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, 1997

                                       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) (I.R.S. 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 May 31, 1997 was 27,250,000 shares.


<PAGE>


                               SPORTS ARENAS, INC.

                                    FORM 10-Q

                          QUARTER ENDED MARCH 31, 1997

                                      INDEX






Part I - Financial Information:


Item 1.- Consolidated Condensed Financial Statements:

      Balance Sheets as of March 31, 1997 and June 30, 1996                1-2

      Statements of Operations for the Three Months Ended
            March 31, 1997 and 1996                                         3

      Statements of Operations for the Nine Months Ended
            March 31, 1997 and 1996                                         4

      Statements of Cash Flows for the Nine Months Ended
            March 31, 1997 and 1996                                        5-6

      Notes to Financial Statements                                       7-10


Item 2.- Management's Discussion and Analysis of Financial Condition
            and Results of Operations                                     11-14



Part II - Other Information                                                15


Signature                                                                  16



<PAGE>




                      SPORTS ARENAS, INC. AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS

                                     ASSETS
<TABLE>
<CAPTION>
                                                                          March 31,       June 30,
                                                                             1997            1996
                                                                        ------------    ------------
                                                                         (Unaudited)
<S>                                                                    <C>             <C>
Current assets:
   Cash and equivalents .............................................   $  1,930,952    $  1,093,465
   Current portion of notes receivable ..............................         25,000          25,000
   Current portion of notes receivable-affiliate ....................        100,000         100,000
   Construction contract receivables ................................        618,153         623,877
   Other receivables ................................................         38,139         134,843
   Inventories ......................................................        121,169            --
   Prepaid expenses .................................................        173,504         182,823
   Property and equipment sold on August 7, 1996 ....................           --         2,745,978
                                                                        ------------    ------------
     Total current assets ...........................................      3,006,917       4,905,986
                                                                        ------------    ------------
Receivables due after one year:
   Note receivable ..................................................        728,838         731,993
     Less deferred gain .............................................       (716,025)       (716,025)
   Affiliate ........................................................        504,740         552,567
   Other ............................................................         97,445          81,696
                                                                        ------------    ------------
                                                                             614,998         650,231
     Less current portion ...........................................       (125,000)       (125,000)
                                                                        ------------    ------------
                                                                             489,998         525,231
                                                                        ------------    ------------
Property and equipment, at cost:
   Land .............................................................        678,000         678,000
   Buildings ........................................................      2,461,327       2,461,327
   Equipment and leasehold and tenant improvements ..................      1,380,334       1,234,170
                                                                        ------------    ------------
                                                                           4,519,661       4,373,497
   Less accumulated depreciation and amortization ...................     (1,266,427)     (1,175,332)
                                                                        ------------    ------------
     Net property and equipment .....................................      3,253,234       3,198,165
                                                                        ------------    ------------
Other assets:
   Undeveloped land, at cost ........................................      4,074,643       4,737,353
   Capitalized carrying costs on leased land ........................         84,147          85,569
   Goodwill, net ....................................................        336,337         538,144
   Deferred loan costs, net .........................................         76,199          97,161
   Investments ......................................................      2,142,629       2,232,119
   Other ............................................................        341,666         125,353
                                                                        ------------    ------------
                                                                           7,055,621       7,815,699
                                                                        ------------    ------------

                                                                        $ 13,805,770    $ 16,445,081
                                                                        ============    ============
</TABLE>





                                       1
<PAGE>

                      SPORTS ARENAS, INC. AND SUBSIDIARIES
                CONSOLIDATED CONDENSED BALANCE SHEETS (CONTINUED)
                LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>

                                                                         March 31,       June 30,
                                                                           1997            1996
                                                                       ------------    ------------
                                                                        (Unaudited)
<S>                                                                   <C>             <C>
Current liabilities:
   Long-term debt subject to extinguishment ........................   $       --      $  1,808,282
   Assessment district obligation - in default .....................      2,044,343       2,061,090
   Long-term debt due within one year ..............................        912,000       1,061,000
   Long-term debt due within one year - related party ..............           --           100,000
   Note payable- short term ........................................        250,000            --
   Accounts payable ................................................      1,053,769         908,530
   Accrued payroll and related expenses ............................         48,639         308,619
   Accrued property taxes ..........................................        405,125         385,591
   Accrued interest ................................................         53,490          33,794
   Accrued frequent bowler program expense .........................        199,836         250,506
   League bowler prize funds .......................................        174,644         113,458
   Other accrued liabilities .......................................         98,310         183,903
                                                                       ------------    ------------
     Total current liabilities .....................................      5,240,156       7,214,773
                                                                       ------------    ------------

Long-term debt, excluding current portion ..........................      3,771,880       4,167,515
                                                                       ------------    ------------

Long-term debt, related party ......................................           --           219,744
                                                                       ------------    ------------

Distributions received in excess of basis in
  investment .......................................................     10,051,685       9,828,360
                                                                       ------------    ------------

Tenant security deposits ...........................................         27,703          25,894
                                                                       ------------    ------------

Minority interests in consolidated subsidiaries ....................      2,212,677       2,212,677
                                                                       ------------    ------------

Commitments and contingencies

Shareholders' equity (deficiency):
   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 .............................................     (7,581,744)     (7,448,409)
                                                                       ------------    ------------
                                                                         (5,579,195)     (5,445,860)
   Less note receivable from shareholder ...........................     (1,919,136)     (1,778,022)
                                                                       ------------    ------------
     Total shareholders' equity (deficiency) .......................     (7,498,331)     (7,223,882)
                                                                       ------------    ------------

                                                                       $ 13,805,770    $ 16,445,081
                                                                       ============    ============
</TABLE>




        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, 1997 AND 1996
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                       1997           1996
                                                                   -----------    -----------
<S>                                                               <C>            <C>
Revenues:
   Bowling .....................................................   $   761,338    $ 2,226,787
   Rental ......................................................       130,408        120,537
   Construction ................................................       240,212        294,811
   Golf ........................................................        22,425           --
   Other .......................................................        32,786         19,597
   Other-related party .........................................        28,005         27,051
                                                                   -----------    -----------
                                                                     1,215,174      2,688,783
                                                                   -----------    -----------
Costs and expenses:
   Bowling .....................................................       457,751      1,229,911
   Rental ......................................................        57,272         69,005
   Construction ................................................       205,858        285,276
   Golf ........................................................        45,609           --
   Development .................................................        53,546         44,676
   Selling, general and administrative .........................       476,095        684,649
   Depreciation and amortization ...............................       162,525        259,130
                                                                   -----------    -----------
                                                                     1,458,656      2,572,647
                                                                   -----------    -----------

Income (loss) from operations ..................................      (243,482)       116,136
                                                                   -----------    -----------

Other income (charges):
   Investment income:
     Related party .............................................        59,560         56,557
     Other .....................................................        43,862         17,276
   Interest expense and amortization of
     finance costs .............................................      (111,728)      (201,682)
   Interest expense related to development
     activities ................................................       (55,033)       (54,551)
   Gain (loss) on disposition of undeveloped land ..............      (468,268)       120,401
   Equity in income of investees ...............................        82,793         54,903
                                                                   -----------    -----------
                                                                      (448,814)        (7,096)
                                                                   -----------    -----------

Net income (loss) ..............................................   $  (692,296)   $   109,040
                                                                   ===========    ===========


Per common share (based on weighted average shares outstanding):
     Net income (loss) .........................................   $      (.02)   $       .00
                                                                   ===========    ===========
</TABLE>








        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, 1997 AND 1996
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                       1997           1996 
                                                                   -----------    -----------
<S>                                                               <C>            <C>
Revenues:
   Bowling .....................................................   $ 2,429,146    $ 5,937,455
   Rental ......................................................       382,552        379,495
   Construction ................................................     2,000,916      1,644,645
   Golf ........................................................        22,425           --
   Other .......................................................        94,618         45,153
   Other-related party .........................................        83,435         80,936
                                                                   -----------    -----------
                                                                     5,013,092      8,087,684
                                                                   -----------    -----------

Costs and expenses:
   Bowling .....................................................     1,715,359      3,706,626
   Rental ......................................................       176,235        185,783
   Construction ................................................     1,765,683      1,431,415
   Golf ........................................................        45,609           --
   Development .................................................       121,005        139,080
   Selling, general and administrative .........................     1,448,748      2,072,741
   Depreciation and amortization ...............................       502,250        781,192
                                                                   -----------    -----------
                                                                     5,774,889      8,316,837
                                                                   -----------    -----------

Loss from operations ...........................................      (761,797)      (229,153)
                                                                   -----------    -----------
Other income (charges):
   Investment income:
     Related party .............................................       173,410        166,543
     Other .....................................................       109,658         52,269
   Interest expense and amortization of
     finance costs .............................................      (358,747)      (642,371)
   Interest expense related to development
     activities ................................................      (192,345)      (163,906)
   Recognize deferred gain .....................................          --           11,442
   Gain on sale of bowling centers .............................     1,099,514           --
   Gain (loss) on disposition of undeveloped land ..............      (468,268)       120,401
   Gain on sale, other .........................................        55,000           --
   Equity in income of investees ...............................       210,240        151,368
                                                                   -----------    -----------
                                                                       628,462       (304,254)
                                                                   -----------    -----------

Net loss .......................................................   $  (133,335)   $  (533,407)
                                                                   ===========    ===========


Per common share (based on weighted average shares outstanding):
     Net loss ..................................................   $       .00    $      (.02)
                                                                   ===========    ===========
</TABLE>



        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, 1997 AND 1996
                                   (Unaudited)


<TABLE>
<CAPTION>

                                                               1997           1996 
                                                            -----------   -----------
<S>                                                        <C>            <C>
Cash flows from operating activities:
   Net loss ............................................   $ ( 133,335)   $ ( 533,407)
   Adjustments to reconcile  net loss to net cash
    provided  (used) by operating activities:
     Amortization of deferred financing costs ..........        22,879         29,957
     Depreciation and amortization .....................       502,250        781,192
     Undistributed income of investees .................      (210,240)      (151,368)
     Gain on sale of bowling centers and other .........    (1,154,514)          --
     (Gain) loss on disposition of undeveloped land ....       468,268       (120,401)
     Interest accrued on assessment district obligation        154,925        164,529
     Interest accrued on receivable from shareholder ...      (141,114)      (131,524)
     Recognize deferred gain ...........................          --          (11,442)
   Changes in assets and liabilities:
     (Increase) decrease in receivables ................       109,455       (133,210)
     Increase in inventories ...........................        (1,567)          --
     Increase in prepaid expenses ......................        (9,114)      (107,119)
     Increase (decrease) in accounts payable
        and accrued  expenses ..........................      (136,893)       641,280
     Increase (decrease) in billings in excess of costs          9,075          3,823
     Other .............................................        26,955         (3,640)
                                                           -----------    -----------
        Net cash provided (used) by operating activities      (492,970)       428,670
                                                           -----------    -----------

Cash flows from investing activities:
   (Increase) decrease in notes receivable .............        80,233        107,787
   Capital expenditures ................................      (243,121)       (15,479)
   Distributions from investees ........................       512,990        244,999
   Contributions to investees ..........................       (30,000)       (17,800)
   Proceeds from sale of bowling centers ...............     2,052,185           --
   Proceeds from sale of video games ...................        10,000           --
   Proceeds from sale of undeveloped land ..............          --          160,401
   Acquire additional interest in Redbird Properties ...          --           (5,244)
   Acquisition of Penley Golf ..........................      (172,071)          --   
                                                           -----------    -----------
     Net cash provided by investing activities .........     2,210,216        474,664
                                                           -----------    -----------
Cash flows from financing activities:
   Scheduled principal payments ........................      (871,489)      (602,584)
   Proceeds from line of credit ........................          --          210,000
   Payments on line of credit ..........................          --         (298,742)
   Other ...............................................        (8,270)          --   
                                                           -----------    -----------
        Net cash used by financing activities ..........      (879,759)      (691,326)
                                                           -----------    -----------

Net increase in cash and equivalents ...................       837,487        212,008

Cash and equivalents, beginning of period ..............     1,093,465        120,027
                                                           -----------    -----------
Cash and equivalents, end of period ....................   $ 1,930,952    $   332,035
                                                           ===========    ===========
</TABLE>



                                       5
<PAGE>



                      SPORTS ARENAS, INC. AND SUBSIDIARIES
           CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED)
                    NINE MONTHS ENDED MARCH 31, 1997 AND 1996
                                   (Unaudited)



SUPPLEMENTAL CASH FLOW INFORMATION:

Supplemental Schedule of Non-Cash Investing and Financing Activities:

   The sale of three bowling centers on August 7, 1996 resulted in the following
     increases (decreases) to the following assets and liabilities: property and
     equipment- ($6,741,237);  accumulated depreciation- ($4,013,747);  deferred
     loan  costs-($6,353);   prepaid  expenses  ($20,000);  and  notes  payable-
     ($1,801,172).

   The Company acquired an additional 29 percent interest in Redbird Properties,
     effective  July, 1, 1995,  in exchange for a $446,000  note  payable.  As a
     result  of  the  acquisition,  Redbird  Properties  became  a  consolidated
     subsidiary.  The acquisition and consolidation,  in addition to eliminating
     the  Company's  investment  of  $134,975,  resulted  in an  increase in the
     following   assets  and  liabilities  in  1995:   property  and  equipment-
     $1,537,984;  accumulated  depreciation-  $331,500;  note payable- $713,538;
     note payable, related party- $446,000.

   The sale of the video game business on December 15, 1996 for $10,000 cash and
     a $45,000  note  receivable  resulted  in a decrease of both  property  and
     equipment, and accumulated depreciation by $140,832.

   On March 18, 1997 the County of  Riverside  foreclosed at public sale on 7 of
     the 40 acres of  undeveloped  land in  Temecula,  California,  which  had a
     carrying  value of $662,710.  The sale  resulted in the  extinguishment  of
     $22,770 of accrued  property  taxes and  $171,672  of  assessment  district
     obligations.

   On January  22,  1997  the  Company   purchased  the  receivables   ($8,594),
     inventories  ($119,602)  and equipment  ($43,875) of the Power Sports Group
     (Penley Golf) for $172,071.

   On March  28,  1997,  the  proceeds  of a  $250,000 loan were used to pay the
     lessor of Grove bowling center for a deferred lease inception fee.






















        See accompanying notes to consolidated condensed financial statements.


                                       6
<PAGE>



                      

                      SPORTS ARENAS, INC. AND SUBSIDIARIES
                 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                             MARCH 31, 1997 AND 1996
                                   (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, 1997 and 1996,  are not
      necessarily indicative of operations for the entire year.

3. Investments:

   (a) Investments consist of the following:
                                                     March 31,        June 30,
                                                      1997             1996 
                                                 -------------     ------------
   Accounted for on the equity method:
        Investment in UCV, L.P.................  $( 10,051,685)    $( 9,828,360)
        Vail Ranch Limited Partnership ........      2,104,703        2,182,087
                                                 -------------     ------------
                                                   ( 7,946,982)     ( 7,646,273)
        Less Investment in UCV, L.P. classified
          as liability- Distributions received
          in excess of basis in investment .....    10,051,685        9,828,360
                                                 -------------     ------------
                                                     2,104,703        2,182,087
     Accounted for on the cost basis:
        All Seasons Inns, La Paz ...............        37,926           50,032
                                                 -------------     ------------
                                                   $ 2,142,629      $ 2,232,119
                                                 =============     ============
     The  following  is a  summary  of  the  equity  in  income  (loss)  of  the
     investments accounted for by the equity method:
                                                        1997             1996  
                                                    ----------       ---------- 
        UCV, L.P. ................................  $  210,240       $  151,368
        Vail Ranch Limited Partnership ...........        --                --
                                                    ----------       ----------
                                                    $  210,240       $  151,368
                                                    ==========       ==========
     During the nine months  ended March 31,  1997,  the Company  received  cash
     distributions of $393,500 from UCV, L.P.  ($244,999 in 1996),  $77,384 (net
     of  $30,000   contribution)  from  Vail  Ranch  Limited  Partners  ($17,800
     contribution in 1996), and $12,106 from All Season Inns, La Paz.

   (b) Investment in UCV, L.P.

     The operating  results of this investment are included in the  accompanying
     consolidated  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, 1996 and
     1995 are as follows:
                                         1997         1996
                                      ----------   ----------
          Revenues ................   $3,250,000   $3,096,000
          Operating and general and
             administrative costs .    1,100,000    1,071,000
          Depreciation ............      146,000      145,000
          Interest expense ........    1,584,000    1,577,000
          Net income ..............      420,000      303,000




                                       7
<PAGE>

                      SPORTS ARENAS, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
                             MARCH 31, 1997 AND 1996
                                   (Unaudited)

4. Contingencies:

     (a) Old Vail Partners (OVP), a consolidated subsidiary and 50 percent owned
     by the Company, owns two contiguous parcels of undeveloped land which total
     approximately  40  acres  that are  located  within  a  special  assessment
     district of the County of Riverside,  California (the County).  The special
     assessment  district was created to fund and develop roadways,  sewers, and
     other required  infrastructure  improvements  in the area necessary for the
     owners to develop  their  properties.  Each parcel of  property  within the
     assessment  district is collateral  for an allocated  portion of the bonded
     debt that were issued by the assessment district to fund the improvements.

     In November 1993, the City of Temecula  adopted a general  development plan
     that  designates  the 40 acres of  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 the 40 acres from a "commercial"  to  "professional
     office" use.  The parcels are subject to  Assessment  District  liens which
     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. 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.

     OVP is delinquent in the payment of property taxes and assessments  related
     to the two parcels for the last five years.  On March 18, 1997,  the County
     sold  the 7 acre  parcel  at  public-sale  for  delinquent  property  taxes
     totaling $22,770 and the buyer assumed the Assessment  District  obligation
     of $171,672.  OVP recorded a loss from the  disposition of the  undeveloped
     land of  $468,268  representing  the  carrying  value of the 7 acre  parcel
     ($662,710)  less  the  property  tax and  assessment  district  obligations
     extinguished.  The County  attempted  to sell the 33 acre  parcel at public
     sale on March 18, 1997 for the defaulted  property taxes and again on April
     22, 1997 for the default under the assessment district obligation, however,
     the County was not able to obtain any bids to satisfy the  obligations  and
     the sale was not completed.

     The amount due to cure the  judgment for the default  under the  Assessment
     District  obligation  on the remaining 33 acre parcel at March 31, 1997 was
     approximately  $813,000  ($688,000 for both parcels at June 30, 1996).  The
     principal balance of the allocated portion of the bonds  ($1,230,699),  and
     delinquent  interest  and  penalties  ($660,190  for the 33 acre parcel and
     $547,360   for  both   parcels  at  March  31,  1997  and  June  30,  1996,
     respectively)  are  classified  as  "Assessment   district  obligation-  in
     default" in the consolidated  balance sheet. In addition,  accrued property
     taxes in the balance sheet includes  $377,829 of delinquent  property taxes
     and late fees related to the 33 acre parcel  ($337,016  for both parcels at
     June 30, 1996).  The annual  payments due related to the bonded debt on the
     33 acre parcel are  approximately  $185,000.  The payments continue through
     the year 2014 and include interest at approximately 7-3/4 percent.


   (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.



                                       8
<PAGE>

                      SPORTS ARENAS, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
                             MARCH 31, 1997 AND 1996
                                   (Unaudited)

5. Significant Events:

   (a) The  Company's revolving  line of credit limit was renewed on November 1,
      1996 and increased  from $300,000 to $500,000.  The line of credit expires
      on  November  1,  1997.  On April 8,  1997,  the line of credit  limit was
      reduced to $200,000 in  conjunction  with the bank  providing an equipment
      loan of $320,000 as described in Note 5c.

   (b) On August 7, 1996 the Company sold the  Village,  Marietta  and  American
      Bowling  Centers  (all  located in Georgia)  and  related  real estate for
      $3,950,000 cash, which resulted in a gain of $1,099,514.  The property and
      equipment and the long-term debt  extinguished from the sale proceeds were
      presented   as  current   assets  and   liabilities   at  June  30,  1996,
      respectively. The following are the results of operations of these bowling
      centers  included in the Company's  statements of operations for the three
      and nine month periods ended March 31, 1997 and 1995:
                                 Three Months             Nine Months
                            --------------------      ---------------------
                              1997          1996        1997         1996
                          ----------    ----------   ----------    ----------
   Revenues ...........   $     --      $1,021,000   $  333,000    $2,720,000
   Bowl costs .........         --         536,000      255,000     1,633,000
   Selling, general and
    administrative:
     Direct ...........       17,000       191,000      117,000       558,000
     Allocated ........         --          63,000       20,000       167,000
   Depreciation .......         --          56,000       18,000       167,000
   Interest expense ...         --          40,000        8,000       133,000
   Income (loss) ......      (17,000)      135,000      (85,000)       62,000

   (c) On December 15, 1996, the Company sold the video game operations  located
      at the two San Diego bowling centers for $55,000 ($10,000 cash and $45,000
      note  receivable)  resulting in a $55,000 gain. The note receivable is due
      in 24 monthly installments of $2,076,  including principal and interest at
      10 percent.  The  following  are the results of the video game  operations
      which were  included in the  Company's  bowling  segment for the three and
      nine months ended March 31, 1997 and 1995:
                                 Three Months             Nine Months
                             ------------------    --------------------
                               1997        1996        1997       1996
                            --------    --------    --------   --------
         Revenues .......   $   --      $ 19,000    $ 25,000   $ 55,000
         Bowl costs .....      1,000      16,000      18,000     54,000
         Depreciation ...       --        19,000        --       56,000
         Interest expense      2,000       3,000       6,000      9,000
         Income (loss) ..     (3,000)    (19,000)      1,000    (64,000)

   (c) On January 22, 1997,  Penley  Sports,  LLC (Penley), a limited  liability
      company for which the Company is the  managing  member and owner of ninety
      percent of the units,  purchased the assets of Power Sports  Group,  Inc.,
      which was a  manufacturer  of  graphite  golf  shafts and ski  poles.  The
      purchase  price  was  $172,071  for  the  accounts  receivable   ($8,594),
      inventories  ($119,602),  and equipment  ($43,875).  The following are the
      results of operations  of Penley  included in the  consolidated  condensed
      financial for the period of January 22, 1997 through March 31, 1997:

            Revenues ...........   $  22,000
            Golf cost ..........      46,000
            Selling, general and     
             administrative ....     105,000
            Net loss ...........    (129,000)

     On April 28,  1997,  the  Company  obtained a $320,000  loan to finance the
     acquisition of approximately $471,000 of manufacturing  equipment, of which
     $171,000 had been  purchased  as of March 31, 1997.  The loan is payable in
     monthly  installments of $8,225,  including  interest at 10-1/2 percent per
     annum,  with the balance due May 1, 2001. The loan is collateralized by the
     $471,000 of equipment.


                                       9
<PAGE>

                      SPORTS ARENAS, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
                             MARCH 31, 1997 AND 1996
                                   (Unaudited)


5. Significant Events (continued):

   (d)  On March 28, 1997,  the proceeds  from a $250,000 bank loan were used to
        pre-pay the balance of payments due on the lease  inception  fee for the
        Grove bowling  center.  The loan is payable in monthly  installments  of
        interest only at 11 percent per annum and the  principal  balance is due
        on April 5, 1998.




                                       10
<PAGE>
ITEM 2.  MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND 
          RESULTS OF OPERATIONS:
                  SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS:
Certain  statements in this Form 10-Q  constitute  "forward-looking  statements"
within the meaning of the Securities Act of 1933 and the Securities Exchange Act
of 1934.  Such statements are subject to certain risks and  uncertainties  which
could cause the actual results to be materially different from those forecasted.
Readers  are  cautioned  not to place undue  reliance  on these  forward-looking
statements  which speak only as of the date hereof.  The Company  undertakes  no
obligation to republish revised forward-looking  statements to reflect events or
circumstances   after  the  date  hereof  or  to  reflect  the   occurrence   of
unanticipated  events.  Readers are also urged to carefully  review and consider
the various  disclosures made by the Company which attempt to advise  interested
parties of the  factors  which  affect the  Company's  business,  including  the
disclosures  made under the caption  "Management's  Discussion  and  Analysis of
Financial  Condition and Results of Operations"  as well as the Company's  other
periodic  reports  on Forms  10-K,  10-Q and 8-K filed with the  Securities  and
Exchange Commission.
                              RESULTS OF OPERATIONS
The  following  is a  recap  of the  circumstances  related  to the  significant
differences  between  the  results  of  operations  for the three and nine month
periods  ended March 31, 1997 and the same periods in 1996  (decreases  in items
are in  brackets  except  for  interest  expense,  for  which  increases  are in
brackets):
<TABLE>
<CAPTION>
                         Three Month Period Ended March 31, 1997 versus March 31, 1996
                         -------------------------------------------------------------
                                                             Constr-                   Develop-     Corporate &
                                 Bowling        Rental        uction         Golf        ment       Unallocated
                               ----------    ----------    ----------    ----------    ----------    ----------
<S>                            <C>           <C>           <C>           <C>          <C>           <C>

Revenues ...................   (1,465,000)       11,000       (55,000)       22,000          --          14,000
                               ----------    ----------    ----------    ----------    ----------    ----------
Costs ......................     (772,000)      (12,000)      (79,000)       46,000         9,000          --
SG&A:
  Direct ...................     (263,000)         --         (22,000)      105,000          --         (29,000)
  Allocated ................      (88,000)         --           4,000          --            --          84,000
Depreciation ...............      (98,000)        1,000          --            --            --            --
                               ----------    ----------    ----------    ----------    ----------    ----------
                               (1,221,000)      (11,000)      (97,000)      151,000         9,000        55,000
                               ----------    ----------    ----------    ----------    ----------    ----------
Operating income (loss) ....     (244,000)       22,000        42,000      (129,000)       (9,000)      (41,000)
                               ----------    ----------    ----------    ----------    ----------    ----------
Other income (charges)
  Interest income ..........         --            --            --            --            --          30,000
  Interest expense .........       78,000          --            --            --            --          11,000
  Gain .....................         --            --            --            --            --        (589,000)
  Equity in investees ......         --            --            --            --            --          28,000
                               ----------    ----------    ----------    ----------    ----------    ----------
                                   78,000          --            --            --            --        (520,000)
                               ----------    ----------    ----------    ----------    ----------    ----------
Net income (loss) ..........     (166,000)       22,000        42,000      (129,000)       (9,000)     (561,000)
                               ==========    ==========    ==========    ==========    ==========    ==========
</TABLE>
<TABLE>
<CAPTION>
                            Nine-Month Period March 31, 1997 versus March 31, 1996
                            ------------------------------------------------------
                                                             Constr-                     Develop-    Corporate &
                                 Bowling        Rental        uction         Golf          ment      Unallocated
                               ----------    ----------    ----------    ----------    ----------    ----------
<S>                            <C>           <C>           <C>           <C>          <C>           <C>
Revenues ...................   (3,508,000)        4,000       356,000        22,000          --          52,000
                               ----------    ----------    ----------    ----------    ----------    ----------
Costs ......................   (1,991,000)       (9,000)      334,000        46,000       (18,000)         --
SG&A:
  Direct ...................     (726,000)         --          (4,000)      105,000          --           1,000
  Allocated ................     (216,000)         --           8,000          --            --         208,000
Depreciation ...............     (275,000)       (4,000)         --            --            --            --
                               ----------    ----------    ----------    ----------    ----------    ----------
                               (3,208,000)      (13,000)      338,000       151,000       (18,000)      209,000
                               ----------    ----------    ----------    ----------    ----------    ----------
Operating income (loss) ....     (300,000)       17,000        18,000      (129,000)       18,000      (157,000)
                               ----------    ----------    ----------    ----------    ----------    ----------
Other income (charges)
  Interest income ..........         --            --            --            --            --          64,000
  Interest expense .........      244,000         1,000          --            --         (28,000)       39,000
  Gain .....................         --            --            --            --            --         554,000
  Equity in investees ......         --            --            --            --            --          59,000
                               ----------    ----------    ----------    ----------    ----------    ----------
                                  244,000         1,000          --            --         (28,000)      716,000
                               ----------    ----------    ----------    ----------    ----------    ----------
Net income (loss) ..........      (56,000)       18,000        18,000      (129,000)      (10,000)      559,000
                               ==========    ==========    ==========    ==========    ==========    ==========
</TABLE>
                                       11
<PAGE>




BOWLING OPERATIONS:

On August 7, 1996, the Company sold its three bowling centers located in Georgia
for  $3,950,000,  which  resulted in a $1,099,514  gain. In May 1996 the Company
also sold the  Redbird  Lanes real estate and ceased  operations  of the bowling
center.  The Company has two bowling  centers  remaining that are located in San
Diego,  California.  On  December  15,  1996,  the  Company  sold the video game
operations  that  were  located  in the two San  Diego  bowling  centers,  which
resulted in a $55,000  gain.  The Company has no plans to sell the two remaining
bowling centers.

The  following  is a summary of the changes to the  components  of the loss from
operations of the bowling  segment during the three and nine month periods ended
March 31, 1997 compared to the same period in 1996:

              Three-Month Period Ended March 31, 1997 versus March 31, 1996
              ------------------------------------------------------------- 
                         Georgia      Redbird     Video      Other    Combined
                          Bowls        Lanes      Games     Changes Incr.(Decr.)
                       ----------    ---------  --------   --------  ----------
Revenues               (1,021,000)   ( 387,000) ( 19,000)  ( 38,000) (1,465,000)

Bowl costs              ( 536,000)   ( 195,000)  ( 15,000) ( 26,000)  ( 772,000)
Selling, general &
 administrative:
  Direct                ( 174,000)    ( 58,000)         -  ( 31,000)  ( 263,000)
  Allocated              ( 63,000)    ( 20,000)         -   ( 5,000)   ( 88,000)
Depreciation             ( 56,000)    ( 24,000)  ( 19,000)    1,000    ( 98,000)
Income from operations  ( 192,000)    ( 90,000)    15,000    23,000   ( 244,000)
Interest expense         ( 40,000)    ( 28,000)   ( 1,000)  ( 9,000)   ( 78,000)
Net income              ( 152,000)    ( 62,000)    16,000    32,000   ( 166,000)

              Nine-Month Period Ended March 31, 1997 versus March 31, 1996:
              ------------------------------------------------------------
                         Georgia     Redbird     Video      Other     Combined
                          Bowls       Lanes      Games     Changes  Incr.(Decr.)
                      ----------   ----------   --------  --------   ----------
Revenues              (2,387,000)  (1,024,000)  ( 30,000) ( 67,000)  (3,508,000)
Bowl costs            (1,378,000)   ( 587,000)  ( 36,000)   10,000   (1,991,000)
Selling, general & administrative:
  Direct               ( 440,000)   ( 202,000)         -  ( 84,000)   ( 726,000)
  Allocated            ( 147,000)    ( 52,000)         -  ( 17,000)   ( 216,000)
Depreciation           ( 148,000)    ( 74,000)  ( 56,000)    3,000    ( 275,000)
Income from operations ( 274,000)   ( 109,000)    62,000  ( 21,000)   ( 300,000)
Interest expense       ( 126,000)    ( 80,000)   ( 3,000) ( 35,000)   ( 244,000)
Net income             ( 148,000)    ( 29,000)    65,000    56,000     ( 56,000)


The following is a comparison of operations of the two remaining bowling centers
which are located in San Diego:

Bowling  revenues  decreased  4.9 and 3.1  percent  in the three and nine  month
periods ended March 31, 1997,  respectively.  The decrease is primarily due to a
decrease in the number of league games  bowled  (13%) at both  bowling  centers.
This decrease has been partially offset by an increase in the revenues from open
bowling (2%) and shoe rentals (25%).

Bowl costs did not significantly  change in the nine month period, but decreased
by 5 percent  ($26,000)  during  the three  month  period  primarily  related to
decreases  in payroll and related  expenses  ($16,000).  Bowl costs during prior
quarters  had  increased by $15,000  primarily  due to the timing of bowling pin
purchases and lane  resurfacing  in the first quarter that either  occurred in a
different period in the prior year or had been deferred. In prior quarters,  the
increases in these expenses had been partially offset by  approximately  $39,000
of reductions in payroll and related costs (11%) in the second quarter.

Selling,  general and  administrative  expense  directly  related to the bowling
segment  decreased  by $84,000 and $31,000 in the nine and three month  periods,
respectively.  Promotions  expense  decreased by $55,000 and $13,000 in the nine
and three  month  periods,  respectively,  primarily  due to  discontinuing  the
awarding of points for the Company's  frequent  bowler  program.  Management has
concluded  that the  frequent  bowler  program  was not  achieving  the goals of
increasing the frequency of bowling or the loyalty of our customers. The $31,000
decrease (4%) in expense in the three month period was primarily attributable to
a  continuing  decrease in  promotions  expense and also a decrease in insurance
expense.

                                       12
<PAGE>

Interest  expense  decreased  by $9,000 and  $35,000 in the three and nine month
periods, respectively, due to the reduction in the balances of notes payable.


RENTAL OPERATIONS:

There were no significant  changes to the components of the consolidated  rental
segment in the three and nine month periods ended March 31, 1997.

The equity in income of investees  increased by $28,000 and $59,000 in the three
and nine month periods,  respectively,  due to improved  occupancy of University
City Village (UCV).  This "seniors"  apartment  project has been operating at 97
percent  occupancy or better since July 1995.  Rental  income of the  apartments
increased  by 5  percent  during  both the three and nine  month  periods  ended
December 31, 1996  ($52,000 and  $154,000,  respectively)  partially  due to a 2
percent  increase in rates  implemented in June of 1996 and also due to the high
rate of occupancy since July 1995.  Rental costs decreased by 2 percent ($6,000)
and  increased by 3 percent  ($29,000) in the three and nine month periods ended
December 31, 1996. A portion of the increase in the nine month period was due to
an $18,000 increase in roof repairs that were performed in May of 1996.

OTHER ACTIVITIES:

Construction costs as a percentage of construction  revenues were 86 percent and
88  percent  in  the  three  and  nine  month  periods  ended  March  31,  1997,
respectively,  versus 97 percent and 87 percent in the comparable periods of the
prior year. The higher cost of sales  percentage in the three month period ended
March 31,  1996 was due to some  unexpected  completion  costs  incurred in that
quarter  ($15,000)  related to jobs closed in the quarter ended December  1995..
Direct selling,  general and  administrative  costs related to the  construction
segment  decreased  by $22,000 in the three month  period  primarily  due to the
decrease in incentive compensation, which is based on profitability.

Development  costs and  expenses  primarily  consist of legal costs  incurred to
contest the City of Temecula's  attempts to down-zone the undeveloped land owned
by Old Vail  Partners.  The  amount of legal  expense  varies  from  quarter  to
quarter. Interest expense related to development activities primarily relates to
interest accrued on the past due and current assessment district  obligations of
Old Vail Partners.  On March 18, 1997, the County sold one of the two parcels (7
acres) at  public-sale  for delinquent  property taxes totaling  $22,770 and the
buyer assumed the  Assessment  District  obligation of $171,672.  OVP recorded a
loss from the disposition of the undeveloped  land of $468,268  representing the
carrying  value  of the 7 acre  parcel  ($662,710)  less  the  property  tax and
assessment district obligations extinguished.

On January 22, 1997,  Penley Sports,  LLC (Penley),  a limited liability company
for which the Company is the managing  member and owner of ninety percent of the
units,   purchased  the  assets  of  Power  Sports  Group,  Inc.,  which  was  a
manufacturer  of graphite golf shafts and ski poles.  The Power Sports Group had
been a small  producer of premium  golf shafts that sold to a limited  number of
golf shops.  The Company is in the process of  purchasing  equipment to automate
the production line and hiring sales and marketing personnel to expand the sales
to golf shops and create  business with the large golf club  manufacturers.  The
Company is also in the process of developing  additional golf shaft products. As
a result,  the golf  costs and  selling,  general  and  administrative  expenses
related to golf  operations  exceeded the golf revenues.  The Company  estimates
that it will continue to incur operating  losses for the next twelve to eighteen
months before sales increase sufficiently to exceed costs.

Other than  changes  associated  with the  bowling  and  construction  segments,
selling,  general and administrative expense did not change significantly in the
three and nine month periods ended March 31, 1997.  However,  as a result of the
disposition  of the four bowling  centers in May and August  1996,  there was an
increase  in the  unallocated  portion of  corporate  overhead  of  $84,000  and
$208,000 in the three and nine month  periods,  respectively.  This  essentially
represents the inability to reduce fixed corporate overhead equal to that amount
which had  previously  been  allocated  to the  administration  of the  disposed
bowling centers.

                                       13
<PAGE>

Other  investment  income increased by $30,000 and $64,000 in the three and nine
month periods,  respectively, due to the increase in cash that was available for
short  term  investment  during  those  periods  as a result of the sales of the
bowling centers in May and August of 1996.

                         Liquidity and Capital Resources

The working  capital  deficit at March 31, 1997 was $2,223,239 and $2,308,787 at
June      30,      1996.       Excluding       the      balance      of      the
assessment-district-obligation-in-default    and   delinquent   property   taxes
described  below,  which are  included  in current  liabilities,  the  Company's
adjusted  working capital of $188,933 as of March 31, 1997 is a $99,614 increase
from the $89,319 of adjusted  working  capital as of June 30, 1996. As discussed
below,  the sale of three bowling  centers in August 1996 provided cash proceeds
of  $2,052,185,  however  cash  used  by  operations  ($492,970),  reduction  of
long-term debt ($871,489) and capital expenditures  ($71,921) less distributions
received from investees  ($512,990) utilized $923,390.  The acquisition of Power
Sports Group  ($172,071)  and the  subsequent  purchase of additional  equipment
($172,200) utilized an additional $344,271 of cash.

On August 7, 1996,  the Company  sold its three  bowling  centers in Georgia for
$3,950,000 cash. The cash proceeds from the sale were $2,052,000 after deducting
selling expenses and  extinguishing  related  long-term debt. The Company has no
plans to sell the two remaining bowling centers.

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 40 acres of  undeveloped  land. The
County of Riverside  obtained  judgments for the default in assessment  district
payments.  On March 18, 1997,  the County sold the 7 acre parcel at  public-sale
for  delinquent  property  taxes  totaling  $22,770  and the buyer  assumed  the
Assessment District obligation of $171,672.. The County attempted to sell the 33
acre parcel at public sale on March 18, 1997 for the  defaulted  property  taxes
and again on April  22,  1997 for the  default  under  the  assessment  district
obligation,  however,  the County was not able to obtain any bids to satisfy the
obligations and the sale was not completed.  The amount due to cure the judgment
for the default under the Assessment  District  obligation on the 33 acre parcel
at March 31, 1997 was approximately  $813,000 ($688,000 for both parcels at June
30,  1996).  The  principal  balance  of the  allocated  portion  of  the  bonds
($1,230,699),  and delinquent  interest and penalties  ($660,190 for the 33 acre
parcel  and  $547,360  for both  parcels  at March 31,  1997 and June 30,  1996,
respectively) are classified as "Assessment  district obligation- in default" in
the  consolidated  balance  sheet.  In addition,  accrued  property taxes in the
balance  sheet  includes  $377,829 of  delinquent  property  taxes and late fees
related to the 33 acre parcel  ($337,016 for both parcels at June 30, 1996).  If
the County of Riverside  again  attempts a public sale of the 33 acre parcel 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 Temeculah
to  effectively  down-zone the  property.  As a results of the judgments and the
attempts to down-zone the property,  the recoverability of the carrying value of
this property is uncertain.

On January 22, 1997,  the Company,  purchased  the assets of Power Sports Group,
Inc. (PSG) for $172,071 cash. PSG manufactured  premium graphite golf shafts and
ski poles and had averaged  approximately  $400,000 in sales in each of the past
two years.  On April 28, 1997,  the Company  obtained a $320,000 loan to finance
the acquisition of approximately $471,000 of manufacturing  equipment,  of which
$171,000 had been purchased as of March 31, 1997. The loan is payable in monthly
installments of $8,225, including interest at 10-1/2 percent per annum, with the
balance  due  May 1,  2001.  The  loan  is  collateralized  by the  $471,000  of
equipment. The Company plan is to automate the manufacturing process and develop
a sales and marketing staff and program to expand the sales. The Company expects
to incur losses totaling $800,000 over the next 18 months before forecasting a
profit. The Company believes that it has sufficient cash to fund these costs.

During the fourth quarter of 1997, the Company  expects to utilize an additional
$1,000,000 of cash for operations  after reduction of long term debt ($664,000),
capital    expenditures    ($50,000)    and    distributions    received    from
investees($60,000).  In  addition to the normal  utilization  of cash during the
fourth quarter of each year due to the seasonality of the bowling  segment,  the
estimate for the fourth  quarter  includes  paying  $502,000 to  extinguish  the
balances of three notes that come due during the third quarter and negative cash
flow of $160,000 from the golf segment.



                                       14
<PAGE>



                                     PART II
                                OTHER INFORMATION



ITEM 1. Legal Proceedings

        As of March 31, 1997,  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, 1996.



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 20, 1996 the Company held its annual shareholder  meeting in
        which the following items were voted upon:
<TABLE>
<CAPTION>
                                                       Tabulation of Votes
                                                 ------------------------------------
                                                   For           Against      Abstain
                                                 ----------      -------      -------
<S>                                              <C>             <C>          <C>

       Election of Directors:
         Harold S. Elkan .....................   22,161,716         --         31,056
         Steven R. Whitman ...................   22,165,066         --         27,706
         Patrick D. Reiley ...................   22,162,116         --         30,656
         James E. Crowley ....................   22,165,016         --         27,756
         Robert A. MacNamara .................   22,165,066         --         27,706

       Selection of KPMG Peat Marwick
        LLP as certified public accountants
        for the year ending June 30, 1998 ....   22,102,258       38,548       51,966
</TABLE>



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:   June 9, 1997




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



     Date: June 9, 1997





                                       16
<PAGE>