,
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    59
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    to review with management the compensation disclosures included
    in our annual proxy statement, and to provide a report on
    compensation for our proxy statement.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The purpose and responsibilities of the committee related to
    nominating candidates for director include considering the
    appropriate size, function and needs of our board of directors,
    developing criteria for membership on our board of directors,
    and identifying and recommending candidates to fill positions on
    our board of directors. The responsibilities of the committee
    related to corporate governance include, among other things,
    considering possible conflicts of interest of board members and
    senior executives, monitoring various committees of our board of
    directors, developing and reviewing annually our corporate
    governance principles, and reviewing and approving transactions
    with related persons in excess of $120,000.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Director
    Compensation</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During the 2008 and 2009 fiscal years and until the consummation
    of this offering, no member of our board of directors received
    or will receive any compensation for service as a director. Upon
    the consummation of this offering, our directors who are not our
    employees will be entitled to an annual cash retainer for their
    services as director in the amount of $12,000 as long as they
    attend at least one board of directors meeting each calendar
    quarter.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Family
    Relationships</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    There are no family relationships between any of our directors
    or executive officers.
</DIV>

<A name='112'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">EXECUTIVE
    COMPENSATION</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Summary
    Compensation Table&#160;&#151; 2008 and 2009</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth information concerning all cash
    and non-cash compensation awarded to, earned by or paid to our
    chief executive officer and each of our other two most highly
    compensated executive officers as of the end of the last fiscal
    year. We refer to these persons as our named executive officers
    elsewhere in this prospectus.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="48%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="5%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="5%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Non-Equity<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>All<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Option<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Incentive Plan<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Other<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
    <B>Name and<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Salary<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Awards(1)<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Compensation(2)<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Compensation(3)<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Total<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Principal Position</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Stephen P. Smith
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    2009
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    242,813
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    &#151;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    &#151;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    &#151;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    242,813
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: 0pt; margin-left: 10pt">
    President, Chief Executive Officer
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    2008
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    259,000
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    279,142
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    &#151;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    13,382
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    551,524
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: 0pt; margin-left: 10pt">
    and Chairman of the Board
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Richard L. Juka
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    2009
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    185,625
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    &#151;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    22,567
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    &#151;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    208,192
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: 0pt; margin-left: 10pt">
    Senior Vice President,
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    2008
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    198,000
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    67,185
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    55,264
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    11,430
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    331,879
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: 0pt; margin-left: 10pt">
    Chief Operating Officer,
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: 0pt; margin-left: 10pt">
    Secretary and Treasurer
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Craig M. Berner
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    2009
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    131,240
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    &#151;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    &#151;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    &#151;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    131,240
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: 0pt; margin-left: 10pt">
    Chief Financial Officer
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    2008
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    140,000
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    135,450
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    &#151;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    7,000
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    282,450
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    Reflects the aggregate grant date fair value of option awards
    computed in accordance with FASB ASC Topic 718. For more
    information, see Note&#160;6 to our consolidated financial
    statements for fiscal year 2009.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (2) </TD>
    <TD></TD>
    <TD valign="bottom">
    The amounts in this column consist of, for Mr.&#160;Juka, a
    bonus equal to 5% of our net profits from sales of spa products
    and equipment for the fiscal year.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (3) </TD>
    <TD></TD>
    <TD valign="bottom">
    Consists of company contributions in 2008 to the executive
    officer&#146;s 401(k) plan account.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have entered into employment agreements with both Stephen P.
    Smith, our President, Chief Executive Officer and Chairman, and
    Richard K. Juka, our Senior Vice-President, Chief Operating
    Officer, Secretary and Treasurer. Each of the employment
    agreements has an initial term of three years and automatically
    extends each day for an additional day until we give notice of
    our election to cease these extensions. Mr.&#160;Smith and
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    60
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Mr.&#160;Juka are entitled to annual salaries of $259,000 and
    $198,000, respectively, subject in each case to increase (but
    not decrease) by determination of the board&#146;s compensation
    committee, and may be awarded a bonus of up to 50% of their
    salaries for the company&#146;s achievement of certain
    milestones to be established annually by the compensation
    committee. In addition, Mr.&#160;Juka is entitled to receive a
    monthly bonus of 5% of the net profit of the company&#146;s
    equipment department. Mr.&#160;Smith&#146;s employment agreement
    permits him to continue to operate the one Planet Beach location
    he currently owns and any other businesses he may establish
    during the term of the employment agreement by agreement with us
    without any obligation to pay us any royalty or franchise fee.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each of the employment agreements may be terminated by us or the
    employee at any time. If we terminate either Mr.&#160;Smith or
    Mr.&#160;Juka without &#147;cause&#148; (as defined in the
    employment agreements), or Mr.&#160;Smith or Mr.&#160;Juka
    terminates his employment agreement for &#147;good reason&#148;
    (as defined in the employment agreements), he would be entitled
    to receive payment equal to three years&#146; annual salary at
    its then current level, payments of any bonuses that would have
    been earned for the three years following termination, vesting
    of all unvested benefits in all equity incentive and retirement
    plans that they were participating in at the time of
    termination, and insurance benefits for the three years
    following termination. In any event, following termination,
    Mr.&#160;Smith and Mr.&#160;Juka are prohibited from competing
    with us or soliciting our employees, franchisees and customers,
    for a period of two years after the termination of employment,
    except that Mr.&#160;Smith and Mr.&#160;Juka are permitted to
    continue to operate the one Planet Beach location they each own,
    respectively, and any other businesses they may establish during
    the term of the employment agreement by agreement with us.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, we have entered into an Asset Purchase Agreement
    with Mr.&#160;Smith and Planet Beach Brands, L.L.C., a limited
    liability company owned solely by Mr.&#160;Smith, pursuant to
    which Planet Beach Brands assigned to us all of the trade names
    and trademarks owned by it under which we conduct our business
    and in exchange for which we have committed to pay it $375,000
    and monthly, in perpetuity, 0.5% of the amount collected by us
    as the royalty fees paid by our franchisees as a percentage of
    their gross sales for each month in which aggregate collections
    exceed $400,000. However, if we terminate Mr.&#160;Smith&#146;s
    employment without &#147;cause&#148; (as defined in his
    employment agreement), he terminates his employment with
    &#147;good reason&#148; (as defined in his employment
    agreement), or there is a change in control of our company, the
    monthly payments we owe Planet Beach Brands will increase to 10%
    of the amount we collect as royalty fees paid by our franchisees
    as a percentage of their gross sales, without regard to the
    gross amount of such collections in the month. Total amounts
    payable to Planet Beach Brands or Mr.&#160;Smith under this
    agreement may not exceed $10,000,000. The agreement will become
    effective upon consummation of this offering.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Currently, compensation for the named executive officers is
    based on what we believe to be the prevailing marketing
    conditions in the United States southern region for a company of
    our size.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In fiscal 2008 and 2009, we had an unwritten understanding with
    Messrs.&#160;Smith and Juka that they would earn a bonus of 5%
    and 3%, respectively, of our net income after taxes in
    profitable years. We have not paid a bonus under this
    arrangement because we incurred net losses in those years.
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    61
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Outstanding
    Equity Awards at Fiscal Year End&#160;&#151; 2009</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="52%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="5%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="6%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="2%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Number of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Number of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Securities<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Securities<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Underlying<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Underlying<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Unexercised<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Unexercised<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Option<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Option<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Grant<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Options<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Options<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Exercise<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Expiration<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Date</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>(#) Exercisable</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>(#) Unexercisable</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Price&#160;($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Date</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Stephen P. Smith
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    9/1/2008
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    54,956
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    151,129
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    3.50
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    9/1/2018
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: 0pt; margin-left: 10pt">
    President, Chief Executive Officer
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: 0pt; margin-left: 10pt">
    and Chairman of the Board
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Richard L. Juka
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    9/1/2008
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    13,227
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    36,374
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    3.50
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    9/1/2018
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: 0pt; margin-left: 10pt">
    Senior Vice President,
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: 0pt; margin-left: 10pt">
    Chief Operating Officer,
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: 0pt; margin-left: 10pt">
    Secretary and Treasurer
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Craig M. Berner
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    8/29/2007
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    6,905
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    7,381
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    3.50
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    8/29/2017
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: 0pt; margin-left: 10pt">
    Chief Financial Officer
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    9/1/2008
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    26,667
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    73,333
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    3.50
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    9/1/2018
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Options granted under our 2005 Stock Option Plan expire ten
    years from the date of grant. Generally, either 20% or 25% of
    the options vest on the first anniversary of the grant.
    Thereafter, the options vest monthly on a pro rata basis until
    the fourth or fifth anniversary of the grant until fully vested.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have a defined contribution employee benefit or 401(k) plan.
    The plan is available to employees who have completed at least
    three months of service and are at least 18&#160;years old.
    Before December&#160;1, 2008, the company matched 25% of each
    dollar contributed up to 4% of the employee&#146;s annual
    salary. The employer contribution vests fully after five years.
    We temporarily suspended matching contributions beginning
    December&#160;1, 2008. Our expense during 2009, 2008 and 2007
    associated with the plan totaled $0, $56,099, and $38,882,
    respectively. We have not determined if and when we will
    reinstate the company match.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We do not believe that there are risks arising from our
    compensation policies and practices that are reasonably likely
    to have a material adverse effect on our business.
</DIV>

<A name='113'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">TRANSACTIONS
    WITH RELATED PERSONS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We describe below certain transactions and series of similar
    transactions that have occurred this year or during our last two
    fiscal years to which we were a party or will be a party,
    including transactions in which:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the amounts involved exceeded or will exceed $120,000;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a director, executive officer, or holder of more than 5% of our
    common stock or any member of his or her immediate family had or
    will have a direct or indirect material interest.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Stephen Smith, our President, Chief Executive Officer, Chairman
    of the Board and majority stockholder, owns a Contempo Spa that
    does not pay royalties to us. This location was the first Planet
    Beach location and opened before Planet Beach Franchising
    Corporation was formed. Under the terms of our first form of
    franchise agreement, which was executed for the first time in
    1996, royalties payable to us were fixed at $250 per month for
    the duration of the agreement. Therefore, the amount of
    royalties that would have been paid by this location to us if it
    were subject to the franchise agreement would have been $3,000
    annually, or approximately $42,000 since 1996.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Richard Juka, our Senior Vice President, Chief Operating
    Officer, Secretary, Treasurer and Director,
    <FONT style="white-space: nowrap">co-owns</FONT> a
    Contempo Spa location that opened on November&#160;2, 2009.
    Mr.&#160;Juka and his partner do not pay the 6% royalty that
    would be required under our current franchise agreement. Rather,
    they pay us a fixed monthly fee of $350. In addition, instead of
    paying the required 2% of gross sales to us per month for brand
    development, they pay 1% of gross sales per month for this
    purpose. For fiscal year 2009, the amount that would have been
    payable to us from this location under our current form of
    franchise agreement would have been $743. The amount actually
    invoiced for fiscal year 2009 under our arrangement with
    Mr.&#160;Juka was $792.
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    62
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have entered into an agreement with Planet Beach Brands,
    L.L.C., that will become effective upon the consummation of this
    offering, under which we will purchase trademarks and other
    intellectual property from Planet Beach Brands. Planet Beach
    Brands is wholly-owned by our Chairman, President, Chief
    Executive Officer and principal stockholder, Stephen Smith. We
    will purchase the intellectual property in exchange for a
    promissory note in the amount of $375,000, which we will repay
    with the net proceeds of this offering. We also agreed to pay
    Planet Beach Brands a monthly royalty equal to 0.5% of the
    royalties we collect from our franchisees (excluding marketing
    and other fees) in any month when those collected royalties
    exceed $400,000. In addition, in the event that we terminate
    Stephen Smith&#146;s employment without cause, if he resigns for
    good reason, or if there is a change in control of our company,
    Planet Beach Brands will be entitled to a royalty of 10% of our
    collected royalties (excluding marketing fees) per month,
    regardless of the amount of our collections. In all events, the
    royalty payments will cease once they have totaled
    $10&#160;million.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We issued a note payable to New Sunshine LLC at 7% interest due
    on April&#160;10, 2012 for our purchase of U-V products. This
    note is secured by 85,714&#160;shares of our common stock owned
    and pledged by Mr.&#160;Smith. During fiscal 2008 and 2009, the
    largest aggregate amount of principal outstanding on the note
    was $750,000, and the amount outstanding at December&#160;31,
    2009 was $515,739. We paid $110,153 in principal and $38,808 in
    interest on the note in fiscal 2008 and $124,108 in principal
    and $41,486 in interest in fiscal 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A substantial amount of our indebtedness has been personally
    guaranteed by certain of our officers and directors, including
    indebtedness that we intend to repay with the proceeds of this
    offering, as described below. See &#147;Use of Proceeds&#148;
    for more information about our intended use of the proceeds of
    the offering.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our indebtedness that has been guaranteed by our officers and
    directors consists of:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    our 6.54%&#160;note to Capital One Bank due March&#160;9, 2027
    for the purchase and improvement of our corporate headquarters.
    This note has been personally guaranteed by Mr.&#160;Smith and
    Mr.&#160;Juka. The largest aggregate amount of principal
    outstanding on the note was $890,737 during fiscal 2008 and
    2009, and the amount outstanding at December&#160;31, 2009 was
    $840,008. We paid $24,630 in principal and $57,511 in interest
    on the note in fiscal 2008 and $26,099 in principal and $55,900
    in interest in fiscal 2009.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    our 5.79%&#160;note to the Small Business Administration due
    June&#160;1, 2027 for the purchase and improvement of our
    corporate headquarters. This note has been personally guaranteed
    by Mr.&#160;Smith and Mr.&#160;Juka. The largest aggregate
    amount of principal outstanding on the note was $623,771 during
    fiscal 2008 and 2009, and the amount outstanding at
    December&#160;31, 2009 was $591,280. We paid $13,052 in
    principal and $35,888 in interest on the note in fiscal 2008 and
    $19,439 in principal and $34,521 in interest in fiscal 2009.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    our 8.25%&#160;note to Whitney National Bank due July&#160;19,
    2012 to fund operations. This note has been personally
    guaranteed by Mr.&#160;Smith and Mr.&#160;Juka. The largest
    aggregate amount of principal outstanding on the note was
    $727,030 during fiscal 2008 and 2009, and the amount outstanding
    at December&#160;31, 2009 was $619,305. We paid $51,545 in
    principal and $58,210 in interest on the note in fiscal 2008 and
    $56,180 in principal and $53,596 in interest in fiscal 2009.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Nancy Price, our Senior Vice President of Sales, Shannon Aleman,
    who is Mr.&#160;Smith&#146;s sister, and certain of our
    employees own Planet Beach franchises. The terms of those
    franchise arrangements are no less favorable to us than those
    that were applicable in our standard franchise agreements that
    were in effect for other franchises at the time those franchises
    were established. The total revenue due to us from each of those
    franchisees in 2009 was less than $120,000.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of December&#160;31, 2009, Ms.&#160;Aleman owed us $35,671 in
    initial franchise fees and other fees. In addition, one of our
    employees, who is also a stockholder, owns two franchise
    locations for which we are currently deferring royalties. At
    December&#160;31, 2009, the amount of deferred royalties from
    these two locations totaled $39,783. Also, another of our
    employees, who is also a stockholder, owed us $73,682 at
    December&#160;31, 2009 in unpaid area representative territory
    fees.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    63
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On November&#160;18, 2009, Mr.&#160;Smith loaned us $50,000 for
    the payment of expenses related to this offering. The note is to
    be repaid with 5% interest (for a total repayment amount of
    $52,500) upon completion of the offering.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<A name='114'>
<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SECURITY
    OWNERSHIP OF CERTAIN<BR>
    BENEFICIAL OWNERS AND MANAGEMENT</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth information with respect to the
    beneficial ownership of our common stock as of March&#160;18,
    2010 for: (i)&#160;each person known by us to beneficially own
    more than 5% of our voting securities, (ii)&#160;each named
    executive officer, (iii)&#160;each of our directors, and
    (iv)&#160;all of our named executive officers and directors as a
    group. The information in the table reflects the 1 for 3.5
    reverse stock split we effected on March&#160;18, 2010 and
    assumes no exercise of the warrants included in the units we are
    offering or the representative&#146;s warrants.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Beneficial ownership is determined in accordance with
    <FONT style="white-space: nowrap">Rule&#160;13d-3</FONT>
    promulgated under the Securities Exchange Act of 1934, as
    amended. Except as otherwise indicated, each person or entity
    named in the table has sole voting and investment power with
    respect to all shares of our capital stock shown as beneficially
    owned, subject to applicable community property laws.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have assumed no exercise of outstanding options (other than,
    in the case of each individual or entity listed in the table
    below, stock options held by that individual or entity that will
    be exercisable for our common stock on or before May&#160;31,
    2010).
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The number of shares of common stock outstanding before this
    offering is 3,713,925.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The percentage of common stock beneficially owned after this
    offering is based
    on&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock to be outstanding after this offering, which
    includes&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock being offered for sale as part of the units
    being offered in this offering but assumes no exercise of the
    warrants issued in connection with this offering or the
    underwriters&#146; over-allotment option.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="64%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="7%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Percent of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Percent of<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Common<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Common<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
    <B>Name and Address<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Shares Beneficially<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Stock Before<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Stock After<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>of Beneficial Owner(1)</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Owned(2)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>the Offering</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>the Offering</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Stephen P. Smith
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    2,545,363
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    65
</TD>
<TD nowrap align="left" valign="top">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: 0pt; margin-left: 10pt">
    President, Chief Executive Officer and Chairman of the Board
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Richard L. Juka
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    612,571
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    16
</TD>
<TD nowrap align="left" valign="top">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: 0pt; margin-left: 10pt">
    Senior Vice President, Chief Operating Officer,
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: 0pt; margin-left: 10pt">
    Secretary, Treasurer and Director
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Craig M. Berner
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    43,095
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    1
</TD>
<TD nowrap align="left" valign="top">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: 0pt; margin-left: 10pt">
    Chief Financial Officer
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Nancy M. Price
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    371,021
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    9
</TD>
<TD nowrap align="left" valign="top">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: 0pt; margin-left: 10pt">
    Senior Vice President of Sales
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Eric E. Bosch
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    0
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    0
</TD>
<TD nowrap align="left" valign="top">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    0
</TD>
<TD nowrap align="left" valign="top">
    %
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: 0pt; margin-left: 10pt">
    Director
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Gary N. Solomon
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    0
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    0
</TD>
<TD nowrap align="left" valign="top">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    0
</TD>
<TD nowrap align="left" valign="top">
    %
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: 0pt; margin-left: 10pt">
    Director
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Ronald Warner
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    0
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    0
</TD>
<TD nowrap align="left" valign="top">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    0
</TD>
<TD nowrap align="left" valign="top">
    %
</TD>
</TR>
<TR valign="bottom" style="color: #000000; background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: 0pt; margin-left: 10pt">
    Director
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    All named executive officers and directors as a group
    (6&#160;persons)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    3,572,050
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    96
</TD>
<TD nowrap align="left" valign="top">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    The address of all persons listed is 5145 Taravella Road,
    Marrero, LA 70072.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (2) </TD>
    <TD></TD>
    <TD valign="bottom">
    Includes 72,130, 17,360, 43,095 and 10,510&#160;shares
    underlying exercisable options and options that will become
    exercisable on or before May&#160;31, 2010 for Mr.&#160;Smith,
    Mr.&#160;Juka, Mr.&#160;Berner and Ms.&#160;Price, respectively.</TD>
</TR>

</TABLE>
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    <BR>
    64
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<A name='115'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">DESCRIPTION
    OF SECURITIES</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Capital
    Stock</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are authorized to issue up to 100,000,000&#160;shares of
    common stock, par value $0.0001 per share and
    10,000,000&#160;shares of preferred stock, par value $0.0001 per
    share. As of March&#160;18, 2010, we had a total of 3,836,611
    shares of common stock issued and 3,713,925&#160;shares
    outstanding. We have no shares of preferred stock outstanding.
    We also have options outstanding to purchase 552,571&#160;shares
    of our common stock. The number of options outstanding excludes
    shares subject to an option held by one of our vendors to
    convert balances due under our note payable within
    12&#160;months of this offering at a conversion price equal to
    the initial public offering price.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    After this offering, we will
    have&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock outstanding,
    or&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    outstanding if the underwriters exercise their over-allotment
    option in full. This assumes no warrants are exercised.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Common
    Stock</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each share of our common stock entitles its holder to one vote
    per share on all matters coming before the stockholders.
    Stockholders do not have preemptive rights to purchase shares in
    any future issuance of our common stock and the common stock is
    not convertible into any other security. Upon our liquidation,
    dissolution or winding up, and after payment of creditors and
    preferred stockholders, if any, our assets will be divided
    pro-rata on a share-for-share basis among the holders of the
    shares of common stock.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The holders of shares of our common stock are entitled to
    dividends out of funds legally available when and as declared by
    our board of directors.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    All of the issued and outstanding shares of our common stock are
    duly authorized, validly issued, fully paid and non-assessable.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Preferred
    Stock</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are authorized to issue up to 10,000,000&#160;shares of
    preferred stock in one or more classes or series within a class
    as may be determined by our board of directors, who may
    establish, from time to time, the number of shares to be
    included in each class or series, may fix the designation,
    powers, preferences and rights of the shares of each such class
    or series and any qualifications, limitations or restrictions of
    the class or series. Any preferred stock so issued by the board
    of directors may rank senior to the common stock with respect to
    the payment of dividends or amounts upon liquidation,
    dissolution or winding up of us, or both. Moreover, under
    certain circumstances, the issuance of preferred stock or the
    existence of the unissued preferred stock might tend to
    discourage or render more difficult a merger or other change of
    control or could hurt the market price of our securities.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Units</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The units we are offering in this prospectus consist of one
    share of our common stock and one redeemable common stock
    purchase warrant. We have applied to list the units for trading
    on the NYSE Amex under the symbol &#147;PBFCU&#148; on or
    promptly after the date of this prospectus. Each of the shares
    and the warrants may be traded separately 35&#160;days after the
    date of this prospectus. Once the shares and warrants begin
    separate trading, we anticipate the shares will be listed on the
    NYSE Amex under the symbol &#147;PBFC&#148; and the warrants
    will be listed on the NYSE Amex under the symbol
    &#147;PBFCW,&#148; but we cannot assure you that our securities
    will be so listed or, if listed, will continue to be listed.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Warrants</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The warrants included in the units we are offering entitle the
    holder to purchase one share of common stock at a price of
    $&#160;&#160;&#160;&#160;&#160; per share, subject to adjustment
    as discussed below, at any time after 9:30:01 a.m., New York
    time,
    on&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2010. The warrants will expire at 5:00 p.m., New York time,
    on&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
</DIV>
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    <BR>
    65
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    2013, or earlier upon redemption. After completion of this
    offering, warrants for&#160;&#160;&#160;&#160;&#160;&#160;shares
    of our common stock will be outstanding.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We may redeem the outstanding warrants at a price of
    $&#160;&#160;&#160;&#160;&#160; per warrant at any time upon a
    minimum 15&#160;days&#146; prior written notice of redemption
    and if, and only if, the closing price of our common stock
    equals or exceeds $&#160;&#160;&#160;&#160;&#160; per share for
    a period of ten consecutive trading days.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If the foregoing conditions are satisfied and we call the
    warrants for redemption, each warrant holder shall then be
    entitled to exercise his or her warrant before the date which is
    two business days before the date scheduled for redemption. We
    do not need the consent of our underwriters in order to redeem
    the outstanding warrants.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The warrants will be issued in registered form under a warrant
    agreement
    between&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    as warrant agent, and us. You should review a copy of the
    warrant agreement, which has been filed as an exhibit to the
    registration statement of which this prospectus is a part, for a
    complete description of the terms and conditions applicable to
    the warrants.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The exercise price and number of shares of common stock issuable
    on exercise of the warrants may be adjusted in certain
    circumstances including in the event of a stock split or stock
    dividend, or our recapitalization, reorganization, merger or
    consolidation.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The warrants may be exercised upon surrender of the warrant
    certificate on or before its expiration date at the offices of
    the warrant agent, with the exercise form on the reverse side of
    the warrant certificate completed and executed as indicated,
    accompanied by full payment of the exercise price, by certified
    or bank cashier&#146;s check payable
    to&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    for the number of warrants being exercised. Warrant holders will
    not have any voting rights or any other of the rights or
    privileges of holders of common stock until they exercise their
    warrants and receive shares of common stock. After the issuance
    of shares of common stock upon exercise of the warrants, each
    holder will be entitled to one vote for each share held on
    record on all matters to be voted on by stockholders.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    No warrants will be exercisable and we will not be obligated to
    issue shares of common stock unless at the time a holder seeks
    to exercise such warrant, a prospectus relating to the common
    stock issuable upon exercise of the warrants is current and the
    common stock has been registered or qualified or deemed to be
    exempt under the securities laws of the state of residence of
    the holder of the warrants. In addition, holders of the warrants
    are not entitled to net cash settlement and the warrants may
    only be settled by delivery of shares of our common stock and
    not cash. Under the terms of the warrant agreement, we have
    agreed to use commercially reasonable efforts to meet these
    conditions and to maintain a current prospectus relating to the
    common stock issuable upon exercise of the warrants until the
    expiration of the warrants. However, we cannot assure you that
    we will be able to do so and, if we do not maintain a current
    prospectus relating to the common stock issuable upon exercise
    of the warrants, holders will be unable to exercise their
    warrants and we will not be required to settle any such warrant
    exercise. If the prospectus relating to the common stock
    issuable upon the exercise of the warrants is not current or if
    the common stock is not qualified or exempt from qualification
    in the jurisdictions in which the holders of the warrants
    reside, the warrants may have no value, the market for the
    warrants may be limited and the warrants may expire worthless.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We will not issue fractional shares upon exercise of the
    warrants. If, upon exercise of the warrants, a holder would be
    entitled to receive a fractional interest in a share, we will,
    upon exercise, round up or down to the nearest whole number to
    determine the number of shares of common stock to be issued to
    the warrant holder.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Certain
    Charter, Bylaw and Statutory Provisions</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Certain provisions of our certificate of incorporation and
    bylaws and Delaware law are described below.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Classified board of directors.</I>&#160;&#160;Our certificate
    of incorporation divides the members of our board of directors
    into three classes, which are designated Class&#160;A,
    Class&#160;B and Class&#160;C. The initial Class&#160;A
    directors are Messrs.&#160;Bosch and Juka, who serve for a term
    expiring at our annual meeting of stockholders in 2011. The
</DIV>
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    <BR>
    66
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    initial Class&#160;B Director is Mr.&#160;Solomon, who serves
    for a term expiring at our annual meeting of stockholders in
    2012. The initial Class&#160;C Directors are Messrs.&#160;Smith
    and Warner, who serve for a term expiring at our annual meeting
    of stockholders in 2013. Thereafter, the members of each class
    serve for a three year term. The terms are staggered, which
    means that each year the term of only one of the classes
    expires. Staggering directors&#146; terms makes it more
    difficult for a potential acquiror to seize control of a target
    company through a proxy contest, even if the acquiror controls a
    majority of the company&#146;s stock, because only one-third or
    fewer of the directors stand for election in any year and
    directors may only be removed for cause.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Stockholder Meetings.</I>&#160;&#160;Our certificate of
    incorporation provides that only the chairman of our board or a
    majority of our directors may call a special meeting of
    stockholders. Stockholders must give advance notice of
    nominations for the election of directors and of business to be
    brought by stockholders before a stockholders&#146; meeting in
    the manner provided in our bylaws. Our charter also provides
    that stockholders may not take any action by written consent.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Limitation of liability of directors and
    officers.</I>&#160;&#160;Our certificate of incorporation
    provides that our directors will not be liable to the
    corporation or its stockholders for monetary damages for breach
    of fiduciary duty to the fullest extent allowed by the General
    Corporation Law of the State of Delaware as it now exists or it
    may be amended in the future. The General Corporation Law of the
    State of Delaware provides that a corporation may provide that a
    director will not be liable to the corporation or its
    stockholders for monetary damages arising from a breach of their
    fiduciary duties, except for:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    breaches of a director&#146;s or officer&#146;s duty of loyalty
    to us or our stockholders;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    acts or omissions not in good faith or involving intentional
    misconduct or knowing violations of law;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    liability for unlawful payments or dividends or unlawful stock
    purchases or redemptions, to the extent provided in the General
    Corporation of Law of the State of Delaware;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a transaction from which a director or officer obtained an
    improper personal benefit.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Indemnification of directors.</I>&#160;&#160;Our certificate
    of incorporation provides that we must indemnify, advance
    expenses to and hold harmless our directors to the fullest
    extent permitted by the General Corporation Law of the State of
    Delaware as it now exists or may be amended in the future. Under
    current Delaware law, a corporation may indemnify directors made
    or threatened to be made a party to any threatened, pending or
    completed civil, criminal, administrative or investigative
    action, suit or proceeding because of that person&#146;s service
    as a director of the corporation or because that person was
    serving at the corporation&#146;s request as a director of
    another corporation or enterprise. The corporation may indemnify
    such a person for expenses (including attorneys&#146; fees),
    judgments, fines and amounts paid in settlement that are
    actually and reasonably incurred by the person in connection
    with the action, suit or proceeding, provided that the person
    acted in good faith and in a manner the person reasonably
    believed to be in or not opposed to the best interests of the
    corporation, and with respect to a criminal action or
    proceeding, if the person had no reasonable cause to believe his
    or her conduct was unlawful.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In each instance of indemnification, the corporation may only
    indemnify the person following a determination that the person
    met the applicable standard of conduct by:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a majority vote of the directors who are not parties to the
    action, suit or proceeding;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a committee of the board of directors designated by a majority
    vote of those disinterested directors;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    by independent legal counsel if there are no disinterested
    directors or the disinterested directors so direct;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the stockholders.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A corporation may pay expenses (including attorneys&#146; fees)
    incurred by the director in defending an action, suit or
    proceeding in advance of the final disposition of the action,
    suit or proceeding upon receipt of an undertaking by the
    director to repay the corporation the amount paid in advance if
    it is ultimately determined that the person is not entitled to
    be indemnified. The corporation shall be required to indemnify,
    or
</DIV>
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    <BR>
    67
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    advance expenses to, our directors in connection with a
    proceeding commenced by our directors only if the board of
    directors authorized the commencement of the proceeding.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Removal of Directors.</I>&#160;&#160;Our directors may be
    removed only for cause and only by a vote of the holders of a
    majority of the total voting power of the shares entitled to
    vote at an election of directors.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Board Vacancies.</I>&#160;&#160;Only the board of directors
    may fill vacancies on the board.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Delaware Law.</I>&#160;&#160;Section&#160;203 of the Delaware
    General Corporation Law will prevent us from engaging in any
    &#147;business combination&#148; with any &#147;interested
    stockholder&#148; for a period of three years following the date
    that the stockholder became an interested stockholder, unless
    one of a number of statutory exceptions or exemptions applied.
    Section&#160;203 defines an &#147;interested stockholder&#148;
    as an entity or person beneficially owning 15% or more of the
    outstanding voting stock of the corporation and any entity or
    person affiliated with or controlling or controlled by such an
    entity or person. The &#147;business combinations&#148; that
    Section&#160;203 prohibits with an interested stockholder are
    the following transactions:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    any merger or consolidation involving us and an interested
    stockholder;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    subject to certain exceptions, any transaction that results in
    our issuance or transfer of any stock of our stock to an
    interested stockholder;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    any transaction involving us that has the effect of increasing
    the proportionate share of the stock of any class or series of
    the corporation beneficially owned by an interested stockholder.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Although Section&#160;203 would not prevent the interested
    stockholder from transferring his shares, the limitations on
    business combinations contained in Section&#160;203 would,
    absent board approval of the transfer, apply to any purchaser
    and could thus potentially limit the ability of the interested
    stockholder to sell his shares freely.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Certain
    Anti-Takeover Effects</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The classification of our board of directors and the lack of
    cumulative voting will make it more difficult for our existing
    stockholders to replace our board of directors as well as for
    another party to obtain control of us by replacing our board of
    directors. Since our board of directors has the power to retain
    and discharge our officers, these provisions could also make it
    more difficult for existing stockholders or another party to
    change our management. In addition, the authorization of
    undesignated preferred stock makes it possible for our board of
    directors to issue preferred stock with voting or other rights
    or preferences that could impede the success of any attempt to
    change our control.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    These provisions may have the effect of deterring hostile
    takeovers or delaying changes in our control or management.
    These provisions are intended to enhance the likelihood of
    continued stability in the composition of our board of directors
    and in the policies they implement, and to discourage certain
    types of transactions that may involve an actual or threatened
    change of our control. These provisions are designed to reduce
    our vulnerability to an unsolicited acquisition proposal. The
    provisions also are intended to discourage certain tactics that
    may be used in proxy fights. However, these provisions could
    have the effect of discouraging others from making tender offers
    for our shares and, as a consequence, they also may inhibit
    fluctuations in the market price of our shares that could result
    from actual or rumored takeover attempts. These provisions may
    also have the effect of preventing changes in our management.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Furthermore, following this offering, our board of directors may
    implement certain additional measures that would discourage a
    takeover of our company. These could include one or a
    combination of the following, among others:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    adoption of a stockholder rights plan, commonly called a poison
    pill.
</TD>
</TR>

</TABLE>
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    <BR>
    68
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    amending our bylaws, or proposing that our stockholders to amend
    our certificate of incorporation or bylaws or adopt amendments
    to our certificate of incorporation, with respect to the
    following:
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="2%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    increasing the vote required by our stockholders to amend our
    certificate of incorporation or bylaws or to remove
    directors,&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    increasing the vote required by our stockholders to consummate a
    business combination if our board of directors does not
    recommend&#160;it.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of directors can amend our by-laws without approval of
    our stockholders. It can amend our certificate of incorporation
    to create the type of preferred stock that is used for a poison
    pill. It can also amend the terms of any preferred stock without
    the approval of holders of the common stock. Other amendments to
    our certificate of incorporation cannot be adopted unless our
    stockholders approve them. Our board of directors will not adopt
    or propose any amendment to our certificate of incorporation or
    our by-laws of the type described above unless it determines
    that the amendment is in the best interests of our stockholders.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    These anti-takeover provisions may further permit our board of
    directors to choose not to entertain offers to purchase us, even
    offers that are at a substantial premium to the market price of
    our stock. Our stockholders may therefore be deprived of
    opportunities to profit from a sale of control.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    After this offering, members of our senior management may enter
    into an agreement providing that they will vote their shares in
    accordance with the majority in interest of the total shares
    held by the parties to the agreement. The agreement may have
    other terms, such as a right of first refusal in the other
    parties to the agreement if any party desires to sell his or her
    shares of the company. The effect of this agreement may be to
    concentrate a certain measure of control of our company in a
    small group of executives.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Transfer
    Agent and Registrar</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our independent stock transfer agent and registrar for our
    common stock and warrants is
    <B>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</B>.
</DIV>

<A name='116'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SHARES
    ELIGIBLE FOR FUTURE SALE</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Before this offering, there has not been a public market for our
    common stock. As described below, only a limited number of
    shares outstanding before this offering will be available for
    sale immediately after the offering due to contractual and legal
    restrictions on resale. Nevertheless, future sales of
    substantial amounts of our common stock, including shares issued
    upon exercise of outstanding options, in the public market after
    the restrictions lapse, or the possibility of such sales, could
    cause the prevailing market price of our common stock to fall or
    impair our ability to raise equity capital in the future.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon completion of this offering, we will have
    outstanding&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of our common stock, assuming the underwriters exercise their
    over-allotment option in full. This also assumes that there are
    no exercises of outstanding options, warrants or other rights to
    acquire our stock. If all of the warrants are exercised
    (excluding the representative&#146;s warrants described below),
    we will
    have&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of common stock outstanding. All of the units sold in this
    offering, and eventually the underlying shares and warrants, as
    well as shares issued upon exercise of the warrants, will be
    freely tradable in the public market without restriction or
    further registration under the Securities Act, unless these
    securities are held by our affiliates, as that term is defined
    in Rule&#160;144 under the Securities Act. Securities held or
    purchased by our affiliates may not be resold except pursuant to
    an effective registration statement or an exemption from
    registration, including the safe harbor under Rule&#160;144 of
    the Securities Act described below.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    After this offering, all of the shares of our common stock held
    by our existing stockholders will be &#147;restricted
    securities,&#148; as that term is defined in Rule&#160;144 under
    the Securities Act. Restricted securities may be sold in the
    public market only pursuant to an effective registration
    statement or an exemption from registration under Rule&#160;144
    or 701 under the Securities Act. These rules are summarized
    below. Subject to the
</DIV>
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    <BR>
    69
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements described below and the provisions of Rule&#160;144
    and Rule&#160;701, these restricted securities will be available
    for sale in the public market as follows:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="16%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="82%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Number of Shares</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Date of Availability for Sale</B>
</DIV>
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD nowrap align="center" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Immediately upon completion of this offering
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="center" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
     90&#160;days after the date of this prospectus and various
    times thereafter
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="center" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    One year after the date of this prospectus and various times
    thereafter
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times"><FONT style="white-space: nowrap">Lock-Up</FONT>
    Agreements</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In connection with this offering, our officers, directors, and
    greater than one percent stock and option holders, who together
    hold an aggregate of 3,428,955 shares of our common stock and
    options to purchase an additional 444,282 shares, have agreed,
    subject to limited exceptions, not to sell directly or
    indirectly or dispose of any shares of common stock or any
    securities convertible into or exchangeable or exercisable for
    shares of common stock for a period of one year after the date
    of this prospectus, and in specific circumstances, up to an
    additional 34&#160;days, without the prior written consent of C
    K. Cooper&#160;&#038; Company, Inc. For additional information,
    see &#147;Underwriting.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Rule&#160;144</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In general, under Rule&#160;144, beginning ninety days after the
    date of this prospectus, a person who is not our affiliate and
    has not been our affiliate at any time during the preceding
    three months will be entitled to sell any shares of our common
    stock that such person has held for at least six months,
    including the holding period of any prior owner other than one
    of our affiliates, without regard to volume limitations. Sales
    of our common stock by any such person would be subject to the
    availability of current public information about us if the
    shares to be sold were held by such person for less than one
    year.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, under Rule&#160;144, a person may sell immediately
    upon the completion of this offering, shares of our common stock
    acquired from us without regard to volume limitations or the
    availability of public information about us, if:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the person is not our affiliate and has not been our affiliate
    at any time during the preceding three months;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the person has beneficially owned the shares to be sold for at
    least one year, including the holding period of any prior owner
    other than one of our affiliates.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Subject to any applicable lock-up agreements, beginning ninety
    days after the date of this prospectus, our affiliates who have
    beneficially owned shares of our common stock for at least six
    months, including the holding period of any prior owner other
    than another of our affiliates, would be entitled to sell within
    any three-month period those shares and any other shares they
    have acquired that are not restricted securities, provided that
    the aggregate number of shares sold does not exceed the greater
    of:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    1% of the number of shares of our common stock then outstanding,
    which will equal
    approximately&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    immediately after this offering, assuming no exercise of the
    underwriters&#146; over-allotment option and no exercise of the
    warrants being issued in connection with this offering;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the average weekly trading volume in our common stock on the
    NYSE Amex during the four calendar weeks preceding the date of
    filing of a Notice of Proposed Sale of Securities Pursuant to
    Rule&#160;144 with respect to the sale.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Sales under Rule&#160;144 by our affiliates are also subject to
    provisions restricting how the shares can be sold, notice
    requirements and to the availability of current public
    information about us.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Representative&#146;s
    Warrants</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In connection with this offering, we have agreed to issue to the
    representative of the underwriters warrants to purchase a total
    of&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;shares
    of our common stock at a price per share equal to 120% of the
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    70
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    initial offering price of the units. The representative&#146;s
    warrants will be exercisable at any time beginning six months
    after the date of this prospectus until the fifth anniversary of
    the date of this prospectus. However, neither the
    representative&#146;s warrants nor the underlying shares may be
    sold, transferred, assigned, pledged or hypothecated, or be the
    subject of any hedging, short sale, derivative, put or call
    transaction that would result in the effective economic
    disposition of the securities by any person for a period of six
    months immediately following the date of effectiveness or
    commencement of sales of this offering, except to any member
    participating in the offering and the officers or partners
    thereof, and only if all securities so transferred remain
    subject to the six month
    <FONT style="white-space: nowrap">lock-up</FONT>
    restriction for the remainder of the
    <FONT style="white-space: nowrap">lock-up</FONT>
    period. The common stock issued to the representative upon
    exercise of these representative&#146;s warrants will be freely
    tradable.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Rule&#160;701</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any employee, officer or director of our company, or consultant
    to our company who purchased shares under a written compensatory
    plan or contract may be entitled to sell them in reliance on
    Rule&#160;701. Rule&#160;701 permits affiliates to sell their
    Rule&#160;701&#160;shares under Rule&#160;144 without complying
    with the holding period requirements of Rule&#160;144.
    Rule&#160;701 further provides that non-affiliates may sell
    these shares in reliance on Rule&#160;144 without complying with
    the holding period, public information, volume limitation or
    notice provisions of Rule&#160;144. All holders of
    Rule&#160;701&#160;shares are required to wait until ninety days
    after the date of this prospectus before selling those shares.
    However, 444,282&#160;shares issuable upon the exercise of
    options issued under Rule&#160;701 are subject to
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements described above and will only become eligible for
    sale when the one year
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements expire.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Registration
    of Shares Issuable Stock Option Plan</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to file a Form
    <FONT style="white-space: nowrap">S-8</FONT>
    registration statement under the Securities Act after the
    completion of this offering to register all 552,571&#160;shares
    of common stock issuable under our 2005 Stock Option Plan. The
    registration statement will become effective immediately upon
    filing, and shares covered by the registration statement will
    thereupon be eligible for sale in the public market, subject to
    any <FONT style="white-space: nowrap">lock-up</FONT>
    agreements and Rule&#160;144 limitations applicable to
    affiliates.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    71
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='117'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">UNDERWRITING</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Subject to the terms and conditions described in an underwriting
    agreement between us and C. K. Cooper&#160;&#038; Company, Inc.,
    as representative and book-running manager, we have agreed to
    sell to the underwriters, and the underwriters have severally
    agreed to purchase from us, the following number of units at the
    offering price less the underwriting discount set forth on the
    cover page of this prospectus.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF"><!-- TABLE 01 -->
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="50%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="48%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Underwriter</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Number of Units</B>
</DIV>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    C. K. Cooper&#160;&#038; Company, Inc.
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The underwriters have agreed to purchase all of the units sold
    under the underwriting agreement if any of the units are
    purchased, other than units covered by the over-allotment option
    described below. The underwriting agreement provides that the
    underwriters&#146; obligation to purchase units depends on the
    satisfaction of the conditions contained in the underwriting
    agreement including:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the obligation to purchase all of the units offered hereby
    (other than those units covered by their option to purchase
    additional units as described below), if any of the units are
    purchased;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the representations and warranties made by us to the
    underwriters are true;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    there is no material change in our business or the financial
    markets; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    we deliver customary closing documents to the underwriters.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have granted the underwriters an option exercisable for
    30&#160;days from the date of the underwriting agreement to
    purchase a total of up
    to&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    additional units at the public offering price less the
    underwriting discount. The underwriters may exercise this option
    solely to cover any over-allotments, if any, made in connection
    with this offering. To the extent the underwriters exercise this
    option in whole or in part, each will be obligated, subject to
    conditions contained in the underwriting agreement, to purchase
    a number of additional units approximately proportionate to that
    underwriter&#146;s initial commitment amount reflected in the
    above table.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The underwriters have advised us that they propose initially to
    offer the units to the public at the public offering price on
    the cover page of this prospectus and to dealers at that price
    less a concession not in excess of
    $&#160;&#160;&#160;&#160;&#160; per unit. After the offering,
    the offering price and other selling terms may be changed.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table shows the per unit and total underwriting
    discounts and commissions to be paid to the underwriters by us.
    The information assumes either no exercise or full exercise by
    the underwriters of their over-allotment option.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF"><!-- TABLE 01 -->
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="72%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="11%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Without Option</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>With Option</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Per Unit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    $
</TD>
<TD nowrap align="right" valign="top">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    $
</TD>
<TD nowrap align="right" valign="top">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    $
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    $
</TD>
<TD nowrap align="right" valign="top">

</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The expenses of this offering that are payable by us, excluding
    the underwriting discount and commissions and related fees, are
    estimated to be approximately $&#160;&#160;&#160;&#160;&#160;.
    We have agreed to reimburse the underwriters for their out of
    pocket expenses in connection with this offering, including
    their attorneys&#146; fees. In addition, in October 2009, we
    paid C.K.&#160;Cooper &#038; Company, Inc. an aggregate of
    $25,000 for advisory services rendered to us in preparation for
    this offering.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In connection with this offering, we have agreed to issue to
    C.K. Cooper&#160;&#038; Company, Inc. warrants entitling it or
    its assigns, to purchase up to an aggregate of 10% of the total
    number of shares sold in this offering at a price equal to 120%
    of the public offering price per share. These warrants will be
    exercisable beginning six months after the date of this
    prospectus until the fifth anniversary of that date and will
    contain customary exercise provisions, representations and
    anti-dilution provisions. The warrants may be exercised for cash
    or on a cashless exercise basis. For the complete terms of the
    representative&#146;s warrants, you should refer to the form of
    representative warrant filed as an exhibit to the registration
    statement of which this prospectus is a part.
</DIV>
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    <BR>
    72
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The warrants to be issued to C.K. Cooper&#160;&#038; Company are
    deemed compensation by the Financial Industry Regulatory
    Authority, Inc., or FINRA, and may not be sold, transferred,
    pledged, hypothecated or assigned or be the subject of any
    hedging, short sale, derivative, put or call transaction that
    would result in the effective economic disposition of the
    securities by any person for a period of
    <FONT style="white-space: nowrap">180-days</FONT>
    following the effective date of the offering pursuant to
    Rule&#160;2710(g)(1) of the NASD Conduct Rules.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, the underwriting agreement also grants C. K.
    Cooper&#160;&#038; Company a right of first refusal to act as
    lead underwriter for any equity or debt offerings we contemplate
    during the period of 36&#160;months from the closing of this
    offering.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have engaged C. K. Cooper&#160;&#038; Company, on a
    non-exclusive basis, as our agent for the solicitation of the
    exercise of the warrants. To the extent not inconsistent with
    the guidelines of FINRA and the rules and regulations of the
    SEC, we have agreed to pay C. K. Cooper&#160;&#038; Company for
    bona fide services rendered a commission equal to 5% of the
    exercise price for each warrant exercised more than one year
    after the date of this prospectus if the exercise was solicited
    by C. K. Cooper&#160;&#038; Company. No compensation will be
    paid to C. K. Cooper&#160;&#038; Company upon the exercise of
    the warrants if:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the market price of the underlying shares of common stock is
    lower than the exercise price;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the holder of the warrants has not confirmed in writing that C.
    K. Cooper&#160;&#038; Company solicited his, her or its exercise;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the warrants are held in a discretionary account, unless prior
    specific written approval for the exercise is received from the
    holder;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the warrants are exercised in an unsolicited transaction;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the arrangement to pay the commission is not disclosed in the
    prospectus provided to warrant holders at the time of exercise.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have agreed to indemnify the underwriters against certain
    liabilities, including liabilities under the Securities Act, or
    to contribute to payments the underwriters may be required to
    make in respect of those liabilities.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We, all of our directors and executive officers and
    substantially all of the holders of our outstanding stock have
    agreed that, without the prior written consent of C. K.
    Cooper&#160;&#038; Company, we will not directly or indirectly,
    (1)&#160;offer for sale, sell, pledge, or otherwise dispose of
    (or enter into any transaction or device that is designed to, or
    could be expected to, result in the disposition by any person at
    any time in the future of) any shares of common stock
    (including, without limitation, shares of common stock that may
    be deemed to be beneficially owned by us or them in accordance
    with the rules and regulations of the SEC and shares of common
    stock that may be issued upon exercise of any options or
    warrants) or securities convertible into or exercisable or
    exchangeable for common stock, (2)&#160;enter into any swap or
    other derivatives transaction that transfers to another, in
    whole or in part, any of the economic consequences of ownership
    of the common stock, (3)&#160;make any demand for or exercise
    any right or file or cause to be filed a registration statement,
    including any amendments thereto, with respect to the
    registration of any shares of common stock or securities
    convertible, exercisable or exchangeable into common stock or
    any of our other securities, or (4)&#160;publicly disclose the
    intention to do any of the foregoing for a period of one year
    after the date of this prospectus.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The one year restricted period described in the preceding
    paragraph will be extended if:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    during the last 17&#160;days of the one year restricted period
    we issue an earnings release or material news or a material
    event relating to us occurs;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    prior to the expiration of the one year restricted period, we
    announce that we will release earnings results during the
    <FONT style="white-space: nowrap">16-day</FONT>
    period beginning on the last day of the one year period, in
    which case the restrictions described in the preceding paragraph
    will continue to apply until the expiration of the
    <FONT style="white-space: nowrap">18-day</FONT>
    period beginning on the issuance of the earnings release or the
    announcement of the material news or occurrence of a material
    event, unless such extension is waived in writing by C. K.
    Cooper&#160;&#038; Company.
</TD>
</TR>

</TABLE>
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    <BR>
    73
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    C.&#160;K. Cooper&#160;&#038; Company, in its sole discretion,
    may release the common stock and other securities subject to the
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements described above in whole or in part at any time with
    or without notice. When determining whether or not to release
    common stock and other securities from
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements, C. K. Cooper&#160;&#038; Company will consider,
    among other factors, the holder&#146;s reasons for requesting
    the release, the number of shares of common stock and other
    securities for which the release is being requested and market
    conditions at the time.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to apply to list the securities we are offering in
    this prospectus on the NYSE Amex as follows:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF"><!-- TABLE 01 -->
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="50%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="48%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    Security
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    Symbol
</DIV>
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Units
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    PBFCU
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Common Stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    PBFC
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Warrants
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    PBFCW
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A prospectus in electronic format may be made available on the
    Internet sites or through other online services maintained by
    one or more of the underwriters, or by their affiliates. Other
    than any prospectus made available in electronic format in this
    manner, the information on any web site containing the
    prospectus is not part of this prospectus or the registration
    statement of which this prospectus forms a part, has not been
    approved or endorsed by us or any underwriter in such capacity
    and should not be relied on by prospective investors.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In connection with this offering, some participants in the
    offering may purchase and sell our securities in the open
    market. These transactions may include short sales, syndicate
    covering transactions and stabilizing transactions. Short sales
    involve sales by the underwriters of securities in excess of the
    number of securities required to be purchased by the
    underwriters in the offering, which creates a syndicate short
    position. &#147;Covered&#148; short sales are sales of
    securities made in an amount up to the number of securities
    represented by the underwriters&#146; over-allotment option.
    Transactions to close out the covered syndicate short position
    involve either purchases of securities in the open market after
    the distribution has been completed or the exercise of the
    over-allotment option. In determining the source of securities
    to close out the covered syndicate short position, the
    underwriters will consider, among other things, the price of
    securities available for purchase in the open market as compared
    to the price at which they may purchase securities through the
    over-allotment option. Stabilizing transactions consist of bids
    for or purchases of securities in the open market while the
    offering is in progress.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The underwriters also may impose a penalty bid. Penalty bids
    permit the underwriters to reclaim a selling concession from an
    underwriter or syndicate member when the underwriters repurchase
    shares originally sold by that underwriter or syndicate member
    in order to cover syndicate short positions or make stabilizing
    purchases.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any of these activities may have the effect of raising or
    maintaining the market price of our securities or preventing or
    retarding a decline in the market price of our securities. As a
    result, the price of our securities may be higher than the price
    that might otherwise exist in the open market. The underwriters
    may conduct these transactions on the NYSE Amex or otherwise. If
    the underwriters commence any of these transactions, they may
    discontinue them at any time.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The underwriters may in the future perform investment banking
    and advisory services for us from time to time for which it may
    in the future receive customary fees and expenses.
</DIV>

<A name='118'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">INTERESTS
    OF CERTAIN PERSONS IN THE OFFERING</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If this offering is not successful, we may not have the funds
    necessary to pay the expenses of the offering in the immediate
    future, including fees of our legal counsel, Fishman Haygood
    Phelps Walmsley Willis&#160;&#038; Swanson, L.L.P., and fees of
    our independent registered public accounting firm,
    Postlethwaite&#160;&#038; Netterville, APAC.
</DIV>
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    <BR>
    74
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='119'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">LEGAL
    MATTERS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Fishman Haygood Phelps Walmsley Willis&#160;&#038; Swanson,
    L.L.P., New Orleans, Louisiana and Richards, Layton&#160;&#038;
    Finger, P.A., Wilmington, Delaware, will pass upon certain legal
    matters for us in connection with the offered securities.
    Certain legal matters will be passed upon for C. K.
    Cooper&#160;&#038; Company by K&#038;L Gates LLP, Irvine,
    California.
</DIV>

<A name='120'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">EXPERTS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The consolidated financial statements of Planet Beach
    Franchising Corporation and subsidiaries as of December&#160;31,
    2009 and 2008, and for each of the years in the three-year
    period ended December&#160;31, 2009, have been included herein
    and in the registration statement in reliance upon the reports
    of Postlethwaite&#160;&#038; Netterville, APAC, independent
    registered public accounting firm appearing elsewhere herein and
    in the registration statement, upon the authority of said firm
    as experts in auditing and accounting.
</DIV>

<A name='121'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">WHERE YOU
    CAN FIND MORE INFORMATION</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have filed with the SEC a registration statement on
    <FONT style="white-space: nowrap">Form&#160;S-1</FONT>
    under the Securities Act with respect to the securities we are
    offering in this prospectus. This prospectus does not contain
    all of the information set forth in the registration statement
    or the exhibits and schedules filed with it. You should refer to
    the registration statement and its exhibits and schedules for
    additional information. When we make references in this
    prospectus to any of our agreements or other documents, the
    references are not necessarily complete and you should refer to
    the exhibits filed with the registration statement for copies of
    the actual agreements or other documents.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    You can read and copy the registration statement and the
    exhibits at prescribed rates at the SEC&#146;s Public Reference
    Room at 100&#160;F&#160;Street, N.E., Washington,&#160;D.C.
    20549, on official business days during the hours of
    10&#160;a.m. to 3&#160;p.m.&#160;You may obtain information on
    the operation of the Public Reference Room by calling the SEC at
    <FONT style="white-space: nowrap">1-800-SEC-0330.</FONT>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our SEC filings, including the registration statement and the
    exhibits filed with the registration statement, are also
    available from the SEC&#146;s website at <U>www.sec.gov</U>,
    which contains reports, proxy and information statements and
    other information regarding issuers that file electronically
    with the SEC.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We will provide a copy of our annual report to stockholders,
    including our audited financial statements, at no charge upon
    written request sent to Planet Beach Franchising Corporation,
    5145 Taravella Road, Marrero, Louisiana, 70072. Our address on
    the World Wide Web is <U>www.planetbeach.com</U>. The
    information on our website is not a part of this prospectus.
</DIV>
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    <BR>
    75
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='122'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">INDEX TO
    FINANCIAL STATEMENTS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The financial statements listed below do not give effect to the
    1 for 3.5 reverse stock split we effected on March&#160;18, 2010.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="97%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadright -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Page</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    CONSOLIDATED FINANCIAL STATEMENTS
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 9pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#300'>Report of Independent Registered Public
    Accounting Firm</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-2
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#301'>Consolidated balance sheets at December 31, 2009
    and 2008</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-3
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    For each of the three years in the period ended December 31,
    2009:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    <A HREF='#302'>Consolidated statements of operations</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-4
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    <A HREF='#303'>Consolidated statements of stockholders&#146;
    equity (deficit)</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-5
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    <A HREF='#304'>Consolidated statements of cash flows</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-6
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#305'>Notes to consolidated financial statements</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-7
</TD>
<TD>&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-1
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='300'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">REPORT
    OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</FONT></U></B>
</DIV>
</A>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To the Board of Directors
</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Planet Beach Franchising Corporation and Subsidiaries
</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Marrero, Louisiana:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have audited the accompanying consolidated balance sheets of
    Planet Beach Franchising Corporation and Subsidiaries (the
    Company) as of December&#160;31, 2009 and 2008, and the related
    consolidated statements of operations, shareholders&#146;
    equity, and cash flows for each of the years in the three-year
    period ended December&#160;31, 2009. These financial statements
    are the responsibility of the Company&#146;s management. Our
    responsibility is to express an opinion on these financial
    statements based on our audits.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We conducted our audits in accordance with the standards of the
    Public Company Accounting Oversight Board (United States). Those
    standards require that we plan and perform the audit to obtain
    reasonable assurance about whether the financial statements are
    free of material misstatement. The company is not required to
    have, nor were we engaged to perform, an audit of its internal
    control over financial reporting. Our audit included
    consideration of internal control over financial reporting as a
    basis for designing audit procedures that are appropriate in the
    circumstances, but not for the purpose of expressing an opinion
    on the effectiveness of the company&#146;s internal control over
    financial reporting. Accordingly, we express no such opinion. An
    audit also includes examining, on a test basis, evidence
    supporting the amounts and disclosures in the financial
    statements, assessing the accounting principles used and
    significant estimates made by management, as well as evaluating
    the overall financial statement presentation. We believe that
    our audits provide a reasonable basis for our opinion.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In our opinion, the financial statements referred to above
    present fairly, in all material respects, the consolidated
    financial position of the Company as of December&#160;31, 2009
    and 2008, and the consolidated results of their operations and
    their cash flows for each of the years in the three-year period
    ended December&#160;31, 2009, in conformity with
    U.S.&#160;generally accepted accounting principles.
</DIV>

<DIV style="margin-top: 24pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 49%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <DIV style="display:inline; text-align:left;">/s/&#160;&#160;POSTLETHWAITE&#160;&#038;
    NETTERVILLE, APAC</DIV>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Metairie, Louisiana
</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    April&#160;1, 2010
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-2
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<!-- XBRL,BS -->
<A name='301'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">PLANET
    BEACH FRANCHISING CORPORATION AND SUBSIDIARIES<BR>
    </FONT></U></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">CONSOLIDATED
    BALANCE SHEETS<BR>
    </FONT></U></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">DECEMBER
    31, 2009 AND 2008</FONT></U></B>
</DIV>
</A>
<!-- XBRL,BODY -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="81%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD colspan="9" align="center" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>ASSETS</B>
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>CURRENT ASSETS</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 17pt">
    Cash and cash equivalents
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    53,810
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    60,068
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 17pt">
    Investments
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    288,614
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 17pt">
    Accounts receivable, net of allowance for doubtful accounts of
    $733,518<BR>
    and $606,867, respectively
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,032,632
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,346,784
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 17pt">
    Due from employees
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    42,064
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    79,398
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 17pt">
    Inventory
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    479,264
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    727,116
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 17pt">
    Notes receivable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    228,569
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    354,384
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 17pt">
    Prepaid expenses and other current assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    89,657
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    87,813
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 34pt">
    Total current assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,925,996
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,944,177
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>PROPERTY, PLANT AND EQUIPMENT, NET</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,188,732
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,171,045
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>OTHER ASSETS</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 17pt">
    Notes receivable, net of allowance for doubtful accounts of
    $518,805 <BR>
    and $279,682, respectively
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    707,365
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    759,657
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 17pt">
    Other long-term assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    111,519
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    91,118
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 34pt">
    Total other assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    818,884
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    850,775
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 34pt">
    <B>TOTAL ASSETS</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,933,612
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5,965,997
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 9pt">
<TD colspan="9">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD colspan="9" align="center" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY (DEFICIT)</B>
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>CURRENT LIABILITIES</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 17pt">
    Current maturities of notes payable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    448,742
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    452,063
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 17pt">
    Line of credit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    192,561
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 17pt">
    Accounts payable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,402,437
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,090,655
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 17pt">
    Customers&#146; deposits
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    264,633
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    142,671
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 17pt">
    Accrued liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    459,951
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    448,964
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 17pt">
    Deferred revenue
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    55,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    234,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 25pt">
    Total current liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,631,263
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,560,914
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>LONG-TERM LIABILITIES</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 17pt">
    Notes payable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,773,919
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,670,179
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 17pt">
    Accrued liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    620,224
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    448,261
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 17pt">
    Deferred revenue
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    213,181
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    220,682
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 25pt">
    Total long-term liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,607,324
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,339,122
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 34pt">
    Total liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,238,587
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,900,036
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>STOCKHOLDERS&#146; EQUITY (DEFICIT)</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 17pt">
    Preferred stock, $0.0001&#160;par value;
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 25pt">
    Shares authorized: 100,000,000; none issued
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 17pt">
    Common stock, $0.0001&#160;par value;
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 25pt">
    Shares authorized: 100,000,000;
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 25pt">
    Shares issued: 13,428,139;
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 25pt">
    Shares outstanding: 12,998,739
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,343
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,343
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 17pt">
    Additional paid-in capital
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    348,802
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    230,869
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 17pt">
    Retained earnings (deficit)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,480,120
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (771,728
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 17pt">
    Accumulated other comprehensive income (loss)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (219,523
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 17pt">
    Treasury stock, at cost
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (175,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (175,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 25pt">
    Total stockholders&#146; equity (deficit)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,304,975
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (934,039
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 25pt">
    <B>TOTAL LIABILITIES AND STOCKHOLDERS&#146;</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 34pt">
    <B>EQUITY (DEFICIT)</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,933,612
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5,965,997
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The accompanying notes are an integral part of these statements.
</DIV>
<!-- /XBRL,bs -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-3
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='302'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">PLANET
    BEACH FRANCHISING CORPORATION AND SUBSIDIARIES<BR>
    </FONT></U></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times"><!-- XBRL,OP -->CONSOLIDATED
    STATEMENTS OF OPERATIONS<BR>
    </FONT></U></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">YEARS
    ENDED DECEMBER 31, 2009, 2008, AND 2007</FONT></U></B>
</DIV>
</A>
<!-- XBRL,BODY -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="62%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>OPERATING REVENUES</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Sales of spa equipment and products
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,919,466
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    14,705,685
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    17,585,785
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Franchise fees
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,257,067
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,067,123
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,745,360
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Royalties and related fees
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,883,254
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,833,193
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,584,958
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Other
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    209,333
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    399,831
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    539,917
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Total operating revenues
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,269,120
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    25,005,832
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26,456,020
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>OPERATING EXPENSES</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Cost of goods sold
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,692,991
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11,131,834
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,369,056
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Operating expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,951,089
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,630,367
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,632,521
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Salaries and bonuses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,279,981
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,790,704
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,633,646
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Commissions
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,579,631
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,013,114
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,012,692
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Total operating expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,503,692
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    25,566,019
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26,647,915
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>LOSS FROM OPERATIONS</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (234,572
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (560,187
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (191,895
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>OTHER INCOME (EXPENSE)</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Interest and other income
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34,871
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12,818
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12,595
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Interest expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (256,172
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (218,575
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (174,204
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Realized gain (loss) on investments
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (252,519
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,697
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    23,751
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Total other income (expense)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (473,820
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (198,060
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (137,858
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>LOSS BEFORE PROVISION<BR>
    FOR INCOME TAXES</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (708,392
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (758,247
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (329,753
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Benefit for income tax
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (4,651
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>NET LOSS</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (708,392
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (758,247
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (325,102
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>LOSS PER COMMON SHARE <BR>
    BASIC AND DILUTED</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.05
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.06
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.03
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>WEIGHTED AVERAGE <BR>
    SHARES&#160;OUTSTANDING<BR>
    BASIC AND DILUTED</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12,998,739
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12,971,046
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12,961,815
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The accompanying notes are an integral part of these statements.
</DIV>
<!-- /XBRL,OP -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-4
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='303'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">PLANET
    BEACH FRANCHISING CORPORATION AND SUBSIDIARIES<BR>
    <!-- XBRL,se --> <BR>
    CONSOLIDATED STATEMENTS OF SHAREHOLDERS&#146; EQUITY
    (DEFICIT)<BR>
    YEARS ENDED DECEMBER 31, 2009, 2008, AND 2007</FONT></U></B>
</DIV>
</A>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL,body -->
<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="36%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=08 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=08 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=08 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=08 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=09 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=09 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=09 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=09 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Retained<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Other<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Common Stock</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Paid-In<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Earnings<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Comprehensive<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Treasury Stock</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Capital</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>(Deficit)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Income (Loss)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Total</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    BALANCE, January&#160;1, 2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12,381,215
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,238
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    141,302
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    319,676
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    37,461
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    415,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (157,500
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    342,177
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Other comprehensive income:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 24pt">
    Net loss
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (325,102
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (325,102
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 24pt">
    Net unrealized loss on investments
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (34,068
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (34,068
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 24pt">
    Foreign currency translation adjustment, net of tax expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,496
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,496
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 32pt">
    Total comprehensive loss
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (357,674
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Stock issuance
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,010,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    101
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    909
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,010
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Stock options compensation
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    16,970
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    16,970
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Dividends paid
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (8,055
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (8,055
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Purchase of treasury stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    14,400
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (17,500
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (17,500
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    BALANCE, December&#160;31, 2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,391,215
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,339
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    159,181
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (13,481
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,889
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    429,400
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (175,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (23,072
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Other comprehensive income:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 24pt">
    Net loss
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (758,247
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (758,247
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 24pt">
    Net unrealized loss on investments
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (223,606
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (223,606
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 24pt">
    Foreign currency translation adjustment, net of tax benefit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (806
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (806
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 32pt">
    Total comprehensive loss
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (982,659
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Stock options compensation
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34,769
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34,769
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Stock issuance
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    36,924
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    36,919
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    36,923
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    BALANCE, December&#160;31, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,428,139
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,343
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    230,869
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (771,728
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (219,523
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    429,400
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (175,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (934,039
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Other comprehensive income:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 24pt">
    Net loss
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (708,392
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (708,392
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 24pt">
    Net realized loss on investments
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    219,822
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    219,822
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 24pt">
    Foreign currency translation adjustment, net of tax benefit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (299
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (299
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 32pt">
    Total comprehensive loss
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (488,869
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 16pt">
    Stock options compensation
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    117,933
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    117,933
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    BALANCE, December&#160;31, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,428,139
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,343
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    348,802
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (1,480,120
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    429,400
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (175,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (1,304,975
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The accompanying notes are an integral part of these statements.
</DIV>
<!-- /XBRL,se -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-5
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<A name='304'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">PLANET
    BEACH FRANCHISING CORPORATION AND SUBSIDIARIES<BR>
    <!-- XBRL,cf --> <BR>
    CONSOLIDATED STATEMENTS OF CASH FLOWS <BR>
    YEARS ENDED DECEMBER 31, 2009, 2008, AND 2007</FONT></U></B>
</DIV>
</A>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL,body -->
<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="71%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B><U>CASH FLOWS FROM OPERATING ACTIVITIES</U></B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Net loss
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (708,392
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (758,247
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (325,102
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Adjustments to reconcile net loss to net cash<BR>
    provided by operating activities:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 27pt">
    Depreciation expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    198,399
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    220,372
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    203,951
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 27pt">
    Bad debt expense and inventory allowance
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    590,124
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    505,652
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    129,430
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 27pt">
    Stock options compensation expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    117,933
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34,769
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    16,970
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 27pt">
    Realized loss (gain) on investments
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    252,519
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (7,697
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (23,751
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 27pt">
    Changes in operating assets and liabilities:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 36pt">
    Deferred benefit expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (4,651
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 36pt">
    National advertising deposits
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (386,356
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    158,832
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 36pt">
    Accounts receivable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (79,512
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (318,999
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (130,529
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 36pt">
    Other current assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11,489
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (90,241
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (23,339
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 36pt">
    Inventory
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    164,852
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    549,585
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (180,194
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 36pt">
    Accounts payable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (569,761
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,411,076
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    200,038
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 36pt">
    Customers&#146; deposits
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    121,962
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (922,351
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    108,370
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 36pt">
    Deferred revenue
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (186,002
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (500
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (24,442
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 36pt">
    Accrued liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    152,882
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27,842
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (47,228
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 36pt">
    Net cash provided by operating activities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    66,493
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    264,905
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    58,355
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B><U>CASH FLOWS FROM INVESTING ACTIVITIES</U></B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Cash paid for acquisition of property, plant and equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (132,845
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (148,115
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (287,307
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Decrease in investments
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    255,618
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,697
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    68,375
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Decrease (increase) in notes receivable, net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    17,648
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (717,483
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    48,443
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 36pt">
    Net cash provided by (used in) investing activities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    140,421
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (857,901
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (170,489
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B><U>CASH FLOWS FROM FINANCING ACTIVITIES</U></B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Net change in line of credit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (192,561
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (51,346
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    67,659
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Proceeds from long-term debt
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    363,345
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    59,476
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    498,978
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Payments on long-term debt
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (383,956
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (300,999
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (133,617
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Payments on capital lease
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (29,028
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Common stock issuance
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    36,923
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,010
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Payment of dividends
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (8,055
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Purchase of treasury stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (17,500
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 36pt">
    Net cash provided by (used in) financing activities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (213,172
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (255,946
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    379,447
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B><U>NET INCREASE (DECREASE) IN</U></B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 27pt">
    <B><U>CASH AND CASH EQUIVALENTS</U></B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (6,258
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (848,942
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    267,313
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B><U>CASH AND CASH EQUIVALENTS&#160;&#151; BEGINNING OF
    YEAR</U></B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    60,068
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    909,010
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    641,697
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B><U>CASH AND CASH EQUIVALENTS&#160;&#151; END OF YEAR</U></B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    53,810
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    60,068
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    909,010
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B><U>SUPPLEMENTAL DISCLOSURE OF CASH ACTIVITIES</U></B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Cash paid for interest
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    215,436
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    213,303
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    167,907
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Cash paid for income taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    8,497
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5,980
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    46,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B><U>SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES</U></B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    <FONT style="white-space: nowrap">Non-cash</FONT>
    property, plant &#038; equipment acquired
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    254,698
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Area developer fee financed
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    310,608
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    377,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The accompanying notes are an integral part of these statements.
</DIV>
<!-- /XBRL,cf -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-6
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<!-- XBRL,ns -->
<A name='305'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">PLANET
    BEACH FRANCHISING CORPORATION<BR>
    AND SUBSIDIARIES<BR>
    <BR>
    NOTES&#160;TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></U></B>
</DIV>
</A>
<!-- XBRL,n -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">1.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><U><FONT style="font-family: 'Times New Roman', Times">Business
    Operations</FONT></U></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">Organization</FONT></U></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Planet Beach Franchising Corporation (the Company) was initially
    incorporated on September&#160;26, 1996, under the laws of the
    State of Louisiana. On March&#160;25, 2008, the Company
    reincorporated under the laws of the State of Nevada. In
    conjunction with the reincorporation, authorized common stock
    was increased from 15&#160;million to 100&#160;million shares,
    and the par value decreased from $0.001 to $0.0001 per common
    share. In addition, 10&#160;million shares of preferred stock
    having a par value of $0.0001 per share were authorized for
    issuance. Currently, the Company is engaged in the business of
    selling Planet Beach Contempo Spa franchises throughout the
    United States, Canada, Ireland, South Africa, and Australia. In
    addition, the Company has locations under development in Egypt,
    Saudi Arabia and Kuwait. The Company also sells spa equipment
    and products to new and existing franchisees.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company has two wholly-owned subsidiaries, Planet Beach Real
    Estate, LLC (PBRE) and Planet Beach International, LLC (PBI).
    PBRE has been largely inactive since 2005. PBI was established
    to recruit master franchisors in international locations under
    long-term contractual arrangements; whereby, the master
    franchisor would be given the right to sell Planet Beach
    Contempo Spa Franchises within the designed international
    region. Master franchisors would pay an initial master franchise
    fee upon entering the agreement. The master franchisor would
    also remit to the Company a percentage of the license fee,
    product and equipment sales, and royalties collected from the
    international franchise locations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company has incurred losses of approximately $708,000,
    $758,000 and $325,000 for its years ended December&#160;31,
    2009, 2008 and 2007, respectively. The losses have occurred due
    to the global economic downturn that began in 2007. The Company
    and the franchisees have been impacted by an impaired ability to
    obtain credit on reasonable terms or at all. Decreased access to
    credit for franchisees has impaired their ability to meet their
    obligations when due and led to franchisee bankruptcies. A
    continued recession will have a negative impact on the
    Company&#146;s financial position.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Management believes that the Company will continue to operate as
    a going concern by reducing operating and salary costs and
    improving operating profitability, controlling inventory levels,
    working with vendors and other creditors to accept more
    favorable payment terms and through seeking additional capital
    for the Company&#146;s operations.
</DIV>
<!-- XBRL,n -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">2.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><U><FONT style="font-family: 'Times New Roman', Times">Summary
    of Significant Accounting Policies</FONT></U></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">Basis
    of Consolidation</FONT></U></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The accompanying consolidated financial statements include the
    accounts of the Company and its subsidiaries. All significant
    intercompany balances and transactions have been eliminated.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">Use of
    Estimates</FONT></U></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The preparation of financial statements in conformity with
    accounting principles generally accepted in the United States of
    America requires management to make estimates and assumptions
    that affect certain reported amounts and disclosures.
    Accordingly, actual results could differ from those estimates.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">Cash
    and Cash Equivalents</FONT></U></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Cash and cash equivalents consist of cash in banks and cash held
    in escrow accounts. The Company considers all highly liquid
    investments with an original maturity of three months or less to
    be cash equivalents.
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-7
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">PLANET
    BEACH FRANCHISING CORPORATION<BR>
    AND SUBSIDIARIES<BR>
    <BR>
    NOTES&#160;TO CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></U></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Certain states require the initial franchise fee be deposited in
    escrow until the franchisee commences business. Once the
    location commences business, the state will release the funds.
    Until funds are released, the revenue for the franchise sale is
    deferred. At December&#160;31, 2009 and 2008, funds held in
    escrow totaled $30,020 and $0, respectively.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">Accounts
    Receivable</FONT></U></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Accounts receivable consist primarily of amounts due for
    franchise royalties and product sales, which are carried at
    original invoice amount less an estimate made for doubtful
    receivables based on a review of all outstanding amounts.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Management determines the allowance for doubtful accounts by
    identifying overdue accounts and by reserving a percentage of
    the account&#146;s outstanding balance as uncollectible based on
    historical experience with collections in general or based on
    the account&#146;s specific circumstance. Accounts receivables
    are written off when deemed uncollectible. Recoveries of
    accounts receivables previously written off are recorded when
    received.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">Inventory</FONT></U></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company&#146;s inventory consists of spa and tanning lotions
    and promotional clothing. Inventory is valued at the lower of
    cost or market, computed on the
    <FONT style="white-space: nowrap">first-in,</FONT>
    first-out basis.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">Investments</FONT></U></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    At December&#160;31, 2008 investments consist primarily of
    mutual funds held at a national brokerage firm, are classified
    as
    <FONT style="white-space: nowrap">available-for-sale,</FONT>
    and carried at fair market value, unrealized gains and losses,
    net of tax, are included in the determination of comprehensive
    income (loss) and reported in shareholders&#146; equity
    (deficit).
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">Property,
    Plant and Equipment</FONT></U></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Property, plant and equipment are stated at cost. Depreciation
    on plant and equipment is calculated using the straight line
    method over the estimated useful lives of the related assets.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Maintenance and repairs are charged to expenses as incurred.
    Improvements and renewals are capitalized and depreciated over
    the remaining estimated useful life. When property, plant, and
    equipment are sold or otherwise disposed of, the asset account
    and related accumulated depreciation are relieved, and any gain
    or loss is included in income.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The useful lives of property, plant, and equipment for purposes
    of computing depreciation are:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="86%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="12%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Buildings and leasehold improvements
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    7 &#150; 39&#160;Years
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Spa equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    7&#160;Years
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Computer equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    3 &#150; 5&#160;Years
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Furniture, fixtures, and equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    3 &#150; 7&#160;Years
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Software
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    5&#160;Years
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">Long-Lived
    Assets</FONT></U></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Long-lived assets, such as property, plant, and equipment, and
    purchased intangible assets subject to amortization, are
    reviewed for impairment whenever events or changes in
    circumstances indicate that the carrying amount of an asset may
    not be recoverable. If circumstances require a long-lived asset
    or asset group be tested for possible impairment, the Company
    first compares undiscounted cash flows expected to be generated
    by that asset or asset group to its carrying value. If the
    carrying value of the long-lived asset or
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-8
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">PLANET
    BEACH FRANCHISING CORPORATION<BR>
    AND SUBSIDIARIES<BR>
    <BR>
    NOTES&#160;TO CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></U></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    asset group is not recoverable on an undiscounted cash flow
    basis, an impairment is recognized to the extent that the
    carrying value exceeds its fair value. Fair value is determined
    through various valuation techniques including discounted cash
    flow models, quoted market values and third-party independent
    appraisals, as considered necessary.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">Fair
    Value of Financial Instruments</FONT></U></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For purposes of financial reporting, management has determined
    that the fair value of financial instruments including cash and
    cash equivalents, accounts and notes receivable, accounts
    payable, accrued liabilities and notes payable, approximate the
    carrying value.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">Notes
    Receivable</FONT></U></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Notes receivable consists principally of area developer fees,
    equipment vendor receivables, and spa purchase fees financed by
    the Company. The allowance for doubtful accounts is the
    Company&#146;s best estimate of the amount of credit losses in
    the Company&#146;s existing notes. The allowance is determined
    on an individual note basis upon review of any note that has a
    payment past due for over 60&#160;days. A note is considered
    impaired if it is probable that the Company will not collect all
    principal and interest contractually due. The impairment is
    measured based on the present value of expected future cash
    flows discounted at the note&#146;s effective interest rate.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company does not accrue interest when a note is considered
    impaired. When ultimate collectability of the principal balance
    if the impaired note is in doubt, all cash receipts on impaired
    notes are applied to reduce the principal amount of such notes
    until the principal has been recovered and are recognized as
    interest income thereafter. Impairment losses are charged
    against the allowance and increases in the allowance are charged
    to bad debt expense. Notes are written off against the allowance
    when all possible means of collection have been exhausted and
    the potential for recovery is considered remote.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The notes have interest rates ranging from non-interest bearing
    to 7.0&#160;percent and will mature upon sale of related
    franchises, or in accordance with scheduled maturities through
    September 2016.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">Other
    long-term assets</FONT></U></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Other long-term assets primarily consist of cost incurred in
    anticipation of an initial public offering of the Company&#146;s
    common stock, trademarks related to the Company&#146;s business
    and deposits.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">Customers&#146;
    Deposits</FONT></U></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Customers&#146; deposits represent advances from franchisees for
    the purchase of spa and tanning equipment. Equipment orders are
    normally shipped within 2-4&#160;weeks of receipt of funds.
    Advance payment is required for all equipment purchases.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">National
    Advertising and Brand Development</FONT></U></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company collects National Advertising and Brand development
    royalty from its franchisees. Franchises that were established
    before April&#160;1, 2008 are required to contribute 1% of gross
    sales to the National Advertising Fund as a royalty for the
    development and distribution of national marketing efforts for
    the benefit of all franchisees within the Planet Beach system.
    The Company carries forward national advertising royalties that
    are not spent in the fiscal year collected to the following
    year, and records them as a deposit on the consolidated balance
    sheet. At December&#160;31, 2009 and 2008, there were no carry
    forward deposits. The Company recognizes national advertising
    expenditures in the consolidated statements of operations as
    incurred.
</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-9
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">PLANET
    BEACH FRANCHISING CORPORATION<BR>
    AND SUBSIDIARIES<BR>
    <BR>
    NOTES&#160;TO CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></U></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Beginning April&#160;1, 2008, franchisees entering the system
    must contribute 2% of gross sales for brand development. The
    Company has no obligation to carry forward any unspent brand
    development royalties for these franchisees to the following
    year. The Company recognizes brand development royalties in our
    consolidated statements of income in full as we accrue them,
    along with the brand development expenses.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">Revenue
    Recognition</FONT></U></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company has entered into franchise agreements that grant
    franchisees the right to operate individual Planet Beach
    Contempo Spas in return for an initial franchise fee and ongoing
    development fees (royalties). In addition, the Company has
    entered into area developer agreements, including international
    master franchisor agreements, which grant area developers the
    right to sell individual Planet Beach Contempo Spas in
    designated territories.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company recognizes revenue from individual franchise sales
    when all material services or conditions relating to the sale
    have been substantially performed or satisfied by the Company.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Area developer fees, which include international master
    franchise fees, are recognized as revenue on the cash basis
    until 50% of the purchase price is collected; the uncollected
    purchase price is deferred. All payments received for these area
    agreements are non-refundable. The Company estimates that once
    50% of the purchase price has been collected, and no further
    significant obligations remain, it is probable that the
    remaining area development fee will be collectible. Therefore,
    the Company fully recognizes area development fees once 50% of
    the purchase price is collected.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Most of these area agreements have promissory notes structured
    requiring payment of at least 50% of the purchase price within
    12&#160;months of agreement execution. The remaining purchase
    price will normally be collected over 3-6&#160;years amortized
    monthly with principle and interest payments.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    All payments received for these area agreements are
    non-refundable.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company accrues royalties based upon the contractual royalty
    rate, currently 6% of total franchise revenue, as defined in the
    respective franchise agreements. Royalties are recorded as
    revenue when the related franchise revenue is reported to the
    Company. Sales of spa equipment and products are recognized as
    revenue, when the items are shipped collection is probable, and
    no further significant obligations remain.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">Advertising
    and Marketing Costs</FONT></U></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company expenses advertising and marketing costs as
    incurred. Advertising and marketing expense incurred by the
    Company during 2009, 2008 and 2007 amounted to $63,179,
    $306,422, and $342,832, respectively.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">Shipping
    Expense</FONT></U></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company provides free shipping for product orders to
    customers ordering minimum amounts. Shipping expense is included
    with operating expenses on the consolidated statement of
    operations and totaled $209,482, $337,525, and $293,833 for the
    years ended December&#160;31, 2009, 2008 and 2007, respectively.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">Foreign
    Currency Translation</FONT></U></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Foreign currency translation relates to the differences from
    historical exchange rates and are reflected in
    Shareholders&#146; Equity (Deficit) as part of accumulated other
    comprehensive income (loss). These adjustments were primarily
    related to a few Canadian transactions.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-10
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">PLANET
    BEACH FRANCHISING CORPORATION<BR>
    AND SUBSIDIARIES<BR>
    <BR>
    NOTES&#160;TO CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></U></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">Income
    Tax</FONT></U></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company accounts for income taxes under the liability
    method. Deferred tax assets and liabilities are recognized for
    the future tax consequences attributable to differences between
    the financial statement carrying amounts of existing assets and
    liabilities and their respective tax bases and operating loss
    and tax credit carryforwards. Deferred tax assets and
    liabilities are measured using enacted tax rates expected to
    apply to taxable income in the years in which those temporary
    differences are expected to be recovered or settled.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The effect on deferred tax assets and liabilities of a change in
    tax rates is recognized in income in the period that includes
    the enactment date. We include any estimated interest and
    penalties on tax related matters in income taxes payable.
    Valuation allowances are established when necessary to reduce
    net deferred income tax assets to the amount expected to be
    realized. (See Note&#160;6)
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Effective January&#160;1, 2009, the Company recognized the
    effect of income tax positions only if those positions are more
    likely than not being sustained. Recognized income tax positions
    are measured at the largest amount that is greater than 50%
    likely of being realized. Changes in recognition or measurement
    are reflected in the period in which the change in judgment
    occurs. Prior to the adoption of ASC 740-10 Income Tax
    Uncertainties, the Company recognized the effect of income tax
    positions only if such positions were probable of being
    sustained. The effect of the adoption of this standard was not
    material.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company records interest related to unrecognized tax
    benefits in interest expense and penalties in selling, general,
    and administrative expenses.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">Stock-Based
    Compensation</FONT></U></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company accounts for its stock-based compensation using the
    modified prospective adjustment method of measuring share based
    payments (see Note&#160;7).
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">Earnings
    (loss) per Share</FONT></U></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Basic earnings (loss) per share is computed by dividing income
    (loss) available to common shareholders by the weighted average
    number of common shares outstanding during the period. Diluted
    earnings per share is computed in the same manner as basic
    earnings per share except that the denominator is increased to
    include the number of additional common shares that could have
    been outstanding assuming the exercise of stock options and the
    potential shares that would have a dilutive effect on earnings
    per share.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Stock options of approximately 1,794,000, 1,864,000 and
    521,000&#160;shares were excluded in the computation of diluted
    earnings per share for the years ended December&#160;31, 2009,
    2008 and 2007, respectively, as the effect would have been
    anti-dilutive due to the loss recorded for the years then ended.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">Effect
    of New Accounting Pronouncements</FONT></U></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In June 2009, the FASB issued authoritative guidance for the
    FASB accounting standards codification (Codification) and the
    hierarchy of generally accepted accounting principles
    (U.S.&#160;GAAP). The guidance establishes the Codification to
    become the source of authoritative U.S.&#160;GAAP recognized by
    the FASB to be applied by nongovernmental entities. Rules and
    interpretive releases of the Securities and Exchange Commission
    (SEC) under authority of federal securities laws are also
    sources of authoritative U.S.&#160;GAAP for SEC registrants. The
    guidance and the Codification are effective for financial
    statements issued for interim and annual periods ending after
    September&#160;15, 2009. The Company adopted the provisions of
    the guidance, as required, and determined that the impact to the
    Company&#146;s financial condition or results of operations was
    immaterial.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-11
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">PLANET
    BEACH FRANCHISING CORPORATION<BR>
    AND SUBSIDIARIES<BR>
    <BR>
    NOTES&#160;TO CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></U></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In June 2009, the FASB issued new accounting guidance which
    requires additional information regarding transfers of financial
    assets, including securitization transactions, and where
    companies have continuing exposure to the risks related to
    transferred financial assets. The guidance eliminates the
    concept of a &#147;qualifying special-purpose entity,&#148;
    changes the requirements for derecognizing financial assets, and
    requires additional disclosures. The guidance will be effective
    for the Company on January&#160;1, 2010. The Company is
    currently evaluating the impact that the guidance will have on
    its financial condition and results of operations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In June 2009, the FASB issued new accounting guidance which
    modifies how a company determines when an entity that is
    insufficiently capitalized or is not controlled through voting
    (or similar rights) should be consolidated. The guidance
    clarifies that the determination of whether a company is
    required to consolidate an entity is based on, among other
    things, an entity&#146;s purpose and design and a company&#146;s
    ability to direct the activities of the entity that most
    significantly impact the entity&#146;s economic performance. The
    guidance requires an ongoing reassessment of whether a company
    is the primary beneficiary of a variable interest entity. The
    guidance also requires additional disclosures about a
    company&#146;s involvement in variable interest entities and any
    significant changes in risk exposure due to that involvement.
    The guidance will be effective for the Company on
    January&#160;1, 2010. The Company is currently evaluating the
    impact that the guidance will have on its financial condition
    and results of operations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The FASB issued an update that all entities are required to make
    disclosures about recurring and nonrecurring fair value
    measurements under Fair Value Measurements. The guidance
    requires certain new disclosures and clarifies two existing
    disclosure requirements. The new disclosures and clarifications
    of existing disclosures are effective for interim and annual
    reporting periods beginning after December&#160;15, 2009, except
    for the disclosures about purchases, sales, issuances, and
    settlements in the roll forward of activity in Level&#160;3 fair
    value measurements. Those disclosures are effective for fiscal
    years beginning after December&#160;15, 2010, and for interim
    periods within those fiscal years.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company does not believe that any other recently issued, but
    not yet effective, accounting standards will have a significant
    effect on its consolidated financial condition or results of
    operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">Reclassifications</FONT></U></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Certain prior year amounts have been reclassified to conform to
    the current year&#146;s presentation.
</DIV>
<!-- XBRL,n -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">3.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><U><FONT style="font-family: 'Times New Roman', Times">Property,
    Plant and Equipment</FONT></U></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 3%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Property, plant and equipment consist of the following:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="73%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Land
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    210,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    210,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Building and leasehold improvements
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,706,015
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,556,015
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Spa equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    516,794
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    384,133
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Computer equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    623,391
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    619,832
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Furniture, fixtures and equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    164,042
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    162,719
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Software
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    554,560
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    626,017
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,774,802
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,558,716
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Less: accumulated depreciation
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,586,070
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,387,671
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Property, plant and equipment, net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,188,732
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,171,045
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-12
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">PLANET
    BEACH FRANCHISING CORPORATION<BR>
    AND SUBSIDIARIES<BR>
    <BR>
    NOTES&#160;TO CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></U></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Depreciation expense associated with property, plant and
    equipment charged to operations during 2009, 2008 and 2007
    totaled $198,399, $220,372, and $203,951 respectively.
    Substantially all of the Company&#146;s building and building
    improvements are pledged as collateral for various loans of the
    Company. (See Note&#160;5)
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    One of the Company&#146;s buildings is subject to a lien filed
    by of $30,361 for unpaid taxes.
</DIV>
<!-- XBRL,n -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">4.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><U><FONT style="font-family: 'Times New Roman', Times">Line
    of Credit</FONT></U></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In 2006, the Company obtained a portfolio credit line which is
    held by the Company&#146;s investment broker. The Company had
    outstanding balances on lines of credit of $0 and $192,561 at
    December&#160;31, 2009 and 2008, respectively, secured by the
    Company&#146;s investments which are held with the
    Company&#146;s investment broker. Interest is paid monthly at
    rates ranging from 8.00% to 3.25% for 2008; and 8.50% to 10.50%
    for 2007. Total amounts available on lines of credit at
    December&#160;31, 2009 and 2008 were $0 and $9,469,
    respectively. The line of credit was terminated during 2009 as
    the related investment portfolio was liquidated.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-13
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">PLANET
    BEACH FRANCHISING CORPORATION<BR>
    AND SUBSIDIARIES<BR>
    <BR>
    NOTES&#160;TO CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></U></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->
<!-- XBRL,n -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">5.&#160;&#160;<U>Long-Term
    Debt</U></FONT></B>
</DIV>
<!-- XBRL,body -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 3%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following is a summary of the Company&#146;s long-term debt
    as of December 31:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF"><!-- TABLE 01 -->
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="75%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Note Payable&#160;&#151; Company, payable in monthly
    installments of $6,837, including interest of 6.54%, through
    March 2027, secured by building; guaranteed by certain Company
    officers and shareholders.&#160;
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    840,008
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    866,108
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Note Payable&#160;&#151; Company, payable in monthly
    installments of $9,170, including interest of 8.25%, through
    June 2012, with final payment estimated to be $459,755 on
    July&#160;19, 2012, secured by accounts receivable and
    inventory; guaranteed by certain Company officers and
    shareholders.&#160;
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    619,305
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    675,485
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Note Payable&#160;&#151; SBA, payable in monthly installments
    ranging from $5,553 through $4,754, including interest of 5.79%,
    through June 2027, secured by building and building
    improvements; guaranteed by certain Company officers and
    shareholders.&#160;
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    591,280
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    610,269
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Note Payable&#160;&#151; Company, payable in monthly
    installments of $771 including interest of 5.80%, through April
    2009, secured by equipment.&#160;
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,866
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Note Payable&#160;&#151; Non-interest bearing, and payable in
    monthly installments of $2,000 through, November 2011, secured
    by stock of the Company.&#160;
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    45,580
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    43,584
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Note
    <FONT style="white-space: nowrap">Payable-Vendor,</FONT>
    payable in monthly installments of $25,451, including interest
    of 7.00%, through April 2012, secured by majority
    shareholder&#146;s common stock.&#160;
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    515,739
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    639,846
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Note
    <FONT style="white-space: nowrap">Payable-Vendor,</FONT>
    payable in monthly installments of $7,200, including interest of
    7.00%, through January 2013, unsecured.&#160;
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    234,276
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    112,347
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Note
    <FONT style="white-space: nowrap">Payable-Vendor,</FONT>
    payable in monthly installments of $5,236, beginning March 2010,
    including interest of 7.00%, through March 2013, unsecured.&#160;
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    173,787
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    121,737
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Note
    <FONT style="white-space: nowrap">Payable-Vendor,</FONT>
    payable in monthly installments of $1,197, including interest of
    7.00%, through March 2013, unsecured.&#160;
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    41,656
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    50,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Note
    <FONT style="white-space: nowrap">Payable-Company</FONT>
    Officer, payable in full upon completion of initial public
    offering, including interest of 5.00%; unsecured.&#160;
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    50,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Note
    <FONT style="white-space: nowrap">Payable-Vendor,</FONT>
    payable in monthly installments ranging from $2,000 to $4,000,
    including interest of 3.47%, through July 2012, secured by
    equipment.&#160;
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    94,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Note
    <FONT style="white-space: nowrap">Payable-Vendor,</FONT>
    payable in monthly installments of $1,553, including interest of
    $7.00%, through August 2011 unsecured.&#160;
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    17,030
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total outstanding notes payables
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,222,661
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,122,242
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Less: current portion
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    448,742
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    452,063
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Long-term notes payables
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,773,919
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,670,179
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the fourth quarter of 2009, the Company borrowed $50,000 from
    its President and CEO to pay for expenses incurred related to
    the Company&#146;s initial public offering (IPO). In the fourth
    quarter of 2009, the Company assumed ownership of a Planet Beach
    Spa located in Irvine, California. In conjunction, the Company
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-14
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">PLANET
    BEACH FRANCHISING CORPORATION<BR>
    AND SUBSIDIARIES<BR>
    <BR>
    NOTES&#160;TO CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></U></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    assumed the note financing the spa&#146;s equipment totaling
    $94,000, and executed a note for overdue rent totaling $17,000.
    The Company also amended the location&#146;s lease through
    August 2011.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As part of the note payable agreement with one of the
    Company&#146;s vendors, the Company converted an accounts
    payable of approximately $59,000 into a four year note payable.
    The Company was also allowed additional financing from the
    vendor of up to $300,000. Under this agreement, the Company
    awarded the vendor with 18,462&#160;shares of common stock and
    the option to convert balances due under the note into
    additional shares of the Company&#146;s common stock within
    12&#160;months of an initial public offering of the
    Company&#146;s common stock at a conversion price equal to the
    initial public offering price.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Substantially all of the Company&#146;s building and building
    improvements are pledged as collateral for various loans of the
    Company.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following is a summary of principal maturities of long-term
    debt for each of the next five years and thereafter:
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF"><!-- TABLE 01 -->
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="88%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2010
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    448,742
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2011
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    616,787
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2012
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    850,973
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2013
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    83,266
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2014
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    60,695
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Thereafter
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,162,198
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,222,661
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL,n -->
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF"><!-- TABLE 05 -->

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">6.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><U><FONT style="font-family: 'Times New Roman', Times">Income
    Taxes</FONT></U></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Significant components of the Company&#146;s deferred income tax
    liabilities and assets as of December 31 are as follows:
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF"><!-- TABLE 01 -->
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="77%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Deferred income tax liabilities:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Accelerated depreciation
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    219,660
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    230,968
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Accrued related party wages
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,543
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,543
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Total deferred income tax liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    223,203
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    234,511
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Deferred income tax assets:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Bad debt allowance
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    488,406
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    345,755
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Employee stock option
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    66,172
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    20,178
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Deferred revenue
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    54,405
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    55,770
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Employee tax credits carryforward
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    189,449
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    178,101
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Net operating loss carryforward
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    174,923
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    114,939
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Total deferred income tax assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    973,355
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    714,743
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Valuation allowance
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (750,152
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (480,232
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Net deferred income tax liabilities, net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Significant components of the provision for income taxes for the
    year ended December 31 are as follows:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF"><!-- TABLE 01 -->
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="79%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Current tax expense (benefit)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Deferred tax expense (benefit)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (4,651
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (4,651
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-15
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">PLANET
    BEACH FRANCHISING CORPORATION<BR>
    AND SUBSIDIARIES<BR>
    <BR>
    NOTES&#160;TO CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></U></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The reconciliation of income taxes computed at the federal
    statutory tax rate to income tax provision (benefit) for the
    year ended December 31 is as follows:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="65%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Tax at federal statutory rate
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (240,853
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (257,804
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (112,116
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Non-deductible expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,275
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10,787
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    17,168
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    State income taxes and credits
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (33,718
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (36,529
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (16,488
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Employee tax credits
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (8,624
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (89,901
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Valuation allowance
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    269,920
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    373,447
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    106,785
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (4,651
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For tax reporting purposes, the Company had cumulated operating
    loss carryforwards of approximately $703,588 and $730,000 at
    December&#160;31, 2009 and 2008, respectively. If not utilized,
    the full amount of such carryforwards would expire in 2028. The
    Company has available for tax reporting purposes $184,449 in
    employee tax credits that will begin to expire in 2025.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company and its subsidiaries file U.S.&#160;federal and
    state income tax returns. There are no on-going examinations of
    income tax returns filed by the Company and its subsidiaries.
    U.S.&#160;federal income tax returns ending after 2005 are
    subject to examination by the Internal Revenue Service. State
    income tax returns for tax years ending after 2005 are subject
    to examination by related state tax authorities.
</DIV>
<!-- XBRL,n -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">7.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><U><FONT style="font-family: 'Times New Roman', Times">Stock
    Option Plan</FONT></U></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On July&#160;1, 2005, the Company adopted the Planet Beach
    Franchise Corporation 2005 Incentive Stock Plan (the
    &#147;Plan&#148;) that provides for the granting of stock
    options to its directors, officers, employees, and consultants.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Stock options granted under our Plan expire ten years from the
    date of grant. Generally, either 20% or 25% of the options vest
    on the first anniversary of the grant. Thereafter, the options
    vest monthly on a pro rata basis until the fourth or fifth
    anniversary of the grant until fully vested.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Plan includes provisions to make adjustments to reflect
    stock splits or stock dividends, and certain other events occur.
    The Company believes that the current level of authorized shares
    is sufficient to satisfy future option exercises.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company has recorded stock-based compensation expense in the
    salaries and commissions line item in the amount of $117,933,
    $34,769, and $16,970, related to stock awards for the fiscal
    years ended December&#160;31, 2009, 2008, and 2007, respectively.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-16
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">PLANET
    BEACH FRANCHISING CORPORATION<BR>
    AND SUBSIDIARIES<BR>
    <BR>
    NOTES&#160;TO CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></U></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A summary of the Company&#146;s option activity under the plan
    for the year ended December&#160;31, 2009 is as follows:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="39%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Number of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Weighted<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Number of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Weighted<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Number of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Weighted<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Shares<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Average<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Shares<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Average<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Shares<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Average<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Underlying<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Exercise<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Underlying<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Exercise<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Underlying<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Exercise<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Options</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Price</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Options</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Price</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Options</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Price</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Outstanding at beginning of year
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,864,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    521,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    215,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Granted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,472,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    316,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Exercised
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Forfeited
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (70,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (129,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (10,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Outstanding at end of year
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,794,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,864,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    521,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Exercisable at end of year
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    639,600
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    285,550
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    172,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Weighted-average fair value of
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Options granted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    596,664
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.38
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    186,336
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.59
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following summarizes the status of the Company&#146;s
    nonvested shares (in number of shares that may be purchased) as
    of December&#160;31, 2009, and changes during the year ended
    December&#160;31, 2009:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="70%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="12%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Year Ended<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Weighted Average<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>December&#160;31,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Grant Date Fair<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Value</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Nonvested at January&#160;1, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,578,450
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    937,198
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Granted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Vested
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (354,050
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (346,293
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Forfeited
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (70,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (38,600
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Nonvested at December&#160;31, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,154,400
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    552,305
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On June&#160;6, 2007, the Company granted 125,000 options
    conditional on the Company&#146;s successful completion of an
    IPO. Management did not consider an IPO probable in 2007 and
    2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The fair value of each option grant is estimated on the date of
    grant using the Black-Scholes option pricing method with the
    following assumptions used for grants issued:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="73%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>For the Fiscal Years Ended</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>December&#160;31,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>December&#160;31,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Volatility
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    180.00
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    186.00
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Risk-free interest rate
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3.05
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4.71
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Expected term (years)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5.67
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5.83
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Dividend yield
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    There is no active external or internal market for the
    Company&#146;s common shares. The Company used similar industry
    comparables to measure a historical volatility to calculate the
    Company&#146;s options. The Company also estimated the
    underlying common share value by calculating the Company&#146;s
    enterprise value for the each year granted.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-17
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">PLANET
    BEACH FRANCHISING CORPORATION<BR>
    AND SUBSIDIARIES<BR>
    <BR>
    NOTES&#160;TO CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></U></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->
<!-- XBRL,n -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">8.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><U><FONT style="font-family: 'Times New Roman', Times">Employee
    Benefit Plan</FONT></U></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company has a defined contribution employee benefit plan
    (Plan). The Plan is available to employees who have completed at
    least three months of service and are at least 18&#160;years
    old. Prior to December&#160;1, 2008, the Company matched 25% of
    each dollar contributed up to 4% of the employee&#146;s annual
    salary. The employer&#146;s contribution vests 100% after five
    years. The company temporarily suspended matching contributions
    beginning December&#160;1, 2008. Expense incurred by the Company
    during 2009, 2008 and 2007 associated with the Plan totaled $0,
    $56,099, and $38,882, respectively.
</DIV>
<!-- XBRL,n -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">9.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><U><FONT style="font-family: 'Times New Roman', Times">Related
    Party Transactions</FONT></U></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company&#146;s president and majority shareholder owns a
    Contempo Spa that does not pay royalties.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
     The Company&#146;s chief operating officer and shareholder owns
    a Contempo Spa that pays a fixed monthly fee of $350 instead of
    a 6% royalty. In addition, the brand development fee paid is 1%
    instead of 2%.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During 2009 the Company issued a note payable to a vendor at 7%
    interest due on April&#160;10, 2012 for the purchase of tanning
    products. The note is secured by 85,724&#160;shares of common
    stock pledged by the Company&#146;s president. During fiscal
    2008 and 2009, the largest aggregate amount of principal
    outstanding on the note was $750,000, and the amount outstanding
    at December&#160;31, 2009 was $515,739.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Certain officers and shareholders of the Company have guaranteed
    a portion of the Company&#146;s indebtedness as described in
    note&#160;5.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On November&#160;18, 2009, the president loaned the Company
    $50,000 for the payment of expenses related to the
    Company&#146;s initial public offering as described in
    note&#160;5.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of December&#160;31, 2009, a certain other officer&#146;s
    family member owed $35,671 to the Company as included in notes
    receivable on the accompanying consolidated balance sheet.
    Another $39,783 and $73,682 were owed to the Company by
    employees and stockholders of the Company for deferred royalties
    and unpaid area representative fees, respectively. These amounts
    are included in accounts receivable and notes receivables in the
    accompanying consolidated balance sheet, respectively.
</DIV>
<!-- XBRL,n -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">10.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><U><FONT style="font-family: 'Times New Roman', Times">Commitments
    and Contingencies </FONT></U></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">Leases
    Guarantees</FONT></U></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During 2002, the Company entered into lease agreements for
    franchise locations under noncancelable operating leases and
    subleased these locations, on terms similar to the primary
    operating leases, to franchisees. Rent expense paid by the
    Company associated with these leases amounted to $29,424,
    $138,174, and $330,052 for 2009, 2008 and 2007, respectively.
    Rent income (recovery) recorded by the Company associated with
    these subleases amounted to $7,219, $29,149, and $114,526 for
    2009, 2008 and 2007, respectively. Net rent expense is recorded
    in operating expenses in the consolidated statements of
    operations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    At January&#160;1, 2010, the Company is not paying rent on any
    of these leases but remains as guarantor on approximately three
    leases. Should any of these franchisees default on their
    subleases, the Company would be responsible for making rent
    payments as guarantor.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-18
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">PLANET
    BEACH FRANCHISING CORPORATION<BR>
    AND SUBSIDIARIES<BR>
    <BR>
    NOTES&#160;TO CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></U></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company&#146;s maximum theoretical future exposure at
    December&#160;31, 2009, computed as the sum of all remaining
    lease payments through the expiration dates of the respective
    leases, was approximately $267,000 as follows:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="90%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2010
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    87,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2011
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    87,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2012
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    87,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2013
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    267,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This amount does not take into consideration any rent recovery
    from franchisees or other mitigating measures that the Company
    could take to reduce this exposure in the event of default,
    including releasing the locations or negotiating lump sum
    payments with landlords to terminate leases.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">Purchase
    Agreements</FONT></U></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During 2002, the Company entered into a product purchase
    agreement (Purchase Agreement) with its primary vendor (Vendor)
    for tanning beds and supplies requiring the Company to purchase
    exclusively from the Vendor all spa tanning equipment and all
    lamps, parts, accessories, lotions, skin and hair care products,
    cleaning equipment and other tanning related products used or
    sold in salons owned, operated, or franchised by the Company. In
    addition, the Company agreed to designate in existing and future
    franchise agreements the Vendor as the exclusive supplier of
    equipment and supplies to the Company. This Purchase Agreement
    is in effect through 2017. The Company purchased approximately
    $2,981,000, $4,860,000, and $7,219,000 of its spa equipment and
    products from this Vendor in 2009, 2008 and 2007, respectively.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As part of a purchase agreement with a vendor during 2009, the
    vendor will sell product directly to the Company&#146;s
    franchisees with the net profit on such sales being remitted
    directly to the Company. As part of the agreement, cash proceeds
    of the profits earned by the Company were to be used to repay an
    outstanding accounts payable balance with the vendor. As of
    December&#160;31, 2009 and 2008, the amount of accounts payable
    due to the vendor subject to the agreement was approximately
    $118,000 and $836,000, respectively.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">Legal
    Proceedings</FONT></U></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    At December&#160;31, 2009, the Company was party to various
    lawsuits filed by current and former franchisees. Outside
    counsel for the Company is not able to determine the probable
    outcome of these cases at this time. The Company believes the
    suits are without merit and is vigorously defending its
    position. Accordingly, no amounts are recorded in the
    consolidated statements of operations in connection with these
    lawsuits.
</DIV>
<!-- XBRL,n -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">11.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><U><FONT style="font-family: 'Times New Roman', Times">Supplementary
    Information</FONT></U></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company has master franchisor agreements in countries
    outside of the United States. The operating revenues and net
    income (loss) from those countries are in the table below. There
    are no long term assets held in countries outside of the US.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="26%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>December&#160;31, 2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>December&#160;31, 2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>December&#160;31, 2007</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>United States</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Rest of World</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>United States</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Rest of World</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>United States</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Rest of World</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Operating Revenue
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    12,904,298
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    364,822
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    23,872,788
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,133,044
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    26,366,020
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    90,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net Loss
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (515,276
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (193,116
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (744,932
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (13,315
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (246,500
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (78,602
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-19
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL -->
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">PLANET
    BEACH FRANCHISING CORPORATION<BR>
    AND SUBSIDIARIES<BR>
    <BR>
    NOTES&#160;TO CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></U></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>
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<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">12.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><U><FONT style="font-family: 'Times New Roman', Times">Fair
    Value</FONT></U></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Disclosure of fair value information about financial
    instruments, whether or not recognized in the balance sheet is
    required. Fair value of a financial instrument is the price that
    would be received to sell an asset or paid to transfer a
    liability in an orderly transaction between market participants
    at the measurement date. Fair value is best determined based
    upon quoted market prices. In cases where quoted market prices
    are not available, fair values are based on estimates using
    present value or other valuation techniques. Those techniques
    are significantly affected by the assumptions used, including
    the discount rate and estimates of future cash flows.
    Accordingly, the fair value estimates may not be realized in an
    immediate settlement of the instruments. Therefore, the
    aggregate fair value amounts presented do not represent the
    underlying value of the Company.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The recent fair value guidance provides a consistent definition
    of fair value, which focuses on exit price in an orderly
    transaction (that is, not a forced liquidation or distressed
    sale) between market participants at the measurement date under
    current market conditions. If there has been a significant
    decrease in the volume and level of activity for the asset or
    liability, a change in valuation technique or the use of
    multiple valuation techniques may be appropriate. In such
    instances, determining the price at which willing market
    participants would transact at the measurement date under
    current market conditions depends on the facts and circumstances
    and requires use of significant judgment. The fair value is a
    reasonable point within the range that is most representative of
    fair value under current market conditions.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In accordance with this guidance, the Company groups its
    financial assets and financial liabilities generally measured at
    fair value in three levels, based on the markets in which the
    assets and liabilities are traded and the reliability of the
    assumptions used to determine fair value.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    At December&#160;31, 2009, the Company did not have any
    financial assets or liabilities to value. At December&#160;31,
    2008, the Company&#146;s investments of $288,614 were a
    level&#160;1.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Net unrealized (loss) on
    <FONT style="white-space: nowrap">available-for-sale</FONT>
    securities in the amount of -0-, ($223,606), and ($34,068) for
    the years ended 2009, 2008 and 2007, respectively, has been
    included in accumulated other comprehensive income (loss).
</DIV>
<!-- XBRL,n -->
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">13.&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><U><FONT style="font-family: 'Times New Roman', Times">Subsequent
    Events</FONT></U></B>
</TD>
</TR>

</TABLE>
<!-- XBRL,body -->
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On February&#160;26, 2010, the Company borrowed $250,000 from
    ETS, LLC for the development of prototype concept store in
    Irvine, California.
</DIV>
<!-- /XBRL,NS -->
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<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-20
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="h69192h691922b.gif" alt="">
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 14pt">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
    Units</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 14pt">Units each consisting of one
    share of Common Stock and one<BR>
    Common Stock Purchase Warrant</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="h69192h6919207.gif" alt="(PLANET BEACH LOGO)"><FONT style="font-size: 14pt">
    </FONT>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 14%; border-bottom: 1pt solid #000000"></CENTER>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 12pt">PROSPECTUS</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 14%; border-bottom: 1pt solid #000000"></CENTER>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2010
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="h69192h6919210.gif" alt="C. K. Cooper and Company">
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Until&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2010, all dealers that effect transactions in these securities
    may be required to deliver a prospectus, regardless of whether
    they are participating in this offering. This is in addition to
    the dealers&#146; obligation to deliver a prospectus when acting
    as underwriters and with respect to their unsold allotments or
    subscriptions.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PART&#160;II<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">INFORMATION
    NOT REQUIRED IN PROSPECTUS</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Item&#160;13.<I>&#160;&#160;</I></FONT></B>
</TD>
    <TD>
    <B><I><FONT style="font-family: 'Times New Roman', Times">Other
    Expenses of Issuance and Distribution</FONT></I></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth the costs and expenses, other
    than underwriting discounts and commissions, to be paid in
    connection with the sale of units being registered, all of which
    we will pay. All amounts, other than the SEC registration fee,
    are estimates.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="91%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    SEC registration fee
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,002
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    NYSE Amex listing application fee
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    55,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Printing expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
    *
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    FINRA filing fee
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,308
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Financial advisory fee
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    25,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Directors&#146; and officers&#146; insurance
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
    *
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Legal fees and expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
    *
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accounting fees and expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
    *
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Blue sky fees and expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
    *
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Transfer agent fees
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
    *
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Miscellaneous
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
    *
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">

</TD>
<TD nowrap align="left" valign="bottom">
    *
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD valign="top">
    * </TD>
    <TD></TD>
    <TD valign="bottom">
    To be filed by amendment.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Item&#160;14.<I>&#160;&#160;</I></FONT></B>
</TD>
    <TD>
    <B><I><FONT style="font-family: 'Times New Roman', Times">Indemnification
    of Directors and Officers</FONT></I></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our certificate of incorporation provides that we must
    indemnify, advance expenses to and hold harmless our directors
    to the fullest extent permitted by the General Corporation Law
    of the State of Delaware as it now exists or may be amended in
    the future. Under current Delaware law, a corporation may
    indemnify directors made or threatened to be made a party to any
    threatened, pending or completed civil, criminal, administrative
    or investigative action, suit or proceeding because of that
    person&#146;s service as a director of the corporation or
    because that person was serving at the corporation&#146;s
    request as a director of another corporation or enterprise. The
    corporation may indemnify such a person for expenses (including
    attorneys&#146; fees), judgments, fines and amounts paid in
    settlement that are actually and reasonably incurred by the
    person in connection with the action, suit or proceeding,
    provided that the person acted in good faith and in a manner the
    person reasonably believed to be in or not opposed to the best
    interests of the corporation, and with respect to a criminal
    action or proceeding, if the person had no reasonable cause to
    believe his or her conduct was unlawful.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In each instance of indemnification, the corporation may only
    indemnify the person following a determination that the person
    met the applicable standard of conduct by:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a majority vote of the directors who are not parties to the
    action, suit or proceeding;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    a committee of the board of directors designated by a majority
    vote of those disinterested directors;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    by independent legal counsel if there are no disinterested
    directors or the disinterested directors so direct; or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the stockholders.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A corporation may pay expenses (including attorneys&#146; fees)
    incurred by the director in defending an action, suit or
    proceeding in advance of the final disposition of the action,
    suit or proceeding upon receipt of an undertaking by the
    director to repay the corporation the amount paid in advance if
    it is ultimately determined that the person is not entitled to
    be indemnified. The corporation shall be required to indemnify,
    or
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    II-1
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    advance expenses to, our directors in connection with a
    proceeding commenced by our directors only if the board of
    directors authorized the commencement of the proceeding.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    At the present time, there is no pending litigation or
    proceeding involving a director, officer, employee or other
    agent of ours in which indemnification would be required or
    permitted. We are not aware of any threatened litigation or
    proceeding which may result in a claim for such indemnification.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We maintain a directors&#146; and officers&#146; liability
    insurance policy, the general effect of which is to provide:
    (a)&#160;coverage for the Company with respect to amounts it is
    permitted to pay to directors under the indemnification
    provisions set forth in the Delaware General Corporation Law and
    Article&#160;V of the Company&#146;s Bylaws and
    (b)&#160;coverage of the directors and officers of the Company
    for liabilities (including certain liabilities under the federal
    securities laws) incurred by such persons in their capacities as
    directors and officers for which they are not indemnified by the
    Company.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Item&#160;15.<I>&#160;&#160;</I></FONT></B>
</TD>
    <TD>
    <B><I><FONT style="font-family: 'Times New Roman', Times">Recent
    Sales of Unregistered Securities</FONT></I></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following is a summary of transactions by us from
    January&#160;1, 2007 through the date of this registration
    statement involving sales of our securities that were not
    registered under the Securities Act of 1933, as amended, or the
    Securities Act. This summary gives effect to the 1 for 3.5
    reverse stock split we effected on March&#160;18, 2010.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On September&#160;30, 2008, we issued 879&#160;shares of common
    stock to JTL Enterprises, Inc., one of our suppliers of water
    massage machines, when we converted $22,350 of accounts payable
    into a promissory note. In addition, we granted JTL Enterprises,
    Inc. the option to convert the remaining outstanding balance we
    owed on the note into common stock, which option expired on
    September&#160;30, 2009. We believe that the issuance of the
    shares and the option was exempt from the registration and
    prospectus delivery requirements of the Securities Act by virtue
    of Section&#160;4(2) of the Securities Act.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    MT Industries, Inc. is a supplier of U-V equipment and related
    products. On October&#160;3, 2008, we converted $92,483 of
    accounts payable owed to MT Industries for equipment purchases
    into a four-year, unsecured note payable. Upon execution of the
    note, we awarded MT Industries 4,396&#160;shares of common stock
    and the option to convert the balance owed into additional
    shares of common stock within 12&#160;months. This option to
    convert expired October&#160;3, 2009. We believe that the
    issuance of the shares and the option was exempt from the
    registration and prospectus delivery requirements of the
    Securities Act by virtue of Section&#160;4(2) of the Securities
    Act.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On October&#160;31, 2008 as part of the note payable agreement
    with one of our vendors, we converted an accounts payable of
    approximately $59,000 into a four year note payable. We were
    also allowed additional financing from the vendor of up to
    $300,000. Under this agreement, we awarded the vendor
    5,275&#160;shares of common stock and the option to convert
    balances due under the note into additional shares of our common
    stock within 12&#160;months of an initial public offering of our
    common stock at a conversion price equal to the initial public
    offering price. We believe that the issuance of the shares and
    grant of the option were exempt from the registration and
    prospectus delivery requirements of the Securities Act by virtue
    of Section&#160;4(2) of the Securities Act.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    II-2
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, we granted options to purchase our common stock to
    our employees pursuant to our 2005 Stock Option Plan as follows:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="84%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="12%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Grant Date</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Number Granted</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    1/1/2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,429
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    4/1/2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    286
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    4/13/2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    25,429
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    4/16/2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    286
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    5/14/2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    286
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    5/16/2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    571
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    5/24/2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    286
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    6/6/2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    35,714
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    7/2/2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    857
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    7/16/2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    286
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    8/29/2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    14,286
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    9/10/2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,857
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    10/9/2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    286
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    10/29/2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    286
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    11/4/2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    286
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    11/9/2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    286
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    12/10/2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    286
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    12/21/2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    286
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    9/1/2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    419,143
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    10/1/2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,429
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    1/1/2010
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    40,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that the above disclosed grants of options were
    exempt from the registration and prospectus delivery
    requirements of the Securities Act of 1933 by virtue of
    Section&#160;4(2) of the Securities Act or Rule&#160;701
    promulgated under Section&#160;3(b) of the Securities Act, as
    transactions not involving any public offering or transactions
    pursuant to compensatory benefit plans and contracts relating to
    compensation.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Item&#160;16.<I>&#160;&#160;</I></FONT></B>
</TD>
    <TD>
    <B><I><FONT style="font-family: 'Times New Roman', Times">Exhibits
    and Financial Statement Schedules</FONT></I></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (a)&#160;Exhibits
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=01 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=01 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=01 type=align1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="91%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Exhibit<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="3" nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Number</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Description</B>
</DIV>
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    1
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Underwriting Agreement
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    3
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    First Amended and Restated Certificate of Incorporation
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    3
</TD>
<TD nowrap align="left" valign="top">
    .2
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    Bylaws
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    4
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of common stock certificate
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    4
</TD>
<TD nowrap align="left" valign="top">
    .2
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of warrant certificate
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    4
</TD>
<TD nowrap align="left" valign="top">
    .3*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of unit certificate
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    4
</TD>
<TD nowrap align="left" valign="top">
    .4*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Warrant
    Agreement&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    4
</TD>
<TD nowrap align="left" valign="top">
    .5
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of representative&#146;s purchase warrants
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    5
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Opinion of Richards, Layton&#160;&#038; Finger, P.A
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .1
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Single Unit Franchise Agreement
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .2
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of
    <FONT style="white-space: nowrap">Multi-Unit</FONT>
    Option Agreement
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .3
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Master Franchisor Agreement
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .4
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Area Representative Agreement
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .5+
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    2005 Stock Option Plan
</TD>
</TR>
</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    II-3
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->
<!-- XBRL Table Pagebreak -->

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=01 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=01 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=01 type=align1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="91%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Exhibit<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="3" nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Number</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Description</B>
</DIV>
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .6+*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Employment Agreement between the Registrant and Stephen P. Smith
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .7+*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Employment Agreement between the Registrant and Richard L. Juka
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .8
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Promissory Note dated March&#160;9, 2007 to Capital One,
    National Association
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .9
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Promissory Note dated June&#160;13, 2007 to Small Business
    Association
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .10
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Promissory Note dated July&#160;19, 2007 to Whitney National Bank
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .11*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Asset Purchase Agreement, by and among Planet Beach Franchising
    Corporation, Planet Beach Brands, L.L.C. and Stephen P. Smith
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    21
</TD>
<TD nowrap align="left" valign="top">
    .1
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    List of subsidiaries of the registrant
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    23
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Consent of Richards, Layton&#160;&#038; Finger, P.A
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    23
</TD>
<TD nowrap align="left" valign="top">
    .2
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Consent of Postlethwaite&#160;&#038; Netterville, APAC
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    24
</TD>
<TD nowrap align="left" valign="top">
    .1
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Power of Attorney (see signature page)
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD valign="top">
    * </TD>
    <TD></TD>
    <TD valign="bottom">
    To be filed by amendment.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    + </TD>
    <TD></TD>
    <TD valign="bottom">
    Management contract or compensatory plan or arrangement.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Item&#160;17.<I>&#160;&#160;</I></FONT></B>
</TD>
    <TD>
    <B><I><FONT style="font-family: 'Times New Roman', Times">Undertakings</FONT></I></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The undersigned registrant hereby undertakes:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    1.&#160;To file, during any period in which offers or sales are
    being made, a post-effective amendment to this registration
    statement:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (a)
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    i.&#160;To include any prospectus required by
    section&#160;10(a)(3) of the Securities Act of 1933;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    ii.&#160;To reflect in the prospectus any facts or events
    arising after the effective date of the registration statement
    (or the most recent post-effective amendment thereof) which,
    individually or in the aggregate, represent a fundamental change
    in the information set forth in the registration statement.
    Notwithstanding the foregoing, any increase or decrease in
    volume of securities offered (if the total dollar value of
    securities offered would not exceed that which was registered)
    and any deviation from the low or high end of the estimated
    maximum offering range may be reflected in the form of
    prospectus filed with the Commission pursuant to
    Rule&#160;424(b) if, in the aggregate, the changes in volume and
    price represent no more than 20% change in the maximum aggregate
    offering price set forth in the &#147;Calculation of
    Registration Fee&#148; table in the effective registration
    statement.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    iii.&#160;To include any material information with respect to
    the plan of distribution not previously disclosed in the
    registration statement or any material change to such
    information in the registration statement;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (b)
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    i.&#160;That, for the purpose of determining any liability under
    the Securities Act of 1933, each such post-effective amendment
    shall be deemed to be a new registration statement relating to
    the securities offered therein, and the offering of such
    securities at that time shall be deemed to be the initial bona
    fide offering thereof.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    ii.&#160;To remove from registration by means of a
    post-effective amendment any of the securities being registered
    which remain unsold at the termination of the offering.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    iii.&#160;For the purpose of determining liability of the
    registrant under the Securities Act of 1933 to any purchaser in
    the initial distribution of the securities, that in a primary
    offering of securities of the undersigned registrant pursuant to
    this registration statement, regardless of the underwriting
    method used to sell the securities to the purchaser, if the
    securities are offered or sold to such
</DIV>
<!-- XBRL Paragraph Pagebreak -->
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    II-4
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="left" style="margin-left: 8%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    purchaser by means of any of the following communications, the
    undersigned registrant will be a seller to the purchaser and
    will be considered to offer or sell such securities to such
    purchaser:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 13%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (I)&#160;Any preliminary prospectus or prospectus of the
    undersigned registrant relating to the offering required to be
    filed pursuant to Rule&#160;424;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 13%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (II)&#160;Any free writing prospectus relating to the offering
    prepared by or on behalf of the undersigned registrant or used
    or referred to by the undersigned registrant;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 13%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (III)&#160;The portion of any other free writing prospectus
    relating to the offering containing material information about
    the undersigned registrant or its securities provided by or on
    behalf of the undersigned registrant;&#160;and
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 13%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (IV)&#160;Any other communication that is an offer in the
    offering made by the undersigned registrant to the purchaser.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    2.&#160;To provide to the underwriter at the closing specified
    in the underwriting agreements certificates in such
    denominations and registered in such names as required by the
    underwriter to permit prompt delivery to each purchaser.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    3.
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (a)&#160;For purposes of determining any liability under the
    Securities Act of 1933, the information omitted from the form of
    prospectus filed as part of this registration statement in
    reliance upon Rule&#160;430A and contained in a form of
    prospectus filed by the registrant pursuant to
    Rule&#160;424(b)(1)&#160;or (4)&#160;or 497(h) under the
    Securities Act shall be deemed to be part of this registration
    statement as of the time it was declared effective.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (b)&#160;For the purpose of determining any liability under the
    Securities Act of 1933, each post-effective amendment that
    contains a form of prospectus shall be deemed to be a new
    registration statement relating to the securities offered
    therein, and the offering of such securities at that time shall
    be deemed to be the initial bona fide offering thereof.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Insofar as indemnification for liabilities arising under the
    Securities Act of 1933&#160;may be permitted to directors,
    officers and controlling persons of the registrant pursuant to
    the foregoing provisions, or otherwise, the registrant has been
    advised that in the opinion of the Securities and Exchange
    Commission such indemnification is against public policy as
    expressed in the Act and is, therefore, unenforceable. In the
    event that a claim for indemnification against such liabilities
    (other than the payment by the registrant of expenses incurred
    or paid by a director, officer or controlling person of the
    registrant in the successful defense of any action, suit or
    proceeding) is asserted by such director, officer or controlling
    person in connection with the securities being registered, the
    registrant will, unless in the opinion of its counsel the matter
    has been settled by controlling precedent, submit to a court of
    appropriate jurisdiction the question whether such
    indemnification by it is against public policy as expressed in
    the Act and will be governed by the final adjudication of such
    issue.
</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    II-5
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SIGNATURES</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Pursuant to the requirements of the Securities Act of 1933, as
    amended, the registrant has duly caused this registration
    statement to be signed on its behalf by the undersigned,
    thereunto duly authorized, in the City of Marrero, State of
    Louisiana, on the second day of April 2010.
</DIV>

<DIV style="margin-top: 24pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 49%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>PLANET BEACH FRANCHISING CORPORATION</B>
</DIV>

<DIV style="margin-top: 48pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="49%"></TD>
    <TD width="4%"></TD>
    <TD width="47%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    By:&#160;
</TD>
    <TD align="left">
    <DIV style="display:inline; text-align:left;">/s/&#160;&#160;<FONT style="font-variant: SMALL-CAPS">Stephen
    P. Smith</FONT></DIV>
</TD>
</TR>

</TABLE>

<DIV style="font-size: 2pt; margin-left: 53%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV align="left" style="margin-left: 53%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Stephen P. Smith
</DIV>

<DIV align="left" style="margin-left: 53%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    President, Chief Executive Officer
</DIV>

<DIV align="left" style="margin-left: 53%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (Principal Executive Officer) and Chairman of
</DIV>

<DIV align="left" style="margin-left: 53%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    the Board of Directors
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">POWER OF
    ATTORNEY</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Pursuant to the requirements of the Securities Act of 1933, this
    registration statement has been signed by the following persons
    in the capacities and on the dates indicated. Each person whose
    signature appears below constitutes and appoints Stephen P.
    Smith and Craig M. Berner, and each of them individually, his
    true and lawful attorneys-in-fact and agents, with full power of
    substitution and resubstitution, for him and in his name, place
    and stead, in any and all capacities, to sign any and all
    amendments (including post-effective amendments) to this
    registration statement, and to file the same, with all exhibits
    thereto, and other documents in connection therewith, with the
    Securities and Exchange Commission, granting unto said
    attorneys-in-fact and agents, and each of them, full power and
    authority to do and perform each and every act and thing
    requisite and necessary to be done in connection therewith, as
    fully to all intents and purposes as he might or could do in
    person, hereby ratifying and confirming all that said
    attorneys-in-fact and agents, or any of them, or their or his
    substitute or substitutes, may lawfully do or cause to be done
    by virtue hereof.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="4%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="39%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="39%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="11%">&nbsp;</TD>	<!-- colindex=04 type=maindata -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="3" nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Signature</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Title</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Date</B>
</DIV>
</TD>
</TR>
<TR style="line-height: 12pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom" style="line-height: 12pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" valign="top">
    <DIV style="display:inline; text-align:left;">/s/&#160;&#160;<FONT style="font-variant: SMALL-CAPS">Stephen
    P. Smith</FONT></DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>Stephen
    P. Smith
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    President, Chief Executive Officer (Principal Executive Officer)
    and Chairman of the Board of Directors
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    April&#160;2, 2010
</TD>
</TR>
<TR valign="bottom" style="line-height: 12pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" valign="top">
    <DIV style="display:inline; text-align:left;">/s/&#160;&#160;<FONT style="font-variant: SMALL-CAPS">Richard
    L. Juka</FONT></DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>Richard
    L. Juka
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    Senior Vice President, Chief Operating Officer, Secretary,
    Treasurer and Director
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    April&#160;2, 2010
</TD>
</TR>
<TR valign="bottom" style="line-height: 12pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" valign="top">
    <DIV style="display:inline; text-align:left;">/s/&#160;&#160;<FONT style="font-variant: SMALL-CAPS">Craig
    M. Berner</FONT></DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>Craig
    M. Berner
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    Chief Financial Officer (Principal Financial and Accounting
    Officer)
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    April&#160;2, 2010
</TD>
</TR>
<TR valign="bottom" style="line-height: 12pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" valign="top">
    <DIV style="display:inline; text-align:left;">/s/&#160;&#160;<FONT style="font-variant: SMALL-CAPS">Eric
    E. Bosch</FONT></DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>Eric
    E. Bosch
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    Director
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    April&#160;2, 2010
</TD>
</TR>
<TR valign="bottom" style="line-height: 12pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" valign="top">
    <DIV style="display:inline; text-align:left;">/s/&#160;&#160;<FONT style="font-variant: SMALL-CAPS">Gary
    N. Solomon</FONT></DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>Gary
    N. Solomon
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    Director
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    April&#160;2, 2010
</TD>
</TR>
<TR valign="bottom" style="line-height: 12pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" valign="top">
    <DIV style="display:inline; text-align:left;">/s/&#160;&#160;<FONT style="font-variant: SMALL-CAPS">Ronald
    Warner</FONT></DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV>Ronald
    Warner
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    Director
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    April&#160;2, 2010
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
<!-- XBRL Pagebreak Begin -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    II-6
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<!-- XBRL Pagebreak End -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">EXHIBIT&#160;INDEX</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=01 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=01 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=01 type=align1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="91%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
</TR>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Exhibit<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="3" nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Number</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Description</B>
</DIV>
</TD>
</TR>
<!-- TableOutputBody -->
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    1
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Underwriting Agreement
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    3
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    First Amended and Restated Certificate of Incorporation
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    3
</TD>
<TD nowrap align="left" valign="top">
    .2
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    Bylaws
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    4
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of common stock certificate
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    4
</TD>
<TD nowrap align="left" valign="top">
    .2
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of warrant certificate
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    4
</TD>
<TD nowrap align="left" valign="top">
    .3*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of unit certificate
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    4
</TD>
<TD nowrap align="left" valign="top">
    .4*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Warrant Agreement
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    4
</TD>
<TD nowrap align="left" valign="top">
    .5
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of representative&#146;s purchase warrants
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    5
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Opinion of Richards, Layton&#160;&#038; Finger, P.A.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .1
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Single Unit Franchise Agreement
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .2
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of
    <FONT style="white-space: nowrap">Multi-Unit</FONT>
    Option Agreement
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .3
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Master Franchisor Agreement
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .4
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Area Representative Agreement
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .5+
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    2005 Stock Option Plan
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .6+*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Employment Agreement between the Registrant and Stephen P. Smith
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .7+*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Employment Agreement between the Registrant and Richard L. Juka
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .8
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Promissory Note dated March&#160;9, 2007 to Capital One,
    National Association
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .9
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Promissory Note dated June&#160;13, 2007 to Small Business
    Association
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .10
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Promissory Note dated July&#160;19, 2007 to Whitney National Bank
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .11*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Asset Purchase Agreement, by and among Planet Beach Franchising
    Corporation, Planet Beach Brands, L.L.C. and Stephen P. Smith
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    21
</TD>
<TD nowrap align="left" valign="top">
    .1
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    List of subsidiaries of the registrant
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    23
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Consent of Richards, Layton&#160;&#038; Finger, P.A
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    23
</TD>
<TD nowrap align="left" valign="top">
    .2
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Consent of Postlethwaite&#160;&#038; Netterville, APAC
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    24
</TD>
<TD nowrap align="left" valign="top">
    .1
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Power of Attorney (see signature page)
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD valign="top">
    * </TD>
    <TD></TD>
    <TD valign="bottom">
    To be filed by amendment.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    + </TD>
    <TD></TD>
    <TD valign="bottom">
    Management contract or compensatory plan or arrangement.</TD>
</TR>

</TABLE>
<!-- XBRL Pagebreak Begin -->

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
</BODY>
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sv1
Table of Contents
As filed with the Securities and Exchange Commission on
    April 2, 2010
Registration
No. 333-
UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
Washington, D.C.
    20549
Form S-1
REGISTRATION
    STATEMENT
UNDER
THE SECURITIES ACT OF
    1933
PLANET BEACH FRANCHISING
    CORPORATION
(Exact name of registrant as
    specified in its charter)
Delaware
7299
72-1343492
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification No.)
5145 Taravella Road
Marrero, Louisiana
    70072
(504) 361-5550
(Address, including zip code,
    and telephone number, including area code, of registrant's
    principal executive offices)
Stephen P. Smith
Planet Beach Franchising
    Corporation
5145 Taravella Road
Marrero, Louisiana
    70072
(504) 361-5550
(Name, address, including zip
    code, and telephone number, including area code, of agent for
    service)
Copies to:
Louis Y. Fishman
Maureen Brennan Gershanik
Fishman Haygood Phelps
Walmsley Willis & Swanson, L.L.P.
201 St. Charles Avenue, Suite 4600
New Orleans, Louisiana 70170
(504) 586-5252
Michael A. Hedge
Joshua A. Lane
K&L Gates LLP
1900 Main Street, Suite 600
Irvine, California 92614
(949) 253-0900
Approximate date of commencement of proposed sale to the
    public:
As soon as practicable after this
    Registration Statement becomes effective.
If any of the securities being registered on this Form are to be
    offered on a delayed or continuous basis pursuant to
    Rule 415 under the Securities Act of 1933, check the
    following
    box.
þ
If this Form is filed to register additional securities for an
    offering pursuant to Rule 462(b) under the Securities Act,
    please check the following box and list the Securities Act
    registration statement number of the earlier effective
    registration statement for the same
    offering.
o
If this Form is a post-effective amendment filed pursuant to
    Rule 462(c) under the Securities Act, check the following
    box and list the Securities Act registration statement number of
    the earlier effective registration statement for the same
    offering.
o
If this Form is a post-effective amendment filed pursuant to
    Rule 462(d) under the Securities Act, check the following
    box and list the Securities Act registration statement number of
    the earlier effective registration statement for the same
    offering.
o
Indicate by check mark whether the registrant is a large
    accelerated filer, an accelerated filer, a non-accelerated
    filer, or a smaller reporting company. See the definitions of
    "large accelerated filer," "accelerated
    filer" and "smaller reporting company" in
    Rule 12b2 of the Exchange Act.
Large accelerated
    filer
o
Accelerated
    filer
o
Non-accelerated
filer
o
Smaller reporting
    company
þ
(Do not check if a smaller reporting
    company)
CALCULATION
    OF REGISTRATION FEE
Proposed Maximum
Aggregate Offering
Amount of
Title of Securities to be Registered
Price(1)(2)
Registration Fee
Units, each unit consisting of:
$11,500,000
$820
One share of common stock, $0.0001 par value
—
—(5)
One warrant to purchase one share of common stock
—
—(5)
Representative's warrants to purchase shares of common
    stock, $0.0001 par value per share (3)
$1,000,000
$71.30
Shares of common stock issuable upon exercise of warrants
    included in the units, and upon exercise of the
    representative's warrants
$15,575,000(4)
$1,110.50
TOTAL
$28,075,000
$2,002
(1)
Estimated solely for the purpose of calculating the registration
    fee pursuant to Rule 457(o) under the Securities Act of
    1933, as amended.
(2)
Includes the aggregate offering price of the units that may be
    issued upon exercise of the underwriters' over-allotment
    option and the shares of common stock underlying the warrants
    included in those over-allotment units.
(3)
In connection with the sale of the units, the registrant will
    issue to the representative of the underwriters warrants to
    purchase up
    to          shares
    of common stock, par value $0.0001 per share.
(4)
Determined in accordance with Rule 457(i) based upon the
    estimated exercise price of the warrants.
(5)
No fee required pursuant to Rule 457(g).
The registrant hereby amends this registration statement on
    such date or dates as may be necessary to delay its effective
    date until the registrant shall file a further amendment which
    specifically states that this registration statement shall
    thereafter become effective in accordance with Section 8(a)
    of the Securities Act of 1933 or until the registration
    statement shall become effective on such date as the Commission,
    acting pursuant to said Section 8(a), may determine.
Table of Contents
The
information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not
permitted.
SUBJECT TO COMPLETION, DATED
    APRIL 2, 2010
PRELIMINARY PROSPECTUS
Units
Units each consisting of one
    Share of Common Stock and
one Common Stock Purchase
    Warrant
This is the initial public offering of Planet Beach Franchising
    Corporation. We are
    offering          
    units, each consisting of one share of our common stock and one
    redeemable common stock purchase warrant. The estimated initial
    offering price is between $      and
    $      per unit. The common stock and
    warrants will trade as a unit for 35 days following the
    date of this prospectus, after which the warrants will be
    exercisable and the common stock and the warrants will trade
    separately. For a more detailed description of our common stock,
    see the section entitled "Description of
    Securities — Common Stock" on page 65 of
    this prospectus, and for a more detailed description of the
    warrants, see the section entitled "Description of
    Securities — Warrants" beginning on page 65
    of this prospectus.
We will apply to list the units for trading on the NYSE Amex
    under the symbol "PBFCU" beginning on or promptly
    after the date of this prospectus. Once the shares and warrants
    begin separate trading, we anticipate that the shares will be
    listed on the NYSE Amex under the symbol "PBFC" and
    the warrants will be listed on the NYSE Amex under the symbol
    "PBFCW," but we cannot assure you that any of the
    securities offered by this prospectus will be so listed or, if
    listed, will continue to be listed. Currently, there is no
    public market for the units, our common stock or the warrants.
This investment involves a high degree of risk.  We
    urge you to read carefully the "Risk Factors" section
    beginning on page 10 of this prospectus.
Per Unit
Total
Public Offering Price
$
$
Underwriting Discount
$
$
Proceeds, Before Expenses, to Us
$
$
We have granted the underwriters an option for a period of
    30 days from the date of this prospectus to purchase up
    to          additional
    units on the same terms and conditions set forth above to cover
    over-allotments.
Please see "Underwriting" beginning on page 72 of
    this prospectus for more information regarding our arrangements
    with the underwriters.
Neither the Securities and Exchange Commission nor any state
    securities commission nor any other regulatory body has approved
    or disapproved of these securities or passed on the accuracy or
    adequacy of this prospectus. Any representation to the contrary
    is a criminal offense.
The underwriters expect to deliver the units to purchasers on or
    about          ,
    2010.
The date of this prospectus
    is          ,
    2010.
Table of Contents
TABLE OF
    CONTENTS
Page No.
SUMMARY
1
RISK FACTORS
10
SPECIAL NOTE REGARDING FORWARD-LOOKING
    STATEMENTS
20
USE OF PROCEEDS
20
DETERMINATION OF OFFERING PRICE
21
CAPITALIZATION
23
DILUTION
24
DIVIDEND POLICY
25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS
26
OUR BUSINESS
43
MANAGEMENT
57
EXECUTIVE COMPENSATION
60
TRANSACTIONS WITH RELATED PERSONS
62
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
    AND MANAGEMENT
64
DESCRIPTION OF SECURITIES
65
SHARES ELIGIBLE FOR FUTURE SALE
69
UNDERWRITING
72
INTERESTS OF CERTAIN PERSONS IN THE OFFERING
74
LEGAL MATTERS
75
EXPERTS
75
WHERE YOU CAN FIND MORE INFORMATION
75
FINANCIAL STATEMENTS
F-1
EX-3.2
EX-4.2
EX-4.5
EX-10.1
EX-10.2
EX-10.3
EX-10.4
EX-10.5
EX-10.8
EX-10.9
EX-10.10
EX-21.1
EX-23.2
You should only rely on the information contained in this
    prospectus. We have not, and the underwriters have not,
    authorized anyone to provide you with additional information or
    information different from that contained in this prospectus. We
    are not, and the underwriters are not, making an offer to sell
    these securities in any jurisdiction where an offer or sale is
    not permitted. You should assume that the information appearing
    in this prospectus is accurate as of the date on the front cover
    of this prospectus only, regardless of the time of delivery of
    this prospectus or of any sale of our securities. Our business,
    prospects, financial condition and results of operations may
    have changed since that date.
This document may only be used where it is legal to sell these
    securities. Certain jurisdictions may restrict the distribution
    of these documents and the offering of these securities. We
    require persons receiving these documents to inform themselves
    about and to observe any such restrictions. We have not taken
    any action that would permit an offering of these securities or
    the distribution of these documents in any jurisdiction that
    requires such action.
The Planet
    Beach
®
name and logo and the Contempo
    Spa
®
name are registered trademarks of Planet Beach Brands, L.L.C.
    All rights reserved.
i
Table of Contents
Industry
    and Market Data
Unless otherwise indicated, the market data and certain other
    statistical information used throughout this prospectus are
    based on independent industry publications, government
    publications, reports by market research firms or other
    published independent sources. Although we believe these
    third-party sources are reliable, we have not independently
    verified the information. None of the sources cited in this
    prospectus has consented to the inclusion of any data from its
    reports, nor have we sought their consent. In addition, some
    data are based on our good faith estimates. Such estimates are
    derived from publicly available information released by
    independent industry analysts and third-party sources, as well
    as our own management's experience in the industry, and are
    based on assumptions we made based on such data and our
    knowledge of the industry and markets, which we believe to be
    reasonable. However, none of our estimates has been verified by
    any independent source. Our estimates and assumptions involve
    risks and uncertainties and are subject to change based on
    various factors, including those discussed in the "Risk
    Factors" section of this prospectus and the other
    information contained in this prospectus. These and other
    factors could cause our actual results to differ materially from
    those expressed in the estimates and assumptions.
ii
Table of Contents
SUMMARY
The items in the following summary are described in more
    detail later in this prospectus. This summary provides an
    overview of selected information and does not contain all the
    information you should consider before investing in our
    securities. Therefore, you should read this entire prospectus
    carefully, especially the matters set forth under "Risk
    Factors," the consolidated financial statements and the
    notes to those consolidated financial statements before making
    an investment decision.
In this prospectus, unless indicated otherwise, references to
    "Planet Beach," "the company,"
    "we," "us," or "our," are
    references to Planet Beach Franchising Corporation and its
    wholly-owned subsidiaries, but do not include the stockholders
    of Planet Beach Franchising Corporation.
    "U.S. dollars," "dollars,"
    "USD" and "$" refer to the legal currency of
    the United States.
Overview
We believe we are the largest, full-service automated day spa
    franchisor in the United States. We grant franchises for stores
    operating under the Planet Beach name. As of January 15,
    2010, we had 345 franchises located in 38 U.S. states,
    Canada, Ireland, South Africa and Australia. We also had at that
    date 20 additional franchises under development, including
    proposed locations in one new state as well as in Egypt, Saudi
    Arabia and Kuwait. In addition, at that date we had candidates
    interested in
re-opening
16 previously closed locations, including one in an additional
    state.
Our Contempo Spas offer our customers a unique experience by
    providing high quality automated day spa services. These
    services include automated massages and facials, ultra violet or
    "U-V" light therapy and sunless tanning. We provide
    automated spa services through equipment such as hydro massage
    and facial machines that do not require a therapist or
    aesthetician. Instead, a spa employee programs individual spa or
    U-V sessions and sets the desired time of the session through
    the store's point of sale software. The customer activates
    the session by pressing a start button in the treatment room and
    may adjust the settings according to his or her preferences on
    certain equipment such as hydro massage units.
Our spas also offer a variety of skin care, U-V and nutritional
    products, as well as an on-line nutritional service.
We establish most of our domestic franchises through
    intermediaries whom we call "area representatives." We
    grant development territories to area representatives in return
    for a territory development fee. These development territories
    are geographic regions within which area representatives are
    entitled to market franchises and are obligated to train,
    support and provide guidance to franchisees in the territory.
    Our area representatives are entitled to a percentage of the
    fees we earn when we sell a new franchise or transfer an
    existing franchise to a new franchisee in the area
    representative's territory. In some circumstances, we also
    pay a percentage of those fees for new or transferred franchises
    outside the area representative's territory obtained as a
    result of the area representative's efforts. Additionally,
    our area representatives are entitled to a percentage of
    collected royalties that we receive from our franchisees in
    their territories.
We establish most of our international franchises through
    persons we refer to as "master franchisors." Our
    agreements with our master franchisors give them the right to
    grant Planet Beach franchises in their assigned geographic
    region. The master franchisors develop their own franchise
    system in their areas. For example, the master franchisors are
    required directly, or through area representatives whom they
    appoint, to sell, train, support and provide guidance to
    franchisees in their areas. The master franchisors owe us a
    master franchise fee when we appoint them as a master
    franchisor, additional fees or royalties upon the sale of
    franchises and a percentage of the revenues generated by
    franchise outlets in the assigned area.
We require our franchisees and master franchisors to purchase
    U-V and spa equipment, as well as certain U-V, skin care and
    nutritional products, from us or from suppliers we designate. We
    receive a royalty for equipment and products sold to our
    franchisees and master franchisors directly by the designated
    supplier. All of the equipment, and approximately 53% of the
    products, are sold under the Planet Beach private label.
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Table of Contents
Our
    Contempo Spa Concept
We were founded in 1996 as a U-V tanning franchise business.
    However, in 2005, we substantially revised our business model to
    adopt our Contempo Spa concept in response to the general
    slowdown of sales in the tanning salon industry.
Our Contempo Spas offer U-V services along with traditional day
    spa services such as facials, steam baths, and massages. These
    spa services are performed by automated equipment such as
    massage units or light therapy equipment, which reduces the
    staffing that is required compared with a traditional day spa
    operation. Reducing the number of trained and certified
    employees required to operate a Planet Beach franchise results
    in reduced operating costs and a greater return on investment.
    The automated equipment at our Contempo Spas allows our
    customers to take advantage of more services in less time and at
    a lower cost than at a traditional day spa. Additionally, we
    believe that the quality of individual services offered at each
    repeat visit is more consistent than at a traditional day spa
    where services are provided by a therapist or aesthetician.
We do not own any long-term exclusive rights to use the
    equipment featured in our Contempo Spas, some of which is also
    used in malls, airports, massage therapist offices, and some
    tanning franchises. However, we are not aware of any significant
    competitor that employs the same automated day spa concept that
    we have developed, using the same type and quantity of equipment
    that we do.
Our Contempo Spas include some, or all, of the following
    automated equipment:
•
aqua and hydro massage units that use heat and water pressure to
    decrease muscle tension, and therasage and cyber-relax units
    that reproduce the therapeutic benefits of a traditional
    pressure massage;
•
hydro-derma fusion stations that combine infrared heat and
    nutrient-rich steam to moisturize the skin;
•
luminous facial and hand units that use light therapy to improve
    skin texture and tone, lighten age spots and diminish wrinkles;
•
misting spa units that use a cool mist spray which prompts
    cellular skin renewal to diminish fine lines and wrinkles and
    improve skin elasticity;
•
sunless tanning equipment that uses a tanning mist which is
    sprayed onto the skin's surface to create an artificial tan;
•
teeth whitening equipment designed to restore teeth color;
•
units that use infrared heating to deep heat the body and
    aromatherapy for relaxation;
•
equipment that leads customers through guided meditation and
    relaxation sessions to reduce stress, improve mental clarity or
    promote lifestyle changes, such as weight loss or smoking
    cessation; and
•
U-V
light
    beds.
In addition to our spa services, our locations offer an array of
    retail products and specialty items that enhance the Contempo
    Spa experience, including U-V lotions, spa accessories, spa
    hydration products, nutritional products, holistic and skincare
    products, and promotional merchandise.
Our Sales
    Platform and Customers
Our franchisees charge a monthly membership fee to customers for
    different service offerings. Members can choose from different
    service levels, some of which include only U-V services, while
    others include U-V services, automated spa treatments and access
    to our on-line NutritionSpa.com service, which provides
    nutrition, skin wellness, and weight control information. At the
    higher service levels, members receive reciprocation rights that
    allow them to visit any of our spa locations without paying an
    additional fee, and they have unlimited access to all of our
    services at a monthly cost that is comparable to or lower than
    the cost of a single visit at a traditional day spa. Our monthly
    membership fees program results in a stable revenue stream for
    our franchisees. Our locations also offer services on an
    individual, non-membership basis, and an array of retail U-V,
    skincare and nutritional products.
2
Table of Contents
In fiscal 2009, our locations served approximately 561,000
    customers. Of those customers, approximately 162,000 were Planet
    Beach members. Membership data indicates that the average age of
    those members was 31, and approximately 88% were female. We also
    have a system-wide database of all current and former Planet
    Beach customers, which contained approximately 2.1 million
    people at December 31, 2009.
Our
    Industry
According to the International SPA Association, or ISPA, the spa
    industry recognized $12.8 billion and $10.9 billion of
    revenue in 2008 and 2007, respectively, an increase of
    approximately 17.5%. Spa visits increased from 138 million
    visits in 2007 to 160 million visits in 2008, or 16%. ISPA
    reports that at the end of 2008 there were 21,300 spas in the
    U.S., a 19% increase since the end of 2007, when there were
    17,900 U.S. spas. The number of spa locations in the
    U.S. has increased at a five year average growth rate of
    17%.
With the introduction of our nutritional and holistic skin care
    lines, as well as our success at converting to the Contempo Spa
    model, we have aimed to place ourselves in the wellness
    industry, an industry that, according to Natural Marketing
    Institute, experienced $200 billion in revenue through 2008.
Our
    Competitive Strengths
We believe that we have the following competitive strengths:
•
Brand Market Differentiation and Brand
    Loyalty.
We are not aware of any other
    significant franchise in the U.S. that uses our business
    model. We believe that our position as the first company to
    market the Contempo Spa concept has the potential to create
    significant market share for us that will solidify our presence
    as the industry leader when other companies begin to compete
    with us in this sector. Our membership reciprocation rights that
    allow members to visit any of our spa locations without paying
    an additional fee is an important part of our strategy to build
    brand loyalty. We believe we can attract customers of our
    tanning salon competitors by introducing them to our spa
    services.
•
Use of Automated Spa Equipment Reduces our Labor Costs and
    Has Customer Appeal.
Through the use of
    automated, non-attended spa equipment, our franchisees are able
    to reduce labor costs because no staff members need be present
    during spa treatments. This format also allows franchisees to
    offer customers competitive and value-oriented pricing. In
    addition, we believe that the use of automated equipment is
    attractive to an expanded client base that desires spa services
    provided in less time and at comparable or lower cost than a
    single visit to a traditional day spa. We believe this model
    also has significant appeal in countries where social customs
    emphasize greater personal modesty. Furthermore, we believe that
    customers find the services provided by automated equipment are
    more consistent in quality from visit to visit than services
    provided by a therapist or aesthetician.
•
Capacity for Expansion.
We intend to add
    customers by increasing our sales network and increasing the
    number of our outlets both domestically and internationally. In
    2010, we believe our growth in open locations will primarily
    occur internationally. At the end of 2010, we expect that we
    will have approximately 28 locations outside the U.S., which
    would be an increase of approximately 22% in international
    locations from December 31, 2009. We expect to return to a
    more rapid growth rate domestically after we expand our
    franchise marketing efforts using the proceeds of this offering.
    We believe we have developed an infrastructure that we can now
    leverage to increase our outlet base domestically and serve as a
    model for our international outlet growth. We expect this
    infrastructure will help us to accommodate our rapid growth
    effectively without the need to hire a significant number of
    additional employees.
•
Our Membership-Based Revenue Model Provides us with a
    Consistent Revenue Stream.
We are in significant
    part a membership-based service business. This membership model
    creates a recurring, stable revenue stream for our franchisees
    and, ultimately, for us, as compared to some of our competitors
    who charge for their services on an individual basis.
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Table of Contents
•
Experienced Management Team.
Our management
    team has substantial experience in franchising, as well as the
    spa and U-V industries, and also has significant experience in
    growing brands and in the retail environment.
•
Our Convenient Locations Help to Increase Our Customer
    Base
.  We desire to become the "neighborhood
    spa" for our customer base by positioning our outlets
    mainly in larger urban area shopping centers. We believe our
    outlets are well positioned to attract our target demographic.
    Based on our customer surveys, we believe our primary target
    market consists of women ranging from 25 to 35 years old,
    with annual incomes of between $50,000 and $100,000 per
    household, and who have attended college. We believe our
    secondary target market consists of women ranging from 36 to
    50 years old, and men ranging from 30 to 50 years old,
    with annual incomes of $50,000 to $100,000 per household, and
    who have attended college.
Our
    Growth Strategy
We are committed to achieving our growth plan by pursuing the
    following strategies:
•
Increasing Overall Franchise Sales.
Our
    primary growth strategy is to increase the overall number of our
    franchise locations. We intend to accomplish this through
    increased marketing, including attending trade shows, as well as
    brand development and increased advertising. In addition, we
    intend to maintain a strong balance sheet, which will provide
    potential franchisees with a certain level of confidence in our
    financial position. To this end, we will use a portion of the
    proceeds from this offering to reduce up to $1.8 million of
    our current debt. Finally, we are continually exploring methods
    to assist our franchisees in obtaining financing, which we
    believe would remove the primary obstacle we have faced in
    increasing our franchise sales since the third quarter of 2008.
•
Conversion of Tanning Salons.
The amount of
    sales generated by a retail chain's existing outlets over a
    period of time is referred to as "same store sales."
    Same store sales are an important statistic because they
    indicate what portion of our total revenue has been generated by
    sales growth and what portion has been generated by the opening
    of new stores. Our operating data suggests to us that our
    Contempo Spa concept results in increased same store sales. At
    January 15, 2010, 141, or 41%, of our franchise locations
    had not yet converted to our Contempo Spa format, which includes
    automated spa services, sunless tanning equipment and U-V
    therapy services. Of these 141 locations, 25 provide only U-V
    therapy services. We believe that the conversion of these 141
    locations into our Contempo Spa concept should result in higher
    per unit sales.
•
International Expansion.
We currently have
    operating locations in Canada, Ireland, South Africa, and
    Australia. We have sold a franchise in Egypt and expect a
    location to open there in the Spring of 2010. We have entered
    into master franchisor agreements, but do not yet have operating
    locations, in Northern Ireland, the United Kingdom, Kuwait, and
    Saudi Arabia. In addition, we are currently negotiating a master
    franchisor agreement in the United Arab Emirates. We plan to
    expand our brand further to other countries in Europe, New
    Zealand, South America, Central America, the Middle East, and
    Asia. In most cases, we enter into agreements and have
    relationships only with our master franchisors, rather than the
    individual franchisees. This arrangement reduces our costs and
    therefore may result in higher profits for us over the long term.
•
Product Development.
We continue to evaluate
    additional services that our franchisees might offer within our
    Contempo Spa concept. The addition of new services at our
    locations has historically resulted in new equipment sales and
    improvement in same store sales. For example, we are currently
    considering various sunless tanning services that would
    complement our current products and services. In addition, we
    periodically evaluate new franchise concepts that would
    complement our core Contempo Spa business. We are now evaluating
    a concept that would overlap with our existing customer base
    without competing with the Planet Beach brand. In addition, it
    would require a smaller initial investment by the franchisee
    than is required for a Planet Beach franchise. We plan to begin
    testing this concept in the late Spring and early Summer of
    2010. We do not know when this testing will be
4
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complete, whether it will be successful, or, if it is
    successful, when we might begin recruiting franchisees.
Risks
    Associated with Our Business
Our business is subject to numerous risks. Please see the
    "Risk Factors" section beginning on page 10 of the
    prospectus.
Corporate
    Information
We were initially incorporated on September 26, 1996, under
    the laws of the State of Louisiana. On March 25, 2008, we
    reincorporated under the laws of the State of Nevada by merging
    our predecessor Louisiana corporation into its newly-formed,
    wholly-owned Nevada subsidiary. On March 18, 2010, we
    changed our state of incorporation to Delaware by merging into
    our newly-formed, wholly-owned Delaware subsidiary.
The address of our principal executive office is 5145 Taravella
    Road, Marrero, Louisiana 70072, and our telephone number is
(504) 361-5550.
We maintain a website at
www.planetbeach.com
. The
    information on, or that can be accessed through, our website is
    not incorporated by reference into this prospectus and should
    not be considered to be a part of this prospectus.
We conduct some of our operations through our wholly-owned
    subsidiaries, principally Planet Beach International, LLC.
5
Table of Contents
The
    Offering
Units:
Units offered by us
units.
    Each unit consists of one share of our common stock and one
    redeemable common stock purchase warrant.
Public offering price of units
$          
    per unit.
Proposed NYSE Amex Symbol
PBFCU
The units are expected to be listed for trading on the NYSE Amex
    as of the date of this prospectus.
Common Stock:
Common stock included in the units offered by us
shares.
Common stock outstanding before the offering
shares.
Common stock outstanding after the offering, before
    exercise of any warrants
shares.
Proposed NYSE Amex Symbol
PBFC
The common stock included in the units is expected to be
    separately listed on the NYSE Amex 35 days from the date of
    this prospectus.
Warrants:
Common stock underlying warrants included in the
    units offered by us
shares.
Common stock outstanding after the offering,
    assuming all warrants are exercised
shares.
Proposed NYSE Amex symbol
PBFCW
The warrants are expected to be separately listed on the NYSE
    Amex 35 days from the date of this prospectus.
Exercisability
Each warrant is exercisable for one share of common stock.
Exercise price
$          .
Exercise period
The warrants become exercisable 35 days from the date of
    this prospectus and will expire at 5:00 p.m., New York
    time,
    on          ,
    2013, or upon earlier redemption.
Redemption
We may redeem the outstanding warrants at a price of
    $      per warrant upon
    15 days' prior written notice if the closing price of
    our common stock equals or exceeds
    $      per share for a period of ten
    consecutive trading days.
Representative's warrants
We have agreed to issue to the representative of the
    underwriters warrants to purchase a total
    of           shares
    of our common stock at a price per share equal to 120% of the
    initial offering
6
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price, exercisable for a period beginning six months from the
    date of this prospectus until the fifth anniversary of that date.
Over-allotment option
We have granted the underwriters an option for a period of
    30 days to purchase up
    to          
    additional units to cover over-allotments.
If the underwriters exercise their over-allotment option in
    full, we will
    have           shares
    outstanding after this offering, before any warrants are
    exercised,
    and           shares,
    assuming all warrants, other than the representative's
    warrants, are exercised.
Proceeds to us
We estimate the net proceeds from this offering, after deducting
    underwriting discounts and commissions and estimated offering
    expenses, would be approximately
    $      million, or approximately
    $      million if the underwriters
    exercise their over-allotment option in full.
We expect to use the net proceeds from this offering:
• for the purchase of up to 25 existing or recently
    closed Planet Beach locations from our franchisees that we plan
    to operate as company stores or resell as franchises;
• to repay outstanding indebtedness of up to
    $1.8 million;
• for advertising and marketing to increase franchise
    sales;
• to develop new skincare and nutritional products;
• to improve our corporate headquarters, which we use
    as our primary training facility for new and existing
    franchisees;
• for working capital;
• to develop new franchise concepts;
• to purchase intellectual property rights; and
• for general corporate purposes.
See the more detailed description of our expected use of the
    proceeds of this offering under the heading "Use of
    Proceeds" on page [  ] of this prospectus.
Dividend policy
We do not expect to pay dividends in the foreseeable future.
Risk factors
Investing in our common stock involves certain risks. You should
    read "Risk Factors" beginning on
    page [  ] for a discussion of factors that you
    should consider carefully before deciding whether to purchase
    the units.
The number of shares of our common stock that will be
    outstanding after this offering is based on
    3,713,925 shares of our common stock outstanding as of
    March 18, 2010, and excludes:
•
552,571 shares of our common stock issuable upon the
    exercise of outstanding options under our 2005 Stock Option
    Plan, all at an exercise price of $3.50 per share;
•
shares subject to an option held by one of our vendors to
    convert balances due under our note payable within
    12 months of this offering at a conversion price equal to
    the initial public offering price; and
•
a number of shares issuable to one of our executive officers and
    one employee in lieu of $13,632 of deferred cash compensation,
    to be determined using the closing price of our common stock on
    the
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NYSE Amex on the first day that the warrants and shares we are
    offering begin trading separately, and to be issued on that date.
Unless otherwise indicated, all information in this prospectus
    assumes:
•
no exercise of the underwriters' option to purchase
    additional units;
•
no exercise of the warrants underlying the units sold in this
    offering;
•
no exercise of the representative's warrants; and
•
a 1 for 3.5 reverse stock split of our common stock that we
    effected when we changed our state of incorporation to Delaware.
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Summary
    Consolidated Financial Information
The following table summarizes selected financial data regarding
    our business and should be read in conjunction with our
    consolidated financial statements and related notes contained
    elsewhere in this prospectus and the information under
    "Management's Discussion and Analysis of Financial
    Condition and Results of Operations." The as adjusted
    balance sheet data gives effect to this offering and the
    application of the offering proceeds as described in "Use
    of Proceeds." The financial statement data as of and for
    each of the fiscal years ended December 31, 2009, 2008 and
    2007 have been derived from our audited consolidated financial
    statements included elsewhere in this prospectus. The historical
    results presented below are not necessarily indicative of
    results to be expected in any future periods, and do not reflect
    our 1 for 3.5 reverse stock split effected March 18, 2010.
Year Ended December 31,
2009
2008
2007
(In thousands, except share data)
Statement of Operations
Operating Revenues
Sales of spa equipment and products
$
4,920
$
14,706
$
17,586
Franchise fees
1,257
3,067
2,745
Royalties and related fees
6,883
6,833
5,585
Other
209
400
540
Total Operating Revenue
13,269
25,006
26,456
Operating Expenses
Cost of goods sold
3,693
11,132
13,369
Operating expenses
3,950
5,630
4,633
Salaries and bonuses
4,280
6,791
6,634
Commissions
1,580
2,013
2,012
Total operating expenses
13,503
25,566
26,648
Income (Loss) From Operations
(234
)
(560
)
(192
)
Other Income (Expense)
Interest and other income
35
13
13
Interest expense
(256
)
(219
)
(174
)
Realized gain (loss)
(253
)
8
23
Total other income (expense)
(474
)
(198
)
(138
)
Income (Loss) Before Provision For Income Taxes
(708
)
(758
)
(330
)
Provision (benefit) for income taxes (benefit)
—
—
(5
)
Net Income (Loss)
$
(708
)
$
(758
)
$
(325
)
Loss Per Common Share
Basic and Diluted
$
(0.05
)
$
(0.06
)
$
(0.03
)
Weighted Average Shares
Outstanding Basic and Diluted
12,998,739
12,971,046
12,961,815
As of December 31,
2009
2008
2007
2009
Actual
As Adjusted
(In thousands)
Consolidated Balance Sheet Data:
Working capital(1)
$
(705
)
$
(617
)
$
238
$
Current assets
1,926
2,944
4,166
Total assets
4,934
5,966
6,517
Current liabilities
2,631
3,561
3,935
Total liabilities
6,239
6,900
6,533
Stockholders' equity (deficit)
(1,305
)
(934
)
(16
)
(1)
Working capital is defined as current assets minus current
    liabilities.
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RISK
    FACTORS
An investment in our securities involves a high degree of
    risk. You should carefully consider the risks described below,
    together with all of the other information included in this
    prospectus, before making an investment decision. If any of the
    following risks actually occur, our business, financial
    condition or results of operations could suffer. In that case,
    the value of our units, common stock and warrants could decline,
    and you may lose all or part of your investment. The risks
    described below are not the only ones we face. Additional risks
    that we currently do not know about or that we currently believe
    to be immaterial may also impair our operations and business
    results.
Risks
    Related To Our Business
If we
    are unable to sell new franchises, or open new spas on time, our
    revenue growth rate and profits may decline.
To expand our business, we must constantly identify new
    franchise opportunities. In addition, our franchisees must open
    new spas on schedule and in a profitable manner. In the past,
    our franchisees have experienced delays in spa openings due
    primarily to the difficulty in obtaining financing, and they may
    experience similar delays in the future. Delays or failures in
    opening new franchises could hurt our ability to meet our growth
    objectives, which may affect the expectations of securities
    analysts and others and thus the trading price of our
    securities. We or our franchisees may not be able to achieve our
    expansion goals and our new spas may not be operated profitably.
    Further, any spas that our franchisees open may not obtain
    operating results similar to those of our existing spas. Our
    ability to expand successfully will depend on a number of
    factors, many of which are beyond our control. Among other
    things, we must:
•
attract and retain qualified franchisees;
•
recruit, train and retain qualified corporate personnel and
    management;
•
create customer awareness of our spas in new markets;
•
compete in our markets; and
•
adjust to general economic conditions.
In addition, our franchisees must:
•
locate suitable spa sites in new and existing markets;
•
obtain acceptable financing for construction of new spas or
    negotiate acceptable lease terms;
•
plan, design and build out spas in a cost-effective and timely
    manner; and
•
obtain and maintain required local and state governmental
    approvals and permits related to the construction and operation
    of the sites.
If we fail to identify new franchise opportunities, or our
    franchisees fail to open new spas on time, our future revenues
    may be adversely impacted.
Deteriorating
    national and global economic conditions have negatively impacted
    the demand for our products and services and the ability of our
    franchisees to obtain financing for new franchises, and these
    conditions may worsen.
Our business has been adversely affected by deteriorating
    national and global economic conditions, including unemployment
    levels, unfavorable interest rates, the lack of availability of
    credit on reasonable terms, changes in consumer spending rates
    and habits, and rising energy costs. These conditions have
    negatively impacted consumer demand for personal care products
    and services, consumers' ability to afford our products and
    services, and consumer habits with respect to how they spend
    their disposable income. Our business could be further
    negatively impacted if conditions deteriorate or efforts and
    initiatives of the
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governments of the United States and other countries to manage
    and stimulate the economy fail or result in worsening economic
    conditions.
In addition, the disruptions in credit and other financial
    markets caused by deteriorating national and international
    economic conditions have caused our franchisees to experience
    great difficulty over the past 18 months in obtaining new
    credit on reasonable terms, and extensions of existing credit.
    As a result, we have had difficulty maintaining open locations,
    selling additional franchises and expanding our business. If
    these conditions continue, they could further impair the
    financial condition of our company and that of our franchisees,
    as well as our suppliers, making it difficult or impossible for
    us to meet our respective obligations and to grow our company.
We are
    dependent on franchisees and their success.
Our performance depends upon our ability to attract and retain
    qualified franchisees and the franchisees' ability to
    execute our concept and capitalize upon our brand recognition
    and marketing. Our inability to recruit franchisees who have the
    business skill, experience and financial resources necessary to
    open spas on schedule, and who will conduct operations in a
    manner consistent with our concept and standards, will have an
    adverse effect on our business and results of operations.
Our
    franchisees may take actions that could harm our
    business.
Franchisees are independent contractors and are not our
    employees. We provide training and support to franchisees, but
    the quality of franchised spa operations may be diminished by
    any number of factors beyond our control. Our franchisees may
    not have the business acumen or financial resources necessary to
    operate successful franchises in their franchise areas.
    Consequently, franchisees may not operate spas in a manner
    consistent with our standards and requirements, or may not hire
    and train qualified managers and other spa personnel. If
    franchisees do not adequately manage their spas, our image and
    reputation, and the image and reputation of other franchisees,
    may suffer materially, and system-wide sales could significantly
    decline. The interests of franchisees may conflict with our
    interests. For example, whereas franchisees are concerned with
    individual business strategies and objectives, we are
    responsible for ensuring the success of the entire range of our
    products and services. In addition, we may also face potential
    claims and liabilities due to the acts of our franchisees based
    on agency or vicarious liability theories.
We may
    require additional capital and we may not be able to obtain it
    on acceptable terms or at all.
We have had net losses of $708,000, $758,000 and $325,000 for
    the 2009, 2008 and 2007 fiscal years, respectively. Future
    operating losses would have an adverse effect on our
    stockholders' equity and working capital. As of
    December 31, 2009, we had cash and cash equivalents of
    $53,810, including escrow cash. We may need additional capital,
    and our needs may increase due to a change in business
    conditions, our inability to achieve our targeted growth
    milestones, a decline in same store sales or other future
    developments that negatively affect our cash flows from
    operations.
If our resources are insufficient to satisfy our cash
    requirements, we may seek to sell additional equity or debt
    securities or obtain additional credit facilities. The sale of
    additional equity securities could result in dilution to our
    stockholders. The incurrence of indebtedness would result in
    increased debt service obligations and could require us to agree
    to operating and financing covenants that would restrict our
    operations. Our ability to obtain additional capital on
    acceptable terms is subject to a variety of uncertainties,
    including:
•
investors' perception of, and demand for, securities of
    United States-based companies involved in the franchise
    distribution business;
•
conditions of the U.S. and other capital markets in which
    we may seek to raise funds;
•
our future results of operations, financial condition and cash
    flows; and
•
economic, political and other conditions in United States and
    other international markets where we may seek to establish a
    presence.
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Financing may not be available in amounts or on terms acceptable
    to us, if at all. If we fail to raise additional funds on terms
    favorable to us, or at all, our business, financial condition
    and results of operations could be materially adversely affected.
Our
    industry is highly competitive, and if we are unable to compete
    effectively and gain market share, our financial condition could
    be negatively affected.
Our market is fragmented with few barriers to entry, and we face
    intense competition for customers and suitable store locations.
    We compete with both tanning salons and day spas, whether
    independently owned or franchised. At the franchise level, we
    compete with other franchisors for potential franchisees, and
    the primary competitive factor at this level is the amount of
    the investment the franchisee must make. If we fail to maintain
    or improve our market position and respond successfully to
    changes in the competitive landscape, our business and results
    of operations may suffer.
We may
    not be able to respond to changing trends in a timely manner,
    which could have a material adverse effect on us.
We operate in a market characterized by possible rapid changes
    in consumer patterns and buying power. Buying power with respect
    to personal care products and services is driven by general
    economic factors, such as personal income levels, inflation and
    interest rates. We design our sales and marketing strategy to
    respond to changes in consumer patterns relating to general
    trends for shopping locations. There is a risk that we may lose
    some of our popularity among customers. If we cannot respond
    rapidly to changes in our industry, then we may lose market
    share to our competitors who are able to respond more rapidly
    and our financial condition and results of operation would be
    negatively affected. Additionally, even though we may respond to
    changing consumer trends, we may not be able to convince our
    franchisees to adopt our recommendations in a timely manner or
    at all.
The
    infringement of our trademarks and other intellectual property,
    or the erosion of our brand, could substantially harm our
    business.
The Planet Beach and Contempo Spa trademarks and other marks are
    vital to maintaining our brand awareness and competitive
    position. Protecting our intellectual property rights and
    combating unlicensed copying of our marks and other intellectual
    property can be difficult and costly. This is because we may be
    required to initiate litigation or other action to enforce our
    rights or establish their validity. As we expand our brand
    globally, protecting our intellectual property rights may be
    more challenging, because we may expand to countries where laws
    are less protective of these rights. We devote substantial
    resources to the establishment and protection of these
    trademarks and other proprietary rights. However, these measures
    may be inadequate to prevent imitation of our products and
    concepts by others. If we are unable to protect our marks and
    our brand, or if our brand becomes confused with the business of
    our competitors, our business could suffer substantially.
We
    have operated as a private company and have no experience
    attempting to comply with public company obligations. Attempting
    to comply with these requirements will increase our costs and
    require additional management resources, and we still may fail
    to comply.
We have operated as a private company and have not been subject
    to many of the requirements applicable to public companies. Laws
    and regulations affecting public companies, including the
    provisions of the Sarbanes-Oxley Act of 2002 and the rules
    related to corporate governance and other matters subsequently
    adopted by the Securities and Exchange Commission, or SEC, and
    the NYSE Amex, will result in increased administrative, legal
    and accounting costs to us. The impact of these events and
    heightened corporate governance standards could also make it
    more difficult for us to attract and retain qualified persons to
    serve on our board of directors, our board committees or as
    executive officers. If we fail to comply with these
    requirements, the trading market for our securities may be
    negatively impacted and the trading price for our stock may
    decrease.
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We may
    be exposed to potential risks relating to our internal controls
    over financial reporting and our ability to have the operating
    effectiveness of our internal controls attested to by our
    independent auditors.
As directed by Section 404 of the Sarbanes-Oxley Act of
    2002, the SEC adopted rules requiring public companies to
    include a report from management on the company's internal
    controls over financial reporting in their annual reports,
    including annual reports on
Form 10-K.
In addition, the independent registered public accounting firm
    auditing a company's financial statements must attest to
    and report on the operating effectiveness of a company's
    internal controls. These rules will apply to us beginning with
    our annual Report on
Form 10-K
for our 2010 fiscal year. Our independent registered public
    accounting firm may issue an adverse opinion on our internal
    controls over financial reporting if one or more material
    weaknesses are identified. We have no prior experience with
    internal control audits and we may not be able to comply with
    all of the requirements imposed by Section 404 or we may
    not receive a positive attestation from our independent
    auditors. If we identify significant deficiencies or material
    weaknesses in our internal controls that we cannot correct in a
    timely manner or we are unable to receive the required
    attestation from our independent auditors with respect to our
    internal controls, investors and others may lose confidence in
    the reliability of our financial statements. A significant
    financial reporting failure could cause an immediate loss of
    investor confidence in our company and a sharp decline in the
    market price of our common stock.
We
    experience fluctuations in operating results which may
    negatively affect our financial condition.
Our annual and quarterly operating results have fluctuated and
    are expected to continue to fluctuate. Among the factors that
    may cause our operating results to fluctuate are customers'
    response to product and service offerings, the timing of the
    rollout of new sales outlets, seasonal variations in sales, the
    timing of merchandise receipts, the level of merchandise
    returns, changes in service and merchandise mix and
    presentation, our cost of service and merchandise, unanticipated
    operating costs, and other factors beyond our control, such as
    general economic conditions and actions of competitors. As a
    result of these factors, we believe that period-to-period
    comparisons of historical and future results will not
    necessarily be meaningful and should not be relied on as an
    indication of future performance.
Complaints
    or litigation by our franchisees may harm our
    business.
We occasionally have disputes with our franchisees, and some of
    these disputes result in litigation against us. These actions
    arise in the ordinary course of our business. Regardless of
    whether any claims against us are valid or whether we are
    liable, claims may be expensive to defend and may divert time
    and money away from our operations and hurt our performance. In
    addition, various state and federal laws govern our relationship
    with our franchisees and potential sales of our franchised spas.
    If we fail to comply with these laws, we could be liable for
    damages to franchisees and fines or other penalties. Any
    uninsured judgments or judgments significantly in excess of our
    insurance coverage for any claims could materially adversely
    affect our financial condition or results of operations.
    Further, adverse publicity resulting from these allegations may
    materially adversely affect us and our franchisees.
Lawsuits
    by customers alleging injuries sustained while using our
    services could harm our business.
Our customers must sign a form indicating they understand the
    potential dangers of U-V beds, which include eye and skin
    injury, allergic reactions, premature aging of the skin and skin
    cancer. Nevertheless, it is possible that a customer may be
    injured or have other health problems related to overexposure to
    U-V equipment, malfunctioning equipment or the effects of our
    products, or allege such claims, and seek redress from us. Any
    insurance we might obtain for these types of claims will be
    subject to deductibles and coverage limitations. In addition,
    the coverages may not be adequate to protect us against future
    claims. Any claim with respect to uninsured liabilities or for
    amounts in excess of insured liabilities could have an adverse
    effect on our business, operating results and prospects.
    Defending a suit, regardless of merit, could be costly, could
    divert management's attention from our business and might
    result in adverse publicity, which could result in the
    withdrawal of, or inability to recruit, prospective franchisees
    or result in brand deterioration. In addition to adversely
    impacting our business and prospects, such adverse publicity
    could materially adversely affect our stock price.
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Our
    current insurance may not provide adequate levels of coverage
    against claims.
We currently maintain insurance customary for businesses of our
    size and type. However, in many cases, such insurance is
    expensive and some coverages are difficult to obtain. We cannot
    assure you that we can maintain, on reasonable terms, sufficient
    coverage to protect us against all the losses we might incur.
Adverse
    public or medical opinions about the health effects of our
    services could harm our business or could lead to additional
    regulation that could harm our business.
Medical opinions and opinions of commentators in the general
    public regarding negative health effects of some of our products
    and services, such as our U-V services, could adversely impact
    our future revenue. Although our industry is highly regulated by
    federal and state government agencies, negative publicity
    regarding the health effects of some of the products and
    services we offer could lead to adverse legislation or further
    regulation of the industry, which could have a negative impact
    on our profit margins as well as the trading price of our
    securities.
Although we have shifted our business model away from emphasis
    on U-V tanning, we still offer U-V services, and despite our
    warnings, some of our customers may continue to use our U-V
    equipment for tanning. The continuation of our U-V services is
    dependent upon the consuming public's sustained belief that
    the benefits of U-V treatments outweigh the risks of exposure to
    ultraviolet light. Any significant change in public perception
    of U-V equipment caused by scientific studies, government
    reports, rumors or otherwise that link U-V equipment to a
    significant increase in the likelihood of skin cancer or other
    skin diseases, could have a material adverse effect on our
    business, financial condition and results of operations. For
    example, the federal health care bill signed into law in March
    2010 contains a 10% tax on U-V tanning services that will take
    effect on July 1, 2010. We have not yet determined whether
    this tax will be imposed on our spa memberships, but we believe
    it would apply to sales of individual U-V therapy sessions and
    could have a chilling effect on demand for U-V services
    generally.
In addition, a Food and Drug Administration advisory panel
    recently recommended that the agency consider actions such as
    requiring that teenagers get parental consent before using a
    tanning bed or even banning the use of tanning beds among teens.
    The panel also recommended reclassifying tanning lamps from
    Class I medical devices — a category that
    includes tongue depressors and elastic bandages — to a
    Class II or Class III device, which would permit the
    agency to impose greater restrictions. According to the
    International Agency for Research on Cancer, which is affiliated
    with the World Health Organization, or WHO, people under 30 who
    use tanning machines increase their risk of skin cancer by 75%.
    The WHO last July listed ultraviolet radiation-emitting beds as
    "carcinogenic to humans," its highest category of
    cancer risk.
Our
    earnings and business growth strategy depends in large part on
    the success of our suppliers and franchisees, and our reputation
    may be harmed by actions taken by these parties that are outside
    of our control.
Our growth strategy, including our plans for new stores, new
    products and services, branded products built to our
    specifications and other initiatives, relies significantly on
    our relationships with our suppliers and franchisees. For
    example, we sell several products under the Planet Beach
    trademark that are manufactured by third parties and we require
    our franchisees to use U-V and spa equipment manufactured by
    third parties that have relationships with us. We provide
    specifications to these suppliers, but the product quality they
    deliver to our franchisees may be diminished by any number of
    factors beyond our control. We believe that customers expect
    high quality products and services from our franchisees at a
    competitive price, and that any shortcoming of our franchisees
    or suppliers, particularly an issue regarding the quality of the
    service provided or the safety of products sold, may be
    attributed by customers to our company, thus damaging our
    reputation and brand value and potentially affecting our results
    of operations.
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We
    must identify and obtain a sufficient number of suitable new spa
    sites for us to sustain our revenue growth rate.
We require that all proposed spa sites meet site-selection
    criteria established by us. We and our franchisees may not be
    able to find sufficient new sites to support our planned
    expansion in future periods. We face significant competition
    from other spa companies and retailers for sites that meet our
    criteria and the supply of sites may be limited in some markets.
    As a result of these factors, our franchisees' costs to
    obtain and lease sites may increase, or they may not be able to
    obtain certain sites at a cost they can afford. This may, in
    turn, reduce our growth rate.
Our
    spas may not achieve market acceptance in the new geographic
    regions we enter.
Our expansion plans include opening spas in new markets where we
    or our franchisees have little or no experience. The success of
    these new spas will be affected by the different competitive
    conditions, consumer preferences, discretionary spending
    patterns, and social customs in the new markets as well as our
    ability to generate market awareness of the Planet Beach brand.
    Sales at spas opening in new markets may take longer to reach
    average annual spa sales, if at all, thereby affecting the
    profitability of these franchises and ultimately our
    profitability.
Because
    we do business internationally, our business could be harmed if
    changes in political or economic stability, laws, exchange rates
    or foreign trade policies should occur.
Sales of our franchises in foreign markets and our relationships
    with our foreign suppliers will subject us to the risks of doing
    business abroad. Longer lead times may be required for the
    manufacture of equipment according to foreign specifications for
    our international locations, which could reduce our flexibility.
    Other risks of doing business internationally include political
    or economic instability, any significant fluctuations in the
    value of the dollar against foreign currencies, terrorist
    activities and restrictions on the transfer of funds. Any
    material disruption to our operations caused by such events may
    have an adverse affect on our business.
Because
    of our international operations, we are subject to the Foreign
    Corrupt Practices Act. A determination that we violated this act
    may affect our business and operations adversely.
As a U.S. corporation, we are subject to the regulations
    imposed by the U.S. Foreign Corrupt Practices Act, or the
    FCPA, which generally prohibits U.S. companies and their
    intermediaries from making improper payments to foreign
    officials for the purpose of obtaining or keeping business. Any
    determination that we have violated the FCPA could have a
    material adverse effect on our financial position, operating
    results and cash flows.
The
    loss of key personnel or difficulties recruiting and retaining
    qualified personnel could jeopardize our ability to meet our
    growth targets.
Our future growth depends substantially on the contributions by
    and abilities of key executives and other employees. We must
    continue to recruit, retain and motivate management and other
    employees sufficient to maintain our current business and
    support our projected growth. A loss or significant shortage of
    high quality employees could jeopardize our ability to meet our
    growth plan.
Stephen Smith has been very important to our success.
    Mr. Smith is one of our founders, our principal stockholder
    and our Chairman, President and Chief Executive Officer. The
    loss of Mr. Smith's services could have a significant
    negative effect on us.
Implementing
    our expansion strategy may strain our resources.
Our expansion strategy may strain our management, financial and
    other resources. We must attract and retain talented franchisees
    to maintain the quality and service levels at our existing and
    future spas. Additionally, we must continue to enhance our
    operational, financial and management systems. We may not
15
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be able to manage these or other aspects of our expansion
    effectively. If we fail to do so, our business, financial
    condition, operating results and cash flows could suffer.
Further, our anticipated growth could place additional strain on
    our third party suppliers, resulting in increased need for us to
    monitor carefully our relationships with these suppliers. Any
    failure by us to manage these relationships effectively could
    have an adverse effect on our ability to expand.
Our
    franchises may not be able to obtain and maintain licenses and
    permits necessary to operate our spas.
Our industry is subject to various state and local government
    regulations, including state regulations requiring a license to
    operate U-V light beds or obtain industry certifications. Such
    regulations are subject to change from time to time. The failure
    of our franchisees to obtain and maintain these licenses,
    permits and approvals could adversely affect our operating
    results. Difficulties or failure to obtain the required licenses
    and approvals could delay or result in our decision to cancel
    the opening of new franchises. Local authorities may revoke,
    suspend or deny renewal of required licenses if they determine
    that our franchisees' conduct violates applicable
    regulations.
Risks
    Related to This Offering and the Market for Our Equity
    Securities Generally
No
    market currently exists for the trading of our securities and no
    market may ever develop. Accordingly, you may not have any means
    of trading the units you acquire in this offering or the
    underlying shares or warrants.
A market does not currently exist for our securities and an
    active market may never develop or be sustained. Consequently,
    you may not be able to liquidate your investment in our
    securities for an emergency or at any time, and the securities
    will not be readily acceptable as collateral for loans. Although
    we will try to establish an active trading market for our
    securities on the NYSE Amex, the market may not be sufficiently
    liquid to enable an investor to liquidate his or her investment
    in us at a time and at a price he or she feels are fair or
    appropriate.
Furthermore, the market price of our units, and ultimately our
    common stock and warrants, may decline below the initial public
    offering price of the units. The initial public offering price
    will be determined through negotiations between us and the
    representative of the underwriters and may not be indicative of
    the market price of our securities following this offering.
    Among the factors considered in such negotiations are prevailing
    market conditions, certain of our financial information, market
    valuations of other companies that we and the representative of
    the underwriters believe are comparable to us, estimates of our
    business potential and the present state of our business. See
    "Underwriting" for additional information.
The NYSE Amex will require that we meet minimum criteria to
    continue listing our securities for trading. Among the criteria
    are a minimum stock price. If we fail to meet the listing
    criteria, our securities could be delisted, and as a result,
    there may not be a liquid trading market for the securities you
    purchase in this offering.
You
    will experience immediate and substantial dilution if you invest
    in this offering, and you may experience additional dilution in
    the future.
If you purchase securities in this offering, you will experience
    immediate and substantial dilution because the public offering
    price of a unit will be substantially greater than the tangible
    book value attributable to the shares of our common stock
    included in a unit after giving effect to this offering. In the
    past, we have issued options to acquire shares of common stock
    at prices significantly below the public offering price of a
    share of our common stock (assuming no value is attributed to
    the redeemable warrants included in the units). To the extent
    these options are ultimately exercised, you will incur further
    dilution.
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The
    price of our securities may be volatile.
The market price of our securities could be subject to wide
    fluctuations in response to factors such as the following, many
    of which are beyond our control:
•
quarterly variations in our operating results, or results that
    vary from the expectations of the investment community;
•
changes in investor perceptions of the our industry in general,
    including our competitors; and
•
general economic and competitive conditions.
In addition, purchases or sales of large quantities of our stock
    could have an unusual effect on our market price.
We may
    be subject to penny stock regulations and restrictions and you
    may have difficulty selling shares of our common
    stock.
The SEC has adopted regulations defining and governing so-called
    "penny stocks," which are equity securities of small
    companies that have a market price of less than $5.00 per share
    or an exercise price of less than $5.00 per share, subject to
    certain exemptions. If our securities become "penny
    stocks", we may become subject to these rules. The rules
    impose additional sales practice requirements on broker-dealers
    that sell penny stocks to persons who are not established
    customers or "accredited investors" (generally,
    individuals with a net worth in excess of $1,000,000 or annual
    income exceeding $200,000, or $300,000 together with their
    spouses). In addition, the broker-dealer must make a special
    suitability determination for the purchaser and receive the
    purchaser's written consent to the transaction prior to
    sale. As a result, this rule may affect the ability of
    broker-dealers to sell our securities and may affect the ability
    of purchasers to sell any of our securities in the secondary
    market.
For any transaction involving a penny stock, unless exempt, the
    rules require delivery, prior to any transaction in a penny
    stock, of a disclosure schedule prepared by the SEC relating to
    the penny stock market. Disclosure is also required to be made
    about sales commissions payable to both the broker-dealer and
    the registered representative and current quotations for the
    securities. Finally, monthly statements are required to be sent
    disclosing recent price information for the penny stock held in
    the account and information on the limited market in penny stock.
Our common stock may not qualify for exemption from the penny
    stock rules. In any event, even if our common stock were exempt
    from the penny stock rules, we would remain subject to
    Section 15(b)(6) of the Exchange Act, which gives the SEC
    the authority to restrict any person from participating in a
    distribution of penny stock if the SEC finds that such a
    restriction would be in the public interest. If our securities
    are subject to the penny stock rules, it could negatively impact
    the trading market and trading price of our securities.
The
    concentration of our capital stock ownership with our founders
    will limit your ability to influence corporate
    matters.
Each share of our common stock has one vote per share on matters
    coming before our stockholders. After this offering, assuming
    the exercise of all outstanding options, but before the exercise
    of any warrants, our three founders will still own approximately
    54.5% of our outstanding common stock. Therefore, our founders
    will be able to control our company, including our ability to
    engage in a merger, sale of our assets, liquidation or
    dissolution or similar fundamental transactions. As a result,
    your ability to influence corporate matters will be limited and
    we may take actions that our stockholders do not view as
    beneficial. The market price of our units, common stock and
    warrants could also be adversely affected by this structure.
Following
    this offering, members of our management team may enter into an
    agreement providing, among other things, that they will vote
    their shares together.
After this offering, members of our senior management may enter
    into an agreement providing that they will vote their shares in
    accordance with the majority in interest of the total shares
    held by all of the parties to
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the agreement. The agreement may have other terms, such as a
    right of first refusal in the other parties to the agreement if
    any party desires to sell his or her shares of the company. The
    effect of this agreement may be to concentrate a measure of
    control of our company in a small group of executives.
We may
    invest or spend the proceeds of this offering in ways with which
    you may not agree or in ways which may not yield a significant
    return, if any.
Our board of directors and management will have broad discretion
    over the use of proceeds from this offering. The net proceeds
    from this offering will be used to fund the acquisition of
    existing or recently closed franchise locations, repay debt, and
    for other purposes more fully described in this prospectus under
    "Use of Proceeds." Our board of directors and
    management will have considerable discretion in the application
    of the net proceeds, and you will not have the opportunity, as
    part of your investment decision, to assess whether the proceeds
    are being used appropriately. The net proceeds may be used for
    corporate purposes that do not increase our operating results or
    market value. Until the net proceeds are used, they may be
    placed in investments that do not produce significant income or
    investments that lose value.
We do
    not anticipate paying any cash dividends in the foreseeable
    future.
We currently intend to retain any future earnings to fund the
    development and growth of our business. We do not anticipate
    paying any cash dividends on our common stock in the foreseeable
    future. As a result, capital appreciation, if any, of our common
    stock will be your sole source of gain for the foreseeable
    future.
Shares
    eligible for future sale may cause the market price of our
    securities to decline, even if our business is doing
    well.
Based on shares outstanding as of March 18, 2010, we will
    have           shares
    of common stock outstanding upon the completion of this offering
    and before the exercise of any warrants. Upon completion of this
    offering, approximately 3,428,955 shares and 444,282
    additional shares subject to options held by our directors and
    executive officers and greater than one percent stock or option
    holders will be subject to
lock-up
agreements with the underwriters, restricting the sale of such
    shares for one year after the date of this prospectus, although
    these
lock-up
agreements may be extended for up to an additional 34 days
    under certain circumstances. These
lock-up
agreements are subject to a number of exceptions and holders may
    be released from these agreements without prior notice at the
    discretion of the underwriters. After the
lock-up
agreements expire, these shares will be eligible for sale in the
    public market, and are subject to volume limitations under
    Rule 144 under the Securities Act of 1933, as amended, or
    the Securities Act. In addition, the 552,571 shares of our
    common stock that are subject to outstanding options under our
    Stock Option Plan as of March 18, 2010 will be eligible for
    sale in the public market to the extent permitted by the
    provisions of the various vesting agreements, the
lock-up
agreements and Rules 144 and 701 under the Securities Act.
    Further, we will also have outstanding unexercised warrants
    included in the units we are offering in this prospectus and the
    representative's warrants that will be exercisable
    for          
    shares of our common stock. If any of these additional shares
    are sold, or it is perceived they will be sold, the trading
    price of our common stock could decline. These sales also might
    make it more difficult for us to sell equity or equity-related
    securities in the future at a time and price that we deem
    reasonable or appropriate.
If
    securities or industry analysts do not publish research or
    reports about our business, if they change their recommendations
    regarding our securities adversely or if our operating results
    do not meet their expectations, our stock price and trading
    volume could decline.
The trading market for our securities could be influenced by the
    research and reports that industry or securities analysts
    publish about us or our business. If we have such coverage and
    one or more analysts cease coverage of us or fail to publish
    reports on us regularly, we could lose visibility in the
    financial markets, which in turn could cause our stock price or
    trading volume to decline. Moreover, if one or more of the
    analysts who cover us downgrade our stock or if our operating
    results do not meet their expectations, our stock price could
    decline.
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Our
    charter and bylaws contain certain provisions that may
    discourage a takeover of our company and our board of directors
    may adopt additional anti-takeover measures after we complete
    this offering.
Our charter and bylaws contain measures that may impede or
    discourage attempts to acquire control of our company without
    the approval of our board of directors. These include a
    classified board of directors, advance notification requirements
    for stockholders to nominate persons for election as directors
    and to make stockholder proposals and the inability of
    stockholders to call special meetings of stockholders. After
    this offering, our board of directors may adopt other measures
    to discourage a takeover of our company, as described under
    "Description of Our Securities." These measures, if
    adopted, would permit our board to choose not to entertain
    offers to purchase our company, even offers that are at a
    substantial premium to the market price of our stock. As a
    result, our stockholders may be deprived of opportunities to
    profit from a sale of control. This could, in turn, reduce the
    market price of our securities. See the section entitled
    "Description of Our Securities" elsewhere in this
    prospectus.
We
    have the right to redeem the warrants issued as part of the
    units, which could impact the trading price of the
    warrants.
We may redeem the warrants issued as part of the units for
    $      per warrant upon
    15 days' prior written notice, provided that the
    closing price of our common stock equals or exceeds
    $      (subject to adjustment), for ten
    consecutive trading days. If we redeem the warrants, you will
    lose your right to exercise the warrants except during the
15-day
redemption period. Redemption of the warrants could force you to
    exercise the warrants at a time when it may be disadvantageous
    for you to do so or to sell the warrants at the then market
    price or accept the redemption price, which likely would be
    substantially less than the market value of the warrants at the
    time of redemption.
If you
    purchase or hold the warrants, you will not be entitled to any
    rights as a stockholder on the common stock underlying the
    warrants, but you will be subject to all changes made with
    respect to our common stock.
If you purchase or hold the warrants, you will not be entitled
    to any rights as a stockholder (including, without limitation,
    voting rights and rights to receive any dividends or other
    distributions on our common stock) on the common stock
    underlying the warrants, other than the right to adjustments in
    the exercise price of the warrants upon certain events, but such
    shares will be subject to all changes to our charter and bylaws
    affecting the common stock. You will only be entitled to rights
    as a stockholder on the common stock underlying the warrants if
    and when we deliver shares of common stock to you upon the
    exercise of your warrants. For example, in the event that an
    amendment is proposed to our certificate of incorporation or
    bylaws requiring stockholder approval and the record date for
    determining stockholders of record entitled to vote on the
    amendment occurs prior to the exercise of your warrants, you
    will not be entitled to vote the shares of common stock
    underlying your warrant on the amendment, although the common
    stock you receive upon exercise of your warrant will
    nevertheless be subject to any changes in the powers,
    preferences or special rights of our common stock.
Certain
    warrant holders are unlikely to receive direct notice of
    redemption of our warrants.
We expect some holders of our warrants will hold their
    securities through one or more intermediaries, and consequently
    they are unlikely to receive notice directly from us that the
    warrants are being redeemed. If you fail to receive notice of
    redemption from a third party and your warrants are redeemed for
    nominal value, you will not have recourse against us.
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SPECIAL
    NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements intended to
    qualify for the safe harbors from liability established by the
    Private Securities Litigation Reform Act of 1995, as amended.
    These forward-looking statements are subject to a number of
    risks and uncertainties, many of which are beyond our control.
    All statements, other than statements of historical fact,
    contained in this prospectus, including statements regarding
    future events, our future financial performance, business
    strategy and plans and objectives of management for future
    operations, are forward-looking statements.
We have attempted to identify forward-looking statements by
    terminology including "anticipates,"
    "believes," "can," "continue,"
    "could," "estimates," "expects,"
    "intends," "may," "plans,"
    "potential," "predicts," "should"
    or "will" or the negative of these terms or other
    comparable terminology. Although we do not make forward-looking
    statements unless we believe we have a reasonable basis for
    doing so, we cannot guarantee their accuracy. These statements
    are only predictions and involve known and unknown risks,
    uncertainties and other factors, including the risks outlined
    under "Risk Factors" or elsewhere in this prospectus,
    which may cause our or our industry's actual results,
    levels of activity, performance or achievements to be materially
    different from any future results, levels of activity,
    performance or achievements expressed or implied by these
    forward-looking statements. Moreover, we operate in a very
    competitive and rapidly changing environment. New risks emerge
    from time to time and it is not possible for us to predict all
    risk factors, nor can we predict the impact of all factors on
    our business or the extent to which any factor, or combination
    of factors, may cause our actual results to differ materially
    from those contained in any forward-looking statements.
The factors that could cause actual results to differ include,
    but are not limited to, those risks that are outlined under the
    "Risk Factors" section beginning on page 10 of
    this prospectus.
You should not place undue reliance on any forward-looking
    statement, each of which applies only as of the date of this
    prospectus. Before you invest in our securities, you should be
    aware that the occurrence of the events described in the section
    entitled "Risk Factors" and elsewhere in this
    prospectus could negatively affect our business, operating
    results, financial condition and price of our securities. Except
    as required by law, we undertake no obligation to update or
    revise publicly any of the forward-looking statements after the
    date of this prospectus to conform our statements to actual
    results or changed expectations.
USE OF
    PROCEEDS
We estimate that the net proceeds to us from the sale
    of          
    units that we are selling in this offering will be approximately
    $      million, after deducting
    the underwriting discounts and commissions and estimated
    offering expenses payable by us, assuming an initial public
    offering price of $      per unit. If
    the underwriters exercise their over-allotment option in full,
    we estimate that our net proceeds would increase to
    approximately $      million.
    Except as described below, the additional proceeds would be used
    to fund our working capital needs and other general corporate
    purposes.
Of the net proceeds from this offering, we expect to use
    approximately:
•
$      (or
    $     if the underwriters exercise
    their overallotment option in full) for the purchase of up to 25
    existing or recently closed Planet Beach locations in the
    U.S. from our franchisees and operate them as company
    stores or resell them as franchises. As of the date of this
    prospectus, we have no understandings, commitments or agreements
    to acquire any stores.
•
$     , plus accrued interest, to repay
    our 8.25% promissory note due July 19, 2012. We issued this
    note to Whitney National Bank to refinance an existing line of
    credit and fund operations.
•
$     , plus accrued interest, to repay
    our 7% promissory note due April 10, 2012 to New Sunshine,
    LLC. We issued this note when we converted $750,000 of accounts
    payable we owed to New Sunshine, which is our primary supplier
    of U-V equipment and U-V products.
•
$     , plus accrued interest, to repay
    our 7% promissory note due March 10, 2013 to JTL
    Enterprises, Inc. We issued this note when we converted $22,350
    of accounts payable we owed to JTL for purchases of equipment.
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•
$     , plus accrued interest, to repay
    our 7% promissory note due March 10, 2013 to MT Industries,
    Inc. We issued this note when we converted $92,500 of accounts
    payable we owed to MT Industries for equipment purchases.
•
$     , plus accrued interest, to repay
    our 7% promissory note due January 1, 2013 to OL Products,
    Inc. We issued this note when we converted $59,800 of accounts
    payable we owed to OL for the purchase of body lotions.
•
$50,000, plus accrued interest, to repay our 5% promissory note
    to our president and chief executive officer. We borrowed these
    funds to pay expenses of this offering. See "Transactions
    with Related Persons" on page 62.
•
$      for advertising and marketing
    activities over a two year period designed to increase overall
    franchise sales.
•
$      to develop new skincare and
    nutritional products to be offered at our locations.
•
$      for capital improvements to our
    corporate headquarters, which we use as our primary training
    center for new and existing franchisees.
•
$      for the development of new
    franchise concepts.
•
$375,00 to purchase certain intellectual property rights from
    Planet Beach Brands, LLC, which is wholly owned by our
    president, chief executive officer, chairman and principal
    stockholder. See "Transactions with Related Persons"
    on page 62 of this prospectus.
We intend to use the remaining $     
    of the net proceeds from this offering for working capital and
    general corporate purposes. The amounts actually spent for these
    purposes may vary significantly and will depend on a number of
    factors, including our operating costs and other factors
    described under the section of this prospectus entitled
    "Risk Factors." While we have no present
    understandings, commitments or agreements to enter into any
    material acquisitions, we may use a portion of the net proceeds
    to acquire property or equipment that complements our business.
    Accordingly, management will retain broad discretion as to the
    allocation of the net proceeds of this offering.
Pending the uses described above, we will invest the net
    proceeds of this offering in short-term, interest-bearing,
    investment-grade securities. We cannot predict whether the
    proceeds will yield a favorable investment return.
DETERMINATION
    OF OFFERING PRICE
Before this offering, there has been no trading market for the
    units, our common stock or the warrants. The initial public
    offering price of the units being offered by this prospectus
    will be determined by negotiation by us and the representative
    of the underwriters. The principal factors considered in
    determining the initial public offering price include:
•
the information set forth in this prospectus and otherwise
    available to the representative;
•
our history and prospects and the history of, and prospects for,
    the industry in which we compete;
•
our past and present financial performance and the
    representative's assessment of our management;
•
our prospects for future earnings and the present state of our
    development;
•
the general condition of the securities markets at the time of
    this offering; and
•
the recent market prices of, and the demand for, publicly traded
    equity securities of generally comparable companies.
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As of March 18, 2010, there were approximately 44
    stockholders of record of our common stock. There are no
    outstanding options, warrants or other rights to acquire our
    common stock other than:
•
options to acquire 552,571 shares of our common stock under
    our 2005 Stock Option Plan, all at an exercise price of $3.50
    per share;
•
shares subject to an option held by one of our vendors to
    convert balances due under our note payable within
    12 months of this offering at a conversion price equal to
    the initial public offering price; and
•
a number of shares issuable to one of our executive officers and
    one employee in lieu of $13,632 of deferred cash compensation,
    to be determined using the closing price of our common stock on
    the NYSE Amex on the first day that the warrants and shares we
    are offering begin trading separately, and to be issued on that
    date.
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CAPITALIZATION
The following table sets forth our cash and cash equivalents and
    capitalization as of December 31, 2009 on:
•
an actual basis; and
•
a pro forma as adjusted basis to give effect to the sale
    of     units in this offering at the
    initial public offering price of $     
    per unit (after deducting estimated underwriting discounts and
    commissions and estimated offering costs payable by us), the
    application of the net proceeds of this offering as described
    under "Use of Proceeds," and the 1 for 3.5 reverse
    stock split of our common stock that was effected when we
    changed our state of incorporation to Delaware on March 18,
    2010.
This table should be read in conjunction with "Use of
    Proceeds," "Management's Discussion and Analysis
    of Financial Condition and Results of Operations" and our
    financial statements and the related notes included elsewhere in
    this prospectus.
As of December 31, 2009
Actual
As Adjusted
Cash and cash equivalents
$
53,810
$
Debt:
Current maturities of long-term debt
$
448,742
Long-term debt, less current maturities
2,773,919
Total debt
3,222,661
Stockholders' equity (deficit):
Preferred Stock, $0.0001 par value per share:
    10,000,000 shares authorized, none issued
—
—
Common Stock, $0.0001 par value per share:
100,000,000 shares authorized, 13,428,139 shares
    issued and 12,998,739 shares outstanding,
    actual,           shares
    issued
    and           shares
    outstanding, as adjusted
1,343
Additional paid-in capital
348,802
Retained earnings (deficit)
(1,480,120
)
Treasury stock, at cost
(175,000
)
Total stockholders' equity (deficit):
(1,304,975
)
Total capitalization:
$
1,917,686
The information in the table above excludes:
•
1,794,000 shares (512,571 shares, as adjusted) of our
    common stock issuable upon exercise of options outstanding at
    December 31, 2009 under our 2005 Stock Option Plan, all at
    an exercise price of $3.50 per share;
•
shares subject to an option held by one of our vendors to
    convert balances due under our note payable within
    12 months of this offering at a conversion price equal to
    the initial public offering price; and
•
a number of shares issuable to one of our executive officers and
    one employee in lieu of $13,632 of deferred cash compensation,
    to be determined using the closing price of our common stock on
    the NYSE amex on the first day that the warrants and shares we
    are offering begin trading separately, and to be issued on that
    date.
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DILUTION
Dilution represents the difference between the public offering
    price per unit paid by investors in this offering, assuming no
    value is attributed to the warrants included in the units, and
    the pro forma net tangible book value per share of common stock
    immediately after the offering. This calculation does not
    reflect any dilution associated with the sale and exercise of
    the warrants. Net tangible book value per share as of
    December 31, 2009 represented the amount of our total
    tangible assets less the amount of our total liabilities,
    divided by the number of shares of common stock deemed to be
    outstanding under U.S. generally accepted accounting
    principles at December 31, 2009. Our net tangible book
    value (unaudited) as of December 31, 2009 based on
    3,713,925 shares of common stock outstanding was $(.351)
    per share.
After giving effect to the sale
    of           shares
    of common stock included in the units we are offering in this
    prospectus, assuming an initial public offering price of
    $      per unit, which is the midpoint
    of the range listed on the cover page of this prospectus, and
    after deducting estimated underwriting discounts and commissions
    and estimated offering expenses payable by us, our pro forma net
    tangible book value as of December 31, 2009 would have been
    approximately $     , or
    $      per common share. This
    represents an immediate increase in net tangible book value to
    our existing stockholders of $      per
    share and an immediate dilution to new investors in this
    offering of $      per share. The
    following table illustrates this per share dilution in net
    tangible book value to new investors, assuming no value is
    attributed to the warrants included in the units:
Assumed initial public offering price per unit
$
Net tangible book value per share as of December 31, 2009
    (unaudited)
$
(.351
)
Increase in net tangible book value per share attributable to
    new investors
$
Pro forma net tangible book value per share after this offering
$
Dilution per share to new investors
$
If the underwriters exercise their over-allotment option in full
    in this offering, the pro forma net tangible book value would be
    $      per share, the increase in pro
    forma net tangible book value per share to existing stockholders
    would be $      and the dilution per
    share to new investors would be $     
    per share, in each case assuming an initial public offering
    price of $      per unit.
The following table summarizes, as of December 31, 2009 on
    a pro forma as adjusted basis, the total number of shares of
    common stock purchased from us, the aggregate cash consideration
    paid to us and the average price per share paid by existing
    stockholders and by new investors in this offering before
    deducting estimated offering expenses. The calculation below is
    based on the offering price of $     
    per unit, before deducting underwriting discounts and
    commissions and estimated offering expenses, and assumes no
    value is attributed to the warrants included in the units:
Shares Purchased
Total Consideration
Average Price
Number
Percent
Amount
Percent
per Share
%
$
%
$
Existing stockholders
3,713,925
%
%
New investors
%
%
Total
100
%
100
%
If the over-allotment option is exercised in full, the number of
    shares of common stock held by existing stockholders will be
    reduced to approximately     % of the
    total number of shares of common stock outstanding after this
    offering, and the number of shares of common stock held by new
    investors will be     , or
    approximately     % of the total number
    of shares of common stock outstanding after this offering,
    assuming no exercise of outstanding options or warrants.
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DIVIDEND
    POLICY
Our board of directors will make any future decisions regarding
    dividends. We currently intend to retain and use any future
    earnings for the development and expansion of our business and
    do not anticipate paying any cash dividends in the foreseeable
    future.
Our board of directors has complete discretion on whether to pay
    dividends, subject to the approval of our stockholders. Even if
    our board of directors decides to pay dividends, the form,
    frequency and amount will depend upon our future operations and
    earnings, capital requirements and surplus, general financial
    condition, contractual restrictions and other factors that the
    board of directors may deem relevant. We paid $8,055 in
    dividends in 2007. We did not pay dividends in 2008 or 2009.
The payment of dividends may be restricted by agreements
    relating to our future indebtedness.
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MANAGEMENT'S
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
We believe we are the largest, full-service automated day spa
    franchisor in the United States. We grant franchises for stores
    operating under the Planet Beach name. As of January 15,
    2010, we had 345 franchises located in 38 U.S. states,
    Canada, Ireland, South Africa and Australia. We also had at that
    date 20 additional franchises under development, including
    proposed locations in one new state as well as in Egypt, Saudi
    Arabia and Kuwait. In addition, at that date we had candidates
    interested in re-opening 16 previously closed locations,
    including one in an additional state.
We establish most of our domestic franchises through
    intermediaries whom we refer to as "area
    representatives." We grant development territories to area
    representatives in exchange for a territory development fee.
    These development territories are geographic regions within
    which area representatives are entitled to market franchises and
    are obligated to train, support and provide guidance to
    franchisees in the territory. Our area representatives are
    entitled to:
•
50% of the initial franchise fee we earn from franchisees who
    establish franchises in the area representative's
    territory, if we sell the franchise as a result of the area
    representative's efforts;
•
50% of the fee we earn when we transfer an existing franchise to
    a new franchisee in the area representative's territory as
    a result of the area representative's efforts;
•
50% of the fee we earn when a franchise broker facilitates a
    sale or a transfer of a franchise in the area
    representative's territory;
•
20% of the fee we earn when we sell a new franchise or transfer
    an existing franchise in the area representative's
    territory, but not as a result of his or her efforts or those of
    a broker;
•
20% of the applicable fee we earn for sales of new franchises or
    transfers of franchises outside the area representative's
    territory, made as a result of the area representative's
    efforts, if the territory has not been granted to another area
    representative; and
•
40% of collected royalties that we receive from our franchisees
    in their territories.
We establish most of our international franchises through
    persons we refer to as "master franchisors." Our
    agreements with our master franchisors give them the right to
    grant Planet Beach franchises in their assigned geographic
    region. The master franchisors develop their own franchise
    system in their areas. For example, the master franchisors are
    required directly, or through area representatives that they
    appoint, to sell, train, support and provide guidance to
    franchisees in their areas. The master franchisors owe us a
    master franchise fee when we appoint them as a master
    franchisor, additional fees or royalties upon the sale of
    franchises and a percentage of the revenues generated by
    franchise outlets in the assigned area.
We require our franchisees and master franchisors to purchase
    U-V and spa equipment, as well as certain U-V, skin care and
    nutritional products, from us or from suppliers we designate.
    All of the equipment, and approximately 53% of the products, are
    sold under the Planet Beach private label. For our foreign
    locations, we sell equipment directly to franchisees and pay a
    portion of our profits to the master franchisor, if any, for the
    applicable territory. We require our master franchisors to own
    or control the first location in their territories, which we
    call "flagship" locations. We sell equipment and
    products to these flagship locations at a discount to our
    domestic rates.
Currently, we sell our private label products at a profit to an
    international distributor, who resells them to our foreign
    franchisees. The distributor also sells other national branded
    products to our foreign franchises, and pays us a royalty from
    those sales. We share 60% of our royalties with the master
    franchisor for the applicable territory. However, we expect that
    in the future we will sell our private label products to our
    master franchisors for resale to foreign franchisees. We would
    earn a profit at the time of sale to the master franchisor and
    would have no royalties on resales to the franchisees.
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We have equipment and product suppliers who sell directly to our
    franchisees and master franchisors, and we receive royalties on
    these sales.
We generate revenues through:
•
Sales of spa equipment and products to our franchisees and
    master franchisors;
•
Franchise fees, consisting of:
•
initial franchise fees;
•
area representative fees for domestic territories and master
    franchise fees for international territories that are licensed
    to our area representatives and master franchisors who sell and
    profit from franchise outlets within the territory;
•
transfer fees payable by franchisees who desire to exit our
    system upon the sale of their franchise to a new franchisee, to
    offset administrative and retraining costs;
•
Royalties and related fees, including fees paid by our domestic
    franchisees for our national advertising program, which we
    recognize for accounting purposes to the extent we incur
    national advertising expenses, and for brand development; and
•
Other fees, consisting of:
•
tenant placement and site design fees earned from securing a spa
    location for our franchisees and coordinating the location
    build-out;
•
company-operated spa revenues; and
•
convention revenues, which consist of registration fees and
    vendor sponsorships for our annual convention for our
    franchisees.
Our primary focus since 2005 has been to increase sales of
    franchises through the development of our Contempo Spa concept.
    All of our locations worldwide earned a total of
    $79.2 million in spa sales for 2009, consisting of
    $54.4 million in membership fees, $12.3 million in
    fees for one-time services and $12.5 million in product
    sales. For 2008, total worldwide spa revenues were
    $82.9 million, consisting of $51.7 million in
    membership fees, $16.9 million in one-time services and
    $14.3 million in product sales.
Principal
    Factors Affecting Our Financial Performance
We experienced challenging operating conditions in fiscal years
    2007, 2008 and 2009. Fiscal year 2006 was our last profitable
    year, when we earned $113,000 of net income. During that year,
    we had a net increase of 66 operating locations, with 335 total
    operating locations at December 31, 2006 compared with 269
    operating locations at December 31, 2005, or an increase of
    25%. Partially as a result of this growth in the number of our
    operating locations, our equipment sales increased. The increase
    in equipment sales was also attributable to the roll out in 2005
    of our Contempo Spa format, which required franchisees to
    purchase spa equipment for the first time. Credit and financing
    was also readily available to franchisees throughout fiscal 2006.
To plan for the possibility that this high growth rate might
    continue into fiscal 2007, we increased our staff by
    11 employees during 2007 to support the growth in
    locations. However, location growth in 2007 returned to the more
    normal levels we experienced in fiscal 2005, resulting in a net
    increase of 36 new locations in 2007. The decrease in location
    openings resulted in a decrease in equipment sales from 2006
    levels, but was offset by an increase in royalty revenue from
    the greater total number of open locations. Ultimately, revenues
    remained constant at approximately $26.4 million in both
    fiscal 2006 and 2007. However, the increase in staff caused our
    total compensation expense to increase to $6.6 million in
    fiscal 2007, compared with $5.4 million in fiscal 2006, and
    we incurred a net loss of $325,000 in 2007. We did not take
    significant steps to correct this overstaffing until November
    2008 when we began to make staff reductions in response to the
    economic recession.
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Our results for fiscal 2008 were driven by several factors.
    First, equipment sales slowed as the number of new locations
    opening during the year decreased, and as the number of our
    locations that had not converted to our Contempo Spa format
    decreased. Second, in the second half of 2008, our franchise
    sales began to be affected by the global recession and
    tightening of the credit market, and we had a net increase of
    only 14 stores for the year, compared with the net 36 new
    stores in 2007. Finally, we did not make meaningful reductions
    in staff and compensation expense until the end of the 2008
    fiscal year.
In fiscal year 2009, ongoing global economic challenges and
    uncertainties had a significant impact on our business. For the
    first time in our 14 year history, the number of our stores
    decreased. We began the year with 385 spa locations worldwide,
    and ended the year with 347 locations. This decrease of 38 spas,
    or 9.9%, was the net result of 28 new or reopened locations and
    66 closures. Although the U.S. economy has shown some signs
    of improvement, management recognizes that the difficult
    situations many of our franchisees and customers are
    experiencing will not be resolved completely in 2010.
Management responded to this decrease in operating locations,
    and the resulting decline in revenue, by reducing our operating
    costs, mainly payroll. Management's goal was to rely less
    on new location sales and openings by bringing recurring revenue
    in line with recurring costs. Through attrition and staff
    reductions, we reduced payroll expense by 37% in 2009 versus
    2008. We consolidated job responsibilities and departments,
    automated services, and cut personnel whose job duties were
    largely intended for rapid location growth. On March 1,
    2010, management further reduced personnel by six employees
    in five departments with 2009 payroll and benefits expense
    of approximately $544,000. However, we have maintained our
    commitment to assist our franchisees with revenue growth, and
    have avoided any reductions in our spa performance department,
    which is responsible for increasing revenues at the franchisee
    level.
The spas that closed in 2009 were largely underperforming
    locations that were not able to sustain a membership base
    necessary to weather the economic downturn. Spa and U-V services
    and related product purchases are non-essential consumer
    expenditures, and we believe the current recession has curtailed
    consumer discretionary spending. However, our locations that we
    classify as Contempo Spas (spas that include our key automated
    spa services, as well as sunless-tanning services and U-V
    therapy services) experienced average same store sales increases
    of 4% in 2009 versus 2008. We believe our Contempo Spa customers
    consider our membership program to be a good value because it
    entitles them to a wide variety of spa services.
The lack of available credit to businesses has significantly
    affected our existing and potential franchisees. Existing
    franchisees who do not have operating lines of credit struggle
    to manage cash flow, which increases their likelihood of
    failure. Franchisees wanting to upgrade their businesses with
    new equipment to attract and retain members are unable to do so
    because equipment financing is also more limited than in the
    past. Potential franchisees applying for
start-up
loans are still being denied credit by lenders, including the
    Small Business Administration, or SBA.
In order to provide more cash to new franchisees entering our
    system, we have focused significant efforts on assisting these
    franchisees in pre-selling memberships months before opening,
    which increases the likelihood of generating a positive cash
    flow for the location's opening month. We have also worked
    with our equipment manufacturers to reduce franchisee equipment
    costs and offer trade-in programs that assist our franchisees in
    upgrading their location's equipment. We have worked to
    reduce the average
start-up
costs for a new location to below $300,000. We will continue to
    assist franchisees in trying to obtain bank financing, including
    SBA loans, by providing them with a model business plan and pro
    forma financial statements that they use to determine their
    financing and seek a lender.
We believe that our franchisees' difficulty in obtaining
    financing is one of the most challenging conditions we face in
    fiscal year 2010. Deteriorating economic conditions have
    negatively impacted our franchisees' ability to obtain
    credit, and therefore, our ability to sell additional
    franchises. Moreover, this disruption in the credit markets has
    negatively affected existing franchisees who are struggling to
    manage cash, as well as credit terms extended by our suppliers.
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In December 2009, the International Franchise Association, the
    oldest and largest organization representing franchising
    businesses with more than 1,250 franchise system members,
    predicted a slow recovery for franchise businesses in 2010, with
    marginal increases in the number of jobs, economic output and
    the number of franchise establishments. The continuing credit
    crisis will likely limit the level of growth that franchise
    businesses will experience as compared with prior recoveries.
    Despite this likely slow recovery, a PricewaterhouseCoopers
    report predicts that the franchise sector that will experience
    the most growth in 2010 is the personal services sector in which
    we participate, with growth forecasted at 4.4%.
The United States personal and skin care services market has
    grown significantly in recent years. According to Cognis, a
    specialty chemical company that focuses on wellness, the skin
    care services market maintained a strong growth rate with sales
    rising by 6.8% from 2004 to 2006. We believe this growth will
    result in increased sales of franchises and patronage of the
    resulting and existing spas, positively affecting our overall
    revenue.
Part of our growth strategy is to expand sales of franchises to
    foreign markets. As of January 15, 2010, 22 of our
    locations were outside the United States. While we continue to
    grow domestically, we are seeking to establish a network of
    sales avenues for our franchises in other developed countries
    where we believe there is a strong demand for our products and
    services. We have operating locations in Canada, Ireland, South
    Africa, and Australia. We have sold a franchise in Egypt and
    expect a location to open there in the Spring of 2010. We have
    entered into master franchisor agreements but do not yet have
    operating locations in Northern Ireland, the United Kingdom,
    Kuwait, and Saudi Arabia. We believe we have found a niche
    market in the Middle East where consumers desire more modesty
    and privacy in spa services, especially for female customers. We
    also plan to expand our brand to other countries in Europe, New
    Zealand, South America, Central America, and Asia.
Critical
    Accounting Policies
The preparation of financial statements in conformity with
    accounting principles generally accepted in the United States
    requires our management to make assumptions, estimates and
    judgments that affect the amounts reported in the financial
    statements, including the related notes and disclosures of
    commitments and contingencies, if any. We consider our critical
    accounting policies to be those that require the more
    significant judgments and estimates in the preparation of
    financial statements, including the following:
Allowances
    for Accounts and Notes Receivable
Accounts receivable consist primarily of amounts due for
    franchise royalties and product sales, which are carried at
    original invoice amount less an estimate made for doubtful
    receivables based on a review of all outstanding amounts.
Management determines the allowance for doubtful accounts by
    identifying overdue accounts and by reserving a percentage of
    the account's outstanding balance as uncollectible based on
    historical experience with collections in general or based on
    the account's specific circumstance. Accounts receivable
    are written off when deemed uncollectible. Recoveries of
    accounts receivable previously written off are recorded when
    received.
Notes receivable consist principally of area developer fees,
    equipment vendor receivables, and spa purchase fees we finance.
    The allowance for doubtful accounts is our best estimate of the
    amount of credit losses in our existing notes. We determine the
    allowance on an individual note basis upon review of any note
    that has a payment past due for over 60 days. A note is
    considered impaired if it is probable that we will not collect
    all principal and interest contractually due. The impairment is
    measured based on the present value of expected future cash
    flows discounted at the note's effective interest rate.
We do not accrue interest when a note is considered impaired.
    When ultimate collectability of the principal balance of the
    impaired note is in doubt, all cash receipts on impaired notes
    are applied to reduce the principal amount of such notes until
    the principal has been recovered and are recognized as interest
    income thereafter. Impairment losses are charged against the
    allowance and increases in the allowance are charged to bad debt
    expense. Notes are written off against the allowance when all
    possible means of collection have been exhausted and the
    potential for recovery is considered remote.
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The notes have interest rates ranging from non-interest bearing
    to 7.0 percent and will mature upon sale of related
    franchises, or in accordance with scheduled maturities through
    September 2016.
National
    Advertising and Brand Development
We collect a national advertising and brand development royalty
    from our franchisees. Franchises that were established before
    April 1, 2008 are required to contribute 1% of gross sales
    to our National Advertising Fund as a royalty for the
    development and distribution of national marketing efforts for
    the benefit of all franchisees within the Planet Beach system.
    We carry forward national advertising royalties that are not
    spent in the fiscal year collected to the following year, and
    record them as a deposit on the consolidated balance sheet. At
    December 31, 2009 and 2008, there were no carry forward
    deposits. We recognize national advertising expenditures in the
    consolidated statements of operations as incurred.
Beginning April 1, 2008, franchisees entering the system
    must contribute 2% of gross sales for brand development. We have
    no obligation to carry forward any unspent brand development
    royalties for these franchisees to the following year. We
    recognize brand development royalties in our consolidated
    statements of income in full as we accrue them, along with the
    brand development expenses.
Property,
    Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation
    on plant and equipment is calculated using the straight line
    method over the estimated useful lives of the related assets.
Maintenance and repairs are charged to expenses as incurred.
    Improvements and renewals are capitalized and depreciated over
    the remaining estimated useful life. When property, plant, and
    equipment are sold or otherwise disposed of, the asset account
    and related accumulated depreciation are relieved, and any gain
    or loss is included in income.
The useful lives of property, plant, and equipment for purposes
    of computing depreciation are:
Buildings and leasehold improvements
7 – 39 Years
Spa equipment
7 Years
Computer equipment
3 – 5 Years
Furniture, fixtures, and equipment
3 – 7 Years
Software
5 Years
Revenue
    Recognition
We have entered into franchise agreements that grant franchisees
    the right to operate individual Planet Beach Contempo Spas in
    return for an initial franchise fee and ongoing development fees
    (royalties). In addition, we have entered into area developer
    agreements, including international master franchisor
    agreements, under which we grant the right to sell individual
    Planet Beach Contempo Spas in designated territories.
We recognize revenue from individual franchise sales when we
    have substantially performed or satisfied all material services
    or conditions relating to the sale.
Area developer fees, which include international master
    franchise fees, are recognized as revenue on the cash basis
    until 50% of the purchase price is collected; the uncollected
    purchase price is deferred. All payments received for these area
    agreements are non-refundable. We estimate that once 50% of the
    purchase price has been collected, and no further significant
    obligations remain, it is probable that the remaining area
    development fee will be collectible. Therefore, we fully
    recognize area development fees once 50% of the purchase price
    is collected.
Most of these area agreements have promissory notes structured
    requiring payment of at least 50% of the purchase price within
    12 months of agreement execution. The remaining purchase
    price will normally be collected over 3-6 years amortized
    monthly with principal and interest payments.
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All payments received for these area agreements are
    non-refundable.
We accrue royalties based upon the contractual royalty rate,
    currently 6% of total franchise revenue, as defined in the
    respective franchise agreements. Royalties are recorded as
    revenue when the related franchise revenue is reported to us.
    Sales of spa equipment and products are recognized as revenue,
    when the items are shipped, collection is probable, and no
    further significant obligations remain.
Income
    Tax
We account for income taxes under the liability method. Deferred
    tax assets and liabilities are recognized for the future tax
    consequences attributable to differences between the financial
    statement carrying amounts of existing assets and liabilities
    and their respective tax bases and operating loss and tax credit
    carryforwards. Deferred tax assets and liabilities are measured
    using enacted tax rates expected to apply to taxable income in
    the years in which those temporary differences are expected to
    be recovered or settled.
The effect on deferred tax assets and liabilities of a change in
    tax rates is recognized in income in the period that includes
    the enactment date. We include any estimated interest and
    penalties on tax related matters in income taxes payable.
    Valuation allowances are established when necessary to reduce
    net deferred income tax assets to the amount expected to be
    realized.
Effective January 1, 2009, we recognize the effect of
    income tax positions only if those positions are more likely
    than not being sustained. Recognized income tax positions are
    measured at the largest amount that is greater than 50% likely
    of being realized. Changes in recognition or measurement are
    reflected in the period in which the change in judgment occurs.
    Prior to the adoption of ASC 740-10 Income Tax Uncertainties, we
    recognized the effect of income tax positions only if such
    positions were probable of being sustained. The effect of the
    adoption of this standard was not material.
We record interest related to unrecognized tax benefits in
    interest expense and penalties in selling, general, and
    administrative expenses.
Stock-Based
    Compensation
We account for our stock-based compensation using the modified
    prospective adjustment method of measuring share-based payments.
Results
    of Operations
The following tables set forth key components of our results of
    operations for the periods indicated.
Year Ended December 31,
2009
2008
2007
(All amounts are in thousands of U.S. dollars)
Operating revenues
$
13,269
$
25,006
$
26,456
Operating expenses
Cost of goods sold
3,693
11,132
13,369
Operating expenses
3,950
5,630
4,633
Salaries and bonuses
4,280
6,791
6,634
Commissions
1,580
2,013
2,012
Total operating expenses
13,503
25,566
26,648
Total other income (expense)
(474
)
(198
)
(138
)
Income (loss) before provision for income taxes
(708
)
(758
)
(330
)
Provision (benefit) for income tax
—
(5
)
Net income (loss)
$
(708
)
$
(758
)
$
(325
)
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Year Ended December 31,
2009
2008
2007
(All amounts are in thousands of U.S. dollars)
Operating revenues
100
%
100
%
100
%
Operating expenses
Cost of goods sold
28
%
45
%
51
%
Operating expenses
30
%
23
%
18
%
Salaries and bonuses
32
%
27
%
25
%
Commissions
12
%
8
%
8
%
Total operating expenses
102
%
102
%
101
%
Total other income (expense)
(4
)%
(1
)%
(1
)%
Income (loss) before provision for income taxes
(5
)%
(3
)%
(1
)%
Provision (benefit) for income tax
0
%
0
%
0
%
Net income (loss)
(5
)%
(3
)%
(1
)%
Year Ended December 31,
2009
2008
2007
(All amounts are in thousands of U.S. dollars)
Sales of spa equipment and products
$
4,920
$
14,706
$
17,586
Franchise fees
1,257
3,067
2,745
Royalties and related fees
6,883
6,833
5,585
Other
209
400
540
Totaling Operating Revenues
$
13,269
$
25,006
$
26,456
Fiscal
    Years Ended December 31, 2009 and 2008
Operating
    Revenues
Our total operating revenues in fiscal 2009 were
    $13.3 million, which is a decrease of $11.7 million,
    or 47%, from total operating revenues in fiscal 2008, during
    which we had revenues of $25.0 million. The decline in
    revenue is attributable to decreases in spa equipment and
    product sales, initial franchise fees, area developer fees, and
    national advertising fees recognized, offset by an increase in
    royalties. Other revenues remained steady year over year.
Spa equipment sales are driven by new location openings and by
    purchases of add-on or upgraded equipment by existing
    franchisees. We had 28 new locations open in fiscal 2009,
    compared with 54 for fiscal 2008, or a decrease of 48%. Our
    equipment sales were $2.6 million and $9.3 million,
    respectively, for fiscal 2009 versus 2008. The decline in new
    locations accounted for approximately $5.6 million of this
    $6.7 million or 72% decrease, with the remaining
    $1.1 million of the decline attributable to a decrease in
    sales of additional equipment to existing franchisees. New
    location equipment sales accounted for $1.5 million and
    $7.2 million in 2009 and 2008, respectively. Add-on
    equipment sales accounted for $1.1 million and
    $2.1 million in 2009 and 2008, respectively. The decrease
    in domestic franchise sales in 2008 versus 2007 of 35% resulted
    in the 48% decline in the number of new location openings in
    2009 versus 2008. Franchise locations typically take from six to
    twelve months to open, so equipment sales for new openings lag
    and typically cross over fiscal years. In addition, there were
    further delays in the opening of locations in 2009 due to the
    lack of available equipment financing. Add-on equipment sales
    were also negatively affected by the lack of available credit
    for small business throughout 2009.
Product sales are driven by the number of our open locations
    purchasing directly from our warehouse. We have several product
    vendors who sell directly to our franchise locations. The vendor
    remits us a percentage of those sales and we record those
    amounts as royalties. Product sales in fiscal 2009 were
    $2.3 million, which is a decrease of $3.1 million, or
    57%, from product sales in fiscal 2008 of $5.4 million. The
    decline in product
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revenue is attributable to two factors. First, in the first
    quarter of fiscal 2009, our primary supplier of U-V lotions, New
    Sunshine LLC, began shipping products directly to franchisees.
    With this shift, we began recording a royalty on these sales.
    Total direct sales to our franchises from New Sunshine, LLC were
    $1.4 million in 2009, and we recorded $403,000 as royalty
    and related fees in 2009 related to these sales. Second, the
    average number of franchise locations opened during the year
    decreased from 378 in fiscal 2008 to 366 in fiscal 2009. At year
    end 2009 and 2008, we had 347 and 385 locations open,
    respectively, a net decrease of 38 locations. This decrease in
    average locations opened in 2009 versus 2008, and locations
    purchasing and selling less expensive products in 2009,
    accounted for the remaining $1.7 million reduction in
    product sales.
Franchise fees, totaled $1.3 million, for fiscal year 2009,
    a decrease of $1.8 million, or 60%, from fiscal year 2008,
    during which we had franchise fees of $3.0 million. Of this
    decrease, $0.7 million resulted from decreased
    international master franchisor fees and $1.1 million
    resulted from lower initial franchise and area representative
    fees. While international master franchisor fees fell in 2009,
    we added three new countries and one new territory. However, the
    countries and territory added were at a lower fee than in 2008
    due to the size of the population in each. Initial franchise
    fees and area representative fees continued to decline in 2009
    in response to the on-going recession and lack of credit
    available to small businesses.
Royalties and related fees mainly include the royalty of 6% of
    franchisees' total revenue which we collect on a monthly
    basis, but also include technology, education and nutrition
    fees, along with royalties received from equipment, product and
    construction vendors who sell directly to our franchisees. Also
    included are fees paid for our national advertising and brand
    development programs. At December 31, 2009, we had 16
    locations that were operated under an older version of our
    franchise agreement or other arrangements that require them to
    pay us a flat monthly royalty fee ranging from $250 to $975 per
    month, or no fee as described under "Transactions with
    Related Persons." Royalties and related fees for fiscal
    2009 and 2008 were consistent at $6.8 million. Royalties
    earned from vendors selling products to or servicing our
    franchisees totaled $0.9 million and $0.6 million in
    2009 and 2008, respectively, an increase of $0.3 million.
    This increase was largely the result of shifting the fulfillment
    responsibilities for our U-V products to New Sunshine, LLC in
    the first quarter of 2009. New value-added services, such as
    access to our on-line service, NutritionSpa.com, and nutrition
    products in 2009 increased royalties by $0.1 million versus
    2008. The decrease in average locations opened in 2009 versus
    2008 did not have a significant effect on the franchisee
    royalties we earned as we experienced a 4% increase in same
    store sales for our Contempo Spa locations.
For franchises established before April 1, 2008, national
    advertising fees are billed at a rate of 1% of total franchisee
    gross sales. We recognize these fees to the extent we incur
    expenses for national advertising. We defer any remaining fees
    to the subsequent year. Beginning April 1, 2008,
    franchisees entering the system must contribute 2% of gross
    sales for brand development. We have no obligation to carry
    forward any unspent brand development fees for these franchisees
    to the following year. These brand development fees totaled
    approximately $110,000 and $10,000 in 2009 and 2008,
    respectively. National advertising and brand development fees
    are largely spent on our annual, nationally televised
    Ms. Planet Beach Spokesmodel Search, which has become the
    primary method of increasing brand awareness domestically and
    internationally for our franchise locations. National
    advertising expenses and recognized revenue totaled
    $0.7 million and $1.1 million, respectively, in fiscal
    2009 and 2008. This $0.4 million decrease was due to
    decreased costs incurred for the competition's planning,
    production and television syndication in 2009 compared with 2008.
Total
    Operating Expenses
Our total operating expenses for fiscal 2009 were
    $13.5 million, which is $12.0 million less than in
    fiscal 2008, during which we had operating expenses of
    $25.5 million, a decrease of 47%. Decreases occurred in all
    categories of expenses, including cost of goods sold, operating
    expenses, salaries and bonuses, and commissions.
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Cost of
    Goods Sold
Our cost of goods sold in fiscal 2009 amounted to
    $3.7 million, which is $7.4 million, or 67%, less than
    in fiscal 2008, during which our cost of goods sold was
    $11.1 million. The decrease in our total cost of goods sold
    resulted from a decrease in sales of spa equipment and products
    and from the change in our relationship with certain suppliers.
    In the first quarter of 2009, certain suppliers shipped and
    billed our franchisees directly for products and began paying us
    royalties based on these sales. Combined sales of spa equipment
    and products were $4.9 million and $14.7 million in
    2009 and 2008, respectively, a decrease of $9.8 million or
    67%. As noted above, sales of spa equipment and products
    decreased sharply in 2009 from 2008 as the result of fewer new
    open locations, a decrease in the average number of open
    locations, the lack of available credit for small businesses to
    expand, and the tendency for franchisees to purchase and sell
    less expensive products in 2009.
Operating
    Expenses
Our operating expenses for fiscal 2009 were $3.9 million,
    which is $1.7 million less than in fiscal 2008, during
    which we had operating expenses of $5.6 million, a decrease
    of 30%. Decreases in 2009 occurred in several categories
    including: a decrease of $0.1 million in consulting and
    contract labor; a decrease of $0.1 million in credit card
    fees; a decrease of $0.1 million in legal expenses; a
    decline in freight of $0.1 million; the elimination of
    $0.1 million in travel-related expenses as a reward for our
    top ten performing franchisees; and a $0.3 million decline
    in advertising and marketing costs; a decrease in travel costs
    of $0.3 million; and decreased costs for our annual
    convention of $0.1; and a decrease in national advertising and
    brand development expenses of $0.4 million; offset by
    increases in lawsuit settlement cost of $0.4 million.
    Decreases in these expenses were necessary to offset declining
    revenues and cash flow. In addition, franchise lawsuits
    increased as troubled franchisees filed suit seeking damages for
    alleged breaches of their contracts. In all cases, management
    agreed to settlements, some through mediation, to avoid lengthy
    and costly legal battles.
Our national advertising and brand development expenses in
    fiscal 2009 were $0.7 million, a decrease of
    $0.4 million from fiscal 2008, during which we had expenses
    of $1.1 million. These expenses are largely for the annual,
    nationally televised Ms. Planet Beach Spokesmodel Search,
    which has become the primary method of increasing brand
    awareness domestically and internationally for our franchise
    locations. The $0.4 million decrease was due to decreased
    costs incurred for the competition's planning, production
    and television syndication in 2009 compared with 2008. The 2009
    competition will air during 2010.
Salaries
    and Bonuses
Our salaries and bonuses in fiscal 2009 were $4.3 million,
    a decrease of $2.5 million, or 37%, from fiscal 2008,
    during which we had salaries and bonuses of $6.8 million.
    The average number of employees decreased from 73 in fiscal 2008
    to 50 in fiscal year 2009, a decrease of 23 employees or
    32%. We had a total of 65 and 47 employees on staff at the
    end of 2008 and 2009, respectively. In response to declining
    revenues and a slowdown in the number of franchise locations
    sold, opening and opened, we began to reduce our staff and
    consolidate departmental operations in the middle of 2008. We
    had layoffs in the third and fourth quarters of 2008 and the
    first quarter of 2009 to adjust our staffing to an efficient
    level based on the current economic climate. In addition to
    staff reductions and department consolidation, we also
    restructured our internal sales commissions, reduced our base
    pay, suspended matching contributions to our 401(k) plan, and
    allocated more of the cost of our health insurance plan to our
    employees.
Commissions
Commissions were $1.6 million and $2.0 million in
    fiscal 2009 and 2008, respectively, a decrease of
    $0.4 million, or 20%. The monthly, recurring fee paid to
    area representatives for their 40% of collected royalties
    totaled $1.2 million and $1.3 million in fiscal 2009
    and 2008, respectively, a decrease of $0.1 million, which
    reflects the total decrease in locations opened in 2009 from
    2008. The remaining $0.3 million decrease is attributable
    to lower commissions paid to external brokers and area
    representatives pursuant to franchise sales or transfers, which
    reflects the decline in franchise sales in 2009 from 2008.
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Other
    Income (Expense)
Other income (expense) includes interest and other income,
    interest expense paid on long-term debt, and realized gains
    (losses). Total other income (expense) was ($0.5) million
    and ($0.2) million in fiscal years 2009 and 2008,
    respectively. The increase is the result of realized losses in
    2009 totaling ($0.3) associated with the liquidation of our
    available-for-sale securities in 2009.
Income
    Taxes
The company recorded no provision for income tax for fiscal 2009
    and 2008 due to net loss incurred in both years.
Fiscal
    Years Ended December 31, 2008 and 2007
Operating
    Revenues
Our total operating revenues in fiscal 2008 were
    $25.0 million, which is a decrease of $1.5 million, or
    5.7%, from total operating revenues in fiscal 2007, during which
    we had revenues of $26.5 million. The decline in revenue is
    attributable to a decrease in equipment sales, offset by an
    increase in initial franchise fees, area representative and
    master franchisor territory fees, royalties, and national
    advertising and brand development fees recognized.
Equipment sales are driven by new location openings and by
    purchases of additional or upgraded equipment by existing
    franchisees. We had 54 new locations open in fiscal 2008, versus
    58 for fiscal 2007, or a decrease of 7%. Our equipment sales
    were $9.3 million and $12.0 million, respectively, for
    fiscal 2008 versus 2007. The decline in new locations opening,
    and existing locations purchasing fewer U-V light beds accounted
    for approximately $2.3 million of this $2.7 million
    decrease, as we continued to promote our spa concept. Purchases
    of U-V light beds in fiscal 2008 year totaled $3.8 million,
    a decrease of $2.3 million from fiscal year 2007, when we
    had U-V light bed purchases totaling $6.1 million. The
    remaining $0.4 million of the decline was attributable to a
    decrease in sales of additional equipment to existing franchises
    struggling with the credit crisis. With the inception of our
    Contempo Spa concept in 2005, add-on equipment sales increased
    in fiscal years 2006 and 2007 as existing locations converted to
    the Contempo Spa format and purchased hydration stations, aqua
    massage, facial, and sunless tanning equipment. However,
    beginning in 2008, these add-on sales started to taper off as
    the number of locations that had not converted to the Contempo
    Spa format decreased.
Franchise fees for fiscal 2008 totaled $3.1 million, which
    is an increase of $0.4 million, or 14.8%, from fiscal 2007,
    during which we had franchise fees of $2.7 million. Fiscal
    2008 was our first full year of international expansion, which
    provided an additional $1.0 million in master franchise
    sales versus fiscal 2007. Initial franchise fees declined
    $0.7 million as domestic franchise sales slowed in response
    to the growing national recession. For 2008, international
    master franchisor sales were $1.1 million, versus
    $0.1 million for 2007. Domestic location and territory
    sales totaled $1.8 million for 2008, versus
    $2.3 million for 2007.
Royalties and related fees mainly include the royalty of 6% of
    franchisees' total revenue which we collect on a monthly
    basis, but also include technology, education and nutrition
    fees, along with royalties received from equipment, product and
    construction vendors who sell directly to our franchisees. Also
    included are fees paid for our national advertising and brand
    development programs. At December 31, 2008, we had 15
    locations that were operated under an older version of our
    franchise agreement or other arrangements that require them to
    pay us a flat monthly royalty fee ranging from $250 to $975 per
    month, or no fee as described under "Transactions with
    Related Persons." Royalties and related fees for fiscal
    2008 totaled $6.8 million, which is an increase of
    $1.2 million or 21.4% from fiscal year 2007, during which
    we had royalties of $5.6 million. Our average open
    locations for fiscal 2008 totaled 378, versus 353 for fiscal
    year 2007. This increase in average locations of 25, or 7%,
    accounted for some of the increase in royalties.
For franchises established before April 1, 2008, national
    advertising fees are billed at a rate of 1% of total franchisee
    gross sales. We recognize these fees to the extent we incur
    expenses for national advertising. We defer any remaining fees
    to the subsequent year. Beginning April 1, 2008,
    franchisees entering the system
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must contribute 2% of gross sales for brand development. We have
    no obligation to carry forward any unspent brand development
    fees for these franchisees to the following year. These brand
    development fees totaled approximately $10,000 in 2008. National
    advertising expenses and recognized revenue totaled
    $1.1 million and $0.6 million, respectively, in fiscal
    2008 and 2007. This $0.5 million increase was due largely
    to costs incurred to record and distribute via television
    syndication the Ms. Planet Beach Spokesmodel Search. The
    2008 competition, which aired in 2009, aired in markets that
    represented 64.7% of U.S. households. This competition has
    become the primary method of increasing brand awareness
    domestically and internationally for our franchise locations.
Total
    Operating Expenses
Our total operating expenses for fiscal 2008 amounted to
    $25.6 million, which is $1.0 million less than in
    fiscal 2007, during which we had operating expenses of
    $26.6 million. As described below, the decrease was mainly
    due to declines in cost of goods sold, offset by an increase in
    national advertising and brand development expenses. All other
    expense categories remained steady.
Cost of
    Goods Sold
Our cost of goods sold in fiscal 2008 amounted to
    $11.1 million, which is $2.2 million or 16.5% less
    than in fiscal 2007, during which our cost of goods sold was
    $13.3 million. The decrease in our total cost of goods sold
    resulted from a decrease in cost of goods sold for spa
    equipment. Sales of spa equipment declined $2.7 million, or
    22.5%, from $12.0 million in fiscal 2007 to
    $9.3 million in fiscal 2008 due to lower add-on equipment
    sales and fewer new location openings.
Operating
    Expenses
Our operating expenses in fiscal 2008 amounted to
    $5.6 million, which is $1.0 million or 21.7% greater
    than in fiscal year 2007, during which our operating expenses
    were $4.6 million. An increase in bad debt expense of
    $0.4 million year over year accounted for some of this
    increase. In addition our national advertising and brand
    development expenses in fiscal 2008 amounted to
    $1.1 million, an increase of $0.5 million over fiscal
    2007, during which we had expenses of $0.6 million. This
    $0.5 million increase was due largely to costs incurred to
    record and distribute via television syndication the
    Ms. Planet Beach Spokesmodel Search. The 2008 competition
    aired in 2009 in markets that represented 64.7% of
    U.S. households. This competition has become a key method
    of increasing brand awareness domestically and internationally
    for our franchise locations.
Salaries
    and Bonuses
Our salaries and bonuses were consistent at $6.8 million
    and $6.6 million for fiscal years 2008 and 2007,
    respectively. Our average number of employees remained stable at
    73 positions for each year, but base salaries increased
    $0.2 million, or 6%, from fiscal 2007 to fiscal 2008, due
    to an increase in management personnel needed to staff our
    growth plan. Employee health plan costs also increased
    $0.1 million in fiscal 2008, or 5%, keeping pace with the
    national average. These increases were offset by
    $0.2 million decrease in internal sales commissions and
    profit bonuses due to a decline in product and equipment sales
    and franchise sales in 2008 compared to 2007.
Commissions
Commission expenses were consistent at $2.0 million in both
    fiscal 2008 and 2007. The monthly, recurring fee paid to area
    representatives for their 40% of collected royalties increased
    by $0.1 million due to an overall increase in company
    royalty revenue, offset by a $0.1 million decrease in
    external broker and area representative commissions paid on new
    franchise sales. Increased royalties of $0.5 million in
    2008 from the national advertising fees recognized do not affect
    commission expense.
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Other
    Income (Expense)
Other income (expense) includes interest and other income,
    interest expense paid on long-term debt and realized gains
    (losses). Total other income (expense) was ($0.2) million
    and ($0.1) million, respectively, for the 2008 and 2007
    fiscal years. The increase was the result of increased interest
    expenses associated with an increase in interest-bearing, long
    term debt.
Income
    Taxes
The company recorded no provision for income tax for fiscal
    2008; a small benefit was recorded in 2007.
Liquidity
    and Capital Resources
As of December 31, 2009, we had cash and cash equivalents
    of $53,810. The following table provides detailed information
    about our net cash flow for all financial statement periods
    presented in this prospectus.
Year Ended December 31,
2009
2008
2007
(All amounts are in thousands
of U.S. dollars)
Components of Operating Revenues
Net cash provided by operating activities
66
265
58
Net cash provided by (used in) investing activities
140
(858
)
(170
)
Net cash provided by (used in) financing activities
(212
)
(256
)
379
Net increase (decrease) in cash and cash equivalents
(6
)
(849
)
267
Operating
    Activities
Net cash provided by operating activities was approximately
    $66,000 and $265,000, respectively, for the fiscal years ended
    December 31, 2009 and December 31, 2008, reflecting a
    decrease of $199,000. Cash flow from operating activities
    decreased period over period due to lower levels of inventory as
    a result of our new product fulfillment agreement with New
    Sunshine, LLC and a significant decrease in accounts payable,
    offset by a decrease in national advertising expense, a decrease
    in accounts receivable, and an increase in cash from customer
    deposits.
We spent less on the Ms. Planet Beach Spokesmodel Search in
    2009 than 2008 for production and television syndication, which
    resulted in the expenditure of fewer national advertising
    deposits. Better management of accounts receivable in 2009
    resulted in a minor increase of $80,000 in accounts receivable
    compared with an increase of $319,000 in 2008, thus more cash
    was available from revenues in 2009 than 2008. Customer deposits
    on hand at December 31, 2008 compared with
    December 31, 2007 were lower due to lower add-on and new
    equipment sales at our annual convention, held every October.
    Thus, cash from customer deposits we remitted to equipment
    vendors were lower by $1.1 million from fiscal year 2009
    compared with fiscal year 2008. Fewer new locations and a lack
    of available financing contributed to a decline in purchases by
    existing franchisees of additional pieces of equipment during
    the last quarter of fiscal 2008.
Net cash provided by operating activities was approximately
    $265,000 and $58,000, respectively, for fiscal years 2008 and
    2007, reflecting an increase of $207,000.
Cash flow from operating activities increased period over period
    due to lower levels of inventory and a decrease in accounts
    payable, offset by a decrease in national advertising deposits
    and a decrease in customer deposits.
A large inventory balance on hand at December 31, 2007 of
    $1.3 million resulted in a source of cash from inventory
    balance reductions for fiscal year 2008 compared with fiscal
    year 2007. We delayed payments on accounts payable to offset
    other operating shortfalls, which caused an increase of
    $1.4 million in accounts payable for fiscal year 2008.
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Negative effects on cash flow included increased spending for
    production and television syndication costs of the
    Ms. Planet Beach Spokesmodel Search in 2008 from 2007,
    resulting in a drawdown of national advertising deposits in
    fiscal 2008. We received substantial customer deposits in 2007,
    which were used to purchase equipment for sales in 2008.
Investing
    Activities
Our main uses of cash for investing activities are for purchases
    of fixed assets, purchases of investments, and notes receivable
    from franchisees, equipment vendors, domestic area
    representatives, and international master franchisors.
Net cash provided by (used in) investing activities was
    approximately $140,000 and ($858,000) for the years ended
    December 31, 2009 and December 31, 2008, respectively,
    an increase of approximately $998,000. Purchases of fixed assets
    were consistent year over year. We liquidated all our
    available-for-sale securities during the first quarter of fiscal
    2009 to forego any further market loss and to improve our cash
    position. For the year ended December 31, 2009, notes
    receivable decreased by a net $17,000 due to payments for
    international and domestic territories, compared with a net
    increase of approximately $717,000 in 2008.
Net cash used in investing activities was approximately $858,000
    and $170,000 for the years ended December 31, 2008 and
    2007, respectively, an increase of $687,000. For the year ended
    December 31, 2008, notes receivable increased by $717,000,
    which included adding notes for domestic territories totaling
    $312,000 and adding notes for international territories totaling
    $427,000, net of initial fees collected for each territory. Cash
    paid for fixed assets was higher in fiscal year 2007 than in
    fiscal 2008 due to increased building improvements costs.
Financing
    Activities
Cash flow from financing activities mainly includes our net
    borrowings in line of credit, and proceeds and payments on
    long-term debt. Our debt ratio (the ratio of total long-term
    debt to total assets) was 65% and 52% at December 31, 2009
    and December 31, 2008, respectively.
Net cash used in financing activities was approximately $212,000
    and $256,000 for the years ended December 31, 2009 and
    December 31, 2008, respectively, a decrease of $44,000. For
    the year ended December 31, 2009, we liquidated all
    available-for-sale securities held by our investment broker,
    which secured our line of credit, and in turn paid off our
    outstanding line of credit of $192,000 in full. During the same
    period, we borrowed a total of $313,000 against credit
    facilities from two of our equipment and product vendors. For
    the same period in 2008, we borrowed a total of $59,000 against
    these vendor credit facilities. Principal payments on long term
    debt were $384,000 for the year ended December 31, 2009.
    For the same period in 2008, principal payments on long term
    debt were $301,000. The increase is attributable to payments on
    the credit facilities from our vendors, all established in late
    2008 as described below.
Net cash (used in) provided by financing activities was
    approximately ($256,000) and $379,000 for fiscal years 2008 and
    2007, respectively, a decrease of $635,000. For fiscal 2008, we
    had payments on long term debt totaling $301,000. For the same
    period in 2007, we had debt payments of $134,000. For fiscal
    2007, we had proceeds from long term debt of $499,000, which
    included a borrowing of $408,000 on our Whitney National Bank
    note described below.
We have incurred losses of approximately $708,000, $758,000 and
    $325,000 for our years ended December 31, 2009, 2008 and
    2007, respectively. The losses have occurred due to the global
    economic downturn that began in 2007. We and our franchisees
    have struggled to obtain credit on reasonable terms or at all.
We are confident that we can continue to operate in a manner to
    generate net cash from operating activities by reducing
    operating and salary costs, improving operating profitability,
    controlling inventory levels, working with vendors and other
    creditors to accept more favorable payment terms, and through
    seeking additional capital for our operations. As described
    above, we implemented many operating expense reductions in
    fiscal year 2009 and will continue to do so into 2010.
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Over the past 18 months, we have reduced payroll expense to
    counter the decline in revenues and to adjust staff levels for
    current locations and activity. We reduced payroll expense in
    fiscal 2009 by 37% or $2.5 million as compared to fiscal
    year 2008. In the first quarter of 2010, we again reduced
    personnel by six employees in five departments with 2009 annual
    payroll and benefits of $544,000, avoiding reductions in spa
    performance departments, which assist franchisees with growth.
We have incurred higher than normal bad debt expense for fiscal
    years 2009 and 2008 of $554,000 and $495,000, respectively, due
    to location closures and struggling franchises. However, we
    achieved same store sales growth of 4% in 2009 as compared to
    2008 for our Contempo Spa locations. Also, we experienced an
    increase in franchise litigation in 2009 with lawsuits filed by
    troubled franchisees seeking damages for alleged breaches of
    their contracts. In fiscal 2009, we recorded as operating
    expense $523,000 in settlement expenses and $189,000 in external
    legal fees as a result of the franchise lawsuits. Management
    does not expect this level of litigation in 2010.
Through this credit crisis and recession, many of our vendors
    have been able to assist us with cash flow by establishing
    payment plans and/or deferring payments. We have a recurring
    revenue stream from royalties and related fees totaling
    $6.8 million in fiscal year 2009 from our 345 locations, as
    of January 15, 2010. We have taken measures to become less
    dependent on spa equipment sales and franchise fees through
    operating and payroll expense reductions.
Loan
    Facilities
The following table details our long-term debt outstanding as of
    December 31, 2009:
Principal
Maturity
Lender
Amount
Date
Interest Rate
Capital One Bank
$
840,000
March 2027
6.54
%
SBA
591,000
June 2027
5.79
%
Whitney National Bank
619,000
July 2012
8.25
%
Former Stockholder
46,000
November 2011
0.00
%
New Sunshine LLC
516,000
April 2012
7.00
%
JTL Enterprises, Inc.
42,000
March 2013
7.00
%
MT Industries, Inc.
174,000
March 2013
7.00
%
OL Products, Inc.
234,000
January 2013
7.00
%
Leaf Funding, Inc.
94,000
July 2012
3.47
%
Irvine Company LLC
17,000
August 2011
7.00
%
Stephen P. Smith
50,000
June 2010
5.00
%
The Capital One loan for $840,000 and the SBA loan for $591,000
    were used to purchase and improve our principal place of
    business; both loans are secured by the buildings and building
    improvements.
The Whitney National Bank loan was used to refinance an existing
    line of credit balance and fund operations, and is secured by
    accounts receivable and inventory.
The loan from the former stockholder was used to buy back the
    individual's shares of our common stock.
The New Sunshine, LLC loan was used to refinance accounts
    payable and is secured by 85,714 shares of our common stock
    owned and pledged by Stephen Smith, our Chairman and Chief
    Executive Officer. New Sunshine, LLC is the parent company of
    ETS, Inc. and Australian Gold, our exclusive suppliers of all
    U-V equipment and parts, and national branded U-V lotions, used
    or sold in our spas. On February 29, 2008, we converted
    $750,000 of accounts payable we owed to New Sunshine, LLC for
    U-V product purchases into a four-year note payable.
JTL Enterprises is one of our suppliers of water massage
    machines. On September 30, 2008, we converted $22,350 of
    accounts payable we owed to JTL for equipment purchases into a
    four-year, unsecured note payable. The note provided additional
    borrowing capacity of up to $27,650. Upon execution of the note,
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we awarded JTL 879 shares of our common stock and the
    option to convert the balance owed into additional shares of
    common stock within 12 months. This option expired on
    September 30, 2009.
MT Industries, Inc. is a supplier of U-V equipment and related
    products. On October 3, 2008, we converted $92,483 of
    accounts payable we owed to MT Industries for equipment
    purchases into a four-year, unsecured note payable. The note
    provided additional borrowing capacity of up to $157,517. Upon
    execution of the note, we awarded MT Industries
    4,396 shares of common stock and the option to convert the
    balance owed into additional shares of common stock within
    12 months. This option to convert expired October 3,
    2009. On September 17, 2009, we terminated any additional
    borrowing and capped the note at $173,787, with a
37-month
term.
OL Products, Inc. is one of our suppliers of body lotions. On
    October 31, 2008, we converted $59,775 of accounts payable
    we owed to OL for body lotions into a four-year, unsecured note
    payable. The note provided additional borrowing capacity of up
    to $240,225. Upon execution of the note, we awarded OL
    5,275 shares of common stock and the option to convert any
    outstanding balance owed into additional shares of common stock
    within the first 12 months after our initial public
    offering at the initial public offering stock price. This option
    to convert remains outstanding.
In October 2009, we took control of our franchise location in
    Irvine, CA and now operate it as a company store. In conjunction
    with that transaction, we assumed the equipment financing note
    from Leaf Funding, Inc., for approximately $94,000 outstanding
    at the time. In addition, we assumed the location lease with
    Irvine Company LLC and established a promissory note for half of
    the overdue rent at that time totaling $17,000. We have recently
    extended the lease term through August 2011.
On November 18, 2009, our President, Chief Executive
    Officer and Chairman, Stephen Smith, loaned us $50,000 for the
    payment of expenses related to this offering. The note is to be
    repaid with 5% interest for a total repayment amount of $52,500
    upon completion of this offering.
On February 26, 2010, we borrowed $250,000 under our June
    2003 agreement with ETS, LLC, for the development and
    construction of a prototype salon. We intend to use these funds
    for renovation and expansion of our company store in Irvine, CA,
    which will showcase ETS's U-V and sunless tanning
    equipment, along with our spa equipment. The Prototype Salon
    Note we executed is due and payable on February 26, 2011.
    The note bears interest at an annual rate equal to the prime
    rate most recently quoted by J.P. Morgan Chase prior to the
    issue date, plus 1%. If we sell the prototype salon before the
    due date of the note, the amount borrowed plus accrued interest
    will become due upon the sale.
Obligations
    under Material Contracts
In October 2002, we entered into a product purchase agreement
    with ETS for the purchase of U-V equipment and supplies, whereby
    we agreed to purchase exclusively from ETS all U-V equipment and
    all lamps, parts, accessories, lotions, skin and hair care
    products, cleaning equipment and other U-V related products used
    or sold in spas owned, operated, or franchised by us. In
    addition, we agreed to designate ETS as our exclusive supplier
    of U-V equipment and supplies in existing and future franchise
    agreements. This purchase agreement is in effect through 2017.
    Under this arrangement, we purchased approximately $2,981,000,
    $4,860,000 and $7,219,000 of our spa equipment and products from
    ETS in 2009, 2008, and 2007, respectively. In 2009 ETS began
    shipping products directly to our franchisees and remits to us a
    royalty on these sales based on the profit margin we were
    earning on the sales previously. As part of the agreement, cash
    proceeds from the profits we earned were to be used to repay an
    outstanding accounts payable balance with the vendor. As of
    December 31, 2009 and 2008, the amounts of accounts payable
    due to the vendor subject to the agreement were approximately
    $118,000 and $836,000, respectively.
Our contracts with our franchisees, area representatives and
    master franchisors are described under "Our Business."
At December 31, 2009, we had 23 area representatives for 27
    territories, covering approximately 64% of our total domestic
    franchise locations and approximately 10% of the total
    U.S. geographic land area. Each territory is governed by a
    separate agreement. Of the 27 agreements, four will expire in
    five years or less, 21
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will expire in six to ten years, and two will expire in 11 to
    15 years. At December 31, 2009, we had eight master
    franchisor agreements in place, one of which will expire in
    2020, five will expire in 2023, and two will expire in 2024.
Seasonality
Like most other retail businesses, our business is seasonal.
    Traditionally, spa patronage and sales of our products and
    services are higher beginning in the early Spring through late
    Summer. Because of the seasonality of our business, results for
    any quarter are not necessarily indicative of the results that
    we may achieve for the full year. In addition, fluctuations in
    sales and operating income in any fiscal quarter may be impacted
    by other events affecting retail sales.
Inflation
Inflationary factors, such as increases in our product and
    overhead costs, could impair our operating results. Although we
    do not believe that inflation has had a material impact on our
    financial position or results of operations to date, a high rate
    of inflation in the future may have an adverse effect on our
    ability to maintain current levels of gross margin and selling,
    general and administrative expenses as a percentage of sales
    revenue if the selling prices of our products and services do
    not increase with these increased costs.
Recently
    Issued Accounting Pronouncements
In June 2009, the FASB issued authoritative guidance for the
    FASB accounting standards codification (Codification) and the
    hierarchy of generally accepted accounting principles
    (U.S. GAAP). The guidance establishes that the Codification
    is the source of authoritative U.S. GAAP recognized by the
    FASB to be applied by nongovernmental entities. Rules and
    interpretive releases of the Securities and Exchange Commission
    (SEC) under authority of federal securities laws are also
    sources of authoritative U.S. GAAP for SEC registrants. The
    guidance and the Codification are effective for financial
    statements issued for interim and annual periods ending after
    September 15, 2009. We adopted the provisions of the
    guidance, as required, and determined that the impact to our
    financial condition or results of operations was immaterial.
In June 2009, the FASB issued new accounting guidance that
    requires additional information regarding transfers of financial
    assets, including securitization transactions, and companies
    that have continuing exposure to the risks related to
    transferred financial assets. The guidance eliminates the
    concept of a "qualifying special-purpose entity,"
    changes the requirements for derecognizing financial assets, and
    requires additional disclosures. We became subject to the
    guidance on January 1, 2010, and we are currently
    evaluating the impact that the guidance will have on our
    financial condition and results of operations.
In June 2009, the FASB issued new accounting guidance which
    modifies how a company determines when an entity that is
    insufficiently capitalized or is not controlled through voting
    (or similar rights) should be consolidated. The guidance
    clarifies that the determination of whether a company is
    required to consolidate an entity is based on, among other
    things, an entity's purpose and design and a company's
    ability to direct the activities of the entity that most
    significantly impact the entity's economic performance. The
    guidance requires an ongoing reassessment of whether a company
    is the primary beneficiary of a variable interest entity. The
    guidance also requires additional disclosures about a
    company's involvement in variable interest entities and any
    significant changes in risk exposure due to that involvement. We
    became subject to the guidance on January 1, 2010, and are
    currently evaluating the impact that the guidance will have on
    our financial condition and results of operations.
The FASB issued an update that all entities are required to make
    disclosures about recurring and nonrecurring fair value
    measurements under Fair Value Measurements. The guidance
    requires certain new disclosures and clarifies two existing
    disclosure requirements. The new disclosures and clarifications
    of existing disclosures are effective for interim and annual
    reporting periods beginning after December 15, 2009, except
    for the disclosures about purchases, sales, issuances, and
    settlements in the roll forward of activity in Level 3 fair
    value measurements. Those disclosures are effective for fiscal
    years beginning after December 15, 2010, and for interim
    periods within those fiscal years.
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We do not believe that any other recently issued, but not yet
    effective, accounting standards will have a significant effect
    on its consolidated financial condition or results of operations.
Off
    Balance Sheet Arrangements
We do not have any obligations that are not reflected on our
    balance sheet.
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OUR
    BUSINESS
Overview
We believe we are the largest, full-service automated day spa
    franchisor in the United States. We grant franchises for stores
    operating under the Planet Beach name. As of January 15,
    2010, we had 345 franchises located in 38 U.S. states,
    Canada, Ireland, South Africa and Australia. We also had at that
    date 20 additional franchises under development, including
    proposed locations in one new state as well as in Egypt, Saudi
    Arabia and Kuwait. In addition, at that date we had candidates
    interested in re-opening 16 previously closed locations,
    including one in an additional state.
Our Contempo Spas offer our customers a unique experience by
    providing high quality automated day spa services. These
    services include automated massages and facials, ultra violet or
    "U-V" light therapy and sunless tanning. We provide
    automated spa services through equipment such as hydro massage
    and facial machines that do not require a therapist or
    aesthetician. Instead, a spa employee programs individual spa or
    U-V sessions and sets the desired time of the session through
    the store's point of sale software. The customer activates
    the session by pressing a start button in the treatment room and
    may adjust the settings according to his or her preferences on
    certain equipment such as hydro massage units.
Our spas also offer a variety of skin care, U-V and nutritional
    products, as well as an on-line nutritional service.
We establish most of our domestic franchises through
    intermediaries whom we call "area representatives." We
    grant development territories to area representatives in return
    for a territory development fee. These development territories
    are geographic regions within which area representatives are
    entitled to market franchises and are obligated to train,
    support and provide guidance to franchisees in the territory.
    Our area representatives are entitled to a percentage of the
    fees we earn when we sell a new franchise or transfer an
    existing franchise to a new franchisee in the area
    representative's territory. In some circumstances, we also
    pay a percentage of those fees for new or transferred franchises
    outside the area representative's territory obtained as a
    result of the area representative's efforts. Additionally,
    our area representatives are entitled to a percentage of
    collected royalties that we receive from our franchisees in
    their territories.
We establish most of our international franchises through
    persons we refer to as "master franchisors." Our
    agreements with our master franchisors give them the right to
    grant Planet Beach franchises in their assigned geographic
    region. The master franchisors develop their own franchise
    system in their areas. For example, the master franchisors are
    required directly, or through area representatives whom they
    appoint, to sell, train, support and provide guidance to
    franchisees in their areas. The master franchisors owe us a
    master franchise fee when we appoint them as a master
    franchisor, additional fees or royalties upon the sale of
    franchises and a percentage of the revenues generated by
    franchise outlets in the assigned area.
We require our franchisees and master franchisors to purchase
    U-V and spa equipment, as well as certain U-V, skin care and
    nutritional products, from us or from suppliers we designate. We
    receive a royalty for equipment and products sold to our
    franchisees and master franchisors directly by the designated
    supplier. All of the equipment, and approximately 53% of the
    products, are sold under the Planet Beach private label.
We intend to grow our company significantly over the next ten
    years, both domestically and internationally.
Our
    Contempo Spa Concept
We were founded in 1996 as a U-V tanning franchise business.
    However, in 2005, we substantially revised our business model to
    adopt our Contempo Spa concept in response to the general
    slowdown of sales in the tanning salon industry.
Our Contempo Spas offer U-V services along with traditional day
    spa services such as facials, steam baths, and massages. These
    spa services are performed by automated equipment such as
    massage units or light therapy equipment, which reduces the
    staffing that is required compared with a traditional day spa
    operation.
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Reducing the number of trained and certified employees required
    to operate a Planet Beach franchise results in reduced operating
    costs and a greater return on investment. The automated
    equipment at our Contempo Spas allows our customers to take
    advantage of more services in less time and at a lower cost than
    at a traditional day spa. Additionally, we believe that the
    quality of individual services offered at each repeat visit is
    more consistent than at a traditional day spa where services are
    provided by a therapist or aesthetician.
We do not own any long-term exclusive rights to use the
    equipment featured in our Contempo Spas, some of which is also
    used in malls, airports, massage therapist offices, and some
    tanning franchises. However, we are not aware of any significant
    competitor that employs the same automated day spa concept that
    we have developed, using the same type and quantity of equipment
    that we do.
Our Contempo Spas include some, or all, of the following
    automated equipment:
•
aqua and hydro massage units that use heat and water pressure to
    decrease muscle tension, and therasage and cyber-relax units
    that reproduce the therapeutic benefits of a traditional
    pressure massage;
•
hydro-derma fusion stations that combine infrared heat and
    nutrient-rich steam to moisturize the skin;
•
luminous facial and hand units that use light therapy to improve
    skin texture and tone, lighten age spots and diminish wrinkles;
•
misting spa units that use a cool mist spray which prompts
    cellular skin renewal to diminish fine lines and wrinkles and
    improve skin elasticity;
•
sunless tanning equipment that uses a tanning mist which is
    sprayed onto the skin's surface to create an artificial tan;
•
teeth whitening equipment designed to restore teeth color;
•
units that use infrared heating to deep heat the body and
    aromatherapy for relaxation;
•
equipment that leads customers through guided meditation and
    relaxation sessions to reduce stress, improve mental clarity or
    promote lifestyle changes, such as weight loss or smoking
    cessation; and
•
U-V light beds.
A spa employee programs individual spa or U-V sessions and sets
    the desired time of the session through the store's point
    of sale software. The equipment is then regulated by a
    centralized management program which communicates with the timer
    on each individual piece of equipment. The customer activates
    the session by pressing a start button in the treatment room and
    may terminate a session at any time using a stop button.
    Customers may adjust the settings according to their preferences
    on certain equipment such as hydro massage units.
In addition to our spa services, our locations offer an array of
    retail products and specialty items that enhance the Contempo
    Spa experience, including U-V lotions, spa accessories, spa
    hydration products, nutritional products, holistic and skincare
    products, and promotional merchandise.
We internally classify a Contempo Spa as a location that
    includes our three key automated spa services (massage, facial
    and hydration), a sunless tanning service and U-V therapy
    services. At January 15, 2010, 204, or 59%, of our total
    345 operating franchises had initially opened or converted to
    the Contempo Spa format. Of the remaining 141 locations, 116, or
    34%, provided some basic spa services in addition to U-V therapy
    services, and 25, or 7%, provided only U-V therapy services. In
    fiscal 2009, our Contempo Spas generally produced an average of
    $5,300 more in monthly sales than the locations that provide
    basic spa services, and an average of over $11,000 more in
    monthly sales than locations that offer U-V services only. In
    addition, same store sales at our Contempo Spas increased by an
    average of 4% in 2009 over 2008, while same store sales for
    basic spa and U-V only locations decreased by an average of 8%
    in 2009 over 2008. Therefore, we are working vigorously to
    convince our franchisees to convert to the Contempo Spa format.
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Since 2007, we have required that all of our new locations open
    as Contempo Spas. As of the date of this prospectus, our new
    locations must open with approximately ten pieces of equipment
    in total, of which at least 50% must be automated spa equipment.
NutritionSpa.com
Planet Beach customers who purchase a higher level of Contempo
    Spa membership also have access to our web-based
    NutritionSpa.com service. This service provides nutrition, skin
    wellness, and weight control information, applications and
    education. It also offers downloadable, customized meal plans,
    corresponding recipes and a message portal to send and receive
    messages to and from Planet Beach's team of experts in
    nutrition and skincare. In the near future, we expect to add
    features including an application that will formulate a
    customized Planet Beach product and service regime.
    NutritionSpa.com is intended for healthy adults and does not
    give medical advice or opinions. We urge our customers to seek
    the advice of a physician before beginning any weight loss
    effort or regimen.
Our Sales
    Platform and Customers
Our franchisees charge a monthly membership fee to customers for
    different service offerings. Members can choose from different
    service levels, some of which include only U-V services, while
    others include U-V services, automated spa treatments and access
    to our on-line NutritionSpa.com service. At the higher service
    levels, members receive reciprocation rights that allow them to
    visit any of our spa locations without paying an additional fee,
    and they have unlimited access to all of our services at a
    monthly cost that is comparable to or lower than the cost of a
    single visit at a traditional day spa. Our monthly membership
    fees program results in a stable revenue stream for our
    franchisees. Our locations also offer services on an individual,
    non-membership basis, and an array of retail U-V, skincare and
    nutritional products.
In fiscal 2009, our locations served approximately 561,000
    customers. Of those customers, approximately 162,000 were Planet
    Beach members. Membership data indicates that the average age of
    those members was 31, and approximately 88% were female. We also
    have a system-wide database of all current and former Planet
    Beach customers, which contained approximately 2.1 million
    people at December 31, 2009.
Our
    Industry
According to the International SPA Association, or ISPA, the spa
    industry recognized $12.8 billion and $10.9 billion of
    revenue in 2008 and 2007, respectively, an increase of
    approximately 17.5%. Spa visits increased from
    138 million visits in 2007 to 160 million visits in
    2008, or 16%. According to ISPA, one in four Americans have been
    to a spa. ISPA reports that at the end of 2008 there were 21,300
    spas in the U.S., a 19% increase since the end of 2007, when
    there were 17,900 U.S. spas. The number of spa locations in
    the U.S. has increased at a five year average growth rate
    of 17%. The spa industry can be divided into six categories: day
    spas, resort and hotel spas, medical spas, club spas, mineral
    spas, and cruise ship or destination spas. At the end of 2008,
    approximately 79% of all spas in the U.S. were considered
    to be day spas, which are spas in which patrons pay for
    massages, facials or body treatments, and then leave the
    premises following the services. Our franchises are part of this
    day spa sector.
According to the U.S. Department of Commerce, sales of
    health and personal care products such as the products we sell
    in our franchises increased 3.3% from January 2009 to January
    2010. In addition, Natural Marketing Institute, a market
    research firm, reports that U.S. retail sales for the
    consumer packaged goods health and wellness industry reached
    more than $112 billion in 2008, representing growth of 9%
    over 2007.
Mintel, a market research firm, reports that U.S. sales of
    anti-aging skincare products, which are also a part of our
    offerings, rose 13% to $1.6 billion between 2006 and 2008,
    outpacing the general skincare segment, which was up 11% over
    the same period.
The ICIS Chemical Business Report, published in November 2009,
    reports that the fastest growing segment in the beauty industry
    currently is "nutraceuticals," with a projected 7.4%
    compound growth rate through 2013. This market consists of
    so-called "beauty beverages" such as beverages that
    promote digestive health with probiotics and skin health with
    antioxidants and superfoods, both of which we offer in our
    nutritional product line.
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We have also introduced a line of products at our franchises
    called "nutricosmetics." Also sometimes referred to as
    "beauty foods," these products include nutritional
    supplements, instant protein shakes, fruit bars, acai packets
    and other foods that are designed to improve and tone the skin,
    boost the metabolism, encourage fat burning, improve circulation
    and enhance beauty systemically. Kline Group, a consulting and
    market research firm, indicates the global market for
    nutricosmetics was valued at $1.5 billion in 2007, and the
    industry is expected to reach $2.5 billion in sales by 2012.
With the introduction of our nutritional and holistic skin care
    lines, as well as our success at converting to the Contempo Spa
    model, we have aimed to place ourselves in the wellness
    industry, an industry that, according to Natural Marketing
    Institute, experienced $200 billion in revenue through 2008.
Our
    Competition
As discussed above, we have developed the Contempo Spa concept
    to distinguish our spas from traditional day spas and tanning
    salons. However, our franchisees compete mostly with
    independently owned tanning salons and day spas. We are not
    aware of any significant competitor that has created a concept
    that is similar to our Contempo Spa.
Our
    Competitive Strengths
We believe that we have the following competitive strengths:
•
Brand Market Differentiation and Brand
    Loyalty.
We are not aware of any other
    significant franchise in the U.S. that uses our business
    model. We believe that our position as the first company to
    market the Contempo Spa concept has the potential to create
    significant market share for us that will solidify our presence
    as the industry leader when other companies begin to compete
    with us in this sector. Our membership reciprocation rights that
    allow members to visit any of our spa locations without paying
    an additional fee is an important part of our strategy to build
    brand loyalty. We believe we can attract customers of our
    tanning salon competitors by introducing them to our spa
    services.
•
Use of Automated Spa Equipment Reduces our Labor Costs and
    Has Customer Appeal.
Through the use of automated,
    non-attended spa equipment, our franchisees are able to reduce
    labor costs because no staff members need be present during spa
    treatments. This format also allows franchisees to offer
    customers competitive and value-oriented pricing. In addition,
    we believe that the use of automated equipment is attractive to
    an expanded client base that desires spa services provided in
    less time and at comparable or lower cost than a single visit to
    a traditional day spa. We believe this model also has
    significant appeal in countries where social customs emphasize
    greater personal modesty. Furthermore, we believe that customers
    find the services provided by automated equipment are more
    consistent in quality from visit to visit than services provided
    by a therapist or aesthetician.
•
Capacity for Expansion.
We intend to add
    customers by increasing our sales network and increasing the
    number of our outlets both domestically and internationally. In
    2010, we believe our growth in open locations will primarily
    occur internationally. At the end of 2010, we expect that we
    will have approximately 28 locations outside the U.S., which
    would be an increase of approximately 22% in international
    locations from December 31, 2009. We expect to return to a
    more rapid growth rate domestically after we expand our
    franchise marketing efforts using the proceeds of this offering.
    We believe we have developed an infrastructure that we can now
    leverage to increase our outlet base domestically and serve as a
    model for our international outlet growth. We expect this
    infrastructure will help us to accommodate our rapid growth
    effectively without the need to hire a significant number of
    additional employees.
•
Our Membership-Based Revenue Model Provides us with a
    Consistent Revenue Stream.
We are in significant part a
    membership-based service business. This membership model creates
    a recurring, stable revenue stream for our franchisees and,
    ultimately, for us, as compared to some of our competitors who
    charge for their services on an individual basis.
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•
Experienced Management Team.
Our management
    team has substantial experience in franchising, as well as the
    spa and U-V industries, and also has significant experience in
    growing brands and in the retail environment.
•
Our Convenient Locations Help to Increase Our Customer
    Base
.  We desire to become the "neighborhood
    spa" for our customer base by positioning our outlets
    mainly in larger urban area shopping centers. We believe our
    outlets are well positioned to attract our target demographic.
    Based on our customer surveys, we believe our primary target
    market consists of women ranging from 25 to 35 years old,
    with annual incomes of between $50,000 and $100,000 per
    household, and who have attended college. We believe our
    secondary target market consists of women ranging from of 36 to
    50 years old, and men ranging from 30 to 50 years old,
    with annual incomes of $50,000 to $100,000 per household, and
    who have attended college.
Our
    Growth Strategy
We are committed to achieving our growth plan by pursuing the
    following strategies:
•
Increasing Overall Franchise Sales.
Our
    primary growth strategy is to increase the overall number of our
    franchise locations. We intend to accomplish this through
    increased marketing, including attending trade shows, as well as
    brand development and increased advertising. In addition, we
    intend to maintain a strong balance sheet, which will provide
    potential franchisees with a certain level of confidence in our
    financial position. To this end, we will use a portion of the
    proceeds from this offering to reduce up to $1.8 million of
    our current debt. Finally, we are continually exploring methods
    to assist our franchisees in obtaining financing, which we
    believe would remove the primary obstacle we have faced in
    increasing our franchise sales since the third quarter of 2008.
•
Conversion of Tanning Salons.
The amount of
    sales generated by a retail chain's existing outlets over a
    period of time is referred to as "same store sales."
    Same store sales are an important statistic because they
    indicate what portion of our total revenue has been generated by
    sales growth and what portion has been generated by the opening
    of new stores. Our operating data suggests to us that our
    Contempo Spa concept results in increased same store sales. At
    January 15, 2010, 141, or 41%, of our franchise locations
    had not yet converted to our Contempo Spa format, which includes
    automated spa services, sunless tanning equipment and U-V
    therapy services. Of these 141 locations, 25 provide only U-V
    therapy services. We believe that the conversion of these 141
    locations into our Contempo Spa concept should result in higher
    per unit sales.
•
International Expansion.
We currently have
    operating locations in Canada, Ireland, South Africa, and
    Australia. We have sold a franchise in Egypt and expect a
    location to open there in the Spring of 2010. We have entered
    into master franchisor agreements, but do not yet have operating
    locations, in Northern Ireland, the United Kingdom, Kuwait, and
    Saudi Arabia. In addition, we are currently negotiating a master
    franchisor agreement in the United Arab Emirates. We plan to
    expand our brand further to other countries in Europe, New
    Zealand, South America, Central America, the Middle East, and
    Asia. In most cases, we enter into agreements and have
    relationships only with our master franchisors, rather than the
    individual franchisees. This arrangement reduces our costs and
    therefore may result in higher profits for us over the long term.
•
Product Development.
We continue to evaluate
    additional services that our franchisees might offer within our
    Contempo Spa concept. The addition of new services at our
    locations has historically resulted in new equipment sales and
    improvement in same store sales. For example, we are currently
    considering various sunless tanning services that would
    complement our current products and services. In addition, we
    periodically evaluate new franchise concepts that would
    complement our core Contempo Spa business. We are now evaluating
    a concept that would overlap with our existing customer base
    without competing with the Planet Beach brand. In addition, it
    would require a smaller initial investment by the franchisee
    than is required for a Planet Beach franchise. We plan to begin
    testing this concept in the late Spring and early Summer of
    2010. We do not know when this testing will be complete, whether
    it will be successful, or, if it is successful, when we might
    begin recruiting franchisees.
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Franchises
As of January 15, 2010, we had 345 franchise outlets in the
    United States, Canada, Ireland, South Africa and Australia, down
    from 385 locations worldwide at the end of 2008. The following
    table sets forth the location, by state and country, of these
    outlets.
State
Outlets
State
Outlets
State
Outlets
AL
4
MA
2
OR
1
AK
1
MD
1
PA
6
AZ
18
MI
6
SC
4
CA
31
MN
17
TN
2
CO
6
MO
1
TX
33
CT
1
MS
3
UT
2
DE
1
MT
5
WA
2
FL
51
NC
18
WI
1
GA
10
NE
1
Canada
18
IA
6
NH
1
Australia
2
ID
8
NJ
9
Ireland
1
IL
5
NM
2
South Africa
1
IN
4
NV
6
KS
2
NY
2
LA
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OK
1
TOTAL
345
Also at January 15, 2010, we had 20 additional spas under
    development and another 16 potential re-openings of
    previously closed locations. We also have agreements with some
    of our domestic franchisees under which they have an option to
    open one or more additional locations, for which they have
    already paid us the initial franchise fee. These fees are not
    refundable.
We do not depend on any one or group of individual franchisees.
Franchise
    Agreements
To be eligible to be our franchisee, an individual must have a
    minimum net worth of $350,000, access to at least $90,000 in
    capital, and pass a background and credit check. He or she must
    also show an enthusiasm for our brand and the discipline to
    follow our business model, among other qualities.
Our minimum location size is generally 1,200 square feet.
    We approve the proposed site for a franchise location and
    consider factors such as the median household income for the
    area, the cost of living and level of average disposable income
    per household, population density and the attitude of the local
    population concerning required travel times to a location.
Franchisees typically obtain bank financing, which may involve a
    Small Business Administration loan, to fund their franchises. We
    provide them a model business plan and pro forma financial
    statements that they use to determine their financing and seek a
    lender. We suggest financing alternatives based on our
    experience with existing, similarly situated franchisees. We
    typically award a franchise and accept the initial franchise fee
    before the franchisee secures financing. The reason is that
    lenders generally require proprietary information regarding the
    franchise concept and a business plan before considering a loan.
Under our current form of agreement, our domestic franchisees
    are required to pay us a $30,000 initial franchise fee, a
    $21,000 fee if they purchased two additional unit locations, a
    $35,000 fee if they purchased four additional unit locations,
    and a $69,000 fee if they purchased nine additional unit
    locations. In addition, the franchisees are required to purchase
    all U-V and spa equipment and products from us, from master
    franchisors who purchase the items from us, or from suppliers we
    designate. We are entitled to a royalty of 6% per month of the
    total sales at their spa locations and collect these royalties
    mainly through AutoDraft drafts or credit card. In addition,
    franchisees must pay us a percentage of their total monthly spa
    sales for our
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marketing and advertising programs. We obtain location sales
    data via spa management software that we use under a license. At
    December 31, 2009, we had 16 locations that are operated
    under an older version of our franchise agreement or other
    arrangements that require them to pay us a flat fee for
    royalties ranging from $250 to $975 per month, or no fee as
    described under "Transactions with Related Persons."
    Franchisees agree to indemnify us for all fines, suits, claims,
    demands or obligations arising out of the obligations in the
    franchise agreement, including training, construction or
    operation of each spa. We may terminate the franchise agreement
    without notice, without penalty and without giving the
    franchisee any right to cure a default upon the occurrence of
    various events, including, among other things, the
    representative's filing a petition for bankruptcy under
    federal or state bankruptcy laws, assigning the franchise
    agreements without our prior written consent, defaults under the
    lease or sublease for the spa location, and failing to comply
    with the training requirements of the franchise agreement.
Our domestic franchisees are required to open their spa
    locations within 275 days after entering into a franchise
    agreement with us. If the domestic franchisee has purchased
    additional units, the second and third unit is required to open
    within 24 and 36 months, respectively, from the date of the
    original franchise agreement. They are required to operate the
    spas in accordance with our operations manual and to comply with
    all applicable laws and regulations. The current version of our
    franchise agreement has a term of fifteen years and can be
    renewed by the franchisee for an additional five year term upon
    expiration of the original term, as long as the franchisee is in
    compliance with the terms and conditions of the franchise
    agreement.
The terms and conditions of any future franchise agreements may
    be different than those described above. We must file an annual
    disclosure document in certain of the U.S. states in which
    we have locations under state franchise law. We are required to
    file the current version of our agreements with that document,
    and if we make material changes to our agreements, we must amend
    our state disclosure document at the time of the change.
The following table shows the number of franchise agreements
    that will expire each year until 2024.
Number of Franchise
Year
Agreements Expiring
2010
3
2011
9
2012
29
2013
79
2014
49
2015
12
2016
0
2017
0
2018
0
2019
0
2020
50
2021
38
2022
38
2023
27
2024
11
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Area
    Representative Agreements
At December 10, 2009, we had 23 area representatives for 27
    territories, covering approximately 64% of our total domestic
    locations and approximately 10% of the total
    U.S. geographic land area. Each territory is governed by a
    separate agreement. Of the 27 agreements, four will expire in
    five years or less, 21 will expire in six to ten years, and two
    will expire in 11 to 15 years.
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To be eligible to become an area representative, an individual
    must have a net worth of $500,000, access to at least $200,000
    in capital, have business and management experience and pass a
    credit and background check. He or she must also have the
    qualities we look for in a franchisee.
Area representatives sign an agreement with us that entitles
    them to represent us in developing franchises within a defined
    geographic territory. The term of the agreement is ten years,
    with the option to renew for additional five year terms. They
    must also execute a separate franchise agreement with us. The
    area representative agreement requires an area representative to
    market successfully one spa for every 40,000 people within
    the area representative's territory. We reserve the right
    to re-market territory of any area representative who does not
    achieve this goal within one calendar year of becoming an area
    representative.
We agree to provide training and support to area representatives
    to assist them in performing their duties. Area representatives
    must attend or participate in three separate training sessions
    we provide, as well as our annual conventions. The area
    representative is responsible for recruiting potential
    franchisees whom they refer to us for evaluation, and to assist
    the franchisee in opening a new franchise and providing ongoing
    supervision, training, and support. We have a corporate
    department dedicated to supervising and assisting our area
    representatives. Area representatives are responsible for
    attending bi-weekly training calls and are required to spend
    $1,000 per month in their markets on franchise opportunity
    marketing. We provide tools such as virtual seminars to assist
    area representatives in their marketing efforts.
Area representatives are entitled to 50% of the initial
    franchise fee we earn for sales of franchises in the area
    representative's territory, if the franchise is sold or
    when an existing franchise is transferred to a new franchisee in
    the area representative's territory as a result of the area
    representative's efforts. For sales of new franchises or
    transfers of existing franchises in the area
    representative's territory, but not as a result of his or
    her efforts, the area representative is entitled to 20% of the
    applicable fee. For sales of new franchises or transfers of
    franchises outside the area representative's territory made
    as a result of the area representative's efforts, the area
    representative is entitled to 20% of the applicable fee as long
    as the territory is not assigned to another area representative.
    When a broker facilitates a transaction, we pay the area
    representative for that territory 50% of the net fee after we
    pay the broker's commission and our internal commissions.
    Our area representatives are also entitled to 40% of collected
    royalties that we receive from our franchisees in their
    territories. We may terminate the area representative agreement
    without penalty upon the occurrence of various events,
    including, among other things, the representative's filing
    a petition for bankruptcy under federal or state bankruptcy laws
    or failing to comply with a mandatory development schedule
    within the first calendar year after the execution of the area
    representative agreement.
Master
    Franchisor Agreements
At December 31, 2009, we had eight master franchisor
    agreements in place, of which one will expire in 2020, five will
    expire in 2023, and two will expire in 2024.
Potential master franchisors must have past business and
    management experience, preferably with an emphasis in franchise
    management. They must be committed to our brand and our overall
    growth beyond the opportunity to profit from their individual
    investment. They must also have a minimum net worth equal to
    their entire investment, which includes the amount of their
    territory fee and the cost of developing the first location in
    their territory, which we call a flagship location.
Under our master franchisor agreements, we grant exclusive
    rights to the master franchisor to grant international
    franchises within a defined territory for a term of fifteen
    years. The master franchisor must open at least one flagship
    location controlled by the master franchisor within one year of
    signing the agreement with us. The master franchisor is
    responsible for marketing, selling and supervising franchises
    located within that territory. He or she agrees to award
    franchises according to a schedule negotiated with us, and
    failure by the master franchisor to achieve the
agreed-upon
goals would allow us to declare a default of the master
    franchisor agreement.
We provide guidance and support for the master franchisor's
    development responsibilities, including providing personnel to
    train employees of the master franchisor and franchisees within
    the territory. Master
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franchisors pay us a territory fee based on the size of the
    population in the territory at the execution of the master
    franchisor agreement, a fee of $9,000 upon the signing of each
    new franchise agreement, a 1.8% royalty on each location's
    total monthly sales, an optional monthly technology fee of $190
    and an optional monthly education fee of $69. Master franchisors
    may terminate the master franchise agreement by giving
    60 days' written notice of a material breach of the
    master franchise agreement by us and provided we do not cure the
    default within the 60 days. We may terminate the master
    franchise agreement, effective immediately upon notice to the
    master franchiser upon the occurrence of various events,
    including, among other things, filing a petition for bankruptcy
    under federal or state bankruptcy laws or the failure to comply
    with a mandatory development schedule and such failure continues
    for a period of 30 days.
We sell equipment directly to foreign franchisees and pay a
    portion of our profits to the master franchisor. If we manage
    the relationship for the transaction with the equipment vendor,
    we pay the master franchisor 40% of our profit on the sale. If
    the master franchisor performs this role, we pay him or her 60%
    of the profit. For flagship locations owned or controlled
    directly by master franchisors, we sell them equipment and
    products at discounts ranging from 15% to 25% of our domestic
    rates. We also have equipment suppliers who sell directly to
    foreign franchisees, and we receive royalties on these sales. We
    share 60% of the royalty with the master franchisor.
Currently, we sell our private label products at a profit to an
    international distributor, who resells them to our foreign
    franchisees. The distributor also sells other national branded
    products to our foreign franchises, and pays us a royalty from
    those sales. We share 60% of our royalties with the master
    franchisor for the applicable territory. However, we expect that
    in the future we will sell our private label products to our
    master franchisors for resale to foreign franchisees. We would
    earn a profit at the time of sale to the master franchisor and
    would have no further royalties on resales to the franchisees.
Our Australian locations are, and our proposed Egyptian location
    will be, operated under a franchise agreement without a master
    franchisor. The franchise agreements for those locations are
    substantially similar to our agreement with our domestic
    franchisees, with some exceptions. For example, the franchisee
    is not required to pay us fees for brand development or
    marketing and we will not perform those activities. We expect
    that we may use the same or a similar arrangement in the future
    for smaller countries where a master franchise structure is not
    necessary.
Franchisee
    Recruitment
We have two primary marketing channels for the recruitment of
    prospective franchisees in the United States. Approximately 60%
    of our U.S. franchisees are recruited by our area
    representatives, who receive a commission for new franchise
    sales and share franchise fees and royalties with us for the
    franchises in their territory. We identify the remaining 40% of
    our franchisees though internal marketing tools such as our
    website and internet-based advertising. Occasionally we also
    receive franchisee referrals from independent brokers, to whom
    we pay a commission for referrals that ultimately result in an
    award of a franchise.
For our international franchise operations, we identify master
    franchisors primarily through trade shows and internet-based
    advertising. In addition, we have also on occasion retained
U.S.-based
commercial services that specialize in facilitating partnerships
    between U.S. and foreign businesses.
Our
    Equipment and Suppliers
We have formed relationships with several equipment
    manufacturers and other suppliers to maximize our buying power
    over our U-V and spa equipment and products and to associate our
    brand prominently with the equipment and products. We have
    assisted with the design of most of the equipment and products
    that our franchises offer and enjoy short-term exclusive rights
    on certain of the offered equipment. In addition, we believe the
    agreements that we have negotiated with these suppliers allow
    our franchisees and master franchisors to purchase equipment at
    an advantageous price compared to normal retail prices available
    to individual business owners.
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We are not dependent on any single supplier. If any supplier
    became unable to meet its obligations to us, we believe we could
    readily replace it without difficulty.
In addition to carrying a thorough private label line of U-V,
    skincare and nutritional products, which accounts for
    approximately 53% of the products sold at our franchises, we
    also carry Australian Gold and Swedish Beauty products. Our
    private label products can only be purchased at Planet Beach
    locations, but Australian Gold and Swedish Beauty products are
    available at indoor tanning establishments.
We sell equipment and products directly to franchisees and
    equipment directly to master franchisors and earn a profit on
    those sales. We also have product suppliers or distributors who
    sell directly to franchisees and master franchisors, and we earn
    royalties on those sales.
Some of our equipment suppliers have agreed to indemnify us
    against claims caused by the design or malfunction of their
    equipment and we are listed as a co-insured on some equipment
    suppliers' liability policies.
Marketing
We engage in marketing and advertising activities for the
    benefit of our domestic franchisees. Our master franchisors do
    the same for our foreign locations. This section describes our
    activities for domestic franchisees.
We strive to achieve the greatest possible national exposure
    through our marketing programs. We believe we have formulated
    our national marketing and advertising strategies in a manner
    that achieves the maximum value for our marketing budget.
Our Ms. Planet Beach Spokesmodel Search has been our most
    significant and successful marketing initiative since 2002. In
    2009, the competition accounted for 70% of our national
    marketing expense. Currently, the competition is produced for
    television and syndicated throughout the United States. The
    television show can also be viewed in some parts of Canada. The
    2009 television show was aired across the U.S. beginning on
    February 1, 2009 through June 1, 2009. The show was
    ultimately aired in markets that represented a total of 64.7% of
    U.S. households.
Also during the syndication period, our website traffic
    increased by over 127,000 hits for the 12 month period
    ending March 31, 2009 versus the prior year period. The
    Ms. Planet Beach website also had an increase of hits from
    671 beginning in the second quarter of 2008 to 15,271 hits as of
    the end of the first quarter of 2009. The television show
    directs viewers to our website for membership and franchise
    information.
Domestic franchisees who entered into agreements with us before
    April 1, 2008 are required to contribute 1% of gross sales
    for our marketing and advertising programs. Domestic franchisees
    who entered into agreements with us on or after April 1,
    2008 contribute 2% of gross sales for this purpose. The funds
    collected are used for the development and distribution of
    national, regional and local marketing for the benefit of all
    domestic franchisees within the Planet Beach system. In
    addition, funds are used to create marketing materials and
    public relations campaigns which promote the products and
    services offered by our franchisees. Our marketing consists of
    television, radio and print media advertisements. We are not
    obligated under our franchise agreements or any other agreement
    to spend any particular amount of fund contributions on the
    placement of marketing in a particular territory or geographic
    area.
We encourage our franchisees to form regional marketing
    cooperatives for the benefit of our franchisees located within
    the same geographic areas. Franchisees are required in their
    franchise agreement with us to belong to the cooperative for
    their area, if any. From time to time, we determine whether a
    regional marketing cooperative is appropriate in a geographical
    area, define the geographic area relevant to each regional
    marketing cooperative, and determine the percentage of gross
    sales each franchisee must contribute for each regional
    marketing cooperative (which contribution may vary among
    cooperatives, depending on marketing costs and requirements in
    the region). Although we provide operating guidelines to
    cooperatives, each cooperative is self-governing. We may change,
    merge or dissolve any regional marketing cooperatives at our
    discretion.
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Our individual franchisees market their spas in the local
    telephone directory or directories covering the area from which
    the spa is likely to draw customers. Such marketing is placed in
    accordance with size and content formulas we provide to the
    franchisees. The cost of marketing in local telephone
    directories is borne by the individual franchisee.
Our
    Intellectual Property
Trademarks
Planet Beach Brands, L.L.C., a limited liability company that is
    wholly-owned by Stephen Smith, our Chairman, President, Chief
    Executive Officer and principal stockholder, has registered the
    following proprietary trademarks on the Principal Register of
    the United States Patent and Trademark Office, except for the
    trademark Bronzen, which we registered.
Trademark
Date Registered
Registration Number
Planet Beach
June 10, 1997
2070046
Planet Beach
June 25, 2002
2585483
Planet Beach Tanning Spa — Our Solar System Revolves Around
    You
January 2, 2007
3195152
Planet Beach
September 6, 2005
2991967
Bronzen
January 10, 2006
3038872
Contempo Spa
September 25, 2007
3299750
Luminous Facial
October 30, 2007
3327379
Planet Beach
August 26, 2008
3491120
We have filed all required affidavits, and the registrations are
    not yet due for renewal. Once registered, and assuming all
    required affidavits are filed timely, the marks listed above
    have a ten year term, and may be renewed for an additional ten
    year term. We have also registered certain of our trademarks, or
    have applications pending, in several foreign jurisdictions. We
    do not own any state trademark registrations.
There are currently no effective determinations of the
    U.S. Patent and Trademark Office, Trademark Trial and
    Appeal Board, the trademark administrator of any state or any
    court, no pending interference, opposition or cancellation
    proceedings, nor any pending material litigation involving any
    of the proprietary trademarks listed above.
We have entered into an agreement with Planet Beach Brands that
    will become effective upon the consummation of this offering,
    under which we will purchase the trademarks listed above and
    other intellectual property from Planet Beach Brands, except for
    the trademark "Bronzen," which we already owned. We
    will purchase the intellectual property in exchange for a
    promissory note in the amount of $375,000, which we will repay
    with the net proceeds of this offering. We also agreed to pay
    Planet Beach Brands a monthly royalty equal to 0.5% of the
    royalties we collect from our franchisees (excluding marketing
    and other fees) in any month when those collected royalties
    exceed $400,000. In addition, in the event that we terminate
    Stephen Smith's employment without cause, if he resigns for
    good reason, or if there is a change in control of our company,
    Planet Beach Brands will be entitled to a royalty of 10% of our
    collected royalties (excluding marketing fees) per month,
    regardless of the amount of our collections. In all events, the
    royalty payments will cease once they have totaled
    $10 million.
Patents,
    Copyrights and Proprietary Information
We do not own any registered patents or copyrights that are
    material to our business. However, we claim common law copyright
    and trade secret protection for several aspects of our franchise
    system including our Operations Manual and our marketing and
    business materials. There are no current determinations,
    proceedings or litigation involving any of our copyrighted
    materials.
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Property
Our corporate headquarters is located at 5145 Taravella Road,
    Marrero, LA 70072. We own two buildings at that location, each
    with office and warehouse space having a combined total of
    30,000 square feet. One of the buildings is subject to a
    lien filed by the Internal Revenue Service for $30,361 related
    mainly to taxes, penalties and interest stemming from our
    Form 1120 tax return for 2003. This matter has been
    resolved. We believe that these premises are adequate, suitable
    and of sufficient capacity to support our current needs.
We operate one Planet Beach company store in Irvine, California
    having a total of 1,876 square feet. We recently renewed
    the location lease through August 31, 2011 and believe such
    facility will be sufficient to meet our needs at that location
    through at least that time.
From 2002 through 2005, our wholly-owned subsidiary Planet Beach
    Real Estate, LLC entered into leases for various franchise
    locations and sublet the premises to our franchisees. We have
    discontinued this practice. However, at January 1, 2010,
    Planet Beach Real Estate remained the sublessor or guarantor for
    approximately three franchise locations, excluding our Irvine
    store. These three leases are expected to be renewed by the
    existing franchisee upon the expiration of the original lease
    without Planet Beach Real Estate as a guarantor. All of these
    leases are scheduled to expire on or before 2013.
Regulation
The U-V industry is regulated at both the state and federal
    levels. Most of the applicable federal laws and regulations do
    not affect us directly. Instead, those regulations primarily
    govern manufacturers of U-V booths, beds and other devices that
    we and our franchisees use. The principal federal laws
    regulating the manufacture of U-V devices are the federal Food,
    Drug and Cosmetic Act administered by the federal Food and Drug
    Administration, or the FDA, the Public Health Service Act and
    the Radiation Control for Health and Safety Act.
Because of the potential for injury and misuse of U-V devices,
    the FDA has issued stringent rules and regulations governing the
    manufacture and use of those devices. These regulations include
    limits on the ultraviolet light emitted by U-V devices, safe
    operation of such devices, timers, warning labels and the like.
We only purchase, and only permit our franchisees and master
    franchisors to purchase, U-V devices that meet or exceed the
    standards required by the FDA. For the personal safety of our
    customers, we require our franchisees to monitor the use of U-V
    beds and booths to assure compliance with the FDA guidelines.
    The U-V beds and booths used by our franchisees are installed,
    maintained and repaired by qualified employees or contractors in
    accordance with manufacturer's specifications.
The federal health care bill signed into law in March 2010
    contains a 10% tax on U-V tanning services that will take effect
    on July 1, 2010. We have not yet determined whether this
    tax will be imposed on our spa memberships, but we believe it
    would apply to sales of individual U-V therapy sessions and
    could have a chilling effect on demand for U-V services
    generally.
State regulation of the U-V industry varies from state to state.
    Many states have no laws or regulations governing U-V services.
    Currently, 31 states have either adopted or are in the
    process of adopting laws and regulations dealing with the U-V
    industry. State laws primarily regulate the health and safety
    aspects of U-V facilities rather than regulating the U-V devices
    used. Typically, states require a minimum customer age and
    parental consent and supervision in some cases, use of
    protective eyewear during any U-V session, maintenance of proper
    exposure distance and maximum exposure time as recommended by
    the manufacturer and availability of suitable physical aids such
    as handrails.
In addition, a Food and Drug Administration advisory panel
    recently recommended that the agency consider actions such as
    requiring that teenagers get parental consent before using a
    tanning bed or even banning the use of tanning beds among teens.
    The panel also recommended reclassifying tanning lamps from
    Class I medical devices — a category that
    includes tongue depressors and elastic bandages — to a
    Class II or Class III device, which would permit the
    agency to impose greater restrictions. According to the
    International Agency for Research on Cancer, which is affiliated
    with the World Health Organization, or WHO, people
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under 30 who use tanning machines increase their risk of skin
    cancer by 75%. The WHO last July listed ultraviolet
    radiation-emitting beds as "carcinogenic to humans,"
    its highest category of cancer risk.
Violation of the federal or state laws or regulations could
    result in criminal or civil penalties.
We are subject to stringent federal and state franchise laws
    requiring extensive disclosures by franchisors to current and
    prospective franchisees. State laws also prohibit fraud in the
    sale of franchises. We believe we are in compliance with all
    material federal and state franchise laws and regulations.
Our
    Employees
Excluding contract labor, as of March 2, 2010, we employed
    42 full-time employees and 1 part-time employee. The
    following table sets forth the number of our employees by
    function as of that date.
Functions
As of March 2, 2010
Franchise sales
5
Product and equipment sales
6
Customer and franchisee support
13
Information technology and marketing
6
Administration, accounting, and legal
9
Executive management
4
TOTAL
43
We believe that our future success will depend in part on our
    continued ability to attract, hire and retain qualified
    personnel. None of our employees are represented by a labor
    union, and we believe our employee relations are good.
Insurance
We maintain property insurance for our administrative office
    buildings. The combined limits of our commercial property,
    commercial wind and hail, and flood policies total
    $7.5 million. We also have other coverages, including
    general liability insurance, business income insurance under our
    commercial property policy, employment practices liability
    insurance, errors and omissions insurance, directors and
    officers liability insurance, workman's compensation
    insurance, key-man life insurance and professional liability
    insurance for our in-house lawyers. We also have commercial
    insurance for our company store in Irvine, California. We
    require each of our franchise locations to have a minimum of
    $1 million in commercial general liability coverage and
    certain other coverages. Our franchisees are also required under
    their franchise agreements to maintain products liability
    coverage and to name us as an additional insured. We believe our
    insurance coverage is customary and standard for companies of
    comparable size in comparable industries in the United States.
Litigation
From time to time, we become involved in various lawsuits and
    legal proceedings that arise in the ordinary course of our
    business. Almost all of these matters arise in connection with
    business disputes between us and our franchisees, but on
    occasion we have been a party to lawsuits by customers alleging
    they were injured while using our spas. We require all of our
    locations to have customers sign a form acknowledging the risks
    of U-V and other services.
As of December 31, 2009, management, with the advice of
    counsel, has determined that the likelihood of loss in any
    pending matter is not reasonably probable or estimable.
    Accordingly, we have not accrued any reserves in our
    consolidated statements of operations in connection with these
    lawsuits. However, litigation is subject to inherent
    uncertainties, and future reserves may be required if losses are
    deemed reasonably probable and estimable due to changes in our
    assumptions, the effectiveness of legal strategies or other
    factors beyond our control. An adverse result in these or other
    matters or the creation of or changes to reserves could have a
    material adverse effect on our business, financial condition or
    operating results. We are vigorously defending
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our position on all claims and proceedings pending as of
    December 31, 2009. Moreover, we do not believe that any
    pending actions or proceedings, either individually or in the
    aggregate, will have a material adverse effect on our financial
    condition, results of operations or cash flows.
Our
    Corporate Structure
We were initially incorporated on September 26, 1996, under
    the laws of the State of Louisiana. On March 25, 2008, we
    reincorporated under the laws of the State of Nevada by merging
    our predecessor Louisiana corporation into its newly-formed,
    wholly-owned Nevada subsidiary. On March 18, 2010, we
    changed our state of incorporation to Delaware by merging into
    our newly-formed, wholly-owned Delaware subsidiary. As part of
    the merger, we effected a 1 for 3.5 reverse stock split of our
    common stock.
We conduct some of our operations through our wholly-owned
    subsidiaries, principally Planet Beach International, LLC,
    through which we conduct our international operations.
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MANAGEMENT
Directors,
    Executive Officers and Key Employees
The following sets forth the name and position of each of our
    current executive officers and directors. With respect to our
    directors, we have provided in their biographical information
    below the experience and qualifications that led to the
    conclusion that they should serve as a director.
Name
Age
Position
Stephen P. Smith
47
President, Chief Executive Officer and Chairman of the Board of
    Directors
Richard L. Juka
51
Senior Vice President, Chief Operating Officer, Secretary,
    Treasurer and Director
Nancy M. Price
42
Senior Vice President of Sales
Tiffany Lassiegne
29
President of Domestic Operations
Craig M. Berner
47
Chief Financial Officer
Eric E. Bosch
42
Director
Gary N. Solomon
53
Director
Ronald Warner
65
Director
Stephen P. Smith.
Mr. Smith is the
    co-founder of the company and has served as President, Chief
    Executive Officer and Chairman of the Board of Directors since
    April 1996. He received a B.A. in Political Science from the
    University of Mississippi, a Masters in Organizational
    Management from the University of Phoenix, and the distinguished
    Certified Franchise Executive designation from the International
    Franchise Association for his work and study in the franchise
    industry.
Mr. Smith has an extensive business background, which
    includes being an entrepreneur since 1986. He opened and
    operated Bodyplex Fitness Center from 1986 through 1989, Bay
    Street Tanning Boutique from 1988 through 1989, and was a
    licensee of three Gold's Gym locations from 1989 through
    1995. Mr. Smith also opened the original Planet Beach
    location in New Orleans, Louisiana in 1995, which was first
    called Electric Beach; he still owns this store today. In 1996,
    Mr. Smith founded Planet Beach Franchising Corporation and
    began franchising that same year.
Richard L. Juka.
Mr. Juka is one of our
    co-founders has served as our Senior Vice President, Chief
    Operating Officer, Secretary, Treasurer and Director since July
    1996. He has 25 years of management experience in retail,
    wholesale and franchising businesses. Prior to joining Planet
    Beach Franchising Corporation, Mr. Juka served as Store
    Director and Field Operator for Pet Smart from 1991 until 1996.
    He was with Pet Smart during their 1993 initial public offering.
    Additionally, Mr. Juka worked for two publicly traded
    companies in the home improvement industry. In 2002,
    Mr. Juka received the designation of Certified Franchise
    Executive from the International Franchise Association for his
    work and study in the franchise industry. He has been a Planet
    Beach franchisee since November 2, 2009.
Nancy M. Price.
Ms. Price co-founded our
    company with Messrs. Smith and Juka and has served as our
    Senior Vice President of Sales since 1996. She was a member of
    our board of directors from 1996 to 2010. She received the
    designation of Certified Franchise Executive from the
    International Franchise Association for her work and study in
    the franchise industry.
Ms. Price studied health and physical education while
    attending Southeastern Louisiana University at Hammond from 1986
    through 1990. She has 13 years experience in the health
    club industry and a total of 24 years experience in
    membership sales. Additionally, Ms. Price acted as the
    National Marketing Representative for Sydney Frank Importing
    Company, Inc. from 1988 through 1992 and also acted in the role
    of Corporate Trainer for the outside field staff of models and
    promoters. She has been a Planet Beach franchisee since December
    1996.
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Tiffany Lassiegne.
Ms. Lassiegne became
    our President of Domestic Operations on January 1, 2010.
    Until that time, she was our Vice President of Entertainment and
    Media, a position she was promoted to in January 2008.
She began her career with Planet Beach in 2000 as the general
    manager of a New Orleans area franchise location and has been
    promoted into numerous positions within the company, including:
    Franchise Relations Consultant from June 2003 until August 2005,
    Franchise Relations Manager from August 2005 to December 2006,
    Director of Franchise Relations from December 2006 until June
    2007 and Senior Director of our Spa Tempo Media Department from
    June 2007 to January 2008. She and her husband were also Planet
    Beach franchisees from 2001 to 2003.
Ms. Lassiegne was previously employed as the Executive
    Producer of the Early Morning News at WWL-870 am radio, an
    Entercom Communications station in New Orleans, while attending
    Loyola University working toward her undergraduate degree in
    Business Management. In 2007, she earned her M.B.A. from the
    University of Phoenix.
Craig M. Berner.
Mr. Berner has served as
    our Chief Financial Officer since August 2007. Prior to that
    time, Mr. Berner served as Associate Controller and
    Director of Accounting for Tulane University from October 1999
    to August 2007, where his primary responsibilities included
    overseeing all financial reporting, developing and monitoring
    internal controls, managing the operations of the accounting
    office, and preparing cash forecasts and capital budgets. He was
    also Manager of Budgeting and Financial Reporting for Tidewater
    Inc. from March 1998 to October 1999, and was responsible in
    that position chiefly for all budgeting and financial reporting,
    preparing quarterly and annual SEC filings, supervision of
    accounting staff, and custody of corporation and insurance
    reserve general ledger accounts. Mr. Berner, who is a
    Certified Public Accountant, has a B.S. in Accounting from the
    University of New Orleans and a M.B.A. from the A.B. Freeman
    School of Business at Tulane University, with a concentration in
    finance and management.
Eric E. Bosch.
Mr. Bosch was elected to
    our board of directors in 2010. He is a Certified Public
    Accountant, licensed in both Louisiana and Mississippi. He has
    been an equity director of the public accounting firm LaPorte
    Sehrt Romig Hand since December 2008. He joined the firm in
    January 1990 after graduating from the University of New Orleans
    in 1989 with a B.S. in accounting. Mr. Bosch serves as the
    engagement director for the accounting and assurance services
    provided by the firm to a number of clients in several different
    industries, as well as for clients that are public reporting
    companies. He has assisted several of these clients with the
    filings required for their initial public offerings, as well as
    the subsequent filings required by the SEC.
Gary N. Solomon.
Mr. Solomon was elected
    to our board of directors in 2010. He has been the Chairman of
    the Board and Chief Executive Officer of Crescent Bank and Trust
    in New Orleans since 1991. He has also been an active venture
    capitalist for the past 20 years, and currently has
    investments in a shipping franchise, several restaurant
    franchises and various real estate developments. He holds a B.S.
    in Business Administration from the University of New Orleans.
Ronald Warner.
Mr. Warner was elected to
    our board of directors in 2010. He has been in the private
    practice of law since 1968. Since July 2003, he has been a
    senior corporate partner in the law firm of Locke Lord
    Bissell & Liddell, where he heads the Corporate
    Practice Group in the Los Angeles office of the firm.
    Mr. Warner's practice concentrates on
    mergers & acquisitions, financings (from emerging
    growth financing through larger multi-national public offerings)
    and compliance with federal and state securities laws and
    Foreign Corrupt Practices Act matters. Mr. Warner currently
    serves on the Boards of Directors of Senetas Corporation
    Limited, an Australian public company that designs and
    distributes encryption products world-wide, and Elite
    Interactive Solutions, Inc., a privately held company located in
    Los Angeles, California, that offers software monitoring
    products and services for facilities. He also serves on the
    Advisory Boards of a number of technology and services companies
    in the United States and other countries. Mr. Warner
    received his Juris Doctorate degree with honors from the New
    York University School of Law, where he was appointed as an
    editor of the Law Review, after receiving his Bachelor of Arts
    degree from Tulane University.
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Board of
    Directors
Our board of directors is composed of five members, divided into
    three classes. This classification of the board of directors may
    delay or prevent a change in control of our company or our
    management. See "Description of Securities —
    Certain Charter, Bylaw and Statutory Provisions."
Director
    Independence
Our board of directors has affirmatively determined that
    Messrs. Bosch, Solomon and Warner meet the definition of
    "independent director" under the rules of the NYSE
    Amex.
Board
    Committees
Our board of directors has two standing committees: an audit
    committee and a governance, compensation and nominating
    committee. Each of those committees has the composition and
    responsibilities set forth below.
Audit
    Committee
The members of the audit committee are Messrs. Bosch
    (Chair), Solomon and Warner. None of the members of the audit
    committee are, or have been, our officers or employees, and each
    member qualifies as an independent director as defined by the
    rules of the NYSE Amex, Section 10A(m) of the Securities
    Exchange Act of 1934, and SEC rules. The board of directors has
    determined that Mr. Bosch meets the definition of an
    "audit committee financial expert" as that term is
    used in Item 401(h) of
Regulation S-K
under the Securities Exchange Act.
Under its written charter, the audit committee's purpose is
    to oversee the integrity of our financial statements and
    internal controls, our compliance with applicable legal and
    regulatory requirements and the qualifications and independence
    of our independent registered public accounting firm. To further
    this purpose, the audit committee has the sole authority to
    appoint and, when deemed appropriate, replace our independent
    registered public accounting firm, and has established a policy
    of pre-approving all audit and permissible non-audit services
    provided by our independent registered public accounting firm.
    The audit committee has, among other things, the responsibility
    to evaluate the qualifications and independence of our
    independent registered public accounting firm; to review and
    approve the scope and results of the annual audit; to review and
    discuss with management and the independent registered public
    accounting firm the content of our financial statements before
    the filing of our quarterly reports and annual reports; to
    review the content and clarity of our proposed communications
    with investors regarding our operating results and other
    financial matters; to review significant changes in our
    accounting policies; to establish procedures for receiving,
    retaining, and investigating reports of illegal acts involving
    us or complaints or concerns regarding questionable accounting
    or auditing matters, and to supervise the investigation of any
    such reports, complaints or concerns; to establish procedures
    for the confidential, anonymous submission by our employees of
    concerns or complaints regarding questionable accounting or
    auditing matters; and to provide sufficient opportunity for the
    independent auditors to meet with the committee without
    management present.
Corporate
    Governance, Compensation and Nominating Committee
The corporate governance, compensation and nominating committee
    is comprised of Messrs. Bosch, Solomon and Warner (Chair),
    each of whom has been determined by our board of directors to
    qualify as independent director as defined by the rules of the
    NYSE Amex, Section 10A(m) of the Securities Exchange Act of
    1934, and SEC rules.
With respect to compensation, the committee discharges the
    responsibilities of our board of directors relating to
    compensation of our chief executive officer and other officers,
    including reviewing and approving the performance goals and
    objectives of our chief executive officer and other officers,
    evaluating the performance of those persons in light of the
    goals and objectives and ensuring that compensation of our
    executives reasonably relates to achieving the goals and
    objectives. The committee has, among other things, the
    responsibility to administer our stock plans, including granting
    options and awards under the stock plans,
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to review with management the compensation disclosures included
    in our annual proxy statement, and to provide a report on
    compensation for our proxy statement.
The purpose and responsibilities of the committee related to
    nominating candidates for director include considering the
    appropriate size, function and needs of our board of directors,
    developing criteria for membership on our board of directors,
    and identifying and recommending candidates to fill positions on
    our board of directors. The responsibilities of the committee
    related to corporate governance include, among other things,
    considering possible conflicts of interest of board members and
    senior executives, monitoring various committees of our board of
    directors, developing and reviewing annually our corporate
    governance principles, and reviewing and approving transactions
    with related persons in excess of $120,000.
Director
    Compensation
During the 2008 and 2009 fiscal years and until the consummation
    of this offering, no member of our board of directors received
    or will receive any compensation for service as a director. Upon
    the consummation of this offering, our directors who are not our
    employees will be entitled to an annual cash retainer for their
    services as director in the amount of $12,000 as long as they
    attend at least one board of directors meeting each calendar
    quarter.
Family
    Relationships
There are no family relationships between any of our directors
    or executive officers.
EXECUTIVE
    COMPENSATION
Summary
    Compensation Table — 2008 and 2009
The following table sets forth information concerning all cash
    and non-cash compensation awarded to, earned by or paid to our
    chief executive officer and each of our other two most highly
    compensated executive officers as of the end of the last fiscal
    year. We refer to these persons as our named executive officers
    elsewhere in this prospectus.
Non-Equity
All
Option
Incentive Plan
Other
Name and
Salary
Awards(1)
Compensation(2)
Compensation(3)
Total
Principal Position
Year
($)
($)
($)
($)
($)
Stephen P. Smith
2009
242,813
—
—
—
242,813
President, Chief Executive Officer
2008
259,000
279,142
—
13,382
551,524
and Chairman of the Board
Richard L. Juka
2009
185,625
—
22,567
—
208,192
Senior Vice President,
2008
198,000
67,185
55,264
11,430
331,879
Chief Operating Officer,
Secretary and Treasurer
Craig M. Berner
2009
131,240
—
—
—
131,240
Chief Financial Officer
2008
140,000
135,450
—
7,000
282,450
(1)
Reflects the aggregate grant date fair value of option awards
    computed in accordance with FASB ASC Topic 718. For more
    information, see Note 6 to our consolidated financial
    statements for fiscal year 2009.
(2)
The amounts in this column consist of, for Mr. Juka, a
    bonus equal to 5% of our net profits from sales of spa products
    and equipment for the fiscal year.
(3)
Consists of company contributions in 2008 to the executive
    officer's 401(k) plan account.
We have entered into employment agreements with both Stephen P.
    Smith, our President, Chief Executive Officer and Chairman, and
    Richard K. Juka, our Senior Vice-President, Chief Operating
    Officer, Secretary and Treasurer. Each of the employment
    agreements has an initial term of three years and automatically
    extends each day for an additional day until we give notice of
    our election to cease these extensions. Mr. Smith and
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Mr. Juka are entitled to annual salaries of $259,000 and
    $198,000, respectively, subject in each case to increase (but
    not decrease) by determination of the board's compensation
    committee, and may be awarded a bonus of up to 50% of their
    salaries for the company's achievement of certain
    milestones to be established annually by the compensation
    committee. In addition, Mr. Juka is entitled to receive a
    monthly bonus of 5% of the net profit of the company's
    equipment department. Mr. Smith's employment agreement
    permits him to continue to operate the one Planet Beach location
    he currently owns and any other businesses he may establish
    during the term of the employment agreement by agreement with us
    without any obligation to pay us any royalty or franchise fee.
Each of the employment agreements may be terminated by us or the
    employee at any time. If we terminate either Mr. Smith or
    Mr. Juka without "cause" (as defined in the
    employment agreements), or Mr. Smith or Mr. Juka
    terminates his employment agreement for "good reason"
    (as defined in the employment agreements), he would be entitled
    to receive payment equal to three years' annual salary at
    its then current level, payments of any bonuses that would have
    been earned for the three years following termination, vesting
    of all unvested benefits in all equity incentive and retirement
    plans that they were participating in at the time of
    termination, and insurance benefits for the three years
    following termination. In any event, following termination,
    Mr. Smith and Mr. Juka are prohibited from competing
    with us or soliciting our employees, franchisees and customers,
    for a period of two years after the termination of employment,
    except that Mr. Smith and Mr. Juka are permitted to
    continue to operate the one Planet Beach location they each own,
    respectively, and any other businesses they may establish during
    the term of the employment agreement by agreement with us.
In addition, we have entered into an Asset Purchase Agreement
    with Mr. Smith and Planet Beach Brands, L.L.C., a limited
    liability company owned solely by Mr. Smith, pursuant to
    which Planet Beach Brands assigned to us all of the trade names
    and trademarks owned by it under which we conduct our business
    and in exchange for which we have committed to pay it $375,000
    and monthly, in perpetuity, 0.5% of the amount collected by us
    as the royalty fees paid by our franchisees as a percentage of
    their gross sales for each month in which aggregate collections
    exceed $400,000. However, if we terminate Mr. Smith's
    employment without "cause" (as defined in his
    employment agreement), he terminates his employment with
    "good reason" (as defined in his employment
    agreement), or there is a change in control of our company, the
    monthly payments we owe Planet Beach Brands will increase to 10%
    of the amount we collect as royalty fees paid by our franchisees
    as a percentage of their gross sales, without regard to the
    gross amount of such collections in the month. Total amounts
    payable to Planet Beach Brands or Mr. Smith under this
    agreement may not exceed $10,000,000. The agreement will become
    effective upon consummation of this offering.
Currently, compensation for the named executive officers is
    based on what we believe to be the prevailing marketing
    conditions in the United States southern region for a company of
    our size.
In fiscal 2008 and 2009, we had an unwritten understanding with
    Messrs. Smith and Juka that they would earn a bonus of 5%
    and 3%, respectively, of our net income after taxes in
    profitable years. We have not paid a bonus under this
    arrangement because we incurred net losses in those years.
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Outstanding
    Equity Awards at Fiscal Year End — 2009
Number of
Number of
Securities
Securities
Underlying
Underlying
Unexercised
Unexercised
Option
Option
Grant
Options
Options
Exercise
Expiration
Name
Date
(#) Exercisable
(#) Unexercisable
Price ($)
Date
Stephen P. Smith
9/1/2008
54,956
151,129
3.50
9/1/2018
President, Chief Executive Officer
and Chairman of the Board
Richard L. Juka
9/1/2008
13,227
36,374
3.50
9/1/2018
Senior Vice President,
Chief Operating Officer,
Secretary and Treasurer
Craig M. Berner
8/29/2007
6,905
7,381
3.50
8/29/2017
Chief Financial Officer
9/1/2008
26,667
73,333
3.50
9/1/2018
Options granted under our 2005 Stock Option Plan expire ten
    years from the date of grant. Generally, either 20% or 25% of
    the options vest on the first anniversary of the grant.
    Thereafter, the options vest monthly on a pro rata basis until
    the fourth or fifth anniversary of the grant until fully vested.
We have a defined contribution employee benefit or 401(k) plan.
    The plan is available to employees who have completed at least
    three months of service and are at least 18 years old.
    Before December 1, 2008, the company matched 25% of each
    dollar contributed up to 4% of the employee's annual
    salary. The employer contribution vests fully after five years.
    We temporarily suspended matching contributions beginning
    December 1, 2008. Our expense during 2009, 2008 and 2007
    associated with the plan totaled $0, $56,099, and $38,882,
    respectively. We have not determined if and when we will
    reinstate the company match.
We do not believe that there are risks arising from our
    compensation policies and practices that are reasonably likely
    to have a material adverse effect on our business.
TRANSACTIONS
    WITH RELATED PERSONS
We describe below certain transactions and series of similar
    transactions that have occurred this year or during our last two
    fiscal years to which we were a party or will be a party,
    including transactions in which:
•
the amounts involved exceeded or will exceed $120,000; and
•
a director, executive officer, or holder of more than 5% of our
    common stock or any member of his or her immediate family had or
    will have a direct or indirect material interest.
Stephen Smith, our President, Chief Executive Officer, Chairman
    of the Board and majority stockholder, owns a Contempo Spa that
    does not pay royalties to us. This location was the first Planet
    Beach location and opened before Planet Beach Franchising
    Corporation was formed. Under the terms of our first form of
    franchise agreement, which was executed for the first time in
    1996, royalties payable to us were fixed at $250 per month for
    the duration of the agreement. Therefore, the amount of
    royalties that would have been paid by this location to us if it
    were subject to the franchise agreement would have been $3,000
    annually, or approximately $42,000 since 1996.
Richard Juka, our Senior Vice President, Chief Operating
    Officer, Secretary, Treasurer and Director,
co-owns
a
    Contempo Spa location that opened on November 2, 2009.
    Mr. Juka and his partner do not pay the 6% royalty that
    would be required under our current franchise agreement. Rather,
    they pay us a fixed monthly fee of $350. In addition, instead of
    paying the required 2% of gross sales to us per month for brand
    development, they pay 1% of gross sales per month for this
    purpose. For fiscal year 2009, the amount that would have been
    payable to us from this location under our current form of
    franchise agreement would have been $743. The amount actually
    invoiced for fiscal year 2009 under our arrangement with
    Mr. Juka was $792.
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We have entered into an agreement with Planet Beach Brands,
    L.L.C., that will become effective upon the consummation of this
    offering, under which we will purchase trademarks and other
    intellectual property from Planet Beach Brands. Planet Beach
    Brands is wholly-owned by our Chairman, President, Chief
    Executive Officer and principal stockholder, Stephen Smith. We
    will purchase the intellectual property in exchange for a
    promissory note in the amount of $375,000, which we will repay
    with the net proceeds of this offering. We also agreed to pay
    Planet Beach Brands a monthly royalty equal to 0.5% of the
    royalties we collect from our franchisees (excluding marketing
    and other fees) in any month when those collected royalties
    exceed $400,000. In addition, in the event that we terminate
    Stephen Smith's employment without cause, if he resigns for
    good reason, or if there is a change in control of our company,
    Planet Beach Brands will be entitled to a royalty of 10% of our
    collected royalties (excluding marketing fees) per month,
    regardless of the amount of our collections. In all events, the
    royalty payments will cease once they have totaled
    $10 million.
We issued a note payable to New Sunshine LLC at 7% interest due
    on April 10, 2012 for our purchase of U-V products. This
    note is secured by 85,714 shares of our common stock owned
    and pledged by Mr. Smith. During fiscal 2008 and 2009, the
    largest aggregate amount of principal outstanding on the note
    was $750,000, and the amount outstanding at December 31,
    2009 was $515,739. We paid $110,153 in principal and $38,808 in
    interest on the note in fiscal 2008 and $124,108 in principal
    and $41,486 in interest in fiscal 2009.
A substantial amount of our indebtedness has been personally
    guaranteed by certain of our officers and directors, including
    indebtedness that we intend to repay with the proceeds of this
    offering, as described below. See "Use of Proceeds"
    for more information about our intended use of the proceeds of
    the offering.
Our indebtedness that has been guaranteed by our officers and
    directors consists of:
•
our 6.54% note to Capital One Bank due March 9, 2027
    for the purchase and improvement of our corporate headquarters.
    This note has been personally guaranteed by Mr. Smith and
    Mr. Juka. The largest aggregate amount of principal
    outstanding on the note was $890,737 during fiscal 2008 and
    2009, and the amount outstanding at December 31, 2009 was
    $840,008. We paid $24,630 in principal and $57,511 in interest
    on the note in fiscal 2008 and $26,099 in principal and $55,900
    in interest in fiscal 2009.
•
our 5.79% note to the Small Business Administration due
    June 1, 2027 for the purchase and improvement of our
    corporate headquarters. This note has been personally guaranteed
    by Mr. Smith and Mr. Juka. The largest aggregate
    amount of principal outstanding on the note was $623,771 during
    fiscal 2008 and 2009, and the amount outstanding at
    December 31, 2009 was $591,280. We paid $13,052 in
    principal and $35,888 in interest on the note in fiscal 2008 and
    $19,439 in principal and $34,521 in interest in fiscal 2009.
•
our 8.25% note to Whitney National Bank due July 19,
    2012 to fund operations. This note has been personally
    guaranteed by Mr. Smith and Mr. Juka. The largest
    aggregate amount of principal outstanding on the note was
    $727,030 during fiscal 2008 and 2009, and the amount outstanding
    at December 31, 2009 was $619,305. We paid $51,545 in
    principal and $58,210 in interest on the note in fiscal 2008 and
    $56,180 in principal and $53,596 in interest in fiscal 2009.
Nancy Price, our Senior Vice President of Sales, Shannon Aleman,
    who is Mr. Smith's sister, and certain of our
    employees own Planet Beach franchises. The terms of those
    franchise arrangements are no less favorable to us than those
    that were applicable in our standard franchise agreements that
    were in effect for other franchises at the time those franchises
    were established. The total revenue due to us from each of those
    franchisees in 2009 was less than $120,000.
As of December 31, 2009, Ms. Aleman owed us $35,671 in
    initial franchise fees and other fees. In addition, one of our
    employees, who is also a stockholder, owns two franchise
    locations for which we are currently deferring royalties. At
    December 31, 2009, the amount of deferred royalties from
    these two locations totaled $39,783. Also, another of our
    employees, who is also a stockholder, owed us $73,682 at
    December 31, 2009 in unpaid area representative territory
    fees.
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On November 18, 2009, Mr. Smith loaned us $50,000 for
    the payment of expenses related to this offering. The note is to
    be repaid with 5% interest (for a total repayment amount of
    $52,500) upon completion of the offering.
SECURITY
    OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the
    beneficial ownership of our common stock as of March 18,
    2010 for: (i) each person known by us to beneficially own
    more than 5% of our voting securities, (ii) each named
    executive officer, (iii) each of our directors, and
    (iv) all of our named executive officers and directors as a
    group. The information in the table reflects the 1 for 3.5
    reverse stock split we effected on March 18, 2010 and
    assumes no exercise of the warrants included in the units we are
    offering or the representative's warrants.
Beneficial ownership is determined in accordance with
Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as
    amended. Except as otherwise indicated, each person or entity
    named in the table has sole voting and investment power with
    respect to all shares of our capital stock shown as beneficially
    owned, subject to applicable community property laws.
We have assumed no exercise of outstanding options (other than,
    in the case of each individual or entity listed in the table
    below, stock options held by that individual or entity that will
    be exercisable for our common stock on or before May 31,
    2010).
The number of shares of common stock outstanding before this
    offering is 3,713,925.
The percentage of common stock beneficially owned after this
    offering is based
    on          shares
    of common stock to be outstanding after this offering, which
    includes          shares
    of common stock being offered for sale as part of the units
    being offered in this offering but assumes no exercise of the
    warrants issued in connection with this offering or the
    underwriters' over-allotment option.
Percent of
Percent of
Common
Common
Name and Address
Shares Beneficially
Stock Before
Stock After
of Beneficial Owner(1)
Owned(2)
the Offering
the Offering
Stephen P. Smith
2,545,363
65
%
President, Chief Executive Officer and Chairman of the Board
Richard L. Juka
612,571
16
%
Senior Vice President, Chief Operating Officer,
Secretary, Treasurer and Director
Craig M. Berner
43,095
1
%
Chief Financial Officer
Nancy M. Price
371,021
9
%
Senior Vice President of Sales
Eric E. Bosch
0
0
%
0
%
Director
Gary N. Solomon
0
0
%
0
%
Director
Ronald Warner
0
0
%
0
%
Director
All named executive officers and directors as a group
    (6 persons)
3,572,050
96
%
(1)
The address of all persons listed is 5145 Taravella Road,
    Marrero, LA 70072.
(2)
Includes 72,130, 17,360, 43,095 and 10,510 shares
    underlying exercisable options and options that will become
    exercisable on or before May 31, 2010 for Mr. Smith,
    Mr. Juka, Mr. Berner and Ms. Price, respectively.
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DESCRIPTION
    OF SECURITIES
Capital
    Stock
We are authorized to issue up to 100,000,000 shares of
    common stock, par value $0.0001 per share and
    10,000,000 shares of preferred stock, par value $0.0001 per
    share. As of March 18, 2010, we had a total of 3,836,611
    shares of common stock issued and 3,713,925 shares
    outstanding. We have no shares of preferred stock outstanding.
    We also have options outstanding to purchase 552,571 shares
    of our common stock. The number of options outstanding excludes
    shares subject to an option held by one of our vendors to
    convert balances due under our note payable within
    12 months of this offering at a conversion price equal to
    the initial public offering price.
After this offering, we will
    have          shares
    of common stock outstanding,
    or          shares
    outstanding if the underwriters exercise their over-allotment
    option in full. This assumes no warrants are exercised.
Common
    Stock
Each share of our common stock entitles its holder to one vote
    per share on all matters coming before the stockholders.
    Stockholders do not have preemptive rights to purchase shares in
    any future issuance of our common stock and the common stock is
    not convertible into any other security. Upon our liquidation,
    dissolution or winding up, and after payment of creditors and
    preferred stockholders, if any, our assets will be divided
    pro-rata on a share-for-share basis among the holders of the
    shares of common stock.
The holders of shares of our common stock are entitled to
    dividends out of funds legally available when and as declared by
    our board of directors.
All of the issued and outstanding shares of our common stock are
    duly authorized, validly issued, fully paid and non-assessable.
Preferred
    Stock
We are authorized to issue up to 10,000,000 shares of
    preferred stock in one or more classes or series within a class
    as may be determined by our board of directors, who may
    establish, from time to time, the number of shares to be
    included in each class or series, may fix the designation,
    powers, preferences and rights of the shares of each such class
    or series and any qualifications, limitations or restrictions of
    the class or series. Any preferred stock so issued by the board
    of directors may rank senior to the common stock with respect to
    the payment of dividends or amounts upon liquidation,
    dissolution or winding up of us, or both. Moreover, under
    certain circumstances, the issuance of preferred stock or the
    existence of the unissued preferred stock might tend to
    discourage or render more difficult a merger or other change of
    control or could hurt the market price of our securities.
Units
The units we are offering in this prospectus consist of one
    share of our common stock and one redeemable common stock
    purchase warrant. We have applied to list the units for trading
    on the NYSE Amex under the symbol "PBFCU" on or
    promptly after the date of this prospectus. Each of the shares
    and the warrants may be traded separately 35 days after the
    date of this prospectus. Once the shares and warrants begin
    separate trading, we anticipate the shares will be listed on the
    NYSE Amex under the symbol "PBFC" and the warrants
    will be listed on the NYSE Amex under the symbol
    "PBFCW," but we cannot assure you that our securities
    will be so listed or, if listed, will continue to be listed.
Warrants
The warrants included in the units we are offering entitle the
    holder to purchase one share of common stock at a price of
    $      per share, subject to adjustment
    as discussed below, at any time after 9:30:01 a.m., New York
    time,
    on          ,
    2010. The warrants will expire at 5:00 p.m., New York time,
    on          ,
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2013, or earlier upon redemption. After completion of this
    offering, warrants for      shares
    of our common stock will be outstanding.
We may redeem the outstanding warrants at a price of
    $      per warrant at any time upon a
    minimum 15 days' prior written notice of redemption
    and if, and only if, the closing price of our common stock
    equals or exceeds $      per share for
    a period of ten consecutive trading days.
If the foregoing conditions are satisfied and we call the
    warrants for redemption, each warrant holder shall then be
    entitled to exercise his or her warrant before the date which is
    two business days before the date scheduled for redemption. We
    do not need the consent of our underwriters in order to redeem
    the outstanding warrants.
The warrants will be issued in registered form under a warrant
    agreement
    between          
    as warrant agent, and us. You should review a copy of the
    warrant agreement, which has been filed as an exhibit to the
    registration statement of which this prospectus is a part, for a
    complete description of the terms and conditions applicable to
    the warrants.
The exercise price and number of shares of common stock issuable
    on exercise of the warrants may be adjusted in certain
    circumstances including in the event of a stock split or stock
    dividend, or our recapitalization, reorganization, merger or
    consolidation.
The warrants may be exercised upon surrender of the warrant
    certificate on or before its expiration date at the offices of
    the warrant agent, with the exercise form on the reverse side of
    the warrant certificate completed and executed as indicated,
    accompanied by full payment of the exercise price, by certified
    or bank cashier's check payable
    to               ,
    for the number of warrants being exercised. Warrant holders will
    not have any voting rights or any other of the rights or
    privileges of holders of common stock until they exercise their
    warrants and receive shares of common stock. After the issuance
    of shares of common stock upon exercise of the warrants, each
    holder will be entitled to one vote for each share held on
    record on all matters to be voted on by stockholders.
No warrants will be exercisable and we will not be obligated to
    issue shares of common stock unless at the time a holder seeks
    to exercise such warrant, a prospectus relating to the common
    stock issuable upon exercise of the warrants is current and the
    common stock has been registered or qualified or deemed to be
    exempt under the securities laws of the state of residence of
    the holder of the warrants. In addition, holders of the warrants
    are not entitled to net cash settlement and the warrants may
    only be settled by delivery of shares of our common stock and
    not cash. Under the terms of the warrant agreement, we have
    agreed to use commercially reasonable efforts to meet these
    conditions and to maintain a current prospectus relating to the
    common stock issuable upon exercise of the warrants until the
    expiration of the warrants. However, we cannot assure you that
    we will be able to do so and, if we do not maintain a current
    prospectus relating to the common stock issuable upon exercise
    of the warrants, holders will be unable to exercise their
    warrants and we will not be required to settle any such warrant
    exercise. If the prospectus relating to the common stock
    issuable upon the exercise of the warrants is not current or if
    the common stock is not qualified or exempt from qualification
    in the jurisdictions in which the holders of the warrants
    reside, the warrants may have no value, the market for the
    warrants may be limited and the warrants may expire worthless.
We will not issue fractional shares upon exercise of the
    warrants. If, upon exercise of the warrants, a holder would be
    entitled to receive a fractional interest in a share, we will,
    upon exercise, round up or down to the nearest whole number to
    determine the number of shares of common stock to be issued to
    the warrant holder.
Certain
    Charter, Bylaw and Statutory Provisions
Certain provisions of our certificate of incorporation and
    bylaws and Delaware law are described below.
Classified board of directors.
Our certificate
    of incorporation divides the members of our board of directors
    into three classes, which are designated Class A,
    Class B and Class C. The initial Class A
    directors are Messrs. Bosch and Juka, who serve for a term
    expiring at our annual meeting of stockholders in 2011. The
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initial Class B Director is Mr. Solomon, who serves
    for a term expiring at our annual meeting of stockholders in
    2012. The initial Class C Directors are Messrs. Smith
    and Warner, who serve for a term expiring at our annual meeting
    of stockholders in 2013. Thereafter, the members of each class
    serve for a three year term. The terms are staggered, which
    means that each year the term of only one of the classes
    expires. Staggering directors' terms makes it more
    difficult for a potential acquiror to seize control of a target
    company through a proxy contest, even if the acquiror controls a
    majority of the company's stock, because only one-third or
    fewer of the directors stand for election in any year and
    directors may only be removed for cause.
Stockholder Meetings.
Our certificate of
    incorporation provides that only the chairman of our board or a
    majority of our directors may call a special meeting of
    stockholders. Stockholders must give advance notice of
    nominations for the election of directors and of business to be
    brought by stockholders before a stockholders' meeting in
    the manner provided in our bylaws. Our charter also provides
    that stockholders may not take any action by written consent.
Limitation of liability of directors and
    officers.
Our certificate of incorporation
    provides that our directors will not be liable to the
    corporation or its stockholders for monetary damages for breach
    of fiduciary duty to the fullest extent allowed by the General
    Corporation Law of the State of Delaware as it now exists or it
    may be amended in the future. The General Corporation Law of the
    State of Delaware provides that a corporation may provide that a
    director will not be liable to the corporation or its
    stockholders for monetary damages arising from a breach of their
    fiduciary duties, except for:
•
breaches of a director's or officer's duty of loyalty
    to us or our stockholders;
•
acts or omissions not in good faith or involving intentional
    misconduct or knowing violations of law;
•
liability for unlawful payments or dividends or unlawful stock
    purchases or redemptions, to the extent provided in the General
    Corporation of Law of the State of Delaware; or
•
a transaction from which a director or officer obtained an
    improper personal benefit.
Indemnification of directors.
Our certificate
    of incorporation provides that we must indemnify, advance
    expenses to and hold harmless our directors to the fullest
    extent permitted by the General Corporation Law of the State of
    Delaware as it now exists or may be amended in the future. Under
    current Delaware law, a corporation may indemnify directors made
    or threatened to be made a party to any threatened, pending or
    completed civil, criminal, administrative or investigative
    action, suit or proceeding because of that person's service
    as a director of the corporation or because that person was
    serving at the corporation's request as a director of
    another corporation or enterprise. The corporation may indemnify
    such a person for expenses (including attorneys' fees),
    judgments, fines and amounts paid in settlement that are
    actually and reasonably incurred by the person in connection
    with the action, suit or proceeding, provided that the person
    acted in good faith and in a manner the person reasonably
    believed to be in or not opposed to the best interests of the
    corporation, and with respect to a criminal action or
    proceeding, if the person had no reasonable cause to believe his
    or her conduct was unlawful.
In each instance of indemnification, the corporation may only
    indemnify the person following a determination that the person
    met the applicable standard of conduct by:
•
a majority vote of the directors who are not parties to the
    action, suit or proceeding;
•
a committee of the board of directors designated by a majority
    vote of those disinterested directors;
•
by independent legal counsel if there are no disinterested
    directors or the disinterested directors so direct; or
•
the stockholders.
A corporation may pay expenses (including attorneys' fees)
    incurred by the director in defending an action, suit or
    proceeding in advance of the final disposition of the action,
    suit or proceeding upon receipt of an undertaking by the
    director to repay the corporation the amount paid in advance if
    it is ultimately determined that the person is not entitled to
    be indemnified. The corporation shall be required to indemnify,
    or
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advance expenses to, our directors in connection with a
    proceeding commenced by our directors only if the board of
    directors authorized the commencement of the proceeding.
Removal of Directors.
Our directors may be
    removed only for cause and only by a vote of the holders of a
    majority of the total voting power of the shares entitled to
    vote at an election of directors.
Board Vacancies.
Only the board of directors
    may fill vacancies on the board.
Delaware Law.
Section 203 of the Delaware
    General Corporation Law will prevent us from engaging in any
    "business combination" with any "interested
    stockholder" for a period of three years following the date
    that the stockholder became an interested stockholder, unless
    one of a number of statutory exceptions or exemptions applied.
    Section 203 defines an "interested stockholder"
    as an entity or person beneficially owning 15% or more of the
    outstanding voting stock of the corporation and any entity or
    person affiliated with or controlling or controlled by such an
    entity or person. The "business combinations" that
    Section 203 prohibits with an interested stockholder are
    the following transactions:
•
any merger or consolidation involving us and an interested
    stockholder;
•
subject to certain exceptions, any transaction that results in
    our issuance or transfer of any stock of our stock to an
    interested stockholder; or
•
any transaction involving us that has the effect of increasing
    the proportionate share of the stock of any class or series of
    the corporation beneficially owned by an interested stockholder.
Although Section 203 would not prevent the interested
    stockholder from transferring his shares, the limitations on
    business combinations contained in Section 203 would,
    absent board approval of the transfer, apply to any purchaser
    and could thus potentially limit the ability of the interested
    stockholder to sell his shares freely.
Certain
    Anti-Takeover Effects
The classification of our board of directors and the lack of
    cumulative voting will make it more difficult for our existing
    stockholders to replace our board of directors as well as for
    another party to obtain control of us by replacing our board of
    directors. Since our board of directors has the power to retain
    and discharge our officers, these provisions could also make it
    more difficult for existing stockholders or another party to
    change our management. In addition, the authorization of
    undesignated preferred stock makes it possible for our board of
    directors to issue preferred stock with voting or other rights
    or preferences that could impede the success of any attempt to
    change our control.
These provisions may have the effect of deterring hostile
    takeovers or delaying changes in our control or management.
    These provisions are intended to enhance the likelihood of
    continued stability in the composition of our board of directors
    and in the policies they implement, and to discourage certain
    types of transactions that may involve an actual or threatened
    change of our control. These provisions are designed to reduce
    our vulnerability to an unsolicited acquisition proposal. The
    provisions also are intended to discourage certain tactics that
    may be used in proxy fights. However, these provisions could
    have the effect of discouraging others from making tender offers
    for our shares and, as a consequence, they also may inhibit
    fluctuations in the market price of our shares that could result
    from actual or rumored takeover attempts. These provisions may
    also have the effect of preventing changes in our management.
Furthermore, following this offering, our board of directors may
    implement certain additional measures that would discourage a
    takeover of our company. These could include one or a
    combination of the following, among others:
•
adoption of a stockholder rights plan, commonly called a poison
    pill.
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•
amending our bylaws, or proposing that our stockholders to amend
    our certificate of incorporation or bylaws or adopt amendments
    to our certificate of incorporation, with respect to the
    following:
•
increasing the vote required by our stockholders to amend our
    certificate of incorporation or bylaws or to remove
    directors, or
•
increasing the vote required by our stockholders to consummate a
    business combination if our board of directors does not
    recommend it.
Our board of directors can amend our by-laws without approval of
    our stockholders. It can amend our certificate of incorporation
    to create the type of preferred stock that is used for a poison
    pill. It can also amend the terms of any preferred stock without
    the approval of holders of the common stock. Other amendments to
    our certificate of incorporation cannot be adopted unless our
    stockholders approve them. Our board of directors will not adopt
    or propose any amendment to our certificate of incorporation or
    our by-laws of the type described above unless it determines
    that the amendment is in the best interests of our stockholders.
These anti-takeover provisions may further permit our board of
    directors to choose not to entertain offers to purchase us, even
    offers that are at a substantial premium to the market price of
    our stock. Our stockholders may therefore be deprived of
    opportunities to profit from a sale of control.
After this offering, members of our senior management may enter
    into an agreement providing that they will vote their shares in
    accordance with the majority in interest of the total shares
    held by the parties to the agreement. The agreement may have
    other terms, such as a right of first refusal in the other
    parties to the agreement if any party desires to sell his or her
    shares of the company. The effect of this agreement may be to
    concentrate a certain measure of control of our company in a
    small group of executives.
Transfer
    Agent and Registrar
Our independent stock transfer agent and registrar for our
    common stock and warrants is
.
SHARES
    ELIGIBLE FOR FUTURE SALE
Before this offering, there has not been a public market for our
    common stock. As described below, only a limited number of
    shares outstanding before this offering will be available for
    sale immediately after the offering due to contractual and legal
    restrictions on resale. Nevertheless, future sales of
    substantial amounts of our common stock, including shares issued
    upon exercise of outstanding options, in the public market after
    the restrictions lapse, or the possibility of such sales, could
    cause the prevailing market price of our common stock to fall or
    impair our ability to raise equity capital in the future.
Upon completion of this offering, we will have
    outstanding           shares
    of our common stock, assuming the underwriters exercise their
    over-allotment option in full. This also assumes that there are
    no exercises of outstanding options, warrants or other rights to
    acquire our stock. If all of the warrants are exercised
    (excluding the representative's warrants described below),
    we will
    have           shares
    of common stock outstanding. All of the units sold in this
    offering, and eventually the underlying shares and warrants, as
    well as shares issued upon exercise of the warrants, will be
    freely tradable in the public market without restriction or
    further registration under the Securities Act, unless these
    securities are held by our affiliates, as that term is defined
    in Rule 144 under the Securities Act. Securities held or
    purchased by our affiliates may not be resold except pursuant to
    an effective registration statement or an exemption from
    registration, including the safe harbor under Rule 144 of
    the Securities Act described below.
After this offering, all of the shares of our common stock held
    by our existing stockholders will be "restricted
    securities," as that term is defined in Rule 144 under
    the Securities Act. Restricted securities may be sold in the
    public market only pursuant to an effective registration
    statement or an exemption from registration under Rule 144
    or 701 under the Securities Act. These rules are summarized
    below. Subject to the
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lock-up
agreements described below and the provisions of Rule 144
    and Rule 701, these restricted securities will be available
    for sale in the public market as follows:
Number of Shares
Date of Availability for Sale
Immediately upon completion of this offering
90 days after the date of this prospectus and various
    times thereafter
One year after the date of this prospectus and various times
    thereafter
Lock-Up
Agreements
In connection with this offering, our officers, directors, and
    greater than one percent stock and option holders, who together
    hold an aggregate of 3,428,955 shares of our common stock and
    options to purchase an additional 444,282 shares, have agreed,
    subject to limited exceptions, not to sell directly or
    indirectly or dispose of any shares of common stock or any
    securities convertible into or exchangeable or exercisable for
    shares of common stock for a period of one year after the date
    of this prospectus, and in specific circumstances, up to an
    additional 34 days, without the prior written consent of C
    K. Cooper & Company, Inc. For additional information,
    see "Underwriting."
Rule 144
In general, under Rule 144, beginning ninety days after the
    date of this prospectus, a person who is not our affiliate and
    has not been our affiliate at any time during the preceding
    three months will be entitled to sell any shares of our common
    stock that such person has held for at least six months,
    including the holding period of any prior owner other than one
    of our affiliates, without regard to volume limitations. Sales
    of our common stock by any such person would be subject to the
    availability of current public information about us if the
    shares to be sold were held by such person for less than one
    year.
In addition, under Rule 144, a person may sell immediately
    upon the completion of this offering, shares of our common stock
    acquired from us without regard to volume limitations or the
    availability of public information about us, if:
•
the person is not our affiliate and has not been our affiliate
    at any time during the preceding three months; and
•
the person has beneficially owned the shares to be sold for at
    least one year, including the holding period of any prior owner
    other than one of our affiliates.
Subject to any applicable lock-up agreements, beginning ninety
    days after the date of this prospectus, our affiliates who have
    beneficially owned shares of our common stock for at least six
    months, including the holding period of any prior owner other
    than another of our affiliates, would be entitled to sell within
    any three-month period those shares and any other shares they
    have acquired that are not restricted securities, provided that
    the aggregate number of shares sold does not exceed the greater
    of:
•
1% of the number of shares of our common stock then outstanding,
    which will equal
    approximately           shares
    immediately after this offering, assuming no exercise of the
    underwriters' over-allotment option and no exercise of the
    warrants being issued in connection with this offering; and
•
the average weekly trading volume in our common stock on the
    NYSE Amex during the four calendar weeks preceding the date of
    filing of a Notice of Proposed Sale of Securities Pursuant to
    Rule 144 with respect to the sale.
Sales under Rule 144 by our affiliates are also subject to
    provisions restricting how the shares can be sold, notice
    requirements and to the availability of current public
    information about us.
Representative's
    Warrants
In connection with this offering, we have agreed to issue to the
    representative of the underwriters warrants to purchase a total
    of          shares
    of our common stock at a price per share equal to 120% of the
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initial offering price of the units. The representative's
    warrants will be exercisable at any time beginning six months
    after the date of this prospectus until the fifth anniversary of
    the date of this prospectus. However, neither the
    representative's warrants nor the underlying shares may be
    sold, transferred, assigned, pledged or hypothecated, or be the
    subject of any hedging, short sale, derivative, put or call
    transaction that would result in the effective economic
    disposition of the securities by any person for a period of six
    months immediately following the date of effectiveness or
    commencement of sales of this offering, except to any member
    participating in the offering and the officers or partners
    thereof, and only if all securities so transferred remain
    subject to the six month
lock-up
restriction for the remainder of the
lock-up
period. The common stock issued to the representative upon
    exercise of these representative's warrants will be freely
    tradable.
Rule 701
Any employee, officer or director of our company, or consultant
    to our company who purchased shares under a written compensatory
    plan or contract may be entitled to sell them in reliance on
    Rule 701. Rule 701 permits affiliates to sell their
    Rule 701 shares under Rule 144 without complying
    with the holding period requirements of Rule 144.
    Rule 701 further provides that non-affiliates may sell
    these shares in reliance on Rule 144 without complying with
    the holding period, public information, volume limitation or
    notice provisions of Rule 144. All holders of
    Rule 701 shares are required to wait until ninety days
    after the date of this prospectus before selling those shares.
    However, 444,282 shares issuable upon the exercise of
    options issued under Rule 701 are subject to
lock-up
agreements described above and will only become eligible for
    sale when the one year
lock-up
agreements expire.
Registration
    of Shares Issuable Stock Option Plan
We intend to file a Form
S-8
registration statement under the Securities Act after the
    completion of this offering to register all 552,571 shares
    of common stock issuable under our 2005 Stock Option Plan. The
    registration statement will become effective immediately upon
    filing, and shares covered by the registration statement will
    thereupon be eligible for sale in the public market, subject to
    any
lock-up
agreements and Rule 144 limitations applicable to
    affiliates.
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UNDERWRITING
Subject to the terms and conditions described in an underwriting
    agreement between us and C. K. Cooper & Company, Inc.,
    as representative and book-running manager, we have agreed to
    sell to the underwriters, and the underwriters have severally
    agreed to purchase from us, the following number of units at the
    offering price less the underwriting discount set forth on the
    cover page of this prospectus.
Underwriter
Number of Units
C. K. Cooper & Company, Inc.
The underwriters have agreed to purchase all of the units sold
    under the underwriting agreement if any of the units are
    purchased, other than units covered by the over-allotment option
    described below. The underwriting agreement provides that the
    underwriters' obligation to purchase units depends on the
    satisfaction of the conditions contained in the underwriting
    agreement including:
•
the obligation to purchase all of the units offered hereby
    (other than those units covered by their option to purchase
    additional units as described below), if any of the units are
    purchased;
•
the representations and warranties made by us to the
    underwriters are true;
•
there is no material change in our business or the financial
    markets; and
•
we deliver customary closing documents to the underwriters.
We have granted the underwriters an option exercisable for
    30 days from the date of the underwriting agreement to
    purchase a total of up
    to          
    additional units at the public offering price less the
    underwriting discount. The underwriters may exercise this option
    solely to cover any over-allotments, if any, made in connection
    with this offering. To the extent the underwriters exercise this
    option in whole or in part, each will be obligated, subject to
    conditions contained in the underwriting agreement, to purchase
    a number of additional units approximately proportionate to that
    underwriter's initial commitment amount reflected in the
    above table.
The underwriters have advised us that they propose initially to
    offer the units to the public at the public offering price on
    the cover page of this prospectus and to dealers at that price
    less a concession not in excess of
    $      per unit. After the offering,
    the offering price and other selling terms may be changed.
The following table shows the per unit and total underwriting
    discounts and commissions to be paid to the underwriters by us.
    The information assumes either no exercise or full exercise by
    the underwriters of their over-allotment option.
Without Option
With Option
Per Unit
$
$
Total
$
$
The expenses of this offering that are payable by us, excluding
    the underwriting discount and commissions and related fees, are
    estimated to be approximately $     .
    We have agreed to reimburse the underwriters for their out of
    pocket expenses in connection with this offering, including
    their attorneys' fees. In addition, in October 2009, we
    paid C.K. Cooper & Company, Inc. an aggregate of
    $25,000 for advisory services rendered to us in preparation for
    this offering.
In connection with this offering, we have agreed to issue to
    C.K. Cooper & Company, Inc. warrants entitling it or
    its assigns, to purchase up to an aggregate of 10% of the total
    number of shares sold in this offering at a price equal to 120%
    of the public offering price per share. These warrants will be
    exercisable beginning six months after the date of this
    prospectus until the fifth anniversary of that date and will
    contain customary exercise provisions, representations and
    anti-dilution provisions. The warrants may be exercised for cash
    or on a cashless exercise basis. For the complete terms of the
    representative's warrants, you should refer to the form of
    representative warrant filed as an exhibit to the registration
    statement of which this prospectus is a part.
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The warrants to be issued to C.K. Cooper & Company are
    deemed compensation by the Financial Industry Regulatory
    Authority, Inc., or FINRA, and may not be sold, transferred,
    pledged, hypothecated or assigned or be the subject of any
    hedging, short sale, derivative, put or call transaction that
    would result in the effective economic disposition of the
    securities by any person for a period of
180-days
following the effective date of the offering pursuant to
    Rule 2710(g)(1) of the NASD Conduct Rules.
In addition, the underwriting agreement also grants C. K.
    Cooper & Company a right of first refusal to act as
    lead underwriter for any equity or debt offerings we contemplate
    during the period of 36 months from the closing of this
    offering.
We have engaged C. K. Cooper & Company, on a
    non-exclusive basis, as our agent for the solicitation of the
    exercise of the warrants. To the extent not inconsistent with
    the guidelines of FINRA and the rules and regulations of the
    SEC, we have agreed to pay C. K. Cooper & Company for
    bona fide services rendered a commission equal to 5% of the
    exercise price for each warrant exercised more than one year
    after the date of this prospectus if the exercise was solicited
    by C. K. Cooper & Company. No compensation will be
    paid to C. K. Cooper & Company upon the exercise of
    the warrants if:
•
the market price of the underlying shares of common stock is
    lower than the exercise price;
•
the holder of the warrants has not confirmed in writing that C.
    K. Cooper & Company solicited his, her or its exercise;
•
the warrants are held in a discretionary account, unless prior
    specific written approval for the exercise is received from the
    holder;
•
the warrants are exercised in an unsolicited transaction; or
•
the arrangement to pay the commission is not disclosed in the
    prospectus provided to warrant holders at the time of exercise.
We have agreed to indemnify the underwriters against certain
    liabilities, including liabilities under the Securities Act, or
    to contribute to payments the underwriters may be required to
    make in respect of those liabilities.
We, all of our directors and executive officers and
    substantially all of the holders of our outstanding stock have
    agreed that, without the prior written consent of C. K.
    Cooper & Company, we will not directly or indirectly,
    (1) offer for sale, sell, pledge, or otherwise dispose of
    (or enter into any transaction or device that is designed to, or
    could be expected to, result in the disposition by any person at
    any time in the future of) any shares of common stock
    (including, without limitation, shares of common stock that may
    be deemed to be beneficially owned by us or them in accordance
    with the rules and regulations of the SEC and shares of common
    stock that may be issued upon exercise of any options or
    warrants) or securities convertible into or exercisable or
    exchangeable for common stock, (2) enter into any swap or
    other derivatives transaction that transfers to another, in
    whole or in part, any of the economic consequences of ownership
    of the common stock, (3) make any demand for or exercise
    any right or file or cause to be filed a registration statement,
    including any amendments thereto, with respect to the
    registration of any shares of common stock or securities
    convertible, exercisable or exchangeable into common stock or
    any of our other securities, or (4) publicly disclose the
    intention to do any of the foregoing for a period of one year
    after the date of this prospectus.
The one year restricted period described in the preceding
    paragraph will be extended if:
•
during the last 17 days of the one year restricted period
    we issue an earnings release or material news or a material
    event relating to us occurs; or
•
prior to the expiration of the one year restricted period, we
    announce that we will release earnings results during the
16-day
period beginning on the last day of the one year period, in
    which case the restrictions described in the preceding paragraph
    will continue to apply until the expiration of the
18-day
period beginning on the issuance of the earnings release or the
    announcement of the material news or occurrence of a material
    event, unless such extension is waived in writing by C. K.
    Cooper & Company.
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C. K. Cooper & Company, in its sole discretion,
    may release the common stock and other securities subject to the
lock-up
agreements described above in whole or in part at any time with
    or without notice. When determining whether or not to release
    common stock and other securities from
lock-up
agreements, C. K. Cooper & Company will consider,
    among other factors, the holder's reasons for requesting
    the release, the number of shares of common stock and other
    securities for which the release is being requested and market
    conditions at the time.
We intend to apply to list the securities we are offering in
    this prospectus on the NYSE Amex as follows:
Security
Symbol
Units
PBFCU
Common Stock
PBFC
Warrants
PBFCW
A prospectus in electronic format may be made available on the
    Internet sites or through other online services maintained by
    one or more of the underwriters, or by their affiliates. Other
    than any prospectus made available in electronic format in this
    manner, the information on any web site containing the
    prospectus is not part of this prospectus or the registration
    statement of which this prospectus forms a part, has not been
    approved or endorsed by us or any underwriter in such capacity
    and should not be relied on by prospective investors.
In connection with this offering, some participants in the
    offering may purchase and sell our securities in the open
    market. These transactions may include short sales, syndicate
    covering transactions and stabilizing transactions. Short sales
    involve sales by the underwriters of securities in excess of the
    number of securities required to be purchased by the
    underwriters in the offering, which creates a syndicate short
    position. "Covered" short sales are sales of
    securities made in an amount up to the number of securities
    represented by the underwriters' over-allotment option.
    Transactions to close out the covered syndicate short position
    involve either purchases of securities in the open market after
    the distribution has been completed or the exercise of the
    over-allotment option. In determining the source of securities
    to close out the covered syndicate short position, the
    underwriters will consider, among other things, the price of
    securities available for purchase in the open market as compared
    to the price at which they may purchase securities through the
    over-allotment option. Stabilizing transactions consist of bids
    for or purchases of securities in the open market while the
    offering is in progress.
The underwriters also may impose a penalty bid. Penalty bids
    permit the underwriters to reclaim a selling concession from an
    underwriter or syndicate member when the underwriters repurchase
    shares originally sold by that underwriter or syndicate member
    in order to cover syndicate short positions or make stabilizing
    purchases.
Any of these activities may have the effect of raising or
    maintaining the market price of our securities or preventing or
    retarding a decline in the market price of our securities. As a
    result, the price of our securities may be higher than the price
    that might otherwise exist in the open market. The underwriters
    may conduct these transactions on the NYSE Amex or otherwise. If
    the underwriters commence any of these transactions, they may
    discontinue them at any time.
The underwriters may in the future perform investment banking
    and advisory services for us from time to time for which it may
    in the future receive customary fees and expenses.
INTERESTS
    OF CERTAIN PERSONS IN THE OFFERING
If this offering is not successful, we may not have the funds
    necessary to pay the expenses of the offering in the immediate
    future, including fees of our legal counsel, Fishman Haygood
    Phelps Walmsley Willis & Swanson, L.L.P., and fees of
    our independent registered public accounting firm,
    Postlethwaite & Netterville, APAC.
74
Table of Contents
LEGAL
    MATTERS
Fishman Haygood Phelps Walmsley Willis & Swanson,
    L.L.P., New Orleans, Louisiana and Richards, Layton &
    Finger, P.A., Wilmington, Delaware, will pass upon certain legal
    matters for us in connection with the offered securities.
    Certain legal matters will be passed upon for C. K.
    Cooper & Company by K&L Gates LLP, Irvine,
    California.
EXPERTS
The consolidated financial statements of Planet Beach
    Franchising Corporation and subsidiaries as of December 31,
    2009 and 2008, and for each of the years in the three-year
    period ended December 31, 2009, have been included herein
    and in the registration statement in reliance upon the reports
    of Postlethwaite & Netterville, APAC, independent
    registered public accounting firm appearing elsewhere herein and
    in the registration statement, upon the authority of said firm
    as experts in auditing and accounting.
WHERE YOU
    CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on
Form S-1
under the Securities Act with respect to the securities we are
    offering in this prospectus. This prospectus does not contain
    all of the information set forth in the registration statement
    or the exhibits and schedules filed with it. You should refer to
    the registration statement and its exhibits and schedules for
    additional information. When we make references in this
    prospectus to any of our agreements or other documents, the
    references are not necessarily complete and you should refer to
    the exhibits filed with the registration statement for copies of
    the actual agreements or other documents.
You can read and copy the registration statement and the
    exhibits at prescribed rates at the SEC's Public Reference
    Room at 100 F Street, N.E., Washington, D.C.
    20549, on official business days during the hours of
    10 a.m. to 3 p.m. You may obtain information on
    the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.
Our SEC filings, including the registration statement and the
    exhibits filed with the registration statement, are also
    available from the SEC's website at
www.sec.gov
,
    which contains reports, proxy and information statements and
    other information regarding issuers that file electronically
    with the SEC.
We will provide a copy of our annual report to stockholders,
    including our audited financial statements, at no charge upon
    written request sent to Planet Beach Franchising Corporation,
    5145 Taravella Road, Marrero, Louisiana, 70072. Our address on
    the World Wide Web is
www.planetbeach.com
. The
    information on our website is not a part of this prospectus.
75
Table of Contents
INDEX TO
    FINANCIAL STATEMENTS
The financial statements listed below do not give effect to the
    1 for 3.5 reverse stock split we effected on March 18, 2010.
Page
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public
    Accounting Firm
F-2
Consolidated balance sheets at December 31, 2009
    and 2008
F-3
For each of the three years in the period ended December 31,
    2009:
Consolidated statements of operations
F-4
Consolidated statements of stockholders'
    equity (deficit)
F-5
Consolidated statements of cash flows
F-6
Notes to consolidated financial statements
F-7
F-1
Table of Contents
REPORT
    OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Planet Beach Franchising Corporation and Subsidiaries
Marrero, Louisiana:
We have audited the accompanying consolidated balance sheets of
    Planet Beach Franchising Corporation and Subsidiaries (the
    Company) as of December 31, 2009 and 2008, and the related
    consolidated statements of operations, shareholders'
    equity, and cash flows for each of the years in the three-year
    period ended December 31, 2009. These financial statements
    are the responsibility of the Company's management. Our
    responsibility is to express an opinion on these financial
    statements based on our audits.
We conducted our audits in accordance with the standards of the
    Public Company Accounting Oversight Board (United States). Those
    standards require that we plan and perform the audit to obtain
    reasonable assurance about whether the financial statements are
    free of material misstatement. The company is not required to
    have, nor were we engaged to perform, an audit of its internal
    control over financial reporting. Our audit included
    consideration of internal control over financial reporting as a
    basis for designing audit procedures that are appropriate in the
    circumstances, but not for the purpose of expressing an opinion
    on the effectiveness of the company's internal control over
    financial reporting. Accordingly, we express no such opinion. An
    audit also includes examining, on a test basis, evidence
    supporting the amounts and disclosures in the financial
    statements, assessing the accounting principles used and
    significant estimates made by management, as well as evaluating
    the overall financial statement presentation. We believe that
    our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
    present fairly, in all material respects, the consolidated
    financial position of the Company as of December 31, 2009
    and 2008, and the consolidated results of their operations and
    their cash flows for each of the years in the three-year period
    ended December 31, 2009, in conformity with
    U.S. generally accepted accounting principles.
/s/  POSTLETHWAITE &
    NETTERVILLE, APAC
Metairie, Louisiana
April 1, 2010
F-2
Table of Contents
PLANET
    BEACH FRANCHISING CORPORATION AND SUBSIDIARIES
CONSOLIDATED
    BALANCE SHEETS
DECEMBER
    31, 2009 AND 2008
2009
2008
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
53,810
$
60,068
Investments
—
288,614
Accounts receivable, net of allowance for doubtful accounts of
    $733,518
and $606,867, respectively
1,032,632
1,346,784
Due from employees
42,064
79,398
Inventory
479,264
727,116
Notes receivable
228,569
354,384
Prepaid expenses and other current assets
89,657
87,813
Total current assets
1,925,996
2,944,177
PROPERTY, PLANT AND EQUIPMENT, NET
2,188,732
2,171,045
OTHER ASSETS
Notes receivable, net of allowance for doubtful accounts of
    $518,805
and $279,682, respectively
707,365
759,657
Other long-term assets
111,519
91,118
Total other assets
818,884
850,775
TOTAL ASSETS
$
4,933,612
$
5,965,997
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Current maturities of notes payable
$
448,742
$
452,063
Line of credit
—
192,561
Accounts payable
1,402,437
2,090,655
Customers' deposits
264,633
142,671
Accrued liabilities
459,951
448,964
Deferred revenue
55,500
234,000
Total current liabilities
2,631,263
3,560,914
LONG-TERM LIABILITIES
Notes payable
2,773,919
2,670,179
Accrued liabilities
620,224
448,261
Deferred revenue
213,181
220,682
Total long-term liabilities
3,607,324
3,339,122
Total liabilities
6,238,587
6,900,036
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $0.0001 par value;
Shares authorized: 100,000,000; none issued
—
—
Common stock, $0.0001 par value;
Shares authorized: 100,000,000;
Shares issued: 13,428,139;
Shares outstanding: 12,998,739
1,343
1,343
Additional paid-in capital
348,802
230,869
Retained earnings (deficit)
(1,480,120
)
(771,728
)
Accumulated other comprehensive income (loss)
—
(219,523
)
Treasury stock, at cost
(175,000
)
(175,000
)
Total stockholders' equity (deficit)
(1,304,975
)
(934,039
)
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
$
4,933,612
$
5,965,997
The accompanying notes are an integral part of these statements.
F-3
Table of Contents
PLANET
    BEACH FRANCHISING CORPORATION AND SUBSIDIARIES
CONSOLIDATED
    STATEMENTS OF OPERATIONS
YEARS
    ENDED DECEMBER 31, 2009, 2008, AND 2007
2009
2008
2007
OPERATING REVENUES
Sales of spa equipment and products
$
4,919,466
$
14,705,685
$
17,585,785
Franchise fees
1,257,067
3,067,123
2,745,360
Royalties and related fees
6,883,254
6,833,193
5,584,958
Other
209,333
399,831
539,917
Total operating revenues
13,269,120
25,005,832
26,456,020
OPERATING EXPENSES
Cost of goods sold
3,692,991
11,131,834
13,369,056
Operating expenses
3,951,089
5,630,367
4,632,521
Salaries and bonuses
4,279,981
6,790,704
6,633,646
Commissions
1,579,631
2,013,114
2,012,692
Total operating expenses
13,503,692
25,566,019
26,647,915
LOSS FROM OPERATIONS
(234,572
)
(560,187
)
(191,895
)
OTHER INCOME (EXPENSE)
Interest and other income
34,871
12,818
12,595
Interest expense
(256,172
)
(218,575
)
(174,204
)
Realized gain (loss) on investments
(252,519
)
7,697
23,751
Total other income (expense)
(473,820
)
(198,060
)
(137,858
)
LOSS BEFORE PROVISION
FOR INCOME TAXES
(708,392
)
(758,247
)
(329,753
)
Benefit for income tax
—
—
(4,651
)
NET LOSS
$
(708,392
)
$
(758,247
)
$
(325,102
)
LOSS PER COMMON SHARE
BASIC AND DILUTED
$
(0.05
)
$
(0.06
)
$
(0.03
)
WEIGHTED AVERAGE
SHARES OUTSTANDING
BASIC AND DILUTED
12,998,739
12,971,046
12,961,815
The accompanying notes are an integral part of these statements.
F-4
Table of Contents
PLANET
    BEACH FRANCHISING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
    (DEFICIT)
YEARS ENDED DECEMBER 31, 2009, 2008, AND 2007
Retained
Other
Common Stock
Paid-In
Earnings
Comprehensive
Treasury Stock
Shares
Amount
Capital
(Deficit)
Income (Loss)
Shares
Amount
Total
BALANCE, January 1, 2007
12,381,215
$
1,238
$
141,302
$
319,676
$
37,461
415,000
$
(157,500
)
$
342,177
Other comprehensive income:
Net loss
—
—
—
(325,102
)
—
—
—
(325,102
)
Net unrealized loss on investments
—
—
—
—
(34,068
)
—
—
(34,068
)
Foreign currency translation adjustment, net of tax expense
—
—
—
—
1,496
—
—
1,496
Total comprehensive loss
(357,674
)
Stock issuance
1,010,000
101
909
—
—
—
—
1,010
Stock options compensation
16,970
16,970
Dividends paid
—
—
—
(8,055
)
—
—
—
(8,055
)
Purchase of treasury stock
—
—
—
—
—
14,400
(17,500
)
(17,500
)
BALANCE, December 31, 2007
13,391,215
1,339
159,181
(13,481
)
4,889
429,400
(175,000
)
(23,072
)
Other comprehensive income:
Net loss
—
—
—
(758,247
)
—
—
—
(758,247
)
Net unrealized loss on investments
—
—
—
—
(223,606
)
—
—
(223,606
)
Foreign currency translation adjustment, net of tax benefit
—
—
—
—
(806
)
—
—
(806
)
Total comprehensive loss
(982,659
)
Stock options compensation
34,769
34,769
Stock issuance
36,924
4
36,919
—
—
—
—
36,923
BALANCE, December 31, 2008
13,428,139
1,343
230,869
(771,728
)
(219,523
)
429,400
(175,000
)
(934,039
)
Other comprehensive income:
Net loss
—
—
—
(708,392
)
—
—
—
(708,392
)
Net realized loss on investments
—
—
—
—
219,822
—
—
219,822
Foreign currency translation adjustment, net of tax benefit
—
—
—
—
(299
)
—
—
(299
)
Total comprehensive loss
(488,869
)
Stock options compensation
—
—
117,933
—
—
—
—
117,933
BALANCE, December 31, 2009
13,428,139
$
1,343
$
348,802
$
(1,480,120
)
$
—
429,400
$
(175,000
)
$
(1,304,975
)
The accompanying notes are an integral part of these statements.
F-5
Table of Contents
PLANET
    BEACH FRANCHISING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2009, 2008, AND 2007
2009
2008
2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
$
(708,392
)
$
(758,247
)
$
(325,102
)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation expense
198,399
220,372
203,951
Bad debt expense and inventory allowance
590,124
505,652
129,430
Stock options compensation expense
117,933
34,769
16,970
Realized loss (gain) on investments
252,519
(7,697
)
(23,751
)
Changes in operating assets and liabilities:
Deferred benefit expense
—
—
(4,651
)
National advertising deposits
—
(386,356
)
158,832
Accounts receivable
(79,512
)
(318,999
)
(130,529
)
Other current assets
11,489
(90,241
)
(23,339
)
Inventory
164,852
549,585
(180,194
)
Accounts payable
(569,761
)
1,411,076
200,038
Customers' deposits
121,962
(922,351
)
108,370
Deferred revenue
(186,002
)
(500
)
(24,442
)
Accrued liabilities
152,882
27,842
(47,228
)
Net cash provided by operating activities
66,493
264,905
58,355
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for acquisition of property, plant and equipment
(132,845
)
(148,115
)
(287,307
)
Decrease in investments
255,618
7,697
68,375
Decrease (increase) in notes receivable, net
17,648
(717,483
)
48,443
Net cash provided by (used in) investing activities
140,421
(857,901
)
(170,489
)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in line of credit
(192,561
)
(51,346
)
67,659
Proceeds from long-term debt
363,345
59,476
498,978
Payments on long-term debt
(383,956
)
(300,999
)
(133,617
)
Payments on capital lease
—
—
(29,028
)
Common stock issuance
—
36,923
1,010
Payment of dividends
—
—
(8,055
)
Purchase of treasury stock
—
—
(17,500
)
Net cash provided by (used in) financing activities
(213,172
)
(255,946
)
379,447
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS
(6,258
)
(848,942
)
267,313
CASH AND CASH EQUIVALENTS — BEGINNING OF
    YEAR
60,068
909,010
641,697
CASH AND CASH EQUIVALENTS — END OF YEAR
$
53,810
$
60,068
$
909,010
SUPPLEMENTAL DISCLOSURE OF CASH ACTIVITIES
Cash paid for interest
$
215,436
$
213,303
$
167,907
Cash paid for income taxes
$
8,497
$
5,980
$
46,500
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES
Non-cash
property, plant & equipment acquired
$
254,698
$
—
$
—
Area developer fee financed
$
310,608
$
377,000
$
—
The accompanying notes are an integral part of these statements.
F-6
Table of Contents
PLANET
    BEACH FRANCHISING CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
Business
    Operations
Organization
Planet Beach Franchising Corporation (the Company) was initially
    incorporated on September 26, 1996, under the laws of the
    State of Louisiana. On March 25, 2008, the Company
    reincorporated under the laws of the State of Nevada. In
    conjunction with the reincorporation, authorized common stock
    was increased from 15 million to 100 million shares,
    and the par value decreased from $0.001 to $0.0001 per common
    share. In addition, 10 million shares of preferred stock
    having a par value of $0.0001 per share were authorized for
    issuance. Currently, the Company is engaged in the business of
    selling Planet Beach Contempo Spa franchises throughout the
    United States, Canada, Ireland, South Africa, and Australia. In
    addition, the Company has locations under development in Egypt,
    Saudi Arabia and Kuwait. The Company also sells spa equipment
    and products to new and existing franchisees.
The Company has two wholly-owned subsidiaries, Planet Beach Real
    Estate, LLC (PBRE) and Planet Beach International, LLC (PBI).
    PBRE has been largely inactive since 2005. PBI was established
    to recruit master franchisors in international locations under
    long-term contractual arrangements; whereby, the master
    franchisor would be given the right to sell Planet Beach
    Contempo Spa Franchises within the designed international
    region. Master franchisors would pay an initial master franchise
    fee upon entering the agreement. The master franchisor would
    also remit to the Company a percentage of the license fee,
    product and equipment sales, and royalties collected from the
    international franchise locations.
The Company has incurred losses of approximately $708,000,
    $758,000 and $325,000 for its years ended December 31,
    2009, 2008 and 2007, respectively. The losses have occurred due
    to the global economic downturn that began in 2007. The Company
    and the franchisees have been impacted by an impaired ability to
    obtain credit on reasonable terms or at all. Decreased access to
    credit for franchisees has impaired their ability to meet their
    obligations when due and led to franchisee bankruptcies. A
    continued recession will have a negative impact on the
    Company's financial position.
Management believes that the Company will continue to operate as
    a going concern by reducing operating and salary costs and
    improving operating profitability, controlling inventory levels,
    working with vendors and other creditors to accept more
    favorable payment terms and through seeking additional capital
    for the Company's operations.
2.
Summary
    of Significant Accounting Policies
Basis
    of Consolidation
The accompanying consolidated financial statements include the
    accounts of the Company and its subsidiaries. All significant
    intercompany balances and transactions have been eliminated.
Use of
    Estimates
The preparation of financial statements in conformity with
    accounting principles generally accepted in the United States of
    America requires management to make estimates and assumptions
    that affect certain reported amounts and disclosures.
    Accordingly, actual results could differ from those estimates.
Cash
    and Cash Equivalents
Cash and cash equivalents consist of cash in banks and cash held
    in escrow accounts. The Company considers all highly liquid
    investments with an original maturity of three months or less to
    be cash equivalents.
F-7
Table of Contents
PLANET
    BEACH FRANCHISING CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
Certain states require the initial franchise fee be deposited in
    escrow until the franchisee commences business. Once the
    location commences business, the state will release the funds.
    Until funds are released, the revenue for the franchise sale is
    deferred. At December 31, 2009 and 2008, funds held in
    escrow totaled $30,020 and $0, respectively.
Accounts
    Receivable
Accounts receivable consist primarily of amounts due for
    franchise royalties and product sales, which are carried at
    original invoice amount less an estimate made for doubtful
    receivables based on a review of all outstanding amounts.
Management determines the allowance for doubtful accounts by
    identifying overdue accounts and by reserving a percentage of
    the account's outstanding balance as uncollectible based on
    historical experience with collections in general or based on
    the account's specific circumstance. Accounts receivables
    are written off when deemed uncollectible. Recoveries of
    accounts receivables previously written off are recorded when
    received.
Inventory
The Company's inventory consists of spa and tanning lotions
    and promotional clothing. Inventory is valued at the lower of
    cost or market, computed on the
first-in,
first-out basis.
Investments
At December 31, 2008 investments consist primarily of
    mutual funds held at a national brokerage firm, are classified
    as
available-for-sale,
and carried at fair market value, unrealized gains and losses,
    net of tax, are included in the determination of comprehensive
    income (loss) and reported in shareholders' equity
    (deficit).
Property,
    Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation
    on plant and equipment is calculated using the straight line
    method over the estimated useful lives of the related assets.
Maintenance and repairs are charged to expenses as incurred.
    Improvements and renewals are capitalized and depreciated over
    the remaining estimated useful life. When property, plant, and
    equipment are sold or otherwise disposed of, the asset account
    and related accumulated depreciation are relieved, and any gain
    or loss is included in income.
The useful lives of property, plant, and equipment for purposes
    of computing depreciation are:
Buildings and leasehold improvements
7 – 39 Years
Spa equipment
7 Years
Computer equipment
3 – 5 Years
Furniture, fixtures, and equipment
3 – 7 Years
Software
5 Years
Long-Lived
    Assets
Long-lived assets, such as property, plant, and equipment, and
    purchased intangible assets subject to amortization, are
    reviewed for impairment whenever events or changes in
    circumstances indicate that the carrying amount of an asset may
    not be recoverable. If circumstances require a long-lived asset
    or asset group be tested for possible impairment, the Company
    first compares undiscounted cash flows expected to be generated
    by that asset or asset group to its carrying value. If the
    carrying value of the long-lived asset or
F-8
Table of Contents
PLANET
    BEACH FRANCHISING CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
asset group is not recoverable on an undiscounted cash flow
    basis, an impairment is recognized to the extent that the
    carrying value exceeds its fair value. Fair value is determined
    through various valuation techniques including discounted cash
    flow models, quoted market values and third-party independent
    appraisals, as considered necessary.
Fair
    Value of Financial Instruments
For purposes of financial reporting, management has determined
    that the fair value of financial instruments including cash and
    cash equivalents, accounts and notes receivable, accounts
    payable, accrued liabilities and notes payable, approximate the
    carrying value.
Notes
    Receivable
Notes receivable consists principally of area developer fees,
    equipment vendor receivables, and spa purchase fees financed by
    the Company. The allowance for doubtful accounts is the
    Company's best estimate of the amount of credit losses in
    the Company's existing notes. The allowance is determined
    on an individual note basis upon review of any note that has a
    payment past due for over 60 days. A note is considered
    impaired if it is probable that the Company will not collect all
    principal and interest contractually due. The impairment is
    measured based on the present value of expected future cash
    flows discounted at the note's effective interest rate.
The Company does not accrue interest when a note is considered
    impaired. When ultimate collectability of the principal balance
    if the impaired note is in doubt, all cash receipts on impaired
    notes are applied to reduce the principal amount of such notes
    until the principal has been recovered and are recognized as
    interest income thereafter. Impairment losses are charged
    against the allowance and increases in the allowance are charged
    to bad debt expense. Notes are written off against the allowance
    when all possible means of collection have been exhausted and
    the potential for recovery is considered remote.
The notes have interest rates ranging from non-interest bearing
    to 7.0 percent and will mature upon sale of related
    franchises, or in accordance with scheduled maturities through
    September 2016.
Other
    long-term assets
Other long-term assets primarily consist of cost incurred in
    anticipation of an initial public offering of the Company's
    common stock, trademarks related to the Company's business
    and deposits.
Customers'
    Deposits
Customers' deposits represent advances from franchisees for
    the purchase of spa and tanning equipment. Equipment orders are
    normally shipped within 2-4 weeks of receipt of funds.
    Advance payment is required for all equipment purchases.
National
    Advertising and Brand Development
The Company collects National Advertising and Brand development
    royalty from its franchisees. Franchises that were established
    before April 1, 2008 are required to contribute 1% of gross
    sales to the National Advertising Fund as a royalty for the
    development and distribution of national marketing efforts for
    the benefit of all franchisees within the Planet Beach system.
    The Company carries forward national advertising royalties that
    are not spent in the fiscal year collected to the following
    year, and records them as a deposit on the consolidated balance
    sheet. At December 31, 2009 and 2008, there were no carry
    forward deposits. The Company recognizes national advertising
    expenditures in the consolidated statements of operations as
    incurred.
F-9
Table of Contents
PLANET
    BEACH FRANCHISING CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
Beginning April 1, 2008, franchisees entering the system
    must contribute 2% of gross sales for brand development. The
    Company has no obligation to carry forward any unspent brand
    development royalties for these franchisees to the following
    year. The Company recognizes brand development royalties in our
    consolidated statements of income in full as we accrue them,
    along with the brand development expenses.
Revenue
    Recognition
The Company has entered into franchise agreements that grant
    franchisees the right to operate individual Planet Beach
    Contempo Spas in return for an initial franchise fee and ongoing
    development fees (royalties). In addition, the Company has
    entered into area developer agreements, including international
    master franchisor agreements, which grant area developers the
    right to sell individual Planet Beach Contempo Spas in
    designated territories.
The Company recognizes revenue from individual franchise sales
    when all material services or conditions relating to the sale
    have been substantially performed or satisfied by the Company.
Area developer fees, which include international master
    franchise fees, are recognized as revenue on the cash basis
    until 50% of the purchase price is collected; the uncollected
    purchase price is deferred. All payments received for these area
    agreements are non-refundable. The Company estimates that once
    50% of the purchase price has been collected, and no further
    significant obligations remain, it is probable that the
    remaining area development fee will be collectible. Therefore,
    the Company fully recognizes area development fees once 50% of
    the purchase price is collected.
Most of these area agreements have promissory notes structured
    requiring payment of at least 50% of the purchase price within
    12 months of agreement execution. The remaining purchase
    price will normally be collected over 3-6 years amortized
    monthly with principle and interest payments.
All payments received for these area agreements are
    non-refundable.
The Company accrues royalties based upon the contractual royalty
    rate, currently 6% of total franchise revenue, as defined in the
    respective franchise agreements. Royalties are recorded as
    revenue when the related franchise revenue is reported to the
    Company. Sales of spa equipment and products are recognized as
    revenue, when the items are shipped collection is probable, and
    no further significant obligations remain.
Advertising
    and Marketing Costs
The Company expenses advertising and marketing costs as
    incurred. Advertising and marketing expense incurred by the
    Company during 2009, 2008 and 2007 amounted to $63,179,
    $306,422, and $342,832, respectively.
Shipping
    Expense
The Company provides free shipping for product orders to
    customers ordering minimum amounts. Shipping expense is included
    with operating expenses on the consolidated statement of
    operations and totaled $209,482, $337,525, and $293,833 for the
    years ended December 31, 2009, 2008 and 2007, respectively.
Foreign
    Currency Translation
Foreign currency translation relates to the differences from
    historical exchange rates and are reflected in
    Shareholders' Equity (Deficit) as part of accumulated other
    comprehensive income (loss). These adjustments were primarily
    related to a few Canadian transactions.
F-10
Table of Contents
PLANET
    BEACH FRANCHISING CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
Income
    Tax
The Company accounts for income taxes under the liability
    method. Deferred tax assets and liabilities are recognized for
    the future tax consequences attributable to differences between
    the financial statement carrying amounts of existing assets and
    liabilities and their respective tax bases and operating loss
    and tax credit carryforwards. Deferred tax assets and
    liabilities are measured using enacted tax rates expected to
    apply to taxable income in the years in which those temporary
    differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in
    tax rates is recognized in income in the period that includes
    the enactment date. We include any estimated interest and
    penalties on tax related matters in income taxes payable.
    Valuation allowances are established when necessary to reduce
    net deferred income tax assets to the amount expected to be
    realized. (See Note 6)
Effective January 1, 2009, the Company recognized the
    effect of income tax positions only if those positions are more
    likely than not being sustained. Recognized income tax positions
    are measured at the largest amount that is greater than 50%
    likely of being realized. Changes in recognition or measurement
    are reflected in the period in which the change in judgment
    occurs. Prior to the adoption of ASC 740-10 Income Tax
    Uncertainties, the Company recognized the effect of income tax
    positions only if such positions were probable of being
    sustained. The effect of the adoption of this standard was not
    material.
The Company records interest related to unrecognized tax
    benefits in interest expense and penalties in selling, general,
    and administrative expenses.
Stock-Based
    Compensation
The Company accounts for its stock-based compensation using the
    modified prospective adjustment method of measuring share based
    payments (see Note 7).
Earnings
    (loss) per Share
Basic earnings (loss) per share is computed by dividing income
    (loss) available to common shareholders by the weighted average
    number of common shares outstanding during the period. Diluted
    earnings per share is computed in the same manner as basic
    earnings per share except that the denominator is increased to
    include the number of additional common shares that could have
    been outstanding assuming the exercise of stock options and the
    potential shares that would have a dilutive effect on earnings
    per share.
Stock options of approximately 1,794,000, 1,864,000 and
    521,000 shares were excluded in the computation of diluted
    earnings per share for the years ended December 31, 2009,
    2008 and 2007, respectively, as the effect would have been
    anti-dilutive due to the loss recorded for the years then ended.
Effect
    of New Accounting Pronouncements
In June 2009, the FASB issued authoritative guidance for the
    FASB accounting standards codification (Codification) and the
    hierarchy of generally accepted accounting principles
    (U.S. GAAP). The guidance establishes the Codification to
    become the source of authoritative U.S. GAAP recognized by
    the FASB to be applied by nongovernmental entities. Rules and
    interpretive releases of the Securities and Exchange Commission
    (SEC) under authority of federal securities laws are also
    sources of authoritative U.S. GAAP for SEC registrants. The
    guidance and the Codification are effective for financial
    statements issued for interim and annual periods ending after
    September 15, 2009. The Company adopted the provisions of
    the guidance, as required, and determined that the impact to the
    Company's financial condition or results of operations was
    immaterial.
F-11
Table of Contents
PLANET
    BEACH FRANCHISING CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
In June 2009, the FASB issued new accounting guidance which
    requires additional information regarding transfers of financial
    assets, including securitization transactions, and where
    companies have continuing exposure to the risks related to
    transferred financial assets. The guidance eliminates the
    concept of a "qualifying special-purpose entity,"
    changes the requirements for derecognizing financial assets, and
    requires additional disclosures. The guidance will be effective
    for the Company on January 1, 2010. The Company is
    currently evaluating the impact that the guidance will have on
    its financial condition and results of operations.
In June 2009, the FASB issued new accounting guidance which
    modifies how a company determines when an entity that is
    insufficiently capitalized or is not controlled through voting
    (or similar rights) should be consolidated. The guidance
    clarifies that the determination of whether a company is
    required to consolidate an entity is based on, among other
    things, an entity's purpose and design and a company's
    ability to direct the activities of the entity that most
    significantly impact the entity's economic performance. The
    guidance requires an ongoing reassessment of whether a company
    is the primary beneficiary of a variable interest entity. The
    guidance also requires additional disclosures about a
    company's involvement in variable interest entities and any
    significant changes in risk exposure due to that involvement.
    The guidance will be effective for the Company on
    January 1, 2010. The Company is currently evaluating the
    impact that the guidance will have on its financial condition
    and results of operations.
The FASB issued an update that all entities are required to make
    disclosures about recurring and nonrecurring fair value
    measurements under Fair Value Measurements. The guidance
    requires certain new disclosures and clarifies two existing
    disclosure requirements. The new disclosures and clarifications
    of existing disclosures are effective for interim and annual
    reporting periods beginning after December 15, 2009, except
    for the disclosures about purchases, sales, issuances, and
    settlements in the roll forward of activity in Level 3 fair
    value measurements. Those disclosures are effective for fiscal
    years beginning after December 15, 2010, and for interim
    periods within those fiscal years.
The Company does not believe that any other recently issued, but
    not yet effective, accounting standards will have a significant
    effect on its consolidated financial condition or results of
    operations.
Reclassifications
Certain prior year amounts have been reclassified to conform to
    the current year's presentation.
3.
Property,
    Plant and Equipment
Property, plant and equipment consist of the following:
2009
2008
Land
$
210,000
$
210,000
Building and leasehold improvements
1,706,015
1,556,015
Spa equipment
516,794
384,133
Computer equipment
623,391
619,832
Furniture, fixtures and equipment
164,042
162,719
Software
554,560
626,017
3,774,802
3,558,716
Less: accumulated depreciation
(1,586,070
)
(1,387,671
)
Property, plant and equipment, net
$
2,188,732
$
2,171,045
F-12
Table of Contents
PLANET
    BEACH FRANCHISING CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
Depreciation expense associated with property, plant and
    equipment charged to operations during 2009, 2008 and 2007
    totaled $198,399, $220,372, and $203,951 respectively.
    Substantially all of the Company's building and building
    improvements are pledged as collateral for various loans of the
    Company. (See Note 5)
One of the Company's buildings is subject to a lien filed
    by of $30,361 for unpaid taxes.
4.
Line
    of Credit
In 2006, the Company obtained a portfolio credit line which is
    held by the Company's investment broker. The Company had
    outstanding balances on lines of credit of $0 and $192,561 at
    December 31, 2009 and 2008, respectively, secured by the
    Company's investments which are held with the
    Company's investment broker. Interest is paid monthly at
    rates ranging from 8.00% to 3.25% for 2008; and 8.50% to 10.50%
    for 2007. Total amounts available on lines of credit at
    December 31, 2009 and 2008 were $0 and $9,469,
    respectively. The line of credit was terminated during 2009 as
    the related investment portfolio was liquidated.
F-13
Table of Contents
PLANET
    BEACH FRANCHISING CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
5.
Long-Term
    Debt
The following is a summary of the Company's long-term debt
    as of December 31:
2009
2008
Note Payable — Company, payable in monthly
    installments of $6,837, including interest of 6.54%, through
    March 2027, secured by building; guaranteed by certain Company
    officers and shareholders.
$
840,008
$
866,108
Note Payable — Company, payable in monthly
    installments of $9,170, including interest of 8.25%, through
    June 2012, with final payment estimated to be $459,755 on
    July 19, 2012, secured by accounts receivable and
    inventory; guaranteed by certain Company officers and
    shareholders.
619,305
675,485
Note Payable — SBA, payable in monthly installments
    ranging from $5,553 through $4,754, including interest of 5.79%,
    through June 2027, secured by building and building
    improvements; guaranteed by certain Company officers and
    shareholders.
591,280
610,269
Note Payable — Company, payable in monthly
    installments of $771 including interest of 5.80%, through April
    2009, secured by equipment.
—
2,866
Note Payable — Non-interest bearing, and payable in
    monthly installments of $2,000 through, November 2011, secured
    by stock of the Company.
45,580
43,584
Note
Payable-Vendor,
payable in monthly installments of $25,451, including interest
    of 7.00%, through April 2012, secured by majority
    shareholder's common stock.
515,739
639,846
Note
Payable-Vendor,
payable in monthly installments of $7,200, including interest of
    7.00%, through January 2013, unsecured.
234,276
112,347
Note
Payable-Vendor,
payable in monthly installments of $5,236, beginning March 2010,
    including interest of 7.00%, through March 2013, unsecured.
173,787
121,737
Note
Payable-Vendor,
payable in monthly installments of $1,197, including interest of
    7.00%, through March 2013, unsecured.
41,656
50,000
Note
Payable-Company
Officer, payable in full upon completion of initial public
    offering, including interest of 5.00%; unsecured.
50,000
—
Note
Payable-Vendor,
payable in monthly installments ranging from $2,000 to $4,000,
    including interest of 3.47%, through July 2012, secured by
    equipment.
94,000
—
Note
Payable-Vendor,
payable in monthly installments of $1,553, including interest of
    $7.00%, through August 2011 unsecured.
17,030
—
Total outstanding notes payables
3,222,661
3,122,242
Less: current portion
448,742
452,063
Long-term notes payables
$
2,773,919
$
2,670,179
In the fourth quarter of 2009, the Company borrowed $50,000 from
    its President and CEO to pay for expenses incurred related to
    the Company's initial public offering (IPO). In the fourth
    quarter of 2009, the Company assumed ownership of a Planet Beach
    Spa located in Irvine, California. In conjunction, the Company
F-14
Table of Contents
PLANET
    BEACH FRANCHISING CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
assumed the note financing the spa's equipment totaling
    $94,000, and executed a note for overdue rent totaling $17,000.
    The Company also amended the location's lease through
    August 2011.
As part of the note payable agreement with one of the
    Company's vendors, the Company converted an accounts
    payable of approximately $59,000 into a four year note payable.
    The Company was also allowed additional financing from the
    vendor of up to $300,000. Under this agreement, the Company
    awarded the vendor with 18,462 shares of common stock and
    the option to convert balances due under the note into
    additional shares of the Company's common stock within
    12 months of an initial public offering of the
    Company's common stock at a conversion price equal to the
    initial public offering price.
Substantially all of the Company's building and building
    improvements are pledged as collateral for various loans of the
    Company.
The following is a summary of principal maturities of long-term
    debt for each of the next five years and thereafter:
2010
$
448,742
2011
616,787
2012
850,973
2013
83,266
2014
60,695
Thereafter
1,162,198
$
3,222,661
6.
Income
    Taxes
Significant components of the Company's deferred income tax
    liabilities and assets as of December 31 are as follows:
2009
2008
Deferred income tax liabilities:
Accelerated depreciation
$
219,660
$
230,968
Accrued related party wages
3,543
3,543
Total deferred income tax liabilities
223,203
234,511
Deferred income tax assets:
Bad debt allowance
488,406
345,755
Employee stock option
66,172
20,178
Deferred revenue
54,405
55,770
Employee tax credits carryforward
189,449
178,101
Net operating loss carryforward
174,923
114,939
Total deferred income tax assets
973,355
714,743
Valuation allowance
(750,152
)
(480,232
)
Net deferred income tax liabilities, net
$
—
$
—
Significant components of the provision for income taxes for the
    year ended December 31 are as follows:
2009
2008
2007
Current tax expense (benefit)
$
—
$
—
$
—
Deferred tax expense (benefit)
—
—
(4,651
)
$
—
$
—
$
(4,651
)
F-15
Table of Contents
PLANET
    BEACH FRANCHISING CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
The reconciliation of income taxes computed at the federal
    statutory tax rate to income tax provision (benefit) for the
    year ended December 31 is as follows:
2009
2008
2007
Tax at federal statutory rate
$
(240,853
)
$
(257,804
)
$
(112,116
)
Non-deductible expenses
13,275
10,787
17,168
State income taxes and credits
(33,718
)
(36,529
)
(16,488
)
Employee tax credits
(8,624
)
(89,901
)
—
Valuation allowance
269,920
373,447
106,785
$
—
$
—
$
(4,651
)
For tax reporting purposes, the Company had cumulated operating
    loss carryforwards of approximately $703,588 and $730,000 at
    December 31, 2009 and 2008, respectively. If not utilized,
    the full amount of such carryforwards would expire in 2028. The
    Company has available for tax reporting purposes $184,449 in
    employee tax credits that will begin to expire in 2025.
The Company and its subsidiaries file U.S. federal and
    state income tax returns. There are no on-going examinations of
    income tax returns filed by the Company and its subsidiaries.
    U.S. federal income tax returns ending after 2005 are
    subject to examination by the Internal Revenue Service. State
    income tax returns for tax years ending after 2005 are subject
    to examination by related state tax authorities.
7.
Stock
    Option Plan
On July 1, 2005, the Company adopted the Planet Beach
    Franchise Corporation 2005 Incentive Stock Plan (the
    "Plan") that provides for the granting of stock
    options to its directors, officers, employees, and consultants.
Stock options granted under our Plan expire ten years from the
    date of grant. Generally, either 20% or 25% of the options vest
    on the first anniversary of the grant. Thereafter, the options
    vest monthly on a pro rata basis until the fourth or fifth
    anniversary of the grant until fully vested.
The Plan includes provisions to make adjustments to reflect
    stock splits or stock dividends, and certain other events occur.
    The Company believes that the current level of authorized shares
    is sufficient to satisfy future option exercises.
The Company has recorded stock-based compensation expense in the
    salaries and commissions line item in the amount of $117,933,
    $34,769, and $16,970, related to stock awards for the fiscal
    years ended December 31, 2009, 2008, and 2007, respectively.
F-16
Table of Contents
PLANET
    BEACH FRANCHISING CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
A summary of the Company's option activity under the plan
    for the year ended December 31, 2009 is as follows:
2009
2008
2007
Number of
Weighted
Number of
Weighted
Number of
Weighted
Shares
Average
Shares
Average
Shares
Average
Underlying
Exercise
Underlying
Exercise
Underlying
Exercise
Options
Price
Options
Price
Options
Price
Outstanding at beginning of year
1,864,000
$
1.00
521,000
$
1.00
215,000
$
1.00
Granted
1.00
1,472,000
$
1.00
316,000
$
1.00
Exercised
—
—
—
Forfeited
(70,000
)
1.00
(129,000
)
$
1.00
(10,000
)
$
1.00
Outstanding at end of year
1,794,000
1,864,000
521,000
Exercisable at end of year
639,600
$
1.00
285,550
$
1.00
172,500
$
1.00
Weighted-average fair value of
Options granted
$
—
$
—
$
596,664
$
0.38
$
186,336
$
0.59
The following summarizes the status of the Company's
    nonvested shares (in number of shares that may be purchased) as
    of December 31, 2009, and changes during the year ended
    December 31, 2009:
Year Ended
Weighted Average
December 31,
Grant Date Fair
2009
Value
Nonvested at January 1, 2009
1,578,450
$
937,198
Granted
—
Vested
(354,050
)
(346,293
)
Forfeited
(70,000
)
(38,600
)
Nonvested at December 31, 2009
1,154,400
$
552,305
On June 6, 2007, the Company granted 125,000 options
    conditional on the Company's successful completion of an
    IPO. Management did not consider an IPO probable in 2007 and
    2008.
The fair value of each option grant is estimated on the date of
    grant using the Black-Scholes option pricing method with the
    following assumptions used for grants issued:
For the Fiscal Years Ended
December 31,
December 31,
2008
2007
Volatility
180.00
%
186.00
%
Risk-free interest rate
3.05
%
4.71
%
Expected term (years)
5.67
5.83
Dividend yield
—
—
There is no active external or internal market for the
    Company's common shares. The Company used similar industry
    comparables to measure a historical volatility to calculate the
    Company's options. The Company also estimated the
    underlying common share value by calculating the Company's
    enterprise value for the each year granted.
F-17
Table of Contents
PLANET
    BEACH FRANCHISING CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
8.
Employee
    Benefit Plan
The Company has a defined contribution employee benefit plan
    (Plan). The Plan is available to employees who have completed at
    least three months of service and are at least 18 years
    old. Prior to December 1, 2008, the Company matched 25% of
    each dollar contributed up to 4% of the employee's annual
    salary. The employer's contribution vests 100% after five
    years. The company temporarily suspended matching contributions
    beginning December 1, 2008. Expense incurred by the Company
    during 2009, 2008 and 2007 associated with the Plan totaled $0,
    $56,099, and $38,882, respectively.
9.
Related
    Party Transactions
The Company's president and majority shareholder owns a
    Contempo Spa that does not pay royalties.
The Company's chief operating officer and shareholder owns
    a Contempo Spa that pays a fixed monthly fee of $350 instead of
    a 6% royalty. In addition, the brand development fee paid is 1%
    instead of 2%.
During 2009 the Company issued a note payable to a vendor at 7%
    interest due on April 10, 2012 for the purchase of tanning
    products. The note is secured by 85,724 shares of common
    stock pledged by the Company's president. During fiscal
    2008 and 2009, the largest aggregate amount of principal
    outstanding on the note was $750,000, and the amount outstanding
    at December 31, 2009 was $515,739.
Certain officers and shareholders of the Company have guaranteed
    a portion of the Company's indebtedness as described in
    note 5.
On November 18, 2009, the president loaned the Company
    $50,000 for the payment of expenses related to the
    Company's initial public offering as described in
    note 5.
As of December 31, 2009, a certain other officer's
    family member owed $35,671 to the Company as included in notes
    receivable on the accompanying consolidated balance sheet.
    Another $39,783 and $73,682 were owed to the Company by
    employees and stockholders of the Company for deferred royalties
    and unpaid area representative fees, respectively. These amounts
    are included in accounts receivable and notes receivables in the
    accompanying consolidated balance sheet, respectively.
10.
Commitments
    and Contingencies
Leases
    Guarantees
During 2002, the Company entered into lease agreements for
    franchise locations under noncancelable operating leases and
    subleased these locations, on terms similar to the primary
    operating leases, to franchisees. Rent expense paid by the
    Company associated with these leases amounted to $29,424,
    $138,174, and $330,052 for 2009, 2008 and 2007, respectively.
    Rent income (recovery) recorded by the Company associated with
    these subleases amounted to $7,219, $29,149, and $114,526 for
    2009, 2008 and 2007, respectively. Net rent expense is recorded
    in operating expenses in the consolidated statements of
    operations.
At January 1, 2010, the Company is not paying rent on any
    of these leases but remains as guarantor on approximately three
    leases. Should any of these franchisees default on their
    subleases, the Company would be responsible for making rent
    payments as guarantor.
F-18
Table of Contents
PLANET
    BEACH FRANCHISING CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
The Company's maximum theoretical future exposure at
    December 31, 2009, computed as the sum of all remaining
    lease payments through the expiration dates of the respective
    leases, was approximately $267,000 as follows:
2010
$
87,000
2011
87,000
2012
87,000
2013
6,000
Total
$
267,000
This amount does not take into consideration any rent recovery
    from franchisees or other mitigating measures that the Company
    could take to reduce this exposure in the event of default,
    including releasing the locations or negotiating lump sum
    payments with landlords to terminate leases.
Purchase
    Agreements
During 2002, the Company entered into a product purchase
    agreement (Purchase Agreement) with its primary vendor (Vendor)
    for tanning beds and supplies requiring the Company to purchase
    exclusively from the Vendor all spa tanning equipment and all
    lamps, parts, accessories, lotions, skin and hair care products,
    cleaning equipment and other tanning related products used or
    sold in salons owned, operated, or franchised by the Company. In
    addition, the Company agreed to designate in existing and future
    franchise agreements the Vendor as the exclusive supplier of
    equipment and supplies to the Company. This Purchase Agreement
    is in effect through 2017. The Company purchased approximately
    $2,981,000, $4,860,000, and $7,219,000 of its spa equipment and
    products from this Vendor in 2009, 2008 and 2007, respectively.
As part of a purchase agreement with a vendor during 2009, the
    vendor will sell product directly to the Company's
    franchisees with the net profit on such sales being remitted
    directly to the Company. As part of the agreement, cash proceeds
    of the profits earned by the Company were to be used to repay an
    outstanding accounts payable balance with the vendor. As of
    December 31, 2009 and 2008, the amount of accounts payable
    due to the vendor subject to the agreement was approximately
    $118,000 and $836,000, respectively.
Legal
    Proceedings
At December 31, 2009, the Company was party to various
    lawsuits filed by current and former franchisees. Outside
    counsel for the Company is not able to determine the probable
    outcome of these cases at this time. The Company believes the
    suits are without merit and is vigorously defending its
    position. Accordingly, no amounts are recorded in the
    consolidated statements of operations in connection with these
    lawsuits.
11.
Supplementary
    Information
The Company has master franchisor agreements in countries
    outside of the United States. The operating revenues and net
    income (loss) from those countries are in the table below. There
    are no long term assets held in countries outside of the US.
December 31, 2009
December 31, 2008
December 31, 2007
United States
Rest of World
United States
Rest of World
United States
Rest of World
Operating Revenue
$
12,904,298
$
364,822
$
23,872,788
$
1,133,044
$
26,366,020
$
90,000
Net Loss
$
(515,276
)
$
(193,116
)
$
(744,932
)
$
(13,315
)
$
(246,500
)
$
(78,602
)
F-19
Table of Contents
PLANET
    BEACH FRANCHISING CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
12.
Fair
    Value
Disclosure of fair value information about financial
    instruments, whether or not recognized in the balance sheet is
    required. Fair value of a financial instrument is the price that
    would be received to sell an asset or paid to transfer a
    liability in an orderly transaction between market participants
    at the measurement date. Fair value is best determined based
    upon quoted market prices. In cases where quoted market prices
    are not available, fair values are based on estimates using
    present value or other valuation techniques. Those techniques
    are significantly affected by the assumptions used, including
    the discount rate and estimates of future cash flows.
    Accordingly, the fair value estimates may not be realized in an
    immediate settlement of the instruments. Therefore, the
    aggregate fair value amounts presented do not represent the
    underlying value of the Company.
The recent fair value guidance provides a consistent definition
    of fair value, which focuses on exit price in an orderly
    transaction (that is, not a forced liquidation or distressed
    sale) between market participants at the measurement date under
    current market conditions. If there has been a significant
    decrease in the volume and level of activity for the asset or
    liability, a change in valuation technique or the use of
    multiple valuation techniques may be appropriate. In such
    instances, determining the price at which willing market
    participants would transact at the measurement date under
    current market conditions depends on the facts and circumstances
    and requires use of significant judgment. The fair value is a
    reasonable point within the range that is most representative of
    fair value under current market conditions.
In accordance with this guidance, the Company groups its
    financial assets and financial liabilities generally measured at
    fair value in three levels, based on the markets in which the
    assets and liabilities are traded and the reliability of the
    assumptions used to determine fair value.
At December 31, 2009, the Company did not have any
    financial assets or liabilities to value. At December 31,
    2008, the Company's investments of $288,614 were a
    level 1.
Net unrealized (loss) on
available-for-sale
securities in the amount of -0-, ($223,606), and ($34,068) for
    the years ended 2009, 2008 and 2007, respectively, has been
    included in accumulated other comprehensive income (loss).
13.
Subsequent
    Events
On February 26, 2010, the Company borrowed $250,000 from
    ETS, LLC for the development of prototype concept store in
    Irvine, California.
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Table of Contents
Table of Contents
Units
Units each consisting of one
    share of Common Stock and one
Common Stock Purchase Warrant
PROSPECTUS
,
    2010
Until          ,
    2010, all dealers that effect transactions in these securities
    may be required to deliver a prospectus, regardless of whether
    they are participating in this offering. This is in addition to
    the dealers' obligation to deliver a prospectus when acting
    as underwriters and with respect to their unsold allotments or
    subscriptions.
Table of Contents
PART II
INFORMATION
    NOT REQUIRED IN PROSPECTUS
Item 13.
Other
    Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other
    than underwriting discounts and commissions, to be paid in
    connection with the sale of units being registered, all of which
    we will pay. All amounts, other than the SEC registration fee,
    are estimates.
SEC registration fee
$
2,002
NYSE Amex listing application fee
55,000
Printing expenses
*
FINRA filing fee
3,308
Financial advisory fee
25,000
Directors' and officers' insurance
*
Legal fees and expenses
*
Accounting fees and expenses
*
Blue sky fees and expenses
*
Transfer agent fees
*
Miscellaneous
*
Total
$
*
*
To be filed by amendment.
Item 14.
Indemnification
    of Directors and Officers
Our certificate of incorporation provides that we must
    indemnify, advance expenses to and hold harmless our directors
    to the fullest extent permitted by the General Corporation Law
    of the State of Delaware as it now exists or may be amended in
    the future. Under current Delaware law, a corporation may
    indemnify directors made or threatened to be made a party to any
    threatened, pending or completed civil, criminal, administrative
    or investigative action, suit or proceeding because of that
    person's service as a director of the corporation or
    because that person was serving at the corporation's
    request as a director of another corporation or enterprise. The
    corporation may indemnify such a person for expenses (including
    attorneys' fees), judgments, fines and amounts paid in
    settlement that are actually and reasonably incurred by the
    person in connection with the action, suit or proceeding,
    provided that the person acted in good faith and in a manner the
    person reasonably believed to be in or not opposed to the best
    interests of the corporation, and with respect to a criminal
    action or proceeding, if the person had no reasonable cause to
    believe his or her conduct was unlawful.
In each instance of indemnification, the corporation may only
    indemnify the person following a determination that the person
    met the applicable standard of conduct by:
•
a majority vote of the directors who are not parties to the
    action, suit or proceeding;
•
a committee of the board of directors designated by a majority
    vote of those disinterested directors;
•
by independent legal counsel if there are no disinterested
    directors or the disinterested directors so direct; or
•
the stockholders.
A corporation may pay expenses (including attorneys' fees)
    incurred by the director in defending an action, suit or
    proceeding in advance of the final disposition of the action,
    suit or proceeding upon receipt of an undertaking by the
    director to repay the corporation the amount paid in advance if
    it is ultimately determined that the person is not entitled to
    be indemnified. The corporation shall be required to indemnify,
    or
II-1
Table of Contents
advance expenses to, our directors in connection with a
    proceeding commenced by our directors only if the board of
    directors authorized the commencement of the proceeding.
At the present time, there is no pending litigation or
    proceeding involving a director, officer, employee or other
    agent of ours in which indemnification would be required or
    permitted. We are not aware of any threatened litigation or
    proceeding which may result in a claim for such indemnification.
We maintain a directors' and officers' liability
    insurance policy, the general effect of which is to provide:
    (a) coverage for the Company with respect to amounts it is
    permitted to pay to directors under the indemnification
    provisions set forth in the Delaware General Corporation Law and
    Article V of the Company's Bylaws and
    (b) coverage of the directors and officers of the Company
    for liabilities (including certain liabilities under the federal
    securities laws) incurred by such persons in their capacities as
    directors and officers for which they are not indemnified by the
    Company.
Item 15.
Recent
    Sales of Unregistered Securities
The following is a summary of transactions by us from
    January 1, 2007 through the date of this registration
    statement involving sales of our securities that were not
    registered under the Securities Act of 1933, as amended, or the
    Securities Act. This summary gives effect to the 1 for 3.5
    reverse stock split we effected on March 18, 2010.
On September 30, 2008, we issued 879 shares of common
    stock to JTL Enterprises, Inc., one of our suppliers of water
    massage machines, when we converted $22,350 of accounts payable
    into a promissory note. In addition, we granted JTL Enterprises,
    Inc. the option to convert the remaining outstanding balance we
    owed on the note into common stock, which option expired on
    September 30, 2009. We believe that the issuance of the
    shares and the option was exempt from the registration and
    prospectus delivery requirements of the Securities Act by virtue
    of Section 4(2) of the Securities Act.
MT Industries, Inc. is a supplier of U-V equipment and related
    products. On October 3, 2008, we converted $92,483 of
    accounts payable owed to MT Industries for equipment purchases
    into a four-year, unsecured note payable. Upon execution of the
    note, we awarded MT Industries 4,396 shares of common stock
    and the option to convert the balance owed into additional
    shares of common stock within 12 months. This option to
    convert expired October 3, 2009. We believe that the
    issuance of the shares and the option was exempt from the
    registration and prospectus delivery requirements of the
    Securities Act by virtue of Section 4(2) of the Securities
    Act.
On October 31, 2008 as part of the note payable agreement
    with one of our vendors, we converted an accounts payable of
    approximately $59,000 into a four year note payable. We were
    also allowed additional financing from the vendor of up to
    $300,000. Under this agreement, we awarded the vendor
    5,275 shares of common stock and the option to convert
    balances due under the note into additional shares of our common
    stock within 12 months of an initial public offering of our
    common stock at a conversion price equal to the initial public
    offering price. We believe that the issuance of the shares and
    grant of the option were exempt from the registration and
    prospectus delivery requirements of the Securities Act by virtue
    of Section 4(2) of the Securities Act.
II-2
Table of Contents
In addition, we granted options to purchase our common stock to
    our employees pursuant to our 2005 Stock Option Plan as follows:
Grant Date
Number Granted
1/1/2007
1,429
4/1/2007
286
4/13/2007
25,429
4/16/2007
286
5/14/2007
286
5/16/2007
571
5/24/2007
286
6/6/2007
35,714
7/2/2007
857
7/16/2007
286
8/29/2007
14,286
9/10/2007
8,857
10/9/2007
286
10/29/2007
286
11/4/2007
286
11/9/2007
286
12/10/2007
286
12/21/2007
286
9/1/2008
419,143
10/1/2008
1,429
1/1/2010
40,000
We believe that the above disclosed grants of options were
    exempt from the registration and prospectus delivery
    requirements of the Securities Act of 1933 by virtue of
    Section 4(2) of the Securities Act or Rule 701
    promulgated under Section 3(b) of the Securities Act, as
    transactions not involving any public offering or transactions
    pursuant to compensatory benefit plans and contracts relating to
    compensation.
Item 16.
Exhibits
    and Financial Statement Schedules
(a) Exhibits
Exhibit
Number
Description
1
.1*
Form of Underwriting Agreement
3
.1*
First Amended and Restated Certificate of Incorporation
3
.2
Bylaws
4
.1*
Form of common stock certificate
4
.2
Form of warrant certificate
4
.3*
Form of unit certificate
4
.4*
Form of Warrant
    Agreement
4
.5
Form of representative's purchase warrants
5
.1*
Opinion of Richards, Layton & Finger, P.A
10
.1
Form of Single Unit Franchise Agreement
10
.2
Form of
Multi-Unit
Option Agreement
10
.3
Form of Master Franchisor Agreement
10
.4
Form of Area Representative Agreement
10
.5+
2005 Stock Option Plan
II-3
Table of Contents
Exhibit
Number
Description
10
.6+*
Employment Agreement between the Registrant and Stephen P. Smith
10
.7+*
Employment Agreement between the Registrant and Richard L. Juka
10
.8
Promissory Note dated March 9, 2007 to Capital One,
    National Association
10
.9
Promissory Note dated June 13, 2007 to Small Business
    Association
10
.10
Promissory Note dated July 19, 2007 to Whitney National Bank
10
.11*
Asset Purchase Agreement, by and among Planet Beach Franchising
    Corporation, Planet Beach Brands, L.L.C. and Stephen P. Smith
21
.1
List of subsidiaries of the registrant
23
.1*
Consent of Richards, Layton & Finger, P.A
23
.2
Consent of Postlethwaite & Netterville, APAC
24
.1
Power of Attorney (see signature page)
*
To be filed by amendment.
+
Management contract or compensatory plan or arrangement.
Item 17.
Undertakings
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are
    being made, a post-effective amendment to this registration
    statement:
(a)
i. To include any prospectus required by
    section 10(a)(3) of the Securities Act of 1933;
ii. To reflect in the prospectus any facts or events
    arising after the effective date of the registration statement
    (or the most recent post-effective amendment thereof) which,
    individually or in the aggregate, represent a fundamental change
    in the information set forth in the registration statement.
    Notwithstanding the foregoing, any increase or decrease in
    volume of securities offered (if the total dollar value of
    securities offered would not exceed that which was registered)
    and any deviation from the low or high end of the estimated
    maximum offering range may be reflected in the form of
    prospectus filed with the Commission pursuant to
    Rule 424(b) if, in the aggregate, the changes in volume and
    price represent no more than 20% change in the maximum aggregate
    offering price set forth in the "Calculation of
    Registration Fee" table in the effective registration
    statement.
iii. To include any material information with respect to
    the plan of distribution not previously disclosed in the
    registration statement or any material change to such
    information in the registration statement;
(b)
i. That, for the purpose of determining any liability under
    the Securities Act of 1933, each such post-effective amendment
    shall be deemed to be a new registration statement relating to
    the securities offered therein, and the offering of such
    securities at that time shall be deemed to be the initial bona
    fide offering thereof.
ii. To remove from registration by means of a
    post-effective amendment any of the securities being registered
    which remain unsold at the termination of the offering.
iii. For the purpose of determining liability of the
    registrant under the Securities Act of 1933 to any purchaser in
    the initial distribution of the securities, that in a primary
    offering of securities of the undersigned registrant pursuant to
    this registration statement, regardless of the underwriting
    method used to sell the securities to the purchaser, if the
    securities are offered or sold to such
II-4
Table of Contents
purchaser by means of any of the following communications, the
    undersigned registrant will be a seller to the purchaser and
    will be considered to offer or sell such securities to such
    purchaser:
(I) Any preliminary prospectus or prospectus of the
    undersigned registrant relating to the offering required to be
    filed pursuant to Rule 424;
(II) Any free writing prospectus relating to the offering
    prepared by or on behalf of the undersigned registrant or used
    or referred to by the undersigned registrant;
(III) The portion of any other free writing prospectus
    relating to the offering containing material information about
    the undersigned registrant or its securities provided by or on
    behalf of the undersigned registrant; and
(IV) Any other communication that is an offer in the
    offering made by the undersigned registrant to the purchaser.
2. To provide to the underwriter at the closing specified
    in the underwriting agreements certificates in such
    denominations and registered in such names as required by the
    underwriter to permit prompt delivery to each purchaser.
3.
(a) For purposes of determining any liability under the
    Securities Act of 1933, the information omitted from the form of
    prospectus filed as part of this registration statement in
    reliance upon Rule 430A and contained in a form of
    prospectus filed by the registrant pursuant to
    Rule 424(b)(1) or (4) or 497(h) under the
    Securities Act shall be deemed to be part of this registration
    statement as of the time it was declared effective.
(b) For the purpose of determining any liability under the
    Securities Act of 1933, each post-effective amendment that
    contains a form of prospectus shall be deemed to be a new
    registration statement relating to the securities offered
    therein, and the offering of such securities at that time shall
    be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
    Securities Act of 1933 may be permitted to directors,
    officers and controlling persons of the registrant pursuant to
    the foregoing provisions, or otherwise, the registrant has been
    advised that in the opinion of the Securities and Exchange
    Commission such indemnification is against public policy as
    expressed in the Act and is, therefore, unenforceable. In the
    event that a claim for indemnification against such liabilities
    (other than the payment by the registrant of expenses incurred
    or paid by a director, officer or controlling person of the
    registrant in the successful defense of any action, suit or
    proceeding) is asserted by such director, officer or controlling
    person in connection with the securities being registered, the
    registrant will, unless in the opinion of its counsel the matter
    has been settled by controlling precedent, submit to a court of
    appropriate jurisdiction the question whether such
    indemnification by it is against public policy as expressed in
    the Act and will be governed by the final adjudication of such
    issue.
II-5
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
    amended, the registrant has duly caused this registration
    statement to be signed on its behalf by the undersigned,
    thereunto duly authorized, in the City of Marrero, State of
    Louisiana, on the second day of April 2010.
PLANET BEACH FRANCHISING CORPORATION
By:
/s/
Stephen
    P. Smith
Stephen P. Smith
President, Chief Executive Officer
(Principal Executive Officer) and Chairman of
the Board of Directors
POWER OF
    ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
    registration statement has been signed by the following persons
    in the capacities and on the dates indicated. Each person whose
    signature appears below constitutes and appoints Stephen P.
    Smith and Craig M. Berner, and each of them individually, his
    true and lawful attorneys-in-fact and agents, with full power of
    substitution and resubstitution, for him and in his name, place
    and stead, in any and all capacities, to sign any and all
    amendments (including post-effective amendments) to this
    registration statement, and to file the same, with all exhibits
    thereto, and other documents in connection therewith, with the
    Securities and Exchange Commission, granting unto said
    attorneys-in-fact and agents, and each of them, full power and
    authority to do and perform each and every act and thing
    requisite and necessary to be done in connection therewith, as
    fully to all intents and purposes as he might or could do in
    person, hereby ratifying and confirming all that said
    attorneys-in-fact and agents, or any of them, or their or his
    substitute or substitutes, may lawfully do or cause to be done
    by virtue hereof.
Signature
Title
Date
/s/
Stephen
    P. Smith
Stephen
    P. Smith
President, Chief Executive Officer (Principal Executive Officer)
    and Chairman of the Board of Directors
April 2, 2010
/s/
Richard
    L. Juka
Richard
    L. Juka
Senior Vice President, Chief Operating Officer, Secretary,
    Treasurer and Director
April 2, 2010
/s/
Craig
    M. Berner
Craig
    M. Berner
Chief Financial Officer (Principal Financial and Accounting
    Officer)
April 2, 2010
/s/
Eric
    E. Bosch
Eric
    E. Bosch
Director
April 2, 2010
/s/
Gary
    N. Solomon
Gary
    N. Solomon
Director
April 2, 2010
/s/
Ronald
    Warner
Ronald
    Warner
Director
April 2, 2010
II-6
Table of Contents
EXHIBIT INDEX
Exhibit
Number
Description
1
.1*
Form of Underwriting Agreement
3
.1*
First Amended and Restated Certificate of Incorporation
3
.2
Bylaws
4
.1*
Form of common stock certificate
4
.2
Form of warrant certificate
4
.3*
Form of unit certificate
4
.4*
Form of Warrant Agreement
4
.5
Form of representative's purchase warrants
5
.1*
Opinion of Richards, Layton & Finger, P.A.
10
.1
Form of Single Unit Franchise Agreement
10
.2
Form of
Multi-Unit
Option Agreement
10
.3
Form of Master Franchisor Agreement
10
.4
Form of Area Representative Agreement
10
.5+
2005 Stock Option Plan
10
.6+*
Employment Agreement between the Registrant and Stephen P. Smith
10
.7+*
Employment Agreement between the Registrant and Richard L. Juka
10
.8
Promissory Note dated March 9, 2007 to Capital One,
    National Association
10
.9
Promissory Note dated June 13, 2007 to Small Business
    Association
10
.10
Promissory Note dated July 19, 2007 to Whitney National Bank
10
.11*
Asset Purchase Agreement, by and among Planet Beach Franchising
    Corporation, Planet Beach Brands, L.L.C. and Stephen P. Smith
21
.1
List of subsidiaries of the registrant
23
.1*
Consent of Richards, Layton & Finger, P.A
23
.2
Consent of Postlethwaite & Netterville, APAC
24
.1
Power of Attorney (see signature page)
*
To be filed by amendment.
+
Management contract or compensatory plan or arrangement.