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 September 30, 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) (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 October 31, 1999 was 27,250,000 shares.

<PAGE>


                               SPORTS ARENAS, INC.

                                    FORM 10-Q

                        QUARTER ENDED SEPTEMBER 30, 1999

                                      INDEX






Part I - Financial Information:


Item 1.- Consolidated Condensed Financial Statements:

        Balance Sheets as of September 30, 1999 (unaudited)
           and June 30, 1999 .........................................    1-2

        Unaudited Statements of Operations for the Three
           Months Ended September 30, 1999 and 1998 ..................      3

        Unaudited Statements of Cash Flows for the Three
           Months Ended September 30, 1999 and 1998 ..................      4

        Notes to Financial Statements ................................    5-8


Item 2.- Management's Discussion and Analysis of Financial
            Condition and Results of Operations ......................   9-12

Item 3. - Quantitative and Qualitative Disclosures about Market Risk .     12

Part II - Other Information ..........................................     13


Signature ............................................................     14



<PAGE>

                      SPORTS ARENAS, INC. AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS

                                     ASSETS

                                                 September 30,     June 30,
                                                     1999            1999
                                                 ------------    ------------
                                                  (Unaudited)

Current assets:
   Cash and cash equivalents .................   $    195,420    $    357,906
   Current portion of notes
      receivable- affiliate ..................         50,000          50,000
   Other receivables .........................        112,250         116,404
   Inventories ...............................        304,491         310,160
   Prepaid expenses ..........................        269,019         199,668
                                                 ------------    ------------
      Total current assets ...................        931,180       1,034,138
                                                 ------------    ------------

Receivables due after one year:
   Note receivable- affiliate, net ...........        111,452         104,829
   Less current portion ......................        (50,000)        (50,000)
                                                 ------------    ------------
                                                       61,452          54,829
                                                 ------------    ------------
Property and equipment, at cost:
   Land ......................................        678,000         678,000
   Buildings .................................      2,461,327       2,461,327
   Equipment and leasehold and
      tenant improvements ....................      2,164,676       2,137,993
                                                 ------------    ------------
                                                    5,304,003       5,277,320
      Less accumulated depreciation
           and amortization ..................     (2,029,536)     (1,968,191)
                                                 ------------    ------------
       Net property and equipment ............      3,274,467       3,309,129
                                                 ------------    ------------

Other assets:
   Undeveloped land, at cost .................      1,408,746       1,582,468
   Intangible assets, net ....................        282,348         294,423
   Investments ...............................        618,853         618,853
   Other .....................................        118,071         104,980
                                                 ------------    ------------
                                                    2,428,018       2,600,724
                                                 ------------    ------------

                                                 $  6,695,117    $  6,998,820
                                                 ============    ============

                                       1
<PAGE>

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

                      LIABILITIES AND SHAREHOLDERS' DEFICIT


                                                September 30,     June 30,
                                                     1999           1999
                                                ------------    ------------
                                                 (Unaudited)

Current liabilities:
   Assessment district obligation-in default    $  2,628,556    $  2,565,179
   Current portion of long-term debt ........        284,000         289,000
   Accounts payable .........................        571,769         453,203
   Accrued payroll and related expenses .....        142,151         164,877
   Accrued property taxes, in default .......        607,624         582,859
   Accrued interest .........................         30,342          14,395
   Other liabilities ........................        196,005         246,211
                                                ------------    ------------
      Total current liabilities .............      4,460,447       4,315,724
                                                ------------    ------------

Long-term debt, excluding current portion ...      4,321,833       3,911,694
                                                ------------    ------------

Distributions received in excess of
   basis in investment ......................     12,718,074      12,688,808
                                                ------------    ------------

Tenant security deposits ....................         87,970          74,602
                                                ------------    ------------

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

Commitments and contingencies (Note 5)

Shareholders' equity 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 ......................    (16,316,941)    (15,415,742)
                                                ------------    ------------
                                                 (14,314,392)    (13,413,193)
   Less note receivable from shareholder ....     (2,291,492)     (2,291,492)
                                                ------------    ------------
      Total shareholders' deficit ...........    (16,605,884)    (15,704,685)
                                                ------------    ------------

                                                $  6,695,117    $  6,998,820
                                                ============    ============








     See accompanying notes to consolidated condensed financial statements.

                                       2
<PAGE>

                      SPORTS ARENAS, INC. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                 THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
                                   (Unaudited)

                                                     1999            1998
                                                ------------    ------------
Revenues:
   Bowling ..................................   $    624,572    $    641,070
   Rental ...................................        156,277         137,229
   Golf .....................................        123,930          73,833
   Other ....................................         28,457          29,192
   Other-related party ......................         42,699          53,131
                                                ------------    ------------
                                                     975,935         934,455
                                                ------------    ------------
Costs and expenses:
   Bowling ..................................        534,770         526,225
   Rental ...................................         62,742          64,471
   Golf .....................................        272,872         275,020
   Development ..............................         61,333          41,261
   Selling, general, and administrative .....        848,391         953,174
   Depreciation and amortization ............         95,569          93,434
                                                ------------    ------------
                                                   1,875,677       1,953,585
                                                ------------    ------------

Loss from operations ........................       (899,742)     (1,019,130)
                                                ------------    ------------

Other income (charges):
   Investment income:
     Related party ..........................          9,920          65,716
     Other ..................................            316          11,885
   Interest expense related to
      development activities ................        (63,376)        (57,750)
   Interest expense and amortization
      of finance costs ......................        (88,768)        (90,675)
   Loss on sale of undeveloped land .........           (638)           --
   Equity in income of investees ............        141,089         112,688
                                                ------------    ------------
                                                      (1,457)         41,864
                                                ------------    ------------

Loss from operations before
   extraordinary loss .......................       (901,199)       (977,266)

Extraordinary loss from early
   extinguishment of investee debt ..........           --           (98,500)
                                                ------------    ------------

Net loss ....................................   $   (901,199)   $ (1,075,766)
                                                ============    ============

Basic and  diluted  net loss per  common
   share  (based on  27,250,000  weighted
   average common shares outstanding) from:
         Operations before extraordinary loss      ($ 0.03)       ($ 0.04)
         Extraordinary loss .................         --              --
                                                   --------       --------
         Net loss ...........................      ($ 0.03)       ($ 0.04)
                                                   ========       ========


     See accompanying notes to consolidated condensed financial statements.

                                       3
<PAGE>


                      SPORTS ARENAS, INC. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                 THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
                                   (Unaudited)

                                                    1999            1998
                                                ------------    ------------
Cash flows from operating activities:
  Net loss ..................................   ($   901,199)   ($ 1,075,766)
  Adjustments to reconcile net loss to the
    net cash used by operating activities:
      Amortization of deferred
        financing costs .....................          2,280           5,839
      Depreciation and amortization .........         95,569          93,434
      Equity in income of investees .........       (141,089)        (14,188)
      Deferred income .......................         12,000            --
      Loss on sale of undeveloped land ......            638            --
      Interest income accrued on note
        receivable from shareholder .........           --           (55,111)
      Interest accrued on assessment
        district obligations ................         63,377          57,750
    Changes in assets and liabilities:
      Decrease in receivables ...............          4,154           6,284
      (Increase) decrease in inventories ....          5,669         (32,555)
      Increase in prepaid expenses ..........        (69,351)        (30,280)
      Increase in accounts payable ..........        118,566          71,900
      Decrease in accrued expenses ..........        (32,220)        (13,629)
      Other .................................         (5,904)          4,307
                                                ------------    ------------
      Net cash used by operating activities .       (847,510)       (982,015)
                                                ------------    ------------

Cash flows from investing activities:
   Increase in notes receivable .............         (6,623)        (15,223)
   Capital expenditures .....................        (43,576)        (14,013)
   Increase in development costs on
     undeveloped land .......................        (17,278)           --
   Proceeds from sale of undeveloped land ...        190,362            --
   Distributions from investees .............        157,000         670,617
                                                ------------    ------------
   Net cash provided by investing activities         279,885         641,381
                                                ------------    ------------

Cash flows from financing activities:
   Scheduled principal payments on
     long-term debt .........................        (68,934)        (57,991)
   Payment of long-term debt ................        (75,927)           --
   Proceeds from note payable ...............        550,000            --
                                                ------------    ------------
   Net cash provided (used by)
     financing activities ...................        405,139         (57,991)
                                                ------------    ------------

Net decrease in cash and cash equivalents ...       (162,486)       (398,625)
Cash and cash equivalents,
   beginning of year ........................        357,906       1,416,460
                                                ------------    ------------
Cash and cash equivalents, end of year ......   $    195,420    $  1,017,835
                                                ============    ============


SUPPLEMENTAL CASH FLOW INFORMATION:
Supplemental schedule of non-cash investing and financing activities:

   In July 1999, the Company discarded a fully depreciated asset with a cost and
      accumulated depreciation of $16,893.



     See accompanying notes to consolidated condensed financial statements.

                                       4
<PAGE>

                      SPORTS ARENAS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                     SEPTEMBER 30, 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 cash flows for the interim periods.

2.      Due  to  the  seasonal  fluctuations  of  the  bowling  operations,  the
        financial  results for the interim  periods ended September 30, 1999 and
        1998, are not necessarily indicative of operations for the entire year.

3. Investments:

   (a) Investments consist of the following:
                                             September 30,     June 30,
                                                 1999            1999
                                             ------------   ------------
        Vail Ranch Limited Partnership
         (equity method) .................   $    580,927   $    580,927
        All Seasons Inns, La Paz
         (cost basis) ....................         37,926         37,926
                                             ------------   ------------
           Total .........................   $    618,853   $    618,853
                                             ============   ============

       Investment in UCV, L.P. classified
         as liability-  Distributions
         received in excess of basis in
         investment ......................   $ 12,718,074   $ 12,688,808
                                             ============   ============

      The  following  is a  summary  of  the  equity  in  income  (loss)  before
      extraordinary  loss of $98,500  related to UCV,  L.P.  of the  investments
      accounted for by the equity method:
                                                 1999           1998
                                             ------------   ------------
       UCV, L.P. .........................   $    141,089   $    122,688
       Vail Ranch Limited Partnership ....           --          (10,000)
                                             ------------   ------------
                                             $    141,089   $    112,688
                                             ============   ============


      The following is a summary of distributions received from investees:
                                                  1999           1998
                                             ------------   ------------
       UCV, L.P. .........................   $    157,000   $     95,000
       Vail Ranch Limited Partnership ....           --          575,617
                                             ------------   ------------
                                             $    157,000   $    670,617
                                             ============   ============


   (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 (UCV) unaudited  statements of income for the  three-month  periods
      ended June 30, 1999 and 1998 are as follows:

                                                  1999           1998
                                             ------------   ------------
       Revenues ..........................   $  1,158,000   $  1,134,000
       Operating and general and
          administrative costs ...........        392,000        343,000
       Depreciation ......................          7,000          7,000
       Interest expense ..................        477,000        534,000
       Income before extraordinary item ..        282,000        250,000
       Extraordinary loss from early
         extinguishment of debt ..........           --          197,000
       Net income ........................        282,000         53,000


                                       5
<PAGE>

      On October  14,  1999,  UCV  increased  the loan amount and  modified  its
      existing  long-term  loan  agreement.  The loan amount was increased  from
      $25,000,000  to  $29,450,000  of which the lender is holding back $410,510
      for capital replacement  reserves.  The interest rate on the original loan
      amount is  unchanged.  The interest  rate on the  additional  loan amount,
      which  is based  on the  additional  loan  amount  less the hold  back for
      reserves,  is the greater of ten percent or a base rate plus 4.75 percent.
      Monthly  payments  of  interest  only are due until May 2000,  whereupon a
      monthly  payment  of  principal  and  interest  is due  based on a 25-year
      amortization  period.  In addition to the monthly payment,  UCV will pay a
      quarterly  principal  payment to be applied to the additional  loan amount
      equal to fifty  percent of UCV's cash flow after debt  service and capital
      replacement  expenditures.  The loan is due  October  15,  2001 but may be
      extended to October 15, 2002 upon payment of a 1/4 percent loan fee and if
      certain  financial  criteria are met. The loan may not be prepaid prior to
      January 1, 2001.  On  maturity,  a fee of up to $294,500  may be due under
      certain  circumstances.   The  proceeds  of  the  additional  advances  of
      $4,039,490 were used to pay loan costs of approximately  $125,000 and make
      distributions to partners of which the Company received $1,757,000.

4. Notes payable:

   On August 24, 1999 and  September  25,  1999 the Company  borrowed a total of
   $550,000 on an unsecured  note  payable from its partner in UCV.  Payments of
   interest  only were due monthly at a base rate plus 1 percent  (9-1/4%).  The
   loan was paid on October 14, 1999 from the Company's distribution from UCV.

5. Contingencies:

   (a)   RCSA Holdings,  Inc.  (RCSA), a wholly owned subsidiary of the Company,
         owns a 50 percent  managing  general  partnership  interest in Old Vail
         Partners,  a  general  partnership  (OVPGP),  which  owns 33  acres  of
         undeveloped  land in Temecula,  California.  On September 23, 1999, the
         other partner assigned his partnership interest to Downtown Properties,
         Inc., a wholly owned subsidiary of the Company.  Once the legal matters
         described below are resolved, OVPGP is obligated to assign its interest
         in the 33 acres of land to Old Vail Partners, L.P. The 33 acres of land
         owned by OVPGP 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
         (required in  semiannual  installments)  due related to the bonded debt
         are approximately $144,000. The payments continue through the year 2014
         and include  interest at  approximately  7-3/4 percent.  OVPGP has been
         delinquent  in the payment of property  taxes and  assessments  for the
         last  seven  years.  The  property  is  currently  subject  to  default
         judgments to the County of Riverside, California totaling approximately
         $2,126,727   regarding   delinquent    assessment   district   payments
         ($1,519,103) and property taxes ($607,624).

         The County had scheduled the 33 acres for public sale for the defaulted
         property  taxes  on  September  27,  1999.  OVPGP  had   unsuccessfully
         attempted to  negotiate a payment  plan with the County  subject to the
         successful   resolution  of  the  zoning  problems  with  the  property
         described  below.  On  September  23, 1999 OVPGP  filed a petition  for
         relief under  Chapter 11 of the federal  bankruptcy  laws in the United
         States  Bankruptcy  Court. The primary claim affected by this action is
         the County's secured claim for delinquent taxes and assessment district
         payments.  OVPGP's  plan is to use the relief from stay to continue its
         efforts to negotiate a settlement of the zoning issues  described below
         and  restore  the  economic  value of the  property.  If the  zoning is
         restored, OVPGP expects that it would either be able to develop or sell
         the  property,  using the proceeds  from  development  loans or sale to
         satisfy the County's claims.

                                       6
<PAGE>

         The delinquent principal,  interest and penalties  ($1,519,103) and the
         remaining  principal balance of the allocated portion of the assessment
         district bonds  ($1,109,453)  are  classified as  "Assessment  district
         obligation- in default" in the consolidated  balance sheet at September
         30, 1999. In addition,  the consolidated balance sheet at September 30,
         1999  includes  $607,624  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 OVPGP 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   OVPGP's   property   from  a
         "commercial" to  "professional  office" use. The property is subject to
         assessment district  obligations that were allocated in 1989 based on a
         higher "commercial" use. Since the assessment district  obligations 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. OVPGP
         has filed suit  against  the City of  Temecula  claiming  that,  if the
         effective  re-zoning  is valid,  the action is a taking and damaging of
         OVPGP's property without payment of just compensation. OVPGP is seeking
         to have the effective  re-zoning  invalidated and an unspecified amount
         of damages.  OVPGP has previously  suffered  adverse  outcomes in other
         suits filed in relation to this matter.  A stipulation was entered that
         dismissed this suit without prejudice and agreed to toll all applicable
         statute of limitations  while OVPGP 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.

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

7. Business segment information:

   The Company operates principally in four business segments:  bowling centers,
   commercial  real  estate  rental,  real  estate  development,  and golf shaft
   manufacturing. The golf shaft manufacturing segment commenced in January 1997
   when the Company  acquired a small golf shaft  manufacturer.  Other revenues,
   which are not part of an identified  segment,  consist of property management
   and  development  fees (earned  from both a property 50 percent  owned by the
   Company and a property in which the Company has no ownership)  and commercial
   brokerage.


                                       7
<PAGE>

   The following is  summarized  information  about the Company's  operations by
   business segment.

<TABLE>
<CAPTION>
                                                        Real Estate    Real Estate                  Unallocated
                                             Bowling       Rental      Development        Golf       And Other        Totals
                                          -----------   -----------   -------------   -----------   -----------   -------------
SEPTEMBER 30, 1999
------------------
<S>                                       <C>           <C>           <C>             <C>           <C>           <C>
Revenues ...............................  $   624,572   $   171,829   $        --     $   123,930   $    71,156   $     991,487
Depreciation and amortization ..........       26,670        34,404            --          22,202        12,293          95,569
Interest expense .......................       36,285        41,754          64,397         4,231         5,477         152,144
Equity in income of investees ..........         --         141,089            --            --            --           141,089
Loss on sale ...........................         --            --              (638)         --            --              (638)
Segment profit (loss) ..................     (201,625)      168,018        (131,368)     (636,120)     (110,340)       (911,435)
Investment income ......................                                                                                 10,236
Loss from operations before
  extraordinary loss ...................                                                                               (901,199)

SEPTEMBER 30, 1998:
-------------------
Revenues ...............................  $   641,070   $   152,184   $        --     $    73,833   $    82,323   $     949,410
Depreciation and amortization ..........       26,529        32,468            --          21,468        12,969          93,434
Interest expense .......................       37,933        33,057          59,475         6,308        11,652         148,425
Equity in income of investees ..........         --         122,688         (10,000)         --            --           112,688
Segment profit (loss) ..................     (183,514)      139,876        (110,736)     (801,420)      (99,073)     (1,054,867)
Investment income ......................                                                                                 77,601
Loss from operations before
  extraordinary loss ...................                                                                               (977,266)


                                             1999            1998
                                          -----------   -----------
Revenues per segment schedule ..........  $   991,487   $   949,410
Intercompany rent eliminated ...........      (15,552)      (14,955)
                                          -----------   -----------
Consolidated revenues ..................  $   975,935   $   934,455
                                          ===========   ===========
</TABLE>


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.


                                       8
<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 $293,087 at
September 30, 1999, which is a $159,539  increase from the similarly  calculated
working  capital  deficit of $133,548 at June 30, 1999.  The decrease in working
capital is primarily  attributable to the cash used by operating  activities for
the three months ended September 30, 1999. The cash used by operating activities
was  partially  offset  by the  proceeds  from the sale of  undeveloped  land in
September 1999 and the $550,000 proceeds from a note payable. The following is a
schedule of the cash provided  (used) before changes in assets and  liabilities,
segregated by business segments:

                                              1999          1998      Change
                                          ----------   -----------   ---------
Bowling ................................  $ (174,000)  $  (156,000)  $ (18,000)
Rental .................................      63,000        51,000      12,000
Golf ...................................    (614,000)     (780,000)    166,000
Development ............................     (67,000)      (43,000)    (24,000)
General corporate expense and other ....     (76,000)      (60,000)    (16,000)
                                          ----------   -----------   ---------
Cash used by continuing operations .....    (868,000)     (988,000)    120,000
Capital expenditures, net of
   financing ...........................     (44,000)      (14,000)    (30,000)
Principal payments on long-term debt ...     (69,000)      (58,000)    (11,000)
                                          ----------   -----------   ---------
Cash used ..............................    (981,000)   (1,060,000)     79,000
                                          ==========   ===========   =========

Distributions received from investees ..     157,000       671,000    (514,000)
                                          ==========   ===========   =========

The  Company has been unable to  generate  sufficient  cash flow from  operating
activities to meet  scheduled  principal  payments on long-term debt and capital
replacement  needs  during  the last  three  years.  It has  used  its  share of
distributions  from investees and proceeds from refinancings and sales of assets
to fund these deficits.

As described in Note 5 of the Notes to Consolidated Financial Statements,  OVPGP
is  delinquent in the payment of special  assessment  district  obligations  and
property  taxes on 33 acres of undeveloped  land. The annual  obligation for the
assessment district is approximately  $144,000. The County of Riverside obtained
judgments for the default in the delinquent  assessment  district payments.  The
amounts due to cure the judgment for the default under the  assessment  district
obligation  on the 33 acre  parcel  at  September  30,  1999  was  approximately
$1,519,000.  The  principal  balance  of the  allocated  portion  of  the  bonds
($1,384,153  as of September 30, 1999),  and  delinquent  interest and penalties
($1,244,403  as of September 30, 1999) are  classified as  "Assessment  district
obligation- in default" in the consolidated balance sheet. In addition,  accrued
property taxes in the consolidated  balance sheet include $607,624 of delinquent
property taxes and late fees as of September 30, 1999. The Company estimates the
value of this land is approximately $4,000,000 to $5,000,000 if the property was
zoned  "commercial".  However,  the  City of  Temecula  has  adopted  a  general
development  plan as a means of down-zoning  the property to a lower use and, if
successful,  may significantly impair the value of the property.  The Company is
contesting  this action.  The County had  scheduled the 33 acres for public sale
for the defaulted property taxes on September 27, 1999. OVPGP had unsuccessfully
attempted to negotiate a payment plan with the County  subject to the successful
resolution of the zoning problems with the property. On September 23, 1999 OVPGP
filed a petition for relief under Chapter 11 of the federal  bankruptcy  laws in
the United States Bankruptcy Court. The primary claim affected by this action is
the  County's  secured  claim  for  delinquent  taxes  and  assessment  district
payments. OVPGP's plan is to use the relief to continue its efforts to negotiate
a  settlement  of the  zoning  issues  and  restore  the  economic  value of the
property. If the zoning is restored,  OVPGP expects that it would either be able
to develop or sell the property,  using the proceeds from  development  loans or
sale to  satisfy  the  County's  claims.  As a result  of the  judgment  and the
down-zoning  of the property,  it is uncertain  that the Company could  generate
enough cash to recover the remaining  $1,408,746  carrying value of the property
and satisfy the related delinquent assessment district obligation of $$1,519,103
and delinquent property taxes of $607,624.

                                       9
<PAGE>


As described in Note 3 of the Notes to  Consolidated  Financial  Statements,  on
October  14,  1999,  UCV  borrowed  additional  funds from its  existing  lender
pursuant to a modification  of its long-term  note payable.  The proceeds of the
additional  financing,  after  loan  costs,  were  used  to  make  approximately
$3,700,000  of  distributions  to the  partners  in UCV,  of which  the  Company
received  $1,757,000,   and  establish  working  capital  for  UCV's  additional
redevelopment  planning  costs.  Management  estimates  that  the  debt  service
(principal  and interest) for the  additional  borrowing  will be  approximately
$800,000 annually.

Excluding the distribution the Company received from UCV from the loan proceeds,
Management  estimates  negative cash flow of  $1,400,000  to $1,700,000  for the
remaining  quarters of the year ending June 30, 2000 from  operating  activities
after  adding  estimated   distributions  from  UCV  operations  ($150,000)  and
deducting  capital   expenditures  and  principal  payments  on  notes  payable.
Management  expects  continuing  cash flow deficits 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  during  the
      fourth quarter of calendar year 1999.

If the steps taken by the Company and its vendors to be Year 2000  compliant are
not successful,  the most likely  worst-case  scenario is that 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.



                                       10
<PAGE>

"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.

                              Results of Operations
                              ---------------------

The  following is a summary of the changes in the results of  operations  of the
three-month  period  ended  September  30, 1999 to the same period in 1998 and a
discussion of the significant changes:

<TABLE>
<CAPTION>
                                                         Real Estate     Real Estate                Unallocated
                                             Bowling       Rental        Development      Golf        And Other          Totals
                                             -------     ---------       -----------      ----        ---------          ------
<S>                                       <C>           <C>              <C>          <C>           <C>           <C>
Revenues ...............................  $   (16,498)  $    19,645      $     --     $    50,097   $   (11,167)  $      42,077
Costs ..................................        8,545        (1,729)         20,072        (2,148)         --            24,740
SG&A-direct ............................       (4,833)         --              --        (121,712)       22,359        (104,186)
SG&A-allocated .........................         (592)        1,000           5,000        10,000       (15,408)           --
Depreciation and amortization ..........          141         1,936            --             734          (676)          2,135
Interest expense .......................       (1,648)        8,697           4,922        (2,077)       (6,175)          3,719
Equity in investees ....................         --          18,401          10,000          --            --            28,401
Gain (loss) on sale ....................         --            --              (638)         --            --              (638)
Segment profit (loss) ..................      (18,111)       28,142         (20,632)      165,300       (11,267)        143,432
Investment income ......................                                                                                (67,365)
Loss from operations before
  extraordinary loss ....................                                                                                76,067
</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 $597.

BOWLING OPERATIONS:

The 3% decrease in bowling revenues was primarily  attributable to a decrease in
revenue  from snack bar  revenues.  A 16%  decrease in league  games  bowled was
offset by a 16% increase in open games bowled.  Although  results of the quarter
ended September 30 typically relate only to the summer league season, management
feels that there will continue to be a decline in league  bowling that is likely
to be offset by increases in open play and the price per game of open play.

Bowl costs  increased  by 2%  primarily  due to due to an  increase  in the lane
resurfacing  expense, which occurs every two years. Direct selling,  general and
administrative   expense  decreased  by  3%  primarily  due  to  a  decrease  in
free-bowling expense.

REAL ESTATE RENTAL:

Rental revenues increased  primarily due to a 14% increase in the average rental
rate at the Company's  office building.  Interest  expense  increased due to the
refinancing in May 1999. The equity in income of UCV increased  primarily due to
a decrease in the interest rate of UCV's long-term debt. Otherwise,  UCV's rents
increased by 2% and the expenses increased 14%. The increase in expenses related
primarily to increases in water and maintenance  expenses.  Management  believes
these  increases in expenses are  indicative of a trend for the remainder of the
fiscal year.
                                       11
<PAGE>

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.

GOLF OPERATIONS:

Sales  during  the years  1999 and 1998 were  small  because  Penley has not yet
developed sales with golf club  manufacturers  or  distributors.  The sales were
principally  to custom golf shops.  The Company  expects that it will be another
six to twelve  months before  Penley is able to develop  significant  sales with
manufacturers or distributors.

Operating  expenses of the golf segment  consisted of the following in 1999, and
1998:

                                             1999         1998
                                        -----------  -----------
   Costs of sales and manufacturing
      overhead .......................  $   205,000  $   233,000
   Research and development ..........       68,000       42,000
                                        -----------  -----------
      Total golf costs ...............      273,000      275,000
                                        ===========  ===========
   Marketing and promotion ...........      370,000      489,000
   Administrative costs- direct ......       33,000       35,000
                                        -----------  -----------
     Total SG&A-direct ...............      403,000      524,000
                                        ===========  ===========



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  maturities 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>
                            2000          2001          2002          2003          2004    Thereafter         Total
                        -----------   -----------   -----------   -----------   -----------   -----------   -----------
<S>                     <C>           <C>           <C>           <C>           <C>           <C>           <C>
Fixed rate debt ......  $   158,000   $ 1,796,000   $    39,000   $    21,000   $    22,000   $ 1,878,000   $ 3,914,000
Weighted average
  interest rate ......          8.2%          8.2%          8.2%          8.2%          8.2%          8.2%          8.2%

Variable rate debt ...  $    58,000   $    78,000   $     6,000          --            --            --     $   142,000
Weighted average
  interest rate ......         10.8%         10.8%         10.8%         --            --            --            10.8%
</TABLE>

The amounts for 2000 relate to the nine months ended June 30, 2000. The $550,000
short-term note payable paid on October 14, 1999 was excluded from this analysis
because it no longer presents a significant market risk.

The  Company's  unconsolidated  subsidiary,  UCV,  has  variable  rate  debt  of
approximately $29,040,000 after the additional advances under the loan agreement
on  October  14,  1999 for  which the  weighted  average  interest  rate was 7.7
percent. The principal maturities for each of UCV's fiscal years ending March 31
is: 2000- $230,000; 2001- $609,000; 2002- $28,201,000; and $29,040,000 in total.

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




                                       12
<PAGE>

                                     PART II
                                OTHER INFORMATION



ITEM 1. Legal Proceedings

         As of September  30, 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, 1999.


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

            NONE

ITEM 5. Other Information

            NONE


ITEM 6. Exhibits & Reports on Form 8-K

      (a) Exhibits: Financial Date Schedule

      (b) Reports on Form 8-K:  NONE



                                       13
<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:   November 13, 1999




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



      Date: November 13, 1999



                                       14
<PAGE>