PwC

Generation HealthA health club for your generation

PwC

GH

Demographics are changing.

Why haven’t our health clubs?

Generation Health will be a premier brand of health clubs catering towards the baby boomer generation and retirees

Overview

• Blue ocean opportunity

• Largest growing population segment

• High disposable income

• More free-time and greater focus on health

• Clustered retirement communities throughout the city

• Need for a facility and guidance with health

and wellness

ObjectiveObtain $500,000 in equity financing

•Current 5 partners will each invest $100K

•$500K additional equity investment for 49.9% of the company and ability to elect 2/5 board members.

•The new equity investor(s) will not be required to make any personal guarantees on loans

•Land, building and equipment will be pledged against the mortgage ($1.35 million) and credit facility ($800K)

Our Professionals

Director of OperationsDavid Colleran, BHKin, Kinesiologist, CA

Director of Finance & AccountingJoseph Muzzin, B.Econ, CA

Director of Sales & MarketingJeffrey Burt, B.A., CA

PricewaterhouseCoopers

World Class Facility Built in University Heights

Equipment geared to Geriatric Health & Wellness

Professionals & services catering to an aging population

Facility & Instruction

PricewaterhouseCoopers

Our Members:

•50-85 years of age•Educated, married or widower•Retired or nearing retirement•High disposable income

•Active already or interested in health & wellness•Looking for somewhere to spend extra time•Community-oriented•Recovering from an accident, fall or operation

Market

Slide 7

PricewaterhouseCoopers

•Facility and staff will cater to Geriatric health & wellness- nothing like it exists

•Promote a sense of community in the club

•Offer extras such as one-on-one physiotherapy and training, outdoor excursions and sell gear and supplements catering to the elderly

Competitive Advantage

Revenue Model

Generation Health will offer a high quality facility & services

at a premium price……….…..

Compete with fitness facilities,Physiotherapy clinics, Rehab

Specialists and Other Clubs…

Slide 9

Key Success Factors

1. Selling clients on the value of a health club created for their specific age group

2. Justifying our premium price by providing a first-class facility and quality instruction and services

3. Maintaining member loyalty through promoting a sense of community among members

Slide 10

PricewaterhouseCoopers

•Return on investment of 28%•Initial investment paid back in the 6th year of operations•Large gross margins •Unlimited opportunities for revenue growth through new locations

Financial Returns

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

(1,000,000)

(500,000)

0

500,000

1,000,000

1,500,000

2,000,000

Profitability

After Tax Earnings

2012201320142015201620172018201920202021

(1,000,000)

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

Net Cash Flow

Cash Balance

Conclusion

•Key Investment Considerations

− High barriers to entry

− Strong projected investment growth and return

− Reduced risk from marketability of capital assets

− High growth potential in the industry giving rise to possible expansion

− Management and directors with significant personal investment

Appendices

Financial Highlights

Scenario Analysis:

Breakeven level of membership at base case prices…….. 724

Sensitivity Analysis        Worst Case Conservative Base Best Case

Interest Rate 14% 10% 6%IRR 32% 33% 35%

Payback Period Year 7 Year 7 Year 6   

Membership Fee 100 150 175IRR 17% 33% 42%

Payback Period Year 9 Year 7 Year 6   

Enrollment Growth 15% 25% 40%IRR 18% 33% 34%

Payback Period Year 9 Year 7 Year 6

*Sustainable growth rate after 2nd year of operations, up to capacity of 2000

Pro-Forma Balance Sheet

Assets 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Current AssetsPro-Forma Balance SheetAssets 2,011 2,012 2,013 2,014 2,015 2,016 2,017 2,018 2,019 2,020 2,021 Current AssetsCash 39,826 53,827 44,425 28,568 24,193 55,745 972,187 2,586,984 4,099,963 5,615,711 7,104,073 Other Current Assets - Total Current Assets 39,826 53,827 44,425 28,568 24,193 55,745 972,187 2,586,984 4,099,963 5,615,711 7,104,073

Capital Assets 2,310,174 2,310,174 2,310,174 2,310,174 2,310,174 2,310,174 2,310,174 2,310,174 2,310,174 2,310,174 2,310,174 Accumulated Depreciation (61,190) (107,300) (168,491) (214,601) (275,791) (318,756) (379,947) (426,057) (487,247) (533,357)

Total Assets 2,350,000 2,302,810 2,247,299 2,170,251 2,119,766 2,090,127 2,963,605 4,517,211 5,984,080 7,438,638 8,880,890

LiabilitiesCurrent Liabilities - Accounts PayableCurrent Line-of-Credit Borrowing - 500,000 780,000 380,000 - - - - - - - Other Current LiabilitiesTotal Current Liabilities - 500,000 780,000 380,000 - - - - - - -

Long-term Debt 1,350,000 1,350,000 1,350,000 1,350,000 900,000 150,000 - - - - -

Total Liabilities 1,350,000 1,850,000 2,130,000 1,730,000 900,000 150,000 - - - - -

Paid-In Capital 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Retained Earnings (547,190) (882,701) (559,749) 219,766 940,127 1,963,605 3,517,211 4,984,080 6,438,638 Earnings/(Deficit) (547,190) (335,512) 322,953 779,514 720,362 1,023,477 1,553,607 1,466,869 1,454,558 1,442,252 Total Capital 1000000 452810.3533 117298.8434 440251.4732 1219765.73 1940127.435 2963604.617 4517211.393 5984080.145 7438638.08 8880889.673

Revenue & COGS ModelInitiation Fee 250Monthly Membership Fee 150Number of Members 270 500 800 1000 1200 1500 2000 2000 2000 2000

2012 2014 2014 2015 2016 2017 2018 2019 2020 2021

Sales

Monthly Membership Fee 387,750 900,000 1,440,000 1,800,000 2,160,000 2,700,000 3,600,000 3,600,000 3,600,000 3,600,000

Initiation Fee 67,500 57,500 75,000 50,000 50,000 75,000 125,000 5,000 5,000 5,000

Physical Therapy 156,000 240,000 276,000 312,000 360,000 420,000 480,000 480,000 480,000 480,000 ProShop Sales 144,000 180,000 228,000 252,000 276,000 288,000 330,000 330,000 330,000 330,000 Total Sales 755,250 1,377,500 2,019,000 2,414,000 2,846,000 3,483,000 4,535,000 4,415,000 4,415,000 4,415,000

Direct Cost of Sales

Memberships - - - - - - - - - - Physical Therapy 84,000 129,231 148,615 168,000 193,846 226,154 258,462 258,462 258,462 258,462 ProShop Sales 24,000 30,000 38,000 42,000 46,000 48,000 55,000 55,000 55,000 55,000

Subtotal Direct Cost of Sales 108,000 159,231 186,615 210,000 239,846 274,154 313,462 313,462 313,462 313,462

Proforma Income Statements2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Sales 755,250 1,377,500 2,019,000 2,414,000 2,846,000 3,483,000 4,535,000 4,415,000 4,415,000 4,415,000 Direct COS 108,000 159,231 186,615 210,000 239,846 274,154 313,462 313,462 313,462 313,462 Gross Margin 647,250 1,218,269 1,832,385 2,204,000 2,606,154 3,208,846 4,221,538 4,101,538 4,101,538 4,101,538

Gross Margin % 86% 88% 91% 91% 92% 92% 93% 93% 93% 93%

Expenses

Payroll 533,000 867,000 867,000 867,000 1,034,000 1,201,000 1,368,000 1,381,680 1,395,497 1,409,452 Training Costs 1,500 10,250 10,250 12,000 15,500 20,750 5,000 5,050 5,101 5,152 Sales and Marketing 42,240 21,616 21,616 21,832 22,050 22,271 22,493 22,718 22,945 23,175 Interest Expense 195,000 228,600 180,600 90,000 15,000 - - - - - Depreciation 61,190 61,190 61,190 61,190 61,190 61,190 61,190 61,190 61,190 61,190 Utilities 234,313 236,656 239,022 241,413 243,827 246,265 248,728 251,215 253,727 256,264 Pool Maintenance 66,017 66,677 67,344 68,017 68,697 69,384 70,078 70,779 71,487 72,202 General Maintenance 5,000 5,050 5,101 5,152 5,203 5,255 5,308 5,361 5,414 5,468 Insurance 30,000 30,300 30,603 30,909 31,218 31,530 31,846 32,164 32,486 32,811 Property Tax 25,368 25,622 25,878 26,137 26,398 26,662 26,929 27,198 27,470 27,745 Other 812 820 828 837 845 853 862 871 879 888 Total Operating Expenses 1,194,440 1,553,781 1,509,432 1,424,486 1,523,928 1,685,161 1,840,433 1,858,225 1,876,196 1,894,346

Profit Before Taxes (547,190) (335,512) 322,953 779,514 1,082,225 1,523,685 2,381,105 2,243,313 2,225,343 2,207,193Depreciation 61,190 61,190 61,190 61,190 61,190 61,190 61,190 61,190 61,190 61,190CCA 102,779 79,881 73,187 67,415 62,401 58,012 54,141 50,702 47,626 44,854Taxes Paid 0 0 0 0 361,864 500,208 827,499 776,444 770,785 764,941Net Profit/(Loss) (547,190) (335,512) 322,953 779,514 720,362 1,023,477 1,553,607 1,466,869 1,454,558 1,442,252

Cash Flows Statement 2011 2012 2013 2014 2015 2016 2017 2018 2019

Cash ReceivedCash from Operations 755,250 1,377,500 2,019,000 2,414,000 2,846,000 3,483,000 4,535,000 4,415,000 New Current Borrowing 500,000 280,000 Paid-In Capital 1,000,000 New Long-Term Liabilities 1,350,000 Sale of AssetsTotal Cash Received 2,350,000 1,255,250 1,657,500 2,019,000 2,414,000 2,846,000 3,483,000 4,535,000 4,415,000

ExpendituresCosts of Sales 108,000 159,231 186,615 210,000 239,846 274,154 313,462 313,462 Expenditures from Operations (minus Dep) 1,133,249 1,492,590 1,448,242 1,363,295 1,462,738 1,623,971 1,779,243 1,797,035 Taxes Paid - - - - 361,864 500,208 827,499 776,444 Additional Cash SpentPrincipal Repayment of Current Borrowing 400,000 380,000 Long-term Liabilities Principal Repayment 450,000 750,000 150,000 Purchase other current assetsPurchase long-term assets 2,310,174 15,080 15,080 18,225 15,080 DividendsSubtotal Cash Spent 2,310,174 1,241,249 1,666,901 2,034,857 2,418,375 2,814,448 2,566,558 2,920,203 2,902,021

Net Cash Flow 39,826 14,001 (9,401) (15,857) (4,375) 31,552 916,442 1,614,797 1,512,979 Beginning Cash Balance - 39,826 53,827 44,425 28,568 24,193 55,745 972,187 2,586,984 Ending Cash Balance 39,826 53,827 44,425 28,568 24,193 55,745 972,187 2,586,984 4,099,963

IRR/NPV Calculations (1,000,000) 14,001 (9,401) (15,857) (4,375) 31,552 916,442 1,614,797 1,512,979

IRR 28%NPV (25%) $161,269Payback is after 6 years of operation