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, 2003
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.)
7415 Carroll Road, Suite C, San Diego, California 92121
-------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (858) 408-0364
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
--- ---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes No X
--- ---
The number of shares outstanding of the issuer's only class of common stock
($.01 par value) as of October 31, 2003 was 27,250,000 shares.
SPORTS ARENAS, INC.
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2003
INDEX
Part I - Financial Information:
Item 1.- Consolidated Condensed Financial Statements:
Unaudited Balance Sheets as of September 30, 2003
and June 30, 2003 ......................................... 1-2
Unaudited Statements of Operations for the Three Months Ended
September 30, 2003 and 2002 .......................... 3
Unaudited Statements of Cash Flows for the Three Months Ended
September 30, 2003 and 2002........................... 4
Notes to Financial Statements................................. 5-6
Item 2.- Management's Discussion and Analysis of Financial Condition
and Results of Operations............................. 7-9
Item 3.- Quantitative and Qualitative Disclosures about Market Risk... 9
Item 4.- Controls and Procedures ..................................... 9
Part II - Other Information........................................... 10
Exhibits and reports on Form 8-K ..................................... 10
Signatures............................................................ 11
SPORTS ARENAS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
(Unaudited)
September 30, June 30,
2003 2003
----------- -----------
Current assets:
Cash and cash equivalents ........................$ 47,438 $ 365,674
Other receivable-affiliate ....................... -- 350,000
Receivables ...................................... 230,861 402,875
Inventories ...................................... 779,301 641,127
Prepaid expenses ................................. 50,305 34,958
----------- -----------
Total current assets .......................... 1,107,905 1,794,634
----------- -----------
Property and equipment, at cost:
Equipment......................................... 1,986,505 1,889,395
Less accumulated depreciation and amortization (1,100,032) (1,052,740)
----------- -----------
Net property and equipment ................... 886,473 836,655
----------- -----------
Other assets:
Investments ...................................... 5,370,795 5,344,007
Deferred tax assets .............................. 4,920,000 4,661,000
Other ............................................ 95,671 95,671
----------- -----------
10,386,466 10,100,678
----------- -----------
$12,380,844 $12,731,967
=========== ===========
1
SPORTS ARENAS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS (CONTINUED)
LIABILITIES AND SHAREHOLDERS' EQUITY
(Unaudited)
September 30, June 30,
2003 2003
----------- -----------
Current liabilities:
Current portion of long-term debt ................$ 9,968 $ 5,771
Accounts payable ................................. 465,384 441,434
Accrued payroll and related expenses ............. 299,278 282,080
Other liabilities ................................ 702 3,796
----------- -----------
Total current liabilities ..................... 775,332 733,081
----------- -----------
Long-term debt, excluding current portion ........... 24,839 --
----------- -----------
Deferred income taxes ............................... 10,514,000 10,514,000
----------- -----------
Minority interest in consolidated subsidiary ........ 431,839 431,839
----------- -----------
Shareholders' equity:
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
Retained earnings ................................ 923,777 1,341,990
----------- -----------
2,926,326 3,344,539
Less note receivable from shareholder ............ (2,291,492) (2,291,492)
----------- -----------
Total shareholders' equity...................... 634,834 1,053,047
----------- -----------
Commitments and contingencies (Note 6)
$12,380,844 $12,731,967
=========== ===========
See accompanying notes to consolidated condensed financial statements.
2
SPORTS ARENAS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(Unaudited)
2003 2002
----------- -----------
Revenues:
Golf .............................................$ 609,525 $ 635,074
Rental ........................................... 19,335 17,976
Other ............................................ 8,631 41,828
Other-related party .............................. 3,404 48,224
----------- -----------
640,895 743,102
----------- -----------
Costs and expenses:
Golf ............................................. 633,261 646,261
Rental ........................................... 19,200 18,700
Selling, general, and administrative ............. 648,577 493,492
Depreciation and amortization .................... 47,292 59,720
----------- -----------
1,348,330 1,218,173
----------- -----------
Loss from operations ................................ (707,435) (475,071)
----------- -----------
Other income (charges):
Investment income:
Related party .................................. 3,471 9,070
Other .......................................... 297 --
Interest expense and amortization of finance costs (334) (33,648)
Equity in income of investees .................... 26,788 40,194
----------- -----------
30,222 15,616
----------- -----------
Loss from continuing operations before income taxes
and change in accounting principle ................ (677,213) (459,455)
Income tax benefit .................................. 259,000 --
----------- -----------
Loss from continuing operations ..................... (418,213) (459,455)
Loss from discontinued operations ................... -- (65,522)
Cumulative effect of change in accounting principle . -- 37,675
----------- -----------
Net loss ............................................$ (418,213) $ (487,302)
=========== ===========
Per common share (based on weighted average shares
outstanding) basic and diluted:
Loss from continuing operations ................... ($0.02) ($0.02)
Discontinued operations ........................... -- --
Cumulative effect of change in accounting principle -- --
------ ------
Net loss ......................................... ($0.02) ($0.02)
====== ======
See accompanying notes to consolidated condensed financial statements.
3
SPORTS ARENAS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(Unaudited)
2003 2002
----------- -----------
Cash flows from operating activities:
Net loss ..........................................$ (418,213) $ (487,302)
Less loss from discontinued operations .......... -- 65,522
----------- -----------
Loss from continuing operations ................. (418,213) (421,780)
Adjustments to reconcile net loss to the net
cash used by operating activities:
Depreciation and amortization ................. 47,292 59,720
Equity in income of investees ................. (26,788) (40,194)
Deferred income ............................... -- 12,000
Provision for deferred income taxes ........... (259,000) --
Change in accounting principle ................ -- (37,675)
Changes in assets and liabilities:
Decrease in receivables ....................... 522,014 77,457
(Increase) decrease in inventories ............ (138,174) 13,736
(Increase) decrease in prepaid expenses ....... (15,347) 10,378
Increase in accounts payable .................. 23,950 58,360
Increase in accrued expenses .................. 14,104 79,397
Other ......................................... -- 9,321
----------- -----------
Net cash used by continuing operations ............ (250,162) (179,280)
Net cash used by discontinued operations .......... -- (46,530)
----------- -----------
Net cash used by operating activities ............. (250,162) (225,810)
----------- -----------
Cash flows from investing activities:
Capital expenditures ............................. (97,110) --
Distributions from investees ..................... -- 242,000
----------- -----------
Net cash provided (used) by investing activities ... (97,110) 242,000
----------- -----------
Cash flows from financing activities:
Scheduled principal payments on long-term debt ... (2,835) (2,521)
Proceeds from long-term debt ..................... 31,871 --
----------- -----------
Net cash provided (used) by financing activities ... 29,036 (2,521)
----------- -----------
Net increase (decrease) in cash and
cash equivalents ................................. (318,236) 13,669
Cash and cash equivalents, beginning of period ...... 365,674 39,345
----------- -----------
Cash and cash equivalents, end of period ............$ 47,438 $ 53,014
=========== ===========
Supplemental Disclosure of Non-Cash Financing Activities:
Reclassification of principal payments on
short-term debt to accrued interest .............$ -- $ 280,631
=========== ===========
See accompanying notes to consolidated condensed financial statements.
4
SPORTS ARENAS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 AND 2002 (Unaudited)
1. The information furnished reflects all adjustments of a recurring nature
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. Certain information and note disclosures normally included
in consolidated financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission.
The accompanying unaudited condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements
and notes thereto included in the Company's Annual Report filed on form
10-K on October 14, 2003 for the year ended June 30, 2003.
Revenue recognition- the Company recognizes revenue when persuasive
evidence of an arrangement exists, delivery has occurred, the amount is
fixed or determinable and collectibility is probable. All of these
conditions are typically met at the time the Company ships products to its
customers.
2. Due to the seasonal fluctuations of the golf club shaft manufacturing
operations, the financial results for the interim periods ended September
30, 2003 and 2002, are not necessarily indicative of operations for the
entire year.
3. Investments:
Investments consist of the following:
September 30, June 30,
2003 2003
----------- -----------
UCV, L.P. ......................................$ 5,303,795 $ 5,277,007
Vail Ranch Limited Partnership ................. 67,000 67,000
----------- -----------
Total ....................................$ 5,370,795 $ 5,344,007
=========== ===========
The following is a summary of the equity in income (loss) of the
investments accounted for by the equity method:
2003 2002
-------- --------
UCV, L.P. .................... $ 26,788 $ 40,194
======== ========
Classified as discontinued operations:
Vail Ranch Limited Partnership $ -- $ 9,000
======== ========
The following is a summary of distributions received from investees:
2003 2002
-------- --------
UCV, L.P. .................... $ -- $242,000
Vail Ranch Limited Partnership -- --
-------- --------
$ -- $242,000
======== ========
As discussed in footnote 5(c) to the Company's June 30, 2003 annual report
on Form 10-K, effective April 1, 2003, the Company began recording its
equity in the income (loss) of UCV, L.P. (UCV) on a current basis rather
than on a 91 day delayed basis. The Company has treated this as a change in
accounting principle and accordingly has classified its $37,675 of equity
in earnings of UCV for the period of April 1, 2002 through June 30, 2002 as
the cumulative effect of a change in accounting principle in 2003.
Therefore, the equity in income of UCV for the period July 1, 2003 through
September 30, 2003 was $40,194 (see footnote 15 to the Company's June 30,
2003 annual report on Form 10-K).
4. Contingencies:
A lawsuit was filed on January 10, 2003 in the United States District
Court in the Southern District of California by Masterson Marketing, Inc.
(Masterson) against Penley Sports, LLC. Masterson's lawsuit claims
copyright infringement, breach of contract, breach of fiduciary duty,
constructive fraud and conversion. Masterson is seeking damages in excess
of $450,000. The Company filed a motion to dismiss all claims. Masterson
dropped all claims except for the claims of copyright infringement and
breach of contract. The balance of the motion to dismiss is waiting for a
court decision. It is not possible at this time to predict the outcome of
this litigation. We intend to vigorously defend against these claims.
5
5. Business segment information:
The Company operates principally in two business segments: commercial real
estate rental and golf club shaft manufacturing. 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.
The following is summarized information about the Company's operations by
business segment.
Real Estate Unallocated
Operation Golf And Other Totals
------------ ----------- ----------- ------------
THREE MONTHS ENDED SEPTEMBER 30, 2003
- -------------------------------------
Revenues ............................. $ 19,335 $ 609,525 $ 12,035 $ 640,895
Depreciation and amortization ........ -- 41,391 5,901 47,292
Interest expense ..................... -- -- 334 334
Equity in income of investee ......... 26,788 -- -- 26,788
Segment profit (loss) ................ 26,923 (530,131) (177,773) (680,981)
Investment income .................... 3,768
Loss from continuing
operations before taxes............. (677,213)
Significant non-cash items ........... (26,788) -- -- (26,788)
THREE MONTHS ENDED SEPTEMBER 30, 2002
- -------------------------------------
Revenues ............................. $ 17,976 $ 635,074 $ 90,052 $ 743,102
Depreciation and amortization ........ 13,355 41,757 4,608 59,720
Interest expense ..................... 1,536 -- 32,112 33,648
Equity in income of investee ......... 40,194 -- -- 40,194
Segment profit (loss) ................ 24,579 (371,872) (121,232) (468,525)
Investment income .................... 9,070
Loss from continuing
operations before taxes............. (459,455)
Significant non-cash items ........... (40,194) -- -- (40,194)
6. Liquidity
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. The Company has
suffered recurring losses 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 obtaining additional investors in its
subsidiary, Penley Sports, or increases in the sales volume of Penley
Sports. The consolidated 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.
7. Discontinued Operations:
During the year ended June 30, 2003, the Company ceased operations in two
business segments. The following is a summary of the income (loss) from the
discontinued business segments:
2003 2002
----------- -----------
Bowling ........................... $ -- $ (74,522)
Real estate development ........... -- 9,000
----------- -----------
$ -- $ (65,522)
=========== ===========
8. Subsequent events:
In December 1990 the Company loaned $1,061,009 to the Company's majority
shareholder, Andrew Bradley, Inc. (ABI), which is 88% owned by Harold S.
Elkan, the Company's President. The loan provided funds to ABI to pay its
obligation related to its purchase of the Company's stock in November 1983.
The loan to ABI provides for interest to accrue at an annual rate of prime
plus 1-1/2 percentage points (5.50 percent at September 30, 2003) and to be
added to the principal balance annually. The loan was due November 7, 2003.
The loan is collateralized by 21,808,267 shares of the Company's stock
owned by ABI. The original loan amount plus accrued interest of $1,230,483
is presented as a reduction of shareholders' equity because ABI's only
asset is the stock of the Company.
On November 7, 2003, the Company presented demand to ABI for payment of
$3,351,724, which represents the original principal balance plus accrued
interest. The note provides for a 5 day grace period and negotiations are
underway between the Company and ABI with respect to disposition of the
note.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ----------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS:
-----------------------------------
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The independent auditors' report dated September 5, 2003 included in our June
30, 2003 Annual Report on Form 10-K contained the following explanatory
paragraph:
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Note 13 to the consolidated financial statements, the Company has suffered
recurring losses, and is forecasting negative cash flows from operating
activities for the next twelve months. These items raise substantial doubt
about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 13. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Management estimates positive cash flow of $100,000 to $200,000 in total for the
remaining three quarters of the year ending June 30, 2004 from operating
activities after deducting capital expenditures and principal payments on notes
payable and adding estimated distributions from UCV and VRLP.
The Company estimates it will receive approximately $1,100,000 of distributions
from UCV in the second quarter of which $290,000 was received in October 2003.
This represents the remainder of funds to be distributed by UCV to the Company
from the sales proceeds of UCV's apartment project.
In February 2003 Vail Ranch Limited Partners (VRLP) sold its membership interest
in Temecula Creek LLC to its other partner in Temecula Creek LLC. VRLP is
entitled to receive one-half of the sales proceeds from the sale of a remaining
parcel undeveloped land as well as the release of $100,000 that was held back
from the sales proceeds in February 2003. The Company is obligated to pay
approximately one-half of these proceeds to its minority partner. The liability
to the minority interest stated in the balance sheet is $431,839 but is likley
to be settled for a lesser amount based on the distributions received from VRLP.
Management expects continuing cash flow deficits until Penley Sports develops
sufficient sales volume to become profitable. Although, there can be no
assurances that Penley Sports will ever achieve profitable operations,
management estimates that a combination of continued increases in the sales of
Penley Sports and reduction of its operating costs will result in Penley Sports
and the Company achieving a breakeven level of operations at the end of the next
two quarters.
Management is currently evaluating other sources of working capital including
the sale of assets or obtaining additional investors in Penley Sports.
Management has not assessed the likelihood of the Company receiving any other
sources of long-term or short-term liquidity. 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. However,
management believes it will be able to meet its financial obligations for the
next twelve months.
The Company has working capital of $332,573 at September 30, 2003, which is a
$728,980 decrease from the working capital of $1,061,553 at June 30, 2003. The
decrease in working capital is primarily attributable to the cash used by
operating activities for the three months ended September 30, 2003. The
following is a schedule of the cash provided (used) before changes in assets and
liabilities, segregated by business segments:
2003 2002 Change
---------- ---------- ----------
Rental .................... $ -- (2,000) 2,000
Golf ...................... (489,000) (330,000) (159,000)
General corporate expense
and other ............... (168,000) (96,000) (72,000)
---------- ---------- ----------
Cash used by continuing
operations .............. (657,000) (428,000) (229,000)
Discontinued operations:
Bowling ................. -- (68,000) 68,000
Real estate development . -- -- --
Capital expenditures....... (97,000) -- (97,000)
Principal payments on
long-term debt .......... (3,000) (3,000) --
---------- ---------- ----------
Cash used ................. (757,000) (499,000) (258,000)
========== ========== ==========
Distributions received from
investees ............... -- 242,000 (242,000)
========== ========== ==========
7
CRITICAL ACCOUNTING POLICIES
----------------------------
In response to the SEC's release No. 33-8040, "Cautionary Advice Regarding
Disclosure About Critical Accounting Policies", the Company has identified its
most critical accounting policy as that related to the carrying value of its
long-lived assets. Any event or circumstance that indicates to the Company an
impairment of the fair value of any asset is recorded in the period in which
such event or circumstance becomes known to the Company. During the three months
ended September 30, 2003 no such event or circumstance occurred that would, in
the opinion of management, signify the need for a material reduction in the
carrying value of any of the Company's assets.
NEW ACCOUNTING PRONOUNCEMENTS
-----------------------------
Statement of Financial Accounting Standards, No. 149 Amendment of Statement 133
on Derivative Instruments and Hedging Activities, or SFAS No. 149, amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133. In particular, SFAS No. 149 clarifies under what circumstances a
contract within an initial net investment meets the characteristic of a
derivative and when a derivative contains a financing component that warrants
special reporting in the statement of cash flows. SFAS No. 149 is generally
effective for contracts entered into or modified after June 30, 2003, and is not
expected to have a material impact on the Company's consolidated financial
statements.
Statement of Financial Accounting Standards, No. 150 Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity, or
SFAS No. 150, establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. SFAS No. 150 requires that an issuer classify a financial instrument
that is within its scope as a liability (or an asset in some circumstances).
Many of those instruments were previously classified as equity. SFAS No. 150 is
effective for financial instruments entered into or modified after May 31, 2003,
and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. At the October 29, 2003 FASB Board meeting, the
Board decided to indefinitely defer the effective date of SFAS No. 150 related
to the classification and measurement requirements for mandatorily redeemable
financial instruments that become subject to SFAS No. 150 solely as a result of
consolidation, such as the minority interest in the accompanying financial
statements.
"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, 2003 to the same period in 2002 and a
discussion of the significant changes:
Real Estate Unallocated
Operation Golf And Other Total
----------- ----------- --------- ------------
Revenues ..................... $ 1,359 $ (25,549) $ (78,017) $ (102,207)
Costs ........................ 500 (13,000) -- (12,500)
SG&A-direct .................. -- (61,076) 69,009 130,085
SG&A-allocated ............... -- 85,000 (60,000) 25,000
Depreciation and amortization (13,355) (366) 1,293 (12,428)
Interest expense ............. (1,536) -- (31,778) (33,314)
Equity in investees .......... (13,406) -- -- (13,406)
Segment profit (loss) ........ 2,344 (158,259) (56,541) (212,456)
Investment income ............ (5,302)
Income tax expense ........... 259,000
Income from continuing
operations ................. 41,242
Discontinued operations ...... 65,522
Change in accounting principle (37,675)
Net income (loss) ............ 69,089
8
RENTAL OPERATIONS:
- ------------------
This segment includes the equity in income UCV, L.P. (UCV) and the sublease of a
portion of the Penley factory. The operations of UCV for the three months ended
September 30, 2002 consisted of the operation of a 542 unit apartment project
until UCV sold the property on April 1, 2003. UCV acquired replacement
properties on August 28, 2003, September 25, 2003 and September 26, 2003. The
operations of UCV for the three months ended September 30, 2003 included the
operations of these three properties since their acquisition.
GOLF OPERATIONS:
- ----------------
There was a slight decline in Golf revenues due to a large OEM order shipped in
July 2002 for which there was no comparable sales activity in 2003. The
following is a breakdown of the percentage of sales by customer category:
2003 2002
---- ----
Golf equipment distributors . 52% 35%
Small golf club manufacturers 17% 28%
Golf shops .................. 29% 29%
Other ....................... 2% 8%
Operating expenses of the golf segment consisted of the following in 2003 and
2002:
2002 2001 Decrease
---------- ---------- ----------
Costs of sales and
manufacturing overhead . $ 580,000 $ 598,000 $ (18,000)
Research and development .. 53,000 48,000 5,000
---------- ---------- ----------
Total golf costs ....... 633,000 646,000 (13,000)
========== ========== ==========
Marketing and promotion ... 243,000 178,000 65,000
Administrative costs- direct 75,000 79,000 (4,000)
---------- ---------- ----------
Total SG&A-direct ....... 318,000 257,000 61,000
========== ========== ==========
There was not a significant change to total golf costs . Marketing and promotion
expenses increased primarily due to an increase in advertising expenses.
OTHER
- -----
Other revenues-related party decreased due to UCV's sale of its apartment
project on April 1, 2003. During the three months ended September 30, 2002 the
Company had received management fees and development fees from UCV totaling
$48,000. Other revenues, which primarily consisted of management fees earned
from a third party, decreased $33,197 due to the sale of the property being
managed in October 2002.
Unallocated selling, general and administrative expenses increased by $69,009
primarily due to the timing of the expenses for the Company's annual audit. In
2002 these services were primarily performed in October 2002 whereas in 2003
these services were primarily completed in September 2003.
The amount of corporate expenses allocated to the Golf segment primarily
increased due to an increase in the percentage of expenses allocable to golf.
This is the result of the discontinuance of the bowling segment in May 2003 and
the reduction in property management services performed for UCV and others
during the three months ended September 30, 2003.
Discontinued Operations:
- ------------------------
As discussed in Footnote 7 of Notes to Consolidated Condensed Financial
Statements, the Company has classified its operations in the bowling and real
estate development segments as discontinued operations.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------------------------------------------------------------------
The Company is exposed to market risk primarily due to fluctuations in interest
rates. However, the Company does not consider this interest rate market risk
exposure to be material to its financial condition or results of operations.
The Company does not enter into derivative or interest rate transactions for
speculative or trading purposes.
9
ITEM 4. CONTROLS AND PROCEDURES
- -------------------------------
An evaluation was carried out under the supervision and with the participation
of the Company's management, including its Chief Executive Officer and its Chief
Financial Officer, of the effectiveness of the disclosure controls and
procedures (as defined in Rule 13a-14(c) under the Securities and Exchange Act
of 1934 (the "Exchange Act") as of September 30, 2003. Based on this evaluation,
the Chief Executive Officer and the Chief Financial Officer have concluded that
the Company's disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms.
PART II
OTHER INFORMATION
ITEM 1. Legal Proceedings
As of September 30, 2003, 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, 2003.
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:
31.1 Certification of Chief Executive Officer
31.2 Certification of Chief Financial Officer
32.1 Certification of Chief Executive Officer pursuant to Sec. 906
32.2 Certification of Chief Financial Officer pursuant to Sec. 906
(b) Reports on Form 8-K: NONE
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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
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Harold S. Elkan, President and Director
Date: November 14, 2003
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By:/s/ Steven R. Whitman
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Steven R. Whitman, Treasurer,
Principal Accounting Officer and Director
Date: November 14, 2003
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