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

                                    FORM 10-K

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

                     For the fiscal year ended June 30, 2004

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

       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

        Securities registered pursuant to Section 12(b) of the Act: None

        Securities registered pursuant to Section 12 (g) of the Act:

                          Common Stock, $.01 par value
                                (Title of class)

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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K.    [ X ]

The aggregate market value of the voting stock held by non-affiliates (5,441,733
shares) of the Registrant as of September 25, 2004 was $283,000 (based on
average of bid and asked prices). The number of shares of common stock
outstanding as of September 25, 2004 was 10,883,467.

Documents Incorporated by Reference - None.





                                       1

                                     PART I
ITEM I.  Business

General Development and Narrative Description of Business
---------------------------------------------------------
Sports Arenas,  Inc. (the "Company") was incorporated as a Delaware  corporation
in 1957.  The Company  currently  owns a graphite golf club shaft  manufacturing
company and an approximate 35%  partnership  interest in UCV, L.P., a California
limited  partnership  ("UCV") which owns three commercial real estate.  Prior to
the dates indicated  below, the Company owned and operated a bowling center and,
owned  a 50%  partnership  interest  in UCV  which  owned a  542-unit  apartment
complex.  The  bowling  center  closed on May 31, 2003 in  conjunction  with the
expiration of the lease for its premises and UCV sold the  apartment  complex on
April 1, 2003.  The Company has its principal  executive  office at 7415 Carroll
Road, Suite C, San Diego, California. The Company presently has approximately 25
employees. The following is a summary of the revenues of each segment (excluding
discontinued  operations)  stated as a percentage of total  revenues for each of
the last three years:
                                    2004 2003 2002
                                    ---- ---- ----
           Real estate operations     3    2    6
           Golf .................    94   75   79
           Other ................     3   23   15

(a)  Real Estate Operations
---------------------------
     (1) Real Estate Development - Prior to February 22, 2003, the Company owned
a 60% interest in Vail Ranch  Limited  Partners  (VRLP),  a  California  limited
partnership, which owned a 50% ownership interest in Temecula Creek, LLC (TC), a
California limited liability  company.  TC owned a 13 acre parcel of undeveloped
land in Temecula,  California. TC was in the process of developing the land when
the other member  purchased  VRLP's  interest in TC on February  22,  2003.  The
Company received  distributions  from VRLP from the proceeds of the sale in 2003
and 2004.

     (2) Commercial  Real Estate Rental - Real estate rental  operations  during
the year  ended  June 30,  2004  consisted  of a  sublease  of a portion  of the
premises  leased by a Company  subsidiary  in San Diego,  California,  and a 35%
ownership  interest UCV, which owns two commercial real estate properties in San
Diego,  California  and one  commercial  real estate  property  in Los  Angeles,
California.

UCVGP, Inc., through its wholly owned subsidiary, UCVNV, Inc., and Sports Arenas
Properties,  Inc. (SAPI),  wholly-owned  subsidiaries of the Company,  are a one
percent managing general partner and a 35 percent limited partner, respectively,
in UCV, L.P. (UCV). UCV acquired  University City Village,  a 542 unit apartment
project  (University City Village) located in San Diego,  California,  in August
1974  and  sold it on  April  1,  2003.  Following  the  sale,  UCV  distributed
approximately $3,769,000 to its Company-affiliated partners. These distributions
served to reduce the Company's beneficial ownership of UCV from 50% to 35%.

Following   this  sale,  UCV  used  the  net  sale  proceeds   available   after
distributions to its partners as a portion of the total consideration to acquire
three  commercial  real estate  properties  in  so-called  "like-kind"  exchange
transactions  intended to cause deferral of federal  income  taxation on the net
sale  proceeds  used in such  acquisitions.  On August  28,  2003,  760,  LLC, a
California limited liability company wholly owned by UCV, acquired a property in
San Diego,  California  with 50,667  square feet of retail and office  space for
approximately  $9,500,000.   The  purchase  was  financed  with  loans  totaling
$6,926,500. Both loans are collateralized by the acquired property. On September
25, 2003, 939 LLC, a California  limited  liability company wholly owned by UCV,
acquired a second  property in San Diego,  California with 23,567 square feet of
retail and office space for approximately $5,000,000.  The purchase was financed
with  the   assumption   of  an  existing   $2,636,811   note  payable  that  is
collateralized by the acquired  property.  On September 26, 2003, UCV Media Tech
Center, LLC, a California limited liability company wholly owned UCV, acquired a
property  in Los  Angeles,  California  with  187,534  square feet of office and
industrial space for approximately $28,670,000. The purchase was financed with a
$20,000,000 note payable, which is collateralized by the acquired property.

(b) Golf Club Shaft  Manufacturing
----------------------------------
On  September  16,  2004 the  Company  committed  to a plan of  disposal  of the
graphite golf club shaft  operation  owned by Penley Sports,  LLC (Penley).  The
Company is currently in negotiations to sell Penley to the former owner,  Carter
Penley.  Carter  Penley has verbally  agreed to fund any cash flow deficits from
November 1, 2004 until a sale is consummated or until the  negotiations  end. In
either event,  the Company will not be required to repay the advances unless the
Company ceases negotiations without cause.

(c) Other  (Bowling  Operations)
--------------------------------
The Company's wholly owned subsidiary, Cabrillo Lanes, Inc. (the Bowl), operated
one 60 lane bowling center located in San Diego,  California  until it closed on
May 31, 2003 in conjunction  with the  expiration of its lease.  The Company had
operated  another 50 lane bowling center in San Diego,  California  until it was
closed on December 21, 2000 in  conjunction  with the sale by the Company of the
land and building. The Company purchased these bowling operations in August 1993

                                       2


(d)  Industry  Segment  Information:
------------------------------------
See Note 9 of Notes to Consolidated  Financial  Statements for required industry
segment financial information.

ITEM 2. Properties
------------------
Penley leases 38,025  square feet of industrial  space in San Diego,  California
pursuant  to a lease that  expires in March 31,  2010 with  options to March 31,
2020.  The  Company's  corporate  offices are located in this space.  Penley has
subleased  approximately  10,000 square feet to a third party  pursuant to a two
year lease that expires in October 2004.

ITEM 3. Legal Proceedings
-------------------------
A lawsuit was filed on January 10, 2003 in the United States  District Court for
the Southern  District of California by Masterson  Marketing,  Inc.  (Masterson)
against Penley Sports,  LLC.  Masterson's lawsuit originally asserted claims for
copyright  infringement,  breach of contract and breach of fiduciary  duty,  and
sought compensatory damages,  punitive damages,  statutory damages, and attorney
fees.  The Company  filed a motion to dismiss  all  claims.  In response to that
motion,  Masterson  dropped  all claims  except  those for  claims of  copyright
infringement  and breach of  contract.  Masterson  also  dropped all prayers for
punitive damages,  statutory  damages,  and attorney fees. It is not possible at
this time to predict the  outcome of this  litigation.  We intend to  vigorously
defend against these claims.

ITEM 4. Submissions of Matters to a Vote of Security Holders:  None
-------------------------------------------------------------

                                     PART II

ITEM 5. Market for the Registrant's Common Stock and Related Stockholder Matters

(a)  There is no  recognized  market for the  Company's  common stock except for
     limited or  sporadic  quotations,  which may occur  from time to time.  The
     following  table  sets  forth the high and low bid  prices per share of the
     Company's common stock in the  over-the-counter  market, as reported on the
     OTC Bulletin Board,  which is a market quotation service for market makers.
     The over-the-counter quotations reflect inter-dealer prices, without retail
     mark-up,  mark-down or commission,  and may not necessarily  reflect actual
     transactions in shares of the Company's common stock.

                                   2004             2003
                              --------------   --------------
                              High      Low     High     Low
                              -----    -----   -----    -----
             First Quarter    $ .02    $ .01   $ .03    $ .02
             Second Quarter   $ .02    $ .01   $ .02    $ .02
             Third Quarter    $ .04    $ .02   $ .02    $ .02
             Fourth Quarter   $ .05    $ .02   $ .02    $ .02

(b)  The number of holders  of record of the common  stock of the  Company as of
     September 25, 2004 is approximately 4,300. The Company believes there are a
     significant  number of  beneficial  owners of its common stock whose shares
     are held in "street name".

(c)  The Company has neither  declared  nor paid  dividends  on its common stock
     during  the  past ten  years,  nor does it have  any  intention  of  paying
     dividends in the foreseeable future.

ITEM 6.  Selected Consolidated Financial Data (Not covered by Independent
           Auditors' Report)


                                                        Year Ended June 30,
                               --------------------------------------------------------------
                                  2004         2003         2002         2001         2000
                               ----------   ----------   ----------   ----------   ----------
                                                                           
Revenues                       $2,820,865   $4,043,550   $3,295,300   $2,283,151   $2,145,980
Loss from operations           (4,296,131)  (1,329,173)  (2,071,750)  (3,015,657)  (2,857,218)
Income (loss) from
   Continuing operations       (2,793,627)  19,098,581   (2,186,520)    (399,444)  (2,589,187)

Basic and diluted income
  (loss) per common share
  from continuing operations     (0.10)         0.70        (0.08)        (0.02)     (0.10)

Total assets                    7,129,139   12,731,967    2,903,403    3,448,474    6,601,236
Long-term debt,
  excluding current portion        67,232         --          5,456       13,942    1,967,169


See  Notes 4,  6(c),  8, and 10 of Notes to  Consolidated  Financial  Statements
regarding disposition of business operations and material uncertainties.

                                       3


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
          OF OPERATIONS.
         
                LIQUIDITY AND CAPITAL RESOURCES

The  independent  auditors'  report  dated  November  15, 2004 on the  Company's
consolidated financial statements for the year ended June 30, 2004 included with
this Annual Report on Form 10-K contains 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 11 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 11.  The
     consolidated financial statements do not include any adjustments that might
     result from the outcome of this uncertainty.

As noted  below,  the  recurring  losses and  negative  cash flows relate to the
Company's  golf club shaft  manufacturing  operations.  The Company has not been
successful  in its  efforts to increase  sales,  reduce  manufacturing  costs or
obtain  additional  investors for this operation.  As a result, on September 16,
2004,  the Company  committed  to a plan of disposal of the  graphite  golf club
shaft operation  owned.  The Company is currently in negotiations to sell Penley
to the former owner,  Carter Penley.  Carter Penley has verbally  agreed to fund
any cash flow  deficits  from  November 1, 2004 until a sale is  consummated  or
until the negotiations end. In either event, the Company will not be required to
repay the advances unless the Company ceases negotiations without cause.

The Company is  expecting a $500,000  cash flow  deficit in the year ending June
30,  2005 from  operating  activities  after  estimated  distributions  from UCV
($420,000,  primarily  distributions  from real  estate  operations),  estimated
capital  expenditures  ($3,000) and  scheduled  principal  payments on long-term
debt,  excluding any estimated  payments to be received from the sale of Penley.
This  analysis  does not include the  obligation to pay federal and state income
taxes totaling  $979,000 related to the taxable income reported from the sale of
apartment project owned by UCV.  Management is currently  uncertain about how it
will obtain the funds to pay these tax liabilities.

Management is currently  evaluating  other sources of working capital  including
the proceeds that would become  available for  distribution  to the Company from
refinancing  the debt related to one of the  properties  owned by UCV or selling
one of the properties  owned by UCV.  Management has not assessed the likelihood
of 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, other than the tax liabilities noted above, management believes it will
be able to meet its financial obligations for the next twelve months.

The Company had a working capital deficit of $422,329 at June 30, 2004, which is
a $1,483,882  decrease in working capital from the working capital of $1,061,553
at June 30,  2003.  Working  capital  decreased  primarily  due to cash  used by
operations of $3,335,000. The use of funds by operations was partially offset by
$1,712,000 of distributions  received from UCV ($1,557,000) and VRLP ($155,000).

                                       4

The cash provided (used) before changes in assets and liabilities  segregated by
business segments was as follows:

                                           2004          2003           2002
                                       -----------   -----------    -----------
 Continuing operations:
  Rental                               $     5,000   $    (2,000)   $    (4,000)
  Golf                                  (2,246,000)   (1,440,000)    (1,647,000)
  General corporate expense and other      (70,000)      100,000       (111,000)
  Income taxes-current                    (979,000)         --             --
                                       -----------   -----------     ----------
     Total continuing operations        (3,290,000)   (1,342,000)    (1,762,000)
 Discontinued operations:
   Bowling                                 166,000      (192,000)        26,000
   Development                                --            --           --
                                       -----------   -----------     ----------
     Total cash used                    (3,124,000)   (1,534,000)    (1,736,000)
 Capital expenditures                     (194,000)      (18,000)          --
 Principal payments on long-term debt      (17,000)       (8,000)       (32,000)
                                       -----------   -----------     ----------
                                        (3,335,000)   (1,560,000)    (1,768,000)
                                       ===========   ===========     ==========

 Distributions received from investees:
    From UCV proceeds of refinance            --            --        1,700,000
    From UCV sale proceeds of property
      April 2003                         1,269,000     2,500,000           --
    From UCV operations                    288,000       526,000        403,000
    From VRLP sale proceeds of TC          155,000       592,000           --
                                       -----------   -----------     ----------
       Total                             1,712,000     3,618,000      2,103,000
                                       ===========   ===========     ==========
 Proceeds from sale of assets              110,000        19,000         31,000
                                       ===========   ===========     ==========
 Payments to minority interests            (73,000)     (371,000)       (50,000)
                                       ===========   ===========     ==========

On April 1, 2003,  UCV sold its 542 unit  apartment  project for  $58,400,000 in
cash.  The  net  sale  proceeds  to  UCV  was  approximately  $19,298,000.   UCV
distributed  approximately $3,769,000 of such proceeds to the Company in partial
liquidation of its partnership  interest in UCV, reducing its ownership interest
from 50 percent to 35 percent.  UCV used the balance of the proceeds to purchase
three properties as part of tax-deferred like-kind-exchange transactions.

One of the  properties  purchased  by UCV is  subject to a loan  agreement  that
requires Sports Arenas,  Inc. to maintain a minimum net worth of $1,000,000.  As
of June 30,  2004,  the  Company  did not meet this  requirement.  UCV is in the
process of requesting a waiver from the lender regarding this covenant. However,
it is  uncertain  whether  the lender  will grant a waiver.  If UCV is unable to
obtain a waiver from the lender, the lender could call the loan due.

In February  2003,  Vail Ranch Limited  Partners  (VRLP),  a California  limited
partnership  in which the Company  holds a 60%  ownership,  sold its interest in
Temecula  Creek  LLC (TC) to its  other  partner  in TC  (ERT).  The sale  price
consisted  of  $1,318,180  cash  and  one-half  of the  sale  proceeds  from the
remaining parcel of undeveloped  land owned by TC when it was sold.  $100,000 of
the sales  proceeds  were held in an escrow to be  applied  to any post  closing
claims ERT may have  related to  warranties  and normal  prorations  in the sale
contract  for the TC  interest.  The cash  proceeds to VRLP of  $1,218,180  were
partially  offset  by  $225,000  of fees paid to one of the VRLP  partners.  The
Company  received a distribution  of $592,776 in 2003 of which $370,838 was paid
to the holder of the minority  interest in Old Vail Partners.  In the year ended
June 30, 2004, VRLP received $288,071 as its share of the proceeds from the sale
of the undeveloped  land, the balance of the hold back, and final settlement for
allocation  of  revenues  and  expenses.   The  Company  received   $155,009  of
distributions  from VRLP  related  to these  transactions.  The  Company  is not
expecting  any  further  distributions  from  VRLP.  As  part  of the  Company's
obligation  to pay  approximately  one-half of these  proceeds  to its  minority
partner, $73,000 was paid to the minority partner during the year ended June 30,
2004. The remaining balance of the minority interest of $358,839 was adjusted to
$15,000 to reflect the estimate of the final amount due the minority partner.

                          CRITICAL ACCOUNTING POLICIES

Our  accounting  policies  are more  fully  described  in Note 1 of the Notes to
Consolidated  Financial  Statements.  As disclosed in Note 1, the preparation of
financial  statements  in  conformity  with  GAAP  requires  management  to make
estimates and assumptions  about future events that affect the amounts  reported
in the financial  statements and related notes.  Future events and their effects
cannot be determined with absolute  certainty.  Therefore,  the determination of
estimates  requires the exercise of judgment.  Actual  results  inevitably  will
differ  from  those  estimates,  and such  differences  may be  material  to the
financial statements.

We believe  that of our  significant  accounting  policies,  the  following  may
involve a higher  degree of  judgment,  estimation,  or  complexity  than  other
accounting policies.

                                       5

Allowance  for Doubtful  Accounts:  We evaluate the  collectibility  of accounts
receivable  based on a combination  of factors.  In  circumstances  where we are
aware of a specific customer's  inability to meet its financial  obligations,  a
specific  reserve is recorded  against  amounts due to reduce the net recognized
receivable  to  the  amount  reasonably  expected  to be  collected.  Additional
reserves are established based upon our perception of the quality of the current
receivables, the current financial position of our customers and past experience
of  collectibility.  If  the  financial  condition  of  our  customers  were  to
deteriorate  resulting  in an  impairment  of their  ability  to make  payments,
additional allowances would be required.

Income  Taxes:  We  record  the  estimated   future  tax  effects  of  temporary
differences between the tax bases of assets and liabilities and amounts reported
in the accompanying  Consolidated  Balance Sheets, as well as operating loss and
tax credit  carryforwards.  We  evaluate  the  recoverability  of any tax assets
recorded on the balance sheet and provide any necessary  allowances as required.
The carrying  value of the net deferred tax assets  assumes that we will be able
to generate sufficient future taxable income based on estimates and assumptions.
If these  estimates  and related  assumptions  change in the  future,  we may be
required to record  additional  valuation  allowances  against our  deferred tax
assets resulting in additional income tax expense in our Consolidated Statements
of  Operations.  In  assessing  the  realizability  of deferred  tax assets,  we
consider  whether  it is more  likely  than not that some  portion or all of the
deferred tax assets will not be realized.  We consider the scheduled reversal of
deferred  tax  liabilities,   projected   future  taxable  income,   carry  back
opportunities, and tax planning strategies in making the assessment. We evaluate
the  ability  to  realize  the  deferred  tax  assets  and  assess  the need for
additional valuation allowances quarterly. In addition, we are subject to income
tax laws and judgment is required in assessing  the future tax  consequences  of
events that have been recognized in our financial statements or tax returns. The
final  outcome of these  future tax  consequences,  tax  audits,  and changes in
regulatory tax laws and rates could materially impact our financial statements.

Inventory  Valuation:  Inventories  are  valued at the lower of cost or  market.
Certain items in inventory may be considered  impaired,  obsolete or excess, and
as such,  we may  establish an  allowance to reduce the carrying  value of these
items to their net realizable value.

Long-Lived  Assets:  We review our  long-lived  assets for  impairment  whenever
events or changes in circumstances  indicate the carrying amount of an asset may
not be recoverable.  Recoverability of assets to be held and used is measured by
a comparison  of the carrying  amount of the assets to the future net cash flows
expected to be  generated  by the assets.  If such assets are  considered  to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying  amount of the assets  exceeds their fair value.  Judgments  made by us
related to the  expected  useful lives of  long-lived  assets and our ability to
realize any  undiscounted  cash flows in excess of the carrying  amounts of such
assets are affected by factors such as the ongoing  maintenance and improvements
of the assets,  changes in the expected  use of the assets,  changes in economic
conditions,  changes in operating performance and anticipated future cash flows.
Since judgment is involved in determining  the fair value of long-lived  assets,
there is risk that the  carrying  value of our  long-lived  assets  may  require
adjustment in future  periods.  If actual fair value is less than our estimates,
long-lived assets may be overstated on the balance sheet and a charge would need
to be taken against earnings.


                          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.
                                       6

In December 2003, the FASB issued FASB  Interpretation  No. 46 (revised December
2003),  Consolidation  of Variable  Interest  Entities,  which  addresses  how a
business  enterprise  should  evaluate  whether it has a  controlling  financial
interest in an entity  through  means other than voting  rights and  accordingly
should  consolidate  the entity.  FIN 46R replaces FASB  Interpretation  No. 46,
Consolidation of Variable Interest  Entities,  which was issued in January 2003.
The Company  will be required  to apply FIN 46R to  variable  interests  in VIEs
created after December 31, 2003.  For variable  interests in VIEs created before
January 1, 2004,  the  Interpretation  will be applied  beginning  on January 1,
2005.  For any VIEs that must be  consolidated  under FIN 46R that were  created
before January 1, 2004, the assets,  liabilities and noncontrolling interests of
the VIE  initially  would  be  measured  at  their  carrying  amounts  with  any
difference  between the net amount added to the balance sheet and any previously
recognized  interest being recognized as the cumulative  effect of an accounting
change.  If determining the carrying amounts is not  practicable,  fair value at
the date FIN 46R first  applies may be used to measure  the assets,  liabilities
and noncontrolling  interest of the VIE. The Company currently does not have any
VIEs in which it has variable interests.

"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, the Business Risks described in Item 1 of this Report
on Form 10-K and  elsewhere in the  Company's  filings with the  Securities  and
Exchange Commission.

                             RESULTS OF OPERATIONS
                             ---------------------
The  discussion of Results of Operations is primarily by the Company's  business
segments.  The analysis is partially based on a comparison of and should be read
in conjunction with the business segment operating  information in Note 9 to the
Consolidated Financial Statements.

The  following is a summary of the changes to the  components of the segments in
the years ended June 30, 2004 and 2003:
                               Real Estate             Unallocated   
                                Operation      Golf     And Other      Total
YEAR ENDED JUNE 30, 2004       -----------  ---------  -----------   ----------
------------------------
Revenues                            $3,928  ($381,696)   ($844,917) ($1,222,685)
Costs                                2,500    (71,659)          --      (69,159)
SG&A-direct                             --    (48,154)     355,169      307,015
SG&A-allocated                          --    544,000     (419,000)     125,000
Depreciation and amortization       (8,611)     1,927       11,785        5,101
Impairment losses                       --         --    1,376,316    1,376,316
Interest expense                    (5,436)        --      (49,422)     (54,858)
Equity in investees            (26,204,886)        --           --  (26,204,886)
Gain (loss) on disposition              --         --      110,241      110,241
Segment profit (loss)          (26,189,411)  (807,810)  (2,009,524) (29,006,745)
Investment income                                                        (7,463)
Income tax expense                                                    7,122,000
Income (loss) from continuing
  operations                                                        (21,892,208)
Discontinued operations                                                 336,571
Change in accounting principle                                          (37,675)
Net income (loss)                                                   (21,593,312)

YEAR ENDED JUNE 30, 2003
------------------------
Revenues                         ($111,277)  $449,453     $410,074     $748,250
Costs                             (114,058)   225,262           --      111,204
SG&A-direct                             --    (95,386)     118,405       23,019
SG&A-allocated                          --    113,000     (120,535)      (7,535)
Depreciation and amortization      (45,283)    (2,526)     (28,291)     (76,100)
Impairment losses                  (44,915)        --           --      (44,915)
Interest expense                       450         --      (27,473)     (27,023)
Equity in investees             26,341,632         --           --   26,341,632
Gain (loss) on disposition              --         --           --           --
Segment profit (loss)           26,434,161    209,103      467,968   27,111,232
Investment income                                                        11,869
Income tax expense                                                   (5,838,000)
Income (loss) from continuing
  operations                                                         21,285,101
Discontinued operations                                                  15,363
Change in accounting principle                                           37,675
Net income (loss)                                                    21,338,139

                                       7

RENTAL OPERATIONS
-----------------
This  segment  includes  the  operations  of a  subleasehold  interest  in  land
underlying a condominium  project  (Sublease)  which was sold in March 2002, and
other  activities  which  include the equity in income of the operation of a 542
unit  apartment  complex,  which was sold April 1, 2003,  and the  sublease of a
portion of the Penley factory.

The following is a summary of the changes in rental operations segment for each
of the years ended June 30, 2004 and 2003 compared to the prior year:

                                      Sublease       Other         Combined
                                    ----------   -----------     ----------- 
   JUNE 30, 2004
   Revenues                         $     --     $      3,928    $     3,928
   Costs                                  --            2,500          2,500
   Depreciation and amortization          --           (8,611)        (8,611)
   Impairment losses                      --             --             --
   Interest expense                     (5,436)          --           (5,436)
   Equity in investees                    --      (26,204,886)   (26,204,886)
   Segment profit (loss)                 5,436    (26,194,847)   (26,189,411)

   JUNE 30, 2003
   Revenues                          ($119,098)  $      7,821      ($111,277)
   Costs                              (116,458)         2,400       (114,058)
   Depreciation and amortization          (474)       (44,809)       (45,283)
   Impairment losses                   (44,915)          --          (44,915)
   Interest expense                        450           --              450
   Equity in investees                    --       26,341,632     26,341,632
   Segment profit (loss)                42,299     26,391,862     26,434,161

The changes to the  sublease  component  relate to the sale of the  subleasehold
interest in March 2002.

On April 1, 2003, UCV, in which the Company had a 50 percent ownership interest,
sold its 542 unit apartment  project for  $58,400,000 in cash.  After  deducting
current selling expenses ($2,442,207),  paying mortgage loans ($38,000,000), and
the refund of lender  impounds  ($1,340,348),  the net sale  proceeds to UCV was
$19,298,141  and  UCV's  gain  from  sale  was  approximately  $52,558,000.  The
Company's  equity  in this  gain  was  approximately  $26,279,000.  The  $44,809
decrease in  depreciation  and  amortization in 2003 relates to the cessation of
amortization  of the step up in basis as a result of the sale of the  underlying
asset of UCV.  Effective  April 1, 2003,  UCV  changed  its fiscal year end from
March 31 to June 30 to conform to the fiscal year end of the  Company.  This was
treated as a change in  accounting  principle  by the Company and the  Company's
$37,675 of equity in the net income of UCV for the three month period ended June
30,  2002 was  classified  as the  cumulative  effect of a change in  accounting
principle.

GOLF CLUB SHAFT MANUFACTURING:
------------------------------
The following is a breakdown of the percentage of sales by customer category:

                                   2004  2003  2002
                                   ----  ----  ----
    Golf equipment distributors     46%   38%   35%
    Small golf club manufacturers   29%   32%   26%
    Golf shops                      21%   24%   33%
    Other                            4%    6%    6%

Prior to January  2000,  golf club shaft sales were  principally  to custom golf
shops.  In January  2000,  Penley  commenced  sales to two of the  largest  golf
equipment  distributors.  In addition to increases in sales related to these two
customers,  sales to other golf equipment  distributors  and direct sales to the
after-market  also  increased,  likely  due to  the  credibility  and  increased
exposure from the Penley  products  being  included in the catalogs of these two
distributors.  Prior to the year ended June 30,  2004,  golf club  shafts  sales
increased by approximately $1,062,000 in 2002 and $449,000 in 2003. In 2004 golf
club  shaft  sales  decreased  by  $382,000.  Some  of the  decrease  in 2004 is
attributable to declines in sales to golf club manufacturers. There were several
large  golf club  manufacturers  that  placed  orders in 2003 that did not place
additional  orders in 2004. Sales to golf shops also decreased in 2004 and sales
to  distributors  did  not  increase  significantly.   Management  believes  the
decreases are likely  attributable to both a decrease in advertising in 2004 and
speculation about the uncertainty of the Company's plans for the golf club shaft
manufacturing operation.

                                       8

Operating expenses of the golf segment consisted of the following in 2004, 2003,
and 2002:
                                        2004          2003          2002
                                     ----------    ----------    ----------
  Costs of sales and manufacturing
    overhead                         $2,487,000    $2,632,000    $2,385,000
  Research and development              271,000       198,000       219,000
                                     ----------    ----------    ----------
     Total golf costs                $2,758,000    $2,830,000    $2,604,000
                                     ==========    ==========    ==========
  Marketing and promotion            $1,008,000    $  970,000    $1,179,000
  Administrative costs- direct          239,000       325,000       212,000
                                     ----------    ----------    ----------
    Total SG&A-direct                $1,247,000    $1,295,000    $1,391,000
                                     ==========    ==========    ==========

Total golf costs decreased in 2004 primarily due to the decrease in direct costs
of goods  sold  related  to the  decrease  in sales in 2004.  Total  golf  costs
increased  in 2003  primarily  due to the  increase in direct cost of goods sold
related to the  increase  in sales in 2003.  Golf costs also  increased  in 2003
related to a $113,000  increase in the valuation  allowance  expense  related to
inventory.

In  general  the  Company  has not been  able to  reduce  golf  costs to a level
commensurate  with the Company's  level of sales.  The  manufacturing  plant was
designed  and equipped to produce  large  production  runs of the same  product.
However, the Company has not been able to develop sufficient sales to large golf
shaft  manufacturers or increase  aftermarket  sales  sufficiently to make large
production runs. Therefore the units costs to manufacture shafts has been higher
than planned.  Additionally,  the Company had substantial  problems in 2004 with
the  quality  of the  material  provided  by one of its  suppliers  that  caused
significant additional expense to yield shafts for finished goods.

Marketing and promotion  expense decreased in 2003 primarily due to decreases in
advertising  and the tour program  expenses.  Administrative  costs decreased in
2004 and 2003  primarily  due to a decrease of $163,000 in 2004 in the allowance
for bad debts.  This was partially  offset by a $68,000 increase in professional
fees related to marketing  consultants.  Administrative  costs increased in 2003
primarily  due to a $103,000  increase in the allowance for bad debts related to
two small golf club manufacturers that discontinued business.

Allocated Selling, General and Administrative costs increased in 2004 to reflect
the  circumstance  that a higher  percentage of the  corporate  segments time is
being spent providing services to the golf club shaft segment.

UNALLOCATED AND OTHER:
----------------------
Other  revenues-related  party  decreased  due to sale  by UCV of its  apartment
property on April 1, 2003. The Company had received  management fees ($110,000),
one time sales commission  ($350,000),  and development fees ($264,000) from UCV
totaling  $724,000 in 2003.  In 2004 the Company only received  management  fees
from UCV for the  management  of the  properties  acquired  in  August  2003 and
September 2003 totaling $47,000.

Other  revenues,  which  primarily  consisted of management fees and commissions
earned  from a third  party,  decreased  $139,000 in 2004 due to the sale of the
property being managed in October 2002 for which the Company had also received a
one time real estate commission of $100,000.

Unallocated  and Other SG&A  increased by $355,000 in 2004 and $118,000 in 2003.
The increase in 2004 was  primarily due to $373,000 of  compensation  related to
Company  shares issued Harold Elkan and Andrew  Bradley,  Inc. in recognition of
the value of personal  guarantees  Harold Elkan provided to lenders on behalf of
the  Company  and its  subsidiaries  over the years.  The  increase  in 2003 was
primarily  due to an  increase  in wages  related to a $100,000  bonus to Harold
Elkan.

In June 2004, the Company  recorded a $1,376,316  impairment loss related to the
foreclosure  on the note  receivable  from Andrew  Bradley,  Inc. See Note 3b of
Notes to the Consolidated Financial Statements.

Interest  expense  decreased in 2002 due to the decrease in the balance of short
term borrowings in 2003. All short term debt was paid in April 2003.

INCOME TAXES:
------------
Income tax expense  increased  in 2003 due to the income  recognized  from UCV's
sale  of  its  apartment   project.   As  discussed   above,  UCV  utilized  the
"like-kind-exchange"  rules to defer  recognition  of a portion  of the  taxable
income from the sale to the extent it  reinvested  the  proceeds  from sale into
like-kind  property.  Since  UCV  used  some  of  the  sales  proceeds  to  fund
distributions to Company,  the Company had a taxable gain from the sale that was
recognized  in the year ended June 30,  2004 of  approximately  $13,295,000  and
recognition of approximately  $12,948,000 of gain will be indefinitely deferred.
The  taxable  portion of this gain  recognized  in 2004 for  federal  income tax
purposes was offset by its federal net operating loss carryforwards,  except for
approximately  $181,000 due for the alternative  minimum tax. Since the State of

                                       9

California has temporarily suspended the utilization of net operating losses for
state income tax purposes,  the Company has a state income tax liability for the
year ended June 30, 2004  related to the gain from sale of UCV of  approximately
$798,000.

DISCONTINUED OPERATIONS:
-----------------------
As discussed in Footnote 10 of Notes to the Consolidated  Financial  Statements,
the  Company  has  classified  its  operations  in the  bowling  and real estate
development segments as discontinued operations.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS:
--------------------------------------------------
The following table summarizes the Company's  contractual  obligations and other
commitments at June 30, 2004 and the effect such  obligations  could have on the
Company's liquidity and cash flow in future periods:

                   Less than     2-3         4-5        Over                
                    one year    Years       Years     5 years      Total
                   ----------  --------   ---------   --------   ----------
Notes payable         $18,071   $38,688     $28,544   $   --        $85,303
Lease commitments     247,000   494,000     494,000    183,000    1,418,000
Guaranty               75,000   156,000     166,000    198,000      595,000
                   ----------  --------   ---------   --------   ----------
                     $340,071  $688,688    $688,544   $381,000   $2,098,303
                   ==========  ========   =========   ========   ==========


ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-------------------------------------------------------------------
The Company is exposed to market risk primarily due to  fluctuations in interest
rates. The Company and its unconsolidated  subsidiary,  UCV, utilizes both fixed
rate and variable rate debt.

The following table presents  scheduled  principal payments and related weighted
average interest rates of the Company's long-term fixed rate debt for the fiscal
years ended June 30:
                   2005    2006     2007     2008     2009    Total   Fair Value
                  ------- ------- -------  -------  -------  -------  ---------
                                                                         (1)
Fixed rate debt   $18,000 $19,000 $20,000  $21,000   $8,000  $86,000   $86,000
Weighted average
   interest rate    4.6%    4.6%    4.6%     4.9%      4.9%    4.6%      4.6%

The following table presents  scheduled  principal payments and related weighted
average  interest rates of the UCV's long-term fixed rate and variable rate debt
for the fiscal years ended June 30:


                     2005      2006      2007     2008       2009     Thereafter     Total      Fair Value
                   --------  --------  -------- --------  ---------- -----------  -----------  -----------
                                                                                                    (1)
                                                                               
Fixed rate debt    $282,000  $300,000  $596,000 $336,000  $2,723,000 $18,493,000  $22,730,000  $22,730,000
Weighted average
   interest rate     4.6%      4.6%      4.6%      6.1%      6.0%        6.0%         6.1%          4.6%

Variable Rate Debt $188,000  $199,000  $211,000 $223,000  $238,000    $5,487,000   $6,546,000   $6,546,000
Weighted average
   interest rate     5.8%      5.8%      5.8%      5.8%      5.8%        5.8%         5.8%          5.8%


(1)  The fair value of fixed-rate and variable rate debt was estimated  based on
     the  current  rates  offered for  fixed-rate  debt with  similar  risks and
     maturities.

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

ITEM 8. Financial Statements and Supplementary Data

     (a)  The Financial Statements and Supplementary Data of Sports Arenas, Inc.
          and Subsidiaries are listed and included under Item 15 of this report.

ITEM 9. Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

On June 29, 2004 the Company changed its accountants from KPMG LLP to Peterson &
Co., LLP. The change in independent  accountants was recommended and approved by
the Company's Audit Committee.  During the Company's fiscal years ended June 30,
2003 and June 30, 2002,  and the  subsequent  interim  periods  through June 29,
2004,  there were no  disagreements  with KPMG LLP on any  matter of  accounting
principles or practices,  financial statement  disclosure,  or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of KPMG LLP,
would have  caused  KPMG LLP to make  reference  thereto in their  report on the
financial  statements for such years. See the Company's  Current Report filed on
form 8K dated  June  29,  2004  and  filed  with  the  Securities  and  Exchange
Commission on July 6, 2004.

                                       10


ITEM 9A. Controls and Procedures

(a)  Evaluation  of  Disclosure  Controls and  Procedures.  As of the end of the
     period  covered by this report,  the  Company's  management,  including the
     Chief  Executive  Officer  and  Chief  Financial   Officer,   conducted  an
     evaluation of the  effectiveness of our disclosure  controls and procedures
     pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief
     Executive  Officer  and the Chief  Financial  Officer  concluded  that such
     disclosure  controls and  procedures  are  effective in alerting  them on a
     timely basis to material information relating to the Company required to be
     included in the Company's periodic filings under the Exchange Act.

(b)  Changes in  Internal  Control.  There have been no  significant  changes in
     internal  controls or in factors that could  significantly  affect internal
     controls,  including  any  corrective  actions  with regard to  significant
     deficiencies  and  material  weaknesses,  subsequent  to the date the Chief
     Executive Officer and Chief Financial Officer completed their evaluation.




                                       11

                                    PART III

ITEM 10.  Directors and Executive Officers of the Registrant

     (a) - (c) The  following  were  directors  and  executive  officers  of the
Company  during the year ended June 30, 2004.  All present  directors  will hold
office until the election of their respective successors. All executive officers
are to be elected annually by the Board of Directors.

 Directors & Officers   Age    Position and Tenure with Company
--------------------   ---     ------------------------------------------------
  Harold S. Elkan       61     President, Chief Executive Officer and
                                 Director since November 7, 1983

  Steven R. Whitman     51     Chief Financial Officer and Treasurer since
                                 May 1987; Director and Assistant Secretary 
                                 since August 1, 1989; Secretary since
                                 January 1995

  Patrick D. Reiley     63     Director since August 21, 1986, sole member
                                 of audit committee

  James E. Crowley      57     Director since January 10, 1989, resigned
                                 November 11, 2003

  Gordon L. Gerson      53     Director since June 3, 2003, resigned
                                 November 11, 2003

There are no  understandings  between any director or executive  officer and any
other person pursuant to which any director or executive officer was selected as
a director or executive officer.

      (d) Family Relationships - None

      (e) Business Experience

     1. Harold S. Elkan has been employed as the  President and Chief  Executive
Officer  of the  Company  since  1983.  For the  preceding  ten  years  he was a
principal of Elkan Realty and Investment Co., a commercial real estate brokerage
firm, and was also President of Brandy  Properties,  Inc., an owner and operator
of commercial real estate.

     2. Steven R. Whitman has been employed as the Chief  Financial  Officer and
Treasurer  since May 1987.  For the  preceding  five  years he was  employed  by
Laventhol & Horwath, CPAs, the last four of which were as a manager in the audit
department.

     3.  Patrick D.  Reiley was the  Chairman  of the Board and Chief  Executive
Officer of Reico Insurance Brokers, Inc. (Reico) from 1980 until June 1995, when
Reico ceased doing business. Reico was an insurance brokerage firm in San Diego,
California.  Mr. Reiley has been a principal of A.R.I.S., Inc., an international
insurance brokerage company, since 1997.

     4. James E.  Crowley has been an owner and  operator of various  automobile
dealerships for the last twenty years. Mr. Crowley was President and controlling
shareholder  of Coast Nissan from 1992 to August 1996; and has been President of
the  Automotive  Group since March 1994.  The  Automotive  Group  operates North
County Ford, North County Jeep-GMC-Kia, North County Hyundai, Valley Toyota, TAG
Collision Repair, and Lake Elsinore Ford.

     5. Gordon L. Gerson has been an attorney  with The Gerson Law Firm,  APC in
San Diego,  California for over the past five years  specializing in real estate
transactions and financings and creditors rights litigation.

      (f) Involvement in legal proceedings - None

     Section 16(a) Compliance  -Section 16(a) of the Securities  Exchange Act of
1934 requires the Company's  directors and executive  officers,  and persons who
own  more  than ten  percent  of a  registered  class  of the  Company's  equity
securities,  to file with the Securities and Exchange Commission initial reports
of  ownership  and  reports of changes in  ownership  of Common  Stock and other
equity  securities  of  the  Company.  Officers,   directors  and  greater  than
ten-percent  shareholders  are required by SEC regulation to furnish the Company
with copies of all Section 16(a) forms they file.

     To the Company's knowledge, based solely on written representations that no
other reports were  required,  during the three fiscal years ended June 30, 2002
through  2004,  all Section  16(a) filing  requirements  applicable to officers,
directors and greater than ten-percent beneficial owners were complied with.

                                       12

ITEM 11.  Executive Compensation

     (b) The following  Summary  Compensation  Table shows the compensation paid
for each of the last three  fiscal years to the Chief  Executive  Officer of the
Company and to the most  highly  compensated  executive  officers of the Company
whose total annual compensation for the fiscal year ended June 30, 2004 exceeded
$100,000.

                                                        Long-term  All Other
  Name and Principal                                     Compen-    Compen-
     Position         Year    Salary      Bonus   Other   sation    sation
 -----------------    ----    ------    -------- -----   ------    --------
 Harold S. Elkan,     2004   $350,000      --    $ --    $  --     $322,997 (1)
    President         2003    350,000  $100,000    --       --        --
                      2002    350,000      --      --       --        --

 Steven R. Whitman,   2004    100,000     5,000    --       --        --
    Chief Financial   2003    100,000      --      --       --        --
       Officer        2002    100,000      --      --       --        --

(1)  The Other Compensation  listed for Harold S. Elkan (Elkan) for 2003 relates
     to the value of 5,441,734  restricted  shares of the Company's common stock
     issued Elkan as extra  compensation in recognition of guarantees  Elkan has
     provided to  subsidiaries  of SAI.  See Item 13 Certain  Relationships  and
     Related Transactions.

     The Company  has no  Long-Term  Compensation  Plans.  Although  the Company
provides  some  miscellaneous  perquisites  and other  personal  benefits to its
executives, the amount of this compensation did not exceed the lesser of $50,000
or 10 percent of an executive's annual compensation.

     (c)-(f)  and (i) The  Company  has not  issued  any stock  options or stock
appreciation rights, nor does the Company maintain any long-term incentive plans
or pension plans.

     (g) Compensation of Directors - The Company pays a $500 fee to each outside
director  for each  director's  meeting  attended.  The Company does not pay any
other fees or compensation  to its directors as compensation  for their services
as directors.

     (h) Employment  Contracts,  Termination of Employment and Change-in-Control
Arrangements:  The  employment  agreement  for  Harold  S.  Elkan  (Elkan),  the
Company's President, expired in January 1998, however, the Company is continuing
to  honor  the  terms  of the  agreement  until  such  time as the  Compensation
Committee conducts a review and proposes a new contract. Pursuant to the expired
employment agreement, Elkan is to receive a sum equal to twice his annual salary
($350,000 as of June 30, 2004) plus $50,000 if he is  discharged  by the Company
without good cause,  or the employment  agreement is terminated as a result of a
change  in the  Company's  management  or voting  control.  The  agreement  also
provides for miscellaneous perquisites, which do not exceed either $50,000 or 10
percent of his annual salary.  The Board of Directors had previously  authorized
that up to $625,000  of loans can be made to Harold S. Elkan at  interest  rates
not to exceed 10  percent.  No loans  have been made to Harold S.  Elkan in over
three years.

     (j) Compensation Committee Interlocks and Insider Participation:  Harold S.
Elkan,  the  Company's  President,  was  appointed  by the  Company's  Board  of
Directors as a compensation  committee of one to review and set compensation for
all  Company  employees  other  than  Harold S.  Elkan.  The  Company's  outside
Directors set compensation for Harold S. Elkan.  None of the executive  officers
of the Company  had an  "interlock"  relationship  to report for the fiscal year
ended June 30, 2004.

     (k) Board Compensation Committee Report on Executive Compensation

     The  Company's  Board  of  Directors   appointed   Harold  S.  Elkan  as  a
compensation  committee  of one to review and set  compensation  for all Company
employees other than Harold S. Elkan.  The Board of Directors,  excluding Harold
S. Elkan and  Steven R.  Whitman,  set and  approve  compensation  for Harold S.
Elkan.

                                       13

     The  objectives of the  Company's  executive  compensation  program are to:
attract,  retain and motivate  highly  qualified  personnel;  and  recognize and
reward superior individual  performance.  These objectives are satisfied through
the use of the  combination  of  base  salary  and  discretionary  bonuses.  The
following  items  are  considered  in  determining  base  salaries:  experience,
personal performance,  responsibilities,  and, when relevant,  comparable salary
information from outside the Company.  Currently, the performance of the Company
is not a factor in setting compensation  levels.  Annual cash bonus payments are
discretionary and would typically relate to subjective  performance  criteria. A
bonus of $100,000 was awarded to Harold Elkan for the year ended June 30, 2003.

     In the fiscal year ended June 30, 1993 the outside  members of the Board of
Directors  approved a new  employment  agreement  for  Harold S.  Elkan  (Elkan)
effective from January 1, 1993 until December 31, 1997. This agreement  provided
for annual base salary of $250,000  plus  discretionary  bonuses as the Board of
Directors may determine and approve.  In setting the compensation levels in this
agreement,  the Board of  Directors,  in addition to  utilizing  their  personal
knowledge of executive compensation levels in San Diego, California, referred to
a special  compensation study performed in 1987 for the Board of Directors by an
independent  outside  consultant.  The Board of Directors is currently reviewing
information for purposes of entering into a new employment agreement with Elkan.
In the meantime, the Board of Directors approved an increase in Elkan's base pay
to $350,000 annually effective July 1, 1998.

     Patrick  D.  Reiley,  the  Company's  sole  outside  director,  serves as a
committee of one to approve  compensation  for Harold S. Elkan:  Harold S. Elkan
serves as a committee of one to approve the  compensation of all other employees
of the Company.

ITEM 12.  Security Ownership of Certain Beneficial Owners and Management
(a) - (c):
                                                    Nature of
                           Shares Beneficially      Beneficial     Percent of
  Name and Address               Owned              Ownership        Class
-------------------------- -------------------  -----------------  --------
                                                    Ownership
Harold S. Elkan                 5,441,734        Sole investment    50.001%
7415 Carroll Road                               and voting power
San Diego, California

All directors and officer       5,441,734        Sole investment    50.001%
  as a group                                    and voting power

ITEM 13.  Certain Relationships and Related Transactions
(a) - (c):
     1. The Company has $355,672 of  unsecured  loans  outstanding  to Harold S.
Elkan,   (President,   Chief  Executive  Officer,   Director  and  the  majority
shareholder  of the Company) as of June 30, 2004 ($360,653 as of June 30, 2003).
These  loans  were  made  prior to June  1998 and were in  conjunction  with the
overall  compensation  package  approved by the  compensation  committee  of the
Company.  The balance at June 30, 2004 bears interest at 8 percent per annum and
is due in monthly  installments  of interest only. The balance is due on demand.
The largest amount outstanding during the year was $360,653 in July 2004.

Elkan's  primary  source  of  repayment  of  these  loans  is  withholding  from
compensation   received  from  the  Company.  Due  to  the  Company's  financial
condition,  there is uncertainty about the Company's ability to continue funding
the additional  compensation necessary to repay the unsecured loans.  Therefore,
during the year ended June 30, 1999, the Company  recorded a $390,000  charge to
reflect  the  uncertainty  of the  repayment  of these  loans.  This  charge was
included  in selling,  general  and  administrative  expense.  The Company  also
discontinued  recording  the  interest  income on the loans except to the extent
that the balance of the loans  remained below  $390,000.  As of June 30, 2004 or
2003 there was no unrecorded accrued interest on the loans.

     2. 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 (Elkan), the Company's  President.  The loan was made to allow Elkan to
maintain  ownership  of at  least a  majority  of the  outstanding  stock of the
Company.  Failure by Elkan to maintain majority ownership at the time would have
been deemed a change of control of the Company under certain  credit  agreements
between  the Company or its  subsidiaries  and third  party  creditors,  thereby
constituting  an event of default  thereunder  allowing an  acceleration  of the
payment  obligations  under those  agreements.  The loan was  collateralized  by
21,808,267  shares of the Company stock held by ABI and provided funds to ABI to
pay its  obligation  related to its purchase of the Company's  stock in November
1983. The loan to ABI provided for interest to accrue at an annual rate of prime
plus 1-1/2 percentage  points (5.25 percent at June 30, 2003) and to be added to
the principal balance annually. The loan was due in November 2003.

Effective January 1, 1999, the Company  discontinued  recognizing the accrual of
interest income on the note receivable from shareholder. This policy was adopted
in recognition that the shareholder's  most likely source of funds for repayment
of the loan is from sale of the  Company's  stock or dividends  from the Company
and that the Company has unresolved liquidity problems. The cumulative amount of
interest  that accrued but was not recorded was  $1,172,566  as of June 30, 2004
($1,001,166 as of June 30, 2003). The balance of the loan,  including accrued by
unrecorded interest as of June 30, 2004 was $3,464,058.

                                       14

On June 30, 2004 the Company,  Elkan and ABI entered into a Debt Payment & Extra
Compensation Agreement ("Debt Agreement"). Pursuant to the Debt Agreement:

     1.   The Company  agreed to issue  1,360,433  shares of the Company  common
          stock  to ABI as  extra  compensation  in  recognition  of  guarantees
          provided to subsidiaries of the Company.
     2.   ABI agreed to the foreclosure by the Company of the 23,168,700  shares
          of Company common stock owned by ABI (including the additional  shares
          of common stock awarded to ABI) valued at $.03951 per share in partial
          satisfaction of the Company's note receivable from ABI.
     3.   The  Company  agreed  to issue  5,441,734  restricted  shares  ("Extra
          Compensation  Shares")  of  Company  common  stock  to  Elkan as extra
          compensation   in   recognition  of  guarantees  he  has  provided  to
          subsidiaries of the Company.
     4.   Elkan  and the  Company  agreed  to  enter  into a  Stock  Restriction
          Agreement.

The Debt Agreement was approved as fair to the Company and its  shareholders  by
Director Patrick D. Reiley, the Company's sole independent director, acting as a
Special Committee of one (the "Special Committee"). For such purposes Mr. Reiley
was represented by independent  counsel. The fairness to the Company of the Debt
Agreement  was  based  in part  upon  the  valuation  of  Company  common  stock
determined  in a written  report  prepared  for the Special  Committee  for such
purpose by an independent investment banking firm. All other parties to the Debt
Agreement were represented by their own respective counsel.

On September 2, 2004,  the Company and Elkan entered into the Stock  Restriction
Agreement ("Agreement") , with an effective date of June 30, 2004. The Agreement
applies to the 5,441,734 of shares of Company common stock ("Restricted Shares")
issued to Elkan  pursuant to the Debt  Agreement and provides  for,  among other
things:

     (1)  Restrictions on Elkan's ability to transfer the Restricted  Shares for
          five years;

     (2)  Elkan's  forfeiture to the Company of the Restricted Shares in certain
          circumstances, including if there occurs an event of default, if Elkan
          is  terminated  with  cause,  or if the net fair  market  value of the
          Company's assets shall have failed to increase by at least 2.5 percent
          per annum,  compounded annually, over the period between the effective
          date of the Agreement and the 90th day prior to the fifth  anniversary
          of such effective date;

     (3)  the Company's  right to purchase any or all of the  Restricted  Shares
          from Elkan at $.05936 per share in limited circumstances; and

     (4)  the grant of certain anti-dilution and registration rights to Elkan as
          set forth in the Agreement.

ITEM 14. Principal Accountants Fees and Services:

KPMG LLP, the Company's  principal  accounting firm until June 29, 2004,  billed
the Company for audit fees totaling  $136,581 and $70,683 during the years ended
June 30,  2004  and  2003,  respectively.  KPMG LLP did not  perform  any  other
services for the Company during those years.

                                       15


                                     PART IV

ITEM 15.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

  A. The following documents are filed as a part of this report:

     1.   Financial Statements of Registrant

        Independent Auditors' Reports                                   17-18
        Sports Arenas, Inc. and subsidiaries consolidated
         financial statements:
           Balance sheets as of June 30, 2004 and 2003                   19
           Statements of operations for each of the years in the
              three-year period ended June 30, 2004                      20
           Statements of shareholders' equity (deficiency)
               for each of the years in the three-year period
               ended June 30, 2004                                       21
           Statements of cash flows for each of the years in the
              three-year period ended June 30, 2004                    22-23
           Notes to consolidated financial statements                  24-35

     2.   Financial Statements of Unconsolidated Subsidiaries

        UCV, L.P. (a California limited partnership)- 35 percent
         owned investee:
           Independent Auditors' Reports                               36-37
           Balance sheets as of June 30, 2004 and 2003                   38
           Statements of operations and partners' equity (deficit)
              for each of the years ended June 30, 2004,
              June 30, 2003, March 31, 2002 and the three-month
              period ended June 30, 2002                                 39
           Statements of cash flows for each of the years
              ended June 30, 2004, June 30, 2003, March 31, 2002
              and the three-month period ended June 30, 2002             40
           Notes to consolidated financial statements                  41-45


     3. Financial Statement Schedules

          There are no financial statement schedules because they
          are either not applicable  or the  required  information
          is shown  in the  financial statement or notes thereto.


     4.  Exhibits
            Index to Exhibits.                                           47




B. Reports on Form 8-K:

     No  reports on Form 8-K were  filed  during the last  quarter of the period
     covered by this report:





                                       16







                          INDEPENDENT AUDITORS' REPORT



Board of Directors and Stockholders
Sports Arenas, Inc.

We have audited the  consolidated  balance sheet of Sports Arenas,  Inc. and its
subsidiaries  ("the Company) as of June 30, 2004,  and the related  consolidated
statements of operations,  shareholders' equity (deficiency), and cash flows for
the year then ended.  These financial  statements are the  responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial  statements based on our audit. The consolidated  financial statements
of Sports Arenas, Inc. and its subsidiaries as of June 30, 2003, were audited by
other  auditors whose report dated  September 5, 2003,  expressed an unqualified
opinion with a going concern explanatory paragraph on those statements.

We  conducted  our audit in  accordance  with  auditing  standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain  reasonable  assurance about whether the
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial  statements.  An audit also  includes  assessing  the  accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating the overall  financial  statement  presentation.  We believe that our
audit provides a reasonable basis for our opinion.

In our opinion,  the 2004 consolidated  financial  statements  referred to above
present  fairly,  in all material  respects,  the  financial  position of Sports
Arenas,  Inc. and its  subsidiaries  as of June 30, 2004, and the results of its
operations  and its cash  flows  for the year  then  ended  in  conformity  with
accounting principles generally accepted in the United States of America.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will  continue as a going  concern.  As discussed in Note 11 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 11. The consolidated  financial statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.



/s/ Peterson & Co., LLP
    PETERSON & CO., LLP
     November 15, 2004










                                       17







             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



The Board of Directors and Shareholders
Sports Arenas, Inc.:


We have audited the  accompanying  consolidated  balance sheet of Sports Arenas,
Inc. and  subsidiaries  (the  "Company")  as of June 30,  2003,  and the related
consolidated  statements of operations,  shareholders'  equity  (deficiency) and
cash flows for each of the years in the  two-year  period  ended June 30,  2003.
These  consolidated  financial  statements are the  responsibility  of Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of Sports Arenas, Inc.
and  subsidiaries  as of June 30, 2003, and the results of their  operations and
their cash  flows for each of the years in the  two-year  period  ended June 30,
2003, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 4(b) to the consolidated  financial  statements,  effective
April 1, 2003,  the  Company  changed  its method of  accounting  for its equity
investment in UCV, L.P.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will  continue as a going  concern.  As discussed in Note 11 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 11. The consolidated  financial statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.


/S/KPMG LLP
   KPMG LLP
    San Diego, California
    September 5, 2003


                                       18



                      SPORTS ARENAS, INC. AND SUBSIDIARIES
               CONSOLIDATED BALANCE SHEETS-JUNE 30, 2004 AND 2003

                                                        2004            2003
                                                   ------------    ------------
                              ASSETS
Current assets:
 Cash and cash equivalents ....................... $    186,716    $    365,674
 Other receivable-affiliate (Note 4b) ............         --           350,000
 Trade receivables, net of allowance for doubtful
   accounts of $45,000 and $228,000 respectively .      275,004         402,875
 Inventories (Note 2) ............................      605,843         641,127
 Prepaid expenses ................................       27,005          34,958
                                                   ------------    ------------
       Total current assets ......................    1,094,568       1,794,634
                                                   ------------    ------------

Property and equipment, at cost:
 Machinery and equipment .........................    1,600,609       1,492,404
 Leasehold improvements ..........................      396,991         396,991
                                                   ------------    ------------
                                                      1,997,600       1,889,395
    Less accumulated depreciation and amortization   (1,167,688)     (1,052,740)
                                                   ------------    ------------
        Net property and equipment ...............      829,912         836,655
                                                   ------------    ------------

Other assets:
 Deferred tax assets (Note 7) ....................    1,330,000       4,661,000
 Investments (Note 4) ............................    3,797,288       5,344,007
 Other ...........................................       77,371          95,671
                                                   ------------    ------------
                                                      5,204,659      10,100,678
                                                   ------------    ------------

                                                   $  7,129,139    $ 12,731,967
                                                   ============    ============
             LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
 Current portion of long-term debt (Note 5a) ..... $     18,071    $      5,771
 Accounts payable ................................      241,540         441,434
 Accrued payroll and related expenses ............      278,286         282,080
 Accrued income taxes ............................      979,000            --
 Other liabilities ...............................         --             3,796
                                                   ------------    ------------
     Total current liabilities ...................    1,516,897         733,081
                                                   ------------    ------------

Long-term debt, excluding current
  portion (Note 5a) ..............................       67,232            --
                                                   ------------    ------------

Deferred tax liabilities (Note 7) ................    5,158,000      10,514,000
                                                   ------------    ------------

Minority interest in consolidated 
  subsidiary (Note 10b) ..........................       15,000         431,839
                                                   ------------    ------------

Shareholders' equity:
 Common stock, $.01 par value, 50,000,000 shares
   authorized, issued and outstanding: 10,883,467
   in 2004 and 27,250,000 in 2003 ................      340,521         272,500
 Additional paid-in capital ......................    2,038,776       1,730,049
 Treasury stock ..................................     (915,176)           --
 Accumulated earnings (deficit) ..................   (1,092,111)      1,341,990
                                                   ------------    ------------
                                                        372,010       3,344,539
 Less note receivable from shareholder (Note 3b) .         --        (2,291,492)
                                                   ------------    ------------
      Total shareholders' equity .................      372,010       1,053,047
                                                   ------------    ------------

Commitments and contingencies (Notes 6 and 8)

                                                   $  7,129,139    $ 12,731,967
                                                   ============    ============

          See accompanying notes to consolidated financial statements.


                                       19


                      SPORTS ARENAS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    YEARS ENDED JUNE 30, 2004, 2003 AND 2002


                                                                     2004            2003            2002
                                                                ------------    ------------    ------------
Revenues:
                                                                                                
 Golf .......................................................   $  2,657,050    $  3,038,746    $  2,589,293
 Rental .....................................................         82,885          78,957         190,234
 Other ......................................................         33,507         201,618         329,402
 Other-related party (Note 4b) ..............................         47,423         724,229         186,371
                                                                ------------    ------------    ------------
                                                                   2,820,865       4,043,550       3,295,300
                                                                ------------    ------------    ------------
Costs and expenses:
 Golf .......................................................      2,758,039       2,829,698       2,604,436
 Rental .....................................................         77,900          75,400         189,458
 Selling, general, and administrative .......................      2,704,417       2,272,402       2,256,918
 Depreciation and amortization ..............................        200,324         195,223         271,323
 Provision for impairment losses (Note 3b) ..................      1,376,316            --            44,915
                                                                ------------    ------------    ------------
                                                                   7,116,996       5,372,723       5,367,050
                                                                ------------    ------------    ------------

Loss from operations ........................................     (4,296,131)     (1,329,173)     (2,071,750)
                                                                ------------    ------------    ------------
Other income (charges):
 Investment income:
   Related party (Notes 3a and 3b) ..........................         33,804          40,251          27,890
   Other ....................................................            299           1,315           1,807
 Interest expense and amortization of finance costs .........         (2,798)        (57,656)        (84,679)
 Equity in income (loss) of investee (Note 4a) ..............         76,958      26,281,844         (59,788)
 Gain on sale (Note 4c) .....................................        110,241            --              --
                                                                ------------    ------------    ------------
                                                                     218,504      26,265,754        (114,770)
                                                                ------------    ------------    ------------

Income (loss) from continuing operations
   before income taxes ......................................     (4,077,627)     24,936,581      (2,186,520)

Income tax benefit (expense) ................................      1,284,000      (5,838,000)           --
                                                                ------------    ------------    ------------

Income (loss) from continuing operations ....................     (2,793,627)     19,098,581      (2,186,520)

Income from discontinued operations net of income
      tax of $238,000 in 2004 and $15,000 in 2003 (Note 10) .        359,526          22,955           7,592
Cumulative effect of change in accounting principle (Note 4b)           --            37,675            --
                                                                ------------    ------------    ------------

Net income (loss) ...........................................   ($ 2,434,101)   $ 19,159,211    ($ 2,178,928)
                                                                ============    ============    ============

Per common share (based on weighted average shares
 outstanding:
 Income (loss) from continuing operations ...................     ($ 0.10)         $  0.70         ($ 0.08)
   Discontinued operations ..................................        0.01              --              --
   Cumulative effect of change in accounting principle ......        --                --              --
                                                                  -------          -------          ------
 Net income (loss) ..........................................     ($ 0.09)         $  0.70          ($ 0.08)
                                                                  =======          =======          =======

Weighted average number of shares outstanding ...............     27,250,000      27,250,000      27,250,000
                                                                ============    ============    ============







          See accompanying notes to consolidated financial statements.


                                       20


                      SPORTS ARENAS, INC. AND SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
                    YEARS ENDED JUNE 30, 2004, 2003 AND 2002



                                Common Stock                                               Note
                            -------------------   Additional                 Retained    Receivable
                            Number of               Paid-In     Treasury     Earnings       from
                             Shares     Amount      Capital      Stock       (Deficit)   Shareholder     Total
                           ----------  --------   ----------   ---------   -----------   -----------  ------------

                                                                                     
Balance at June 30, 2001   27,250,000  $272,500   $1,730,049    $   --    ($15,638,293)  ($2,291,492) ($15,927,236)

  Net loss                       --        --           --          --      (2,178,928)          --     (2,178,928)
                          -----------  --------   ---------- -----------   ------------   ----------  ------------

Balance at June 30, 2002   27,250,000   272,500    1,730,049        --      (17,817,221)  (2,291,492)  (18,106,164)

  Net income                     --        --           --          --       19,159,211         --      19,159,211
                          -----------  --------   ----------   ---------   ------------   ----------   -----------
Balance at June 30, 2003   27,250,000   272,500    1,730,049        --        1,341,990   (2,291,492)    1,053,047

  Foreclosure on
     stock (Note 3b)      (23,168,700)     --           --      (915,176)          --      2,291,492     1,376,316
  Issue of
     shares (Note 3b)       6,802,167    68,021      308,727        --             --           --         376,748
  Net loss                       --        --           --          --       (2,434,101)        --      (2,434,101)
                          -----------  --------   ----------   ----------  ------------   ----------   -----------

Balance at June 30, 2004   10,883,467  $340,521   $2,038,776   ($915,176)   ($1,092,111)  $     --      $  372,010
                          ===========  ========   ==========   ==========  ============   ==========   ============









          See accompanying notes to consolidated financial statements.



                                       21


                      SPORTS ARENAS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                    YEARS ENDED JUNE 30, 2004, 2003 AND 2002



                                                                 2004            2003           2002
                                                             -----------    ------------    -----------
Cash flows from operating activities:
                                                                                            
 Net income (loss) .......................................   ($2,434,101)   $ 19,159,211    ($2,178,928)
   Less income from discontinued operations ..............      (359,526)        (22,955)        (7,592)
                                                             -----------    ------------    -----------
   Income (loss) from continuing operations ..............    (2,793,627)     19,136,256     (2,186,520)
 Adjustments to reconcile net income (loss) to cash
   used by operating activities:
     Depreciation and amortization .......................       200,324         195,223        271,323
     Equity in income (loss) of investee .................       (76,958)    (26,319,519)        59,788
     Deferred income .....................................          --          (192,000)        48,000
     Provision for impairment losses .....................     1,376,316            --           44,915
     Gain on sale of assets ..............................      (110,241)           --             --
     Stock compensation expense ..........................       376,748            --             --
     Deferred taxes ......................................    (2,263,000)      5,838,000           --
     Changes in assets and liabilities:
       (Increase) decrease in receivables ................       463,775        (294,242)      (124,339)
       (Increase) decrease in inventories ................        35,284         151,563       (207,579)
      (Increase) decrease in prepaid expenses ............         7,953          20,112        (14,878)
       Increase (decrease) in accounts payable ...........       (45,515)       (456,755)       248,077
       Increase (decrease) in accrued expenses and
         other liabilities ...............................       987,746          14,744          6,932
     Other ...............................................        18,300          37,612         62,284
                                                             -----------    ------------    -----------
       Net cash used by continuing operations ............    (1,822,895)     (1,869,006)    (1,791,997)
       Net cash provided (used) by discontinued operations         9,059        (320,402)        70,104
                                                             -----------    ------------    -----------
        Net cash used by operating activities ............    (1,813,836)     (2,189,408)    (1,721,893)
                                                             -----------    ------------    -----------

Cash flows from investing activities:
  Additions to property and equipment ....................      (193,581)        (17,850)          --
  Proceeds from sale of miscellaneous assets .............       110,241          19,465         30,700
  Distributions to holders of minority interest ..........       (73,000)       (370,838)       (50,000)
  Distributions received from investees ..................     1,711,686       3,618,276      2,102,820
                                                             -----------    ------------    -----------
     Net cash provided by investing activities ...........     1,555,346       3,249,053      2,083,520
                                                             -----------    ------------    -----------

Cash flows from financing activities:
  Scheduled principal payments ...........................       (16,946)         (7,685)       (32,486)
  Proceeds from short-term borrowings ....................          --            75,000        450,000
  Payments on short-term borrowings ......................          --          (800,631)    (1,255,000)
  Proceeds from long-term debt ...........................        96,478            --             --
                                                             -----------    ------------    -----------
    Net cash provided (used) by financing activities .....        79,532        (733,316)      (837,486)
                                                             -----------    ------------    -----------

Net increase (decrease) in cash and equivalents ..........      (178,958)        326,329       (475,859)
Cash and cash equivalents, beginning of year .............       365,674          39,345        515,204
                                                             -----------    ------------    -----------
Cash and cash equivalents, end of year ...................   $   186,716    $    365,674    $    39,345
                                                             ===========    ============    ===========






                                       22


                      SPORTS ARENAS, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                    YEARS ENDED JUNE 30, 2004, 2003, AND 2002

SUPPLEMENTAL CASH FLOW INFORMATION:
                          2004        2003       2002    
                        -------    ---------   --------
   Interest paid        $ 8,000    $  54,000   $ 11,000
                        =======    =========   ========

Supplemental schedule of non-cash investing and financing activities:

     During the year ended June 30, 2004, the Company issued stock  compensation
          totaling  $376,748,  which  increased  common  stock  by  $68,021  and
          increased additional paid in capital by $308,727.

     During the  year  ended  June  30,  2004  the  Company  foreclosed  on  the
          23,168,700 shares of the Company's stock held by Andrew Bradley,  Inc.
          (ABI) as collateral for ABI's note payable to the Company. The balance
          of the note was  $3,464,058  with a related  allowance for  impairment
          loss of  $2,548,882.  The  Company  shares,  which are  being  held as
          treasury stock, were valued at $915,176.

     During the year ended June 30, 2003,  the Company closed its bowling center
          operations and sold the machinery and equipment for $19,465.  The cost
          and  accumulated  depreciation  of the assets sold were  $473,861  and
          $471,112, respectively.

     During the year ended June 30, 2003, the Company  reclassified  $280,631 of
          principal payments on short-term debt to accrued interest.

     During the year ended June 30, 2002 the Company  assigned its  interests in
          the  leasehold  and  the  related  subleasehold  interests  for a note
          receivable of $37,500.  The note receivable was assigned to the master
          lessor in satisfaction of a portion of the rent due. There was $75,615
          of unamortized  deferred  lease costs for which an impairment  loss of
          $44,915 had been recorded in the year ended June 30, 2002.






















          See accompanying notes to consolidated financial statements.


                                       23

                      SPORTS ARENAS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    YEARS ENDED JUNE 30, 2004, 2003 AND 2002

1. Summary of significant accounting policies and practices:

     Description of business- The Company,  primarily  through its subsidiaries,
          owns and operates a graphite  golf club shaft  manufacturer  and three
          commercial  real estate  properties  (35%  owned).  The  Company  also
          performs a minor  amount of services in property  management  and real
          estate brokerage related to commercial leasing.

     Principles  of  consolidation  - The  accompanying  consolidated  financial
          statements  include  the  accounts  of  Sports  Arenas,  Inc.  and all
          subsidiaries and  partnerships  more than 50 percent owned or in which
          there is a controlling financial interest (the Company).  All material
          inter-company  balances and  transactions  have been  eliminated.  The
          minority   interests'  share  of  the  net  loss  of  partially  owned
          consolidated  subsidiaries  have been  recorded  to the  extent of the
          minority interests'  contributed  capital. The Company uses the equity
          method  of  accounting  for  investments  in  entities  in  which  its
          ownership   interest   gives  the  Company  the  ability  to  exercise
          significant  influence  over  operating and financial  policies of the
          investee.   The  Company  uses  the  cost  method  of  accounting  for
          investments  in which it has virtually no influence over operating and
          financial policies.

     Cash and cash  equivalents - Cash and cash  equivalents only include highly
          liquid  investments  with  original  maturities of less than 3 months.
          There were no cash equivalents at June 30, 2004 and 2003.

     Inventories -  Inventories  are  stated  at the  lower  of cost  (first-in,
          first-out) or market and relate to golf club shaft manufacturing.

     Property and  equipment  -  Property  and  equipment  are  stated  at cost.
          Depreciation and amortization are provided on the straight-line method
          based on the estimated  useful lives of the related assets,  which are
          from 3 to 15 years.

     Investments - The  Company's  purchase  price in March 1975 of the one-half
          interest  in UCV,  L.P.  exceeded  the equity in the book value of net
          assets of the project at that time by  approximately  $1,300,000.  The
          excess was  allocated to land and  buildings  based on their  relative
          fair values.  The amount  allocated to buildings  was being  amortized
          over the remaining  useful lives of the buildings and the amortization
          was included in the Company's  depreciation and  amortization  expense
          until the property was sold April 1, 2003.

     Income taxes - The Company  accounts  for income  taxes using the asset and
          liability  method.  Deferred tax assets and liabilities are recognized
          for the future tax  consequences  attributable to differences  between
          the  financial  statement  carrying  amounts  of  existing  assets and
          liabilities and their  respective tax bases and operating loss and tax
          credit carryforwards. Deferred tax assets and liabilities are measured
          using  enacted tax rates  expected  to apply to taxable  income in the
          years  in  which  those  temporary  differences  are  expected  to  be
          recovered   or  settled.   The  effect  on  deferred  tax  assets  and
          liabilities  of a change in tax rates is recognized in the period that
          includes the enactment date.

     Amortization of intangible  assets - Deferred loan costs are amortized over
          the terms of the loans on the straight-line method, which approximates
          the effective interest method. Unamortized loan costs related to loans
          refinanced  or paid prior to their  contractual  maturity  are written
          off.

     Valuation  impairment - The Company adopted  Statement No. 144,  Accounting
          for the  Impairment or Disposal of Long-Lived  Assets  (Statement  No.
          144),  on  July  1,  2002.   Statement  No.  144  addresses  financial
          accounting  and reporting for the impairment or disposal of long-lived
          assets. This statement requires that long-lived assets be reviewed for
          impairment  whenever events or changes in circumstances  indicate that
          the carrying amount of an asset may not be recoverable. Recoverability
          of  assets  to be held and used is  measured  by a  comparison  of the
          carrying  amount of an asset to future net cash flows  expected  to be
          generated by the asset. If the carrying amount of an asset exceeds its
          estimated future cash flows, an impairment charge is recognized by the
          amount by which the carrying amount of an asset exceeds the fair value
          of the asset.  Statement  No. 144  requires  companies  to  separately
          report  discontinued  operations  and  extends  that  reporting  to  a
          component  of an entity  that  either has been  disposed  of (by sale,
          abandonment,  or in a distribution to owners) or is classified as held
          for sale.  Assets to be disposed  of are  reported at the lower of the
          carrying  amount or the fair value  less  costs to sell.  Prior to the
          adoption of Statement  No. 144,  the Company  followed the guidance of
          Statement No. 121.

                                       24

     Concentrations  of credit risk - Financial  instruments  which  potentially
          subject  the  Company to  concentrations  of credit risk are the notes
          receivable described in Note 3.

     Fair value of financial instruments - The following methods and assumptions
          were  used to  estimate  the  fair  value of each  class of  financial
          instruments where it is practical to estimate that value:
          Cash and  cash   equivalents,   other   receivables-affiliate,   trade
               receivables, accounts payable, and notes payable-short term - the
               carrying  amount reported in the balance sheet  approximates  the
               fair value due to their short-term maturities.
          Note receivable-affiliate  - It is  impractical  to estimate  the fair
               value of the note  receivable-affiliate  due to the related party
               nature of the instrument.
          Long-term debt - the fair value was determined by  discounting  future
               cash flows using the Company's current incremental borrowing rate
               for similar types of borrowing  arrangements.  The carrying value
               of long-term debt reported in the balance sheet  approximates the
               fair value.

     Use  of  estimates  -  Management  of the  Company  has  made a  number  of
          estimates  and  assumptions  relating to the  reporting  of assets and
          liabilities,  the disclosure of contingent  assets and  liabilities at
          the  date  of the  consolidated  financial  statements,  and  reported
          amounts of revenue and expenses during the reporting period to prepare
          these  consolidated  financial  statements  in  conformity  with  U.S.
          generally accepted accounting principles.  Actual results could differ
          from these estimates.

     Income (loss) per share-  Basic  earnings per share is computed by dividing
          income  (loss)  by  the  weighted  average  number  of  common  shares
          outstanding during each period. Diluted earnings per share is computed
          by dividing  the amount of income  (loss) for the period by each share
          that would  have been  outstanding  assuming  the  issuance  of common
          shares for all potentially dilutive securities  outstanding during the
          reporting period.  The Company  currently has no potentially  dilutive
          securities outstanding. The weighted average shares used for basic and
          diluted  earnings per share  computation  was 27,250,000 for the years
          ended June 30, 2004, June 30, 2003 and June 30, 2002.

2. Inventories:

   Inventories consist of the following:
                                               2004         2003
                                            ---------    ---------
               Raw materials ............   $ 133,102    $ 126,766
               Work in process ..........     403,770      561,161
               Finished goods ...........     384,971      186,200
                                            ---------    ---------
                                              921,843      874,127
                 Less valuation allowance    (316,000)    (233,000)
                                            ---------    ---------
                                            $ 605,843    $ 641,127
                                            =========    =========

3. Notes receivable:

     (a)  Affiliate - The Company made unsecured  loans to Harold S. Elkan,  the
          Company's   President   and,   indirectly,   the  Company's   majority
          shareholder,  and recorded  interest income of $33,804,  $40,251,  and
          $27,890 in 2004, 2003, and 2002, respectively. The loans bear interest
          at 8 percent per annum and are due on demand.

          Elkan's  primary  source of  repayment  of  unsecured  loans  from the
          Company is withholding  from  compensation  received from the Company.
          Due to the Company's financial  condition,  there is uncertainty about
          the Company's ability to continue funding the additional  compensation
          necessary to repay the  unsecured  loans.  Therefore,  during the year
          ended June 30, 1999, the Company recorded a $390,000 charge to reflect
          the uncertainty of the  collectibility  of the unsecured  loans.  This
          charge was included in selling, general and administrative expense. As
          a result  of the  balance  of the  unsecured  loans  decreasing  below
          $390,000 as of June 30, 2004 and June 30, 2003,  $4,981 and $29,347 of
          the  valuation  allowance  were  recovered in the years ended June 30,
          2004 and 2003, respectively.

          The Company also  discontinued  recording  the interest  income on the
          loans  except to the extent  that the  balance  of the loans  remained
          below  $390,000.  As of June 30, 2004 and 2003 no interest  accrued on
          the loans was unrecorded.
                                               2004         2003
                                            ---------    ---------
               Balance of note receivable   $ 355,672    $ 360,653
               Less valuation allowance .    (355,672)    (360,653)
                                            ---------    ---------
                                            $    --      $    --
                                            =========    =========

                                       25

     (b)  Shareholder - 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 provided for
          interest  to accrue at an annual  rate of prime plus 1-1/2  percentage
          points and to be added to the principal balance annually. The loan was
          due in November 2003. The loan was collateralized by 21,808,267 shares
          of the Company's stock. The original loan amount plus accrued interest
          of $1,230,483 was presented as a reduction of shareholders'  equity as
          of June 30, 2003 because ABI's only asset is the stock of the Company.

          Effective  January 1, 1999, the Company  discontinued  recognizing the
          accrual of interest income on the note  receivable  from  shareholder.
          This policy was adopted in  recognition  that the  shareholder's  most
          likely  source of funds for  repayment of the loan is from sale of the
          Company's stock or dividends from the Company and that the Company has
          unresolved liquidity problems.  The cumulative amount of interest that
          accrued  but was not  recorded  was  $1,172,566  as of June  30,  2004
          ($1,001,166 as of June 30, 2003).

          On June 30,  2004 the  Company,  Harold  S.  Elkan  ("Elkan")  and ABI
          entered   into  a  Debt   Payment  &  Extra   Compensation   Agreement
          ("Agreement") whereby:

          1.   The Company  agreed to issue  1,360,433  shares of Company common
               stock to ABI as extra  compensation  in recognition of guarantees
               provided to subsidiaries of SAI.
          2.   ABI  agreed to the  foreclosure  and sale to the  Company  of the
               23,168,700 shares of Company common stock owned by ABI (including
               the  additional  shares of common stock awarded to ABI) valued at
               $.03951 per share in partial  satisfaction  of the Company's note
               receivable from ABI.
          3.   The Company agreed to issue 5,441,734  restricted  shares ("Extra
               Compensation  Shares") of Company  common stock to Elkan as extra
               compensation  in recognition of guarantees  Elkan has provided to
               subsidiaries of the Company.
          4.   Elkan and the Company  were to  negotiate  and enter into a Stock
               Restriction Agreement.

          On  September  2, 2004,  the Company and Elkan  entered into the Stock
          Restriction  Agreement  ("Agreement") , with an effective date of June
          30, 2004. The Agreement  applies to the 5,441,734 of shares of Company
          common stock  ("Restricted  Shares")  issued to Elkan  pursuant to the
          Debt Payment and Compensation  Agreement and provides for, among other
          things:

          (a)  Restrictions on Elkan's ability to transfer the Restricted Shares
               for five years;
          (b)  Elkan's  forfeiture  to the Company of the  Restricted  Shares in
               certain  circumstances,  including  if there  occurs  an event of
               default,  if Elkan is terminated  with cause,  or if the net fair
               market  value  of the  Company's  assets  shall  have  failed  to
               increase by at least 2.5 percent per annum,  compounded annually,
               over the period  between the effective  date of the Agreement and
               the 90th day prior to the  fifth  anniversary  of such  effective
               date;                     
          (c)  The  Company's  right to  purchase  any or all of the  Restricted
               Shares from Elkan at $.05936 per share in limited  circumstances;
               and                     
          (d)  the grant of certain  anti-dilution  and  registration  rights to
               Elkan as set forth in the Agreement.

4. Investments:
     (a)  Investments consist of the following:
                                                        2004          2003 
                                                    -----------   -----------
           Accounted for on the equity method:
             Investment in UCV, L.P. ............   $ 3,797,288   $ 5,277,007
             Vail Ranch Limited Partnership
              (See Note 10b) ....................          --          67,000
                                                    -----------   -----------
                                                      3,797,288     5,344,007
                                                    -----------   -----------
          Accounted for on the cost basis:
             All Seasons Inns, La Paz ...........          --          37,926
               Less provision for impairment loss          --         (37,926)
                                                    -----------   -----------
                Total investments ...............   $ 3,797,288   $ 5,344,007
                                                    ===========   ===========

          The following is a summary of the equity in income (loss) from UCV:
                                       2004       2003           2002
                                     -------   -----------    ---------
           UCV, L.P. ..............  $76,958   $26,281,844    $ (59,788)

          The equity in income  (loss)  from VRLP (see Note 10b) is  included in
          the income from discontinued operations.

                                       26

     (b)  Investment in UCV, L.P. (real estate operation segment):

          The Company was a one percent  managing general partner and 49 percent
          limited  partner  in UCV,  L.P.  (UCV)  which  owned  University  City
          Village,  a 542 unit apartment project in San Diego,  California until
          it  was  sold  April  1,  2003.  As a  result  of  the  $3,769,000  of
          distributions  the Company received related to the sale, the Company's
          beneficial ownership in UCV was reduced from 50 percent to 35 percent.

          Effective April 1, 2003, the Company began recording its equity in the
          income  (loss)  of UCV on a  current  basis  rather  than  on a 91 day
          delayed  basis.  The  Company  has  treated  this as a  change  in its
          accounting  principle and  accordingly  has  classified its $37,675 of
          equity  in the net  income  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.

          On April 1, 2003, UCV sold the University City Village  Apartments for
          $58,400,000  in  cash.   After  deducting   current  selling  expenses
          ($2,495,820),  paying mortgage loans ($38,000,000),  and the refund of
          lender  impounds  ($1,340,348),  the  net  sale  proceeds  to UCV  was
          approximately  $19,298,141 and UCV's gain from sale was  approximately
          $52,558,000.  As of June 30, 3004, UCV distributed a cumulative amount
          of approximately $3,769,000 of such proceeds to the Company in partial
          liquidation  of its  partnership  interest in UCV. Of this total,  UCV
          distributed  $2,500,000 to the Company in the year ended June 30, 2003
          and  $1,269,000 in the year ended June 30, 2004.  The remaining  funds
          were  reinvested by UCV in "like-kind"  property to defer a portion of
          the  income  tax  consequences  of the  sale.  As  part  of the  sales
          transaction,  the Company earned a $350,000 sales  commission that was
          included in UCV' selling expenses.

          The following is  summarized  financial  information  of UCV's balance
          sheets as of June 30, 2004 and 2003:
                                      2004          2003
                                   -----------   -----------
               Total assets ....   $44,431,000   $15,617,000
               Total liabilities    30,423,000       406,000





          The following is summarized financial  information of UCV's results of
          operations:
                                                      Three Months
                             Year Ended   Year Ended     Ended      Year Ended
                              June 30,     June 30,      June 30,     March 31,
                                2004         2003         2002         2002
                             ----------   ----------   ----------   ----------
Revenues .................   $3,611,000 $       --     $     --     $     --
Operating and general
  and administrative costs    1,082,000         --           --           --
Depreciation .............      868,000         --           --           --
Interest and amortization
  of loan costs ..........    1,442,000         --           --           --
Income (loss) before
  discontinued operations       219,000         --           --           --
Income (loss) from
  discontinued operations          --     52,564,000       76,000     (119,000)
Net income (loss) ........      219,000   52,564,000       76,000     (119,000)

          The loan agreement for one of the  properties  owned by UCV provides a
          loan  covenant  that  requires  the  Company to maintain a minimum net
          worth of  $1,000,000.  As of June 30, 2004,  the Company does not meet
          this  requirement.  UCV is in the process of  requesting a waiver from
          the lender regarding this covenant.

          The Company  performs  property  management  services  for UCV and its
          subsidiaries. The Company recognized management fee income of $47,423,
          $110,229,  and  $138,371 in the  twelve-month  periods  ended June 30,
          2004,  2003,  and  2002,  respectively.  In  addition,  pursuant  to a
          development  fee  agreement  with UCV dated July 1, 1998,  the Company
          received  development fees totaling $72,000 in the year ended June 30,
          2003 and $96,000 in the year ended June 30, 2002. The Company had been
          deferring  one half of fees it was  receiving  from UCV  pursuant to a
          development  services  agreement.  The balance of  deferred  income at
          March 31, 2003  ($228,000)  was recognized as revenue on April 1, 2003
          upon the sale of the property.  The Company believes that the terms of
          these  agreements  were no less  favorable  to the Company or UCV than
          could be obtained with an independent third party.

                                       27

          A reconciliation of the investment  (distributions  received in excess
          of basis) in UCV as of June 30 is as follows:
                                                2004            2003
                                            ------------    ------------
               Balance, beginning .......   $  5,277,007    $(18,008,401)
               Equity in income .........         76,958      26,319,519
               Cash distributions .......     (1,556,677)     (3,025,500)
               Amortization of purchase
                  price in excess
                  of equity in net assets           --            (8,611)
                                            ------------    ------------
               Balance, ending ..........   $  3,797,288    $  5,277,007
                                            ============    ============

     (c)  Other investment:

          The  Company  owned a 6 percent  limited  partnership  interest in two
          partnerships  that owned and operated a 109-room  hotel (the Hotel) in
          La Paz,  Mexico (All  Seasons  Inns,  La Paz).  The cost basis of this
          investment  ($162,629)  had been reduced by provisions  for impairment
          loss of $37,926  recorded in the year ended June 30, 2000 and $125,000
          recorded  in the year ended June 30,  1991.  On August 13,  1994,  the
          partners owning the Hotel agreed to sell their  partnership  interests
          to one of the general partners. The total consideration to the Company
          ($123,926)  was $2,861  cash at  closing  (December  31,  1994) plus a
          $121,065  note  receivable   bearing   interest  at  10  percent  with
          installments of $60,532 plus interest due on January 1, 1996 and 1997.
          Due  to  financial   problems,   the  note  receivable  was  initially
          restructured  so that  all  principal  was  due on  January  1,  1997,
          however,  only an  interest  payment of $12,106  was  received on that
          date. Because the cash consideration  received at closing was minimal,
          the Company had not recorded the sale of its  investment at that time.
          The  cash  payments  of  $27,074   received   through  June  30,  1997
          (representing  accrued interest through December 1996) were applied to
          reduce  the cost of the  investment.  During  the year  ended June 30,
          2004,  the  Company  accepted  $92,240  as payment in full of the note
          receivable and recorded a gain from the settlement of $92,240.

5. Long-term and short-term debt:

     (a)  Long  term debt as of June 30,  2004  consisted  of two notes  payable
          totaling $85,303 that are collateralized by automobiles with a cost of
          $113,654.  The notes provide for monthly  payments of $1,802 including
          principal and interest  (average  annual  interest rate of 4.6%).  The
          notes are due in July and December of 2008. The principal payments due
          on notes  payable  during the next five  fiscal  years are as follows:
          $18,071 in 2005, $18,904 in 2006, $19,784 in 2007, $20,698 in 2008 and
          $7,846 in 2009.

     (b)  The  Company  borrowed  a  total  of  $2,700,000  ($150,000  in  2002,
          $1,200,000 in 2001 and $1,350,000 in 2000) from the Company's  partner
          in UCV (Lender) of which  $725,631  (including  $280,631  reclassified
          from accrued  interest in 2003),  $955,000 and  $1,300,000 was paid in
          2003, 2002 and 2001,  respectively.  The loans were unsecured,  due on
          demand and bore  interest  monthly at a base rate plus 1 percent . The
          Company admitted the Lender and an affiliate of the Lender as partners
          in Old Vail Partners with a liquidating partnership interest for which
          they  received  combined  distributions  of $112,410 in the year ended
          June 30, 2001 and their  partnership  interests were  liquidated.  The
          Company also provided the Lender with an ownership  interest in Penley
          Sports that would  provide  the Lender  with a 10 percent  interest in
          profits  and  distributions.  Although  the  terms of these  loans are
          likely to be  comparable to the loan terms from an  independent  third
          party,  it is unlikely  that the Company  could  obtain a similar loan
          from an independent third party.

     (c)  On February 27, 2003 the Company  borrowed $75,000 from its partner in
          OVP, LP. The loan was  unsecured,  due on demand and bore  interest at
          the rate of 10  percent.  The loan plus  accrued  interest of $884 was
          paid on April 11, 2003.  Although the terms of this loan are likely to
          be comparable to the loan terms from an independent third party, it is
          unlikely  that  the  Company  could  obtain  a  similar  loan  from an
          independent third party.

     (d)  On January 11,  2002,  the Company  borrowed  $300,000  from Harold S.
          Elkan, the Company's President and, indirectly, the Company's majority
          shareholder,  pursuant to a short term loan agreement that was paid on
          March 27,  2002.  During the term of the loan $8,200 of interest  (10%
          per  annum)  was paid to  Elkan.  Although  the terms of this note are
          likely to be  comparable to the loan terms from an  independent  third
          party,  it is unlikely  that the Company  could  obtain a similar loan
          from an independent third party.

                                       28

6. Commitments and contingencies:

     (a)  The Company leases its golf club shaft manufacturing plant under a ten
          year operating  lease  agreement,  which  commenced April 1, 2000. The
          lease provides for fixed annual minimum  rentals in addition to taxes,
          insurance  and  maintenance  for each of the years  ending  June 30 as
          follows:  $247,000 in each of the years 2005 through 2009 and $183,000
          in 2010.  Commencing  April 1, 2005 the lease provides for adjustments
          to the rent based on  increases  in a  consumer  price  index,  not to
          exceed six percent per annum.  The lease also provides for two options
          that each extend the lease for an additional five years.  The rent for
          the first  year of the first  option  will be based on a five  percent
          increase over the previous year's rent. Subsequent year's rent will be
          adjusted  based on  increases  in the  consumer  price  index.  Rental
          expense  for  the  manufacturing  facilities  was  $241,128  in  2004,
          $234,105 in 2003, and $227,288 in 2002.

          The  Company   has   subleased  a  portion  of  the  golf  club  shaft
          manufacturing  plant to different  tenants since November 1, 2001. The
          current  sublease  commenced  November 1, 2002 and  continues  through
          October 31, 2004.  Rental  income from  subleases was $82,885 in 2004,
          $78,957 in 2003,  and $71,136 in 2002.  These amounts are presented as
          rental revenues.

          The Company was conditionally  released by a lender from its remaining
          lease  obligation  for space it  occupied  in a  building  sold by the
          Company in December  2000.  In the event there is an uncured  event of
          default by the new owner of the  office  building  under the  existing
          loan  agreement,  the  Company's  obligations  under its lease will be
          reinstated  to the  extent  there is not an  enforceable  lease on the
          Company's  space.  The future  minimum rent  payments  under the lease
          agreement are as follows for the years ending June 30:  $75,000- 2005;
          $77,000-  2006;  $79,000 in 2007,  $82,000  in 2008,  $84,000 in 2009,
          $198,000 thereafter and $595,000 in the aggregate.

     (b)  The  Company's  employment  agreement  with Harold S. Elkan expired on
          January 1, 1998,  however the Company is continuing to honor the terms
          of the  agreement  until  such time as it is able to  negotiate  a new
          contract. The agreement provides that if he is discharged without good
          cause,  or  discharged  following a change in management or control of
          the Company, he will be entitled to liquidation damages equal to twice
          his salary at the time of  termination  plus  $50,000.  As of June 30,
          2004, his annual salary was $350,000.

     (c)  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
          originally  asserted  claims  for  copyright  infringement,  breach of
          contract,  breach of fiduciary duty, and sought compensatory  damages,
          punitive damages,  statutory  damages,  and attorney fees. The Company
          filed a motion to dismiss  all claims.  In  response  to that  motion,
          Masterson  dropped  all  claims  except  for the  claims of  copyright
          infringement  and  breach of  contract.  Masterson  also  dropped  all
          prayers for punitive damages, statutory damages, and attorney fees. It
          is  not  possible  at  this  time  to  predict  the  outcome  of  this
          litigation. We intend to vigorously defend against these claims.

     (d)  The  Company is  involved  in other  various  routine  litigation  and
          disputes incident to its business. In management's  opinion,  based in
          part on the advice of legal counsel, none of these matters, other than
          as described in Note 6(c) will have a material  adverse  affect on the
          Company's financial position.

7. Income taxes

     At June 30, 2004,  the Company had net  operating  loss  carry-forwards  of
     $3,913,000  for federal  income tax purposes and  $5,475,000 for California
     state income tax purposes. The federal carryforwards expire from years 2020
     to 2022.  The state  carryforwards  expire from 2005 to 2013.  Deferred tax
     assets are primarily related to these net operating loss  carryforwards and
     certain other temporary differences.

     In accordance with SFAS No. 109, the Company records a valuation  allowance
     against  deferred tax assets if it is more likely than not that some or all
     of the deferred tax assets will not be realized. The Company has recorded a
     valuation allowance primarily for impairment losses and state net operating
     loss  carryforwards  which may  expire  before  they can be  utilized.  The
     decrease  in the  valuation  allowance  in 2003  primarily  related  to the
     increased  likelihood that federal net operating loss carryforwards will be
     realized due to taxable  income from  partnerships  to be recognized by the
     Company for tax purposes in 2004.

                                       29

     The  income tax  expense  attributable  to income  (loss)  from  continuing
     operations for the years ended June 30, 2004, 2003, and 2002 is as follows:

                                         2004           2003          2002 
                                     -----------    -----------    ----------
 Current .........................   $   979,000    $      --      $     --   
                                     -----------    -----------    ----------
 Deferred:
    Federal ......................    (1,273,000)     4,346,000          --
    State ........................      (752,000)     1,507,000          --   
                                     -----------    -----------    ----------
       Total deferred ............    (2,025,000)     5,853,000          --   
                                     -----------    -----------    ----------
    Total current and deferred
       tax (benefit) .............    (1,046,000)     5,853,000          --
    Tax expense allocated to
       discontinued operations ...      (238,000)       (15,000)         --   
                                     -----------    -----------    ----------
    Total income tax expense
       (benefit)                     $(1,284,000)   $ 5,838,000    $     --   
                                     ===========    ===========    ==========

     The following is a reconciliation of the normal expected federal income tax
     rate of 34 percent to the income (loss) from  continuing  operations in the
     financial statements:
                                          2004           2003           2002
                                      -----------    -----------    -----------
  Expected federal income tax
    expense (benefit) .............   $(1,386,000)   $ 8,491,000    $  (743,000)
  State tax, net of federal benefit      (238,000)     1,457,000       (128,000)
  Increase (decrease) in valuation
    allowance .....................       160,000     (4,351,000)       620,000
  Federal alternative minimum tax .       181,000           --             --
  Expiration of net operating loss
    carryforward ..................          --          185,000        191,000
  Other ...........................        (1,000)        56,000         60,000
                                      -----------    -----------    -----------
  Provision for income tax expense    $(1,284,000)   $ 5,838,000    $      --
                                      ===========    ===========    ===========

     The following is a schedule of the significant  components of the Company's
     deferred tax assets and deferred  tax  liabilities  as of June 30, 2004 and
     2003:
                                                       2004            2003
                                                   ------------    ------------
     Deferred tax assets :
        Net operating loss carryforwards ........  $  1,330,000    $  4,753,000
        Accumulated depreciation and amortization       123,000         101,000
        Valuation allowance for impairment losses       275,000         919,000
        Other ...................................     1,037,000         163,000
                                                   ------------    ------------
           Total deferred tax assets ............     2,765,000       5,936,000
           Less valuation allowance .............    (1,435,000)     (1,275,000
                                                   ------------    ------------
              Net deferred tax assets ...........  $  1,330,000    $  4,661,000
                                                   ============    ============

     Deferred tax  liabilities:
        Gain on sale to be recognized ...........  $       --      $  5,407,000
        Gain on sale to be deferred .............     5,158,000       5,107,000
                                                   ------------    ------------
              Net deferred tax liabilities ......  $  5,158,000    $ 10,514,000
                                                   ============    ============

8. Leasing activities:
     The Company was a sublessor of land to condominium  owners under  operating
     leases with an approximate  remaining  term of 44 years which  commenced in
     1981 and 1982.  On March 20, 2002,  the Company  sold its  interests in the
     subleases.

9. 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.  Two  segments,  bowling  centers  and  real  estate
     development, were disposed of in the fourth quarter of 2003 (Note 10).



                                       30

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


                                            Real Estate                    Unallocated
                                             Operation         Golf         And Other          Totals
                                           ------------    ------------    ------------    ------------
YEAR ENDED JUNE 30, 2004
                                                                                        
Revenues ...............................   $     82,885    $  2,657,050    $     80,930    $  2,820,865
Depreciation and amortization ..........           --           169,412          30,912         200,324
Impairment losses ......................           --              --         1,376,316       1,376,316
Interest expense .......................           --              --             2,798           2,798
Equity in income of investee ...........         76,958            --              --            76,958
Gain on disposition ....................           --              --           110,241         110,241
Segment profit (loss) ..................         81,943      (2,415,553)     (1,778,120)     (4,111,730)
Investment income ......................                                                         34,103
Loss from continuing operations ........                                                     (4,077,627)
Significant non-cash items .............        (76,958)           --         1,376,316       1,299,358
Segment assets .........................      3,799,847       1,759,621       1,569,671       7,129,139
Investment in equity of investees ......      3,797,288            --              --         3,797,288
Expenditures for segment assets ........           --            76,005         117,576         193,581
Information for disposed segments:
  Assets ...............................                                                           --
  Expenditures .........................                                                           --

YEAR ENDED JUNE 30, 2003
Revenues ...............................   $     78,957    $  3,038,746    $    925,847    $  4,043,550
Depreciation and amortization ..........          8,611         167,485          19,127         195,223
Impairment losses ......................           --              --              --              --
Interest expense .......................          5,436            --            52,220          57,656
Equity in income of investee ...........     26,281,844            --              --        26,281,844
Gain on disposition ....................           --              --              --              --
Segment profit (loss) ..................     26,271,354      (1,607,743)        231,404      24,895,015
Investment income ......................                                                         41,566
Income from continuing operations ......                                                     24,936,581
Significant non-cash items .............    (26,319,519)           --              --       (26,319,519)
Segment assets .........................      5,277,908       1,896,012       5,490,999      12,664,919
Investment in equity of investees ......      5,277,007            --              --         5,277,007
Expenditures for segment assets ........           --             5,210          12,640          17,850
Information for disposed segments:
  Assets ...............................                                                         67,000
  Expenditures .........................                                                           --

YEAR ENDED JUNE 30, 2002
Revenues ...............................   $    190,234    $  2,589,293    $    515,773    $  3,295,300
Depreciation and amortization ..........         53,894         170,011          47,418         271,323
Impairment losses ......................         44,915            --              --            44,915
Interest expense .......................          4,986            --            79,693          84,679
Equity in loss of investee .............        (59,788)           --              --           (59,788)
Gain on disposition ....................           --              --              --              --
Segment profit (loss) ..................       (162,807)     (1,816,846)       (236,564)     (2,216,217)
Investment income ......................                                                         29,697
Loss from continuing operations ........                                                     (2,186,520)
Significant non-cash items .............        104,703            --              --           104,703
Segment assets .........................          2,296       2,227,595         132,502       2,362,393
Investment in equity of investees ......           --              --              --              --
Expenditures for segment assets ........           --              --              --              --
Information for disposed segments:
  Assets ...............................                                                        541,010
  Expenditures .........................                                                           --


     Revenues  from one customer of the Golf segment  represented  approximately
     $321,000 of the Company's consolidated revenues for the year ended June 30,
     2004.


                                       31


10. Disposition of business segments:

     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 excluding the income tax expense of $238,000
     related to 2004 and $15,000 related to 2003:

                                       2004        2003         2002
                                    ---------   ---------    ---------
          Bowling ...............   $ 165,678   $(198,164)   $ (10,619)
          Real estate development     431,848     236,119       18,211
                                    ---------   ---------    ---------
                                    $ 597,526   $  37,955    $   7,592
                                    =========   =========    =========

     (a)  Bowling segment:

          On May 31, 2003, the Company ceased  operations at the leased facility
          (lease  expired June 2003) occupied by the Grove Bowling  Center.  The
          Company sold the  machinery  and  equipment for $19,465 and recorded a
          gain of $16,716.  The cost and accumulated  depreciation of the assets
          sold were $473,861 and $471,112, respectively.

          The following is a summary of the results of operations of the bowling
          segment:
                               2004          2003           2002
                           -----------   -----------    -----------
          Revenues .....   $   165,678   $ 1,441,508    $ 1,783,545
          Bowl costs ...          --      (1,277,431)    (1,404,006)
          SG&A-direct ..          --        (231,397)      (236,068)
          SG&A-corporate
           allocation ..          --        (125,000)      (117,465)
          Depreciation .          --         (22,560)       (36,625)
          Gain from sale          --          16,716           --
                           -----------   -----------    -----------
          Income (loss)    $   165,678   ($  198,164)   ($   10,619)
                           ===========   ===========    ===========

     (b)  Real estate development segment:

          During the three years ended June 30, 2004,  the Company's real estate
          development  activities  related  to  undeveloped  land that was owned
          through a consolidated  subsidiary,  Old Vail Partners  (OVP),  and an
          unconsolidated  subsidiary,  Vail Ranch  Limited  Partnership  (VRLP),
          which was  accounted for using the equity  method of  accounting.  The
          Company  owns a combined 50 percent  general  and limited  partnership
          interest in Old Vail Partners,  L.P., a California limited partnership
          (OVP).  OVP owns a 60 percent  limited  partnership  interest  in Vail
          Ranch  Limited  Partnership  (VRLP).  The other partner in OVP holds a
          liquidating  limited  partnership  interest  which  entitles him to 50
          percent of future distributions up to $2,450,000,  of which $1,853,838
          has been paid  through  June 30, 2004  ($73,000  in 2004,  $370,838 in
          2003, $50,000 in 2002,  $860,000 in 2001, $50,000 in 1999 and $450,000
          in 1998).  This limited partner's capital account balance is presented
          as "Minority interest" in the consolidated balance sheets. The balance
          of the  minority  interest  as of June 30,  2004 was  adjusted  to the
          estimated amount that is likely to be distributed to this partner. The
          adjustment of $343,839 is presented in the  Consolidated  Statement of
          Operations as a component of Income from Discontinued Operations

          Three other  parties were granted  liquidating  partnership  interests
          related to either their efforts with achieving the zoning approval for
          the 33 acres  described below or making a loan to the Company that was
          used to fund payments to the County of Riverside for delinquent taxes.
          These partners  received  distributions  totaling  $1,312,410 from the
          sale of the undeveloped land in the year ended June 30, 2001 and their
          limited partnership interests were liquidated.

          The  following is a summary of the results of  operations  of the real
          estate development segment:
                                            2004        2003         2002
                                         ---------   ---------    ---------
               Credit (provision) for
                 impairment loss .....   $  88,009   $ (88,881)   $    --
               Minority interest .....     343,839        --           --
               Equity in income (loss)
                 of investee .........        --       325,000       18,211
                                         ---------   ---------    ---------
               Income ................   $ 431,848   $ 236,119    $  18,211
                                         =========   =========    =========

                                       32


          VRLP is a partnership formed in September 1994 between OVP (60 percent
          ownership  interest  since  1999)  and a third  party  (Developer)  to
          develop  32  acres of the land  that was  contributed  by OVP to VRLP.
          During the fiscal year ended June 30, 1997, VRLP constructed a 107,749
          square foot retail complex which utilized  approximately  14 of the 27
          developable  acres.  On January 1, 1998,  VRLP sold the retail complex
          for $9,500,000.  On August 7, 1998, VRLP executed a limited  liability
          company  operating  agreement for Temecula Creek, LLC (Temecula Creek)
          with the buyer of the retail center to develop the remaining 13 acres.
          VRLP,  as a  50  percent  member  and  the  manager,  contributed  the
          remaining  13 acres of  developable  land at an agreed  upon  value of
          $2,000,000 and the other member contributed cash of $1,000,000,  which
          was distributed to VRLP as a capital distribution.

          On  February  21,  2003 Vail Ranch  Limited  Partners  (VRLP) sold its
          interest in Temecula  Creek LLC (TC) to its other partner in TC (ERT).
          The sale price  consisted of $1,318,180 cash plus one-half of the sale
          proceeds from the  remaining  parcel of  undeveloped  land owned by TC
          when it is sold.  $100,000 of the sales proceeds were being held in an
          escrow to be applied to any post  closing  claims ERT may have related
          to  warranties  and normal  prorations in the sale contract for the TC
          interest. The cash proceeds to VRLP of $1,218,180 received in February
          2003 were partially offset by $225,000 of fees paid to one of the VRLP
          partners.  The Company  received a  distribution  of $592,776 of which
          $370,838 was paid to the holder of the  minority  interest in Old Vail
          Partners.  VRLP  recorded  a  $843,326  gain  from  the  sale  of  the
          partnership  interest.  This  gain  was  partially  offset  by  VRLP's
          agreement to pay its general  partner  $225,000 of fees related to the
          sale of the  partnership  interest.  In the year ended June 30,  2004,
          VRLP  received  $288,071 as its share of the proceeds from the sale of
          the  undeveloped  land,  the  balance  of the  hold  back,  and  final
          settlement  for  allocation  of  revenues  and  expenses.  The Company
          received  $155,009  of  distributions   from  VRLP  related  to  these
          transactions.  The Company is not expecting any further  distributions
          from VRLP.  As part of the Company's  obligation to pay  approximately
          one-half of these proceeds to its minority  partner,  $73,000 was paid
          to the minority partner during the year ended June 30, 2004.

          The Company recorded  provisions for impairment  losses of $480,000 in
          June 1998 and  $88,881 in March 2003 to reduce the  carrying  value of
          its  investment  in VRLP to reflect an amount  equal to the  estimated
          distributions  the Company would  receive based on the estimated  fair
          market  value of  VRLP's  assets  and  liabilities.  This was  further
          adjusted in March 2004 to reverse  $88,009 of the provision to reflect
          the amounts actually received.

          The  following is a  reconciliation  of the  investment  in Vail Ranch
          Limited Partnership:
                                               2004         2003
                                            ---------    ---------
               Balance, beginning .......   $ 635,881    $ 903,657
               Equity in net income .....        --        325,000
               Distributions received ...    (155,009)    (592,776)
                                            ---------    ---------
               Balance, ending ..........     480,872      635,881
                 Less valuation allowance    (480,872)    (568,881)
                                            ---------    ---------
                                            $    --      $  67,000
                                            =========    =========



                                       33


11. 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  selling  the  operations  of  its
     subsidiary, Penley Sports, and obtaining funds from additional financing of
     the  properties  owned  by  UCV  and  its  subsidiaries.  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.

12. Subsequent Events:

     On  September  16, 2004 the Company  committed to a plan of disposal of the
     graphite golf club shaft  operation  owned by Penley Sports,  LLC (Penley).
     The  Company is  currently  in  negotiations  to sell  Penley to the former
     owner,  Carter Penley.  Carter Penley has verbally  agreed to fund any cash
     flow deficits from  November 1, 2004 until a sale is  consummated  or until
     the negotiations  end. In either event, the Company will not be required to
     repay the advances unless the Company ceases negotiations without cause

     The following is a summary of the results of operations of Penley  included
     in the financial statements:
                               2004           2003           2002
                           -----------    -----------    -----------
          Revenues .....   $ 2,657,050    $ 3,038,746    $ 2,589,293
          Golf costs ...    (2,758,039)    (2,829,698)    (2,604,436)
          SG&A-direct ..    (1,247,152)    (1,295,306)    (1,390,692)
          SG&A-corporate
            allocation .      (898,000)      (354,000)      (241,000)
          Depreciation .      (169,412)      (167,485)      (170,011)
                           -----------    -----------    -----------
          Loss .........   ($2,415,553)   ($1,607,743)   ($1,816,846)
                           ===========    ===========    ===========



                                       34


13. Quarterly financial data (unaudited):

     The following summarizes the condensed quarterly financial  information for
     the Company:



                                                       QUARTERS ENDED 2004
                                      -----------------------------------------------------
                                      September 30   December 31    March 31      June 30
                                       ----------    ----------     ---------    ----------
                                                                            
     Revenue .......................      640,895       422,785       881,471       875,714
     Total costs and expenses ......    1,348,330     1,225,758     1,607,315     2,935,593
     Other income & expense, net ...       30,222       157,128        70,304       (39,150)
     Income tax expense (benefit) ..     (259,000)     (257,000)     (198,000)     (570,000)
     Income (loss) from
       Continuing operations .......     (418,213)     (388,845)     (457,540)   (1,529,029)
     Income (loss) from
       Discontinued operations .....         --            --          88,009       271,517
     Net income (loss) .............     (418,213)     (388,845)     (369,531)   (1,257,512)
     Basic and diluted net income
       (loss) per common share from:
        Continuing operations ......      (0.02)        (0.01)        (0.02)        (0.06)
        Net income (loss) ..........      (0.02)        (0.01)        (0.01)        (0.05)




                                                       QUARTERS ENDED 2003
                                      ------------------------------------------------------
                                      September 30   December 31     March 31       June 30
                                       ----------    ----------     ---------     ----------
                                                                             
     Revenue .......................      743,102       681,857       918,350      1,700,241
     Total costs and expenses ......    1,218,173     1,100,346     1,296,841      1,757,363
     Other income & expense, net ...       15,616        22,347       (78,700)    26,306,491
     Income tax expense ............         --            --            --        5,838,000
     Income (loss) from
       Continuing operations .......     (459,455)     (396,142)     (457,191)    20,411,369
     Income (loss) from
       Discontinued operations .....      (65,522)      (42,747)      258,092       (126,868)
     Cumulative effect of change
      in accounting principle ......       37,675          --            --           37,675
     Net income (loss) .............     (487,302)     (438,889)     (199,099)    20,284,501
     Basic and diluted net income
       (loss) per common share from:
        Continuing operations ......      (0.02)        (0.01)        (0.02)          0.75
        Net income (loss) ..........      (0.02)        (0.02)        (0.01)          0.75


     The  impact on the  fourth  quarter  of 2003 of the  change  in  accounting
     principle  described in footnote 4(b) was to record the Company's  share of
     the gain on the sale of UCV of $26,278,831  ($0.96 per share) in the fourth
     quarter of 2003 rather than in the first quarter of 2004.












                                       35





                          INDEPENDENT AUDITORS' REPORT



General Partners
UCV, L.P., a California limited partnership:


We have audited the  accompanying  consolidated  balance  sheet of UCV,  L.P., a
California  limited   partnership,   as  of  June  30,  2004,  and  the  related
consolidated  statements of operations and partners'  equity  (deficit) and cash
flows for the year then ended. These consolidated  financial  statements are the
responsibility of UCV, L.P.'s  management.  Our  responsibility is to express an
opinion on these  consolidated  financial  statements  based on our  audit.  The
financial  statements  of UCV,  L.P. as of June 30, 2003,  were audited by other
auditors whose report dated  September 5, 2003 expressed an unqualified  opinion
on these statements.


We  conducted  our audit in  accordance  with  auditing  standards of the Public
Company  Accounting  Oversight Board,  (United States).  Those standards require
that we plan and perform the audit to obtain reasonable  assurance about whether
the financial  statements are free of material  misstatement.  An audit includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial  statements.  An audit also  includes  assessing  the  accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating the overall  financial  statement  presentation.  We believe that our
audit provides a reasonable basis for our opinion.


In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position of UCV,  L.P.,  a
California  limited  partnership,  as of June 30,  2004,  and the results of its
operations  and its cash  flows  for the year  then  ended  in  conformity  with
accounting principles generally accepted in the United States of America.



/s/ Peterson & Co., LLP
    PETERSON & CO., LLP
    October 15, 2004











                                       36








             INDEPENDENT AUDITORS' REPORT


General Partners
UCV, L.P., a California limited partnership:


We have  audited the  accompanying  balance  sheets of UCV,  L.P.,  a California
limited  partnership,  as of  June  30,  2003  and  the  related  statements  of
operations  and  partners'  equity  (deficit) and cash flows for the years ended
June 30, 2003 and March 31, 2002 and the three-month period ended June 30, 2002.
These financial statements are the responsibility of UCV, L.P.'s management. Our
responsibility  is to express an opinion on these financial  statements based on
our audits.


We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.


In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of UCV, L.P., a California limited
partnership,  as of June 30, 2003 and the results of its operations and its cash
flows for the years ended June 30,  2003 and March 31, 2002 and the  three-month
period ended June 30, 2002, in conformity with accounting  principles  generally
accepted in the United States of America.

As discussed in Note 1(l) to the financial  statements,  effective April 1, 2003
the Partnership changed its year-end to June 30.



/s/ KPMG LLP
    KPMG LLP
    San Diego, California
    September 5, 2003





                                       37


                           UCV, L.P. AND SUBSIDIARIES
                       (A CALIFORNIA LIMITED PARTNERSHIP)
              CONSOLIDATED BALANCE SHEETS - JUNE 30, 2004 and 2003


                                                          2004           2003
                                                  ------------    -----------
                                     ASSETS

     Property and equipment (Note 3):
          Land ................................   $ 14,885,000    $      --
          Buildings ...........................     28,322,268           --
                                                  ------------    -----------
                                                    43,207,268           --
          Less accumulated depreciation .......       (867,606)          --
                                                  ------------    -----------
                                                    42,339,662           --

     Cash .....................................         71,566        119,293
     Restricted cash (Note 3) .................      1,117,935           --
     Cash held by accommodator (Note 5) .......           --       15,123,883
     Accounts receivable ......................         29,018         75,620
     Straight-line rent receivable ............        369,454           --
     Prepaid expenses .........................         84,622         20,728
     Deferred acquisition costs ...............           --           77,015
     Deferred loan costs, less accumulated
        amortization of $52,249 in 2004  ......        413,402           --
     Deposits .................................           --          200,000
     Other ....................................          5,797           --
                                                  ------------    -----------
                                                  $ 44,431,456    $15,616,539
                                                  ============    ===========




                        LIABILITIES AND PARTNERS' EQUITY


     Debt (Note 3) ............................   $ 29,277,103    $      --
     Accounts payable .........................         82,234         56,333
     Accounts payable- affiliate ..............           --          350,000
     Accrued interest .........................        146,995           --
     Accrued property tax .....................        181,569           --
     Other accrued expenses ...................        382,569           --
     Tenants' security deposits ...............        352,317           --
                                                  ------------    -----------
                                                    30,422,787        406,333

     Minority interest ........................            260           --

     Partners' equity .........................     14,008,409     15,210,206

                                                  ------------    -----------
                                                  $ 44,431,456    $15,616,539
                                                  ============    ===========


                 See accompanying notes to financial statements.





                                       38



                           UCV, L.P. AND SUBSIDIARIES
      CONSOLIDATED STATEMENTS OF OPERATIONS AND PARTNERS' EQUITY (DEFICIT)
       FOR THE YEARS ENDED JUNE 30, 2004 AND 2003, AND MARCH 31, 2002 AND
                    FOR THE THREE MONTHS ENDED JUNE 30, 2002



                                                              Three Months
                                Year Ended     Year Ended         Ended        Year Ended
                                 June 30,       June 30,        June 30,        March 31,
                                   2004           2003            2002            2002
                               ------------    ------------    ------------    ------------
                                                                          
Rent revenues ..............   $  3,063,738    $       --      $       --      $       --
Tenant reimbursements ......        474,677            --              --              --
Other rental related .......         72,783            --              --              --
                               ------------    ------------    ------------    ------------
                                  3,611,198            --              --              --
                               ------------    ------------    ------------    ------------


Operating expenses .........      1,034,183            --              --              --
Management fees, related
  party (Note 2) ...........         47,423            --              --              --
Depreciation ...............        867,606            --              --              --
Interest and amortization
  of loan costs ............      1,442,107            --              --              --
                               ------------    ------------    ------------    ------------
                                  3,391,319            --              --              --
                               ------------    ------------    ------------    ------------


Income before discontinued
  operations ...............        219,879            --              --              --

Income (loss) from
 discontinued operations ...           --        52,563,687          75,350        (119,577)
                               ------------    ------------    ------------    ------------

Net income (loss) ..........        219,879      52,563,687          75,350        (119,577)

Partners' equity (deficit),
  beginning of year ........     15,210,206     (33,252,981)    (32,871,331)    (28,370,933)

Cash distributed to partners     (1,421,676)     (4,100,500)       (457,000)     (4,380,821)
                               ------------    ------------    ------------    ------------

Partners' equity (deficit),
 end of year ...............   $ 14,008,409    $ 15,210,206    ($33,252,981)   ($32,871,331)
                               ============    ============    ============    ============


                 See accompanying notes to financial statements.



                                       39


                           UCV, L.P. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
       FOR THE YEARS ENDED JUNE 30, 2004 AND 2003, AND MARCH 31, 2002 AND
                    FOR THE THREE MONTHS ENDED JUNE 30, 2002



                                                                           Three Months
                                             Year Ended      Year Ended         Ended        Year Ended
                                              June 30,        June 30,        June 30,        March 31,
                                                2004            2003            2002            2002
                                            ------------    ------------    ------------    ------------
Cash flows from operating activities:
                                                                                         
Net income (loss) .......................   $    219,879    $ 52,563,687    $     75,350    $  (119,577)
Adjustments to reconcile net income
  (loss) to net cash provided by
  operating activities:
   Depreciation .........................        867,606          10,649           3,102          14,399
   Amortization of deferred loan costs ..         52,249         777,022         282,387         679,668
   Increase in straight-line rent
       receivable .......................       (369,454)           --              --              --
   Loss from extinguishment of debt .....           --              --              --           335,042
   Gain on sale .........................           --       (52,557,662)           --              --
   Other ................................           --            48,500            --              --
Changes in assets and liabilities:
   Increase in restricted cash ..........     (1,117,935)       (231,266)        (88,074)        (38,137)
   (Increase) decrease in receivables ...         46,602         (44,247)           (695)        (18,568)
   (Increase) decrease in prepaid
      expenses ..........................        (63,894)        169,168        (155,262)         62,689
   Increase in accounts payable
      and other accrued expenses ........        240,039          19,439          87,783         183,490
   Increase (decrease) in accrued
      interest ..........................        146,995            --              --          (155,533)
   Increase (decrease) in security
      deposits ..........................        352,317        (225,930)         12,668           4,729
   Other ................................         (5,797)           --              --              --
                                            ------------    ------------    ------------    ------------
Net cash provided by operating
   activities ...........................        368,607         529,360         217,259         948,202
                                            ------------    ------------    ------------    ------------

Net cash from investing activities:
  Additions to redevelopment costs ......           --          (422,000)        (23,163)       (354,717)
  Additions to property and equipment ...    (43,207,268)         (5,269)         (1,357)         (7,424)
  Proceeds from sale ....................           --        55,928,702            --              --
  (Increase) decrease to purchase escrows        200,000        (200,000)           --              --
  (Incr.) decr. in cash at accommodator .     15,123,883     (15,123,883)           --              --
  (Incr.) decr. in deferred acquisition
      costs .............................         77,015         (77,015)           --              --
                                            ------------    ------------    ------------    ------------
     Net cash provided (used) by
        investing activities ............    (27,806,370)     40,100,535         (24,520)       (362,141)
                                            ------------    ------------    ------------    ------------

Cash flows from financing activities:
  Principal payments on debt ............       (286,278)           --              --              --
  Extinguishment of debt ................           --       (38,000,000)           --       (33,000,000)
  Proceeds from debt ....................     29,563,381            --              --        38,000,000
  Refund of restricted cash held by
      lender ............................           --         1,340,348            --           903,531
  Restricted cash funded from loan
      proceeds ..........................           --              --              --        (1,079,371)
  Loan costs ............................       (465,651)           --               298      (1,241,928)
  Increase in minority interest .........            260            --              --              --
  Cash distributed to partners ..........     (1,421,676)     (4,100,500)       (457,000)     (4,380,821)
                                            ------------    ------------    ------------    ------------
     Net cash provided (used) by
        financing activities ............     27,390,036     (40,760,152)       (456,702)       (798,589)
                                            ------------    ------------    ------------    ------------

Net decrease in cash ....................        (47,727)       (130,257)       (263,963)       (212,528)
Cash, beginning of year .................        119,293         249,550         513,513         726,041
                                            ------------    ------------    ------------    ------------
Cash, end of year .......................   $     71,566    $    119,293    $    249,550    $    513,513
                                            ============    ============    ============    ============

Supplemental cash flow information:
  Interest paid .........................   $  1,242,863    $  1,949,170    $    553,900    $  2,979,509
                                            ============    ============    ============    ============


                 See accompanying notes to financial statements

                                       40



                           UCV, L.P. AND SUBSIDIARIES
                       (a California Limited Partnership)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          YEARS ENDED JUNE 30, 2004, JUNE 30, 2003, MARCH 31, 2002, AND
                   THE THREE MONTH PERIOD ENDED JUNE 30, 2002

1. Organization and Summary of Significant Accounting Policies:

     (a)  Organization-  UCV,  L.P., is a California  limited  partnership  (the
          Partnership)  which conducts business as University City Village.  The
          Partnership is the sole member of three California  limited  liability
          companies,  760,  LLC,  939, LLC and UCV Media Tech Center,  LLC ("UCV
          MTC"). 760, LLC owns a 99.99% undivided  interest in a commercial real
          estate  property in San Diego,  California.  The other .01%  undivided
          interest  is  owned  by  Harold  S.  Elkan  (Elkan),  the  controlling
          shareholder  of Sports Arenas,  Inc.,  which is the parent company for
          one of the general and limited partners the Partnership. This interest
          is presented as Minority Interest in Consolidated  Subsidiaries in the
          balance sheet.

     (b)  Principles of consolidation - The accompanying  consolidated financial
          statements  include the  accounts of UCV,  L.P.  and its three  wholly
          owned  subsidiaries,  760,  LLC,  939 LLC,  and UCV MTC.  All material
          inter-company balances and transactions have been eliminated.

     (c)  Leasing  arrangements- Until April 1, 2003, when the apartment project
          was sold, the Partnership  leased  apartments  under operating  leases
          that were  substantially all on a month-to-month  basis. The apartment
          operations were the  Partnership's  only business segment until it was
          sold. Rental revenues were recognized when earned.

          Commencing  August 28, 2003, the Partnership,  as a lessor,  commenced
          leasing  commercial  real estate under  operating  leases that are for
          periods  ranging  from one to fifteen  years.  Base  rental  income is
          recognized on a  straight-line  basis over the terms of the respective
          lease  agreements.  Differences  between rental income  recognized and
          amounts  contractually  due under the lease agreements are credited or
          charged,  as  applicable,   to  straight-line  rent  receivable.   The
          difference between  straight-line rental income and contractual rental
          income  increased  revenue  by  $369,000  in 2004 and is listed in the
          accompanying  balance sheets as  Straight-line  Rent  Receivable.  The
          leases generally contain  provisions under which the tenants reimburse
          the Partnership  for a portion of property  operating  expenses,  real
          estate taxes, and other recoverable costs.


     (d)  Property and  equipment and  depreciation-  Property and equipment are
          stated at cost.  Depreciation  is  provided  using  the  straight-line
          method  based  on the  estimated  useful  lives  of the  property  and
          equipment  (25 or 33  years  for real  property  and  3-10  years  for
          equipment).  The  depreciable  basis of the property and equipment for
          tax purposes is approximately $40,183,000 less than the basis used for
          financial statement purposes.

     (e)  Income  taxes-  For  income  tax  purposes,  any  profit  or loss from
          operations  is  includable  in the income tax returns of the  partners
          and,  therefore,  a provision  for income taxes is not required in the
          accompanying financial statements.

     (f)  Redevelopment  planning costs- Prior to April 1, 2003, the Partnership
          capitalized  engineering,   architectural  and  other  costs  incurred
          related to the planning of the possible redevelopment of the apartment
          project.

     (g)  Deferred  loan costs-  Costs  incurred  in  obtaining  financing  were
          amortized using the straight-line  method over the term of the related
          loan.

     (h)  Fair  value of  financial  instruments  - The  following  methods  and
          assumptions  were used to  estimate  the fair  value of each  class of
          financial  instruments  for which it is  practical  to  estimate  that
          value:
          Cash, restricted cash, cash held by accommodator, accounts receivable,
               accounts  payable,  accrued interest and other accrued  expenses-
               the carrying  amount  reported in the balance sheet  approximates
               the fair value due to their short-term maturities.
          Long-term debt - The carrying  value of long-term debt reported in the
               balance sheet  approximates  the fair value based on management's
               belief  that  the  interest  rates  and  terms  of the  debt  are
               comparable to those commercially  available to the Partnership in
               the marketplace for similar instruments.




                                       41


                           UCV, L.P. AND SUBSIDIARIES
                       (a California Limited Partnership)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          YEARS ENDED JUNE 30, 2004, JUNE 30, 2003, MARCH 31, 2002 AND
                   THE THREE MONTH PERIOD ENDED JUNE 30, 2002

     (i)  Derivative Financial Instruments- The Partnership adopted Statement of
          Financial  Accounting  Standards No. 133  "Accounting  for  Derivative
          Instruments and Hedging Activities" (SFAS 133) on January 1, 2001. The
          terms of a note  payable,  which was paid in April 2003,  had required
          the  Partnership  to maintain  an  interest  rate cap (the Cap) on the
          notional  principal  amount of the  debt.  The  Partnership  used this
          derivative  financial  instrument to  effectively  manage the interest
          rate risk of the related  variable rate note payable.  Accounting  for
          any gains or losses  resulting from changes in the market value of the
          derivative  depend  upon  the use of the  derivative  and  whether  it
          qualifies for hedge accounting.

          The instrument was negotiated with a high credit quality counterparty,
          therefore,   the  risk  of   nonperformance  by  the  counterparty  is
          considered to be  negligible.  See  additional  information  regarding
          derivative financial instruments in Note 4.

     (j)  Use of estimates - Management of the  Partnership has made a number of
          estimates  and  assumptions  relating to the  reporting  of assets and
          liabilities,  the disclosure of contingent  assets and  liabilities at
          the date of the financial  statements and reported  amounts of revenue
          and expenses  during the reporting  period to prepare these  financial
          statements  in  conformity  with U.S.  generally  accepted  accounting
          principles. Actual results could differ from these estimates.

     (k)  Valuation impairment long-lived   assets  and  certain  identifiable
          intangibles are reviewed for impairment  whenever events or changes in
          circumstances indicate that the carrying amount of an asset may not be
          recoverable.  Recoverability of assets to be held and used is measured
          by a comparison of the carrying  amount of an asset to future net cash
          flows  (undiscounted and without interest) expected to be generated by
          the  asset.  If  such  assets  are  considered  to  be  impaired,  the
          impairment  to be  recognized  is  measured by the amount by which the
          carrying amounts of the assets exceed the fair values of the assets.

     (l)  Accounting period- effective April 1, 2003 the Partnership changed the
          date of its fiscal year end from March 31 to June 30 to conform to the
          fiscal year end of one of the partners (See Note 6).

     (m)  Basis of  presentation-  As a result of the sale of the sole  asset of
          the  Partnership  on April 1, 2003, the results of operations for each
          of  the  periods   presented  have  been  classified  as  discontinued
          operations.

2. Related party transactions:

     An affiliate of a partner provided  management  services to the Partnership
     and was paid a fee equal to 2-1/2  percent of gross  revenues,  as defined.
     This agreement was terminated  April 1, 2003 upon the sale of the apartment
     project.  On August 28, 2003,  the same  affiliate  of a partner  commenced
     providing  management  services to the  commercial  real estate  properties
     owned by 760,  LLC and 939,  LLC and is paid a fee equal to four percent of
     monthly revenues.

     In July 1998 the Partnership  entered into development  services agreements
     with two affiliates of a partner. The agreements were cancelable on 30 days
     notice and related to planning for  redevelopment  of the  apartments.  The
     affiliate was paid the following  amounts for these  development  services:
     $72,000  for the year ended June 30,  2003;  $96,000  for each of the years
     ended  March 31,  2002 and 2001;  and  $24,000  for each of the three month
     periods ended June 30, 2002 and 2001.  The  agreements  were  terminated on
     April 1, 2003.

     As part of the sales  transaction  described  in Note 5, an  affiliate of a
     partner earned a sales commission of $350,000 in April 2003.




                                       42

                           UCV, L.P. AND SUBSIDIARIES
                       (a California Limited Partnership)
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
          YEARS ENDED JUNE 30, 2004, JUNE 30, 2003, MARCH 31, 2002 AND
                   THE THREE MONTH PERIOD ENDED JUNE 30, 2002

3. Debt:
   As of June 30, 2004, debt consisted of the following:
    5.819%  note  payable,  collateralized  by first deed of
          trust  on  $9,495,998  of land  and  building  and
          related leases,  provides for monthly  payments of
          $42,434  including  interest  based on a base rate
          (six month LIBOR) plus 4.25 percent and  principal
          based on  amortization  of the  principal  balance
          over 25 years.  This  balance is due  September 1,
          2013.  The  note  payable  also  requires  monthly
          payments  of $5,000 to be held in an impound to be
          used  for  qualified   expenditures   for  leasing
          commissions  and  tenant  improvements.  Harold S.
          Elkan is a co-borrower.                                  $ 6,546,710
    5.50% note payable to seller,  collateralized  by second
          deed of trust on  $9,495,998 of land and building,
          provides  for monthly  payments of interest  only,
          balance due August 22, 2006.                                  76,500
    7.15% note  payable,  collateralized  by  first  deed of
          trust  on  $4,935,774  of land  and  building  and
          related leases,  provides for monthly  payments of
          $19,112  including  interest based on a fixed rate
          of  7.15%  and  principal.  This  balance  is  due
          September 1, 2013.  The note payable also requires
          monthly  payments  of  $6,365  to  be  held  in an
          impound  to be used  for  insurance  and  property
          taxes.                                                     2,604,092
    5.95% note  payable,  collateralized  by  first  deed of
          trust  on  $28,775,496  of land and  building  and
          related leases and a $1,250,000  letter of credit,
          provides   for   monthly   payments   of  $119,268
          including  interest  5.95% and principal  based on
          amortization  of the  principal  balance  over  30
          years.  This  balance is due October 1, 2013.  The
          note payable  requires monthly payments of $24,375
          to be held in an impound  for  property  taxes and
          insurance and additional payments of $44,008 to be
          held  in an  impound  to  be  used  for  qualified
          expenditures  for leasing  commissions  and tenant
          improvements.                                             19,849,801
                                                                  ------------
       Total                                                      $ 29,277,103
                                                                  ============

     The values of property and equipment as collateral for the notes are listed
     at historical cost. The funds being held by the lender in impounds as noted
     above, are classified in the accompanying balance sheet as restricted cash.

     The $2,604,092 note payable loan agreement contains a provision that Sports
     Arenas,  Inc., the parent company of two of the partners of the Partnership
     and  guarantor  of certain  provisions  of the loan  agreement,  maintain a
     minimum net worth of $1,000,000.  As of June 30, 2004, Sports Arenas,  Inc.
     no longer  met that  requirement.  The  Partnership  is in the  process  of
     requesting a waiver of this covenant.

     If the lender does not grant a waiver of the covenant as noted  above,  the
     principal  payments due on notes payable  during the next five fiscal years
     are as follows:  $3,032,000  in 2005,  $454,000 in 2006,  $759,000 in 2007,
     $508,000 in 2008, and $543,000 in 2009.

     On April 1, 2003, the Partnership  sold its 542 unit apartment  project and
     paid the related debt of $38,000,000.

     On March 8, 2002,  UCV  refinanced  its  $33,000,000  note payable with two
     loans  totaling  $38,000,000.  Each of the loans  matured April 1, 2003 and
     provided for a six month extension upon meeting certain financial criteria.
     The first deed of trust was $36,000,000  and provided for monthly  payments
     equal to interest plus principal based on a 30 year amortization  schedule.
     Interest was based on an annual interest rate of 300 basis points above the
     greater of the 30-Day LIBOR rate or 2.4 percent, adjusted monthly. UCV paid
     a $48,500 fee to cap the base rate of LIBOR at 4 percent, which effectively
     capped the maximum  interest rate charged at 7 percent over the term.  This
     note  was   collateralized  by  UCV's  land,   buildings  and  leases.  The
     Partnership was required to make monthly payments of approximately  $29,358
     to  a  property  tax  and  insurance  impound  account  and  $15,803  to  a
     replacement  reserve  account  maintained  by  the  lender.   Additionally,
     $787,198  was  deducted  from the loan  proceeds  and was being held by the
     lender as funds to be used for  estimates  of  deferred  maintenance.  This
     amount was included in Restricted  Cash in the balance sheet as of June 30,
     2002.
                                       43

                           UCV, L.P. AND SUBSIDIARIES
                       (a California Limited Partnership)
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
          YEARS ENDED JUNE 30, 2004, JUNE 30, 2003, MARCH 31, 2002 AND
                   THE THREE MONTH PERIOD ENDED JUNE 30, 2002

     The second deed of trust was $2,000,000  and provided for monthly  payments
     of interest only at an annual rate of 12-1/2 percent. This loan was payable
     in full at any  time  subject  to a fee  equal  to the  difference  between
     $185,000 and the amount of interest paid from  inception to the loan payoff
     date. This loan was collateralized by UCV's land, buildings, and leases and
     the ownership interests of UCV's partners.

     The proceeds of the new loans,  after  extinguishing  the $33,000,000  note
     payable  were   utilized  to:  pay  loan  costs  of   $1,178,044   and  pay
     distributions  to the partners of $3,400,000 in March 2002. The refinancing
     resulted  in charges of  $335,042  related  to the  unamortized  portion of
     deferred loan costs related to the old note payable.

4. Interest Rate Cap:

     The  Partnership  adopted SFAS 133 on January 1, 2001. Due to the extensive
     documentation   and   administration   requirements   of  SFAS   133,   the
     Partnership's  derivative  instruments did not currently  qualify for hedge
     accounting treatment.  Although the Partnership's Caps as of March 31, 2002
     were  designed as a cash flow hedge,  the  Partnership  cannot  adopt hedge
     accounting  treatment,  until all required  documentation  is completed and
     hedging  criteria is met. Since SFAS 133 requires that all unrealized gains
     and losses on derivatives not qualifying for hedge accounting be recognized
     currently through earnings,  the Partnership accounted for the Caps in this
     manner. For the year ended June 30, 2003 the Partnership recorded a loss of
     $48,500 in  discontinued  operations for the change in the value of the Cap
     since inception of the transaction on March 8, 2002.

5. Sale of property:

     On April 1,  2003 the  Partnership  sold its  property  and  equipment  for
     $58,400,000  cash to an unrelated  third party.  The net proceeds  from the
     sale  were  $19,298,141   after  deducting   current  selling  expenses  of
     $2,495,820,  paying the related mortgage loans of $38,000,000 and receiving
     a $1,340,348 refund of lender impounds. The Partnership utilized $4,009,000
     of the  proceeds to fund cash  distributions  to the partners and pay other
     Partnership  obligations.  The  balance  of  the  funds  $15,289,722,  were
     deposited  in a special  escrow  with a qualified  intermediary  ("exchange
     accommodator")  for  purposes  of  meeting  the  Internal  Revenue  Service
     criteria for  purchasing  "like-kind"  property and thereby  qualifying  to
     defer the taxability of a portion of the gain from the sale of the property
     on April 1, 2003.

     The sale resulted in a gain of $52,557,662  after deducting current selling
     expenses  plus  $53,613  of costs  deferred  from a prior  period,  cost of
     property and  equipment of  $7,016,738  less  accumulated  depreciation  of
     $5,707,721, and the accumulated redevelopment planning costs of $2,037,501.
     In accordance with SFAS 66, Accounting for Sales of Real Estate,  this gain
     was recognized at the time of sale because the profit was  determinable and
     the earnings process was complete.





                                       44


                           UCV, L.P. AND SUBSIDIARIES
                       (a California Limited Partnership)
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
          YEARS ENDED JUNE 30, 2004, JUNE 30, 2003, MARCH 31, 2002 AND
                   THE THREE MONTH PERIOD ENDED JUNE 30, 2002


     The  following  is a summary of the results of  operations  of the 542 unit
     apartment  project  for each of the  periods  presented,  which  have  been
     classified as discontinued operations:
                                                     Three Months
                                        Year Ended       Ended      Year Ended
                                         June 30,      June 30,      March 31,
                                           2003          2002          2002
                                       -----------   -----------   -----------
Revenues:
   Apartment rentals ...............   $ 4,175,467   $ 1,331,324   $ 5,206,822
   Other rental related ............       170,408        44,219       198,896
                                       -----------   -----------   -----------
                                         4,345,875     1,375,543     5,405,718
                                       -----------   -----------   -----------
Costs and expenses:
   Operating .......................     1,149,604       355,150     1,227,883
   General and administrative ......       294,676        70,326       307,882
   Management fees, related party ..       110,229        35,328       136,445
   Depreciation ....................        10,649         3,102        14,399
   Other expense ...................        48,500          --            --
   Interest and amortization of loan     2,726,192       836,287     3,503,644
   costs
   Loss from extinguishment of debt           --            --         335,042
                                       -----------   -----------   -----------
                                         4,339,850     1,300,193     5,525,295
                                       -----------   -----------   -----------
Income (loss) before gain on sale ..         6,025        75,350      (119,577)
Gain on sale .......................    52,557,662          --            --
                                       -----------   -----------   -----------
Net income (loss) from discontinued
   operations ......................   $52,563,687   $    75,350   $  (119,577)
                                       ===========   ===========   ===========

6. Change in Accounting Period:

     Effective  April 1, 2003,  the  Partnership  changed the date of its fiscal
     year end from March 31 to June 30 to conform to the fiscal  year end of one
     of the partners.  The following unaudited  financial statement  information
     for the three-month period ended June 30, 2001 is for comparative purposes:

               Revenues:
                 Apartment rentals .....................   $1,274,062
                 Other rental related ..................       54,673
                                                           ----------
                                                            1,328,735
                                                           ----------
               Costs and expenses:
                 Operating .............................      314,206
                 General and administrative ............       70,141
                 Management fees, related party ........       33,402
                 Depreciation ..........................        3,255
                 Interest and amortization of loan costs      868,336
                                                           ----------
                                                            1,289,340
                                                           ----------
               Net income ..............................   $   39,395
                                                           ==========

7. Minimum Future Lease Payments:

     Minimum  future  lease  payments  to be received as of June 30, 2004 are as
     follows:  2005:  $1,283,000;  2006:  $1,319,000;  2007:  $1,364,000;  2008:
     $1,431,000;  2009:  $1,457,000;   thereafter:  $4,026,000;  and  in  total:
     $10,880,000






                                       45




                                   SIGNATURES

Pursuant to the  Requirements of Section 13 or 15(d) 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.

        (Registrant) SPORTS ARENAS, INC.


        (Registrant)                  SPORTS ARENAS, INC.


        By (Signature and Title)     /s/ Harold S. Elkan
                                     ------------------------------------
                                         Harold S. Elkan, President & Director


        DATE:                        December 30, 2004
                                     -----------------

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.



         SIGNATURE                            TITLE                  DATE
-----------------------  ----------------------------------- ------------------



/s/ Steven R. Whitman     Chief Financial Officer, Director,  December 30, 2004
---------------------     and Principal Accounting Officer    ------------------
    Steven R. Whitman


/s/ Patrick D. Reiley           Director                      December 30, 2004
---------------------                                         ------------------
    Patrick D. Reiley





                                       46

                                INDEX TO EXHIBITS
Exhibit
  No         Exhibit Description
-------   ---------------------------------------------------------------------
    3.1  Certificate of Incorporation dated September 30, 1957

    3.2  By-Laws of the Company

    3.3  Amendment to Certificate of Incorporation dated May 9, 1972

    3.4  Amendment to Certificate of Incorporation dated February 21, 1987

   10.1  Lease Agreement dated as of April 5, 1994 between the Company and DP
          Partnership

   10.2  First Amendment to Lease Agreement dated as of November 1, 1996
          between the Company and DP Partnership

   10.3  Second Amendment to Lease Agreement dated as of November 28, 1998
          between the Company and DP Partnership

   10.4  Third Amendment to Lease Agreement dated as of December 18, 1998
          between the Company and DP Partnership

   10.5  Fourth Amendment to Lease Agreement dated as of January 19, 1999
          between the Company and DP Partnership

   10.6  Fifth Amendment to Lease Agreement dated as of February 29, 1999
          between the Company and DP Partnership

   10.7  Sixth Amendment to Lease Agreement dated as of March 29, 1999 between
          the Company and DP Partnership

   10.8  Agreement of Limited Partnership for UCV, L.P. dated June 1, 1994

   10.9  First Amendment to Agreement of Limited Partnership for UCV, L.P. 
          dated February 27, 2001

  10.10  Agreement of Limited Partnership for Vail Ranch Limited Partnership
          dated April 1, 1994

  10.11  Amendment to Limited Partnership Agreement for Vail Ranch Limited
          Partnership dated January 25, 1996

  10.12  Agreement of Limited Partnership for Old Vail Partners, L.P. dated
            September 23, 1994

  10.13  Lease Agreement dated February 17, 2000 between the Company and H.G.
            Fenton Company

  10.14  Agreement for Sale of Office Building dated October 23, 2000

  10.15  Agreement for Sale of Bowling Center Real Estate dated
            October 23, 2000

  10.16  Agreement for Sale of Undeveloped Land dated January 11, 2001

  10.17  Agreement for Sale of University City Village Apartments dated
            February 14, 2003

  10.18  Amendment to Agreement for Sale of University City Village
            Apartments dated March 6, 2003

  10.19  Debt Payment and Extra Compensation Agreement, dated as of June 30,
           2004 by and between Sports Arenas,  Inc. and Harold S. Elkan
          (filed as Exhibit 99.1 to Sports  Arenas,  Inc.'s report on Form 8-K,
          as filed with the Securities and Exchange Commission on July 7, 2004).

  10.20  Statement  Confessing  Judgement,  dated  as of June  30,  2004 by and
          between Sports Arenas,  Inc. as plaintiff and Andrew Bradley,  Inc. as
          defendant  (filed as Exhibit 99.2 to Sports  Arenas,  Inc.'s report on
          Form 8-K, as filed with the Securities and Exchange Commission on July
          7, 2004).

  10.21  Promissory  Note,  dated as of December 21, 1990 from Andrew  Bradley,
          Inc. to Sports Arenas,  Inc.  (filed as Exhibit 99.1 to Sports Arenas,
          Inc.'s report on Form 8-K, as filed with the  Securities  and Exchange
          Commission on July 7, 2004).

   21.1    Subsidiaries of Registrant

  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

                                       47



EXHIBIT 21.1 
                      SPORTS ARENAS, INC. AND SUBSIDIARIES
                           SUBSIDIARIES OF REGISTRANT

      State of
    Incorporation           Subsidiary
    -------------       --------------------------------------------------------

      New York         Cabrillo Lanes, Inc.

      Delaware         Downtown Properties, Inc.

     California           Old Vail Partners, a California general partnership
                          (50% general partner)

     California        Downtown Properties Development Corp.

       Nevada          UCVNV, Inc.

     California           UCVGP, Inc.

     California             UCV, L.P. (1% general partner)

     California        Sports Arenas Properties, Inc.

     California           UCV, L.P. (35% limited partner) (formerly known as
                            University City Village, a joint venture)

     California             760, LLC, a California limited liability company,
                            100% owned by UCV, LP

      Delaware              939, LLC, a Delaware limited liability company, 100%
                            owned by UCV, LP

      Delaware              UCV Media Tech Center, LLC, a Delaware limited
                            liability Company, 100% owned by UCV, LP

     California        Ocean West, Inc.

     California        RCSA Holdings, Inc.

     California           Old Vail Partners, a California general partnership
                          (50% general partner)

     California           Old Vail Partners, L.P. (49% limited partner)

     California             Vail Ranch Limited Partnership (50% limited partner)

     California        OVGP, Inc.

     California           Old Vail Partners, L.P. (1% general partner)

     California        Ocean Disbursements, Inc.

     California        Bowling Properties, Inc.

     California        Penley Sports, LLC (90% managing member)

All subsidiaries are 100% owned, unless otherwise indicated, and are included in
the  Registrant's  consolidated  financial  statements,  except  for Vail  Ranch
Limited Partnership and UCV, L.P.

                                       48