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, 1996

                                       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, 1996 was 27,250,000 shares.
<PAGE>

                                 SPORTS ARENAS, INC.

                                      FORM 10-Q

                           QUARTER ENDED SEPTEMBER 30, 1996

                                        INDEX






Part I - Financial Information:


Item 1.- Consolidated Condensed Financial Statements:

      Balance Sheets as of September 30, 1996 and June 30, 1996            1-2

      Statements of Operations for the Three Months Ended September 30,     3
            1996 and 1995

      Statements of Cash Flows for the Three Months Ended September 30,     4
            1996 and 1995

      Notes to Financial Statements                                        5-7


Item 2.- Management's Discussion and Analysis of Financial Condition
            and Results of Operations                                     8-10



Part II - Other Information                                                11


Signature                                                                  12

<PAGE>


 
                         SPORTS ARENAS, INC. AND SUBSIDIARIES
                        CONSOLIDATED CONDENSED BALANCE SHEETS

                                        ASSETS
<TABLE>
<CAPTION>
                                                       
                                                     September 30,      June 30,                 
                                                         1996            1996   
                                                         ----            ----   
                                                      (Unaudited)
<S>                                                  <C>             <C>          
Current assets:
   Cash and equivalents ..........................   $  1,542,158    $  1,093,465
   Sales proceeds held in escrow .................      1,066,939            --           
   Current portion of notes receivable ...........         25,000          25,000
   Current portion of notes receivable-affiliate .        100,000         100,000
   Construction contract receivables .............        644,284         623,877
   Other receivables .............................         28,110         134,843
   Prepaid expenses ..............................        208,629         148,225
   Property and equipment sold on August 7, 1996 .      2,745,978           --
                                                      -----------     -----------   
     Total current assets ........................      3,615,120       4,905,986
                                                      -----------     -----------  

Receivables due after one year:
   Note receivable ...............................        720,449         731,993
     Less deferred gain ..........................       (716,025)       (716,025)
   Affiliate .....................................        590,140         552,567
   Other .........................................         73,662          81,696
                                                      -----------     -----------  
                                                          668,226         650,231
     Less current portion ........................       (125,000)       (125,000)
                                                      -----------     -----------  
                                                          543,226         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      1,249,873       1,234,170
                                                      -----------     -----------  
                                                        4,389,200       4,373,497
   Less accumulated depreciation and amortization      (1,252,273)     (1,175,332)
                                                      -----------     -----------  
     Net property and equipment ..................      3,136,927       3,198,165
                                                      -----------     -----------  

Other assets:
   Undeveloped land, at cost .....................      4,737,353       4,737,353
   Capitalized carrying costs on leased land .....         85,095          85,569
   Goodwill, net .................................        470,875         538,144
   Deferred loan costs, net ......................         82,678          97,161
   Investments ...................................      2,204,095       2,232,119
   Other .........................................        103,075         125,353
                                                      -----------     -----------  
                                                        7,683,171       7,815,699
                                                      -----------     -----------  

                                                     $ 14,978,444    $ 16,445,081
                                                     ============    ============
</TABLE>




<PAGE>

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

                  LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>

                                                     September 30,      June 30,  
                                                          1996            1996 
                                                          ----            ---- 
                                                      (Unaudited)
<S>                                                  <C>             <C>
Current liabilities:
   Long-term debt subject to extinguishment ........ $       --      $  1,808,282
   Assessment district obligation - in default .....    2,111,398       2,061,090
   Long-term debt due within one year ..............      912,000       1,061,000
   Long-term debt due within one- related party ....      100,000         100,000
   Accounts payable ................................      922,781         908,530
   Accrued payroll and related expenses ............      221,320         308,619
   Accrued property taxes ..........................      382,914         385,591
   Accrued interest ................................       36,543          33,794
   Accrued frequent bowler program expense .........      231,955         250,506
   League bowler prize funds .......................       55,490            --
   Other accrued liabilities .......................      161,612         297,361
                                                     ------------    ------------
     Total current liabilities .....................    5,136,013       7,214,773
                                                     ------------    ------------

Long-term debt, excluding current portion ..........    4,058,326       4,167,515
                                                     ------------    ------------

Long-term debt, related party ......................      219,744         219,744
                                                     ------------    ------------
Distributions received in excess of basis in     
  investment .......................................    9,862,384       9,828,360
                                                     ------------    ------------

Tenant security deposits                                   26,523          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 .............................   (6,716,525)     (7,448,409)
                                                     ------------    ------------
                                                       (4,713,976)     (5,445,860)
   Less note receivable from shareholder ...........   (1,823,247)     (1,778,022)
                                                     ------------    ------------
     Total shareholders' equity (deficiency) .......   (6,537,223)     (7,223,882)
                                                     ------------    ------------

                                                     $ 14,978,444    $ 16,445,081
                                                     ============    ============
</TABLE>
                                            






        See accompanying notes to consolidated condensed financial statements.

<PAGE>

                         SPORTS ARENAS, INC. AND SUBSIDIARIES
                   CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
                    THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
                                     (Unaudited)
<TABLE>
<CAPTION>
                                                          1996             1995
                                                          ----             ----
<S>                                                    <C>            <C>
Revenues:
   Bowling .........................................   $   990,498    $ 1,743,800
   Rental ..........................................       124,411        124,019
   Construction ....................................       666,705        528,704
   Other ...........................................        40,862         30,233
   Other-related party .............................        27,766         27,040
                                                       -----------    -----------
                                                         1,850,242      2,453,796
                                                       -----------    -----------

Costs and expenses:
   Bowling .........................................       806,746      1,218,599
   Rental ..........................................        54,696         54,927
   Construction ....................................       573,049        461,391
   Development .....................................        29,610         46,379
   Selling, general and administrative .............       521,176        745,386
   Depreciation and amortization ...................       179,324        261,353
                                                       -----------    -----------
                                                         2,164,601      2,788,032
                                                       -----------    -----------

Loss from operations ...............................      (314,359)      (334,236)
                                                       -----------    -----------
Other income (charges):
   Investment income:
     Related party .................................        56,257         55,894
     Other .........................................        13,623         17,568
   Interest expense and amortization of finance 
     costs .........................................      (117,362)      (220,800)
   Interest expense related to development 
     activities ....................................       (68,620)       (54,695)
   Recognize deferred gain .........................          --            5,650
   Gain from sale of bowling centers ...............     1,099,514           --
   Equity in income of investees ...................        62,831         40,775
                                                       -----------    -----------
                                                         1,046,243       (155,608)
                                                       -----------    -----------

Net income (loss) ..................................   $   731,884    $  (489,844)
                                                       ===========    =========== 
</TABLE>



Per common share (based on weighted average
  shares outstanding):
     Net income (loss) .............................      $ .03         $(.02)
                                                          =====         ===== 






        See accompanying notes to consolidated condensed financial statements.

<PAGE>

                         SPORTS ARENAS, INC. AND SUBSIDIARIES
                   CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                    THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
                                     (Unaudited)
<TABLE>
<CAPTION>
                                                                                 
                                                              1996           1995
                                                              ----           ----
<S>                                                      <C>            <C>
Cash flows from operating activities:
   Net income (loss) .................................   $   731,884    $ ( 489,844)
   Adjustments to reconcile net loss to net cash
    provided (used) by operating activities:
     Amortization of deferred financing costs ........         8,130          9,842
     Depreciation and amortization ...................       179,324        261,353
     Undistributed income of investees ...............       (62,831)       (40,775)
     Gain on sale of bowling centers .................    (1,099,514)          --
     Interest accrued on assessment district
        obligation ...................................        50,308         52,211
     Interest accrued on receivable from shareholder .       (45,225)       (43,929)
     Recognize deferred gain .........................          --          ( 5,650)
                                                         -----------    -----------
                                                            (237,924)      (256,792)
                                                        
   Changes in assets and liabilities:
     (Increase) decrease in receivables and prepaid
        expenses .....................................        40,520        (91,433)
     Increase (decrease) in accounts payable and
        accrued expenses .............................      (171,786)       233,786
     Other ...........................................        20,110         (1,537)
                                                         -----------    -----------
       Net cash provided (used) by operating
         activities ..................................      (349,080)      (298,722)
                                                         -----------    -----------

Cash flows from investing activities:
   (Increase) decrease in notes receivable ...........       (17,995)        12,042
   Capital expenditures ..............................       (15,703)        (3,036)
   Distributions from investees ......................       111,524        105,000
   Proceeds from sale of bowling centers .............       985,246           --
   Acquire additional interest in Redbird Properties .          --           (5,264)
                                                         -----------    -----------
      Net cash provided (used) by investing activities     1,063,072        108,760
                                                         -----------    -----------
Cash flows from financing activities:
   Scheduled principal payments ......................      (265,299)      (168,215)
   Proceeds from line of credit ......................          --          210,000
   Payments on line of credit ........................          --          (15,000)
                                                         -----------    -----------
       Net cash used by financing activities .........      (265,299)        26,785
                                                         -----------    -----------

Net increase (decrease) in cash and equivalents ......       448,693         19,569

Cash and equivalents, beginning of period ............     1,093,465        120,027
                                                         -----------    -----------

Cash and equivalents, end of period ..................   $ 1,542,158    $   139,596
                                                         ===========    ===========
</TABLE>

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
  increase  (decreases) to the following assets and  liabilities:  sale proceeds
  held  in  escrow-  $1,066,939  (received  October  15,  1996);   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:  property and equipment-  $1,537,984;  accumulated  depreciation-
  $331,500; note payable- $713,538;  note payable,  related party- $446,000. See
  accompanying notes to consolidated condensed financial statements.
<PAGE>

                         SPORTS ARENAS, INC. AND SUBSIDIARIES
                 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
                             SEPTEMBER 30, 1996 AND 1995
                                     (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 September 30, 1996 and 1995, are not
     necessarily indicative of operations for the entire year.

3. Investments:

   (a) Investments consist of the following:
                                               September 30,     June 30,
                                                    1996           1996 
                                                -----------    -----------
     Accounted for on the equity method:
        Investment in UCV, L.P. .............   $(9,862,384)   $(9,828,360)
        Vail Ranch Limited Partnership ......     2,154,063      2,182,087
                                                -----------    -----------
                                                 (7,708,321)    (7,646,273)
        Less Investment in UCV, L.P. classified
          as liability- Distributions received
          in excess of basis in investment ..     9,862,384      9,828,360
                                                -----------    -----------
                                                  2,154,063      2,182,087
     Accounted for on the cost basis:
        All Seasons Inns, La Paz ............        50,032         50,032
                                                -----------    -----------

                                                $ 2,204,095    $ 2,232,119
                                                ===========    ===========

     The  following  is a  summary  of  the  equity  in  income  (loss)  of  the
     investments accounted for by the equity method:
                                                 1996          1995  
                                                 ----          ----  
        UCV, L.P. ........................... $ 62,831      $ 40,775
        Vail Ranch Limited Partnership ......     --            --
                                              --------      --------
                                              $ 62,831      $ 40,775
                                              ========      ========

     During the three months ended September 30, 1996, the Company received cash
     distributions of $83,500 from UCV, L.P. and $28,024 from Vail Ranch Limited
     Partners ($105,000 from UCV, L.P. in 1995).

   (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 three-month periods ended
        June 30, 1996 and 1995 are as follows:
                                                                   
                                                     1996          1995    
                                                     ----          ----    
        Revenues ............................... $ 1,067,000   $ 1,007,000
        Operating and general and                   
          administrative costs .................     368,000       356,000
        Depreciation ...........................      49,000        48,000
        Interest expense .......................     524,000       522,000
        Net income .............................     125,000        81,000


<PAGE>



                         SPORTS ARENAS, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
                             SEPTEMBER 30, 1996 AND 1994
                                     (Unaudited)

4. Contingencies:

    (a)Old Vail Partners  (OVP), a consolidated  subsidiary and 50 percent owned
       by the Company,  owns approximately 40 acres of undeveloped land that are
       located within a special assessment  district of the County of Riverside,
       California  (the County) which was created to fund and develop  roadways,
       sewers,  and  other  required  infrastructure  improvements  in the  area
       necessary for the owners to develop their properties. Property within the
       assessment  district is collateral for an allocated portion of the bonded
       debt  that  were   issued  by  the   assessment   district  to  fund  the
       improvements.  The annual  payments  due  related to the bonded  debt are
       approximately  $156,000 for the 40 acres.  The payments  continue through
       the year 2014 and include interest at approximately 7-3/4 percent. OVP is
       delinquent in the payment of property taxes and  assessments for the last
       four years.  As of September 30, 1996, the County had obtained  judgments
       for the defaults under the assessment district obligations,  however, the
       County has not yet commenced foreclosure proceedings on these judgments.

       The  amount  due  to  cure  the  judgments  at   September 30, 1996   was
       approximately $711,000 ($688,000 at June 30, 1996). The principal balance
       of the  allocated  portion  of the  bonds  ($1,513,730),  and  delinquent
       interest and  penalties  ($597,668 and $547,360 at September 30, 1996 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  $340,169  ($337,016
       at June 30, 1996) of delinquent  property  taxes and late fees related to
       the 40 acre parcel.

       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  acre  parcel  from  a
       "commercial"  to  "professional  office"  use.  The  parcel is 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.

   (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.


<PAGE>


                         SPORTS ARENAS, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
                             SEPTEMBER 30, 1996 AND 1994
                                     (Unaudited)

5. Significant Events:

   (a) The Company's revolving line of credit limit was renewed and increased to
       from $300,000 to $500,000. The line of credit expires in September 1997.

   (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. At September 30,
       1996,  $1,066,939 of the proceeds were still held in escrow.  These funds
       were  received on October 15, 1996.  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 months ended
       September 30,  1996 and 1995: 1996 1995 Revenues $ 331,961 $ 815,298 Bowl
       costs 260,183 548,743 Selling, general and administrative:  Direct 93,572
       211,825  Allocated  20,100 50,300  Depreciation  18,598  55,871  Interest
       expense 7,401 45,674 Loss ( 67,893) ( 97,115)



<PAGE>

ITEM2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS
       OF OPERATIONS:

                           Liquidity and Capital Resources

The  working  capital  deficit  at  September  30,  1996 was  $1,520,893  versus
$2,308,787    at   June   30,    1996.    Excluding    the    balance   of   the
assessment-district-obligation-in-default  included in current liabilities,  the
Company's  working  capital of $590,505 as of  September  30, 1996 is a $838,202
increase  from the $247,697  working  capital  deficit as of June 30, 1996.  The
increase in working  capital is primarily  attributable to the proceeds from the
sale of three bowling  centers on August 7, 1996 which was  partially  offset by
the $503,223 of negative  cash flow from  operations  after debt service for the
three months ended September 30, 1996.  Other than an extra $115,000  payment in
July  1996 on a note  payable,  this  negative  cash  flow  from  operations  is
comparable to the same period in 1995 and is reflective  of the  seasonality  of
the bowling industry.

On August 7, 1996,  the Company  sold its three  bowling  centers in Georgia for
$3,950,000  cash.  Including  the  $1,066,939  of sales  proceeds held in escrow
(which was received on October 15,  1996),  the cash proceeds from the sale were
$2,052,000 after deducting selling expenses and extinguishing  related long-term
debt.

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  has  obtained  judgments  for the  default  in  assessment
district payments.  The amount due to cure the judgment as of September 30, 1996
is $711,000.  Other than a notice of levy received in November 1995 on a 33 acre
portion of the 40 acres of land,  the County has not yet  commenced  foreclosure
proceedings on the judgments.  If the County of Riverside  takes the property to
public sale and the  judgments  are not  satisfied  prior to the sale,  Old Vail
Partners  could lose title to the property and the property would not be subject
to  redemption.  Also  as  described  in  Note 4 of the  Notes  to  Consolidated
Condensed  Financial  Statements,  Old Vail Partners is contesting an attempt by
the City of 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.

Management  estimates  a cash flow  deficit in the range or $200,000 to $250,000
for the remaining three quarters in the year ending June 30, 1997 from operating
activities  after  adding  estimated   distributions  from  UCV  ($445,000)  and
deducting  capital  expenditures and scheduled  principal  payments on long-term
debt. The Company believes its cash at September 30, 1996 and the Company's line
of credit  will be  sufficient  to fund the  expected  cash flow  deficit.  This
analysis  does  not  include   consideration  of  the  following  due  to  their
uncertainty:  any  distributions  the Company may receive from its investment in
Vail Ranch  Limited  Partners;  or, any payments  made on  delinquent or current
property taxes and assessments on undeveloped land.


                                Results of Operations

The  following  is a  recap  of the  circumstances  related  to the  significant
differences  between the net income for the three month period  ended  September
30, 1996 and the net loss for the same period in 1995  (increases in loss are in
brackets):

    Gain on  sale of  Georgia  bowling  centers  on    
      August 7, 1996 ................................. 1,099,000
    Reduction in operations related to:
       Sale of Redbird Lanes in May 1996 .............    51,000
       Sale of Georgia bowling centers ...............    29,000
    Other changes to bowling segment .................    30,000
    Changes in construction segment ..................     6,000
    Reduction in allocation  of corporate  overhead
      to bowling segment as result of dispositions ...  ( 44,000)
    Increase in equity in income of investees ........    22,000
    Other changes ....................................    29,000
                                                       ---------     
       Net change for period ......................... 1,222,000
                                                       ---------               


<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.

The  following  is a summary of the changes to the  components  of the loss from
operations of the bowling  segment during the three month period ended September
30, 1996 compared to the same period in 1995 that related to the  disposition of
the bowling centers in May and August 1996:

                                  Georgia     Redbird
                                   Bowls       Lanes     Combined
                                   -----       -----     --------
     Revenues ................   (483,000)   (288,000)   (771,000)
     Bowl costs ..............   (289,000)   (193,000)   (482,000)
     Selling, general and
      administrative expenses:
       Direct ................   (118,000)    (75,000)   (193,000)
       Allocated .............    (30,000)    (14,000)    (44,000)
     Depreciation ............    (37,000)    (25,000)    (62,000)
     Loss from operations ....      9,000     (19,000)    (10,000)
     Interest expense ........    (38,000)    (32,000)    (70,000)
     Net loss ................    (29,000)    (51,000)    (80,000)

The  following  is a  comparison  of  operations  of the two  remaining  bowling
centers:

There  was no  meaningful  change to the  bowling  revenues  of the two  bowling
centers in San Diego  compared to the same  period in the prior  year.  Although
revenues  were flat for the  summer  season,  management  is  forecasting  a six
percent  decrease  in  bowling  revenues  for the  remainder  of the year due to
declines at both San Diego  bowling  centers in the number of league  bowlers at
the beginning of the league season.

Bowl costs of these two centers  increased by $62,000  primarily  related to the
timing of bowling pin purchases and lane  resurfacing  that either occurred in a
different period in the prior year or had been deferred.

Selling,  general and  administrative  expense  directly  related to the bowling
segment decreased by $46,000 primarily due to a decrease in promotions  expense.
The  decrease in  promotions  expense  primarily  related 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.

Interest expense  decreased  related to these two bowling centers by $17,000 due
to the reduction in the balances of notes payable.


RENTAL OPERATIONS:

There were no significant changes to the components of the rental segment in the
period ended September 30, 1996.

OTHER ACTIVITIES:

Construction  costs as a percentage of construction  revenues stayed  relatively
consistent in the range of 86%-87%  during the periods ended  September 30, 1996
and 1995. Selling,  general and administrative costs related to the construction
segment increased by $20,000 primarily due to increased  incentive  compensation
as a result of the increased profitability in the second quarter.

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.   Old  Vail  Partners  became  a
consolidated subsidiary on October 1, 1994.

Other than  changes  associated  with the  bowling  and  construction  segments,
selling,  general and  administrative  expense did not change  significantly  in
1996. However, as a result of the disposition of the four bowling centers in May
and  August  1996,  there  will be an  increase  in the  unallocated  portion of
corporate overhead,  even though there will not be an increase in the components
of corporate overhead.

The equity in income of investees increased by $22,000 in the three month period
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.

<PAGE>

                                       PART II
                                  OTHER INFORMATION



ITEM 1. Legal Proceedings

As of September 30, 1996, 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

          NONE

ITEM 5. Other Information

          NONE


ITEM 6. Exhibits & Reports on Form 8-K

     (a) Exhibits: NONE

     (b) Reports on Form 8-K:  NONE




<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 14, 1996




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



     Date:     November 14, 1996