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      STATES SECURITIES AND EXCHANGE COMMISSION</font></div>
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      D.C. 20549</font></div>
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      8-K</strong></font></div>
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      REPORT</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pursuant
      to Section 13 or 15(d) of the Securities and Exchange Act of 1934</font></div>
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      of
      Report: February 13, 2006</font></div>
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      of
      earliest event reported)</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>HEALTH
      PARTNERSHIP INC.</strong></font></div>
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      name of registrant as specified in the charter)</font></div>
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      satisfy the filing obligation of the registrant under any of the following
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div><br>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      1.01 Entry into a Material Definitive Agreement.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font id="TAB1" style="MARGIN-LEFT: 36pt"></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
      February 13, 2006, Health Partnership Inc., a Colorado corporation (the
&#8220;Company&#8221;), entered into an Agreement and Plan of Merger (the &#8220;Merger
      Agreement&#8221;) with Capital Partners For Health &amp; Fitness, Inc., a North
      Carolina corporation (&#8220;Capital Partners&#8221;), Capital Partners Merger Sub, Inc., a
      North Carolina corporation and wholly-owned subsidiary of the Company
      (&#8220;Mergeco&#8221;), Capital Partners Acquisitions Sub, Inc., a North Carolina
      corporation and wholly-owned subsidiary of the Company (&#8220;Acquisitionco&#8221;),
      Randall Rohm and Thomas Flynn. On February 13, 2006, the terms and conditions
      of
      the Merger Agreement were either satisfied or waived and the transactions
      contemplated by the Merger Agreement were consummated. Pursuant to the Merger
      Agreement, a copy of which is attached hereto as Exhibit 99.1, Capital Partners
      became a wholly-owned subsidiary of the Company. The terms of the Merger
      Agreement and the effect of the merger transaction are more fully described
      in
      Item 2.01 of this Current Report on Form 8-K. Capital Partners&#8217; predecessor was
      Kapital Engine Investments, Inc. (&#8220;Kapital Engine&#8221;). For purposes of this
      Current Report on Form 8-K, unless otherwise indicated, the meanings of the
      terms &#8220;Kapital Engine&#8221; and &#8220;Capital Partners&#8221; shall be synonymous. </font></div>
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      2.01 Completion of Acquisition or Disposition of Assets.</strong></font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      previously stated in Item 1.01 of this Current Report on Form 8-K, the
      transactions contemplated by the Merger Agreement were consummated on February
      13, 2006. </font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>The
      Merger</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pursuant
      to the terms of the Merger Agreement, Mergeco merged with Capital Partners,
      with
      Capital Partners continuing to exist as the surviving corporation following
      this
      merger (the &#8220;Initial Merger&#8221;). Immediately thereafter, Capital Partners merged
      with Acquisitionco (collectively with the Initial Merger, the &#8220;Merger&#8221;).
      Acquisitionco, which remains a wholly-owned subsidiary of the Company, continued
      as the survivor following the Merger. Immediately following the Merger,
      Acquisitionco filed the necessary documents with the North Carolina Secretary
      of
      State to change its name to Capital Partners For Health &amp; Fitness, Inc. The
      parties intend the Merger to be treated as a tax-free reorganization pursuant
      to
      Section 368(a)(2)(D) of the Internal Revenue Code. </font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Merger
      Consideration</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">All
      of
      the shares of Capital Partners&#8217; common stock that were issued and outstanding
      immediately prior to the Merger and all legal or beneficial rights to
      participate in any fashion in the economic benefits of ownership of Capital
      Partners were converted into the right to receive, in the aggregate (subject
      to
      certain limitations): (a) $6,992,859 in cash (the &#8220;Cash Consideration&#8221;); (b)
      3,496,430 shares of the Company&#8217;s common stock (the &#8220;Stock Consideration&#8221;); and
      (c) the Earnout Consideration (as defined below), if earned. Once the Merger
      was
      completed, all shares of Capital Partners&#8217; capital stock were automatically
      redeemed and canceled and no longer exist. The Stock Consideration is
      unregistered, restricted stock and constitutes &#8220;restricted securities&#8221; as that
      term is defined in Rule 144 under the Securities Act of 1933. The Company has
      agreed that it will include the Stock Consideration in its next &#8220;Selling
      Stockholder&#8221; registration statement that it files with the Securities and
      Exchange Commission (the &#8220;SEC&#8221;). </font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Notwithstanding
      the foregoing, the parties to the Merger agreed that no portion of the Cash
      Consideration would be paid at the closing of the Merger. Instead, the Company
      delivered to each of Capital Partners&#8217; shareholders, Messrs. Rohm and Flynn, a
      promissory note in the principal amount of such shareholder&#8217;s respective portion
      of the Cash Consideration (the &#8220;Purchase Money Note&#8221;). These Purchase Money
      Notes mature on the earlier of June 30, 2006 or such time as the Company shall
      have raised capital sufficient to fund the entire amount of Cash Consideration.
      The Purchase Money Notes accrue simple interest at the annual rate of five
      percent (5%) for the first sixty days after the Merger was completed, and will
      accrue simple interest at the annual rate of ten percent (10%) thereafter.
      The
      Purchase Money Notes also provide that, if the founder of the predecessor to
      Capital Partners purchases up to $1.0 million of the Company&#8217;s common stock as
      part of the Offering (as defined below), the holders of the Purchase Money
      Notes
      will be entitled to sell back to the Company up to that number of shares of
      the
      Company&#8217;s common stock as would cumulatively total the subscription amount
      received by the Company from such founder. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      noted,
      Capital Partners&#8217; shareholders are collectively entitled to earn an additional
      amount of merger consideration. This additional potential consideration is
      a
      one-time payment in cash (the &#8220;Cash Earnout Payment&#8221;) and a one-time payment in
      the Company&#8217;s common stock (the &#8220;Stock Earnout Payment&#8221; and, together with the
      Cash Earnout Payment, the &#8220;Earnout Consideration). The Earnout Consideration is
      equal to (1) the amount, if any, by which (a) one-half of Capital Partners&#8217;
earnings before interest, taxes, depreciation and amortization (computed in
      accordance with GAAP) during the first eight full calendar quarters following
      the Merger (the &#8220;Earnout Period&#8221;) (as certified by the Company&#8217;s independent
      public accountant) (the &#8220;Earnout Period EBITDA&#8221;) exceeds (b) an amount equal to
      the sum of (i) $3,158,933 plus (ii) one-half of the amount of any portion of
      $400,000 of bridge loan made by the Company to Capital Partners</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">that
      is
      used by Capital Partners for working capital purposes, (2) multiplied by 4.2.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Earnout Consideration, if any, must be paid within ten days following the
      receipt by the Company and Capital Partners&#8217; shareholders of a written
      determination of the Earnout Period EBITDA if Capital Partners&#8217; shareholders do
      not contest the Earnout Period EBITDA within five days following their receipt
      of such calculation. If Capital Partners&#8217; shareholders contest the Earnout
      Period EBITDA, the Company and such shareholders will have ten days to settle
      the dispute or the dispute will be settled by arbitration. Shares of the
      Company&#8217;s common stock that are issued as part of the Stock Earnout Payment will
      be valued at the average closing price per share of the Company&#8217;s common stock
      on the final ten trading days of the Earnout Period. Within ten days after
      each
      Form 10-QSB or 10-KSB is filed with the SEC by the Company during the Earnout
      Period, the Company will cause to be delivered to Capital Partners&#8217; former
      shareholders a report of Capital Partners&#8217; financial results.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Effect
      of Merger </em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company was formed in 1996 as NELX Marketing, Inc., a Colorado corporation,
      then
      changed its name later that year to Mind2Market, Inc. Due to lack of funding,
      the Company ceased its efforts in 2002 to develop certain technology. From
      2002
      through the closing of the Merger, the Company had substantially no operations.
      In May 2005, the Company changed its name to Health Partnership Inc. and, prior
      to the Merger, it satisfied the SEC&#8217;s definition of a &#8220;shell company.&#8221; Pursuant
      to the Merger, Capital Partners became the Company&#8217;s wholly-owned subsidiary. As
      a result, the Company became a holding company and its shell company status
      terminated. Capital Partners&#8217; business operations currently represent
      substantially all of the Company&#8217;s operations. The Company&#8217;s common stock is
      traded on the OTC Bulletin Board under the trading symbol
&#8220;HHPN.OB.&#8221;</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Private
      Placement Offering </em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">On
      January 31, 2006, the Company commenced a private placement offering of up
      to
      8,000,000 shares of its common stock for $1.25 per share (the &#8220;Offering&#8221;). The
      Offering is made only to &#8220;accredited investors&#8221; as defined in Rule 501 of
      Regulation D under the Securities Act of 1933. The Company reserved the right,
      in its sole discretion, to increase the Offering to a total of 12,000,000 shares
      of its common stock. Upon the Company&#8217;s acceptance of subscriptions to purchase
      at least 2,400,000 shares of its common stock through the Offering, the Company
      has agreed to apply the net proceeds from such sale (after satisfaction of
      other
      appropriate Company obligations), toward reduction of the indebtedness evidenced
      by the Purchase Money Notes. The Company has further covenanted with the former
      shareholders of Capital Partners, that subsequent net proceeds from the Offering
      are not to be applied toward the purchase of other businesses until the Purchase
      Money Notes have been paid in full. As of the date of this Current Report on
      Form 8-K, the Company has not sold any shares of its common stock through the
      Offering. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Description
      of Capital Partners</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Capital
      Partners is a regional chain of nine health and fitness clubs in the greater
      Raleigh-Durham metropolitan area. It acquired the clubs in late 2005 from
      Kapital Engine, an entity then controlled by Mr. Randall Rohm, the current
      chief
      operating officer of Capital Partners. Capital Partners&#8217; clubs are the largest
      chain of health clubs in the greater Raleigh-Durham metropolitan area, with
      in
      excess of 55,000 members. The clubs range in size from 13,500 to 25,000 square
      feet and operate from leased facilities. Capital Partners endeavors to promote
      a
      good value of services at a low cost to its health club members. Based on its
      experience, it has found that, in the past, the larger national chains of health
      clubs have chosen not to enter Capital Partners&#8217; market due at least in part to
      the relatively low cost at which Capital Partners offers its memberships.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Business
      Strategy</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Capital
      Partners&#8217; business plan contemplates the addition of health clubs to the current
      regional market, as well as the entry into other markets through both strategic
      acquisition and organic growth. Subject to availability of financing, Capital
      Partners would like to develop some new facilities on a larger scale (50,000
      square feet or more), offering a wider amenity package and the possibility
      of
      consolidating membership from several of the smaller clubs into these larger
      clubs. Capital Partners&#8217; value proposition for its members focuses on the
      provision of a high quality health club experience at a relatively modest cost
      to its members. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Each
      facility is equipped with state-of-the-art equipment in amounts generally
      sufficient to adequately serve members during peak hours (typically 5-7 am
      and
      5-7 pm). The Company believes that the management at each facility is trained
      to
      provide a favorable customer experience and to do so in a cost effective manner,
      being mindful of the bottom line. Capital Partners employs a discretionary
      bonus
      system to incent and reward employees for exemplary individual and team
      effort.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Sales
      and Marketing</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      sale of new memberships and retention of existing members is essential to
      Capital Partners&#8217; business strategy. Due to the relatively young age of its
      members and their greater mobility than older members, Capital Partners
      experiences an approximately 75% turnover of its members on an annualized basis.
      The Company believes that all of its employees are trained to encourage the
      members to renew their memberships. At the same time, all employees who
      regularly interface with members are encouraged to promote the clubs and to
      bring in new members. Membership packages are offered in a variety of formats,
      including pre-paid one and two year memberships, as well as month-to-month
      memberships. Pricing incentives are currently structured to encourage long-term
      participation, including promotions as low as $10 per month for two-year
      commitments, and a standard $39 per month fee plus a modest enrollment fee
      for
      certain shorter term commitments. These pricing incentives are subject to change
      in the Company&#8217;s sole discretion. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Advertising
      is done primarily through direct mail promotions, where Capital Partners
      believes the responses are measurable. In its experience, Capital Partners
      has
      found that telephone solicitation, utilization of a variety of referral sources
      and Internet marketing have all been successful methods of driving new
      membership in its health clubs. Capital Partners has employed radio and print
      advertising, as well as event marketing in the past, and found that these
      methods have been less productive than the other methods enumerated above.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Amenities</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Each of
      Capital Partners&#8217; health clubs has extensive equipment, which is typically
      purchased through full payout lease financing, which is described below. Each
      club&#8217;s equipment is divided substantially equally among cardiovascular (such as
      treadmill, elliptical trainers, stationary bikes and stairclimbers), resistance
      training and selectorized equipment, and free weight/cable equipment. Each
      facility averages approximately 120 pieces of equipment. Capital Partners
      believes that its facilities contain ample studio area for classes, including
      aerobics, yoga, step, kickboxing and abdominal workouts. D&#233;cor of the clubs is
      typically modern, with the layout intended to provide for a pleasant workout
      experience. Full locker room and shower facilities are available for members.
      A
      limited number of the clubs maintain basketball facilities and/or juice
      bars.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      October 2004, Capital Partners entered into a five-year agreement with Beyond
      Fitness Companies (&#8220;Beyond Fitness&#8221;) to provide personal trainers to its health
      club facilities at no cost to either party. Beyond Fitness generally is paid
      for
      its personal training services by the health club members that contract for
      such
      services. Capital Partners believes that Beyond Fitness is the second largest
      independent personal training operation in the United States. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
      the
      extent that food or clothing concessions are available at the clubs, management
      subcontracts these services to independent contractors who pay a base rent
      for
      the operation of small facilities. The Company believes that for clubs of its
      size, profitability is enhanced by avoiding food or apparel service due to
      the
      extensive time and personnel requirements associated with each, as well as
      the
      need to continually monitor inventory.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company is considering moving toward the development of some new and larger
      clubs which would have a broader scope of amenities, such as swimming pools,
      racquet courts, spa services and full-scale food facilities. The Company
      believes that these newer facilities would likely carry a somewhat higher
      membership fee and may serve as replacement facilities for some of the older,
      less modern facilities currently operated by the Company, and their development
      is contingent upon the availability of financing to Capital
      Partners.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Financing</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      As
      described above, Capital Partners currently finances the equipment for its
      health clubs through two leasing sources, Sun Trust (formerly, Central Carolina
      Bank and Trust Company) and Life Fitness, a division of Brunswick Corporation,
      which typically sells its lease paper to CIT. Through these sources, the
      purchase price and a market value interest factor for the equipment is financed
      through full payout amortization payments over a three- to five-year term,
      with
      either a $1.00 purchase option or a residual value purchase option at the end
      of
      lease term. Certain of the equipment in the facilities is fully paid for and
      much of the remaining equipment is substantially paid for, with new leases
      typically written as additional or replacement equipment is acquired.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      November 2004, Capital Partners financed certain of its billing equipment and
      software from Duvera Billing Services, a billing company, based upon $350,000
      of
      cumulative borrowings (plus interest), being paid out through level amortization
      over an approximately sixteen-month period for the first $250,000 and a two-year
      period for the remaining $100,000. Approximately $25,000 remains on this
      obligation. In addition, Duvera entered into a factoring arrangement with
      Capital Partners where over time approximately $448,000 of funds were provided
      in exchange for sale of two-year membership contracts at an approximately 32%
      discount to the aggregate funds to be paid out over their terms. The agreement
      contemplates that should a contract be terminated or fall into default, Capital
      Partners is responsible for replacing the contract with a substitute performing
      contract for like payments, or is liable for the deficiency with respect to
      the
      future payout from the terminated or defaulted contracts. At January 30, 2006,
      approximately $389,000 in principal amount of this purchase obligation remained.
      Duvera instituted suit to collect all indebtedness owed to it in February 2006,
      and subsequent to such filing Capital Partners forwarded replacement contracts
      to put the arrangement back in balance; the suit has not yet been withdrawn,
      but
      the Company believes, but cannot guarantee, that the suit may be withdrawn
      once
      the original $25,000 loan obligation is either timely satisfied or other
      appropriate arrangements for payment can be made. See &#8220;Legal Proceedings,&#8221;
below.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Employees</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Capital
      Partners currently employs approximately 230 employees, about sixty of whom
      are
      full-time. Operation of the clubs is divided into three districts, with each
      district having a manager who runs one club and oversees the other clubs in
      the
      manager&#8217;s district. In addition, each district has a club manager for each of
      the other clubs in the district and an assistant manager overseeing the
      day-to-day operations of each club, together with the club manager. Each club
      typically employs 1-4 fitness consultants, 3-6 babysitting employees, 3-6 group
      fitness instructors, 2-3 salespeople and 2-3 cleaning people. The fitness
      instructors and personal trainers work at each club, as necessitated by demand.
      These individuals are typically independent contractors, which the Company
      believes increases profitability because it does not compensate them during
      non-peak times.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Corporate
      Information</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Company&#8217;s executive offices are located at 3111 North Seminary, Suite 1N,
      Chicago, Illinois 60657. The Company&#8217;s telephone number is (312) 640-2975, and
      its fax number is (312) 640-2976. Capital Partners&#8217; executive offices are
      located in its Waverly Place (Cary, NC) club at 101-A New Waverly Place, Cary,
      North Carolina 27511. Its telephone number is (919) 816-9853, and its fax number
      is (919) 854-2016. Each of Capital Partners&#8217; clubs provides a centralized
      computer system with data to allow collection to be processed from this
      centralized office. </font></div>
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    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Facilities</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Each of
      Capital Partners&#8217; facilities is leased by a separate corporation or limited
      liability company that is wholly owned by Capital Partners. A summary of the
      clubs&#8217; leases is set forth below:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Durham,
                NC</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                This is a 20,000 square foot facility. It had originally been operated
                as
                a Gold&#8217;s Gym by the prior owner before the acquisition by the company in
                2003. Base rent plus pass through charges total approximately $19,000
                per
                month. An additional 20,000 square feet of adjacent space is available
                for
                expansion at no additional cost. The lease expires June 30,
                2006.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Creedmore
                Road, Raleigh, NC</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                This is a 25,000 square foot facility opened in late 2000. Base rent
                plus
                pass through charges total approximately $20,000 per month. An additional
                22,000 square feet of expansion space is available. The lease expires
                April 30, 2011, subject to two 5-year renewal options, with Consumer
                Price
                Index (&#8220;CPI&#8221;) escalators. The lease requires the landlord&#8217;s consent to
                change in beneficial ownership, but not where the beneficial owner
                is a
                publicly traded corporation. The landlord has provided an estoppel
                certificate to Capital Partners.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Spring
                Forest Road, Raleigh, NC</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                This is an 18,000 square foot facility acquired approximately ten
                years
                ago, and had been operated as a health club facility for at least
                ten
                years prior to that time. It is Capital Partners&#8217; oldest facility and
                presently operated on a month-to-month basis. The Company anticipates
                moving this facility&#8217;s membership to a new club within the next year
                unless the landlord makes significant improvements to the
                facility.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Glenwood
                &amp; Duraleigh, Raleigh, NC</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                This is a 25,000 square foot facility that was opened in 1998 and
                recently
                underwent an expansion which included the addition of two basketball
                courts. Base rent and pass through charges total approximately $20,000
                per
                month. The lease expires December 31, 2013, with a five-year renewal
                clause order subject to certain CPI escalators. It requires the landlord&#8217;s
                consent to change in beneficial ownership, which has been obtained.
                </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">5.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Maynard
                Road, Cary, NC</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                This is an 18,000 square foot facility opened in 1996. Base rent
                plus pass
                through charges total approximately $16,000 per month. Approximately
                3,000
                square feet of expansion space are available at no additional cost.
                The
                lease expires October 31, 2006 and the Company is contemplating whether
                to
                renew the lease or migrate the members to a proposed new construction
                facility. It has three five-year renewal options, subject to certain
                CPI
                escalators.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">6.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Buck
                Jones Road, Cary, NC</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                This is the original facility opened by Capital Partners in 1995,
                comprised of 13,500 square feet and requiring base rent plus pass
                through
                expenses of approximately $8,000 per month. The lease expires December
                1,
                2007, subject to two five-year renewal options. The Company would
                consider
                renewing the lease if certain upgrades are provided by the landlord.
                The
                tenant has a right of first refusal to purchase the facility in the
                event
                of a sale.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
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        </div>
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      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">7</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">7.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Waverly
                Place, Cary, NC</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                This is a 22,500 square foot facility opened in 2001, and houses
                Capital
                Partners&#8217; corporate offices. It is presently on a month-to-month lease.
                The Company anticipates that it will eventually close this facility
                and
                move the club&#8217;s members to either the Buck Jones Road facility or a new
                facility considered for
                development.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">8.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Garner,
                NC</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                This facility was opened in 2000 and contains 20,500 square feet,
                leased
                at approximately $10,000 per month including pass through expenses.
                Its
                lease expires in July 14, 2012, subject to one five-year extension.
                This
                is the most remote of the locations for Capital Partners&#8217; clubs,
                approximately twenty-five miles from the next nearest
                club.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">&#160;</td>
            <td style="width: 36pt;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9.</font></div>
            </td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>Fuquay
                Varina, NC</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
                This is a 20,000 square foot facility opened in late 2003, with base
                rent
                plus pass through expenses totaling approximately $20,000 per month.
                The
                lease expires in 2013, with three five-year renewal options. This
                lease
                requires the landlord&#8217;s consent to change in beneficial ownership, which
                consent has not been obtained after the date of this Current Report
                on
                Form 8-K. See &#8220;Risk Factors.&#8221; </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 72pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Risk
      Factors</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">An
      investment in shares of the Company&#8217;s common stock involves a high degree of
      risk. Prospective investors should consider carefully the following risk
      factors, together with all of the other information included or referred to
      in
      this Current Report on Form 8-K, before purchasing shares of the Company&#8217;s
      common stock. There are numerous and varied risks, known and unknown, that
      may
      prevent the Company from achieving its goals. The risks described below are
      not
      the only risks the Company will encounter. If any of these risks actually occur,
      the Company&#8217;s business, financial condition or results of operation may be
      materially adversely affected. In such case, the trading price of the Company&#8217;s
      common stock could decline and investors in the Company&#8217;s common stock could
      lose all or part of their investment. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
      Current Report on Form 8-K contains statements that constitute &#8220;forward-looking
      statements&#8221; within the meaning of Section 27A of the Securities Act of 1933, as
      amended (the &#8220;Securities Act&#8221;), and Section 21E of the Securities Exchange Act
      of 1934, as amended (the &#8220;Exchange Act&#8221;). Those statements appear in a number of
      places herein and include statements regarding the intent, belief or current
      expectations of the Company with respect to, among others things: (i) the
      development of the Company&#8217;s business; (ii) the targeting of industries that
      will require the use of the business; (iii) trends affecting the Company&#8217;s
      financial condition or results of operation; and (iv) the Company&#8217;s business and
      growth strategies. Prospective investors are cautioned that any such
      forward-looking statements are not guarantees of future performance and involve
      risks and uncertainties, and that actual results may differ materially from
      those projected, expressed or implied, in the forward-looking statements as
      a
      result of various factors. The accompanying information contained herein
      identifies important factors that could cause such differences. Such
      forward-looking statements speak only as of the date of this Current Report
      on
      Form 8-K and the Company cautions potential investors not to place undue
      reliance on such statements.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">8</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Information</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      with
      respect to Capital Partners is based on information provided to the Company
      by
      Capital Partners prior to the Merger and, although the Company has performed
      due
      diligence inquiry as to Capital Partners, there can be no assurances that such
      information is accurate in all respects. Information regarding market and
      industry statistics contained herein is included based on information available
      to the Company that it believes is accurate. It is generally based on industry
      and other trade publications that are not produced for purposes of securities
      offerings or economic analysis. The Company has not reviewed or included data
      from all sources, and the Company cannot assure potential investors of the
      accuracy or completeness of the data included herein. Forward-looking
      information obtained from these sources are subject to the same qualifications
      and the additional uncertainties accompanying any estimates of future market
      size, revenue and market acceptance of products and services. The Company has
      no
      obligation to update forward-looking information to reflect actual results
      or
      changes in assumptions or other factors that could affect those statements.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Business
      Risks</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Competition</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Capital
      Partners will experience significant competition, and there are virtually no
      barriers to entry into its business. In the health club industry, there are
      numerous large chains with substantially greater resources, which include Bally
      Total Fitness Holding Corporation, Life Time Fitness, Inc. (both publicly
      traded), 24 Hour Fitness Worldwide, Inc., Town Sports International, Inc.,
      LA
      Fitness, The Sports Club Company, Inc. and The WellBridge Company, doing
      business under various names like Northwest Athletic Club. These larger chains
      have the ability to enter into select markets and subsidize the cost of
      operations in order to gain market share through a variety of strategies which
      include price wars, massive advertising campaigns, and the ability to offer
      superior amenities. They tend to have access to greater amounts of capital,
      enabling them to erect state of the art facilities and to attract top talent,
      which may include Capital Partners&#8217; employees. In addition, by being able to
      promote national brands, they can in certain instances stretch their advertising
      dollars further, due to the ability to amortize expenditures over a larger
      number of clubs, as well as to enter into strategic alliances with other
      national brands for co-marketing of the brands on a national basis. These larger
      competitors tend to offer a wider scope of products and services to their
      customers, including amenities at larger clubs, such as swimming pools, spa&#8217;s,
      rock climbing walls, racquet sports and other sports, not currently offered
      by
      Capital Partners, as well as other services such as full menu food offerings,
      wellness programs and salons, as well as branded apparel and food
      products.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">There
      is
      also significant competition from comparably sized chains and smaller unit
      operators, in addition to health club facilities operated by the YMCA and
      similar not-for-profit organizations, local governmental and hospital health
      care and recreational facilities, country clubs, tennis and other athletic
      clubs, schools, recreational facilities in office and other buildings,
      condominium and townhome association amenities and home-use equipment.
</font></div>
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        </div>
      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">9</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">While
      the
      Company believes that Capital Partners and other businesses that it may acquire
      in the health club industry will be competitive and able to maintain and grow
      their businesses, it is expected that competition will intensify over time.
      In
      addition, the Company in most instances expects to structure acquisitions on
      an
      earn-out basis where some portion of the purchase price will be contingent
      on
      future performance, which is intended to incent the sellers to continue the
      operations of the facilities aggressively following purchase. There can be
      no
      assurances that the sellers will have the same level of enthusiasm for the
      operation of the businesses following sale, or that if they cease performing
      services for the businesses, the Company will be able to install replacement
      management with the same skill sets and determination as the sellers. The
      Company will typically negotiate for a noncompete agreement from the key
      seller(s) of a business; however, following the termination of the noncompete
      period, there is always a risk that the seller will attempt to reenter the
      market and possibly seek to recruit some of the former employees of the
      business, who may continue to be key employees of the business that the Company
      acquires. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Prior&#160;Dealings
      with Jeremy Jaynes</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.&#160;
      &#160;In 2002, the founder&#160;&#160;(Edward "Ted" Sampson)&#160;of Kapital
      Engine Investments, Inc. ("KEI"), the predecessor&#160;entity to &#160;Capital
      Partners, sold a 47.5% interest in KEI to Mr. Jeremy Jaynes for $4,125,000,
      comprised of $2,000,000 of&#160; cash and the balance by note.&#160; In 2003,
      the founder sold the remaining 52.5% of KEI to Mr. Randall Rohm and a second
      purchaser (no longer a stockholder) for $3,900,000 comprised of $1,000,000
      of
      cash and a note for the balance, with Mr. Rohm retaining voting control over
      all
      of such shares and effective control of the operations of KEI.&#160; In 2005,
      the shares of the subsidiary entities which operate all of the Capital Partners
      health clubs were assigned by KEI to Capital Partners.&#160; Subsequently in
      2005, Mr. Rohm entered into an agreement with Mr. Jaynes where he acquired
      100%
      of Mr. Jaynes' stock and economic interest in KEI for $628,425.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      2004,
      Mr. Jaynes was convicted of violation of the Virginia anti-spamming statute
      and
      sentenced as a felon to nine years in prison.&#160; This related to Mr. Jaynes'
      unsolicited sending of unwanted emails to persons in excess of legally permitted
      levels, as well as using deceptive routing to hide the source of the emails.
      This conviction is under appeal.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mr.
      Jaynes&#160;has also been implicated in connection with his alleged involvement
      in a so-called &#8220;pump and dump&#8221; penny stock scheme involving a public shell
      company named Absolute Health &amp; Fitness, Inc. (&#8220;AHFI&#8221;). The Securities &amp;
Exchange Commission (&#8220;SEC&#8221;) has filed a civil suit in Florida naming certain
      individuals who allegedly participated in the scheme.&#160; The complaint states
      that Mr. Rohm was the majority owner of two holding companies that operated
      several fitness centers which Mr. Jaynes had proposed to be merged with AHFI,
      and that Mr. Rohm subsequently broke off negotiations for the sale of the
      businesses to AHFI.&#160; However, the complaint states that the stock promoters
      acted as if the merger had occurred and that the signature appearing under
      Mr.
      Rohm&#8217;s name was not Mr. Rohm's signature.&#160;&#160;&#160; The complaint
      further states that Mr. Rohm never executed an agreement to merge his companies
      with AHFI. Although Mr. Jaynes was not named as a defendant, it is possible
      that
      he will be named as a defendant in the lawsuit or in subsequent criminal
      proceedings regarding the SEC allegations.</font></div>
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      </div>
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        </div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company has performed what it considers to be a commercially reasonable level
      of
      due diligence with respect to the above matters and believes Mr. Rohm and Mr.
      Sampson to be innocent of the alleged wrongdoings surrounding Mr. Jaynes or
      the
      other parties in the SEC complaint based upon the information of which the
      Company is presently aware.&#160; In addition, Mr. Rohm has delivered to the
      Company a letter dated December&#160;15, 2004, from the office of the US
      Attorney for the Eastern District of North Carolina stating that as of that
      date
      neither Mr. Rohm nor Mr. Sampson was the target of any investigation being
      conducted by that office.&#160; Nevertheless, it is expected that there will be
      significant publicity in the future regarding the AHFI stock scheme and possible
      &#160;attempts by the press to link Mr. Rohm and/or Mr. Sampson to the
      activities of Mr. Jaynes and other persons accused of wrongdoing.&#160; This
      could have a material adverse impact on the Company and the market price of
      the
      Company&#8217;s common stock irrespective of the merits of such allegations.&#160; In
      addition, notwithstanding the due diligence conducted to date by the Company,
      there is always a risk that there are matters which differ from its present
      understanding, which could implicate these individuals in such wrongdoing.&#160;
Current and prospective investors in the Company should consider these factors
      and their possible impact on the Company.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Troubleshooter
      Investigation</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.&#160;
      In early February 2006, several articles appeared in the Raleigh press, as
      well
      as several local television stories, addressing complaints regarding Capital
      Partners&#8217; health clubs.&#160; One such article states that there were more
      than&#160;200 complaints over the past thirty-six months with the Better
      Business Bureau ranging from matters such as broken exercise equipment in select
      locations to complaints regarding sanitation and improper billing and collection
      practices. The article states that the North Carolina Attorney General's Office
      is investigating over 350 complaints over the past three years.&#160; Management
      of Capital Partners has advised that with nine clubs and over 55,000 members,
      it
      is inevitable that complaints will be lodged by members, and that this average
      annual volume of complaints constitutes less than one half of one percent of
      the
      annual membership at the clubs.&#160;&#160;Nevertheless,&#160;any adverse
      publicity could have a material adverse impact on membership at the clubs and
      on
      the market price of the Company&#8217;s common stock, and could result in fines,
      requirement for remedial action, or&#160;possibly more severe sanctions from the
      applicable regulatory authorities.&#160; The Company's business plan includes
      addressing necessary&#160;repairs, maintenance and sanitation actions to operate
      and maintain the clubs&#160;to a level of high member satisfaction.&#160; There
      can be no assurances that the Company will be able to operate the clubs in
      this
      manner.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Brands
      and Reputation</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
&#8220;Health Partners&#8221; and &#8220;Capital Partners&#8221; brands are not well known, and
      developing adequate brand awareness may not be possible or may be too costly
      to
      achieve. Many of the Company&#8217;s competitors have much more widespread brand
      awareness and much more financial ability to promote their brands. In addition,
      the brands and reputations of Health Partnership and Capital Partners are
      closely associated with the business and personal reputations of Messrs. Lee
      Wiskowski, Douglas Stukel, Gerard Jacobs and Randall Rohm. Any damage to the
      business or personal reputation of one or more of these individuals could have
      a
      material adverse effect on the Company&#8217;s business, results of operations,
      financial condition and the trading price of the Company&#8217;s common
      stock.</font></div>
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    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Governmental
      Regulation</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      All
      areas of the operations of health clubs are subject to regulation on the
      federal, state and local levels. A significant aspect of the success of a health
      club is its ability to advertise and bring in new members to grow revenues
      as
      well as to replace terminating members. Health club advertisements and
      membership plans have drawn significant scrutiny from the Federal Trade
      Commission as well as its counterparts on the state and local levels, especially
      associated with the truthfulness of the advertising programs and terms of their
      membership contracts. State statutes have been enacted and/or proposed to
      regulate the health club industry, including related to:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Giving
      the member the right to a period of typically three to ten days following the
      signing of a contract, during which period of time the individual can cancel
      a
      membership contract;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Establishment
      of limits on the time period and dollar amounts of contracts issued to
      members;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Requiring
      the posting of bonds and/or escrowing of monies collected in connection with
      pre-opening membership drives, as well as limiting the time period in which
      such
      drives may be effected; and</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="MARGIN-LEFT: 36pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 9pt">&#160;&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Regulation
      of so-called deceptive trade practices, where the terms of the membership are
      deemed to be misleading, or where the offering of negotiated or differing
      membership terms to individuals may be deemed to be discriminatory.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      existing and future legislation governing the industry will require continued
      awareness by the Company and could impact the way business is done in the
      future. These costs may result in reduced margins, as there may be no way of
      passing on the benefit of this compliance to the consumer.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">To
      date,
      Capital Partners has not been subject to any significant adverse governmental
      enforcement proceedings; however, as noted in &#8220;Troubleshooters&#8221; above, there
      have been a certain number of complaints and there may be a current
      investigation by The North Carolina Attorney General&#8217;s Office as to the
      operation and business practice of Capital Partners.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Dependence
      on Key Employees</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Company&#8217;s success depends to a significant degree upon the continuing
      contributions of its key management, Lee Wiskowski, Douglas Stukel and Gerard
      Jacobs, who will oversee the acquisition and finance strategies of the Company
      as well as of the key employees from Capital Partners, which initially shall
      include Randall Rohm. The Company does not maintain key man insurance with
      respect to any of these individuals. The loss of any of these individuals could
      have a material adverse effect upon the Company and its operations. The Company,
      through Capital Partners, has entered into an employment agreement with Mr.
      Rohm
      and anticipates that it will enter into additional employment contracts with
      certain of the key operations employees of the Company, but no other contracts
      currently exist. Messrs. Wiskowski, Stukel and Jacobs have substantial other
      business interests and will not be devoting their full time to the Company&#8217;s
      business. The Company does not have employment agreements with Messrs.
      Wiskowski, Stukel or Jacobs, and could be required to spend significant time,
      attention and money in finding replacements should any of them no longer be
      associated with the Company. There is no assurance the Company would be able
      to
      find similarly qualified replacements which could have a material adverse effect
      on the Company&#8217;s business, results of operations, financial condition and the
      trading price of the Company&#8217;s common stock.</font></div>
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    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Need
      for Accounting Personnel and Systems</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Company is conducting a search for a chief financial officer. The Company also
      intends to locate a financial controller for Capital Partners. There is no
      assurance that the Company will be able to promptly locate and hire such a
      qualified chief financial officer, nor that Capital Partners will be able to
      promptly locate and hire a competent financial controller, nor at compensation
      levels acceptable to the Company. Failure to locate such individuals on terms
      satisfactory to the Company and Capital Partners could have a material adverse
      effect on the Company&#8217;s business, results of operations, financial condition and
      the trading price of the Company&#8217;s common stock. In addition, the Company and
      its independent accountants believe that Capital Partners must migrate its
      internal financial accounting onto a robust general accounting system, and
      a
      failure to do so could have a material adverse effect on the Company&#8217;s business,
      results of operations, financial condition and the trading price of the
      Company&#8217;s common stock, and could potentially lead to deficiencies in regard to
      the Company&#8217;s internal financial controls and reporting.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Insider
      Control</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Certain
      individuals and entities controlled by them own a substantial majority of the
      Company&#8217;s common stock. Accordingly, they have substantial influence over the
      Company&#8217;s policies and management. The Company may take actions supported by
      them that may not be viewed by some stockholders to be in the Company&#8217;s best
      interest.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Geographic
      Expansion</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Capital
      Partners currently operates in the Raleigh-Durham market and has been the
      dominant health club company in that market due to its rapid expansion and
      the
      relatively low cost of its club memberships, which may make the market less
      attractive to new entrants. To the extent that expansion into new geographic
      markets is effected by internal growth as opposed to acquisition, the Company
      may experience greater difficulty than in its current market due to the
      entrenchment of existing competition, which may compete vigorously to avoid
      the
      loss of customers. In addition, profitability of operations is often tied in
      large part to the ability to operate multiple facilities in a market, which
      enable the operator to amortize advertising expenditures over a larger base,
      benefit from name recognition in the community, ability to retain a customer
      who
      moves from one sector of the area to another and the ability to attract and
      retain high quality employees who can oversee multiple location
      facilities.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      success of Capital Partners in the Raleigh-Durham market may be due in large
      part to the familiarity of its management with both the customs of the local
      market and the geographic nuances of the market. As it seeks to expand into
      other markets, there will be less familiarity with the drivers to success in
      those markets. In addition, site selection will be critical, and there can
      be no
      assurances that access to geographical and demand generation information will
      be
      sufficient to ensure success in those markets.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Membership
      Retention and Need for New Members</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Company&#8217;s success will be tied in large part to its ability to continue to
      attract and retain new members. There can be no assurances that the Company
      will
      be successful in this regard or that the market will continue to generate new
      prospective members in sufficient numbers. See &#8220;Competition&#8217;&#8221; above. The Company
      believes that the health club industry experiences significant turn over in
      memberships due to a variety of reasons, including members switching to clubs
      with other amenities, the decision to simply not renew the membership, moving
      to
      new locales and financial inability to continue as members. Consequently, the
      Company believes it must attract and retain a large number of paying members
      on
      an ongoing basis. To do so, the Company must continue to invest significant
      resources in order to enhance its existing facilities, equipment and services,
      and to introduce new high-quality facilities, equipment and services. Further,
      if the Company is unable to predict member preferences or industry changes,
      or
      if the Company is unable to modify its facilities, equipment and services on
      a
      timely basis, the Company may lose existing members and may fail to attract
      new
      members. There is no assurance that the Company will have the personnel,
      financial or other resources required to enhance existing and introduce new
      facilities, equipment and services. Failure to enhance or develop facilities,
      equipment and services or to respond to the needs of members in an effective
      or
      timely manner could have a material adverse effect on the Company&#8217;s business,
      results of operations, financial condition and the trading price of the
      Company&#8217;s common stock. The Company cannot provide any assurances that it will
      be able to add more members than it loses each month. Failure to increase the
      Company&#8217;s membership on a cost-effective basis could have a material adverse
      effect on the Company&#8217;s business, results of operations, financial condition and
      the trading price of the Company&#8217;s common stock.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Trademark
      Protection</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Capital
      Partners has been operating under the &#8220;Beyond Fitness&#8221; service mark since its
      inception. To date, no Federal Registration application has been submitted
      for
      the service mark and Capital Partners has been relying upon its common law
      rights with respect to the mark. The Company expects to submit a federal
      registration application in the near future. There can be no assurances that
      the
      US Patent and Trademark Office will grant a federal registration for the service
      mark or that if granted, it will be enforceable at all, or with respect to
      all
      current or future anticipated uses by the Company. In a preliminary search
      of
      registered marks, the mark &#8220;Beyond Fitness&#8221; was granted to one registrant in
      2003 for the provision of wellness services (showing first use in 1997), which
      although not directly related to health club and personal training services,
      is
      in the general health care field. While the Company believes that Capital
      Partners has enforceable rights in the Beyond Fitness mark, there can be no
      assurances that the mark will be registered or given sufficiently broad
      protection. Even if the Beyond Fitness mark is fully registered, the Company
      will be required to enforce the mark against potential infringers, and would
      have to bear costs in connection with any such proceedings. There is always
      a
      risk that in connection with an enforcement proceeding, the court could declare
      the prior grant of the mark to be invalid or unenforceable.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Leases</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Certain
      of the leases for the Capital Partners facilities typically have change in
      control provisions, which were triggered upon the Merger or which were triggered
      in connection with a prior change of control in 2003. Not all of the required
      landlord consents were obtained upon the closing of the Merger. The requisite
      landlord consents were obtained for all of Capital Partners&#8217; leases except the
      two month-to-month leases where management anticipates moving to a new location
      and/or consolidating the members in one of its other nearby clubs, and the
      health club located in Fuquay Varina, North Carolina. Capital Partners has
      engaged in preliminary discussions with the landlord of the Fuquay Varina
      facility and, based on these negotiations, it believes that the landlord is
      willing to provide its consent upon receipt of additional security deposit
      funding. Management intends to continue to negotiate for a less costly
      concession. However, there can be no assurances that such landlord will grant
      the consent and will not choose to terminate the lease. In addition, there
      can
      be no assurances that moving Capital Partners&#8217; members who currently support
      clubs on month-to-month leases into new or existing clubs can be effected on
      a
      timely and cost effective basis or that the members will accept any such new
      facility. To the extent a consent is not obtained, Capital Partners may be
      required to vacate the premises and open a new club in a new location and may
      have potential exposure with respect to the lease. Prior to the Merger,
      management of Capital Partners advised the Company that the opening of a new
      facility is often quite easy and can be done quickly, however there can be
      no
      assurances that this will be the case or that there will not be significant
      member loss in connection with a new club location. In addition, there would
      be
      a need to invest in additional leasehold improvements in the event of such
      a
      move, and there can be no assurances that the Company would have the capital
      necessary to effect the same. </font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Ability
      to Access Sufficient Capital for Future Acquisitions and
      Developments</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Continued growth of the Company through its strategy to acquire additional
      health club facilities will be contingent upon the Company having access to
      sufficient capital from a variety of sources, including equity raises, debt
      financing, internally generated earnings and the ability to use its stock as
      currency&#8212;which in turn is contingent in large part upon the Company&#8217;s ability to
      maintain a liquid market for its shares at acceptable price levels. There can
      be
      no assurances that the Company will be able to borrow sufficient capital to
      meet
      its needs, or if so, that such loan and/or new equity will be provided on terms
      satisfactory to the Company or to investors. </font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      the
      event that the Company is able to borrow monies to fund acquisitions and/or
      operations, it will be subject to leverage. Typically, leverage results in
      less
      dilution than in connection with equity financings. However, it also increases
      the risk profile of the Company in that cash is required to service the debt,
      ongoing covenants are typically employed which can restrict the way in which
      the
      Company is operated and, if the financing comes due either upon maturity or
      an
      event of default, the Company may lack the resources at that time to either
      pay
      off or refinance the debt, or if it is able to refinance, it may be on terms
      that are less favorable than those originally in place, and may require
      additional equity or quasi equity accommodations. This is particularly true
      with
      respect to the Purchase Money Notes, which come due on June 30, 2006; should
      the
      Company be unable to raise sufficient new capital and/or refinance the balance
      due on the Purchase Money Notes as of their maturity dates, the Company could
      be
      adversely affected.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Development
      of new club facilities requires significant additional capital. This includes
      monies necessary to fund leasehold improvements and purchase of equipment (to
      the extent equipment financing is not available). In addition, if the Company
      begins to develop larger facilities, it may be more beneficial to own the
      facilities due to the significant capital expenditures that would not be
      recouped in the event of lease termination. There can be no assurances that
      the
      Company will have sufficient capital available to fund the cash down payment
      and/or the necessary credit to fund mortgage financing for owned
      facilities.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Accounting
      Projections</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Any
      accounting projections used by the Company as to future events are based upon
      assumptions made by the Company regarding the future. There is no assurance
      that
      actual events will correspond with these assumptions. Actual results for any
      period may or may not approximate such statements. In the event that the Company
      experiences delays in raising capital, the Company&#8217;s business plan may be
      adversely affected.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Significant
      Fluctuations in Quarterly Operating Results</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Company may experience significant fluctuations in future quarterly operating
      results from a number of factors, including: (i) the timing and nature of
      expansion efforts in both new and existing markets; (ii) the introduction of
      new
      products or services and the market response to those introductions; (iii)
      the
      timing and nature of sales transactions and accounting treatment with respect
      to
      customer contracts; (iv) seasonal trends; (v) changes in pricing policies or
      service offerings; (vi) changes in the level of marketing and other operating
      expenses to support future growth; (vii) competitive factors; and (viii) general
      economic conditions. Consequently, quarterly revenue and operating results
      may
      fluctuate significantly, and the Company believes that period-to-period
      comparisons of results will not necessarily be meaningful and should not be
      relied upon as an indication of future performance. Furthermore, due to the
      foregoing factors, among others, it is likely that the Company's future
      quarterly operating results from time to time may not meet the expectations
      of
      research analysts or investors, which may have an adverse effect on the price
      of
      the Company&#8217;s common stock.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Management
      of Growth</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Company's anticipated growth through acquisitions and organic expansion is
      expected to place a significant strain on the Company's managerial, operational,
      technical and financial resources. The Company expects operating expenses and
      staffing levels to increase substantially in the future as the Company expands.
      To manage its growth, the Company must expand its operational and technical
      capabilities, increase, train and manage its employee base and manage multiple
      relationships with customers, suppliers and other third parties. There can
      be no
      assurance that the Company will be able to manage its expanding operations
      effectively. Any failure of the Company to implement effective management and
      operating systems, add resources on a cost-effective basis or effectively manage
      the Company's expansion could have a material adverse effect on the Company's
      business, results of operations, financial condition and the trading price
      of
      the Company&#8217;s common stock.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Need
      for Additional Capital</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Company will need to procure additional financing over time, the amount and
      timing of which will depend on a number of factors including the pace of
      expansion of the Company's markets and customer base, services offered and
      development efforts and the cash flow generated by its operations. The Company
      cannot predict the extent to which it will require additional financing. There
      can be no assurance regarding the availability or terms of additional financing
      the Company may be able to procure over time. Any future debt financing or
      issuance of preferred equity by the Company could be senior to the rights of
      shareholders, and any future issuance of equity could result in the dilution
      of
      the then existing owners' proportionate equity interests in the
      Company.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Actions
      Not Requiring Your Approval</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      terms and conditions of any acquisition could require the Company to take
      actions that would not require shareholder approval. In order to acquire certain
      companies or assets, the Company may issue additional shares of common or
      preferred stock, borrow money or issue debt instruments including debt
      convertible into capital stock. Not all of these actions would require your
      approval even if these actions dilute your economic or voting interest as a
      shareholder.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Acquisitions</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Company may not be able to identify, negotiate, finance or close acquisitions.
      A
      significant component of the Company&#8217;s growth strategy focuses on acquiring
      additional companies or assets. The Company may not, however, be able to
      identify or acquire companies or assets on acceptable terms if at all.
      Additionally, the Company may need to finance all or a portion of the purchase
      price for an acquisition by incurring indebtedness. There can be no assurance
      that the Company will able to obtain financing on terms that are favorable,
      if
      at all, which will limit the Company&#8217;s ability to acquire additional companies
      or assets in the future. Failure to acquire additional companies or assets
      on
      acceptable terms, if at all, would have a material adverse effect on the
      Company&#8217;s ability to increase assets, revenues and net income and on the trading
      price of the Company&#8217;s common stock.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Integration
      of Acquired Businesses</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Company may be unable to successfully integrate acquired businesses. Even if
      the
      Company is able to acquire additional companies or assets, the Company may
      not
      be able to successfully integrate these companies or assets. For example, the
      Company may need to integrate widely dispersed operations with different
      corporate cultures, operating margins, competitive environments, computer
      systems, compensation schemes, business plans and growth potential requiring
      significant management time and attention. Failure to successfully integrate
      acquired businesses could have a material adverse effect on the Company&#8217;s
      business, results of operations and financial condition and the trading price
      of
      the Company&#8217;s common stock.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div><br>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Earnouts</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Company has agreed to pay earnouts in regard to its acquisition of Capital
      Partners. The Company will likely also agree to contingent payout arrangements
      in connection with future acquisitions. There is no assurance that the Company
      will have cash available to pay these earnouts if they are earned. Thus, the
      Company may have to borrow additional monies or sell additional equity to raise
      the needed funds, which may have a material adverse effect on the Company&#8217;s
      results of operations, financial condition, business prospects and the trading
      price of the Company&#8217;s common stock. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Investment
      Risks</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>National
      Securities Listing</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Listing
      on a national exchange such as the American Stock Exchange (&#8220;AMEX&#8221;), or NASDAQ
      Capital Market or NASDAQ National Market may be sought, but is not assured.
      There is no guarantee that if such listing is pursued the Company, it will
      meet
      the listing requirements or that such efforts to list the Company&#8217;s common stock
      on any national or regional exchange or the NASDAQ SmallCap market will be
      successful, or if successful, will be maintained, including but not limited
      to
      requirements associated with maintenance of a minimum net worth, minimum stock
      price and ability to establish a sufficient number of market makers.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>The
      Company Does Not Expect to Pay Dividends</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
      the
      foreseeable future, it is anticipated that earnings, if any, which may be
      generated from the Company&#8217;s operations will be used to finance the growth of
      the Company and that dividends may not be paid to holders of shares of the
      Company&#8217;s common stock.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>The
      Company&#8217;s Articles of Incorporation, Bylaws and State Law May Contain Provisions
      that Preserve Current Management</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Provisions of state law, the Company&#8217;s articles of incorporation and by-laws may
      discourage, delay or prevent a change in the Company&#8217;s management team that
      stockholders may consider favorable. These provisions will be likely to
      include</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">:</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">authorizing
                the issuance of &#8220;blank check&#8221; preferred stock without any need for action
                by stockholders;</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

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            <td align="right" style="width: 72pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Symbol, serif">&#183;&#160;&#160;</font></td>
            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">permitting
                stockholder action by written consent;
                and</font></div>
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    <div>
      <table cellpadding="0" cellspacing="0" id="list" width="100%">

          <tr valign="top" style="line-height: 1.25;">
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">establishing
                advance notice requirements for nominations for election to the board
                of
                directors or for proposing matters that can be acted on by stockholders
                at
                stockholder meetings.</font></div>
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      provisions, if included in the Company&#8217;s articles of incorporation or by-laws,
      could allow the Company&#8217;s board of directors to affect the investor&#8217;s rights as
      a stockholder since the board of directors can make it more difficult for
      preferred stockholders or common stockholders to replace members of the board.
      Because the board of directors is responsible for appointing the members of
      the
      management team, these provisions could, in turn, affect any attempt to replace
      the current or future management team. </font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>There
      are Additional Costs of Being a Public Company and those Costs may be
      Significant</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Company is subject to the information and reporting requirements of the U.S.
      securities laws. The U.S. securities laws require, among other things, review,
      audit and public reporting of the Company&#8217;s financial results, business
      activities and other matters. The public company costs of preparing and filing
      registration statements, as well as annual and quarterly reports, proxy
      statements and other information with the SEC and furnishing audited reports
      to
      stockholders will cause expenses to be higher than if it were privately-held.
      These increased costs may be material and may include the hiring of additional
      employees and/or the retention of additional consultants and professionals.
      Failure by the Company to comply with the federal or state securities laws
      could
      result in private or governmental legal action against the Company and/or its
      officers and directors, which could have a detrimental effect on the business
      and finances of the Company, the value of the Company&#8217;s stock and the ability of
      stockholders to resell their stock.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>The
      Common Stock of the Company may be Considered &#8220;Penny Stock&#8221; and may be Difficult
      to Trade</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>.</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      The SEC
      has adopted regulations which generally define &#8220;penny stock&#8221; to be an equity
      security that has a market or exercise price of less than $5.00 per share,
      subject to specific exemptions. The market price of the Company&#8217;s common stock
      may be less than $5.00 per share and, therefore, may be designated as a &#8220;penny
      stock&#8221; according to SEC rules. This designation requires any broker or dealer
      selling these securities to disclose certain information concerning the
      transaction, obtain a written agreement from the purchaser and determine that
      the purchaser is reasonably suitable to purchase the securities. These rules
      may
      restrict the ability of brokers or dealers to sell the Company&#8217;s common stock
      and may affect the ability of investors to sell their shares. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Certain
      of the Company&#8217;s Shares are Eligible for Sale, and their Sale Could Depress the
      Market Price of its Stock</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Much of
      the Company&#8217;s common stock is subject to resale under Rule 144, subject to
      certain volume limitations. Shares which are not registered may be offered
      from
      time to time in the open market pursuant to Rule 144, and these sales may have
      a
      depressive effect on the market for the Company&#8217;s common stock. In general, a
      person who has held restricted shares for a period of one year may, upon filing
      with the SEC a notification on Form 144, sell into the market shares of the
      Company&#8217;s common stock in an amount equal to the greater of 1% of the
      outstanding shares or the average weekly number of shares sold in the last
      four
      weeks prior to such sale. Such sales may be repeated once each three months,
      and
      any amount of the restricted shares may be sold by a non-affiliate after they
      have been held two years.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Indemnification
      of Officers and Directors</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      The
      Company intends to indemnify its officers and directors to the fullest extent
      permissible under the law. Under most circumstances, the Company's officers
      and
      directors may not be held liable to the Company or its equity owners for errors
      in judgment or other acts or omissions in the conduct of the Company's business
      unless such errors in judgment, acts or omissions constitute fraud, gross
      negligence or malfeasance.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Management&#8217;s
      Discussion and Analysis of Financial Condition and Results of
      Operations.</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      following discussion of the historical results of operations, liquidity and
      capital resources of Kapital Engine Investments, Inc. and its subsidiaries
      (collectively, &#8220;Kapital Engine&#8221;), which is the predecessor to Capital Partners,
      should be read in conjunction with the consolidated financial statements and
      related notes that appear elsewhere in this Current Report on Form 8-K. For
      purposes of this discussion, the terms &#8220;Kapital Engine&#8221; and &#8220;Capital Partners&#8221;
shall be synonymous. This discussion contains forward-looking statements that
      involve risks and uncertainties. Capital Partners&#8217; actual results could differ
      materially from those anticipated in these forward-looking statements as a
      result of various factors, including those discussed in &#8220;Risk Factors&#8221; beginning
      on page 8 of this Current Report on Form 8-K.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>&#160;</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Overview</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Capital
      Partners is primarily engaged in design, management and operation of fitness
      centers, principally in the Raleigh, North Carolina area. As of September 30,
      2005, Capital Partners owned and operated nine fitness clubs. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      fitness clubs generally offer weight training, cardiovascular equipment,
      aerobics classes, yoga, tanning, babysitting and basketball courts. Operations
      focus on prospecting for new members, membership sales, and renewals.&#160;
Memberships may be prepaid or paid monthly. The majority of the memberships
      sold
      are for two-year periods.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">This
      discussion compares the results of Capital Partners&#8217; centers based on how long
      the centers have been open at the most recent measurement period. Capital
      Partners includes a center for comparable center revenue purposes beginning
      on
      the first day of the thirteenth full calendar month of the center&#8217;s operation,
      prior to which time the center is referred to as a new center. As Capital
      Partners grows its presence in existing markets by opening new centers, it
      expects to attract some memberships away from its other existing centers already
      in those markets, thereby reducing revenue and initially lowering the
      memberships of those existing centers. In addition, as a result of new center
      openings in existing markets, and because older centers will represent an
      increasing proportion of Capital Partners&#8217; center base over time, Capital
      Partners&#8217; comparable center revenue increases may be lower in future periods
      than in the past. Future plans include expansion into markets closely
      surrounding the Raleigh Durham market area (the &#8220;triangle&#8221;). These areas are
      rapidly expanding due to decreased land costs and the willingness of the
      workforce to commute to the triangle. These areas are further from Capital
      Partners&#8217; existing clubs than its previous expansions have been. Therefore
      Capital Partners&#8217; does not anticipate a significant impact on existing club
      revenue. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Capital
      Partners&#8217; measures performance using such key operating statistics as average
      revenue per membership, including membership dues and enrollment fees, average
      in-center revenue per membership and center operating expenses, with an emphasis
      on payroll and occupancy costs, as a percentage of sales and comparable center
      revenue growth. Capital Partners&#8217; uses center revenue and EBITDA margins to
      evaluate overall performance and profitability on an individual center basis.
      In
      addition, Capital Partners&#8217; focuses on several membership statistics on a
      center-level and system-wide basis. These metrics include growth of center
      membership levels and growth of system-wide memberships, percentage center
      membership to target capacity, center membership usage, center membership mix
      among individual, couple and family memberships and center attrition rates.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div><br>
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        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Capital
      Partners&#8217; primarily receives revenue from two sources. First, its largest source
      of revenue is membership dues and enrollment fees paid by its members. Capital
      Partners receives a one-time enrollment fee at the time a member joins and
      monthly membership dues for usage from its members. The enrollment fees
      generally are nonrefundable after three&#160;to ten days. Enrollment fees and
      related direct expenses (primarily commissions) are deferred and recognized
      on a
      straight-line basis over an estimated membership period of twelve to
      thirty-six&#160;months, which is based on the life of the contract. In addition,
      monthly membership dues paid in advance of a center&#8217;s opening are deferred until
      the center opens. Capital Partners offers members month-to-month memberships
      and
      recognizes as revenue the monthly membership dues in the month to which they
      pertain. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Second,
      Capital Partners generates revenue at its centers from rental revenue from
      several third party vendors who operate refreshment areas within each fitness
      center. Rental revenue from this activity is recognized monthly. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      fitness center operations expenses consist primarily of salary, commissions,
      payroll taxes, benefits, real estate taxes and other occupancy costs, utilities,
      repairs and maintenance, supplies, administrative support and communications
      to
      operate our centers. Advertising and marketing expenses consist of its marketing
      department costs and media and advertising costs to support center membership
      growth. General and administrative expenses include costs relating to Capital
      Partners&#8217; centralized support functions, such as accounting, information
      systems, procurement and member relations and other members of senior
      management. Capital Partners&#8217; other operating expenses include other corporate
      expenses, as well as gains or losses on its dispositions of assets. Capital
      Partners&#8217; total operating expenses may vary from period to period depending on
      the number of new centers opened during that period and the number of centers
      engaged in pre-sale activities. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Critical
      Accounting Policies and Estimates</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      preparation of financial statements in conformity with generally accepted
      accounting principles in the U.S., or GAAP, requires the Company to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those estimates.
      In recording transactions and balances resulting from business operations,
      Capital Partners uses estimates based on the best information available. Capital
      Partners uses estimates for such items as depreciable lives, tax provisions
      and
      provisions for uncollectible receivables. Capital Partners also uses estimates
      for calculating the amortization period for deferred enrollment fee revenue
      and
      associated direct costs, which are based on the weighted average expected life
      of center memberships. Capital Partners revises the recorded estimates when
      better information is available, facts change or it can determine actual
      amounts. These revisions can affect operating results. Capital Partners has
      identified below the following accounting policies that it considers to be
      critical.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Revenue
      Recognition &#8212;</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
      Capital
      Partners receives a one-time enrollment fee at the time a member joins and
      monthly membership dues for usage from its members. The enrollment fees
      generally are nonrefundable after three to ten days. Enrollment fees and related
      direct expenses (primarily commissions) are deferred and recognized on a
      straight-line basis over an estimated membership period of twelve to
      thirty-six&#160;months, which is based on the life of the contract. In addition,
      monthly membership dues paid in advance of a center&#8217;s opening are deferred until
      the center opens. Capital Partners offers members month-to-month memberships
      and
      recognizes as revenue the monthly membership dues in the month to which they
      pertain. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Capital
      Partners also receives rental revenue from several third party vendors who
      operate refreshment areas within each fitness center. Rental revenue from this
      activity is recognized monthly. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Fair
      Value of Financial Instruments </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-
      Fair
      value estimates discussed herein are based upon certain market assumptions
      and
      pertinent information available to management. The respective carrying value
      of
      certain on-balance-sheet financial instruments approximated their fair values.
      These financial instruments include cash, accounts receivable, accounts payable,
      and accrued expenses. Fair values were assumed to approximate carrying values
      for these financial instruments since they are short-term in nature and their
      carrying amounts approximate fair values or they are receivable or payable
      on
      demand. The fair value of Capital Partners&#8217; notes payable is estimated based
      upon the quoted market prices for the same or similar issues or on the current
      rates offered to Capital Partners for debt of the same remaining maturities
      and
      approximates the carrying amounts of the notes. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Accounts
      Receivable </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-
      Accounts receivable principally consists of amounts due from Capital Partners&#8217;
membership base. Capital Partners maintains an allowance for doubtful accounts
      for estimated losses resulting from the inability of its members to make
      required payments. Capital Partners considers facts such as: historical
      collection experience, the age of the receivable balance, and general economic
      conditions that may affect its member&#8217;s ability to pay.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Impairment
      of Long-lived Assets </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">-
      The
      carrying value of long-lived assets is reviewed annually and whenever events
      or
      changes in circumstances indicate that such carrying values may not be
      recoverable. Capital Partners considers a history of consistent and significant
      operating losses to be its primary indicator of potential impairment. Assets
      are
      grouped and evaluated for impairment at the lowest level for which there are
      identifiable cash flows, which is generally at an individual location. The
      determination of whether impairment has occurred is based on an estimate of
      undiscounted future cash flows directly related to that center, compared to
      the
      carrying value of these assets. If an impairment has occurred, the amount of
      impairment recognized is determined by estimating the fair value of these assets
      and recording a loss if the carrying value is greater than the fair value.
      For
      the years ended December 31, 2004 and 2003 there was no impairment charge
      recorded. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">21</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Year
      Ended December&#160;31, 2004 Compared to Year Ended December&#160;31,
      2003</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Total
      revenue. </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Total
      revenue increased $2,654,500, or 37.9%, to $9,661,200 for the year ended
      December 31, 2004 from $7,006,700 for the year ended December&#160;31, 2003.
      This was primarily due to the opening of a new fitness center and the purchase
      of an existing facility. The addition of new members by the new facilities
      resulted in a growth in total membership base of 20%. The memberships sold
      by
      the new facilities were primarily pre-paid and account for approximately 25%
      of
      the revenue increase. The remaining revenue increase is due to an overall
      company focus on pre-paid membership sales.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>General
      and administrative expenses. </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">General
      and administrative expenses were $7,998,600 or 85.3%, of total revenue, for
      the
      year ended December&#160;31, 2004 compared to $7,344,100, or 108.7% of total
      revenue, for the year ended December&#160;31, 2003. This decrease primarily
      consisted of decreases of approximately $200,000 in advertising cost, $150,000
      in contracted services, $200,000 in payroll, and $100,000 in professional fees.
      As a percentage of total revenue, these expenses decreased due to the eliminated
      expenses not being performance related (i.e. sales bonus). </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Other
      operating income. </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Other
      operating income was $126,000 for the year ended December 31, 2004 compared
      to
      $150,900 for the year ended December&#160;31, 2003. This $24,900 decrease was
      primarily due to a decrease in subleasing of unused space in the facilities.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Interest
      expense. </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Interest
      expense was $141,700 for the year ended December&#160;31, 2004 compared to
      $124,400 for the year ended December&#160;31, 2003. This $17,300 increase was
      primarily the result of new debt and capital leases.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Net
      income(loss). </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      a
      result of the factors described above, net income (loss) was $1,351,500, or14.4%
      of total revenue, for the year ended December&#160;31, 2004 compared to
      $(609,800), or (9.02)% of total revenue, for the year ended December&#160;31,
      2003. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Nine
      Months Ended September&#160;30, 2005 Compared to the Nine Months Ended
      September&#160;30, 2004</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Total
      revenue. </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Total
      revenue decreased $854,400 or 11.4%, to $6,618,600 for the nine months ended
      September 30, 2005 from $7,473,000 for the nine months ended September&#160;30,
      2004. This decrease does not reflect a decrease in memberships. Rather, the
      decrease is a result of an increase in monthly membership sales and a decrease
      in paid-in-full sales. The decrease is also due to an increase in
      competition.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>General
      and administrative expenses. </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">General
      and administrative expenses were $4,873,100 or 73.6%, of total revenue, for
      the
      nine months ended September&#160;30, 2005 compared to $5,837,000, or 78.1% of
      total revenue, for the nine months ended September&#160;30, 2004. This decrease
      primarily consisted of decreases of approximately $250,000 in advertising cost,
      $150,000 in contracted services, $400,000 in payroll, and $150,000 in
      professional fees. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">22</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Other
      operating income. </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Other
      operating income was $277,400 for the nine months ended September 30, 2005
      compared to $78,800 for the nine months ended September&#160;30, 2004. This
      $198,600 increase was primarily due to advertising revenues generated in the
      facilities and an increase in subleases.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Interest
      expense. </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Interest
      expense was $87,900 for the nine months ended September&#160;30, 2005 compared
      to $120,200 for the nine months ended September&#160;30, 2004. This $32,300
      decrease was primarily the result of loan balances being
      paid-in-full.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Net
      income. </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      a
      result of the factors described above, net income was $1,935,000, or 29.2%
      of
      total revenue, for the nine months ended September 30, 2005 compared to
      $1,594,600, or 21.3% of total revenue, for the nine months ended September
      30,
      2004.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Non-GAAP
      Financial Measures</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Capital
      Partners uses the term &#8220;EBITDA,&#8221; which consists of net income plus interest
      expense, net, provision for income taxes and depreciation and amortization.
      This
      term, as Capital Partners defines it, may not be comparable to a similarly
      titled measure used by other companies and is not a measure of performance
      presented in accordance with GAAP. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Capital
      Partners uses EBITDA as a measure of operating performance. EBITDA should not
      be
      considered as a substitute for net income, cash flows provided by operating
      activities, or other income or cash flow data prepared in accordance with GAAP.
      The funds depicted by EBITDA are not necessarily available for discretionary
      use
      if they are reserved for particular capital purposes, to maintain compliance
      with debt covenants, to service debt or to pay taxes. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Capital
      Partners believes EBITDA is useful to an investor in evaluating its operating
      performance and liquidity because: </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8226;&#160;&#160;</font></div>
            </td>
            <td align="left" valign="top" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">it
                is a widely accepted financial indicator of a company&#8217;s ability to service
                its debt;</font></div>
            </td>
          </tr>
          <tr>
            <td align="left" colspan="5" valign="middle" width="78%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8226;&#160;&#160;</font></div>
            </td>
            <td align="left" valign="top" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">it
                is widely used to measure a company&#8217;s operating performance without regard
                to items such as depreciation and amortization, which can vary depending
                upon accounting methods and the book value of assets, and to present
                a
                meaningful measure of corporate performance exclusive of our capital
                structure and the method by which assets were acquired;
                and</font></div>
            </td>
            <td align="left" valign="top" width="1%">&#160;</td>
            <td align="left" valign="top" width="1%">&#160;</td>
          </tr>
          <tr>
            <td align="left" colspan="5" valign="middle" width="78%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8226;&#160;&#160;</font></div>
            </td>
            <td align="left" valign="top" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">it
                helps investors to more meaningfully evaluate and compare the results
                of
                its operations from period to period by removing from its operating
                results the impact of its capital structure, primarily interest expense
                from its outstanding debt, and asset base, primarily depreciation
                and
                amortization of its properties.</font></div>
            </td>
            <td align="left" valign="top" width="1%">&#160;</td>
            <td align="left" valign="top" width="1%">&#160;</td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">23</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Capital
      Partners uses EBITDA: </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="top" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8226;&#160;&#160;</font></div>
            </td>
            <td align="left" valign="top" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">as
                a measurement of operating performance because it assists it in comparing
                its performance on a consistent basis, as EBITDA removes from Capital
                Partners&#8217; operating results the impact of its capital structure, which
                includes interest expense from Capital Partners&#8217; outstanding debt, and its
                asset base, which includes depreciation and amortization of its
                properties;</font></div>
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          <tr>
            <td align="left" colspan="5" valign="middle" width="78%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8226;&#160;&#160;</font></div>
            </td>
            <td align="left" valign="top" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">in
                presentations to the members of its board of directors to enable
                the board
                to have the same consistent measurement basis of operating performance
                used by management; and</font></div>
            </td>
            <td align="left" valign="top" width="1%">&#160;</td>
            <td align="left" valign="top" width="1%">&#160;</td>
          </tr>
          <tr>
            <td align="left" colspan="5" valign="middle" width="78%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
          </tr>
          <tr>
            <td align="left" valign="top" width="2%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td align="left" valign="top" width="3%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#8226;&#160;&#160;</font></div>
            </td>
            <td align="left" valign="top" width="72%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">as
                the basis for incentive bonuses paid to selected members of senior
                and
                center-level management.</font></div>
            </td>
            <td align="left" valign="top" width="1%">&#160;</td>
            <td align="left" valign="top" width="1%">&#160;</td>
          </tr>
          <tr>
            <td align="left" colspan="5" valign="top" width="78%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
                following table provides a reconciliation of net income, the most
                directly
                comparable GAAP measure, to EBITDA:</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><br></div>
    <div>&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" id="ftable" width="100%">

          <tr>
            <td align="left" valign="bottom" width="43%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td width="2%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="left" colspan="5" valign="bottom" width="26%" style="border-bottom: black thin solid;">&#160;

              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">For
                the Nine Months Ended </font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">September
                30,</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="left" colspan="5" valign="bottom" width="26%" style="border-bottom: black thin solid;">
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center">&#160;<font size="2">For
                the Year Ended </font></div>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="center"><font size="2">December
                31</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
          </tr>
          <tr>
            <td align="left" valign="bottom" width="43%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td width="2%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2005</font>&#160;</div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2004</font>&#160;</div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2004</font>&#160;</div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #ffffff solid;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: black thin solid;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2003</font>&#160;</div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff solid;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="bottom" width="43%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Net
                income (loss)</font></div>
            </td>
            <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
            </td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">1,935,000</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
            </td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">1,594,600</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
            </td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">1,351,500</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
            </td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">(609,800</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">)</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="43%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Interest
                expense</font></div>
            </td>
            <td width="2%" style="border-bottom: white;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">87,900</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: white;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">120,200</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: white;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">141,700</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: white;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">124,400</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="bottom" width="43%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Provision
                for income taxes</font></div>
            </td>
            <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">-</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">-</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">-</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">-</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="43%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Depreciation
                and amortization</font></div>
            </td>
            <td width="2%" style="border-bottom: white;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">463,300</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: white;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">463,900</font></div>
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: white;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">589,500</font></div>
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            <td align="left" valign="bottom" width="2%" style="border-bottom: white;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">514,200</font></div>
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: white;">&#160;</td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="left" valign="bottom" width="43%" style="border-bottom: #ccffcc;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: #ccffcc;">
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: #ccffcc;">
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: #ccffcc;">
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: #ccffcc;">
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="left" valign="bottom" width="43%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">EBITDA</font></div>
            </td>
            <td width="2%" style="border-bottom: white;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
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            <td align="left" valign="bottom" width="1%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">2,178,700</font></div>
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            <td align="left" valign="bottom" width="2%" style="border-bottom: white;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
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            <td align="left" valign="bottom" width="2%" style="border-bottom: white;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">$</font></div>
            </td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: white;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px"><font style="DISPLAY: inline; FONT-SIZE: 10pt; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; MARGIN-RIGHT: 0px; FONT-FAMILY: Times New Roman">28,800</font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: -18pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: #ccffcc;">
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: #ccffcc;">
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: #ccffcc;">
            </td>
            <td align="left" valign="bottom" width="2%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
            <td align="right" valign="bottom" width="11%" style="border-bottom: #ccffcc;">
            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ccffcc;">&#160;</td>
          </tr>

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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Seasonality
      of Business</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Seasonal
      trends have a limited effect on Capital Partners&#8217; overall business. Generally,
      it has experienced greater membership growth at the beginning of the year and
      has not experienced an increased rate of membership attrition during any
      particular season of the year.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Liquidity
      and Capital Resources</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Liquidity</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Historically,
      Capital Partners has satisfied its liquidity needs through various debt
      arrangements capital contributions and cash from operations. Capital Partners
      believes that its cash from operations will be sufficient to satisfy its cash
      requirements during the next twelve months. Principal liquidity needs have
      included the development of new fitness centers, debt service requirements
      and
      expenditures necessary to maintain and update its existing centers and their
      related fitness equipment. Capital Partners believes that it can satisfy its
      current and longer-term debt service obligations and capital expenditure
      requirements with cash flow from operations and by the extension of the terms
      of
      or refinancing its existing debt, although there can be no assurance that such
      actions can or will be completed. Capital Partners&#8217; business model operates with
      negative working capital because it carries minimal accounts receivable due
      to
      Capital Partners ability to have monthly membership dues paid by electronic
      draft and that it defers enrollment fee revenue. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">24</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Operating
      Activities</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      of
      September 30, 2005, Capital Partners had total cash of $20,400. Net cash
      provided by operating activities was $1,061,300 for the nine months ended
      September 30, 2005 as compared to $968,600 for same period in 2004. The increase
      of $92,700 was primarily due to a $240,400 increase in net income adjusted
      for
      non-cash charges and in cash provided by net operating assets and liabilities
      in
      2005 compared to 2004. The cash used by net operating assets and liabilities
      was
      a result of an increased number of memberships. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Net
      cash
      provided by operating activities was $1,080,100 for 2004 compared to $1,268,500
      for 2003. The decrease of $188,400 was primarily due to an increase in
      memberships and deferred revenue during 2004. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Investing
      Activities</em></strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Investing
      activities consist primarily of purchasing and sales of fitness equipment.
      In
      addition, Capital Partners makes capital expenditures to maintain and update
      its
      existing centers. Capital Partners finances the purchase of its fitness
      equipment by cash payments or by financing through notes payable or capital
      lease obligations. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Net
      cash
      used by investing activities was $9,200 for the nine months ended September
      30,
      2005, as compared to $223,700 for same period in 2004. The decrease of $214,500
      was primarily due to the decreased purchases of property and equipment during
      the 2005 period as compared to 2004. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Net
      cash
      used by investing activities was $221,300 for 2004 compared to $191,100 for
      2003. The increase of $30,200 was primarily due to an increase in the purchase
      of property and equipment. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Opening
      new facilities will require financing for new equipment. A 25,000 square foot
      facility typically requires approximately $250,000 in new
      equipment.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><em>Financing
      Activities</em></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Equipment
      is financed by Sun Trust (formerly known as Central Carolina Bank and Trust
      Company) and Life Fitness, a division of Brunswick Corporation, which typically
      sells its leases to CIT following the closing of the financing. They are
      typically three-year leases with a $1 purchase option upon maturity. Upfit
      of an
      existing building is typically financed by Sun Trust. Depending on the work
      required, this cost is between $200,000 and $700,000.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Recent
      Accounting Pronouncements</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      May
      2005, the FASB issued SFAS No.&#160;154, </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Accounting
      Changes and Error Corrections</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      SFAS
      No.&#160;154 changes the requirements for the accounting for and reporting of a
      change in accounting principle. In addition, it carries forward without change
      the guidance contained in APB Opinion No.&#160;20 for reporting the correction
      of an error in previously issued financial statements and a change in accounting
      estimate. SFAS No.&#160;154 requires retrospective application to prior periods&#8217;
financial statements of changes in accounting principle in most circumstances.
      The provisions of SFAS No.&#160;154 are effective in fiscal years beginning
      after December&#160;15, 2005. Capital Partners plans to prospectively adopt SFAS
      No.&#160;154 at the beginning of the 2006 fiscal year. &#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">25</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      June
      2005, the Emerging Issues Task Force (&#8220;EITF&#8221;) reached a consensus on Issue
      No.&#160;05-06, Determining the Amortization Period for Leasehold Improvements
      Purchased after Lease Inception or Acquired in a Business Combination (&#8220;EITF
      05-06&#8221;). EITF 05-06 concludes that the amortization period for leasehold
      improvements acquired in a business combination and leasehold improvements
      that
      are in service significantly after and not contemplated at the beginning of
      the
      lease term should be amortized over the shorter of the useful life of the assets
      or a term that includes required lease periods and renewals that are deemed
      to
      be reasonably assured at the date of inception. As of September&#160;30, 2005,
      this pronouncement had no impact on the financial statements.
&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Other
      recent accounting pronouncements issued by the FASB (including its EITF), the
      AICPA, and the SEC did not or are not believed by management to have a material
      impact on Capital Partners present or future financial statements. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Impact
      of Inflation</strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Capital
      Partners believes that inflation has not had a material impact on its results
      of
      operations for any of the periods presented. It cannot assure you that future
      inflation will not have an adverse impact on its operating results and financial
      condition.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Security
      Ownership of Certain Beneficial Owners and Management</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      following table sets forth information, as of the date of this Current Report
      on
      Form 8-K, regarding the beneficial ownership of the Company&#8217;s common stock on a
      fully-diluted basis by: (1) each of the Company&#8217;s executive officers and
      directors; (2) all of the Company&#8217;s executive officers and directors as a group;
      and (3) each person known by the Company to be the beneficial owners of more
      than 5.0% of the outstanding shares of the Company&#8217;s common stock.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Beneficial
      ownership is determined under the rules of the SEC and generally includes voting
      or investment power over securities. Except in cases where community property
      laws apply or as indicated in the footnotes to this table, the Company believes
      that each stockholder identified in the table possesses sole voting and
      investment power over all shares of the Company&#8217;s common stock shown as
      beneficially owned by the stockholder. Percentage of beneficial ownership is
      based on 19,481,735 shares of the Company&#8217;s common stock outstanding as of the
      date of this Current Report on Form 8-K. The amount of the Company&#8217;s outstanding
      shares of common stock reflects the Stock Consideration issued in the Merger,
      but does not include shares that may be issued in the Offering. Unless indicated
      otherwise in the footnotes, the address of each individual listed in the table
      is c/o Health Partnership Inc., 3111 North Seminary, Suite 1N, Chicago, Illinois
      60657. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="left" valign="bottom" width="29%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Name</strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
            </td>
            <td valign="bottom" width="25%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Shares
                of Common Stock</strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Beneficially
                Owned</strong></font></div>
            </td>
            <td valign="bottom" width="25%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Percentage
                of Common </strong></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Stock
                Beneficially Owned</strong></font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="justify" valign="top" width="29%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Douglas
                Stukel</font></div>
            </td>
            <td valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,831,250</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>(</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>1</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>),
                (4)</sup></font></div>
            </td>
            <td valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14.53%</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="29%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Lee
                Wiskowski</font></div>
            </td>
            <td valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2,831,250</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>(</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>2</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>),
                (4)</sup></font></div>
            </td>
            <td valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">14.53%</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="justify" valign="top" width="29%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Gerard
                Jacobs</font></div>
            </td>
            <td valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">9,437,500</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>(</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>3)</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>&#160;</sup></font></div>
            </td>
            <td valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">48.44%</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="29%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">All
                Officers &amp; Directors</font></div>
            </td>
            <td valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">15,100,000</font></div>
            </td>
            <td valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">77.50%</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="justify" valign="top" width="29%">&#160;</td>
            <td valign="top" width="25%">&#160;</td>
            <td valign="top" width="25%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td align="justify" valign="top" width="29%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>5%
                Stockholders</strong></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
            <td valign="top" width="25%">
            </td>
            <td valign="top" width="25%">
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td align="justify" valign="top" width="29%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Randall
                Rohm</font></div>
            </td>
            <td valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3,279,952</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>(</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>2)(4)</sup></font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
            <td valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">16.84%</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><sup><font size="2">1
      Legal title to these shares is held by DJS
      Investments, LLC (&#8220;DJS&#8221;), a limited liability company controlled by Mr. Stukel.
      DJS has granted certain individuals the option to purchase a portion of the
      shares held by DJS.</font></sup></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><sup><font size="2">2
      Legal title to these shares is held by
      Grander, LLC, a limited liability company controlled by Mr. Wiskowski. Grander
      has granted certain individuals the option to purchase a portion of the shares
      held by Grander.</font></sup></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>3
      Legal title to these shares is held by the Roberti Jacobs Family Trust (the
      &#8220;Trust&#8221;), which is an irrevocable trust whose beneficiaries include Mr. Jacobs&#8217;
children. Mr. Jacobs&#8217; mother-in-law is the current trustee of the Trust. Mr.
      Jacobs has disclaimed any beneficial ownership of any securities, including
      the
      Company&#8217;s common stock, owned by the Trust. The Trust has granted certain
      individuals the option to purchase a portion of the shares held by the
      Trust.</sup></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>4
      Messrs Rohm and Flynn (a former stockholder of Capital Partners) have provided
      Mr. Jacobs, or his designees, with an irrevocable proxy to vote their shares
      until disposed of to and nonaffiliated, and effective upon the initial closing
      of the Offering, it is expected that DJS and Grander will grant to Mr. Jacobs
      or
      his designee an irrevocable proxy to vote their shares until disposed of to
      a
      nonaffiliated.</sup></font></div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">26</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Management</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Set
      forth
      below is information concerning the Company&#8217;s executive officers and directors,
      as well as the current executive officers of Capital Partners.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table cellpadding="0" cellspacing="0" width="100%">

          <tr>
            <td align="justify" valign="top" width="25%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Name</strong></font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="left" valign="top" width="9%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Age</strong></font></div>
            </td>
            <td width="1%">&#160;</td>
            <td align="justify" valign="top" width="48%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Position</strong></font></div>
            </td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Gerard
                Jacobs</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
            <td width="1%">&#160;</td>
            <td align="left" valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">50</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
            <td width="1%">&#160;</td>
            <td align="justify" valign="top" width="48%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Chairman
                of the Board; Chief Executive Officer of the Company</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Douglas
                Stukel</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
            <td width="1%">&#160;</td>
            <td align="left" valign="top" width="9%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">35</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
            <td width="1%">&#160;</td>
            <td align="justify" valign="top" width="48%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Director,
                Vice Chairman, President of the Company</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
          </tr>
          <tr>
            <td align="justify" valign="top" width="25%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Lee
                Wiskowski</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
            <td width="1%">&#160;</td>
            <td align="left" valign="top" width="9%">
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            <td width="1%">&#160;</td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Director,
                Secretary and Treasurer of the Company</font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Ashley
                Shepard</font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">President
                of Capital Partners</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Randall
                Rohm</font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">31</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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            <td width="1%">&#160;</td>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Chief
                Operating Officer of Capital Partners</font></div>
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
            </td>
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      </table>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Gerard
      Jacobs. </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mr.
      Jacobs was appointed as the chairman of the Company&#8217;s board of directors and as
      its chief executive officer upon the closing of the Merger. Since December
      2001,
      Mr. Jacobs has served as the chief executive officer, secretary and treasurer
      of
      CGI Holding Corporation d/b/a Think Partnership Inc., an AMEX listed provider
      of
      internet services including internet advertising, online dating and online
      educational services. Mr. Jacobs also served as president of CGI Holding
      Corporation from December 2001 to December 2005. From March 1999 until December
      2001, Mr. Jacobs was an officer and director of several privately held
      companies. From 1995 until March 1999, Mr. Jacobs served as the chief executive
      officer of Metal Management, Inc., Chicago, Illinois, a NASDAQ listed metal
      processor and dealer. Mr. Jacobs is a graduate of Harvard University, where
      he
      was elected to Phi Beta Kappa, and of The University of Chicago Law School,
      which he attended as a Weymouth Kirkland Law Scholar. Mr. Jacobs was elected
      twice to the Board of Education of District 200, Oak Park and River Forest
      High
      School, Oak Park, Illinois.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Douglas
      Stukel</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>.
      </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mr.
      Stukel was appointed as the Company&#8217;s vice chairman upon the closing of the
      Merger. Mr. Stukel also has served as the Company&#8217;s president and as a member of
      its board of directors since May 2005. In addition, Mr.&#160;Stukel serves as a
      director of Capital Growth Systems, Inc. (&#8220;CGS&#8221;) and as the co-chief executive
      officer of CGS. Mr.&#160;Stukel, together with Mr.&#160;Wiskowski, led the
      investor group which purchased the majority stake in CGS, and subsequently
      raised substantial capital to fund working capital requirements in connection
      with CGS&#8217; acquisitions of Nexvu Technologies, LLC and Frontrunner Network
      Systems, Inc. Nexvu has developed an advanced set of software tools in the
      application performance management services industry. Frontrunner is a
      complementary telephone systems integrator, with expertise in installation,
      sales and management of systems through its network operating center. In
      addition, Mr.&#160;Stukel is a co-founder of Premier Holdings of Illinois, LLC,
      a distributor of medical supplies based in Joliet, Illinois. Mr.&#160;Stukel
      served as the president of Cendant Home Funding, a residential mortgage company
      based in Joliet, Illinois, from 1997 until 2001. Mr.&#160;Stukel is also a
      co-founder of Momentum Capital, LLC, a privately held firm providing financial
      advisory services in connection with mergers and acquisitions and analysis
      as to
      strategic alternatives. As a co-founder of Momentum Capital, LLC,
      Mr.&#160;Stukel's responsibilities are related to the location of potential
      clients, the negotiation of agreements with those clients and the provision
      of
      advisory services related to the clients.</font></div>
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      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">27</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Lee
      Wiskowski. </em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mr.
      Wiskowski also has served as the Company&#8217;s secretary and treasurer and as a
      member of its board of directors since May 2005. Mr.&#160;Wiskowski also serves
      as a director of Capital Growth Systems, Inc. (&#8220;CGS&#8221;) and as a co-chief
      executive officer of CGS. In 1994, Mr.&#160;Wiskowski was the co-founder of
      Madison Securities and early in 1999 was a co-founder of Advanced Equities,
      Inc., both NASD licensed broker-dealers focusing on emerging growth companies.
      During his tenure with these two companies, Mr.&#160;Wiskowski had significant
      responsibility in the companies' raising of capital for private and public
      placements, primarily of high technology companies. Mr.&#160;Wiskowski sold his
      interest to the other principals of Advanced Equities approximately five years
      ago. Since December 2002, Mr.&#160;Wiskowski has been engaged in the business of
      providing financial and advisory services to emerging growth companies through
      Grander, LLC and Momentum Capital, LLC, both privately held advisory and
      consulting firms. As the sole owner of Grander, LLC and co-founder of Momentum
      Capital, LLC, Mr.&#160;Wiskowski's responsibilities are related to the location
      of potential clients, the negotiation of agreements with those clients and
      the
      provision of advisory services related to the clients.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Randall
      Rohm</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      Upon
      the closing of the Merger, Mr. Rohm became the chief operating officer of
      Capital Partners. Prior to that, Mr. Rohm served as the chief executive officer
      of Capital Partners since his purchase of majority control of the chain in
      2003.
      Since that time, he has opened two new clubs, with a third under development.
      He
      is a former high school and college athlete and has pursued physical fitness
      and
      entrepeneurialism his entire adult life. Mr. Rohm was certified as a physical
      fitness trainer in 1997 and left school to pursue a career in health club
      management. In addition, he started and successfully operated a limousine
      business from 1998-2004.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Ashley
      Shepard</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>&#160;</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Mr.
      Shepard has served as the president of Capital Partners since 2005. He is a
      graduate of Clemson University and former player for the St. Louis Rams and
      Minnesota Vikings in the National Football League. From 1998 to the present
      he
      has been active in the telecommunications industry, having held sales and
      marketing positions of increasing responsibility with Southeastern Telecom,
      Williams Communications, ITC Delacom, Colo Solutions and Universal Solutions.
      </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Board
      of Directors</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company&#8217;s by-laws provide that the size of its board of directors may be fixed
      from time to time by resolution of the board. The Company&#8217;s board of directors
      adopted a resolution fixing the number of directors at three members. The
      Company anticipates that its board of directors will adopt another resolution
      to
      add an additional six directors, for a total of nine directors, by the end
      of
      the second quarter of 2006. All directors hold office until the next annual
      meeting of stockholders and the election and qualification of their successors
      or their earlier removal or retirement. Executive officers are elected annually
      by the board of directors and serve at the discretion of the board.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">28</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Compensation
      of the Board of Directors</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company will reimburse each of its directors for reasonable travel and other
      expenses incurred with attending all board meetings. In addition, the Company
      anticipates that it will pay each director that is not an officer or director
      of
      the Company an undetermined fee for each board meeting that such director
      attends. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Audit
      Committee </em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company has not yet formed an audit committee of its board of director and
      is
      not yet required to do so because it is not a &#8220;listed issuer&#8221; as such term is
      defined by the rules adopted under the Securities Exchange Act of 1934. However,
      the Company intends to form an audit committee once it adds additional members
      to its board of directors as previously noted. The Company anticipates that
      its
      audit committee will consist of one or more independent members of its board
      of
      directors, at least one of whom will qualify as an audit committee financial
      expert under the SEC&#8217;s rules and regulations. In the meantime, the Company&#8217;s
      board of directors intends to satisfy the duties of the audit committee. The
      audit committee&#8217;s duties would be to recommend to the Company&#8217;s board of
      directors the engagement of independent auditors to audit the Company&#8217;s
      financial statements and to review its accounting and auditing principles.
      The
      audit committee would review the scope, timing, and fees for the annual audit
      and the results of audit examinations performed by the internal auditors and
      independent public accountants, including their recommendations to improve
      the
      system of accounting and internal controls. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Executive
      Compensation</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      following summary compensation table sets forth information concerning the
      cash
      and non-cash compensation earned by, awarded or paid to Capital Partners&#8217; then
      acting chief executive officer for services rendered during the fiscal years
      ended December 31, 2003, 2004 and 2005. The Company&#8217;s current officers and
      directors are not receiving any compensation from the Company. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
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          <tr>
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          </tr>
          <tr>
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                Term</strong></font></div>
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              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Annual
                Compensation</strong></font></div>
            </td>
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            <td align="left" colspan="5" valign="bottom" width="35%" style="border-bottom: black thin solid;">
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            </td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: #ffffff thin solid;">&#160;</td>
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            <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
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            <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
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            <td align="left" valign="top" width="1%" style="border-bottom: medium none;">
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            <td align="right" colspan="6" valign="bottom" width="35%" style="border-bottom: medium none;">
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            <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
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            <td align="left" valign="bottom" width="27%" style="border-bottom: medium none;">&#160;</td>
            <td width="1%" style="border-bottom: medium none;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
            <td align="right" valign="bottom" width="5%" style="border-bottom: medium none;">
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            <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
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            <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
            <td align="right" valign="bottom" width="5%" style="border-bottom: medium none;">
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            <td align="left" valign="top" width="1%" style="border-bottom: medium none;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&#160;</div>
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            <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
            <td align="right" valign="bottom" width="5%" style="border-bottom: medium none;">
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            <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
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          <tr bgcolor="#ccffcc">
            <td align="left" valign="bottom" width="27%" style="border-bottom: medium none;">&#160;</td>
            <td width="1%" style="border-bottom: medium none;">&#160;</td>
            <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
            <td align="right" valign="bottom" width="5%" style="border-bottom: medium none;">
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            <td align="right" valign="bottom" width="5%" style="border-bottom: medium none;">
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            <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
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            <td align="left" valign="top" width="1%" style="border-bottom: medium none;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0px; TEXT-INDENT: 0px; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0px">&#160;</div>
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            <td align="left" valign="bottom" width="1%" style="border-bottom: medium none;">&#160;</td>
            <td align="right" valign="bottom" width="5%" style="border-bottom: medium none;">
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">___________________</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(1)
      The
      Company made automobile lease payments on behalf of Mr. Rohm during 2003, 2004
      and a portion of 2005. Mr. Rohm assumed the automobile lease during 2005.
</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div><br>
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      </div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Employment
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      agreement with Randall Rohm, the former chief executive officer of Capital
      Partners. Pursuant to the employment agreement, Mr. Rohm agreed to act as the
      chief operating officer of Capital Partners for a three-year term. Mr. Rohm
      will
      earn an annual base salary of $200,000 and will be eligible to receive raises,
      bonuses, options and warrants in the sole discretion of the board of directors
      of Capital Partners. Mr Rohm will be eligible for a mandatory bonus of $50,000
      during each year of the term if Capital Partners' EBITDA reaches certain levels.
      In addition to serving as the chief operating officer, Mr. Rohm agreed to
      perform such duties as may be assigned to him by Capital Partners&#8217; board of
      directors or chief executive officer. Mr. Rohm&#8217;s initial assignment is to
      provide full-time management of the health club facilities owned by Capital
      Partners. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Incentive
      Plan</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company anticipates establishing a qualified stock incentive plan to incent
      the
      employees, officers and directors of the Company and its subsidiaries, as well
      as other persons providing assets or services of value to the Company, calling
      for the issuance of restricted stock, stock options and/or other equity based
      compensation. At present, no such plan is in place.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Certain
      Relationships and Related Party Transactions</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Convertible
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      October 2005, the Company issued a series of notes (the &#8220;Convertible
      Debentures&#8221;) totaling $500,000 in principal amount, bearing simple interest at
      7% per annum and maturing one year from issuance. The principal plus interest
      accrued under the Convertible Debentures automatically convert into shares
      of
      the Company&#8217;s common stock effective upon the Company closing on an equity raise
      of $3,000,000 (inclusive of the amount of equity issued on conversion of the
      Convertible Debentures) or more, at a 25% discount to the price paid per share
      to investors in the equity raise. The Company may seek to raise up to $1,000,000
      of additional Convertible Debentures to enable it to provide bridge loan
      financing to Capital Partners and/or other acquisition candidates for working
      capital purposes. The holders of the Convertible Debentures include persons
      who
      currently serve as directors and/or officers of the Company or who may do so
      in
      the future.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>$400,000
      Bridge Loan</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      December 2005, Douglas Stukel and two other individuals loaned an aggregate
      of
      $300,000 to the Company, which in turn was loaned by the Company to Capital
      Partners at 8% per annum to enable it to effect the funding of the buyout of
      a
      former minority shareholder of its predecessor entity. In January 2006, another
      individual loaned the Company an additional $100,000, which in turn was loaned
      by the Company to Capital Partners at 8% per annum to enable it to fund certain
      of its working capital requirements. All of these loans to the Company bear
      simple interest at 12% per annum and are due upon the initial closing of the
      Offering. See &#8220;Certain Relationships and Related Party Transactions -
      Convertible Debentures,&#8221; above.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">30</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Advisory
      Fees</em></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">&#160;</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company expects to pay advisory fees to its current and future officers and
      directors, as well as possibly other persons assisting the Company in the
      acquisitions of Capital Partners and/or additional acquisition candidates,
      which
      could total up to $1,500,000 plus warrants to purchase up to 1,200,000 shares
      of
      the Company&#8217;s common stock at $1.25 per share. These fees are expected to be
      awarded by the board of directors and paid for identification and negotiation
      of
      the acquisition of the target companies, as well as services associated with
      the
      consummation of the acquisitions. This compensation will be adjusted downward
      to
      the extent that fewer than three targets are acquired by the Company in 2006,
      and is in addition to other compensation that the board of directors may award
      from time to time to these persons for other services. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Description
      of Securities</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>General</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      authorized capital stock of the Company consists of: (i) 50,000,000 shares
      of
      common stock, par value $.0001 per share, 19,481,734 of which shares were
      outstanding as of the date of this Current Report on Form 8-K; and (ii)
      5,000,000 Shares of Preferred Stock, par value $0.10 per share, none of which
      were issued and outstanding as of the date of this Current Report on Form
      8-K.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Common
      Stock</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Each
      share of the Company&#8217;s common stock is entitled to one vote. There are no
      preemptive, subscription, conversion or redemption rights pertaining to the
      shares of such common stock. Stockholders are entitled to receive such dividends
      as declared by the board of directors out of assets legally available therefor
      and to share ratably in the assets of the Company available upon
      liquidation.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company&#8217;s Articles of Incorporation do not provide for cumulative voting.
      Therefore, stockholders do not have the right to aggregate their votes for
      the
      election of directors and, accordingly, stockholders holding more than fifty
      percent (50%) of the shares of the Company&#8217;s common stock outstanding can elect
      all of the directors.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><em>Preferred
      Stock</em></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company is authorized to issue 5,000,000 Shares of Preferred Stock without
      designation, par value $0.10 per Share. As of the date of this Current Report
      on
      Form 8-K, there were no shares of Preferred Stock outstanding.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company&#8217;s Articles of Incorporation grants the board of directors the right to
      cause the Company to issue, from time to time, all or part of the shares of
      Preferred Stock remaining undesignated in one or more series, and to fix the
      number of shares of Preferred Stock and determine or alter for each series,
      the
      voting powers, full, limited, or none, and other designations, preferences,
      or
      relative, participating, optional or other special rights and such
      qualifications, limitations, or restrictions thereof.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">31</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Market
      for the Company&#8217;s Common Equity and Related Stockholder
      Information</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company&#8217;s common stock is traded on the OTC Bulletin Board under the trading
      symbol &#8220;HHPN.OB.&#8221; As of the date of this Current Report on Form 8-K, the Company
      had&#160;approximately 232&#160;stockholders of record prior to the Merger. The
      Company has not declared any dividends on its common stock during the fiscal
      years ended December 31, 2003 or 2004, or the nine months ended September 30,
      2005. The Company does not anticipate that it will declare any dividends in
      the
      foreseeable future. The table below sets forth the high and low bid information
      with respect to the Company&#8217;s common stock for each quarter during the same
      periods.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div align="center">
      <table border="0" cellpadding="0" cellspacing="0" width="80%">

          <tr>
            <td valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>2003</strong></font></div>
            </td>
            <td width="1%">&#160;</td>
            <td valign="top" width="18%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>High</strong></font></div>
            </td>
            <td width="1%">&#160;</td>
            <td valign="top" width="18%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Low</strong></font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="top" width="17%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">1</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>st</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                Quarter</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td valign="top" width="18%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">No
                quote available</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td valign="top" width="18%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">No
                quote available</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="17%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>nd</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                Quarter</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td valign="top" width="18%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">No
                quote available</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td valign="top" width="18%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">No
                quote available</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="top" width="17%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>rd</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                Quarter</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td valign="top" width="18%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.010</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td valign="top" width="18%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.010</font></div>
            </td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="17%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">4</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><sup>th</sup></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
                Quarter</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td valign="top" width="18%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.010</font></div>
            </td>
            <td width="1%">&#160;</td>
            <td valign="top" width="18%">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.010</font></div>
            </td>
          </tr>
          <tr bgcolor="#ccffcc">
            <td valign="top" width="17%">&#160;</td>
            <td width="1%">&#160;</td>
            <td valign="top" width="18%">&#160;</td>
            <td width="1%">&#160;</td>
            <td valign="top" width="18%">&#160;</td>
          </tr>
          <tr bgcolor="white">
            <td valign="top" width="17%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>2004</strong></font></div>
            </td>
            <td width="1%">&#160;</td>
            <td valign="top" width="18%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>High</strong></font></div>
            </td>
            <td width="1%">&#160;</td>
            <td valign="top" width="18%" style="border-bottom: black thin solid;">
              <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="center"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Low</strong></font></div>
            </td>
          </tr>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Legal
      Proceedings</strong></font></div>
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      February 2006, Duvera Billing Services (&#8220;Duvera&#8221;) filed a complaint in the
      General Court of Justice, District Court Division of Wake County, North Carolina
      against, among others, Kapital Engine Investments, Inc. (&#8220;Kapital Engine&#8221;), the
      predecessor to Capital Partners. Duvera alleges in the complaint that Kapital
      Engine breached that certain Master Loan Agreement dated November 16, 2004,
      by
      failing to make the required payments thereunder. Duvera is seeking
      approximately $414,000 through its complaint. Although the Company has reserved
      a sufficient sum to satisfy the matter, the Company intends to review such
      complaint, the relevant facts and all appropriate defenses.</font></div>
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      Company is not involved in any other legal proceedings as of the date of this
      Current Report on Form 8-K.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Recent
      Sales of Unregistered Securities</strong></font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company has not issued any securities since October 31, 2005 (the date of its
      last report of sales of securities, as reported on Form 8-K) other than: (i)
      the
      issuance of 3,496,430 shares of its common stock to the two former shareholders
      of Capital Partners pursuant to the Merger of Capital Partners with a wholly
      owned subsidiary of the Company; and (ii) the issuance of $400,000 of unsecured
      notes to four individuals during the period December 2005 through January,
      2006;
      such notes bear simple interest at 12% per annum and are due on the earlier
      of
      June 30, 2006 or the initial closing of the Offering. The Company believes
      that
      such transactions were exempt from the registration requirements of the
      Securities Act of 1933 pursuant to Section 4(2) and Regulation D promulgated
      thereunder. Capital Partners, as a predecessor to the Company, issued 66 shares
      of its common stock to one stockholder in late 2005 (representing approximately
      6% of its issued and outstanding stock) pursuant to a transaction which the
      Company believes was exempt from the registration requirements of the Securities
      Act of 1933 pursuant to Section 4(2).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Indemnification
      of Directors and Officers</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Colorado Business Corporation Act contains provisions permitting and, in some
      situations, requiring Colorado corporations to provide indemnification to their
      officers and directors for losses and litigation expense incurred in connection
      with their service to the corporation. The Company&#8217;s articles and bylaws contain
      provisions requiring its indemnification of its directors and officers and
      other
      persons acting in their corporate capacities.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Colorado Business Corporation Act (the &#8220;Colorado BCA&#8221;) permits indemnification
      of a director of a Colorado corporation, in the case of a third-party action,
      if
      the director: </font></div>
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            <td>
              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">conducted
                himself or herself in good faith,</font></div>
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    <div>
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              <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">reasonably
                believed that (a) in the case of conduct in his or her official capacity,
                his or her conduct was in the corporation's best interest, or (b)
                in all
                other cases, his or her conduct was not opposed to the corporation's
                best
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    <div>
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                that his or her conduct was
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Colorado BCA further provides for mandatory indemnification of directors and
      officers who are successful on the merits or otherwise in litigation. The
      statute limits the indemnification that a corporation may provide to its
      directors in a derivative action in which the director is held liable to the
      corporation, or in any proceeding in which the director is held liable on the
      basis of his improper receipt of a personal benefit.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      addition, the Company may enter into agreements with its directors providing
      contractually for indemnification consistent with the articles and bylaws.
      The
      Colorado BCA also authorizes the Company to purchase insurance for its directors
      and officers insuring them against risks as to which the Company may be unable
      lawfully to indemnify them. </font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      to the
      exculpation or indemnification of directors, officers, and controlling persons
      for liabilities arising under the Securities Act of 1933, the Company has been
      advised that, in the opinion of the SEC, such exculpation or indemnification
      is
      against public policy and is, therefore, unenforceable.</font></div>
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">33</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Other
      Information</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company is subject to the reporting requirements of the Securities Exchange
      Act
      of 1934, and is required to file reports and other information with the SEC,
      450
      Fifth Street N.W., Washington, D.C., 20549. These reports and other information
      are available at the SEC&#8217;s website at </font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><u>http://www.sec.gov</u></font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">.
      In
      addition, you may examine copies of these documents without charge at, or obtain
      copies of such documents upon payment of prescribed fees from, the Public
      Reference Section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
      Washington, D.C. 20549, or at the regional offices of the SEC located at Room
      1400, 75 Park Place, New York, New York 10007 and 500 West Madison Street,
      Suite
      1400, Chicago, Illinois 60661-2511.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company will send to its stockholders annual reports containing audited
      financial statements with a report thereon by its independent public
      accountants. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      3.02 Unregistered Sales of Equity Securities.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      Company has not issued any securities since October 31, 2005 (the date of its
      last report of sales of securities, as reported on Form 8-K), other than: (i)
      the issuance of 3,496,430 shares of its common stock to the two former
      shareholders of Capital Partners pursuant to the Merger of Capital Partners
      with
      a wholly owned subsidiary of the Company; and (ii) the issuance of $400,000
      of
      unsecured notes to four individuals during the period of December 2005 through
      January, 2006; such notes bear simple interest at 12% per annum and are due
      on
      the earlier of June 30, 2006 or the initial closing of the Offering. The Company
      believes that such transactions were exempt from the registration requirements
      of the Securities Act of 1933 pursuant to Section 4(2) and Regulation D
      promulgated thereunder. Capital Partners, as a predecessor to the Company,
      issued 66 shares of its common stock to one stockholder in late 2005
      (representing approximately 6% of its issued and outstanding stock) pursuant
      to
      a transaction which the Company believes was exempt from the registration
      requirements of the Securities Act of 1933 pursuant to Section
      4(2).</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      5.02 Departure of Directors or Principal Officers; Election of Directors;
      Appointment of Principal Officers.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Immediately
      following the closing of the Merger, the Company&#8217;s board of directors appointed
      Gerard Jacobs as the chairman of the board of directors and the chief executive
      officer of the Company. Prior to that date, Douglas Stukel, the Company&#8217;s
      president, acted as the Company&#8217;s chief executive officer. Mr. Stukel will
      continue to serve the Company as its president. In addition, the Company&#8217;s board
      of directors also appointed Mr. Stukel as the vice chairman of the Company.
      Reference is made to the disclosure set forth under Item 2.01 of this Current
      Report on Form 8-K, which disclosure is incorporated herein by
      reference.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
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        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">34</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
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      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      5.06 Change in Shell Company Status.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">As
      a
      result of the consummation of the Merger described in Items 1.01 and 2.01 of
      this Current Report on Form 8-K, the Company believes that it is no longer
      a
      shell corporation as that term is defined in Rule 405 of the Securities Act
      of
      1933 and Rule 12b-2 of the Securities Exchange Act of 1934.</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong>Item
      9.01 Financial Statements and Exhibits.</strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
            </td>
            <td align="left" style="width: 18pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(a)</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Financial
                Statements of Business Acquired.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      accordance with Item 9.01(a), Capital Partners audited financial statements
      for
      the fiscal years ended December 31, 2003 and 2004 and Capital Partners&#8217;
unaudited financial statements for the interim period ended September 30, 2005,
      are filed in this Current Report on Form 8-K as Exhibit 99.1</font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
            </td>
            <td align="left" style="width: 18pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(b)</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Pro
                Forma Financial Information.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">In
      accordance with Item 9.01(b), the Company&#8217;s pro forma financial statements are
      filed in this Current Report on Form 8-K as Exhibit 99.2. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td style="width: 36pt;">
            </td>
            <td align="left" style="width: 18pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">(c)</font></td>
            <td align="left">
              <div align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Exhibits</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 36pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="left"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">The
      exhibits listed in the following Exhibit Index are filed as part of this Current
      Report on Form 8-K. </font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Exhibit
      No.</u></strong></font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"><strong><u>Description</u></strong></font></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 81pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">2.1</font></td>
            <td align="left">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Agreement
                and Plan of Merger dated February 13, 2006, by and among Health
                Partnership Inc., Capital Partners Merger Sub, Inc., Capital Partners
                Acquisition Sub, Inc., Capital Partners for Health &amp; Fitness, Inc.,
                Randall Rohm and Thomas Flynn (to be filed by
                amendment).</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 81pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.1</font></td>
            <td align="left">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Articles
                of Incorporation of Health Partnership
                Inc.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 81pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.2</font></td>
            <td align="left">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
                of Bylaws of Health Partnership Inc.
</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 81pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.3</font></td>
            <td align="left">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
                of Articles of Merger merging Capital Partners Merger Sub, Inc.,
                a North
                Carolina corporation, with Capital Partners for Health &amp; Fitness,
                Inc., a North Carolina corporation.
</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 81pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">3.4</font></td>
            <td align="left">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
                of Articles of Merger merging Capital Partners for Health &amp; Fitness,
                Inc., a North Carolina corporation, with Capital Partners Acquisition
                Sub,
                Inc., a North Carolina corporation.
</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div><br>
    <div id="PGBRK" style="MARGIN-LEFT: 0pt; WIDTH: 100%; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <div id="FTR">
        <div id="GLFTR" style="WIDTH: 100%" align="left">
        </div>
      </div>
      <div id="PN" style="PAGE-BREAK-AFTER: always">
        <div style="WIDTH: 100%; TEXT-ALIGN: center"><font style="DISPLAY: inline; FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">35</font></div>
        <div style="WIDTH: 100%; TEXT-ALIGN: center">
          <hr style="COLOR: black" noshade size="2">
        </div>
      </div>
      <div id="HDR">
        <div id="GLHDR" style="WIDTH: 100%" align="right">
        </div>
      </div>
    </div><br>
    <div style="DISPLAY: block; MARGIN-LEFT: 108pt; TEXT-INDENT: -108pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><br></div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 81pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.1</font></td>
            <td align="left">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
                of Note Purchase Agreement used in connection with the issuance of
                the
                Company&#8217;s convertible debentures totaling
                $500,000.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 81pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.2</font></td>
            <td align="left">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
                of Note Purchase Agreement used in connection with the $400,000,
                in the
                aggregate, bridge loan to Capital Partners.
</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 81pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.3</font></td>
            <td align="left">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
                of Membership Agreement used by Capital Partners&#8217; health club
                facilities.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 81pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.4</font></td>
            <td align="left">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Master
                Loan Agreement dated November 16, 2004, between Kapital Engine
                Investments, Inc. and Duvera Billing Services,
                LLC.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 81pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.5</font></td>
            <td align="left">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
                of Equipment Lease between Life Fitness, a division of Brunswick
                Corporation, and the Company. </font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 81pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.6</font></td>
            <td align="left">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
                of Equipment Finance Lease Agreement between Central Carolina Bank
                and the
                Company.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 81pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">10.7</font></td>
            <td align="left">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Form
                of Employment Agreement between Capital Partners and Randall
                Rohm.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 81pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">23.1</font></td>
            <td align="left">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Consent
                of Pender Newkirk and Company.</font></div>
            </td>
          </tr>

      </table>
    </div>
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    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 81pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">99.1</font></td>
            <td align="left">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Audited
                financial statements for Kapital Engine Investments, Inc. for the
                fiscal
                years ended December 31, 2003 and 2004, and unaudited financial statements
                for the interim period ended September 30,
                2005.</font></div>
            </td>
          </tr>

      </table>
    </div>
    <div style="DISPLAY: block; MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify">&#160;</div>
    <div>
      <table align="center" border="0" cellpadding="0" cellspacing="0" id="hangingindent" width="100%" style="MARGIN-LEFT: 0pt; TEXT-INDENT: 0pt; MARGIN-RIGHT: 0pt">

          <tr valign="top" style="line-height: 1.25;">
            <td align="left" style="width: 81pt;"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">99.2</font></td>
            <td align="left">
              <div align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">Unaudited
                pro forma consolidated balance sheet as of September 30, 2005 of
                Kapital
                Engine Investments, Inc. and Health Partnership Inc. Unaudited pro
                forma
                consolidated statements of operations for the nine months ended September
                30, 2005 of Kapital Engine Investments, Inc. and Health Partnership
                Inc.
                Unaudited pro forma statements of operations for the year ended December
                31, 2004 of Kapital Engine Investments, Inc. and Health Partnership
                Inc.</font></div>
            </td>
          </tr>

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      has
      duly caused this report to be signed on its behalf by the undersigned hereunto
      duly authorized.</font></div>
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      13, 2006</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 369pt; TEXT-INDENT: 0pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">HEALTH
      PARTNERSHIP INC.</font></div>
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    <div style="DISPLAY: block; MARGIN-LEFT: 405pt; TEXT-INDENT: -36pt; LINE-HEIGHT: 1.25; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">By:</font><u><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font id="TAB2" style="COLOR: black; LETTER-SPACING: 27pt">&#160;</font><font style="DISPLAY: inline; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">/s/
      Douglas Stukel_________</font></u></div>
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      Stukel, President</font></div>
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{"company-data": {"conformed-name": "Health Partnership Inc.", "cik": "0001076044", "assigned-sic": "8000", "irs-number": "841361341", "state-of-incorporation": "CO", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-28711", "film-number": "06605220"}, "business-address": {"street1": "875 N. MICHIGAN AVE.,", "street2": "SUITE 3335", "city": "CHICAGO", "state": "IL", "zip": "60611", "phone": "312-952-7100"}, "mail-address": {"street1": "875 N. MICHIGAN AVE.,", "street2": "SUITE 3335", "city": "CHICAGO", "state": "IL", "zip": "60611"}, "former-company": [{"former-conformed-name": "HEALTH PARTNERSHIP INC.", "date-changed": "20051108"}, {"former-conformed-name": "MIND2MARKET INC", "date-changed": "19991222"}]}
UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
      D.C. 20549
FORM
      8-K
CURRENT
      REPORT
Pursuant
      to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date
      of
      Report: February 13, 2006
(Date
      of
      earliest event reported)
HEALTH
      PARTNERSHIP INC.
(Exact
      name of registrant as specified in the charter)
COLORADO
(State
                or other jurisdiction of incorporation)
000-28711
(Commission
                File No.)
84-1361341
(IRS
                Employer Identification No.)
3111
      North Seminary, Suite 1N
Chicago,
      Illinois 60657
(Address
      of Principal Executive Offices)
(312)
      640-2975
Registrant's
      telephone number including area code)
NOT
      APPLICABLE
(Former
      name or former address, if changed since last report)
Check
      the
      appropriate box below if the Form 8-K filing is intended to simultaneously
      satisfy the filing obligation of the registrant under any of the following
      provisions (see General Instruction A.2. below):
£
Written
                communications pursuant to Rule 425 under the Securities Act (17
                CFR
                230.425)
£
Soliciting
                material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
                240.14a-12)
£
Pre-commencement
                communications pursuant to Rule 14d-2(b) under the Exchange Act (17
                CFR
                240.14d-2(b))
£
Pre-commencement
                communications pursuant to Rule 13e-4(c) under the Exchange Act (17
                CFR
                240.13e-4(c))
Item
      1.01 Entry into a Material Definitive Agreement.
On
      February 13, 2006, Health Partnership Inc., a Colorado corporation (the
"Company"), entered into an Agreement and Plan of Merger (the "Merger
      Agreement") with Capital Partners For Health & Fitness, Inc., a North
      Carolina corporation ("Capital Partners"), Capital Partners Merger Sub, Inc., a
      North Carolina corporation and wholly-owned subsidiary of the Company
      ("Mergeco"), Capital Partners Acquisitions Sub, Inc., a North Carolina
      corporation and wholly-owned subsidiary of the Company ("Acquisitionco"),
      Randall Rohm and Thomas Flynn. On February 13, 2006, the terms and conditions
      of
      the Merger Agreement were either satisfied or waived and the transactions
      contemplated by the Merger Agreement were consummated. Pursuant to the Merger
      Agreement, a copy of which is attached hereto as Exhibit 99.1, Capital Partners
      became a wholly-owned subsidiary of the Company. The terms of the Merger
      Agreement and the effect of the merger transaction are more fully described
      in
      Item 2.01 of this Current Report on Form 8-K. Capital Partners' predecessor was
      Kapital Engine Investments, Inc. ("Kapital Engine"). For purposes of this
      Current Report on Form 8-K, unless otherwise indicated, the meanings of the
      terms "Kapital Engine" and "Capital Partners" shall be synonymous.
Item
      2.01 Completion of Acquisition or Disposition of Assets.
As
      previously stated in Item 1.01 of this Current Report on Form 8-K, the
      transactions contemplated by the Merger Agreement were consummated on February
      13, 2006.
The
      Merger
Pursuant
      to the terms of the Merger Agreement, Mergeco merged with Capital Partners,
      with
      Capital Partners continuing to exist as the surviving corporation following
      this
      merger (the "Initial Merger"). Immediately thereafter, Capital Partners merged
      with Acquisitionco (collectively with the Initial Merger, the "Merger").
      Acquisitionco, which remains a wholly-owned subsidiary of the Company, continued
      as the survivor following the Merger. Immediately following the Merger,
      Acquisitionco filed the necessary documents with the North Carolina Secretary
      of
      State to change its name to Capital Partners For Health & Fitness, Inc. The
      parties intend the Merger to be treated as a tax-free reorganization pursuant
      to
      Section 368(a)(2)(D) of the Internal Revenue Code.
Merger
      Consideration
All
      of
      the shares of Capital Partners' common stock that were issued and outstanding
      immediately prior to the Merger and all legal or beneficial rights to
      participate in any fashion in the economic benefits of ownership of Capital
      Partners were converted into the right to receive, in the aggregate (subject
      to
      certain limitations): (a) $6,992,859 in cash (the "Cash Consideration"); (b)
      3,496,430 shares of the Company's common stock (the "Stock Consideration"); and
      (c) the Earnout Consideration (as defined below), if earned. Once the Merger
      was
      completed, all shares of Capital Partners' capital stock were automatically
      redeemed and canceled and no longer exist. The Stock Consideration is
      unregistered, restricted stock and constitutes "restricted securities" as that
      term is defined in Rule 144 under the Securities Act of 1933. The Company has
      agreed that it will include the Stock Consideration in its next "Selling
      Stockholder" registration statement that it files with the Securities and
      Exchange Commission (the "SEC").
2
Notwithstanding
      the foregoing, the parties to the Merger agreed that no portion of the Cash
      Consideration would be paid at the closing of the Merger. Instead, the Company
      delivered to each of Capital Partners' shareholders, Messrs. Rohm and Flynn, a
      promissory note in the principal amount of such shareholder's respective portion
      of the Cash Consideration (the "Purchase Money Note"). These Purchase Money
      Notes mature on the earlier of June 30, 2006 or such time as the Company shall
      have raised capital sufficient to fund the entire amount of Cash Consideration.
      The Purchase Money Notes accrue simple interest at the annual rate of five
      percent (5%) for the first sixty days after the Merger was completed, and will
      accrue simple interest at the annual rate of ten percent (10%) thereafter.
      The
      Purchase Money Notes also provide that, if the founder of the predecessor to
      Capital Partners purchases up to $1.0 million of the Company's common stock as
      part of the Offering (as defined below), the holders of the Purchase Money
      Notes
      will be entitled to sell back to the Company up to that number of shares of
      the
      Company's common stock as would cumulatively total the subscription amount
      received by the Company from such founder.
As
      noted,
      Capital Partners' shareholders are collectively entitled to earn an additional
      amount of merger consideration. This additional potential consideration is
      a
      one-time payment in cash (the "Cash Earnout Payment") and a one-time payment in
      the Company's common stock (the "Stock Earnout Payment" and, together with the
      Cash Earnout Payment, the "Earnout Consideration). The Earnout Consideration is
      equal to (1) the amount, if any, by which (a) one-half of Capital Partners'
earnings before interest, taxes, depreciation and amortization (computed in
      accordance with GAAP) during the first eight full calendar quarters following
      the Merger (the "Earnout Period") (as certified by the Company's independent
      public accountant) (the "Earnout Period EBITDA") exceeds (b) an amount equal to
      the sum of (i) $3,158,933 plus (ii) one-half of the amount of any portion of
      $400,000 of bridge loan made by the Company to Capital Partners
that
      is
      used by Capital Partners for working capital purposes, (2) multiplied by 4.2.
The
      Earnout Consideration, if any, must be paid within ten days following the
      receipt by the Company and Capital Partners' shareholders of a written
      determination of the Earnout Period EBITDA if Capital Partners' shareholders do
      not contest the Earnout Period EBITDA within five days following their receipt
      of such calculation. If Capital Partners' shareholders contest the Earnout
      Period EBITDA, the Company and such shareholders will have ten days to settle
      the dispute or the dispute will be settled by arbitration. Shares of the
      Company's common stock that are issued as part of the Stock Earnout Payment will
      be valued at the average closing price per share of the Company's common stock
      on the final ten trading days of the Earnout Period. Within ten days after
      each
      Form 10-QSB or 10-KSB is filed with the SEC by the Company during the Earnout
      Period, the Company will cause to be delivered to Capital Partners' former
      shareholders a report of Capital Partners' financial results.
Effect
      of Merger
The
      Company was formed in 1996 as NELX Marketing, Inc., a Colorado corporation,
      then
      changed its name later that year to Mind2Market, Inc. Due to lack of funding,
      the Company ceased its efforts in 2002 to develop certain technology. From
      2002
      through the closing of the Merger, the Company had substantially no operations.
      In May 2005, the Company changed its name to Health Partnership Inc. and, prior
      to the Merger, it satisfied the SEC's definition of a "shell company." Pursuant
      to the Merger, Capital Partners became the Company's wholly-owned subsidiary. As
      a result, the Company became a holding company and its shell company status
      terminated. Capital Partners' business operations currently represent
      substantially all of the Company's operations. The Company's common stock is
      traded on the OTC Bulletin Board under the trading symbol
"HHPN.OB."
3
Private
      Placement Offering
On
      January 31, 2006, the Company commenced a private placement offering of up
      to
      8,000,000 shares of its common stock for $1.25 per share (the "Offering"). The
      Offering is made only to "accredited investors" as defined in Rule 501 of
      Regulation D under the Securities Act of 1933. The Company reserved the right,
      in its sole discretion, to increase the Offering to a total of 12,000,000 shares
      of its common stock. Upon the Company's acceptance of subscriptions to purchase
      at least 2,400,000 shares of its common stock through the Offering, the Company
      has agreed to apply the net proceeds from such sale (after satisfaction of
      other
      appropriate Company obligations), toward reduction of the indebtedness evidenced
      by the Purchase Money Notes. The Company has further covenanted with the former
      shareholders of Capital Partners, that subsequent net proceeds from the Offering
      are not to be applied toward the purchase of other businesses until the Purchase
      Money Notes have been paid in full. As of the date of this Current Report on
      Form 8-K, the Company has not sold any shares of its common stock through the
      Offering.
Description
      of Capital Partners
Capital
      Partners is a regional chain of nine health and fitness clubs in the greater
      Raleigh-Durham metropolitan area. It acquired the clubs in late 2005 from
      Kapital Engine, an entity then controlled by Mr. Randall Rohm, the current
      chief
      operating officer of Capital Partners. Capital Partners' clubs are the largest
      chain of health clubs in the greater Raleigh-Durham metropolitan area, with
      in
      excess of 55,000 members. The clubs range in size from 13,500 to 25,000 square
      feet and operate from leased facilities. Capital Partners endeavors to promote
      a
      good value of services at a low cost to its health club members. Based on its
      experience, it has found that, in the past, the larger national chains of health
      clubs have chosen not to enter Capital Partners' market due at least in part to
      the relatively low cost at which Capital Partners offers its memberships.
Business
      Strategy
.
      Capital
      Partners' business plan contemplates the addition of health clubs to the current
      regional market, as well as the entry into other markets through both strategic
      acquisition and organic growth. Subject to availability of financing, Capital
      Partners would like to develop some new facilities on a larger scale (50,000
      square feet or more), offering a wider amenity package and the possibility
      of
      consolidating membership from several of the smaller clubs into these larger
      clubs. Capital Partners' value proposition for its members focuses on the
      provision of a high quality health club experience at a relatively modest cost
      to its members.
Each
      facility is equipped with state-of-the-art equipment in amounts generally
      sufficient to adequately serve members during peak hours (typically 5-7 am
      and
      5-7 pm). The Company believes that the management at each facility is trained
      to
      provide a favorable customer experience and to do so in a cost effective manner,
      being mindful of the bottom line. Capital Partners employs a discretionary
      bonus
      system to incent and reward employees for exemplary individual and team
      effort.
4
Sales
      and Marketing
.
      The
      sale of new memberships and retention of existing members is essential to
      Capital Partners' business strategy. Due to the relatively young age of its
      members and their greater mobility than older members, Capital Partners
      experiences an approximately 75% turnover of its members on an annualized basis.
      The Company believes that all of its employees are trained to encourage the
      members to renew their memberships. At the same time, all employees who
      regularly interface with members are encouraged to promote the clubs and to
      bring in new members. Membership packages are offered in a variety of formats,
      including pre-paid one and two year memberships, as well as month-to-month
      memberships. Pricing incentives are currently structured to encourage long-term
      participation, including promotions as low as $10 per month for two-year
      commitments, and a standard $39 per month fee plus a modest enrollment fee
      for
      certain shorter term commitments. These pricing incentives are subject to change
      in the Company's sole discretion.
Advertising
      is done primarily through direct mail promotions, where Capital Partners
      believes the responses are measurable. In its experience, Capital Partners
      has
      found that telephone solicitation, utilization of a variety of referral sources
      and Internet marketing have all been successful methods of driving new
      membership in its health clubs. Capital Partners has employed radio and print
      advertising, as well as event marketing in the past, and found that these
      methods have been less productive than the other methods enumerated above.
Amenities
.
      Each of
      Capital Partners' health clubs has extensive equipment, which is typically
      purchased through full payout lease financing, which is described below. Each
      club's equipment is divided substantially equally among cardiovascular (such as
      treadmill, elliptical trainers, stationary bikes and stairclimbers), resistance
      training and selectorized equipment, and free weight/cable equipment. Each
      facility averages approximately 120 pieces of equipment. Capital Partners
      believes that its facilities contain ample studio area for classes, including
      aerobics, yoga, step, kickboxing and abdominal workouts. Décor of the clubs is
      typically modern, with the layout intended to provide for a pleasant workout
      experience. Full locker room and shower facilities are available for members.
      A
      limited number of the clubs maintain basketball facilities and/or juice
      bars.
In
      October 2004, Capital Partners entered into a five-year agreement with Beyond
      Fitness Companies ("Beyond Fitness") to provide personal trainers to its health
      club facilities at no cost to either party. Beyond Fitness generally is paid
      for
      its personal training services by the health club members that contract for
      such
      services. Capital Partners believes that Beyond Fitness is the second largest
      independent personal training operation in the United States.
To
      the
      extent that food or clothing concessions are available at the clubs, management
      subcontracts these services to independent contractors who pay a base rent
      for
      the operation of small facilities. The Company believes that for clubs of its
      size, profitability is enhanced by avoiding food or apparel service due to
      the
      extensive time and personnel requirements associated with each, as well as
      the
      need to continually monitor inventory.
The
      Company is considering moving toward the development of some new and larger
      clubs which would have a broader scope of amenities, such as swimming pools,
      racquet courts, spa services and full-scale food facilities. The Company
      believes that these newer facilities would likely carry a somewhat higher
      membership fee and may serve as replacement facilities for some of the older,
      less modern facilities currently operated by the Company, and their development
      is contingent upon the availability of financing to Capital
      Partners.
5
Financing
.
      As
      described above, Capital Partners currently finances the equipment for its
      health clubs through two leasing sources, Sun Trust (formerly, Central Carolina
      Bank and Trust Company) and Life Fitness, a division of Brunswick Corporation,
      which typically sells its lease paper to CIT. Through these sources, the
      purchase price and a market value interest factor for the equipment is financed
      through full payout amortization payments over a three- to five-year term,
      with
      either a $1.00 purchase option or a residual value purchase option at the end
      of
      lease term. Certain of the equipment in the facilities is fully paid for and
      much of the remaining equipment is substantially paid for, with new leases
      typically written as additional or replacement equipment is acquired.
In
      November 2004, Capital Partners financed certain of its billing equipment and
      software from Duvera Billing Services, a billing company, based upon $350,000
      of
      cumulative borrowings (plus interest), being paid out through level amortization
      over an approximately sixteen-month period for the first $250,000 and a two-year
      period for the remaining $100,000. Approximately $25,000 remains on this
      obligation. In addition, Duvera entered into a factoring arrangement with
      Capital Partners where over time approximately $448,000 of funds were provided
      in exchange for sale of two-year membership contracts at an approximately 32%
      discount to the aggregate funds to be paid out over their terms. The agreement
      contemplates that should a contract be terminated or fall into default, Capital
      Partners is responsible for replacing the contract with a substitute performing
      contract for like payments, or is liable for the deficiency with respect to
      the
      future payout from the terminated or defaulted contracts. At January 30, 2006,
      approximately $389,000 in principal amount of this purchase obligation remained.
      Duvera instituted suit to collect all indebtedness owed to it in February 2006,
      and subsequent to such filing Capital Partners forwarded replacement contracts
      to put the arrangement back in balance; the suit has not yet been withdrawn,
      but
      the Company believes, but cannot guarantee, that the suit may be withdrawn
      once
      the original $25,000 loan obligation is either timely satisfied or other
      appropriate arrangements for payment can be made. See "Legal Proceedings,"
below.
Employees
.
      Capital
      Partners currently employs approximately 230 employees, about sixty of whom
      are
      full-time. Operation of the clubs is divided into three districts, with each
      district having a manager who runs one club and oversees the other clubs in
      the
      manager's district. In addition, each district has a club manager for each of
      the other clubs in the district and an assistant manager overseeing the
      day-to-day operations of each club, together with the club manager. Each club
      typically employs 1-4 fitness consultants, 3-6 babysitting employees, 3-6 group
      fitness instructors, 2-3 salespeople and 2-3 cleaning people. The fitness
      instructors and personal trainers work at each club, as necessitated by demand.
      These individuals are typically independent contractors, which the Company
      believes increases profitability because it does not compensate them during
      non-peak times.
Corporate
      Information
.
      The
      Company's executive offices are located at 3111 North Seminary, Suite 1N,
      Chicago, Illinois 60657. The Company's telephone number is (312) 640-2975, and
      its fax number is (312) 640-2976. Capital Partners' executive offices are
      located in its Waverly Place (Cary, NC) club at 101-A New Waverly Place, Cary,
      North Carolina 27511. Its telephone number is (919) 816-9853, and its fax number
      is (919) 854-2016. Each of Capital Partners' clubs provides a centralized
      computer system with data to allow collection to be processed from this
      centralized office.
6
Facilities
.
      Each of
      Capital Partners' facilities is leased by a separate corporation or limited
      liability company that is wholly owned by Capital Partners. A summary of the
      clubs' leases is set forth below:
1.
Durham,
                NC
.
                This is a 20,000 square foot facility. It had originally been operated
                as
                a Gold's Gym by the prior owner before the acquisition by the company in
                2003. Base rent plus pass through charges total approximately $19,000
                per
                month. An additional 20,000 square feet of adjacent space is available
                for
                expansion at no additional cost. The lease expires June 30,
                2006.
2.
Creedmore
                Road, Raleigh, NC
.
                This is a 25,000 square foot facility opened in late 2000. Base rent
                plus
                pass through charges total approximately $20,000 per month. An additional
                22,000 square feet of expansion space is available. The lease expires
                April 30, 2011, subject to two 5-year renewal options, with Consumer
                Price
                Index ("CPI") escalators. The lease requires the landlord's consent to
                change in beneficial ownership, but not where the beneficial owner
                is a
                publicly traded corporation. The landlord has provided an estoppel
                certificate to Capital Partners.
3.
Spring
                Forest Road, Raleigh, NC
.
                This is an 18,000 square foot facility acquired approximately ten
                years
                ago, and had been operated as a health club facility for at least
                ten
                years prior to that time. It is Capital Partners' oldest facility and
                presently operated on a month-to-month basis. The Company anticipates
                moving this facility's membership to a new club within the next year
                unless the landlord makes significant improvements to the
                facility.
4.
Glenwood
                & Duraleigh, Raleigh, NC
.
                This is a 25,000 square foot facility that was opened in 1998 and
                recently
                underwent an expansion which included the addition of two basketball
                courts. Base rent and pass through charges total approximately $20,000
                per
                month. The lease expires December 31, 2013, with a five-year renewal
                clause order subject to certain CPI escalators. It requires the landlord's
                consent to change in beneficial ownership, which has been obtained.
5.
Maynard
                Road, Cary, NC
.
                This is an 18,000 square foot facility opened in 1996. Base rent
                plus pass
                through charges total approximately $16,000 per month. Approximately
                3,000
                square feet of expansion space are available at no additional cost.
                The
                lease expires October 31, 2006 and the Company is contemplating whether
                to
                renew the lease or migrate the members to a proposed new construction
                facility. It has three five-year renewal options, subject to certain
                CPI
                escalators.
6.
Buck
                Jones Road, Cary, NC
.
                This is the original facility opened by Capital Partners in 1995,
                comprised of 13,500 square feet and requiring base rent plus pass
                through
                expenses of approximately $8,000 per month. The lease expires December
                1,
                2007, subject to two five-year renewal options. The Company would
                consider
                renewing the lease if certain upgrades are provided by the landlord.
                The
                tenant has a right of first refusal to purchase the facility in the
                event
                of a sale.
7
7.
Waverly
                Place, Cary, NC
.
                This is a 22,500 square foot facility opened in 2001, and houses
                Capital
                Partners' corporate offices. It is presently on a month-to-month lease.
                The Company anticipates that it will eventually close this facility
                and
                move the club's members to either the Buck Jones Road facility or a new
                facility considered for
                development.
8.
Garner,
                NC
.
                This facility was opened in 2000 and contains 20,500 square feet,
                leased
                at approximately $10,000 per month including pass through expenses.
                Its
                lease expires in July 14, 2012, subject to one five-year extension.
                This
                is the most remote of the locations for Capital Partners' clubs,
                approximately twenty-five miles from the next nearest
                club.
9.
Fuquay
                Varina, NC
.
                This is a 20,000 square foot facility opened in late 2003, with base
                rent
                plus pass through expenses totaling approximately $20,000 per month.
                The
                lease expires in 2013, with three five-year renewal options. This
                lease
                requires the landlord's consent to change in beneficial ownership, which
                consent has not been obtained after the date of this Current Report
                on
                Form 8-K. See "Risk Factors."
Risk
      Factors
An
      investment in shares of the Company's common stock involves a high degree of
      risk. Prospective investors should consider carefully the following risk
      factors, together with all of the other information included or referred to
      in
      this Current Report on Form 8-K, before purchasing shares of the Company's
      common stock. There are numerous and varied risks, known and unknown, that
      may
      prevent the Company from achieving its goals. The risks described below are
      not
      the only risks the Company will encounter. If any of these risks actually occur,
      the Company's business, financial condition or results of operation may be
      materially adversely affected. In such case, the trading price of the Company's
      common stock could decline and investors in the Company's common stock could
      lose all or part of their investment.
This
      Current Report on Form 8-K contains statements that constitute "forward-looking
      statements" within the meaning of Section 27A of the Securities Act of 1933, as
      amended (the "Securities Act"), and Section 21E of the Securities Exchange Act
      of 1934, as amended (the "Exchange Act"). Those statements appear in a number of
      places herein and include statements regarding the intent, belief or current
      expectations of the Company with respect to, among others things: (i) the
      development of the Company's business; (ii) the targeting of industries that
      will require the use of the business; (iii) trends affecting the Company's
      financial condition or results of operation; and (iv) the Company's business and
      growth strategies. Prospective investors are cautioned that any such
      forward-looking statements are not guarantees of future performance and involve
      risks and uncertainties, and that actual results may differ materially from
      those projected, expressed or implied, in the forward-looking statements as
      a
      result of various factors. The accompanying information contained herein
      identifies important factors that could cause such differences. Such
      forward-looking statements speak only as of the date of this Current Report
      on
      Form 8-K and the Company cautions potential investors not to place undue
      reliance on such statements.
8
Information
with
      respect to Capital Partners is based on information provided to the Company
      by
      Capital Partners prior to the Merger and, although the Company has performed
      due
      diligence inquiry as to Capital Partners, there can be no assurances that such
      information is accurate in all respects. Information regarding market and
      industry statistics contained herein is included based on information available
      to the Company that it believes is accurate. It is generally based on industry
      and other trade publications that are not produced for purposes of securities
      offerings or economic analysis. The Company has not reviewed or included data
      from all sources, and the Company cannot assure potential investors of the
      accuracy or completeness of the data included herein. Forward-looking
      information obtained from these sources are subject to the same qualifications
      and the additional uncertainties accompanying any estimates of future market
      size, revenue and market acceptance of products and services. The Company has
      no
      obligation to update forward-looking information to reflect actual results
      or
      changes in assumptions or other factors that could affect those statements.
Business
      Risks
Competition
.
      Capital
      Partners will experience significant competition, and there are virtually no
      barriers to entry into its business. In the health club industry, there are
      numerous large chains with substantially greater resources, which include Bally
      Total Fitness Holding Corporation, Life Time Fitness, Inc. (both publicly
      traded), 24 Hour Fitness Worldwide, Inc., Town Sports International, Inc.,
      LA
      Fitness, The Sports Club Company, Inc. and The WellBridge Company, doing
      business under various names like Northwest Athletic Club. These larger chains
      have the ability to enter into select markets and subsidize the cost of
      operations in order to gain market share through a variety of strategies which
      include price wars, massive advertising campaigns, and the ability to offer
      superior amenities. They tend to have access to greater amounts of capital,
      enabling them to erect state of the art facilities and to attract top talent,
      which may include Capital Partners' employees. In addition, by being able to
      promote national brands, they can in certain instances stretch their advertising
      dollars further, due to the ability to amortize expenditures over a larger
      number of clubs, as well as to enter into strategic alliances with other
      national brands for co-marketing of the brands on a national basis. These larger
      competitors tend to offer a wider scope of products and services to their
      customers, including amenities at larger clubs, such as swimming pools, spa's,
      rock climbing walls, racquet sports and other sports, not currently offered
      by
      Capital Partners, as well as other services such as full menu food offerings,
      wellness programs and salons, as well as branded apparel and food
      products.
There
      is
      also significant competition from comparably sized chains and smaller unit
      operators, in addition to health club facilities operated by the YMCA and
      similar not-for-profit organizations, local governmental and hospital health
      care and recreational facilities, country clubs, tennis and other athletic
      clubs, schools, recreational facilities in office and other buildings,
      condominium and townhome association amenities and home-use equipment.
9
While
      the
      Company believes that Capital Partners and other businesses that it may acquire
      in the health club industry will be competitive and able to maintain and grow
      their businesses, it is expected that competition will intensify over time.
      In
      addition, the Company in most instances expects to structure acquisitions on
      an
      earn-out basis where some portion of the purchase price will be contingent
      on
      future performance, which is intended to incent the sellers to continue the
      operations of the facilities aggressively following purchase. There can be
      no
      assurances that the sellers will have the same level of enthusiasm for the
      operation of the businesses following sale, or that if they cease performing
      services for the businesses, the Company will be able to install replacement
      management with the same skill sets and determination as the sellers. The
      Company will typically negotiate for a noncompete agreement from the key
      seller(s) of a business; however, following the termination of the noncompete
      period, there is always a risk that the seller will attempt to reenter the
      market and possibly seek to recruit some of the former employees of the
      business, who may continue to be key employees of the business that the Company
      acquires.
Prior Dealings
      with Jeremy Jaynes
. 
       In 2002, the founder  (Edward "Ted" Sampson) of Kapital
      Engine Investments, Inc. ("KEI"), the predecessor entity to  Capital
      Partners, sold a 47.5% interest in KEI to Mr. Jeremy Jaynes for $4,125,000,
      comprised of $2,000,000 of  cash and the balance by note.  In 2003,
      the founder sold the remaining 52.5% of KEI to Mr. Randall Rohm and a second
      purchaser (no longer a stockholder) for $3,900,000 comprised of $1,000,000
      of
      cash and a note for the balance, with Mr. Rohm retaining voting control over
      all
      of such shares and effective control of the operations of KEI.  In 2005,
      the shares of the subsidiary entities which operate all of the Capital Partners
      health clubs were assigned by KEI to Capital Partners.  Subsequently in
      2005, Mr. Rohm entered into an agreement with Mr. Jaynes where he acquired
      100%
      of Mr. Jaynes' stock and economic interest in KEI for $628,425.
In
      2004,
      Mr. Jaynes was convicted of violation of the Virginia anti-spamming statute
      and
      sentenced as a felon to nine years in prison.  This related to Mr. Jaynes'
      unsolicited sending of unwanted emails to persons in excess of legally permitted
      levels, as well as using deceptive routing to hide the source of the emails.
      This conviction is under appeal.
Mr.
      Jaynes has also been implicated in connection with his alleged involvement
      in a so-called "pump and dump" penny stock scheme involving a public shell
      company named Absolute Health & Fitness, Inc. ("AHFI"). The Securities &
Exchange Commission ("SEC") has filed a civil suit in Florida naming certain
      individuals who allegedly participated in the scheme.  The complaint states
      that Mr. Rohm was the majority owner of two holding companies that operated
      several fitness centers which Mr. Jaynes had proposed to be merged with AHFI,
      and that Mr. Rohm subsequently broke off negotiations for the sale of the
      businesses to AHFI.  However, the complaint states that the stock promoters
      acted as if the merger had occurred and that the signature appearing under
      Mr.
      Rohm's name was not Mr. Rohm's signature.    The complaint
      further states that Mr. Rohm never executed an agreement to merge his companies
      with AHFI. Although Mr. Jaynes was not named as a defendant, it is possible
      that
      he will be named as a defendant in the lawsuit or in subsequent criminal
      proceedings regarding the SEC allegations.
10
The
      Company has performed what it considers to be a commercially reasonable level
      of
      due diligence with respect to the above matters and believes Mr. Rohm and Mr.
      Sampson to be innocent of the alleged wrongdoings surrounding Mr. Jaynes or
      the
      other parties in the SEC complaint based upon the information of which the
      Company is presently aware.  In addition, Mr. Rohm has delivered to the
      Company a letter dated December 15, 2004, from the office of the US
      Attorney for the Eastern District of North Carolina stating that as of that
      date
      neither Mr. Rohm nor Mr. Sampson was the target of any investigation being
      conducted by that office.  Nevertheless, it is expected that there will be
      significant publicity in the future regarding the AHFI stock scheme and possible
       attempts by the press to link Mr. Rohm and/or Mr. Sampson to the
      activities of Mr. Jaynes and other persons accused of wrongdoing.  This
      could have a material adverse impact on the Company and the market price of
      the
      Company's common stock irrespective of the merits of such allegations.  In
      addition, notwithstanding the due diligence conducted to date by the Company,
      there is always a risk that there are matters which differ from its present
      understanding, which could implicate these individuals in such wrongdoing. 
Current and prospective investors in the Company should consider these factors
      and their possible impact on the Company.
Troubleshooter
      Investigation
. 
      In early February 2006, several articles appeared in the Raleigh press, as
      well
      as several local television stories, addressing complaints regarding Capital
      Partners' health clubs.  One such article states that there were more
      than 200 complaints over the past thirty-six months with the Better
      Business Bureau ranging from matters such as broken exercise equipment in select
      locations to complaints regarding sanitation and improper billing and collection
      practices. The article states that the North Carolina Attorney General's Office
      is investigating over 350 complaints over the past three years.  Management
      of Capital Partners has advised that with nine clubs and over 55,000 members,
      it
      is inevitable that complaints will be lodged by members, and that this average
      annual volume of complaints constitutes less than one half of one percent of
      the
      annual membership at the clubs.  Nevertheless, any adverse
      publicity could have a material adverse impact on membership at the clubs and
      on
      the market price of the Company's common stock, and could result in fines,
      requirement for remedial action, or possibly more severe sanctions from the
      applicable regulatory authorities.  The Company's business plan includes
      addressing necessary repairs, maintenance and sanitation actions to operate
      and maintain the clubs to a level of high member satisfaction.  There
      can be no assurances that the Company will be able to operate the clubs in
      this
      manner.
Brands
      and Reputation
.
      The
"Health Partners" and "Capital Partners" brands are not well known, and
      developing adequate brand awareness may not be possible or may be too costly
      to
      achieve. Many of the Company's competitors have much more widespread brand
      awareness and much more financial ability to promote their brands. In addition,
      the brands and reputations of Health Partnership and Capital Partners are
      closely associated with the business and personal reputations of Messrs. Lee
      Wiskowski, Douglas Stukel, Gerard Jacobs and Randall Rohm. Any damage to the
      business or personal reputation of one or more of these individuals could have
      a
      material adverse effect on the Company's business, results of operations,
      financial condition and the trading price of the Company's common
      stock.
11
Governmental
      Regulation
.
      All
      areas of the operations of health clubs are subject to regulation on the
      federal, state and local levels. A significant aspect of the success of a health
      club is its ability to advertise and bring in new members to grow revenues
      as
      well as to replace terminating members. Health club advertisements and
      membership plans have drawn significant scrutiny from the Federal Trade
      Commission as well as its counterparts on the state and local levels, especially
      associated with the truthfulness of the advertising programs and terms of their
      membership contracts. State statutes have been enacted and/or proposed to
      regulate the health club industry, including related to:
·
Giving
      the member the right to a period of typically three to ten days following the
      signing of a contract, during which period of time the individual can cancel
      a
      membership contract;
·
Establishment
      of limits on the time period and dollar amounts of contracts issued to
      members;
·
Requiring
      the posting of bonds and/or escrowing of monies collected in connection with
      pre-opening membership drives, as well as limiting the time period in which
      such
      drives may be effected; and
·
Regulation
      of so-called deceptive trade practices, where the terms of the membership are
      deemed to be misleading, or where the offering of negotiated or differing
      membership terms to individuals may be deemed to be discriminatory.
The
      existing and future legislation governing the industry will require continued
      awareness by the Company and could impact the way business is done in the
      future. These costs may result in reduced margins, as there may be no way of
      passing on the benefit of this compliance to the consumer.
To
      date,
      Capital Partners has not been subject to any significant adverse governmental
      enforcement proceedings; however, as noted in "Troubleshooters" above, there
      have been a certain number of complaints and there may be a current
      investigation by The North Carolina Attorney General's Office as to the
      operation and business practice of Capital Partners.
Dependence
      on Key Employees
.
      The
      Company's success depends to a significant degree upon the continuing
      contributions of its key management, Lee Wiskowski, Douglas Stukel and Gerard
      Jacobs, who will oversee the acquisition and finance strategies of the Company
      as well as of the key employees from Capital Partners, which initially shall
      include Randall Rohm. The Company does not maintain key man insurance with
      respect to any of these individuals. The loss of any of these individuals could
      have a material adverse effect upon the Company and its operations. The Company,
      through Capital Partners, has entered into an employment agreement with Mr.
      Rohm
      and anticipates that it will enter into additional employment contracts with
      certain of the key operations employees of the Company, but no other contracts
      currently exist. Messrs. Wiskowski, Stukel and Jacobs have substantial other
      business interests and will not be devoting their full time to the Company's
      business. The Company does not have employment agreements with Messrs.
      Wiskowski, Stukel or Jacobs, and could be required to spend significant time,
      attention and money in finding replacements should any of them no longer be
      associated with the Company. There is no assurance the Company would be able
      to
      find similarly qualified replacements which could have a material adverse effect
      on the Company's business, results of operations, financial condition and the
      trading price of the Company's common stock.
12
Need
      for Accounting Personnel and Systems
.
      The
      Company is conducting a search for a chief financial officer. The Company also
      intends to locate a financial controller for Capital Partners. There is no
      assurance that the Company will be able to promptly locate and hire such a
      qualified chief financial officer, nor that Capital Partners will be able to
      promptly locate and hire a competent financial controller, nor at compensation
      levels acceptable to the Company. Failure to locate such individuals on terms
      satisfactory to the Company and Capital Partners could have a material adverse
      effect on the Company's business, results of operations, financial condition and
      the trading price of the Company's common stock. In addition, the Company and
      its independent accountants believe that Capital Partners must migrate its
      internal financial accounting onto a robust general accounting system, and
      a
      failure to do so could have a material adverse effect on the Company's business,
      results of operations, financial condition and the trading price of the
      Company's common stock, and could potentially lead to deficiencies in regard to
      the Company's internal financial controls and reporting.
Insider
      Control
.
      Certain
      individuals and entities controlled by them own a substantial majority of the
      Company's common stock. Accordingly, they have substantial influence over the
      Company's policies and management. The Company may take actions supported by
      them that may not be viewed by some stockholders to be in the Company's best
      interest.
Geographic
      Expansion
.
      Capital
      Partners currently operates in the Raleigh-Durham market and has been the
      dominant health club company in that market due to its rapid expansion and
      the
      relatively low cost of its club memberships, which may make the market less
      attractive to new entrants. To the extent that expansion into new geographic
      markets is effected by internal growth as opposed to acquisition, the Company
      may experience greater difficulty than in its current market due to the
      entrenchment of existing competition, which may compete vigorously to avoid
      the
      loss of customers. In addition, profitability of operations is often tied in
      large part to the ability to operate multiple facilities in a market, which
      enable the operator to amortize advertising expenditures over a larger base,
      benefit from name recognition in the community, ability to retain a customer
      who
      moves from one sector of the area to another and the ability to attract and
      retain high quality employees who can oversee multiple location
      facilities.
The
      success of Capital Partners in the Raleigh-Durham market may be due in large
      part to the familiarity of its management with both the customs of the local
      market and the geographic nuances of the market. As it seeks to expand into
      other markets, there will be less familiarity with the drivers to success in
      those markets. In addition, site selection will be critical, and there can
      be no
      assurances that access to geographical and demand generation information will
      be
      sufficient to ensure success in those markets.
Membership
      Retention and Need for New Members
.
      The
      Company's success will be tied in large part to its ability to continue to
      attract and retain new members. There can be no assurances that the Company
      will
      be successful in this regard or that the market will continue to generate new
      prospective members in sufficient numbers. See "Competition'" above. The Company
      believes that the health club industry experiences significant turn over in
      memberships due to a variety of reasons, including members switching to clubs
      with other amenities, the decision to simply not renew the membership, moving
      to
      new locales and financial inability to continue as members. Consequently, the
      Company believes it must attract and retain a large number of paying members
      on
      an ongoing basis. To do so, the Company must continue to invest significant
      resources in order to enhance its existing facilities, equipment and services,
      and to introduce new high-quality facilities, equipment and services. Further,
      if the Company is unable to predict member preferences or industry changes,
      or
      if the Company is unable to modify its facilities, equipment and services on
      a
      timely basis, the Company may lose existing members and may fail to attract
      new
      members. There is no assurance that the Company will have the personnel,
      financial or other resources required to enhance existing and introduce new
      facilities, equipment and services. Failure to enhance or develop facilities,
      equipment and services or to respond to the needs of members in an effective
      or
      timely manner could have a material adverse effect on the Company's business,
      results of operations, financial condition and the trading price of the
      Company's common stock. The Company cannot provide any assurances that it will
      be able to add more members than it loses each month. Failure to increase the
      Company's membership on a cost-effective basis could have a material adverse
      effect on the Company's business, results of operations, financial condition and
      the trading price of the Company's common stock.
13
Trademark
      Protection
.
      Capital
      Partners has been operating under the "Beyond Fitness" service mark since its
      inception. To date, no Federal Registration application has been submitted
      for
      the service mark and Capital Partners has been relying upon its common law
      rights with respect to the mark. The Company expects to submit a federal
      registration application in the near future. There can be no assurances that
      the
      US Patent and Trademark Office will grant a federal registration for the service
      mark or that if granted, it will be enforceable at all, or with respect to
      all
      current or future anticipated uses by the Company. In a preliminary search
      of
      registered marks, the mark "Beyond Fitness" was granted to one registrant in
      2003 for the provision of wellness services (showing first use in 1997), which
      although not directly related to health club and personal training services,
      is
      in the general health care field. While the Company believes that Capital
      Partners has enforceable rights in the Beyond Fitness mark, there can be no
      assurances that the mark will be registered or given sufficiently broad
      protection. Even if the Beyond Fitness mark is fully registered, the Company
      will be required to enforce the mark against potential infringers, and would
      have to bear costs in connection with any such proceedings. There is always
      a
      risk that in connection with an enforcement proceeding, the court could declare
      the prior grant of the mark to be invalid or unenforceable.
Leases
.
      Certain
      of the leases for the Capital Partners facilities typically have change in
      control provisions, which were triggered upon the Merger or which were triggered
      in connection with a prior change of control in 2003. Not all of the required
      landlord consents were obtained upon the closing of the Merger. The requisite
      landlord consents were obtained for all of Capital Partners' leases except the
      two month-to-month leases where management anticipates moving to a new location
      and/or consolidating the members in one of its other nearby clubs, and the
      health club located in Fuquay Varina, North Carolina. Capital Partners has
      engaged in preliminary discussions with the landlord of the Fuquay Varina
      facility and, based on these negotiations, it believes that the landlord is
      willing to provide its consent upon receipt of additional security deposit
      funding. Management intends to continue to negotiate for a less costly
      concession. However, there can be no assurances that such landlord will grant
      the consent and will not choose to terminate the lease. In addition, there
      can
      be no assurances that moving Capital Partners' members who currently support
      clubs on month-to-month leases into new or existing clubs can be effected on
      a
      timely and cost effective basis or that the members will accept any such new
      facility. To the extent a consent is not obtained, Capital Partners may be
      required to vacate the premises and open a new club in a new location and may
      have potential exposure with respect to the lease. Prior to the Merger,
      management of Capital Partners advised the Company that the opening of a new
      facility is often quite easy and can be done quickly, however there can be
      no
      assurances that this will be the case or that there will not be significant
      member loss in connection with a new club location. In addition, there would
      be
      a need to invest in additional leasehold improvements in the event of such
      a
      move, and there can be no assurances that the Company would have the capital
      necessary to effect the same.
Ability
      to Access Sufficient Capital for Future Acquisitions and
      Developments
.
      Continued growth of the Company through its strategy to acquire additional
      health club facilities will be contingent upon the Company having access to
      sufficient capital from a variety of sources, including equity raises, debt
      financing, internally generated earnings and the ability to use its stock as
      currency—which in turn is contingent in large part upon the Company's ability to
      maintain a liquid market for its shares at acceptable price levels. There can
      be
      no assurances that the Company will be able to borrow sufficient capital to
      meet
      its needs, or if so, that such loan and/or new equity will be provided on terms
      satisfactory to the Company or to investors.
14
In
      the
      event that the Company is able to borrow monies to fund acquisitions and/or
      operations, it will be subject to leverage. Typically, leverage results in
      less
      dilution than in connection with equity financings. However, it also increases
      the risk profile of the Company in that cash is required to service the debt,
      ongoing covenants are typically employed which can restrict the way in which
      the
      Company is operated and, if the financing comes due either upon maturity or
      an
      event of default, the Company may lack the resources at that time to either
      pay
      off or refinance the debt, or if it is able to refinance, it may be on terms
      that are less favorable than those originally in place, and may require
      additional equity or quasi equity accommodations. This is particularly true
      with
      respect to the Purchase Money Notes, which come due on June 30, 2006; should
      the
      Company be unable to raise sufficient new capital and/or refinance the balance
      due on the Purchase Money Notes as of their maturity dates, the Company could
      be
      adversely affected.
Development
      of new club facilities requires significant additional capital. This includes
      monies necessary to fund leasehold improvements and purchase of equipment (to
      the extent equipment financing is not available). In addition, if the Company
      begins to develop larger facilities, it may be more beneficial to own the
      facilities due to the significant capital expenditures that would not be
      recouped in the event of lease termination. There can be no assurances that
      the
      Company will have sufficient capital available to fund the cash down payment
      and/or the necessary credit to fund mortgage financing for owned
      facilities.
Accounting
      Projections
.
      Any
      accounting projections used by the Company as to future events are based upon
      assumptions made by the Company regarding the future. There is no assurance
      that
      actual events will correspond with these assumptions. Actual results for any
      period may or may not approximate such statements. In the event that the Company
      experiences delays in raising capital, the Company's business plan may be
      adversely affected.
Significant
      Fluctuations in Quarterly Operating Results
.
      The
      Company may experience significant fluctuations in future quarterly operating
      results from a number of factors, including: (i) the timing and nature of
      expansion efforts in both new and existing markets; (ii) the introduction of
      new
      products or services and the market response to those introductions; (iii)
      the
      timing and nature of sales transactions and accounting treatment with respect
      to
      customer contracts; (iv) seasonal trends; (v) changes in pricing policies or
      service offerings; (vi) changes in the level of marketing and other operating
      expenses to support future growth; (vii) competitive factors; and (viii) general
      economic conditions. Consequently, quarterly revenue and operating results
      may
      fluctuate significantly, and the Company believes that period-to-period
      comparisons of results will not necessarily be meaningful and should not be
      relied upon as an indication of future performance. Furthermore, due to the
      foregoing factors, among others, it is likely that the Company's future
      quarterly operating results from time to time may not meet the expectations
      of
      research analysts or investors, which may have an adverse effect on the price
      of
      the Company's common stock.
15
Management
      of Growth
.
      The
      Company's anticipated growth through acquisitions and organic expansion is
      expected to place a significant strain on the Company's managerial, operational,
      technical and financial resources. The Company expects operating expenses and
      staffing levels to increase substantially in the future as the Company expands.
      To manage its growth, the Company must expand its operational and technical
      capabilities, increase, train and manage its employee base and manage multiple
      relationships with customers, suppliers and other third parties. There can
      be no
      assurance that the Company will be able to manage its expanding operations
      effectively. Any failure of the Company to implement effective management and
      operating systems, add resources on a cost-effective basis or effectively manage
      the Company's expansion could have a material adverse effect on the Company's
      business, results of operations, financial condition and the trading price
      of
      the Company's common stock.
Need
      for Additional Capital
.
      The
      Company will need to procure additional financing over time, the amount and
      timing of which will depend on a number of factors including the pace of
      expansion of the Company's markets and customer base, services offered and
      development efforts and the cash flow generated by its operations. The Company
      cannot predict the extent to which it will require additional financing. There
      can be no assurance regarding the availability or terms of additional financing
      the Company may be able to procure over time. Any future debt financing or
      issuance of preferred equity by the Company could be senior to the rights of
      shareholders, and any future issuance of equity could result in the dilution
      of
      the then existing owners' proportionate equity interests in the
      Company.
Actions
      Not Requiring Your Approval
.
      The
      terms and conditions of any acquisition could require the Company to take
      actions that would not require shareholder approval. In order to acquire certain
      companies or assets, the Company may issue additional shares of common or
      preferred stock, borrow money or issue debt instruments including debt
      convertible into capital stock. Not all of these actions would require your
      approval even if these actions dilute your economic or voting interest as a
      shareholder.
Acquisitions
.
      The
      Company may not be able to identify, negotiate, finance or close acquisitions.
      A
      significant component of the Company's growth strategy focuses on acquiring
      additional companies or assets. The Company may not, however, be able to
      identify or acquire companies or assets on acceptable terms if at all.
      Additionally, the Company may need to finance all or a portion of the purchase
      price for an acquisition by incurring indebtedness. There can be no assurance
      that the Company will able to obtain financing on terms that are favorable,
      if
      at all, which will limit the Company's ability to acquire additional companies
      or assets in the future. Failure to acquire additional companies or assets
      on
      acceptable terms, if at all, would have a material adverse effect on the
      Company's ability to increase assets, revenues and net income and on the trading
      price of the Company's common stock.
Integration
      of Acquired Businesses
.
      The
      Company may be unable to successfully integrate acquired businesses. Even if
      the
      Company is able to acquire additional companies or assets, the Company may
      not
      be able to successfully integrate these companies or assets. For example, the
      Company may need to integrate widely dispersed operations with different
      corporate cultures, operating margins, competitive environments, computer
      systems, compensation schemes, business plans and growth potential requiring
      significant management time and attention. Failure to successfully integrate
      acquired businesses could have a material adverse effect on the Company's
      business, results of operations and financial condition and the trading price
      of
      the Company's common stock.
16
Earnouts
.
      The
      Company has agreed to pay earnouts in regard to its acquisition of Capital
      Partners. The Company will likely also agree to contingent payout arrangements
      in connection with future acquisitions. There is no assurance that the Company
      will have cash available to pay these earnouts if they are earned. Thus, the
      Company may have to borrow additional monies or sell additional equity to raise
      the needed funds, which may have a material adverse effect on the Company's
      results of operations, financial condition, business prospects and the trading
      price of the Company's common stock.
Investment
      Risks
National
      Securities Listing
.
      Listing
      on a national exchange such as the American Stock Exchange ("AMEX"), or NASDAQ
      Capital Market or NASDAQ National Market may be sought, but is not assured.
      There is no guarantee that if such listing is pursued the Company, it will
      meet
      the listing requirements or that such efforts to list the Company's common stock
      on any national or regional exchange or the NASDAQ SmallCap market will be
      successful, or if successful, will be maintained, including but not limited
      to
      requirements associated with maintenance of a minimum net worth, minimum stock
      price and ability to establish a sufficient number of market makers.
The
      Company Does Not Expect to Pay Dividends
.
For
      the
      foreseeable future, it is anticipated that earnings, if any, which may be
      generated from the Company's operations will be used to finance the growth of
      the Company and that dividends may not be paid to holders of shares of the
      Company's common stock.
The
      Company's Articles of Incorporation, Bylaws and State Law May Contain Provisions
      that Preserve Current Management
.
      Provisions of state law, the Company's articles of incorporation and by-laws may
      discourage, delay or prevent a change in the Company's management team that
      stockholders may consider favorable. These provisions will be likely to
      include
:
·
authorizing
                the issuance of "blank check" preferred stock without any need for action
                by stockholders;
·
permitting
                stockholder action by written consent;
                and
·
establishing
                advance notice requirements for nominations for election to the board
                of
                directors or for proposing matters that can be acted on by stockholders
                at
                stockholder meetings.
These
      provisions, if included in the Company's articles of incorporation or by-laws,
      could allow the Company's board of directors to affect the investor's rights as
      a stockholder since the board of directors can make it more difficult for
      preferred stockholders or common stockholders to replace members of the board.
      Because the board of directors is responsible for appointing the members of
      the
      management team, these provisions could, in turn, affect any attempt to replace
      the current or future management team.
17
There
      are Additional Costs of Being a Public Company and those Costs may be
      Significant
.
      The
      Company is subject to the information and reporting requirements of the U.S.
      securities laws. The U.S. securities laws require, among other things, review,
      audit and public reporting of the Company's financial results, business
      activities and other matters. The public company costs of preparing and filing
      registration statements, as well as annual and quarterly reports, proxy
      statements and other information with the SEC and furnishing audited reports
      to
      stockholders will cause expenses to be higher than if it were privately-held.
      These increased costs may be material and may include the hiring of additional
      employees and/or the retention of additional consultants and professionals.
      Failure by the Company to comply with the federal or state securities laws
      could
      result in private or governmental legal action against the Company and/or its
      officers and directors, which could have a detrimental effect on the business
      and finances of the Company, the value of the Company's stock and the ability of
      stockholders to resell their stock.
The
      Common Stock of the Company may be Considered "Penny Stock" and may be Difficult
      to Trade
.
The SEC
      has adopted regulations which generally define "penny stock" to be an equity
      security that has a market or exercise price of less than $5.00 per share,
      subject to specific exemptions. The market price of the Company's common stock
      may be less than $5.00 per share and, therefore, may be designated as a "penny
      stock" according to SEC rules. This designation requires any broker or dealer
      selling these securities to disclose certain information concerning the
      transaction, obtain a written agreement from the purchaser and determine that
      the purchaser is reasonably suitable to purchase the securities. These rules
      may
      restrict the ability of brokers or dealers to sell the Company's common stock
      and may affect the ability of investors to sell their shares.
Certain
      of the Company's Shares are Eligible for Sale, and their Sale Could Depress the
      Market Price of its Stock
.
      Much of
      the Company's common stock is subject to resale under Rule 144, subject to
      certain volume limitations. Shares which are not registered may be offered
      from
      time to time in the open market pursuant to Rule 144, and these sales may have
      a
      depressive effect on the market for the Company's common stock. In general, a
      person who has held restricted shares for a period of one year may, upon filing
      with the SEC a notification on Form 144, sell into the market shares of the
      Company's common stock in an amount equal to the greater of 1% of the
      outstanding shares or the average weekly number of shares sold in the last
      four
      weeks prior to such sale. Such sales may be repeated once each three months,
      and
      any amount of the restricted shares may be sold by a non-affiliate after they
      have been held two years.
Indemnification
      of Officers and Directors
.
      The
      Company intends to indemnify its officers and directors to the fullest extent
      permissible under the law. Under most circumstances, the Company's officers
      and
      directors may not be held liable to the Company or its equity owners for errors
      in judgment or other acts or omissions in the conduct of the Company's business
      unless such errors in judgment, acts or omissions constitute fraud, gross
      negligence or malfeasance.
18
Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations.
The
      following discussion of the historical results of operations, liquidity and
      capital resources of Kapital Engine Investments, Inc. and its subsidiaries
      (collectively, "Kapital Engine"), which is the predecessor to Capital Partners,
      should be read in conjunction with the consolidated financial statements and
      related notes that appear elsewhere in this Current Report on Form 8-K. For
      purposes of this discussion, the terms "Kapital Engine" and "Capital Partners"
shall be synonymous. This discussion contains forward-looking statements that
      involve risks and uncertainties. Capital Partners' actual results could differ
      materially from those anticipated in these forward-looking statements as a
      result of various factors, including those discussed in "Risk Factors" beginning
      on page 8 of this Current Report on Form 8-K.
Overview
Capital
      Partners is primarily engaged in design, management and operation of fitness
      centers, principally in the Raleigh, North Carolina area. As of September 30,
      2005, Capital Partners owned and operated nine fitness clubs.
The
      fitness clubs generally offer weight training, cardiovascular equipment,
      aerobics classes, yoga, tanning, babysitting and basketball courts. Operations
      focus on prospecting for new members, membership sales, and renewals. 
Memberships may be prepaid or paid monthly. The majority of the memberships
      sold
      are for two-year periods.
This
      discussion compares the results of Capital Partners' centers based on how long
      the centers have been open at the most recent measurement period. Capital
      Partners includes a center for comparable center revenue purposes beginning
      on
      the first day of the thirteenth full calendar month of the center's operation,
      prior to which time the center is referred to as a new center. As Capital
      Partners grows its presence in existing markets by opening new centers, it
      expects to attract some memberships away from its other existing centers already
      in those markets, thereby reducing revenue and initially lowering the
      memberships of those existing centers. In addition, as a result of new center
      openings in existing markets, and because older centers will represent an
      increasing proportion of Capital Partners' center base over time, Capital
      Partners' comparable center revenue increases may be lower in future periods
      than in the past. Future plans include expansion into markets closely
      surrounding the Raleigh Durham market area (the "triangle"). These areas are
      rapidly expanding due to decreased land costs and the willingness of the
      workforce to commute to the triangle. These areas are further from Capital
      Partners' existing clubs than its previous expansions have been. Therefore
      Capital Partners' does not anticipate a significant impact on existing club
      revenue.
Capital
      Partners' measures performance using such key operating statistics as average
      revenue per membership, including membership dues and enrollment fees, average
      in-center revenue per membership and center operating expenses, with an emphasis
      on payroll and occupancy costs, as a percentage of sales and comparable center
      revenue growth. Capital Partners' uses center revenue and EBITDA margins to
      evaluate overall performance and profitability on an individual center basis.
      In
      addition, Capital Partners' focuses on several membership statistics on a
      center-level and system-wide basis. These metrics include growth of center
      membership levels and growth of system-wide memberships, percentage center
      membership to target capacity, center membership usage, center membership mix
      among individual, couple and family memberships and center attrition rates.
19
Capital
      Partners' primarily receives revenue from two sources. First, its largest source
      of revenue is membership dues and enrollment fees paid by its members. Capital
      Partners receives a one-time enrollment fee at the time a member joins and
      monthly membership dues for usage from its members. The enrollment fees
      generally are nonrefundable after three to ten days. Enrollment fees and
      related direct expenses (primarily commissions) are deferred and recognized
      on a
      straight-line basis over an estimated membership period of twelve to
      thirty-six months, which is based on the life of the contract. In addition,
      monthly membership dues paid in advance of a center's opening are deferred until
      the center opens. Capital Partners offers members month-to-month memberships
      and
      recognizes as revenue the monthly membership dues in the month to which they
      pertain.
Second,
      Capital Partners generates revenue at its centers from rental revenue from
      several third party vendors who operate refreshment areas within each fitness
      center. Rental revenue from this activity is recognized monthly.
The
      fitness center operations expenses consist primarily of salary, commissions,
      payroll taxes, benefits, real estate taxes and other occupancy costs, utilities,
      repairs and maintenance, supplies, administrative support and communications
      to
      operate our centers. Advertising and marketing expenses consist of its marketing
      department costs and media and advertising costs to support center membership
      growth. General and administrative expenses include costs relating to Capital
      Partners' centralized support functions, such as accounting, information
      systems, procurement and member relations and other members of senior
      management. Capital Partners' other operating expenses include other corporate
      expenses, as well as gains or losses on its dispositions of assets. Capital
      Partners' total operating expenses may vary from period to period depending on
      the number of new centers opened during that period and the number of centers
      engaged in pre-sale activities.
Critical
      Accounting Policies and Estimates
The
      preparation of financial statements in conformity with generally accepted
      accounting principles in the U.S., or GAAP, requires the Company to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those estimates.
      In recording transactions and balances resulting from business operations,
      Capital Partners uses estimates based on the best information available. Capital
      Partners uses estimates for such items as depreciable lives, tax provisions
      and
      provisions for uncollectible receivables. Capital Partners also uses estimates
      for calculating the amortization period for deferred enrollment fee revenue
      and
      associated direct costs, which are based on the weighted average expected life
      of center memberships. Capital Partners revises the recorded estimates when
      better information is available, facts change or it can determine actual
      amounts. These revisions can affect operating results. Capital Partners has
      identified below the following accounting policies that it considers to be
      critical.
20
Revenue
      Recognition —
Capital
      Partners receives a one-time enrollment fee at the time a member joins and
      monthly membership dues for usage from its members. The enrollment fees
      generally are nonrefundable after three to ten days. Enrollment fees and related
      direct expenses (primarily commissions) are deferred and recognized on a
      straight-line basis over an estimated membership period of twelve to
      thirty-six months, which is based on the life of the contract. In addition,
      monthly membership dues paid in advance of a center's opening are deferred until
      the center opens. Capital Partners offers members month-to-month memberships
      and
      recognizes as revenue the monthly membership dues in the month to which they
      pertain.
Capital
      Partners also receives rental revenue from several third party vendors who
      operate refreshment areas within each fitness center. Rental revenue from this
      activity is recognized monthly.
Fair
      Value of Financial Instruments
-
      Fair
      value estimates discussed herein are based upon certain market assumptions
      and
      pertinent information available to management. The respective carrying value
      of
      certain on-balance-sheet financial instruments approximated their fair values.
      These financial instruments include cash, accounts receivable, accounts payable,
      and accrued expenses. Fair values were assumed to approximate carrying values
      for these financial instruments since they are short-term in nature and their
      carrying amounts approximate fair values or they are receivable or payable
      on
      demand. The fair value of Capital Partners' notes payable is estimated based
      upon the quoted market prices for the same or similar issues or on the current
      rates offered to Capital Partners for debt of the same remaining maturities
      and
      approximates the carrying amounts of the notes.
Accounts
      Receivable
-
      Accounts receivable principally consists of amounts due from Capital Partners'
membership base. Capital Partners maintains an allowance for doubtful accounts
      for estimated losses resulting from the inability of its members to make
      required payments. Capital Partners considers facts such as: historical
      collection experience, the age of the receivable balance, and general economic
      conditions that may affect its member's ability to pay.
Impairment
      of Long-lived Assets
-
      The
      carrying value of long-lived assets is reviewed annually and whenever events
      or
      changes in circumstances indicate that such carrying values may not be
      recoverable. Capital Partners considers a history of consistent and significant
      operating losses to be its primary indicator of potential impairment. Assets
      are
      grouped and evaluated for impairment at the lowest level for which there are
      identifiable cash flows, which is generally at an individual location. The
      determination of whether impairment has occurred is based on an estimate of
      undiscounted future cash flows directly related to that center, compared to
      the
      carrying value of these assets. If an impairment has occurred, the amount of
      impairment recognized is determined by estimating the fair value of these assets
      and recording a loss if the carrying value is greater than the fair value.
      For
      the years ended December 31, 2004 and 2003 there was no impairment charge
      recorded.
21
Year
      Ended December 31, 2004 Compared to Year Ended December 31,
      2003
Total
      revenue.
Total
      revenue increased $2,654,500, or 37.9%, to $9,661,200 for the year ended
      December 31, 2004 from $7,006,700 for the year ended December 31, 2003.
      This was primarily due to the opening of a new fitness center and the purchase
      of an existing facility. The addition of new members by the new facilities
      resulted in a growth in total membership base of 20%. The memberships sold
      by
      the new facilities were primarily pre-paid and account for approximately 25%
      of
      the revenue increase. The remaining revenue increase is due to an overall
      company focus on pre-paid membership sales.
General
      and administrative expenses.
General
      and administrative expenses were $7,998,600 or 85.3%, of total revenue, for
      the
      year ended December 31, 2004 compared to $7,344,100, or 108.7% of total
      revenue, for the year ended December 31, 2003. This decrease primarily
      consisted of decreases of approximately $200,000 in advertising cost, $150,000
      in contracted services, $200,000 in payroll, and $100,000 in professional fees.
      As a percentage of total revenue, these expenses decreased due to the eliminated
      expenses not being performance related (i.e. sales bonus).
Other
      operating income.
Other
      operating income was $126,000 for the year ended December 31, 2004 compared
      to
      $150,900 for the year ended December 31, 2003. This $24,900 decrease was
      primarily due to a decrease in subleasing of unused space in the facilities.
Interest
      expense.
Interest
      expense was $141,700 for the year ended December 31, 2004 compared to
      $124,400 for the year ended December 31, 2003. This $17,300 increase was
      primarily the result of new debt and capital leases.
Net
      income(loss).
As
      a
      result of the factors described above, net income (loss) was $1,351,500, or14.4%
      of total revenue, for the year ended December 31, 2004 compared to
      $(609,800), or (9.02)% of total revenue, for the year ended December 31,
      2003.
Nine
      Months Ended September 30, 2005 Compared to the Nine Months Ended
      September 30, 2004
Total
      revenue.
Total
      revenue decreased $854,400 or 11.4%, to $6,618,600 for the nine months ended
      September 30, 2005 from $7,473,000 for the nine months ended September 30,
      2004. This decrease does not reflect a decrease in memberships. Rather, the
      decrease is a result of an increase in monthly membership sales and a decrease
      in paid-in-full sales. The decrease is also due to an increase in
      competition.
General
      and administrative expenses.
General
      and administrative expenses were $4,873,100 or 73.6%, of total revenue, for
      the
      nine months ended September 30, 2005 compared to $5,837,000, or 78.1% of
      total revenue, for the nine months ended September 30, 2004. This decrease
      primarily consisted of decreases of approximately $250,000 in advertising cost,
      $150,000 in contracted services, $400,000 in payroll, and $150,000 in
      professional fees.
22
Other
      operating income.
Other
      operating income was $277,400 for the nine months ended September 30, 2005
      compared to $78,800 for the nine months ended September 30, 2004. This
      $198,600 increase was primarily due to advertising revenues generated in the
      facilities and an increase in subleases.
Interest
      expense.
Interest
      expense was $87,900 for the nine months ended September 30, 2005 compared
      to $120,200 for the nine months ended September 30, 2004. This $32,300
      decrease was primarily the result of loan balances being
      paid-in-full.
Net
      income.
As
      a
      result of the factors described above, net income was $1,935,000, or 29.2%
      of
      total revenue, for the nine months ended September 30, 2005 compared to
      $1,594,600, or 21.3% of total revenue, for the nine months ended September
      30,
      2004.
Non-GAAP
      Financial Measures
Capital
      Partners uses the term "EBITDA," which consists of net income plus interest
      expense, net, provision for income taxes and depreciation and amortization.
      This
      term, as Capital Partners defines it, may not be comparable to a similarly
      titled measure used by other companies and is not a measure of performance
      presented in accordance with GAAP.
Capital
      Partners uses EBITDA as a measure of operating performance. EBITDA should not
      be
      considered as a substitute for net income, cash flows provided by operating
      activities, or other income or cash flow data prepared in accordance with GAAP.
      The funds depicted by EBITDA are not necessarily available for discretionary
      use
      if they are reserved for particular capital purposes, to maintain compliance
      with debt covenants, to service debt or to pay taxes.
Capital
      Partners believes EBITDA is useful to an investor in evaluating its operating
      performance and liquidity because:
•
it
                is a widely accepted financial indicator of a company's ability to service
                its debt;
•
it
                is widely used to measure a company's operating performance without regard
                to items such as depreciation and amortization, which can vary depending
                upon accounting methods and the book value of assets, and to present
                a
                meaningful measure of corporate performance exclusive of our capital
                structure and the method by which assets were acquired;
                and
•
it
                helps investors to more meaningfully evaluate and compare the results
                of
                its operations from period to period by removing from its operating
                results the impact of its capital structure, primarily interest expense
                from its outstanding debt, and asset base, primarily depreciation
                and
                amortization of its properties.
23
Capital
      Partners uses EBITDA:
•
as
                a measurement of operating performance because it assists it in comparing
                its performance on a consistent basis, as EBITDA removes from Capital
                Partners' operating results the impact of its capital structure, which
                includes interest expense from Capital Partners' outstanding debt, and its
                asset base, which includes depreciation and amortization of its
                properties;
•
in
                presentations to the members of its board of directors to enable
                the board
                to have the same consistent measurement basis of operating performance
                used by management; and
•
as
                the basis for incentive bonuses paid to selected members of senior
                and
                center-level management.
The
                following table provides a reconciliation of net income, the most
                directly
                comparable GAAP measure, to EBITDA:
For
                the Nine Months Ended
September
                30,
For
                the Year Ended
December
                31
2005
2004
2004
2003
Net
                income (loss)
$
1,935,000
$
1,594,600
$
1,351,500
$
(609,800
)
Interest
                expense
87,900
120,200
141,700
124,400
Provision
                for income taxes
-
-
-
-
Depreciation
                and amortization
463,300
463,900
589,500
514,200
EBITDA
$
2,486,200
$
2,178,700
$
2,082,700
$
28,800
Seasonality
      of Business
Seasonal
      trends have a limited effect on Capital Partners' overall business. Generally,
      it has experienced greater membership growth at the beginning of the year and
      has not experienced an increased rate of membership attrition during any
      particular season of the year.
Liquidity
      and Capital Resources
Liquidity
Historically,
      Capital Partners has satisfied its liquidity needs through various debt
      arrangements capital contributions and cash from operations. Capital Partners
      believes that its cash from operations will be sufficient to satisfy its cash
      requirements during the next twelve months. Principal liquidity needs have
      included the development of new fitness centers, debt service requirements
      and
      expenditures necessary to maintain and update its existing centers and their
      related fitness equipment. Capital Partners believes that it can satisfy its
      current and longer-term debt service obligations and capital expenditure
      requirements with cash flow from operations and by the extension of the terms
      of
      or refinancing its existing debt, although there can be no assurance that such
      actions can or will be completed. Capital Partners' business model operates with
      negative working capital because it carries minimal accounts receivable due
      to
      Capital Partners ability to have monthly membership dues paid by electronic
      draft and that it defers enrollment fee revenue.
24
Operating
      Activities
As
      of
      September 30, 2005, Capital Partners had total cash of $20,400. Net cash
      provided by operating activities was $1,061,300 for the nine months ended
      September 30, 2005 as compared to $968,600 for same period in 2004. The increase
      of $92,700 was primarily due to a $240,400 increase in net income adjusted
      for
      non-cash charges and in cash provided by net operating assets and liabilities
      in
      2005 compared to 2004. The cash used by net operating assets and liabilities
      was
      a result of an increased number of memberships.
Net
      cash
      provided by operating activities was $1,080,100 for 2004 compared to $1,268,500
      for 2003. The decrease of $188,400 was primarily due to an increase in
      memberships and deferred revenue during 2004.
Investing
      Activities
Investing
      activities consist primarily of purchasing and sales of fitness equipment.
      In
      addition, Capital Partners makes capital expenditures to maintain and update
      its
      existing centers. Capital Partners finances the purchase of its fitness
      equipment by cash payments or by financing through notes payable or capital
      lease obligations.
Net
      cash
      used by investing activities was $9,200 for the nine months ended September
      30,
      2005, as compared to $223,700 for same period in 2004. The decrease of $214,500
      was primarily due to the decreased purchases of property and equipment during
      the 2005 period as compared to 2004.
Net
      cash
      used by investing activities was $221,300 for 2004 compared to $191,100 for
      2003. The increase of $30,200 was primarily due to an increase in the purchase
      of property and equipment.
Opening
      new facilities will require financing for new equipment. A 25,000 square foot
      facility typically requires approximately $250,000 in new
      equipment.
Financing
      Activities
Equipment
      is financed by Sun Trust (formerly known as Central Carolina Bank and Trust
      Company) and Life Fitness, a division of Brunswick Corporation, which typically
      sells its leases to CIT following the closing of the financing. They are
      typically three-year leases with a $1 purchase option upon maturity. Upfit
      of an
      existing building is typically financed by Sun Trust. Depending on the work
      required, this cost is between $200,000 and $700,000.
Recent
      Accounting Pronouncements
In
      May
      2005, the FASB issued SFAS No. 154,
Accounting
      Changes and Error Corrections
.
      SFAS
      No. 154 changes the requirements for the accounting for and reporting of a
      change in accounting principle. In addition, it carries forward without change
      the guidance contained in APB Opinion No. 20 for reporting the correction
      of an error in previously issued financial statements and a change in accounting
      estimate. SFAS No. 154 requires retrospective application to prior periods'
financial statements of changes in accounting principle in most circumstances.
      The provisions of SFAS No. 154 are effective in fiscal years beginning
      after December 15, 2005. Capital Partners plans to prospectively adopt SFAS
      No. 154 at the beginning of the 2006 fiscal year.
25
In
      June
      2005, the Emerging Issues Task Force ("EITF") reached a consensus on Issue
      No. 05-06, Determining the Amortization Period for Leasehold Improvements
      Purchased after Lease Inception or Acquired in a Business Combination ("EITF
      05-06"). EITF 05-06 concludes that the amortization period for leasehold
      improvements acquired in a business combination and leasehold improvements
      that
      are in service significantly after and not contemplated at the beginning of
      the
      lease term should be amortized over the shorter of the useful life of the assets
      or a term that includes required lease periods and renewals that are deemed
      to
      be reasonably assured at the date of inception. As of September 30, 2005,
      this pronouncement had no impact on the financial statements.
Other
      recent accounting pronouncements issued by the FASB (including its EITF), the
      AICPA, and the SEC did not or are not believed by management to have a material
      impact on Capital Partners present or future financial statements.
Impact
      of Inflation
Capital
      Partners believes that inflation has not had a material impact on its results
      of
      operations for any of the periods presented. It cannot assure you that future
      inflation will not have an adverse impact on its operating results and financial
      condition.
Security
      Ownership of Certain Beneficial Owners and Management
The
      following table sets forth information, as of the date of this Current Report
      on
      Form 8-K, regarding the beneficial ownership of the Company's common stock on a
      fully-diluted basis by: (1) each of the Company's executive officers and
      directors; (2) all of the Company's executive officers and directors as a group;
      and (3) each person known by the Company to be the beneficial owners of more
      than 5.0% of the outstanding shares of the Company's common stock.
Beneficial
      ownership is determined under the rules of the SEC and generally includes voting
      or investment power over securities. Except in cases where community property
      laws apply or as indicated in the footnotes to this table, the Company believes
      that each stockholder identified in the table possesses sole voting and
      investment power over all shares of the Company's common stock shown as
      beneficially owned by the stockholder. Percentage of beneficial ownership is
      based on 19,481,735 shares of the Company's common stock outstanding as of the
      date of this Current Report on Form 8-K. The amount of the Company's outstanding
      shares of common stock reflects the Stock Consideration issued in the Merger,
      but does not include shares that may be issued in the Offering. Unless indicated
      otherwise in the footnotes, the address of each individual listed in the table
      is c/o Health Partnership Inc., 3111 North Seminary, Suite 1N, Chicago, Illinois
      60657.
Name
Shares
                of Common Stock
Beneficially
                Owned
Percentage
                of Common
Stock
                Beneficially Owned
Douglas
                Stukel
2,831,250
(
1
),
                (4)
14.53%
Lee
                Wiskowski
2,831,250
(
2
),
                (4)
14.53%
Gerard
                Jacobs
9,437,500
(
3)
48.44%
All
                Officers & Directors
15,100,000
77.50%
5%
                Stockholders
Randall
                Rohm
3,279,952
(
2)(4)
16.84%
1
      Legal title to these shares is held by DJS
      Investments, LLC ("DJS"), a limited liability company controlled by Mr. Stukel.
      DJS has granted certain individuals the option to purchase a portion of the
      shares held by DJS.
2
      Legal title to these shares is held by
      Grander, LLC, a limited liability company controlled by Mr. Wiskowski. Grander
      has granted certain individuals the option to purchase a portion of the shares
      held by Grander.
3
      Legal title to these shares is held by the Roberti Jacobs Family Trust (the
      "Trust"), which is an irrevocable trust whose beneficiaries include Mr. Jacobs'
children. Mr. Jacobs' mother-in-law is the current trustee of the Trust. Mr.
      Jacobs has disclaimed any beneficial ownership of any securities, including
      the
      Company's common stock, owned by the Trust. The Trust has granted certain
      individuals the option to purchase a portion of the shares held by the
      Trust.
4
      Messrs Rohm and Flynn (a former stockholder of Capital Partners) have provided
      Mr. Jacobs, or his designees, with an irrevocable proxy to vote their shares
      until disposed of to and nonaffiliated, and effective upon the initial closing
      of the Offering, it is expected that DJS and Grander will grant to Mr. Jacobs
      or
      his designee an irrevocable proxy to vote their shares until disposed of to
      a
      nonaffiliated.
26
Management
Set
      forth
      below is information concerning the Company's executive officers and directors,
      as well as the current executive officers of Capital Partners.
Name
Age
Position
Gerard
                Jacobs
50
Chairman
                of the Board; Chief Executive Officer of the Company
Douglas
                Stukel
35
Director,
                Vice Chairman, President of the Company
Lee
                Wiskowski
39
Director,
                Secretary and Treasurer of the Company
Ashley
                Shepard
35
President
                of Capital Partners
Randall
                Rohm
31
Chief
                Operating Officer of Capital Partners
Gerard
      Jacobs.
Mr.
      Jacobs was appointed as the chairman of the Company's board of directors and as
      its chief executive officer upon the closing of the Merger. Since December
      2001,
      Mr. Jacobs has served as the chief executive officer, secretary and treasurer
      of
      CGI Holding Corporation d/b/a Think Partnership Inc., an AMEX listed provider
      of
      internet services including internet advertising, online dating and online
      educational services. Mr. Jacobs also served as president of CGI Holding
      Corporation from December 2001 to December 2005. From March 1999 until December
      2001, Mr. Jacobs was an officer and director of several privately held
      companies. From 1995 until March 1999, Mr. Jacobs served as the chief executive
      officer of Metal Management, Inc., Chicago, Illinois, a NASDAQ listed metal
      processor and dealer. Mr. Jacobs is a graduate of Harvard University, where
      he
      was elected to Phi Beta Kappa, and of The University of Chicago Law School,
      which he attended as a Weymouth Kirkland Law Scholar. Mr. Jacobs was elected
      twice to the Board of Education of District 200, Oak Park and River Forest
      High
      School, Oak Park, Illinois.
Douglas
      Stukel
.
Mr.
      Stukel was appointed as the Company's vice chairman upon the closing of the
      Merger. Mr. Stukel also has served as the Company's president and as a member of
      its board of directors since May 2005. In addition, Mr. Stukel serves as a
      director of Capital Growth Systems, Inc. ("CGS") and as the co-chief executive
      officer of CGS. Mr. Stukel, together with Mr. Wiskowski, led the
      investor group which purchased the majority stake in CGS, and subsequently
      raised substantial capital to fund working capital requirements in connection
      with CGS' acquisitions of Nexvu Technologies, LLC and Frontrunner Network
      Systems, Inc. Nexvu has developed an advanced set of software tools in the
      application performance management services industry. Frontrunner is a
      complementary telephone systems integrator, with expertise in installation,
      sales and management of systems through its network operating center. In
      addition, Mr. Stukel is a co-founder of Premier Holdings of Illinois, LLC,
      a distributor of medical supplies based in Joliet, Illinois. Mr. Stukel
      served as the president of Cendant Home Funding, a residential mortgage company
      based in Joliet, Illinois, from 1997 until 2001. Mr. Stukel is also a
      co-founder of Momentum Capital, LLC, a privately held firm providing financial
      advisory services in connection with mergers and acquisitions and analysis
      as to
      strategic alternatives. As a co-founder of Momentum Capital, LLC,
      Mr. Stukel's responsibilities are related to the location of potential
      clients, the negotiation of agreements with those clients and the provision
      of
      advisory services related to the clients.
27
Lee
      Wiskowski.
Mr.
      Wiskowski also has served as the Company's secretary and treasurer and as a
      member of its board of directors since May 2005. Mr. Wiskowski also serves
      as a director of Capital Growth Systems, Inc. ("CGS") and as a co-chief
      executive officer of CGS. In 1994, Mr. Wiskowski was the co-founder of
      Madison Securities and early in 1999 was a co-founder of Advanced Equities,
      Inc., both NASD licensed broker-dealers focusing on emerging growth companies.
      During his tenure with these two companies, Mr. Wiskowski had significant
      responsibility in the companies' raising of capital for private and public
      placements, primarily of high technology companies. Mr. Wiskowski sold his
      interest to the other principals of Advanced Equities approximately five years
      ago. Since December 2002, Mr. Wiskowski has been engaged in the business of
      providing financial and advisory services to emerging growth companies through
      Grander, LLC and Momentum Capital, LLC, both privately held advisory and
      consulting firms. As the sole owner of Grander, LLC and co-founder of Momentum
      Capital, LLC, Mr. Wiskowski's responsibilities are related to the location
      of potential clients, the negotiation of agreements with those clients and
      the
      provision of advisory services related to the clients.
Randall
      Rohm
.
      Upon
      the closing of the Merger, Mr. Rohm became the chief operating officer of
      Capital Partners. Prior to that, Mr. Rohm served as the chief executive officer
      of Capital Partners since his purchase of majority control of the chain in
      2003.
      Since that time, he has opened two new clubs, with a third under development.
      He
      is a former high school and college athlete and has pursued physical fitness
      and
      entrepeneurialism his entire adult life. Mr. Rohm was certified as a physical
      fitness trainer in 1997 and left school to pursue a career in health club
      management. In addition, he started and successfully operated a limousine
      business from 1998-2004.
Ashley
      Shepard
.
Mr.
      Shepard has served as the president of Capital Partners since 2005. He is a
      graduate of Clemson University and former player for the St. Louis Rams and
      Minnesota Vikings in the National Football League. From 1998 to the present
      he
      has been active in the telecommunications industry, having held sales and
      marketing positions of increasing responsibility with Southeastern Telecom,
      Williams Communications, ITC Delacom, Colo Solutions and Universal Solutions.
Board
      of Directors
The
      Company's by-laws provide that the size of its board of directors may be fixed
      from time to time by resolution of the board. The Company's board of directors
      adopted a resolution fixing the number of directors at three members. The
      Company anticipates that its board of directors will adopt another resolution
      to
      add an additional six directors, for a total of nine directors, by the end
      of
      the second quarter of 2006. All directors hold office until the next annual
      meeting of stockholders and the election and qualification of their successors
      or their earlier removal or retirement. Executive officers are elected annually
      by the board of directors and serve at the discretion of the board.
28
Compensation
      of the Board of Directors
The
      Company will reimburse each of its directors for reasonable travel and other
      expenses incurred with attending all board meetings. In addition, the Company
      anticipates that it will pay each director that is not an officer or director
      of
      the Company an undetermined fee for each board meeting that such director
      attends.
Audit
      Committee
The
      Company has not yet formed an audit committee of its board of director and
      is
      not yet required to do so because it is not a "listed issuer" as such term is
      defined by the rules adopted under the Securities Exchange Act of 1934. However,
      the Company intends to form an audit committee once it adds additional members
      to its board of directors as previously noted. The Company anticipates that
      its
      audit committee will consist of one or more independent members of its board
      of
      directors, at least one of whom will qualify as an audit committee financial
      expert under the SEC's rules and regulations. In the meantime, the Company's
      board of directors intends to satisfy the duties of the audit committee. The
      audit committee's duties would be to recommend to the Company's board of
      directors the engagement of independent auditors to audit the Company's
      financial statements and to review its accounting and auditing principles.
      The
      audit committee would review the scope, timing, and fees for the annual audit
      and the results of audit examinations performed by the internal auditors and
      independent public accountants, including their recommendations to improve
      the
      system of accounting and internal controls.
Executive
      Compensation
The
      following summary compensation table sets forth information concerning the
      cash
      and non-cash compensation earned by, awarded or paid to Capital Partners' then
      acting chief executive officer for services rendered during the fiscal years
      ended December 31, 2003, 2004 and 2005. The Company's current officers and
      directors are not receiving any compensation from the Company.
Summary
                Compensation Table
Long-
                Term
Compensation
Annual
                Compensation
Awards
Payouts
Name
                and
Principal
                Position
Year
Salary
                ($)
Bonus
                ($)
Other
                Annual Compensation ($)
Securities
                Underlying Options
LTIP
Payouts
($)
All
                Other Compen-sation ($)
Randall
                Rohm, CEO
2005
90,000
0
12,583
(1)
0
0
0
2004
180,000
0
39,000
(1)
0
0
0
2003
180,000
0
28,750
(1)
0
0
0
___________________
(1)
      The
      Company made automobile lease payments on behalf of Mr. Rohm during 2003, 2004
      and a portion of 2005. Mr. Rohm assumed the automobile lease during 2005.
29
Employment
      Agreement
Concurrent
      with the closing of the Merger, Capital Partners entered into an employment
      agreement with Randall Rohm, the former chief executive officer of Capital
      Partners. Pursuant to the employment agreement, Mr. Rohm agreed to act as the
      chief operating officer of Capital Partners for a three-year term. Mr. Rohm
      will
      earn an annual base salary of $200,000 and will be eligible to receive raises,
      bonuses, options and warrants in the sole discretion of the board of directors
      of Capital Partners. Mr Rohm will be eligible for a mandatory bonus of $50,000
      during each year of the term if Capital Partners' EBITDA reaches certain levels.
      In addition to serving as the chief operating officer, Mr. Rohm agreed to
      perform such duties as may be assigned to him by Capital Partners' board of
      directors or chief executive officer. Mr. Rohm's initial assignment is to
      provide full-time management of the health club facilities owned by Capital
      Partners.
Incentive
      Plan
The
      Company anticipates establishing a qualified stock incentive plan to incent
      the
      employees, officers and directors of the Company and its subsidiaries, as well
      as other persons providing assets or services of value to the Company, calling
      for the issuance of restricted stock, stock options and/or other equity based
      compensation. At present, no such plan is in place.
Certain
      Relationships and Related Party Transactions
Convertible
      Debentures
In
      October 2005, the Company issued a series of notes (the "Convertible
      Debentures") totaling $500,000 in principal amount, bearing simple interest at
      7% per annum and maturing one year from issuance. The principal plus interest
      accrued under the Convertible Debentures automatically convert into shares
      of
      the Company's common stock effective upon the Company closing on an equity raise
      of $3,000,000 (inclusive of the amount of equity issued on conversion of the
      Convertible Debentures) or more, at a 25% discount to the price paid per share
      to investors in the equity raise. The Company may seek to raise up to $1,000,000
      of additional Convertible Debentures to enable it to provide bridge loan
      financing to Capital Partners and/or other acquisition candidates for working
      capital purposes. The holders of the Convertible Debentures include persons
      who
      currently serve as directors and/or officers of the Company or who may do so
      in
      the future.
$400,000
      Bridge Loan
In
      December 2005, Douglas Stukel and two other individuals loaned an aggregate
      of
      $300,000 to the Company, which in turn was loaned by the Company to Capital
      Partners at 8% per annum to enable it to effect the funding of the buyout of
      a
      former minority shareholder of its predecessor entity. In January 2006, another
      individual loaned the Company an additional $100,000, which in turn was loaned
      by the Company to Capital Partners at 8% per annum to enable it to fund certain
      of its working capital requirements. All of these loans to the Company bear
      simple interest at 12% per annum and are due upon the initial closing of the
      Offering. See "Certain Relationships and Related Party Transactions -
      Convertible Debentures," above.
30
Advisory
      Fees
The
      Company expects to pay advisory fees to its current and future officers and
      directors, as well as possibly other persons assisting the Company in the
      acquisitions of Capital Partners and/or additional acquisition candidates,
      which
      could total up to $1,500,000 plus warrants to purchase up to 1,200,000 shares
      of
      the Company's common stock at $1.25 per share. These fees are expected to be
      awarded by the board of directors and paid for identification and negotiation
      of
      the acquisition of the target companies, as well as services associated with
      the
      consummation of the acquisitions. This compensation will be adjusted downward
      to
      the extent that fewer than three targets are acquired by the Company in 2006,
      and is in addition to other compensation that the board of directors may award
      from time to time to these persons for other services.
Description
      of Securities
General
The
      authorized capital stock of the Company consists of: (i) 50,000,000 shares
      of
      common stock, par value $.0001 per share, 19,481,734 of which shares were
      outstanding as of the date of this Current Report on Form 8-K; and (ii)
      5,000,000 Shares of Preferred Stock, par value $0.10 per share, none of which
      were issued and outstanding as of the date of this Current Report on Form
      8-K.
Common
      Stock
Each
      share of the Company's common stock is entitled to one vote. There are no
      preemptive, subscription, conversion or redemption rights pertaining to the
      shares of such common stock. Stockholders are entitled to receive such dividends
      as declared by the board of directors out of assets legally available therefor
      and to share ratably in the assets of the Company available upon
      liquidation.
The
      Company's Articles of Incorporation do not provide for cumulative voting.
      Therefore, stockholders do not have the right to aggregate their votes for
      the
      election of directors and, accordingly, stockholders holding more than fifty
      percent (50%) of the shares of the Company's common stock outstanding can elect
      all of the directors.
Preferred
      Stock
The
      Company is authorized to issue 5,000,000 Shares of Preferred Stock without
      designation, par value $0.10 per Share. As of the date of this Current Report
      on
      Form 8-K, there were no shares of Preferred Stock outstanding.
The
      Company's Articles of Incorporation grants the board of directors the right to
      cause the Company to issue, from time to time, all or part of the shares of
      Preferred Stock remaining undesignated in one or more series, and to fix the
      number of shares of Preferred Stock and determine or alter for each series,
      the
      voting powers, full, limited, or none, and other designations, preferences,
      or
      relative, participating, optional or other special rights and such
      qualifications, limitations, or restrictions thereof.
31
Market
      for the Company's Common Equity and Related Stockholder
      Information
The
      Company's common stock is traded on the OTC Bulletin Board under the trading
      symbol "HHPN.OB." As of the date of this Current Report on Form 8-K, the Company
      had approximately 232 stockholders of record prior to the Merger. The
      Company has not declared any dividends on its common stock during the fiscal
      years ended December 31, 2003 or 2004, or the nine months ended September 30,
      2005. The Company does not anticipate that it will declare any dividends in
      the
      foreseeable future. The table below sets forth the high and low bid information
      with respect to the Company's common stock for each quarter during the same
      periods.
2003
High
Low
1
st
Quarter
No
                quote available
No
                quote available
2
nd
Quarter
No
                quote available
No
                quote available
3
rd
Quarter
.010
.010
4
th
Quarter
.010
.010
2004
High
Low
1
st
Quarter
.028
.005
2
nd
Quarter
.019
.004
3
rd
Quarter
.005
.001
4
th
Quarter
.010
.001
2005
High
Low
1
st
Quarter
.100
.100
2
nd
Quarter
.100
.100
3
rd
Quarter
.100
.100
Legal
      Proceedings
In
      February 2006, Duvera Billing Services ("Duvera") filed a complaint in the
      General Court of Justice, District Court Division of Wake County, North Carolina
      against, among others, Kapital Engine Investments, Inc. ("Kapital Engine"), the
      predecessor to Capital Partners. Duvera alleges in the complaint that Kapital
      Engine breached that certain Master Loan Agreement dated November 16, 2004,
      by
      failing to make the required payments thereunder. Duvera is seeking
      approximately $414,000 through its complaint. Although the Company has reserved
      a sufficient sum to satisfy the matter, the Company intends to review such
      complaint, the relevant facts and all appropriate defenses.
The
      Company is not involved in any other legal proceedings as of the date of this
      Current Report on Form 8-K.
32
Recent
      Sales of Unregistered Securities
The
      Company has not issued any securities since October 31, 2005 (the date of its
      last report of sales of securities, as reported on Form 8-K) other than: (i)
      the
      issuance of 3,496,430 shares of its common stock to the two former shareholders
      of Capital Partners pursuant to the Merger of Capital Partners with a wholly
      owned subsidiary of the Company; and (ii) the issuance of $400,000 of unsecured
      notes to four individuals during the period December 2005 through January,
      2006;
      such notes bear simple interest at 12% per annum and are due on the earlier
      of
      June 30, 2006 or the initial closing of the Offering. The Company believes
      that
      such transactions were exempt from the registration requirements of the
      Securities Act of 1933 pursuant to Section 4(2) and Regulation D promulgated
      thereunder. Capital Partners, as a predecessor to the Company, issued 66 shares
      of its common stock to one stockholder in late 2005 (representing approximately
      6% of its issued and outstanding stock) pursuant to a transaction which the
      Company believes was exempt from the registration requirements of the Securities
      Act of 1933 pursuant to Section 4(2).
Indemnification
      of Directors and Officers
The
      Colorado Business Corporation Act contains provisions permitting and, in some
      situations, requiring Colorado corporations to provide indemnification to their
      officers and directors for losses and litigation expense incurred in connection
      with their service to the corporation. The Company's articles and bylaws contain
      provisions requiring its indemnification of its directors and officers and
      other
      persons acting in their corporate capacities.
The
      Colorado Business Corporation Act (the "Colorado BCA") permits indemnification
      of a director of a Colorado corporation, in the case of a third-party action,
      if
      the director:
·
conducted
                himself or herself in good faith,
·
reasonably
                believed that (a) in the case of conduct in his or her official capacity,
                his or her conduct was in the corporation's best interest, or (b)
                in all
                other cases, his or her conduct was not opposed to the corporation's
                best
                interest; and
·
in
                the case of any criminal proceeding, had no reasonable cause to believe
                that his or her conduct was
                unlawful.
The
      Colorado BCA further provides for mandatory indemnification of directors and
      officers who are successful on the merits or otherwise in litigation. The
      statute limits the indemnification that a corporation may provide to its
      directors in a derivative action in which the director is held liable to the
      corporation, or in any proceeding in which the director is held liable on the
      basis of his improper receipt of a personal benefit.
In
      addition, the Company may enter into agreements with its directors providing
      contractually for indemnification consistent with the articles and bylaws.
      The
      Colorado BCA also authorizes the Company to purchase insurance for its directors
      and officers insuring them against risks as to which the Company may be unable
      lawfully to indemnify them.
As
      to the
      exculpation or indemnification of directors, officers, and controlling persons
      for liabilities arising under the Securities Act of 1933, the Company has been
      advised that, in the opinion of the SEC, such exculpation or indemnification
      is
      against public policy and is, therefore, unenforceable.
33
Other
      Information
The
      Company is subject to the reporting requirements of the Securities Exchange
      Act
      of 1934, and is required to file reports and other information with the SEC,
      450
      Fifth Street N.W., Washington, D.C., 20549. These reports and other information
      are available at the SEC's website at
http://www.sec.gov
.
      In
      addition, you may examine copies of these documents without charge at, or obtain
      copies of such documents upon payment of prescribed fees from, the Public
      Reference Section of the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
      Washington, D.C. 20549, or at the regional offices of the SEC located at Room
      1400, 75 Park Place, New York, New York 10007 and 500 West Madison Street,
      Suite
      1400, Chicago, Illinois 60661-2511.
The
      Company will send to its stockholders annual reports containing audited
      financial statements with a report thereon by its independent public
      accountants.
Item
      3.02 Unregistered Sales of Equity Securities.
The
      Company has not issued any securities since October 31, 2005 (the date of its
      last report of sales of securities, as reported on Form 8-K), other than: (i)
      the issuance of 3,496,430 shares of its common stock to the two former
      shareholders of Capital Partners pursuant to the Merger of Capital Partners
      with
      a wholly owned subsidiary of the Company; and (ii) the issuance of $400,000
      of
      unsecured notes to four individuals during the period of December 2005 through
      January, 2006; such notes bear simple interest at 12% per annum and are due
      on
      the earlier of June 30, 2006 or the initial closing of the Offering. The Company
      believes that such transactions were exempt from the registration requirements
      of the Securities Act of 1933 pursuant to Section 4(2) and Regulation D
      promulgated thereunder. Capital Partners, as a predecessor to the Company,
      issued 66 shares of its common stock to one stockholder in late 2005
      (representing approximately 6% of its issued and outstanding stock) pursuant
      to
      a transaction which the Company believes was exempt from the registration
      requirements of the Securities Act of 1933 pursuant to Section
      4(2).
Item
      5.02 Departure of Directors or Principal Officers; Election of Directors;
      Appointment of Principal Officers.
Immediately
      following the closing of the Merger, the Company's board of directors appointed
      Gerard Jacobs as the chairman of the board of directors and the chief executive
      officer of the Company. Prior to that date, Douglas Stukel, the Company's
      president, acted as the Company's chief executive officer. Mr. Stukel will
      continue to serve the Company as its president. In addition, the Company's board
      of directors also appointed Mr. Stukel as the vice chairman of the Company.
      Reference is made to the disclosure set forth under Item 2.01 of this Current
      Report on Form 8-K, which disclosure is incorporated herein by
      reference.
34
Item
      5.06 Change in Shell Company Status.
As
      a
      result of the consummation of the Merger described in Items 1.01 and 2.01 of
      this Current Report on Form 8-K, the Company believes that it is no longer
      a
      shell corporation as that term is defined in Rule 405 of the Securities Act
      of
      1933 and Rule 12b-2 of the Securities Exchange Act of 1934.
Item
      9.01 Financial Statements and Exhibits.
(a)
Financial
                Statements of Business Acquired.
In
      accordance with Item 9.01(a), Capital Partners audited financial statements
      for
      the fiscal years ended December 31, 2003 and 2004 and Capital Partners'
unaudited financial statements for the interim period ended September 30, 2005,
      are filed in this Current Report on Form 8-K as Exhibit 99.1
(b)
Pro
                Forma Financial Information.
In
      accordance with Item 9.01(b), the Company's pro forma financial statements are
      filed in this Current Report on Form 8-K as Exhibit 99.2.
(c)
Exhibits
The
      exhibits listed in the following Exhibit Index are filed as part of this Current
      Report on Form 8-K.
Exhibit
      No.
Description
2.1
Agreement
                and Plan of Merger dated February 13, 2006, by and among Health
                Partnership Inc., Capital Partners Merger Sub, Inc., Capital Partners
                Acquisition Sub, Inc., Capital Partners for Health & Fitness, Inc.,
                Randall Rohm and Thomas Flynn (to be filed by
                amendment).
3.1
Articles
                of Incorporation of Health Partnership
                Inc.
3.2
Form
                of Bylaws of Health Partnership Inc.
3.3
Form
                of Articles of Merger merging Capital Partners Merger Sub, Inc.,
                a North
                Carolina corporation, with Capital Partners for Health & Fitness,
                Inc., a North Carolina corporation.
3.4
Form
                of Articles of Merger merging Capital Partners for Health & Fitness,
                Inc., a North Carolina corporation, with Capital Partners Acquisition
                Sub,
                Inc., a North Carolina corporation.
35
10.1
Form
                of Note Purchase Agreement used in connection with the issuance of
                the
                Company's convertible debentures totaling
                $500,000.
10.2
Form
                of Note Purchase Agreement used in connection with the $400,000,
                in the
                aggregate, bridge loan to Capital Partners.
10.3
Form
                of Membership Agreement used by Capital Partners' health club
                facilities.
10.4
Master
                Loan Agreement dated November 16, 2004, between Kapital Engine
                Investments, Inc. and Duvera Billing Services,
                LLC.
10.5
Form
                of Equipment Lease between Life Fitness, a division of Brunswick
                Corporation, and the Company.
10.6
Form
                of Equipment Finance Lease Agreement between Central Carolina Bank
                and the
                Company.
10.7
Form
                of Employment Agreement between Capital Partners and Randall
                Rohm.
23.1
Consent
                of Pender Newkirk and Company.
99.1
Audited
                financial statements for Kapital Engine Investments, Inc. for the
                fiscal
                years ended December 31, 2003 and 2004, and unaudited financial statements
                for the interim period ended September 30,
                2005.
99.2
Unaudited
                pro forma consolidated balance sheet as of September 30, 2005 of
                Kapital
                Engine Investments, Inc. and Health Partnership Inc. Unaudited pro
                forma
                consolidated statements of operations for the nine months ended September
                30, 2005 of Kapital Engine Investments, Inc. and Health Partnership
                Inc.
                Unaudited pro forma statements of operations for the year ended December
                31, 2004 of Kapital Engine Investments, Inc. and Health Partnership
                Inc.
36
SIGNATURES
Pursuant
      to the requirements of the Securities Exchange Act of 1934, the Registrant
      has
      duly caused this report to be signed on its behalf by the undersigned hereunto
      duly authorized.
Dated:
February
      13, 2006
HEALTH
      PARTNERSHIP INC.
By:
/s/
      Douglas Stukel_________
Douglas
      Stukel, President
37