<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(Mark One)
|X| Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 30, 1995;
or
|_| Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____________ to
___________.
Commission File Number 0-6106
--------
UNITED LEISURE CORPORATION
-----------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-2652243
------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
8800 Irvine Center Drive, Irvine, California 92718
----------------------------------------------------
(Address of Principal Executive Offices)
(Zip Code)
(714) 837-1200
-----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Check whether the Issuer (1) filed all reports to be filed by Section
13 or 15(d) 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 at least the past 90 days.
YES [X] [NO]
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
Class Outstanding at November 10, 1995
--------------------- --------------------------------
Common Stock, par value 12,292,849 shares
$.01 per share
Transitional Small Business Disclosure Format (check one):
YES [ ] NO [X]
Page 1 of 10 Pages
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UNITED LEISURE CORPORATION AND SUBSIDIARIES
PART I -- FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets
September 30, 1995 and December 31, 1994
Consolidated Statements of Operations For the Three Months
Ended September 30, 1995 and September 30, 1994 and the Nine
Months Ended September 30, 1995 and 1994
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 1995 and
September 30, 1994
Notes to Consolidated Financial Statements
September 30, 1995 and September 30, 1994
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
</TABLE>
Page 2 of 10 Pages
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PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
UNITED LEISURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
--------------------- -------------------
ASSETS
<S> <C> <C>
CASH AND CASH EQUIVALENTS $ 11,138,817 $ 15,955,140
RECEIVABLES 501,869 299,628
PREPAID EXPENSES 156,220 29,423
PROPERTY AND EQUIPMENT, net 3,561,030 56,246
INVENTORY 101,907 0
OTHER ASSETS
Due from related party 10,000 10,000
Investment in limited partnership 60,000 60,000
Pre-opening costs 125,262 66,931
Intangible assets, net 77,805 97,461
Deposits 214,587 249,726
---------------- ----------------
$ 15,947,497 $ 16,824,555
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Payable to acquisition of minority interest $ 0 $ 520,000
Accounts payable and accrued expenses 387,220 459,581
Income taxes payable (200) 19,800
Due to lessor (Note 2) 1,128,973 1,128,973
Due to related party 951,211 1,246,571
Deferred revenues 19,560 23,810
Deposits and Other 124,275 124,275
---------------- ----------------
TOTAL CURRENT LIABILITIES $ 2,611,039 $ 3,523,010
================ ================
Long-term debt 850,000 0
Minority Interest 0 500,017
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common stock 122,124 122,034
Capital 24,252,956 24,242,297
Accumulated deficit (11,888,622) (11,562,803)
---------------- ----------------
TOTAL STOCKHOLDERS' EQUITY
(DEFICIENCY) 12,486,458 12,801,528
---------------- ----------------
$ 15,947,497 $ 16,824,555
================ ================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
Page 3 of 10 Pages
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UNITED LEISURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended Ended
September 30, September 30,
--------------------------------------- -------------------------------
1995 1994 1995 1994
----------------- ---------------- ---------------- ----------
<S> <C> <C> <C> <C>
REVENUES
Rentals $ 532,273 $ 579,844 $ 1,062,825 $ 1,284,566
Admissions 231,720 0 284,708 0
Camp admissions 906,894 798,005 998,610 860,662
Concessions 63,495 0 75,457 0
Income - other 118,955 0 136,751 0
Interest income 170,578 1,896 556,251 5,149
---------------- ---------------- ---------------- ---------------
TOTAL REVENUES $ 2,023,915 $ 1,379,745 $ 3,114,602 $ 2,150,377
================ ================ ================ ===============
COSTS AND EXPENSES
Occupancy $ 1,520,177 $ 676,010 $ 2,472,812 $ 1,298,048
Selling, general and
administrative 176,331 54,603 549,465 164,140
Depreciation and amortization 21,940 23,870 62,534 83,820
Interest 35,526 0 75,094 32,094
Legal costs - Irvine Co. litigation 48,132 31,184 253,165 240,028
Write-off goodwill 0 0 115,603 0
---------------- ---------------- ---------------- ---------------
TOTAL COSTS AND EXPENSES $ 1,802,106 $ 785,667 $ 3,528,673 $ 1,818,130
================ ================ ================ ===============
NET INCOME (LOSS) BEFORE
MINORITY INTEREST 221,809 594,078 (414,071) 332,247
MINORITY INTEREST 0 0 115,620 0
---------------- ---------------- ---------------- ---------------
NET INCOME (LOSS) BEFORE
TAXES 221,809 594,078 (298,451) 332,247
PROVISION FOR INCOME TAXES 15,626 0 27,351 (49,800)
---------------- ---------------- ---------------- ---------------
NET INCOME (LOSS) BEFORE
EXTRAORDINARY ITEMS 206,183 594,078 (325,802) 382,047
EXTRAORDINARY ITEMS 0 5,000 o 112,238
---------------- ---------------- ---------------- ---------------
NET INCOME (LOSS) 206,183 599,078 (325,802) 494,235
================ ================ ================ ===============
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES 12,212,428 7,295,928 12,212,428 7,295,928
================ ================ ================ ===============
NET INCOME (LOSS) PER SHARE
BEFORE EXTRAORDINARY
ITEMS $ .0168 $ .0814 $ (.0266) $ .0523
================ ================ ================ ===============
EXTRAORDINARY ITEM .0168 .0814 (.0266) .0153
---------------- ---------------- ---------------- ---------------
NET INCOME (LOSS) $ .0168 $ .0814 $ (.0266) $ .0676
================ ================ ================ ===============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
Page 4 of 10 Pages
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UNITED LEISURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
----------------------------------------------------
1995 1994
----------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Loss $ (325,802) $ 494,285
Adjustments to reconcile net loss
to net cash provided (used) by
operating activities:
Depreciation and amortization
of property and equipment 36,192 49,500
Amortization of intangibles 26,342 34,320
Loss attributable to acquisition
of minority interest
Gain from settlement of debt 115,603 (164,438)
Minority interest in net loss of
consolidated subsidiary (115,620)
Changes in operating assets and liabilities:
Receivables (202,241) (49,506)
Inventory (101,907) (3,982)
Prepaid expenses (126,797)
Pre-opening costs (58,331)
Deposits 35,159
Amounts payable and accrued expenses (72,361) (615,697)
Income taxes payable (20,000)
Accrued expenses due to related party 18,555
Deferred revenue and other (4,250) 3,759
---------------- -------------------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES (814,013) (233,204)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (3,709,837) (5,100)
Lease acquisition costs (6,113)
Investment in joint venture (500,000)
Release of Restricted Cash 407,055
---------------- -------------------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES (3,715,950) (98,045)
---------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Exercise of stock warrants 9,000
Sale of common shares 500,000
Preferred stock conversion fee (75,000)
Deferred offering costs (96,081)
Principal payments under short-term
and long-term obligations (265,000)
Repayment of related party advances (295,360) (200,000)
---------------- -------------------
NET CASH PROVIDED (USED) IN
FINANCING ACTIVITIES (286,360) (136,081)
---------------- -------------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (4,816,323) (467,330)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 15,955,140 682,261
---------------- -------------------
CASH AND CASH EQUIVALENTS
END OF YEAR $ 11,138,817 $ 214,931
================ ===================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
Page 5 of 10 Pages
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UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The results of interim periods are not necessarily indicative
of results to be expected for the year, due to the seasonal nature
of the Company's business. In the opinion of the Company, the
accompanying consolidated financial statements reflect all
adjustments (which are normal recurring adjustments) necessary for
a fair presentation of the results for the interim period and the
comparable period presented. These condensed financial statements
do not purport to be full presentations and do not include all
requirements in accordance with generally accepted accounting
principles, but include all information required by the
instructions to Form 10-QSB.
Note 2. Provision for contingent disputed claim
The provision for contingent disputed claim is the subject of
litigation between the Company and its landlord. In the initial
trial related to such litigation, the jury found that the Company
did not owe such rent and, in its order for a new trial, the court
did not indicate that it disagreed with that conclusion.
Page 6 of 10 Pages
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Financial Condition
As a result of a completion of a public offering in November, 1994, at
September 30, 1995, the Company had cash and cash equivalents in the amount of
$11,138,817. Given the stability of the revenues from its current operations,
the Company expects that its operations will continue to generate sufficient
cash flow to continue its current operations through the end of the term of The
Irvine Company Ground Lease (February 28, 1997). In the meantime, the Company
intends to expend the funds raised in the 1994 public offering in the following
directions in order to expand its business and prepare the Company for
operations after the expiration of the Irvine Ground Lease: Planet Kids Learning
Centers Joint Venture - $3,000,000, Camp Frasier expansion - $2,750,000,
interactive multimedia development - $1,000,000, and mergers and acquisitions
program - $3,500,000. During the first nine months of 1995, the Company
commenced making some of these investments, approximately $325,000 in developing
the Planet Kids locations, approximately $165,000 toward the acquisition and
opening of two additional Camp Frasier locations and approximately $150,000 for
the development of its interactive multimedia business. In addition, the Company
expended $1,040,000 in buying out its joint venture partner in Planet Kids
Learning Centers and purchased for $1,685,000 Marshall Scotty's Amusement Park
(now Frasier's Frontier) in San Diego.
The Irvine Company Litigation
Since 1987, the Company's wholly-owned subsidiary, Lion Country Safari,
Inc. - California (the "Subsidiary"), has been engaged in protracted and
expensive litigation with its landlord, Irvine, in Orange County Superior Court
(Case No. 49-12-02). The case is styled The Splash v. The Irvine Company and
Marsh & McLennan; The Irvine Company vs. The Splash and Lion Country Safari,
Inc. - California; Lion Country Safari, Inc. - California v. The Irvine Company.
On April 15, 1994, the court granted a new trial on all issues. The Company has
appealed this order and intends to vigorously continue its prosecution of The
Irvine Company Litigation. It is anticipated that the ruling on this appeal may
take until mid 1996.
Results of Operations
The Company's business has historically been highly seasonal with the
second and third quarters of each being the strongest quarters of operations.
During the quarter ended September 30, 1995, the Company received total revenues
of $2,023,915, compared to $1,379,745 in revenues for the third quarter of 1994.
During the nine month period ended September 30, 1995, the Company received
total revenues of $3,114,602 as compared to total revenues of $2,150,377 for the
first nine months of 1994. The Company incurred a net loss of $325,802, or
$(.0266) per share, with respect to the first nine months of 1995 as compared to
a net income of $494,235, or $(.0676) per share, for the comparable period of
the previous year. For the quarter ended September 30, 1995, the Company
incurred net income of
Page 7 of 10 Pages
<PAGE>
$206,183, or $(.0168) per share, as compared to net income of $599,078, or
$.0814 per share, for the comparable period of 1994.
Revenues increased during the 1995 periods primarily because of the
additional revenues received from three Camp Frasier locations as opposed to one
in the prior year and revenues received from admissions and concessions at
Planet Kids and Frasier's Frontier, which were open during the third quarter.
Expenses increased during the first nine months of 1995, as compared to 1994
because of increased occupancy expenses related to the two new Camp Frasier
locations and the Planet Kids leases, operating expenses incurred in carrying
out these operations, increased selling and administration expenses related to
the development of the two new Camp Frasier locations, the development of the
initial Planet Kids Learning-Play Centers, the development of Frasier's
Frontier, the amusement park property acquired by the Company and expenses
incurred in the development of the Company's interactive operating expenses.
The Company acquired the other 50% interest in Planet Kids Learning
Centers as of June 1, 1995, thereby removing the minority interest reflected on
the financial statements contained in this Quarterly Report on Form 10-QSB for
future periods and opened its initial Planet Kids facility on June 3, 1995. The
two additional Camp Frasier locations opened later in the month of June and
operated most of the season. Like the original Camp Frasier operation, it is
expected that it will take a few years for each of these new locations to
mature.
Page 8 of 10 Pages
<PAGE>
PART II -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
On September 12, 1995, the Annual Meeting of Stockholders of United
Leisure Corporation was held, at which the following actions were taken:
1. The shares of Common Stock represented at the Annual Meeting
were voted for the election of Directors as follows:
<TABLE>
<CAPTION>
Number
Voting For Withhold
---------- ---------- --------
<S> <C> <C> <C>
Harry Shuster 10,699,245 10,599,994 99,251
Renate Graf 10,699,245 10,600,194 102,151
Alvin Cassel, Esq. 10,699,245 10,597,094 99,051
Alvin Alexander 10,699,245 10,600,094 99,151
</TABLE>
2. The shares of Common Stock represented at the Annual Meeting
were voted for the approval of the Stock Option Plan of the
Company as follows:
<TABLE>
<CAPTION>
Number
Voting For Against Abstain
---------- --------- ------- -------
<S> <C> <C> <C>
10,699,245 10,341,093 297,739 60,413
</TABLE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
The Company filed no Reports on Form 8-K during or for the
period covered by this Quarterly Report on Form 10-QSB.
No other Items of Part II are applicable to the Registrant for the
period covered by this Quarterly Report on Form 10-QSB.
Page 9 of 10 Pages
<PAGE>
SIGNATURES
Pursuant to the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
UNITED LEISURE CORPORATION
Date: November 20, 1995 By: /s/ HARRY SHUSTER
----------------------------------
Harry Shuster, Chairman of the
Board and Chief Executive
Officer
Date: November 20, 1995 By: /s/ RENATE GRAF
---------------------------------
Renate Graf, Vice President
and Controller
Page 10 of 10 Pages
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 11,138,817
<SECURITIES> 0
<RECEIVABLES> 501,869
<ALLOWANCES> 0
<INVENTORY> 101,907
<CURRENT-ASSETS> 11,796,906
<PP&E> 7,293,616
<DEPRECIATION> 3,607,324
<TOTAL-ASSETS> 15,947,497
<CURRENT-LIABILITIES> 2,611,039
<BONDS> 850,000
<COMMON> 122,124
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 15,947,497
<SALES> 0
<TOTAL-REVENUES> 3,114,602
<CGS> 4,348,046
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75,094
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (325,802)
<EPS-PRIMARY> (0.027)
<EPS-DILUTED> 0
</TABLE>
