UNITED STATES
                          SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C. 20549


                                      FORM 10-Q


                (Mark One)
               [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                                 THE SECURITIES EXCHANGE ACT OF 1934

                    For the quarterly period ended March 31, 1999
                                          OR

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

         For the transition period from __________________ to ______________


                            Commission File Number 0-2380

                                 SPORTS ARENAS, INC.
                (Exact name of registrant as specified in its charter)


                                 Delaware 13-1944249
                   (State of Incorporation) (IRS Employer I.D. No.)


           5230 Carroll Canyon Road, Suite 310, San Diego, California 92121
                 (Address of principal executive offices) (Zip Code)

          Registrant's telephone number, including area code (619) 587-1060




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

The number of shares  outstanding  of the  issuer's  only class of common  stock
($.01 par value) as of April 30, 1999 was 27,250,000 shares.


<PAGE>


                                 SPORTS ARENAS, INC.

                                      FORM 10-Q

                             QUARTER ENDED MARCH 31, 1999

                                        INDEX






Part I - Financial Information:


Item 1.- Unaudited Consolidated Condensed Financial Statements:

      Balance Sheets as of March 31, 1999 and June 30, 1998 .............  1-2

      Statements of Operations for the Three Months Ended March 31,
            1999 and 1998 ...............................................    3

      Statements of Operations for the Nine Months Ended March 31, 1999     
            and 1998 ....................................................    4

      Statements of Cash Flows for the Nine Months Ended March 31, 1999    
            and 1998 ....................................................  5-6

      Notes to Consolidated Condensed Financial Statements ..............  7-9


Item 2.- Management's Discussion and Analysis of Financial Condition
            and Results of Operations ................................... 10-14

Item 3.- Quantitative and Qualitative Disclosures About Market Risks ....   14

Part II - Other Information .............................................   15


Signature ...............................................................   16



<PAGE>




                       SPORTS ARENAS, INC. AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS

                                      ASSETS

                                                         March 31,    June 30,
                                                           1999         1998
                                                       ------------ -----------
                                                        (Unaudited)

Current assets:
   Cash and cash equivalents ......................... $   169,953  $ 1,416,460
   Notes receivable- Other ...........................        --         12,105
   Current portion of note receivable-affiliate ......      50,000       50,000
   Other receivables .................................      96,238      166,427
   Inventories .......................................     338,472      302,595
   Prepaid expenses ..................................     152,702      246,135
                                                       -----------  -----------
      Total current assets ...........................     807,365    2,193,722
                                                       -----------  -----------

Receivables due after one year:
   Note receivable- Affiliate, excluding
       current portion ...............................     443,904      473,408
                                                       -----------  -----------

Property and equipment, at cost:
   Land ..............................................     678,000      678,000
   Buildings .........................................   2,461,327    2,461,327
   Equipment and leasehold and tenant improvements....   2,121,012    1,997,192
                                                       -----------  -----------
                                                         5,260,339    5,136,519
      Less accumulated depreciation and
        amortization .................................  (1,887,605)  (1,654,521)
                                                       -----------  -----------
       Net property and equipment ....................   3,372,734    3,481,998
                                                       -----------  -----------

Other assets:
   Undeveloped land, at cost .........................   1,665,643    1,665,643
   Intangible assets, net ............................     288,023      315,015
   Investments .......................................     533,773    1,209,944
   Other .............................................     105,328      108,923
                                                       -----------  -----------
                                                         2,592,767    3,299,525
                                                       -----------  -----------

                                                       $ 7,216,770  $ 9,448,653
                                                       ===========  ===========



                                       1
<PAGE>




                       SPORTS ARENAS, INC. AND SUBSIDIARIES
                CONSOLIDATED CONDENSED BALANCE SHEETS (CONTINUED)

                      LIABILITIES AND SHAREHOLDERS' DEFICIT


                                                        March 31,     June 30,
                                                          1999          1998
                                                     ------------   -----------
                                                      (Unaudited)

Current liabilities:
   Assessment district obligation-in default ....... $  2,500,251  $  2,319,826
   Current portion of long-term debt ...............      253,000       347,000
   Accounts payable ................................      495,540       577,847
   Accrued payroll and related expenses ............      118,131       108,497
   Accrued property taxes-in default ...............      558,095       487,728
   Accrued interest ................................       25,736        28,581
   Other liabilities ...............................      276,568       143,631
                                                     ------------  ------------
      Total current liabilities ....................    4,227,321     4,013,110
                                                     ------------  ------------

Long-term debt, excluding current portion ..........    3,185,970     3,287,783
                                                     ------------  ------------

Distributions received in excess of basis
   in investment ...................................   12,589,780    12,280,101
                                                     ------------  ------------

Tenant security deposits ...........................       25,605        25,951
                                                     ------------  ------------

Minority interest in consolidated subsidiary .......    1,712,677     1,762,677
                                                     ------------  ------------

Commitments and contingencies (Note 4)

Shareholders' deficit:
   Common stock, $.01 par value, 50,000,000
     shares authorized, 27,250,000 shares
     issued and outstanding ........................      272,500       272,500
   Additional paid-in capital ......................    1,730,049     1,730,049
   Accumulated deficit .............................  (14,235,640)  (11,736,312)
                                                     ------------  ------------
                                                      (12,233,091)   (9,733,763)
   Less note receivable from shareholder ...........   (2,291,492)   (2,187,206)
                                                     ------------  ------------
     Total shareholders' deficit ...................  (14,524,583)  (11,920,969)
                                                     ------------  ------------

                                                     $  7,216,770  $  9,448,653
                                                     ============  ============







        See accompanying notes to consolidated condensed financial statements.


                                       2
<PAGE>


                     SPORTS ARENAS, INC. AND SUBSIDIARIES
                CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                  THREE MONTHS ENDED MARCH 31, 1999 AND 1998
                                  (Unaudited)

                                                          1999        1998
                                                      -----------   -----------
Revenues:
   Bowling .......................................... $   784,665  $   790,850
   Rental ...........................................     139,845      119,763
   Golf .............................................      86,468       49,359
   Other ............................................      30,520       49,176
   Other-related party ..............................      53,354       28,262
                                                      -----------  -----------
                                                        1,094,852    1,037,410
                                                      -----------  -----------
Costs and expenses:
   Bowling ..........................................     480,788      499,111
   Rental ...........................................      59,583       63,467
   Golf .............................................     299,298      287,844
   Development ......................................      30,423       41,709
   Selling, general, and administrative .............     849,591      738,822
   Depreciation and amortization ....................      95,990      134,245
                                                      -----------  -----------
                                                        1,815,673    1,765,198
                                                      -----------  -----------

Loss from operations ................................    (720,821)    (727,788)
                                                      -----------  -----------

Other income (expenses):
   Investment income:
     Related party ..................................       9,417       61,243
     Other ..........................................         631       39,687
   Interest expense related to development activities     (57,749)     (51,898)
   Interest expense and amortization of finance costs     (89,229)    (114,085)
   Equity in income of investees ....................     107,537    1,624,359
   Gain on sale, other ..............................        --          9,175
   Recognize deferred gain ..........................        --         43,380
                                                      -----------  -----------
                                                          (29,393)   1,611,861
                                                      -----------  -----------

Net income (loss) ................................... $ (750,214) $    884,073
                                                      ===========  ===========

Basic and diluted net income (loss) per common share
   from continuing  operations (based on 27,250,000
   weighted average common shares outstanding).......    $(0.03)      $0.03
                                                         ======       =====








        See accompanying notes to consolidated condensed financial statements.


                                       3
<PAGE>


                     SPORTS ARENAS, INC. AND SUBSIDIARIES
                CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                   NINE MONTHS ENDED MARCH 31, 1999 AND 1998
                                  (Unaudited)

                                                          1999         1998
                                                     -----------   -----------
Revenues:
   Bowling ......................................... $ 2,111,999   $ 2,106,492
   Rental ..........................................     416,114       367,606
   Golf ............................................     232,242       133,262
   Other ...........................................     110,392       100,760
   Other-related party .............................     159,478        85,145
                                                     -----------   -----------
                                                       3,030,225     2,793,265
                                                     -----------   -----------
Costs and expenses:
   Bowling .........................................   1,485,310     1,497,405
   Rental ..........................................     183,047       184,830
   Golf ............................................     793,930       613,852
   Development .....................................     114,855       115,407
   Selling, general, and administrative ............   2,621,867     2,135,574
   Depreciation and amortization ...................     283,170       401,723
                                                     -----------   -----------
                                                       5,482,179     4,948,791
                                                     -----------   -----------

Loss from operations ...............................  (2,451,954)   (2,155,526)
                                                     -----------   -----------

Other income (expenses):
   Investment income:
     Related party .................................     135,367       185,046
     Other .........................................      20,251        73,693
   Interest expense related to development activities   (180,425)     (162,820)
   Interest expense and amortization of finance costs   (256,453)     (355,457)
   Equity in income of investees ...................     233,886     1,802,859
   Gain on sale, other .............................        --           9,175
   Recognize deferred gain .........................        --          43,380
                                                     -----------   -----------
                                                         (47,374)    1,595,876
                                                     -----------   -----------

Loss from continuing operations ....................  (2,499,328)     (559,650)

Loss from discontinued operations ..................        --         (21,970)
                                                     -----------   -----------

Net loss ........................................... $(2,499,328)   $ (581,620)
                                                     ===========   ===========

Basic and diluted net loss per common share from
   continuing operations (based on 27,250,000
   weighted average common shares outstanding) .....   ($0.09)        ($0.02)
                                                       ======         ======








        See accompanying notes to consolidated condensed financial statements.

                                       4
<PAGE>


                     SPORTS ARENAS, INC. AND SUBSIDIARIES
                CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                   NINE MONTHS ENDED MARCH 31, 1999 AND 1998
                                  (Unaudited)

                                                         1999          1998
                                                     -----------   -----------
Cash flows from operating activities:
  Net loss ......................................... $(2,499,328)  $  (581,620)
  Adjustments to reconcile net loss to the
    net cash used by operating activities:
      Amortization of deferred financing costs .....      11,337        17,595
      Depreciation and amortization ................     283,170       405,916
      Equity in income of investees ................    (233,886)   (1,802,859)
      Interest income accrued on note receivable
        from shareholder ...........................    (104,286)     (153,000)
      Interest accrued on assessment district
        obligations ................................     180,425       162,820
      Recognition of deferred gain .................        --         (43,380)
      Gain on sale of assets .......................        --         (10,279)
    Changes in assets and liabilities:
      (Increase) decrease in other receivables .....      70,189       (78,198)
      Increase in inventories ......................     (35,877)      (53,274)
      (Increase) decrease in prepaid expenses ......      93,433       (46,943)
      Decrease in assets of discontinued operation .        --         130,607
      Increase (decrease) in accounts payable ......     (82,307)      216,584
      Increase in accrued expenses and other
        liabilities ................................     210,093       144,761
      Decrease in liabilities of discontinued
        operation ..................................        --         (76,105)
      Other ........................................      20,038         4,743
                                                     -----------   -----------
        Net cash used by operating activities ......  (2,086,999)   (1,762,632)
                                                     -----------   -----------

Cash flows from investing activities:
   Decrease in notes receivable ....................      41,609        62,248
   Capital expenditures ............................    (123,820)     (280,956)
   Sale of discontinued operation ..................        --          30,207
   Proceeds from sale of other assets ..............        --          26,950
   Distributions from investees ....................   1,179,671     2,084,511
   Payments to holder of minority interest .........     (50,000)     (400,000)
                                                     -----------   -----------
        Net cash provided by investing activities ..   1,047,460     1,522,960
                                                     -----------   -----------

Cash flows from financing activities:
   Scheduled principal payments on long-term debt ..    (195,813)     (369,757)
   Proceeds from short term borrowings .............        --         400,000
   Payments of short-term borrowings ...............        --        (250,000)
   Other ...........................................     (11,155)         --
                                                     -----------   -----------
        Net cash used by financing activities ......    (206,968)     (219,757)
                                                     -----------   -----------

Net decrease in cash and cash equivalents ..........  (1,246,507)     (459,429)
Cash and cash equivalents, beginning of year .......   1,416,460       821,513
                                                     -----------   -----------
Cash and cash equivalents, end of year ............. $   169,953   $   362,084
                                                     ===========   ===========


                                       5
<PAGE>




                     SPORTS ARENAS, INC. AND SUBSIDIARIES
          CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued)
                   NINE MONTHS ENDED MARCH 31, 1999 AND 1998
                                  (Unaudited)

SUPPLEMENTAL CASH FLOW INFORMATION:
   Supplemental Schedule of Non-Cash Investing and Financing Activities:

Long-term debt of $45,486  was  incurred  to  finance  capital  expenditures  of
   $79,572 in 1997.

In 1997 the Company sold miscellaneous  assets for cash proceeds of $26,950. The
   sale  resulted  in a  reduction  of  property  and  equipment  by $54,980 and
   accumulated depreciation by $38,309.

The sale of the stock of Ocean  West  Builders  on January  1, 1998 for  $67,678
   resulted in the following decreases in assets and liabilities:  Cash-$37,471,
   contract   and   other   receivables-$309,022,    prepaid   expenses-$13,553,
   equipment-$44,041,       accumulated      depreciation-$6,687,       accounts
   payable-$260,446,   accrued   expenses-$28,236,   billings   in   excess   of
   costs-$21,983, and notes payable-$19,007.



































        See accompanying notes to consolidated condensed financial statements.

                                       6
<PAGE>

                         SPORTS ARENAS, INC. AND SUBSIDIARIES
                 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                          MARCH 31, 1999 AND 1998(Unaudited)

1.    The  information  furnished  reflects  all  adjustments  which  management
      believes are  necessary to a fair  statement  of the  Company's  financial
      position,  results of operations  and changes in cash flow for the interim
      periods.

2.    Due to the seasonal fluctuations of the bowling operations,  the financial
      results for the  interim  periods  ended March 31, 1999 and 1998,  are not
      necessarily indicative of operations for the entire year.

3. Investments:
   (a) Investments consist of the following:
                                               March 31,   June 30,
                                                 1999        1998
                                               --------   ----------
       Vail Ranch Limited Partnership
        (equity method) ....................   $495,847   $1,172,018
       All Seasons Inns, La Paz (cost basis)     37,926       37,926
                                               --------   ----------
          Total ............................   $533,773   $1,209,944
                                               ========   ==========
       Investment in UCV, L.P. classified
        as liability-
          Distributions received in excess
           of basis in investment.........  $12,589,780  $12,280,101
                                            ===========  ===========

     The  following  is a  summary  of  the  equity  in  income  (loss)  of  the
     investments accounted for by the equity method:
                                                 1999         1998
                                               --------   ----------
       UCV, L.P. ...........................   $263,886   $  258,859
       Vail Ranch Limited Partnership ......    (30,000)   1,544,000
                                               --------   ----------
                                               $233,886   $1,802,859
                                               ========   ==========

     The following is a summary of distributions received from investees:
                                                   1999         1998
                                               ------------ ------------
       UCV, L.P. ...........................   $    533,500 $    312,000
       Vail Ranch Limited Partnership ......        646,171    1,772,511
                                               ------------ ------------
           .................................   $  1,179,671 $  2,084,511
                                               ============ ============

   (b) Investment in UCV, L.P.

     The operating  results of this investment are included in the  accompanying
     consolidated   condensed   statements   of   operations   based   upon  the
     partnership's  fiscal  year (March 31).  Summarized  information  from UCV,
     L.P.'s  unaudited  statements  of income for the  nine-month  periods ended
     December 31, 1998 and 1997 are as follows:
                                                  1999       1998
                                               --------   ----------
       Revenues ............................  $3,460,000  $3,368,000
       Operating and general and
             administrative costs ..........   1,142,000   1,122,000
       Depreciation ........................      21,000     143,000
       Interest expense ....................   1,572,000   1,584,000
       Write off of unamortized loan costs .     197,000         --
       Net income ..........................     528,000     519,000

                                       7
<PAGE>


4. Contingencies:

   (a) Old Vail Partners  (OVP), a consolidated  subsidiary and 50 percent owned
     by the Company,  owns  approximately  33 acres of undeveloped land that are
     located  within a special  assessment  district of the County of Riverside,
     California  (the  County)  which was created to fund and develop  roadways,
     sewers,  and  other  required  infrastructure   improvements  in  the  area
     necessary for the owners to develop their  properties.  Property within the
     assessment  district is collateral  for an allocated  portion of the bonded
     debt that was issued by the assessment  district to fund the  improvements.
     The annual  payments (made in semiannual  installments)  due related to the
     bonded  debt are  approximately  $144,000  for the 33 acres.  The  payments
     continue through the year 2014 and include interest at approximately  7-3/4
     percent. OVP is delinquent in the payment of property taxes and assessments
     for the last six  years.  The  property  is  currently  subject  to default
     judgments to the County of  Riverside,  California  totaling  approximately
     $1,923,370 regarding delinquent  assessment district payments  ($1,365,275)
     and property taxes ($558,095).

     The principal balance of the allocated  portion of the assessment  district
     bonds  ($1,134,976 at March 31, 1999 and $1,160,500 at June 30, 1998),  and
     delinquent principal,  interest and penalties ($1,365,275 at March 31, 1999
     and  $1,159,326 at June 30, 1998) are  classified as  "Assessment  district
     obligation- in default" in the  consolidated  condensed  balance sheet.  In
     addition,  accrued  property taxes in the  consolidated  condensed  balance
     sheet  include  $558,095 at March 31, 1999 and $487,728 at June 30, 1998 of
     delinquent property taxes and late fees related to the 33-acre parcel.

     In November 1993, the City of Temecula  adopted a general  development plan
     that  designated  the property  owned by OVP as suitable for  "professional
     office" use, which is contrary to its zoning as  "commercial"  use. As part
     of the  adoption  of its  general  development  plan,  the City of Temecula
     adopted a  provision  that,  until  the  zoning is  changed  on  properties
     affected by the general  plan,  the general  plan shall  prevail when a use
     designated by the general plan  conflicts  with the existing  zoning on the
     property.  The  result  is  that  the  City  of  Temecula  has  effectively
     down-zoned OVP's property from a "commercial" to "professional office" use.
     The property is subject to Assessment District liens that were allocated in
     1989 based on a higher  "commercial"  use.  Since the  Assessment  District
     liens  are not  subject  to  reapportionment  as a result of  re-zoning,  a
     "professional   office"  use  is  not  economically  feasible  due  to  the
     disproportionately  high allocation of Assessment  District costs.  OVP has
     filed suit against the City of Temecula  claiming that the City's  adoption
     of a general  plan as a means of  effectively  re-zoning  the  property  is
     invalid.  Additionally, OVP is claiming that, if the effective re-zoning is
     valid,  the  action is a taking  and  damaging  of OVP's  property  without
     payment  of  just  compensation.  OVP is  seeking  to  have  the  effective
     re-zoning  invalidated and an unspecified  amount of damages. A stipulation
     was entered that dismissed  this suit without  prejudice and agreed to toll
     all applicable  statute of  limitations  while OVP and the City of Temecula
     attempted  to  informally  resolve  this  litigation.  The  outcome of this
     litigation  is  uncertain.  If the City of  Temecula is  successful  in its
     attempt  to  down-zone  the  property,  the  value of the  property  may be
     significantly impaired.

   (b) The Company is involved in other various routine  litigation and disputes
     incident to its business. In the management's opinion, based in part on the
     advice of legal counsel, none of these matters will have a material adverse
     affect on the Company's financial position.

5. Comprehensive  Income- On July 1, 1998,  the company  adopted  Statement of
     Financial  Accounting  Standards ("SFAS") No. 130, Reporting  Comprehensive
     Income. SFAS No. 130 requires the reporting of comprehensive  income (loss)
     in addition to net income  (loss).  Comprehensive  income  (loss) is a more
     inclusive  financial  reporting  methodology  that  includes  disclosure of
     certain financial  information that historically has not been recognized in
     the  calculation on net income  (loss).  The adoption of this statement did
     not have an effect on the consolidated condensed financial statements.

                                       8
<PAGE>


6. Reclassifications-  Certain  reclassifications  have been made to the prior
     year financial statements to conform to the classifications used in 1999.

7. Significant Events:

   (a)  On January 11, 1999 the maturity date on a $80,673 note payable that was
        due February 1999 was extended to February  2004.  The interest rate was
        reduced from 8-1/2 percent to 8 percent.

   (b)  On May 11, 1999 the Company used the  proceeds of a  $1,975,000  loan to
        payoff an  existing  note  payable  of  $1,147,560.  The new loan  bears
        interest at an annual  fixed rate of 8.15 percent and is paid in monthly
        installments of $14,699 including  principal and interest.  The new loan
        is collateralized by $1,170,000 of land and office building. The loan is
        due on June 1, 2009.  The  prepayment of the existing note resulted in a
        prepayment penalty of $45,902 and the write-off of unamortized loan fees
        of $33,020, both of which were charged to expense in May 1999.

   (c)  Effective  January 1, 1999,  the Company  discontinued  recognizing  the
        accrual of interest income on the note receivable from shareholder. This
        policy was adopted in  recognition  that the  shareholder's  most likely
        source of funds for  repayment of the loan is from sale of the Company's
        stock or dividends  from the Company and that the Company has unresolved
        liquidity problems.

8. Liquidity

     The  accompanying  consolidated  condensed  financial  statements have been
     prepared assuming the Company will continue as a going concern. The Company
     has  suffered  recurring  losses  from  operations,  has a working  capital
     deficiency,  and is  forecasting  negative  cash flows for the next  twelve
     months.  These items raise substantial doubt about the Company's ability to
     continue as a going concern.  The Company's  ability to continue as a going
     concern is dependent on either  refinancing or selling  certain real estate
     assets or increases in the sales volume of its  subsidiary,  Penley Sports.
     The consolidated condensed financial statements do not contain adjustments,
     if any, including diminished recovery of asset carrying amounts, that could
     arise from forced dispositions and other insolvency costs.



                                       9
<PAGE>

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

                           LIQUIDITY AND CAPITAL RESOURCES

Excluding  the  balance  of  the  assessment-district-obligation-in-default  and
property  taxes in default  related to the same  property  which are included in
current  liabilities,  the Company has a working  capital deficit of $361,610 at
March 31,  1999,  which is a  $1,349,776  change from the  similarly  calculated
working  capital of $988,166 at June 30, 1998. The change in working  capital is
primarily  attributable  to the cash used by operating  activities  for the nine
months ended March 31, 1999.  The  following is a schedule of the cash  provided
(used)  before  changes  in  assets  and  liabilities,  segregated  by  business
segments:

                                        1999           1998         Change
                                    -----------    -----------    -----------
    Bowling .....................   $  (121,000)   $  (174,000)   $    53,000
    Rental ......................       169,000        120,000         49,000
    Golf ........................    (2,058,000)    (1,653,000)      (405,000)
    Development .................      (120,000)      (121,000)         1,000
    General corporate expense and
      other......................      (232,000)      (158,000)       (74,000)
                                    -----------    -----------    -----------
       Cash used by continuing
       operations ...............    (2,362,000)    (1,986,000)      (376,000)
    Discontinued operations .....          --          (19,000)        19,000
    Capital expenditures, net of
      financing..................      (124,000)      (281,000)       157,000
    Principal payments on
      long-term debt.............      (196,000)      (370,000)       174,000
                                    -----------    -----------    -----------
       Cash used ................    (2,682,000)    (2,656,000)       (26,000)
                                    ===========    ===========    ===========
    Distributions received from
       investees, net of payments
       to holders of minority
       interests ................     1,130,000      1,685,000       (555,000)
                                    ===========    ===========    ===========

As  described  in  Note 4 of  the  Notes  to  Consolidated  Condensed  Financial
Statements, Old Vail Partners is delinquent in the payment of special assessment
district  obligations  and property taxes on 33 acres of  undeveloped  land. The
County of  Riverside  has  obtained  judgments  for the  defaults in  assessment
district payments and property taxes. The amount due to cure the judgments as of
March 31, 1999 is $1,923,000.  If the County of Riverside  takes the property to
public sale and the  judgments  are not  satisfied  prior to the sale,  Old Vail
Partners  could lose title to the property and the property would not be subject
to  redemption.  Also  as  described  in  Note 4 of the  Notes  to  Consolidated
Condensed  Financial  Statements,  Old Vail Partners is contesting an attempt by
the City of Temecula to effectively  down-zone the property.  As a result of the
judgments and the attempts to down-zone the property,  the recoverability of the
carrying value of this property is uncertain.

UCV, L.P. (UCV) is currently  evaluating the  feasibility  of  redeveloping  the
apartment  project from 542 units to approximately  1,100 units. As part of this
process,  UCV  is  attempting  to  obtain  local  government  approval  for  the
redevelopment.  UCV  expects  a  decision  prior  to the end of  calendar  1999.
Management  does not expect  the  redevelopment  planning  process to affect the
distributions  to partners from  operating  activities  because  $500,000 of the
refinancing proceeds (May 1998) were allocated for the planning costs.

Old Vail Partners (OVP) received a $575,617 distribution from Vail Ranch Limited
Partnership  in  August  1998 as its  share  of the  distribution  from  the new
partnership  with an affiliate of New Plan Realty Trust (formerly Excel Realty).
OVP also  received  additional  distributions  of $70,554 in the  quarter  ended
December  31,  1998.  However,  it is  unlikely  that there will be  significant
distributions  in the future  until the  remaining  undeveloped  land in the new
partnership is developed and sold.

On May 11, 1999 the  Company  refinanced  the  existing  $1,147,560  loan on its
office  building with a new $1,975,000  loan. The net proceeds of the loan after
payoff of the existing debt,  prepayment  penalties of $45,902 and other closing
costs,  was  approximately  $675,000.  The new loan bears  interest at an annual
fixed  rate of 8.15  percent  and is paid in  monthly  installments  of  $14,699
including principal and interest. The loan is due on June 1, 2009.

                                       10
<PAGE>
Management  estimates  negative  cash  flow  of  $600,000  to  $700,000  for the
remaining  quarter of the year ending June 30,  1999 from  operating  activities
after adding estimated  distributions  from UCV ($164,000) and deducting capital
expenditures  and scheduled  principal  payments on long-term  debt.  Management
estimates that the existing cash balance plus the proceeds from the  refinancing
of the office  building  loan will be  sufficient  to fund the cash flow deficit
through June 30, 1999.  Management  expects  continuing cash flow deficits after
June 30, 1999 until Penley  Sports  develops  sufficient  sales volume to become
profitable.  However,  there can be no  assurances  that Penley Sports will ever
achieve profitable operations.  Management is currently evaluating other sources
of working  capital from the sale of  undeveloped  land in Temecula or obtaining
additional  investors  in Penley  Sports  to  provide  sufficient  funds for the
expected  future  cash  flow  deficits.  If the  Company  is not  successful  in
obtaining  other sources of working  capital this could have a material  adverse
effect on the Company's ability to continue as a going concern.

                                 YEAR 2000 COMPLIANCE
The Company has a program to  identify,  evaluate and  implement  changes to its
computer  systems as  necessary  to address the Year 2000 issue.  The program is
broken  down  into  three  separate  categories:   computer  systems,   embedded
technologies, and third party relationships.

   Computer systems- This category consists  primarily of the Company's software
     and hardware for its  accounting  system.  The Company is in the process of
     evaluating its existing desktop computers and software systems.  Based upon
     an initial evaluation as well as representations  from some of the software
     suppliers,  the management's best estimate is that, other than software and
     equipment upgrades made in the normal course of business, it will not incur
     any significant expenses to become fully Year 2000 compliant.

   Embedded  Technologies-  This  category  includes  company  owned  or  leased
     equipment with microprocessors or microcontrollers.  This type of equipment
     principally  consists of phone equipment,  automatic  scorekeepers and cash
     registers at the bowling centers,  and manufacturing  equipment at the golf
     shaft   manufacturer.   Based  upon  an  initial   evaluation  as  well  as
     representations from some of the equipment suppliers, the management's best
     estimate is that, other than acquiring a software upgrade for the automatic
     scorekeeping equipment, the price of which has not yet been determined,  it
     will  not  incur  any  significant  expenses  to  become  fully  Year  2000
     compliant.

   Third Party Relationships- This category includes critical relationships with
     vendors  such as  graphite  manufacturers  in the golf shaft  segment,  and
     providers  of local  utilities  (water and  electricity).  The Company will
     implement a program conducting discussions with these types of suppliers in
     calendar  year 1999.  There can be no  guarantee  that the systems of other
     companies that support the Company's operations will be timely converted or
     that a failure by these companies to correct their Year 2000 problems would
     not have a material adverse effect on the Company. At the present time, the
     Company  does not have a  contingency  plan in place in the event of a Year
     2000 failure at one of the Company's  significant  suppliers.  However, the
     Company plans to create a contingency plan in the calendar year 1999.

If the steps taken by the Company and its vendors to be Year 2000  compliant are
not successful,  the Company could experience various operational  difficulties.
These could include, among other things, processing transactions to an incorrect
accounting  period,  difficulties in posting general ledger interfaces and lapse
of certain  services by vendors to the  Company's  operations.  If the Company's
plan to install new systems which effectively address the Year 2000 issue is not
successfully  or  timely  implemented,  the  Company  may  need to  devote  more
resources  to the  process and  additional  costs may be  incurred.  The Company
believes  that the Year  2000  issue is  being  appropriately  addressed  by the
Company  and does not  expect  the Year 2000  issue to have a  material  adverse
impact on the  financial  position,  results of  operations or cash flows of the
Company in future periods. However, should the remaining review of the Company's
Year 2000 risks reveal  potentially  non-compliant  computer systems or material
third parties, contingency plans will be developed at that time.

"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
   REFORM ACT OF 1995

With the  exception  of  historical  information  (information  relating  to the
Company's  financial  condition and results of operations at historical dates or
for historical periods),  the matters discussed in this Management's  Discussion
and  Analysis of  Financial  Condition  and Results of  Operations  are forward-
looking  statements that  necessarily  are based on certain  assumptions and are
subject to certain risks and uncertainties. These forward-looking statements are
based on management's  expectations as of the date hereof,  and the Company does
not  undertake  any  responsibility  to update  any of these  statements  in the
future.  Actual future  performance and results could differ from that contained
in or suggested by these  forward-looking  statements as a result of the factors
set forth in this  Management's  Discussion and Analysis of Financial  Condition
and Results of  Operations  and  elsewhere  in the  Company's  filings  with the
Securities and Exchange Commission.

                                       11
<PAGE>

                                RESULTS OF OPERATIONS

The  following  are  summaries of the changes in the results of  operations  for
year-to-date and the current quarter:

                             Nine Months Ended March 31, 1999 versus 1998:
                             ---------------------------------------------
<TABLE>
<CAPTION>
                                                             Real Estate               Unallocated
                                     Bowling       Rental    Development     Golf       And Other       Totals
                                    ---------    --------    ----------    ---------    --------    -----------
<S>                                 <C>          <C>         <C>           <C>         <C>          <C>
Revenues ........................   $   5,507    $ 50,278          --      $  98,980    $ 83,965    $   238,730
Costs ...........................     (12,095)     (1,783)         (552)     180,078        --          165,648
SG&A-direct .....................     (10,269)       --            --        258,366     195,966        444,063
SG&A-allocated ..................      13,139       4,000          --         72,000     (45,139)        44,000
Depreciation and amortization ...    (136,197)      9,852          --          5,445       2,347       (118,553)
Interest expense ................     (45,682)     (1,107)       17,276       (5,713)    (46,173)       (81,399)
Equity in investees .............        --         5,027    (1,574,000)        --          --       (1,568,973)
Gain on disposition .............        --          --            --         (1,225)    (51,330)       (52,555)
Segment profit (loss) ...........     196,611      44,343    (1,590,724)    (412,421)    (74,366)    (1,836,557)
Investment income ...............        --          --            --           --          --         (103,121)
Net loss from continuing
   operations ...................        --          --            --           --          --       (1,939,678)
</TABLE>
                                Three Months Ended March 31, 1999 versus 1998:
                                ----------------------------------------------
<TABLE>
<CAPTION>
                                                             Real Estate              Unallocated
                                      Bowling      Rental    Development      Golf     And Other       Totals
                                      -------    ---------   -----------   ---------    --------    -----------
<S>                                 <C>          <C>         <C>           <C>          <C>         <C>        
Revenues ........................   $  (6,185)   $ 20,679          --      $  37,109    $  6,436    $    58,039
Costs ...........................     (18,323)     (3,884)      (11,286)      11,454        --          (22,039)
SG&A-direct .....................     (12,160)       --            --         67,315      56,211        111,366
SG&A-allocated ..................       6,969       2,000          --         29,000     (37,969)          --
Depreciation and ................     (44,907)      5,624          --            395         633        (38,255)
amortization
Interest expense ................      (8,180)       (380)        5,720       (1,927)    (14,238)       (19,005)
Equity in investees .............        --        37,178    (1,554,000)        --          --       (1,516,822)
Gain on disposition .............        --          --            --         (1,225)    (51,330)       (52,555)
Segment profit (loss) ...........      70,416      54,497    (1,548,434)     (70,353)    (49,531)    (1,543,405)
Investment income ...............        --          --            --           --          --          (90,882)
Net loss from continuing
   operations ...................        --          --            --           --          --       (1,634,287)
</TABLE>


   Note:  The change in rental  revenues  and SG&A  expenses  do not include the
   effect of the net change in  elimination of  intercompany  rent of $1,770 and
   $597 for the nine and three month periods respectively.

BOWLING OPERATIONS:

Bowling  revenues  remained  relatively  consistent  in the three and nine month
periods. The number of games bowled decreased by 4% in the nine month period and
3% in the three month period.  The declines in games bowled primarily related to
declines in league play.  These decreases were partially  offset by increases of
3% in the nine month  period  and 2% in the three  month  period in the  average
price of all games  bowled.  Management  feels that there will  continue to be a
decline  in  league  bowling  but this is  likely  to  continue  to be offset by
increases  in the  number of  open-play  games  bowled and the price per game of
open-play.

Bowl costs remained relatively consistent for the nine month period and declined
by 3% for the three month period.  The decrease in bowl costs in the three-month
period were primarily attributable to a 4% decrease in payroll and related costs
($9,000).

Selling,  general  and  administrative  expenses  directly  attributable  to the
bowling  segment  decreased  by 8% and 2% in the three and  nine-month  periods,
respectively.  The  decrease  in the three  month  period  primarily  related to
decreases  of 12%  ($5,000) in payroll and related  expenses  and 7% ($4,000) in
promotional expenses. The decrease in the nine month period primarily related to
a decrease of 4% ($9,000) in promotional expenses.

                                       12
<PAGE>

Depreciation  and  amortization  expense  decreased in the three and  nine-month
periods  due to  equipment  and  goodwill  acquired in 1983 (when the bowls were
purchased)  becoming fully  depreciated and amortized in the year ended June 30,
1998.

Interest  expense  related  to the  bowling  segment  decreased  because  of the
extinguishment  of all bowl  related  financing  during  the year ended June 30,
1998.

RENTAL OPERATIONS:

Rental  revenues  increased by 17% and 13% in the three and nine month  periods,
respectively.  This is primarily due to increases in the average  rental rate of
22% for the three month period and 14% for the nine month period.  There were no
other  significant  changes to the components of the rental segment in the three
and nine-month  periods  except for the equity in income of investees,  which is
primarily UCV.

The  equity in income of UCV  increased  in the three and  nine-month  period by
$37,178 and $5,027, respectively related to the results of operations of UCV for
the periods ended  December 31, 1998 and 1997. The following is a summary of the
changes in UCV's operations for the three and nine month periods:

                                    Three Months   Nine Months
                                    ------------   -----------
     Revenues .....................   $  43,000    $  92,000
     Costs ........................      29,000       20,000
     Interest .....................     (21,000)     (12,000)
     Depreciation .................     (40,000)    (122,000)
     Write off  unamortized
       loan fees ..................        --        197,000
     Net income ...................      75,000        9,000

UCV's  vacancy for each year has averaged  approximately  1 percent.  The rental
rate for the three and nine month periods  increased by approximately 3 percent.
Costs  increased in both periods  primarily  due to increases in the three month
period of $10,000 in payroll and $13,000 in miscellaneous  maintenance expenses.
Although a $20,000,000  note was refinanced  with a $25,000,000  note payable in
May 1998,  interest  expense  decreased  during the three and nine month periods
because the effective  interest rate decreased from 10% to 7-1/2%.  Depreciation
expense  decreased in both periods because the original  acquisition cost of the
buildings became fully depreciated in the prior periods. In conjunction with the
refinancing  of the note payable in May 1998,  the balance of  unamortized  loan
fees was charged to expense.

REAL ESTATE DEVELOPMENT OPERATIONS:

Development  costs and expenses  primarily  consists of legal costs  incurred to
contest the City of Temecula's  attempts to down-zone the undeveloped land owned
by Old  Vail  Partners.  Interest  expense  related  to  development  activities
primarily  relates to interest  accrued on the past due and  current  assessment
district obligations of Old Vail Partners.

The equity in income of Vail Ranch Limited Partners  decreased from 1998 because
of the gain from the sale of the shopping center recognized in January 1998.




                                       13
<PAGE>



GOLF OPERATIONS:

Sales during the three and nine month periods ended March 31, 1999  continued to
be  insignificant  because the Company has not yet generated  sales to golf club
manufacturers  or  distributors.  The Company  expects  that it will be at least
three to nine months  before the  Company is able to  generate  sales with these
types of  customers.  Sales  during  the  three  and  nine  month  periods  were
principally to custom golf shops.

The following is a breakdown of the costs associated with the golf operation:

                                   1999         1998         1999         1998
                               ----------   ----------   ----------   ----------
 Costs of goods sold .......   $   57,000   $   30,000   $  130,000   $   48,000
 Underutilized manufacturing
   overhead ................      178,000      235,000      503,000      496,000
 Research & development ....       65,000       23,000      161,000       70,000
                                ---------    ---------    ---------    ---------
      Total golf costs .....      300,000      288,000      794,000      614,000
                                =========    =========    =========    =========
 Marketing & promotion .....      404,000      297,000    1,173,000      864,000
 Administrative-direct .....       26,000       66,000      110,000      161,000
                                ---------    ---------    ---------    ---------
      Total SG&A-direct ....      430,000      363,000    1,283,000    1,025,000
                                =========    =========    =========    =========
 Allocated corporate costs .       65,000       36,000      196,000      124,000
                                =========    =========    =========    =========

UNALLOCATED AND OTHER

Other  revenues  increased in the three and nine month periods  primarily due to
development  planning  fees  collected  from  UCV  starting  in  July  1998  and
administrative  fees  collected  from  Ocean  West  Builders,   Inc.  which  had
previously been a wholly owned and consolidated  subsidiary of the Company until
January 1, 1998.

Selling,  general and  administrative  expense  increased  in the three and nine
month periods because of bonuses awarded in December 1998.

Investment  income decreased in the nine and three month periods ended March 31,
1999 primarily due to  discontinuing  the accrual of interest income on the note
receivable from  shareholder  (decrease of $49,000) and the payoff of a $670,000
note receivable in June 1998 (decrease of $60,000).

Interest  expense  decreased  in the  three  and  nine  month  periods  due to a
reduction in long-term debt in June of 1998.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk primarily due to  fluctuations in interest
rates.  The  Company  utilizes  both fixed  rate and  variable  rate  debt.  The
following  table  presents  principal  cash flows and related  weighted  average
interest rates of the Company's  long-term fixed rate and variable rate debt for
the fiscal years ended June 30.

<TABLE>
<CAPTION>
                                  1999       2000         2001         2002     2003    Thereafter    Total
                              ---------  ----------    ----------   --------  --------  ----------  ----------
<S>                           <C>        <C>          <C>           <C>       <C>       <C>         <C>       
 Fixed rate debt ..........   $  51,000  $  211,000   $ 1,801,000   $ 44,000  $ 26,000  $1,953,000  $4,086,000
 Weighted  average interest
     rate .................       8.2%        8.2%          8.2%       8.2%      8.2%        8.2%        8.2%

 Variable rate debt .......   $  19,000  $   78,000   $    78,000   $  6,000      --          --     $ 181,000
 Weighted  average interest
     rate .................      10.5%       10.5%         10.5%      10.5%       --          --        10.5%
</TABLE>


The amounts for 1999 relate to the three months  ended June 30, 1999.  The fixed
rate  debt  information  has  been  adjusted  to  reflect  the  effects  of  the
refinancing completed on May 11, 1999.

The  Company's  unconsolidated  subsidiary,  UCV,  has  variable  rate  debt  of
$25,000,000  for which the  current  interest  rate is 7 percent  and all of the
principal is due May 2001.

The Company does not enter into  derivative  or interest rate  transactions  for
speculative or trading purposes.


                                       14
<PAGE>


                                       PART II
                                  OTHER INFORMATION



ITEM 1. Legal Proceedings

        As of March 31, 1999,  there were no changes in legal  proceedings  from
        those set forth in Item 3 of the Form 10-K filed for the year ended June
        30, 1998.


ITEM 2. Changes in Securities

          NONE


ITEM 3. Defaults upon Senior Securities

          N/A


ITEM 4. Submission of Matters to a Vote of Security Holder

        On December 23, 1998 the Company held its annual shareholder  meeting in
        which the following item was voted upon:
                                         Tabulation of Votes
                                   ---------------------------------
                                    For          Against     Abstain
                                   ----------    -------     -------
      Election of Directors:
         Harold S. Elkan ........  23,289,103       0        272,072
         Steven R. Whitman ......  23,289,603       0        271,572
         Patrick D. Reiley ......  23,290,103       0        271,072
         James E. Crowley .......  23,290,603       0        270,572
         Robert A. MacNamara ....  23,290,703       0        270,572


ITEM 5. Other Information

          NONE


ITEM 6. Exhibits & Reports on Form 8-K

     (a) Exhibits: NONE

     (b) Reports on Form 8-K:  NONE





                                       15
<PAGE>



                                      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 thereunto duly authorized.




     SPORTS ARENAS, INC.



     By: /s/ Harold S. Elkan
             ----------------
                 Harold S. Elkan, President and Director


     Date:   May 17, 1999
             -------------



     By:/s/ Steven R. Whitman
            -----------------
              Steven R. Whitman, Treasurer,
               Principal Accounting Officer and Director



     Date: May 17, 1999
           -------------




                                       16
<PAGE>