<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 March 31, 1996; or
|_| Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____________ to
___________.
Commission File Number 0-6106
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 March 31, 1996
------------- -----------------------------
Common Stock, par value 12,368,849 shares
$.01 per share
Transitional Small Business Disclosure Format (check one):
YES NO X
Page 1 of 9 Pages
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UNITED LEISURE CORPORATION AND SUBSIDIARIES
PART I -- FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements
Consolidated Balance Sheets
March 31, 1996 and December 31, 1995 3
Consolidated Statements of Operations
For the Three Months Ended March 31, 1996
and March 31, 1995 4
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 1996 and
March 31, 1995 5
Notes to Consolidated Financial Statements
March 31, 1996 and March 31, 1995 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K __
Page 2 of 9 Pages
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
UNITED LEISURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------- -------------
(Unaudited) (Derived from
Audited
Financial
Statements)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 8,556,015 $ 9,929,785
Receivables 286,116 417,368
Inventory 77,942 80,301
Prepaid expenses 222,313 178,009
---------------- ----------------
TOTAL CURRENT ASSETS 9,142,386 10,605,463
PROPERTY AND EQUIPMENT, Net 4,830,946 4,845,406
OTHER ASSETS
Due from related parties 785,000 110,000
Investment in limited partnership 15,000 15,000
Pre-opening costs 23,372 405
Intangible assets, net 59,660 68,440
Deposits 255,448 237,538
---------------- ----------------
$ 15,111,812 $ 15,882,252
================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 353,286 $ 509,259
Provision for disputed contingent claim 1,128,973 1,128,973
Due to related party 919,988 1,003,265
Deferred revenue 37,022 31,320
Deposits and other 132,095 124,275
---------------- ----------------
TOTAL CURRENT LIABILITIES $ 2,571,364 $ 2,797,092
LONG-TERM DEBT 842,000 842,000
---------------- ----------------
TOTAL LIABILITIES 3,413,364 3,639,092
STOCKHOLDERS' EQUITY
Preferred stock - $100 par value
Authorized 100,000 shares, none outstanding
Common stock - $.01 par value
Authorized 30,000,000 shares, issued and
outstanding 12,368,849 shares at March 31,
1996 and December 31, 1995 123,688 123,688
Capital in excess of par value 24,326,458 24,326,458
Accumulated deficit (12,751,698) (12,206,986)
---------------- ----------------
TOTAL STOCKHOLDERS' EQUITY 11,698,448 12,243,160
---------------- ----------------
$ 15,111,812 $ 15,882,252
================ ================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
Page 3 of 9 Pages
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UNITED LEISURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months
Ended
March 31,
---------------------------------------
1996 1995
----------------- ----------------
REVENUES
Rentals $ 167,850 $ 247,446
Children's recreational activities 462,423
---------------- ----------------
TOTAL REVENUES 630,273 247,446
---------------- ----------------
OPERATING EXPENSES
Occupancy 872,426 256,489
Selling, general and
administrative 179,945 85,663
Depreciation and amortization 113,409 20,297
---------------- ----------------
TOTAL COSTS AND EXPENSES 1,165,780 362,449
---------------- ----------------
OPERATING LOSS (535,507) (115,003)
---------------- ----------------
OTHER INCOME (EXPENSE)
Interest income 90,867 206,396
Interest expense (21,065) (20,000)
Legal costs (88,377) (67,644)
Other 9,370
---------------- ----------------
TOTAL OTHER INCOME
(EXPENSE) (9,205) 118,752
---------------- ----------------
INCOME (LOSS) BEFORE MINORITY
INTEREST (544,712) 3,749
MINORITY INTEREST 3,209
---------------- ----------------
NET INCOME (LOSS) $ (544,712) $ 6,958
================ ================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 12,368,849 12,478,139
================ ===============
EARNINGS (LOSS) PER COMMON
SHARE $ (0.04) $ Nil
================ ================
See accompanying Notes to Consolidated Financial Statements.
Page 4 of 9 Pages
<PAGE>
UNITED LEISURE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1996 1995
-------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (544,712) $ 6,958
Adjustments to reconcile net income
(loss) to net cash used by
operating activities:
Depreciation and amortization 113,409 20,297
Changes in operating assets and liabilities:
Receivables 131,252 160,686
Inventory 2,359
Prepaid expenses (44,304) (123,263)
Pre-opening costs (22,967) (122,983)
Deposits (17,910) (76,215)
Accounts payable and accrued expenses (155,973) 36,660
Income taxes payable (20,000)
Deferred revenue and other 5,702 18,400
------------ --------------
Net cash used by operating activities (533,144) (99,460)
------------ --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (90,169) (139,173)
Deposits and other 7,820 (3,210)
------------ --------------
Net cash used in investing activities (82,349) (142,383)
------------ --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Exercise of stock options and warrants 10,500
Advances to related party (675,000)
Repayments of related party advances (83,277) (306,133)
------------ --------------
Net cash used in financing activities (758,277) (295,633)
------------ --------------
DECREASE IN CASH (1,373,770) (537,476)
CASH AND CASH EQUIVALENTS,
Beginning of period 9,929,785 15,955,140
------------ --------------
CASH AND CASH EQUIVALENTS,
End of period $ 8,556,015 $ 15,417,664
============ ==============
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Interest paid $ 21,065 $ 20,000
Income taxes paid $ 11,620
Interest received $ 90,868 $ 206,396
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
Page 5 of 9 Pages
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UNITED LEISURE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
Concentration of Risk -- The Company invests its excess cash in
certificates of deposit and money market funds, which, at times, may
exceed federally insured limits. The Company maintains its accounts
with financial institutions with high credit ratings.
Inventory -- Inventory consists primarily of merchandise held for
sale at the Company's play - learning centers. Inventory is stated
at the lower of cost (first-in-, first-out) or market.
2. DISCLOSURE OF CERTAIN SIGNFICANT RISKS AND UNCERTAINTIES
--------------------------------------------------------
Termination of Ground Lease -- the ground lease relating to the
Company's major asset is set to expire in February 1997.
Additionally, the Company has been engaged in protracted and
expensive litigation with its landlord. Accordingly, the Company
must prepare itself for the future by the development of its
business into new fields of endeavor.
Uncertainty of Success of Play-Learning Centers -- In June 1994, the
Company entered into a joint venture for the development and
operation of children's play-learning centers. This new business may
take some time to develop, and there can be no assurance that the
new business will be a success.
Merger/Acquisition Plans -- The Company plans to engage in a merger
and acquisition program in order to merge with or acquire companies
engaged in similar or complementary businesses. The Company is not
engaged in any negotiations to merge with or acquire any such target
companies, but the Company is in the process of endeavoring to
identify potential acquisition or merger candidates. The Company can
make no assurances that it will be able to merge with or acquire any
companies.
LEGAL PROCEEDINGS
-----------------
The Company's primary operating subsidiary, Lion Country Safari,
Inc. -- California, has been engaged in protracted litigation with
the landlord of the Company's park property since 1986. After a
six-week trial in October and November 1993, the Company was awarded
a jury verdict in the total approximate amount of $42,000,000. The
jury found that the landlord had breached the covenant of good faith
and fair dealing in the ground lease with the subsidiary and awarded
the subsidiary approximately $37,000,000 in compensatory damages for
such breaches. The jury also found that the landlord acted with
"fraud and malice" in interfering with the subsidiary's relationship
with the operator of the water park on the premises and awarded an
additional $5,000,000 in punitive damages. In the rent dispute
between the landlord and the subsidiary, the jury found that the
subsidiary owed no rent whatsoever because of the landlord's own
unexcused material breaches of the ground lease. The jury also found
that one of the key amendments to the ground lease had been entered
into by the subsidiary under duress and without consideration.
In April 1994, after hearing a post-verdict motions brought by the
landlord for a new trial and/or judgment notwithstanding the
verdict, the Court granted a new trial on all issues and denied the
landlord's motion for judgment notwithstanding the verdict, on the
basis that the evidence was not sufficient to justify the verdict
brought by the jury. The Company has appealed this order and intends
to vigorously continue its prosecution of the litigation. There can
be no assurance as to the outcome of this litigation. The Company
incurred legal costs in connection with this litigation during the
years ended December 31, 1995 and 1994, of $365,207 and $340,679,
respectively.
Page 6 of 9 Pages
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Financial Condition
At March 31, 1996, the Company had cash or cash equivalents in the amount
of $8,556,015. Given the stability of revenues from its current operations, the
Company expects that its operations will continue to generate sufficient cash
flow to continue its operations through the end of the term of the Irvine
Company Ground Lease (February 28, 1997).
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 v. 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 March 31, 1996, the Company received total revenues of
$630,273, compared to $247,446 in revenues for the first quarter of 1995. For
the quarter ended March 31, 1996, the Company incurred a net loss of $544,712,
or $(0.4) per share, as compared to a net income of $6,958, or $.00 per share,
for the comparable period of 1995.
Revenues increased during the first three months of 1996 as compared to
the same period for 1995, primarily because of revenues received from admissions
and concession at Planet Kids and Frasier's Frontier. Expenses increased during
the first three months of 1996, as compared to 1995, because of increased
occupancy expenses related to new Planet Kids locations, increased selling and
administrative expenses related to the development of new Camp Frasier locations
and Planet Kids leases, and operating expenses in carrying out these operations.
Other expenses incurred in this quarter included development costs of $131,967
for Frasier's Frontier and $39,378 for United Leisure Interactive. In addition,
Lion County Safari incurred legal costs of $96,000 associated with the appeal
pending on the Irvine Company litigation. Interest income was reduced by
$108,000 in this quarter.
Page 7 of 9 Pages
<PAGE>
PART II -- OTHER INFORMATION
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 8 of 9 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: May ___, 1996 By: HARRY SHUSTER
---------------------------------------
Harry Shuster, Chairman of the
Board and Chief Executive
Officer
Date: May ___, 1996 By: RENATE GRAF
----------------------------------------
Renate Graf, Vice President
and Controller
Page 9 of 9 Pages
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Article 5 FDS for 1st Quarter 10-QSB
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> $8,556,015
<SECURITIES> 0
<RECEIVABLES> $286,116
<ALLOWANCES> 0
<INVENTORY> $77,942
<CURRENT-ASSETS> $9,142,386
<PP&E> $4,830,946
<DEPRECIATION> 0
<TOTAL-ASSETS> $15,111,812
<CURRENT-LIABILITIES> $2,571,364
<BONDS> 0
<COMMON> $123,688
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> $15,111,812
<SALES> 0
<TOTAL-REVENUES> $630,273
<CGS> 0
<TOTAL-COSTS> $1,165,780
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> $21,065
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> $(544,712)
<EPS-PRIMARY> $(0.04)
<EPS-DILUTED> $(0.04)
</TABLE>
